Executive Summary
For most of its history, the financial advice industry has been very slow to change. Over the last 50 years, even the most substantial changes to occur – such as the movement away from commissions and towards fee-based compensation, and the shift from an investment-centric approach to more holistic financial planning – have taken place over decades and, in many cases, are still ongoing. In the last few years, however, the pace of change seems to have quickened considerably, as the technology landscape has mushroomed, and private equity funding has fueled an unprecedented surge of mergers and acquisitions that has reshaped the competitive landscape.
For many business leaders, the standard playbook for dealing with changes such as those the advisory industry faces today has been based on John Kotter's change framework, which supports organizational change and alignment with a strategic vision that ultimately helps the business move forward. But while Kotter's model may work well for larger firms with ample resources and people available to enact change, it can be less effective for smaller organizations with fewer people available to create coalitions for change (and where the power to block change might even be concentrated among one or a handful of executives or owners).
Therefore, those at smaller firms who want to promote change may benefit from a framework based on an "Agile Change" model adapted for smaller firms. In this model, the groundwork for change is first established by assessing the situation (e.g., reviewing external factors like best practices and services or technology solutions available, as well as internal factors like the current pain points employees have with existing processes or technology), then using that information to communicate the importance of change to create a sense of urgency and build buy-in from the ground-level stakeholders who will be affected by the change. Additionally, those promoting change can be very clear about what the process will entail and how it will be implemented (with the caveat that the plan needs to be flexible to allow for change as conditions evolve).
Ideally, the result of all this groundwork is that when explaining the change process to higher-level management and firm leadership, there will already be solid evidence of the support for the change within the organization and the positive impact it can (or has already served to) create, making it more likely to achieve crucial buy-in from the top needed to go through with the change. Once the change process is implemented, it's critical to track the progress and assess the results so that refinements to adjust and improve the process can be made and, in the best case, can enhance buy-in even more. Eventually, the change becomes part of the normal business process to the extent that it is baked into job expectations with negative consequences for employees who don't buy into the change, setting the stage to begin the next iteration of change as the firm grows and evolves.
The key point is that even as situations develop rapidly and necessitate constant changes – both large and small – the process for dealing with these changes can be systematized in a way that ensures that the people who need to buy into the change, from the bottom to the top of the organization, actually do so. Although it may take time to lay the groundwork and build support for change before actually trying to implement it, these steps can be crucial to ensure that the change is accepted even among team members who may be less eager to change how they work. Which will ultimately make it easier for the firm to make the changes needed to adapt (and succeed!) in today's rapidly changing advisory industry!
Advisory firms are navigating a lot of evolutionary turbulence these days. Here's a process to implement change in a variety of circumstances with maximum success and minimal disruption.
The planning profession has undergone a number of what might be called 'episodes' when the evolutionary pace picked up a bit – but in my 40 years in the business, I've never experienced anything like what we're going through now. We seem to be experiencing a new tech revolution every couple of years as the fintech landscape evolves and AI elbows its way into our lives. The revenue models are shifting from AUM. The value proposition, which has decisively moved from managing assets to holistic planning, is redefining what 'holistic' means seemingly day by day.
Add to that the issues of managing a firm through the destruction of the centralized workplace and demands for increased work/life balance among Gen Z staff, conforming to the rapid consolidation into large advisor entities, shifting from general practitioner planning to niches or specialty clientele, and working with a new generation of clients who don't want to be served the way their parents were – and, well, there's no shortage of things you have to adapt to if you want to make it through to the other side of next week.
So what's the formula for constant adaptation? One of the best presentations at our Insider's Forum conference came when Alyssa Phillips, Founder of C-Suite Power Partners, described her methodology for coping with the VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) environment we find ourselves in today.
Phillips has an interesting background: She has worked with professional athletes to raise funds for causes and opened foundations dedicated to various causes. She has worked in franchise management, and at a firm that literally worked out of a garage before growing to 3 divisions and $20 million in revenues. Finally (as she describes it), she "tripped and fell and landed in wealth management."
What she found is that planning firms were being managed but not led, and that leadership was the key to navigating change. Phillips's presentation included a quote from management consultant John Kotter, which defines the difference between managing and leading:
The central function of management is to provide order and consistency to organizations, whereas leadership is to produce change and movement. Thus, management is about seeking order and stability, while leadership is about seeking adaptive and constructive change.
The interesting challenge at most advisory firms is to take on a leadership role and drag management along through the chaos you're creating as you surf the necessary changes the environment is imposing.
