How Do You Know It’s Time To Leave Your Advisory Firm?

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#OfficeHours with @MichaelKitces Video Transcript

Welcome, everyone! Welcome to Office Hours with Michael Kitces!

Today I want to talk about challenges that crop up when you get your first job as a financial advisor, and then you find out it's not actually such a good job after all. This week's question comes from Jeremy, who asks:

"I just joined an advisory firm about six months ago. And I've realized since I got here that I'm not really comfortable with their investment philosophy, and there isn't much proper training or career path. And so, I'm wondering, is it too early for me to try to leave and find another job, because I'm afraid that having such a short stint on my resumé will hurt my future job opportunities?"

Great question, Jeremy! I definitely feel your pain here. On the one hand, you're not comfortable with the investment philosophy or what they're delivering to clients, and the job feels like a dead end. On the other hand, you don't want to leave your dead end job and find out you can't get another one because, now, you're a job-hopper.

You know, unfortunately, the reality is life does happen. Sometimes we do find ourselves in these challenging situations where it feels like you're just stuck between a bit of rock and a hard a place and you have to make a decision.

I was someone who went through an early version of this. I had three jobs in my first three years getting started in the industry while I tried to find the right fit. And, frankly, based on what we see with hiring paraplanners and associate planners and job opportunities of New Planner Recruiting where we look at a lot of resumés and prospective candidates, let me give you a couple of suggestions about how to move forward.

Start By Trying To Create The Change [Time - 1:42]

First and foremost, if you're concerned about how your firm implements investments or long-term career opportunities at the firm, I encourage you to see if you can solve the problem within the firm first. In other words, the starting point would be to fix the situation where you are, not leave it or just run away from the problem.

Let's start with investment philosophy. Now, you didn't say in your message exactly what the investment philosophy is. I'm going to guess, in some way, shape, or form, that it probably relates to the firm being more active in its investments in some manner that is not leading to good results, because that's the most common problem or situation I see. Maybe the firm actively manages clients, but it's having trouble doing it well because each of your clients' portfolios is different. Maybe they're using mutual funds or separate account managers that aren't performing well.

The reality is, if you go to your firm owner and say, "Hey, I'm not comfortable with how we're managing investments for clients," or, "I think we're doing it wrong," this is not going to go well, because you're putting your firm owner on the defensive. If you suggest what they're doing is wrong or bad (even if it is!), pushing the point that way is just going to make them want to defend themselves because that's what any rational person does. You feel attacked, so you defend yourself. And the reality is, you're the employee and they're the firm owner, which means they have the power in the relationship. I think you can see how this is going to turn out if you make it antagonistic.

My recommendation here is to try coming up with a better alternative. Come up with a better way to execute some of the client portfolios, and suggest it to the firm. Perhaps if the firm keeps using some managers that don't perform well and you've just come out of a client meeting where the client was complaining about the results, you can suggest, "Hey, the clients are clearly unhappy with a couple of these large cap funds that haven't done well. What if we tried using a Core and Satellite approach where you can use some low-cost ETFs for the core and then just use our better funds in the satellites?" The advantage of this approach is that now you aren't challenging the firm owner. You're responding to a client issue. It is something a client pointed out and you're providing a solution that would be a win for everyone.

Alternatively, if the reality is that the firm manages each client's portfolio differently and is struggling to keep up with it all, you might suggest like, "What if we have rebalancing software to help us track and manage all the client models more effectively. Can I research some of the rebalancing software solutions, and I'll bring to you the best two that I find, and we can look and see if they might help?"

Again, with this approach, you're not criticizing the way portfolios are managed. You're offering to do some of the work to help find what should be a better solution for clients and for the firm, which perhaps implicitly recognizes the firm is currently not doing good, but without saying it, and focuses on a proactive solution. And most firm owners I know will be happy if you come and say, "I want to do some work to bring a better solution to the table." And you know what? If they adopt your solution, you're going to get the firm to change the better outcome that you wanted.

Simply put, there's a lot a good that can be accomplished by starting a conversation with your firm owner using the words "what if"... "What if we did this?", or, "What if we tried it this way?", and not "Why do we do it this way?" Because the latter usually makes the other person want to defend themselves. There's nothing wrong with a true why question, like "I really want to understand why we're doing something." But the problem so often is that when we say, "Why do we do it this way?", it's pretty much a veiled way of saying "I think it's dumb we do it this way." And that does not lead to a positive conversation to change. It leads to defensiveness. If you want to bring about change, start with "What if we did it this other way?" and not "Why do we do it the way that we do?"

You Want A Career Path? Ask For It. [Time - 5:26]

Similarly, when it comes to career opportunities, the best way to clarify what the long-term career opportunity is with the firm is to ask what the long-term career opportunity is with the firm. Start the conversation.

I'm constantly amazed how often I hear advisors complain that the firm owner where they work hasn't given them a career track. When I say, "Well, what happened when you raised this conversation with the firm owner?" crickets chirp. It's silent. Like, "Oh, well, we've never had that conversation." So, look, if you have the conversation and you don't like the answer, that's one thing. If you've never taken upon yourself to initiate the conversation, that's on you. So initiate the conversation!

