Advisors: HR Disasters To Avoid

It’s a common occurrence: Financial advisors hire the wrong person and then suffer the consequences to their practice.

This may be somewhat surprising, as wealth management is a highly regulated field that requires extreme prudence and extensive due diligence. Nevertheless, hiring miscues abound, resulting in everything from internal friction to employee theft and disaffected clients.

There are numerous reasons why this happens, but often it’s due to ignorance or lack of human resources experience on the part of advisors.

“What causes most hiring disasters is a lack of time in hiring, monitoring and managing, because the people who do the hiring mostly have a skill set in financial planning, but not necessarily HR,” says Mark LaSpisa, principal of Vermillion Financial Advisors, an RIA in South Barrington, Ill., who has experienced HR problems.

BAD FIT

Rick Kahler, president of the Kahler Group in Rapid City, S.D., thought he had the perfect hire. His candidate for the operations manager position topped the list of 130 applicants, testing in the top tier in all her evaluations during the interview process, and Kahler intended to move her to a planning job within several years. But one year later she was toast.

“Though she performed some of her duties well,’’ Kahler says, “she had poor listening skills and created lots of tension because she couldn’t get along with co-workers.

“We had many heart-to-heart talks,” he recounts, and “we did everything we could to integrate her, to the point where my staff was upset with me being so patient in giving her every possible chance.”

“The shocking thing is we’re meticulous in how we hire, and we still blew it,” he admits. LaSpisa experienced hiring problems of another kind. He would sometimes discover that work for a client was incomplete despite what staff members had assured him.

“I’ve had to let people go whose follow-up skills or work discipline hasn’t been up to our standard,” he acknowledges. “You have to make sure promises made to clients are not broken in some way by your staff.”

As part of their hiring routine, LaSpisa advises firms to put a process or system in place to monitor tasks assigned to staff, particularly if they’re unseasoned. The planner says he now dictates follow-up procedures to staff members after each client meeting. “They receive their daily tasks,” he says, “and I make sure they are fulfilled properly and in a timely manner.”

HIDDEN MOTIVE

Another common source of problems: hiring a client’s relative. Take the experience of a financial planning firm in New Jersey that was prevailed upon by a major client to hire his son. At first it seemed like a win-win situation. But after the young man accessed his family’s financial records and proceeded to share this information, along with office gossip, with his family, the parents decided to take their business elsewhere. 

Advisors say it’s not unusual for unrealistic or overly aggressive career goals to be disguised by candidates who otherwise appear charming during their hiring interviews. Often, a person’s true ambitions aren’t apparent until the candidate begins work.

After hiring a young man as a junior financial planner, it became apparent to Rob Siegmann he had made a mistake.

“While he accepted the position, he quickly saw it as beneath him, and expected to rapidly ascend to a lead role in the firm,” recalls Siegmann, chief operating officer at Financial Management Group, an RIA in Cincinnati, Ohio.

“He was very bright and energetic, well educated, and even had attended the same college I did,” he says, referring to Xavier University, a small Jesuit school located in Cincinnati.

“But after a few months, he developed this overconfidence that he should be leading client meetings and managing his own clients without supervision,” Siegmann says. “He became very unhappy when told he was in a support role for the time being. The end result, we terminated his employment.”

CLEAR EXPECTATIONS

Siegmann’s advice to other planners: “Make sure you have clear career expectations on both sides in the hiring process. If someone has the expectation they’re going to be running unsupervised client meetings after six months, that’s unrealistic.’’

During his long career, Howard Diamond has observed many hiring disasters.

Managing director and general counsel at Diamond Consultants, an executive search firm in Chester, N.J., Diamond recommends that planning firms hire a professional manager or COO to take charge of managing day-to-day operations and any HR issues that arise.

“In that way,” he says, “senior leadership can focus on making rain and client relationships.” Putting urgency before quality can also be a fatal mistake.

Scott Wood, an executive coach at Peak Advisor Alliance, an Omaha, Nebraska coaching program for advisors, says he recently worked with an advisory firm who “hired the first person they talked to because they wanted to save time and increase productivity.” Ouch!

An assistant at the firm left on short notice, leaving the firm shorthanded,” explains Wood. “Instead of hiring someone who looked good for the job, they hired someone who didn’t look bad,” he says. “Not surprisingly, the hire turned out to be a horrible fit and was gone in a matter of weeks, setting the firm back even further.”

“A solid hiring system at a planning firm,” he says, “requires patience and commitment to hire the right team player, not just the best available candidate.”

Here’s one way to avoid an HR fiasco: Hire your spouse.

Lou Stanasolovich, CEO and COO of Legend Financial Advisors of Pittsburgh, hired his wife in 1995 shortly after opening his firm. She brought extensive book keeping and hiring experience to the firm from pervious jobs and helped set up systems designed to prevent HR problems. “It’s one of the best moves I ever made,” says Stanasolovich.

Likewise, LaSpisa hired his wife, who had an accounting background and performed HR duties.“Of course, this may not be the solution for most RIAs,” admits Siegmann. But if you do hire your spouse, make sure she’s qualified.

 Bruce W. Fraser is a New York-based financial writer. He is writing a book about the ultra-wealthy.