G2

Building the Next Generation
 
 
Standards Information Network (Verlag)
  • erschienen am 22. August 2017
  • |
  • 256 Seiten
 
E-Book | ePUB mit Adobe-DRM | Systemvoraussetzungen
978-1-119-37007-9 (ISBN)
 
Vital guidance to ensuring the future of your firm
G2: Building the Next Generation provides financial advisory firms with a clear roadmap to management succession. Based on the author's 17 years of experience with over 1,000 firms, this book provides a systematic process to help you identify, develop, and install the new leadership that will guide your firm's future. Extensive statistical research backs proven strategies for structuring management and succession, overcoming obstacles, selling equity, and more, while expert guidance walks you through the process and warn you of potential pitfalls along the way.
A generation of entrepreneurs used their talent and ambition to build an industry; to ensure that their success lives on, those leaders now face the formidable challenge of succession. With the future of your firm at stake, how do you recruit, train, mentor, and develop the next generation of professionals, owners, and leaders? This book shows you how to find the people you need, and develop them into the leadership your firm deserves.
* Identify and develop future leaders from the pool of existing and upcoming talent
* Structure management and management succession to ensure successful transition
* Begin selling equity to your firm's next generation of leaders
* Learn smart strategies for dealing with setbacks along the way
The next generation of leaders will shape the future of your firm, but collectively, they will define the future of the entire advisory industry. Firms who succeed in developing their best talent will continue to thrive--those who fail will be left with a great car, but no driver. Getting this right may be one of the most critical points of your career, and it isn't something that should be left to chance or "gut feeling". G2: Building the Next Generation gives you a solid, grounded, systematic approach for ensuring your firm's long-lived success.
1. Auflage
  • Englisch
  • Newark
  • |
  • USA
John Wiley & Sons Inc
  • Für Beruf und Forschung
  • 0,63 MB
978-1-119-37007-9 (9781119370079)
weitere Ausgaben werden ermittelt
PHILIP PALAVEEV is the founder and CEO of The Ensemble Practice, LLC, and a recognized expert on the management of financial advisory firms and teams. Palaveev also is a business owner who speaks from the perspective of having built and managed successful businesses. He is the author of The Ensemble Practice.
  • Intro
  • Title Page
  • Table of Contents
  • Preface
  • Acknowledgments
  • CHAPTER 1: Who Are G2s?
  • Defining G2
  • Developing the Next Generation Is Critical
  • Just Hiring Them Is Not Enough (But Start There)
  • What G2 Professionals Need
  • G2s Need to Take Over Client Relationships
  • G2s Are the Future
  • Notes
  • CHAPTER 2: The Career Track
  • The Advisory Career Track
  • Non-Client-Facing Career Tracks
  • Progressing through the Career Track
  • Being Flat
  • Top Performers
  • Reaching the End of the Track
  • Notes
  • CHAPTER 3: Recruiting G2
  • Beginning with the End in Mind
  • Hiring Levels
  • Becoming the Employer of Choice
  • Advertising
  • Recruiting in Small Markets
  • Screening
  • Interviewing
  • Opportunistic Hiring
  • Experienced Hires
  • Notes
  • CHAPTER 4: Taking Over Client Relationships
  • What Is a Lead Advisor?
  • Qualities of a Trusted Advisor
  • Transitioning the Lead to G2
  • Notes
  • CHAPTER 5: How Advisory Firms Develop New Business
  • The Business Development Process
  • When and How Clients Act
  • Existing Clients as a Referral Source
  • Some Theories about Referrals
  • Other Referral Sources
  • Beyond Referrals
  • The Simple Mathematics of Reputation-based Selling
  • Principles of Business Development
  • Notes
  • CHAPTER 6: Be a Business Developer
  • The Four Stages of Learning to Develop New Business
  • Solving a Puzzle
  • Finding Your Mentor
  • Learning to Ask Questions and Listen
  • Finding Your Specialty
  • Developing a Niche
  • Following a Disciplined Process
  • Be Persistent
  • Note
  • CHAPTER 7: Managing People
  • Defining Management
  • Prioritizing Management and Communication
  • Accepting Responsibility
  • Providing Feedback
  • Dealing with Poorly Performing Team Members
  • Performance Evaluations
  • Being a Mentor
  • Notes
  • CHAPTER 8: Managing Up
  • Speaking Up
  • Getting Involved
  • Taking Responsibility for Your Team
  • Supporting Your Colleagues
  • Measuring Your Criticism
  • Managing Your Own Expectations
  • CHAPTER 9: Managing Yourself
  • Defining Balance of Life
  • Balancing Time
  • Dealing with Weaknesses
  • Thoughtful Communication
  • On the Value of Conflict
  • Looking at Your Own Plate
  • Notes
  • CHAPTER 10: Owner, Manager, and Leader
  • Defining Owner, Manager, and Leader
  • Management
  • Leadership
  • Note
  • CHAPTER 11: Adding Owners: The Firm's Perspective
  • Criteria for Ownership/Partnership
  • Admission Process
  • Adding Family Members as Partners
  • Laying the Foundation for New Partners
  • Tackling Buy-In Financing and Valuation
  • Onboarding Partners
  • CHAPTER 12: Buying Equity: The G2 Perspective
  • What Does It Mean to Be an Owner?
  • Key Questions to Ask
  • Should You Buy Equity?
  • The Characteristics of Equity
  • Understanding Your Ownership Agreement
  • Small Firms and Family Firms
  • Owner Compensation
  • What If the Ownership Agreement Isn't Right for You?
  • Understanding the Valuation and the Price
  • Organizing Your Personal Finances
  • Beyond the First Purchase
  • CHAPTER 13: The Ownership and Governance Foundation for G2
  • Career Investment
  • Stability and Governance
  • Elements of Governance
  • Governance as a Function of Size
  • Reviewing Your Governance Model
  • Achieving Results
  • Notes
  • CHAPTER 14: Succession
  • Different Aspects of Succession
  • Internal Succession of Ownership
  • Finding the Motivation
  • The Big Transaction
  • A Large Number of Small Transactions
  • Passive Ownership
  • The Intermittent Transaction
  • Equity-based Compensation
  • Profits Interest Options
  • Nonvoting Shares
  • Synthetic Equity
  • Mergers Facilitating Succession
  • Creating a Lasting Firm
  • Notes
  • CHAPTER 15: Keeping Up with the Industry
  • Being a Student of the Industry
  • Developing Your Industry Connections
  • Benchmarking Your Client Services
  • Learning Best Practices
  • Participating in External Training
  • Contributing to the Industry
  • CHAPTER 16: Conclusion
  • From G2 to G3
  • A Note of Optimism
  • Bibliography
  • About the Author
  • Index
  • End User License Agreement