The reality at most smaller advisory firms (under 10 employees, which is almost all advisory firms...), the truth is that the firm owner has no idea what the career track is. They don't know. They've never had a firm as large as what they're hoping to grow it to in the coming years. You know, it's one thing when you're at a large firm that has 50 people, and 10 of them have already gone through a career track, and the 11th person comes in and says, "What's the career track?" You say, "Well, here's how it works around here. Here's how we've done it with all the rest." When you're the first one going down this track and if you're a paraplanner or an associate planner in a firm with as many as 5 to 10 employees, you may be the first person that ever actually is going to move up the line in a career track, and they literally don't know what the track is because they've never gone down this path! You have to recognize it's a first time for the firm owner as much as it may be a first time for you.

My suggestion, again, is to start the conversation with your boss or firm owner and tell him or her that you like to understand the opportunities within the firm as it continues to grow. And the "continues to grow" part is really important because it's emphasizing that this isn't about getting more of your share from a fixed pie. This is about the opportunities as the firm gets bigger and more opportunities abound, because trying to get more from a pie that isn't growing is hard. When you're trying to get a small slice of a growing pie, then everyone benefits. It works much better.

I'd suggest that you schedule some time to talk about long-term opportunities with the firm as it continues to grow and explore what might be possible.

Though again, recognize that because your firm owner probably has no idea what the opportunity is because they haven't fully fleshed it out because the growth hasn't happened yet, and they may have never run a firm of that size, so realize there's probably not going to be an answer at first. Don't make this a win-lose situation, For example, "I need an answer now, or I'm leaving." Tell them you'd like to know what the opportunities can be with continued growth and that you want to revisit it at your next review. And that gives the firm owner some time to think about possibilities as well, start moving towards the vision of the firm, and figure out how you fit into it.

When It’s Time To Leave – Philosophy Mismatches And Career Opportunities [Time - 8:25]

Unfortunately, sometimes you would try to start these conversations, they really don't go anywhere. The firm owner really does not want to change or improve on an investment process. Maybe it's problematic, but they're comfortable. They're used to it. It's worked decently so far. (Remember, they could afford to hire you!) It's not completely broken, no matter how negative you think it is. And maybe they really can't articulate a career path or an opportunity for you.

Even worse, perhaps there really is no growth, and there aren't going to be opportunities because the truth is, at a firm that isn't growing, there's very little chance there will ever be a career track! If the firm is not growing, every additional dollar for you is a dollar less for the owner, which is not appealing from the owner's perspective.

When the firm is growing, it means there are more dollars for you. Suddenly you may hear, "Hey, we grew a bunch. I'm going to make a little more and I'm going to pay you a little more. You're going to get a promotion and we're going to hire more people." Everyone feels like they're winning. That's one of the primary reasons why I suggested, if you want to find a firm with career opportunities, find a firm that's growing. Because it's literally the growth that brings the career opportunities.

But what do you do when it's really a dead end? First, I think you have to clarify what the problem is, because there's a big difference between a firm that just doesn't have good long-term career track opportunities and a firm where you are not comfortable with how clients are invested or taken care of.

If you're really uncomfortable with how the firm handles its recommendations to clients and they're not willing to budge, I think you need to leave (like, "start looking now" leave). Life is too short to live in a firm that doesn't do right by its clients. And, sadly, those advisors are out there that don't do good work for their clients.

On the other hand, if the reality is it's a fine firm and they're good people but you just don't think there's a good long-term fit or any long-term opportunity, then eventually you're going to need to leave for the next opportunity, but there's no hurry. I'd actually encourage you to take your time and prepare yourself so that the next job really is a good one. Finish your experience requirement on your CFP. If you haven't already, start studying for your CFP. Build up your savings so that you can afford to make a transition if there is maybe a little gap in income or saving up so that you even have a fallback where you can go launch your own advisory firm if you want to.

That's actually one of the biggest cautions we give to advisors that come to XYPN to start their own firm. Build up your savings and a financial cushion first. It gives you more choices. And, you know, we talk about this as fiscal prudence for our clients, but it applies to us in our career tracks as well. Don't quit your job sooner than you need to because you're not sure it's going to work out well in 5 or 10 years. It's one thing if you are dealing with ethical issues. But it's another if you're just saying, "I'm not sure what my long-term opportunity is." With the latter, you have some time to figure this out.

Looking For A Job Discreetly When You Already Have One [Time - 11:07]

I know, for some of you, the challenge at this point is literally how do you search for a new job while you're at your current one, because you usually don't want your current firm owner to find out since they may or may not push you out if they find out you're getting ready to leave?

A couple of tips here: Number one, clarify what you're actually legally allowed to do. This means double-check. You have an employment contract, so what does it say? Does it have a non-compete? Does it have a non-solicit? Non-compete means you literally can't work for another competitor. Non-solicit means you can work for another firm, but you can't solicit any other existing clients to come with you.