Phillips told the audience that Kotter's change framework was the best available in the general business landscape, with a sequence that looks like this:
- Create a sense of urgency.
- Build a guiding coalition within the firm.
- Form a strategic vision about the change.
- Enlist a volunteer army in the firm.
- Enable action by removing barriers.
- Generate short-term wins.
- Sustain acceleration.
And finally:
- Institute change.
This is great for larger firms. But when Phillips began applying this methodology at Centura, she found a number of issues peculiar both to smaller firms and to the advisory profession that required her to adapt the model for adapting to change.
"I had trouble following Kotter's process because I didn't have all the resources available to me", she told the audience. "Sometimes your guiding coalition is going to be a party of one", she added. "And removing barriers, depending on your level of authority and autonomy, might be a challenge. What if leadership doesn't embrace change? What if the barrier is a department leader or an executive or owner of the firm?"
In response, Phillips changed the change management process into something called an Agile Change approach, which is better suited to helping those of us who don't have a volunteer army or a guiding coalition.
The Agile Change model, she said, is designed to navigate around the peculiar challenges that advisors might be facing, while still following the general principles of the Kotter model.
Agile Change: A Parallel Model Adapted For Smaller Firms And More Personal Interactions
The biggest contrast between the Kotter model and Phillips's Agile Change adaptation is that Agile Change focuses on individuals and their personalities, while the Kotter model presupposes an institutional structure. "With the firms we all work in, change is not this inanimate object that we are just guiding", Phillips told the audience. "We're leading people through change. And it is worth mentioning that people don't like change", she added. "I don't know how many people wake up in the morning and say, 'I can't wait to change things in the office.' That becomes something we have to navigate."
The Agile Change process follows a number of steps that parallel the Kotter model, but are interestingly more personal and perhaps more realistic in a small firm setting:
- Assess the situation.
- Create a sense of urgency.
- Build buy-in from the ground up.
- Formulate the plan.
- Solidify the buy-in from the top down.
- Communicate and highlight wins.
- Track results and refine.
And finally:
- Institutionalize the change.
In the presentation, Phillips elaborated on these steps one at a time.
Step 1: Assessing The Situation
Phillips gave the example of a specific change that she executed at Centura, where she helped the firm switch from a CRM that tracks birthdays, names, and addresses to one that would also track staff activities and operate as a management tool. The challenge, of course, was that many people in the office would have to start inputting more information into the system, which would be at best an inconvenience, at worst an interruption of the flow of their days.
Assessing the situation means looking first at the external, asking about the best practices of other firms that were getting operational and management capabilities out of their CRM solutions, and researching which of those CRM solutions would be the best option for her firm.
It also means checking out what solutions are available on the market, and their feature sets. "In this stage, I'm doing demos, watching videos, and talking to colleagues at other firms", said Phillips. "I want to get a sense of what could reasonably be expected from a CRM in our world today."
Then you move to assess the internal situation. "Right from the start, you want to start talking about the project to diverse, key stakeholders in the firm", Phillips told the audience, sounding them out about how this change might affect them – and potentially help them as well. "I can't stress enough how important it is to cast a wide net in the beginning", Phillips added. "This is going to help down the line for buy-in, which is going to help further down the line during implementation."
This, by itself, is a pretty big step forward, even if nothing has happened yet when Step 1 is completed. Phillips created a realistic view of what the change would accomplish, the best software solutions, how the change would impact people, and implicitly prepared them for the change. The staff feedback would also help identify anything that Phillips might have been missing about the importance of this or that feature in the software that she would be shopping for.
In this exploratory stage, be prepared for negative feedback and what Phillips called 'venting.' Her advice: Don't avoid venting; in fact, encourage it early in the change process. "If someone is venting, I'm trying to listen and understand what their real concerns are", she told the audience. "I would much rather get this out before we started than have it come up during the process."
And, she added, if you encourage the strong and sometimes angry emotions early enough, it shows that you're willing to listen to their feedback. "If you do listen to them when they're venting, you are going to establish a connection with them", said Phillips, "and you'll be able to draw on that trust and connection down the line when it's time for implementation."
Step 2: Creating A Sense Of Urgency
The traditional thinking around creating urgency is to set clear deadlines and create consequences if those aren't met. But here, Phillips is talking about something else entirely. "This is your prep for building buy-in", she said. "You want to use the key stakeholder concerns that you learned about in Step 1 and build specific communications to address those concerns. When it comes time to buy in, you want to be able to deliver your message in a way that emphasizes the future state, to get everyone to believe we need to do this, to make this our project."