CHAPTER 1
Who Are G2s?


There were about 30 people in the room. They were gathered for a study-group meeting and half of them were founders who years ago had started some of the largest and most successful advisory firms in the country. The other half were younger. They had joined the firms in the last 10 years as employees and had over time risen to become owners and leaders in their respective organizations. This collection of firms was called the younger group G2, short for second generation, to signify that they were not founders but rather the next generation.

A founder by the name of Richie Lee stood up. He spoke slowly and his words were rather poetic. "If a business is like a painting," Richee said, "I want my business to be a beautiful painting that people can see even after I am gone. I want it to be a painting that lasts and endures."

Becky Krieger, one of the G2 participants, got up to respond and what she said, to this day, best illustrates for me the dynamic between the generations of leaders inside advisory firms. "Richee," she said, "You have to remember we are artists, too. We are not here just to preserve your painting. We are here because we want to create our own works as well. We want to add to your painting and we want to paint our own!"

Rebecca represents the G2s whom this book is about. They are talented, ambitious, and driven. They are experienced and accomplished in their profession. They are young but not youngsters; they have one or two decades of achievements behind them. They are looking to continue the work of the founders and eager to build and create their own. They are the future of the advisory industry and they are ready to take over.

G2 has already begun to take over, in fact. Many G2 members are owners (partners) in their respective firms. Some are COOs and CIOs. G2 professionals are managing client relationships, leading teams of people, and striving to be leaders.

Every firm needs a G2 if it is to have a chance of lasting beyond the involvement of the founders. Firms that lack a G2 or those where G2 is underdeveloped will likely dissipate or be merged and sold into bigger entities over the next 10 years. Firms that have developed their next generation, in contrast, will be magnets for other practices who want to merge with them. They will not run out of energy or people as the founders approach retirement.

G2 may be the future of the advisory industry, but it cannot take over yet-not without some help from firms and the industry at large. Having spent most of my early professional career as G2, I can easily relate to the challenges facing the next generation. Some are challenges that G2 members created themselves, and others are deficiencies in the environment where they grew their careers. Now that I am founder of my own firm and working with G2 partners, I can also relate to the feelings of the founders. It is difficult to trust a generation that is so eager but still unproven.