The good news from the employee perspective is that a lot of non-competes are unenforceable. Many states just outright don't allow them. Sadly, a lot of firms still make employees sign them even if they're not enforceable because not everybody looks into it and figures it out. If you've got one or you're not sure, find a lawyer in your state. You need one in your state that knows employment law in your state. Pay them a couple hundred bucks to review the agreement and find out if it's an option for you and what your legal choices are. Don't get yourself in trouble.

Number two, update that resumé and start sending it out. Clearly, you don't want to post it to open job sites for employers to come find you because then it's out there and that could come back to your boss as well. You're going to have to be a little bit more proactive about looking for the job opportunities. You can go to the relevant job boards in our industry: CFP Board's job board... FPA has one... NAPFA has one. We have job opportunities listings at New Planner Recruiting as well.

Find jobs that are of interest and apply to those jobs. Just note in your cover letter your current firm is not aware that you're looking to make a change and that you would appreciate discretion. People who are hiring understand what that means. If they're interested in you, they don't want to screw up the deal by screwing the relationship with you by accidentally outing you to your boss while they're evaluating you, so they will do their best to be discreet.

But, also, make sure you don't out yourself, which means don't apply from your work email address. Make sure your resumé has your cell phone or personal number and your personal email address. You'd be amazed the number of people that I get. They'll say, like, "Hey, I'm looking for a job, but my boss doesn't know. Let me know if there's interest." And they send it from their work email address. What am I supposed to do? Hit reply and say, "I found three great jobs for you" and just hope your boss doesn't look at the email at the time? Do try to be discreet, but if you go put your firm's phone number on your resumé and the potential hirer calls your firm, that's on you, not them. Do your own diligence to make sure that you're not putting yourself out there in a way that's likely to bring it to light for everyone.

Number three, join a professional association. It can be FPA, NAPFA, IMCA, AICPA PFP Section, whatever is a good fit for your firm and your role. But be in an association. Be involved and volunteer. It's not just about giving back to your profession, which is important, but the reality is, being involved in professional associations is a great place to find a job. The relationships you're going to build with people at other firms and with people you work with as volunteers on committees are the ones you can network through to find the next opportunity. And they're likely to want to help you because you've got a relationship with them. And the good news is that you don't even have to explain to your boss why you're going out to something. It's an association, and that's what you do! You just might happen to find your future boss there as well.

I'm certainly not saying this is the only reason to join an association, but it's a powerful opportunity to network and find future opportunities that I find a lot of planners tend to overlook. And that means investing yourself. If your firm won't pay for your joining FPA or NAFPA, then pay for yourself. It's an investment in your network and in your long-term future.

Getting back to Jeremy's original question, is this short-stint job going to label you as a "job-hopper" and hurt your ability to get a future job? The good news is I don't think it has to or at least not when it happens once. And here's how I would explain it. When you're interviewing for a new job, I would just say, "When I got my first job, I didn't really understand the industry that well. And I didn't even know what questions to ask really about the firm's philosophy and its opportunities. But now I know." You are sending the message that lesson learned here is on you. You picked a bad firm out of the gate, but now you're looking for a new opportunity.

The reality, again, is that most advisors out there know there are other advisors that do some bad stuff. No one's going to begrudge you because you got hired into a bad firm and you didn't realize it until you got there. Those firms are out there. And, unfortunately, sometimes they're pretty good at sales, and you don't realize it until it's too late. No one's going to hold a grudge against you for that. However, that excuse only works once, because, in your next job, you better do your due diligence on the firm and their investment/planning philosophy. That means figure out what they do and ask the questions you need to ask to make sure you don't do this to yourself again.

And remember, an interview is a two-way conversation. They interview you and you interview them. So ask the questions you need to ask so that you don't end up with this problem again. Because, if it happens repeatedly, it is going to be an issue. At that point you're either a job-hopper who isn't serious about any particular job in the industry or, worse, you're not a candidate who's serious enough to do basic research and due diligence on your firm. And you know what I would worry about at that point as a business owner? If you can't take the time to ask questions and research your next job opportunity for yourself and look out for yourself, how confident can I be that you're going to pay attention to details that matter for our clients?

So, Jeremy, if you need to make a change because you didn't get the right fit the first time out, that's okay. I wouldn't freak out about it. Make a change. But use it as a learning opportunity about how to do better due diligence so that you get a better fit the next time. And be candid with the new firm that's why you left. It's an okay reason, at least once, maybe twice, but at some point, you've got to take responsibility for yourself for making that interview two-way conversation and making sure you really ask the questions you need to ask to find the right fit.

I hope that helps and provides some food for thought about what to do if it's time to leave your advisory firm and find a new job. Always start with trying to resolve it in your current firm first. I know sometimes they're hard conversations and it can feel awkward, but start there. See if you can make it work there. And if it doesn't work, then it's time to look.

This has been "Office Hours With Michael Kitces," normally 1 p.m. East Coast time. But I was out of whack today with travel and the blizzard and the rest, so we're meeting here now. Thanks for joining us and have a great day, everyone!

So what do you think? How  do you know when it's time to leave a firm? What would you do to try and make it work first? Should young planners worry about being labeled job-hoppers? Please share your thoughts in the comments below!