With the understanding of how the change would impact different people in the firm (from Step 1), the change agent/leader can now approach the different members of the team with a slightly more concrete vision of how the change might impact them. Phillips offered some language that might help to preempt the immediate defensive reaction that most people have to having their familiar workflows disrupted:
The owners would like to utilize the CRM system a bit more, and I'm not exactly sure how that's going to resonate, but it definitely will be connected to your daily workflows. I recognize that maybe you don't have a lot of experience with this system. I know that you are busy and you have a lot going on. I understand that this might feel like just another thing I have to do or just another thing I have to learn. I totally understand all of that, and all of that is very valid.
However, what I would like to do is get your perspective and understand your concerns. So when we start to design what this is going to look like, then it's going to make sense for everyone. Is that something you can help me with?
"In creating a sense of urgency", said Phillips, "I'm building specific rhetoric for individuals and departments that I'm going to later use in Step 3, which is build buy-in."
Step 3: Building Buy-In From The Ground Up
Remember that nothing has been launched yet at this stage. "Having pre-launch conversations is going to make people feel like they're in the know", said Phillips, "so they're not surprised when you actually launch and need to implement. It's essentially just giving people a heads up – and who doesn't like a heads up?"
She added that at this stage of the process, your energy level matters. "If you're not positive, if you are not excited about this change, do you think anybody else is going to be?" Phillips asked the audience. "So make sure that you're conscious of your energy. It's so important when you're leading change that you bring the energy that is going to motivate and inspire people. If your energy is drained and you're not feeling optimistic about it, that's going to come through, and it's going to be so much harder to get anything done."
In her efforts to change the CRM system at Centura, Phillips went around to the different team members, armed with what she had learned in Steps 1 and 2 (and from the venting), and customized her message to address each person's unique concerns. "You are tailoring your message to everyone", she said. "I'm making sure that I'm nailing these concerns that they talked to me about in Step 1."
Step 4: Formulating The Plan
Now it's time to help the team members visualize the end state, what the firm will be doing once whatever change has been made, and how it will impact them. Phillips advised the audience to inject as much clarity as possible.
"Remember, you're living and breathing this all day", she said. "They only have a cursory experience with it. The more clarity you can give them, the more confidence they're going to have, which will help you in the implementation stage. And", Phillips added, "you want to keep focusing on the purpose. Why are we doing this?"
But she said that you also need to be flexible with the implementation. "I can't stress enough how important it is to leave room for the 'how'", Phillips told the audience. "I can't tell you how many times I've seen someone put together a well-intended, very well-thought-out plan that was very detailed but also inflexible. So when they implement", Phillips added, "if it doesn't go perfectly according to that plan, things just crumble."
Her point was that the leader of change has to be open to change, too. "We can't just expect everybody else to be open to change", Phillips said. Each team member will be more likely to adopt the additional work if they can use their unique understanding of their role to customize how they can most efficiently change their processes and procedures to fit the overall plan.
During this stage, Phillips would once again ask for feedback – but for a different reason. She told the audience that instead of asking for the opinions of the various stakeholders in different departments, she would now only ask for advice.
The distinction is subtle, but Phillips learned that it can have a significant impact on how the conversations proceed. "When you ask for advice, you are going to be much more successful in creating a constructive dialogue", she said. "When I ask you for advice, I'm recognizing you as a subject matter expert. So you're going to be much more open to having a dialogue with me than when I simply ask you about your opinion."
Here's a sample dialogue:
Hey, thank you so much for your help thus far. It's been really helpful. I'd love for you to take a look at this if you're able, and give me your advice. How do you think this is going to resonate with others in your department? What do you think can be better? Do you have any concerns?
"At this stage, I'm definitely not trying to become an expert in everything at the firm", said Phillips. "I just want to get some of the stakeholders on board."
Step 5: Solidifying The Buy-In From The Top Down
Asking for advice in the previous step sets the stage for success in this one. Phillips noted that the management team doesn't want to be surprised by any aspects of the change, and they may be as resistant to new procedures as anybody on staff. So the leader/change agent should make a presentation that not only shows the end state, but also emphasizes that key stakeholders have already contributed to the plan and bought in. "This is not my plan", said Phillips. "This is our plan. It's going to be much more real and practical to the management that way."
Instead of making a presentation that says, "Here are all the cool reports and things that the new CRM system will produce and we should definitely do it", Phillips recommended that would-be leaders talk to management in their language of order and consistency:
Hey, management team, here is the scope of what we've done thus far. We've assessed the situation and all these things. These are all the people who have been part of this process. Here are some of the concerns that were highlighted in different departments, and this is how we're planning to alleviate those concerns with the plan.
