Complacency might be the biggest risk that advisors, clients are overlooking

Keeping advisors from complacency

The same positive returns and asset growth that can breed complacency among clients will impact advisors, too. A stable practice with money coming in and assets growing might make an advisor want to “coast,” but that can create complacency as well and put their practice at serious risk during a market downturn.

“If you look back in history advisor practices and dealers tend to fail during these corrections that people don’t see coming. Whether you go back to the ’87 market correction, the dot-com crash, and the financial crisis,” Haines says. “When you have these big things, that’s where, I guess the internal phrase is people tend to get ‘blown up.’ Perhaps they have too much risk or they’re not doing enough. That’s when they tend to lose clients.”

Haines is responsible for the independent advisory channel at Raymond James and in working with those advisors, he says the best thing a dealer can provide is coaching. His team will talk regularly with advisors, find out about their businesses, and offer support where they can. Those engagements can prompt the kind of self-reflection that works against complacency.

Rather than a dealer going out to practices with a “command and control” tone, he says that a more understanding and probing approach can create an embedded culture that works against complacency. Giving advisors a specific set of tasks or processes might make a dealer feel like they’ve solved the problem, Haines says, but the more effective solution lies in leadership, inspiration, and allowing advisors to work independently. Even using the word ‘complacency’ can put an advisor on the defensive or prompt them to dismiss the idea because things are going well. Haines says curiosity about the business can help ensure advisors move constantly towards a goal.

“Rather than ask them if they’re feeling complacent or not doing things, the best thing we can do is ask them how their business is going, where they want it to go in the next few years, what their goals and what their plans are,” Haines says. “If they don’t have answers to that that’s probably going to trigger that reset in their thinking.”