By Richard Russell, CEO, and
Patrick Corcoran, managing director
The Richland Group
As they say in Vegas, “the house is doing well,” and then it was 2008, and the financial dream suddenly became an endless nightmare.
Anyone who was a financial advisor, mortgage broker, equity analyst, and all the other titles the financial sector surrounds itself with, was doing just fine. The large institutions, the medium size banks, and the boutique firms all had a piece of the pie – one that seemed to never end. Taxes were low, job growth was high, credit was extended and then, “suddenly and surprisingly” it all went away – fast.
It ended, the “human spirit” was crushed and the world stood still, shocked and waiting for answers to their many questions: Can the historic firm Lehman Brothers really collapse? Will the U.S. government use tax dollars to “bail out” various financial institutions? How will China, Europe, and the rest of the world react?
Well, we all know the answers to those questions, and unfortunately, some of them still fuel uncertainty.
In 2008 there were many firms, everything from those trading exotics to those originating loans – and aside from those “too big to fail,” very few remain. The financial services sector was purged by U.S. government action, destroyed by their own operational stupidity, and eventual economic catastrophe.
Many boutique firms were either purchased by larger institutions, merged with one another, or were simply put out of business. A select few survived the shockwave and were forced to reinvent themselves.
On the one hand, one could certainly argue that a “good” chief executive can always move their company from one set of expertise to another. But, on the other hand, think about how the difficulties during such a shift might hinder what we describe at Richland, as a “transitional diversification.”
Not only were we forced to diversify in order to remain competitive, but from beginning to end, we were never being able to step back and analyze the precise movements of such a transition because we could not allow the business i.e. the bottom line, to falter. It is an ongoing balancing act between priority and planning.
The question now becomes: how you as a leader and as a staff cope with such stressful and increasingly important change – not only to compete, but survive.
As in all shifts in one’s business environment, there are the common lessons learned, but we would argue that these are much more awesome in scope in a boutique setting as opposed to a corporate setting – whereby the hierarchy is stricter and policy is more refined. In the boutique setting, in most cases the CEO is personally known by all employees, and general policies are much looser.
This process of transitional diversification teaches us in the boutique setting to grow patience with the market and industry peers as some transactions can take up to a year to clear because of increased regulation and inefficient operation structures due to cutbacks and such. It teaches us increased self-reliance and what we describe as an “adventurous entrepreneurial rebirth,” where the copy machine breaks – you fix it, or letters need mailing – you mail them. Equality, for the most part, among the staff members becomes the new norm.
Along with internal changes, there are also business related changes that come as a result of the transition; you are forced to say “Sorry, we cannot handle that currently.”
For the first time in a long time, CEOs are playing conservative business, in fear of over-extension, maintaining a constant revenue stream, and as a result, teams are required to continually research and analyze different financial trends (both in the United States and abroad), and much more.
In the cases where you are able to operate, there are still hindering factors which have to be overcome. For instance, corporate bureaucratic systems have tightened, approval levels have increased, and fewer exceptions are made – what you used to rely on was simply a system, but when the system becomes stressed or inefficient, you have to rely on relationships with everyone from vice presidents to secretaries. It forces your once close-knit rolodex to almost mimic your social media connection list.
We have coped with such shifts in the business environment by implementing two important strategies: diverse management hiring and providing paramount customer service consultations.
Our hiring of a diverse group of individual,s not all necessarily experienced or seasoned financial advisors, but with backgrounds that included management consulting to academia, brings an entire new perspective to business development. We also find tha, in an era of uncertainty and financial jargon, clients not only want answers, but they want truth.
And because we deal with all sorts of client,s from academic deans to financial advisors, our diverse staff is able to communicate on various levels on a whole host of issues.
A boutique firm adds tremendous value to today’s market, but rest assured, today’s market makes the boutique firm work harder than ever before.