Step 6: Communicating And Highlighting Wins
With both management and key stakeholders on board with the change, it's time to actually implement. (Phillips recognized that members of the audience, and not a few readers, were getting a bit impatient for something to actually happen.)
But even here, with all the prep work that has gone into the change, Phillips recommended caution in the implementation stage. "I cannot stress enough", she said, "how much I hope you will deliver a phased launch plan."
Why? Because, she said, significant change in processes and procedures is difficult to swallow in 1 gulp. "Instead of giving them everything all at once, break it up into bite-sized pieces that are easier to digest", Phillips recommended. With the CRM shift, Phillips took a month to implement the entire plan.
"You want to give periodic updates, and you want to provide transparency", she advised. "Clarity creates confidence, and it helps all of us battle that fear of the unknown."
Later, she noted that the CRM project was laid out and tracked in the Asana project management software, and Phillips gave everybody at Centura, across the organization, access to the tracking system. "If they were curious, they could get into the weeds and see exactly where we were in the process", Phillips told the audience. "But just the fact that it was accessible made people feel better."
Highlighting wins means that when one or another stakeholder succeeds in making the change, that person becomes famous within the firm. "I will emphasize the key stakeholder contributions, specifically people that I know would be concerned about the change", said Phillips. With the management team, she would show the improvements in the reports and the data that was becoming available. The conversation might sound like: "Here are not only reports and dashboards for business intelligence that are going to help us make better strategic decisions, but also some really cool automations that are going to help remind us when it's time to reach out to better manage our existing client relationships.
Step 7: Tracking Results And Refining
The stage where wins are highlighted ends when the process begins to become normalized. But Phillips said that it's important to monitor, to compare what was supposed to happen with what actually did happen across the firm, and what was learned and what should be done with that information.
"With Operation CRM, I started to report on activity and usage in the CRM system, at first at a team level", she told the group, "and then as we gained traction, I worked on getting everybody invested in the change and reinforcing new behaviors."
Phillips then moved to tracking activity and usage on an individual level, because she had learned from past change management experience that people tend to be competitive.
"I assigned points to it, ranked it, and sent the point totals and rankings out on the internal messenger to the team members", she told the audience.
And something remarkable happened, which greatly accelerated the implementation process. The next day, her inbox was flooded with messages around: 'How do I get more points?' "This really got their attention", said Phillips. "I would get messages like: 'I have a few more notes to put in. If I do it before 6:00 PM, can I still get my points?'"
Before long, staff members started questioning the fairness of the scoring system that Phillips had created. The dialogue would go something like this:
I took 20 minutes to prep for a client meeting. The meeting was an hour, and then it took another 10 or so minutes to debrief. That's like an hour and a half. And I got one point. But such and such, he sent an email and that took him like 10 minutes and he got a point, too. That's not fair.
Oh, good point. Well taken. So what I'm hearing is: You all would prefer a weighted scoring system based on the level of effort for the activity. Is that correct?
Well, yeah.
Okay. Why don't you form a committee and figure that out? And if you all think it's fair, I am more than happy to take that into consideration.
And suddenly there is a committee to decide how everybody should be scored as they were making a behavior modification that many team members initially (reflexively) opposed.
Step 8: Institutionalizing Change
By now, pretty much everybody on the team has become accustomed to the new way of doing their jobs. Phillips said that the last step is to tie the metrics that she (with the help of this new ad hoc committee) has created to the key performance indicators of everybody's job evaluation, which will tie them to the objectives and key results. This will flow into the performance review, which is connected to the bonus pay. Now, finally, there are consequences for not buying in.
Phillips said that this major shift in Centura's operations took roughly a year, but added that not all change is going to be that widespread or disruptive. Leaders will be constantly instituting changes, large and small; they can use her adaptation of the Kotter model more rapidly with smaller ones.
Her overriding advice is to be patient enough to take the process one step at a time. "Don't skip the warmup", Phillips said. "None of us would jump out of bed and run a mile. We recognize the benefit of warmup as it pertains to physical exercise. Change management is no different", she concluded. "Many of the steps in my Agile Change approach are warm up, and I promise they are there for a reason. Most of the people in this room are like-minded individuals: You are doers who like to get things done, who embrace changes when necessary, and are impatient to get to the implementation. Remember", said Phillips, "that most of the people on your teams are going to need some extra time to get to that same place that you're at from the start."
This article original appeared in the May 2024 publication of Inside Information.
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