I have written this book as a bridge between founders and G2 because, ultimately, the truth is this: G2 is the future of the industry, and successful firms need to hire and embrace these younger professionals. Firms that fail to do so will have short remaining lifespans. To flourish, G2 members need to learn not only how to be good professionals (i.e., how to attract and service clients) but also how to be good owners, managers, and leaders of their firms. They need to learn how to make good decisions, put the best interests of the business first, and inspire others. Good firms will find a way to cultivate their management skills, educate them about being owners, and give them the opportunity to become leaders.

I hope you will follow me in this exploration of why G2s are the future of the advisory industry.

Defining G2


The term G2 includes the cadre of professionals inside advisory firms who:

  • Are not founders and did not join the firm in the first 10 years of business-in other words, they were not part of the start-up phase of evolution.
  • Have at least five years of experience in their field-they are experienced and not just starting out.
  • Occupy key positions in their firms-they are lead advisors or team leaders in operations.
  • Are considered future owners or are already owners in their firms, meaning they are invested in the future success of the firm in career, emotional, and financial terms.
  • Are seen as successors to the founders, not necessarily individually but as a group.
  • Most of all, self-identify as future leaders of the firm who both preserve the legacy of the founders and look to take the firm further and make it better.

Thousands of G2 professionals are already rising to prominence inside the advisory industry. More importantly, thousands are missing entirely. According to the 2016 Financial Performance Study of financial advisory firms produced by The Ensemble Practice LLC, the typical advisory firm started in 1997.1 Today, those firms generally have more than 20 years of history and have grown to be sizeable and successful organizations. As these firms have matured, their need to hire more people has increased. Unfortunately, not many firms have.

A well-publicized report by research firm Cerulli Associates indicates that 43 percent of advisors are over the age of 55 and intend to retire in the next 10 years (although intention is not the same as action).2 The same report claims that only 11 percent of advisors in the industry are younger than 35. These numbers cause research firms to predict that we will be missing as many as 280,000 advisors in the next 10 years, after accounting for continued growth and retirement.

The 46 percent of advisors who fall between these two age brackets-younger than 55 but older than 35-are the subject of this book. However, age is not a factor that defines G2. The focus is on professionals who are experienced and accomplished but have not yet had their turn at driving the business.

Developing the Next Generation Is Critical


Too often the development of G2 is equated with succession. While the logic here is solid-develop G2 successors or you will have to sell the firm in order to retire-it is also incomplete. Firms need G2 for growth! The typical advisory firm doubled in size every four to five years in the period between 2003 and 2014.3 While growth has slowed down in the past three years, firms continue to need more people, more professional capacity, and, most of all, more leaders.

G2s as Agents of Growth


G2 professionals are not just successors. They are agents of growth who bring skills and talents firms otherwise would not have. As a firm adds more client relationships, it needs professionals who can manage those relationships. In my experience and depending on the business model, a lead advisor can manage only 40 (for multifamily-office and ultrahigh-net-worth firms) to 150 (for general financial advisory firms) client relationships. If client rosters exceed those numbers, the firm must find a new advisor.

The hope of every firm is that its advisors will be just as talented and dedicated as the founders when working with clients. What is more, it is not just the hope but very much a requirement of firms that advisors do not defect to a competing firm that is trying to take away clients. Advisors are asked to remain with the firm-ideally for the duration of their careers-since clients do not look forward to changing professionals. These dual expectations of excellence and longevity are unique to professional service firms and even more pronounced in financial advisory firms. While attorneys and CPAs can and do change employers, advisory firms expect to hold onto their professionals and clients for many, many years.

It seems to me that for every 100 or so additional clients, a firm needs to hire at least one professional who brings both an extraordinary skillset and a dedication to the firm. The new hire must be experienced and credible enough to lead clients, be loyal to the firm, and be integrated into its culture to stay for a long time. Before these professionals become the successors, they will be the leaders of growth. This is why every firm needs its own G2 advisors and cannot have enough of them.

Many firms have tried to bypass the need to hire and develop G2 advisors by leveraging the founders more. I have worked with clients where single founders or small groups of founders have surrounded themselves with capable service people. These service people tackle much of the work, but they cannot lead client relationships. This means of leverage, combined with careful client selection, can certainly take a firm to a billion or more in assets under management (AUM). But even with leverage, the day will come when capacity is exhausted. Moreover, a firm with extreme leverage can be very fragile.

Beyond increasing a firm's capacity, G2 professionals bring a skillset that perhaps the founders never had. Many hold MBA degrees and have experience in management and operations. Often the proponents of structure and process, they become the first COOs of many firms. They help clarify organizational structures, define positions, and establish career tracks. Their growth puts pressure on firms to create governance and ownership structures that can allow for many to participate, and they encourage founders to remember the long view.

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