The Danger Of Promoting A Competent Adviser
Financial Advice & Practice Management & Professional Services

The Danger Of Promoting A Competent Adviser

December 12, 2014

by Tony Vidler  CFP logo   CLU logo  ChFC logo

In any organisation a person tends to rise to their level of incompetence.

 

This is just as true for the self employed Principal of a professional services firm as it is for the staff member in a large corporate.  Actually, I believe that it is THE reason why so many advice firms amble along doing the same thing year after year: the Principal was an adviser who was “promoted” to their level of incompetence.

 

This concept is explained in a book which influenced me enormously some years ago: The Peter Principle.  This is the concept in brief:

“It holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent (their “level of incompetence”)”

 

When we think about how the typical advice firm evolves, it usually goes like this:

  1. Adviser enters business, studies hard, and becomes technically skilled
  2. Adviser does the hard yards in the real world for some years and becomes an excellent relationship manager as well as being technically skilled.
  3. Adviser works out how to make a very good living by generating enough prospective clients to keep very busy, so hires some support staff.
  4. Adviser looks to leverage business knowledge and time and starts bringing other Advisers into the practice, and becomes largely a business manager…

 

….and, enter The Peter Principle.

“…anything that works will be used in progressively more challenging applications until it fails…”

Peters_principle.svg

“Fail” is a bit harsh…rising to a level of incompetence is not necessarily failure as such. It is also not necessarily the end of development and acquisition of skills – as long as the person recognises they have moved to a role which is beyond them with their existing knowledge and skill set.

 

New knowledge and new skills can, and usually are, acquired all the time.  That is especially true of financial advisers who as a rule are in a continual search for new knowledge and skills anyway.

 

There is no doubt that advisers, especially those who are Principals of an advice firm, are generally intelligent and adaptable. The danger is that often they do not recognise, or perhaps acknowledge, that they have hit a level of incompetence as business managers.  Their competence as advisers remains superb, but the role of Principal of a firm requires different skills and knowledge areas.  Their incompetence is in a different arena.

 

Business coaching can help at this point, as can appointing consultants – and they are two quite different functions. The real solution is finding a Mentor.  Somebody who has walked a similar path, successfully, and whom you respect and are willing to be guided by.

 

The danger of being a competent adviser is that you find yourself one day running a complex business instead of just advising clients, and don’t recognise that this is the point where your knowledge and skills need further development. The most obvious warning signs are usually unhappy staff; adviser recruits who don’t stay for long; constant cashflow problems and ongoing “crisis management”.  And stress.  Lots and lots of stress.  That is a really strong signal that the level of incompetence has been reached, and that external help is required.

 

Recognise your own competencies, and the areas where there is danger of not being competent, and then get a coach or a mentor.  It will be the key to creating new competency and learning how to move the business beyond crisis management.  It negates the danger of promoting a competent adviser into an incompetent manager.

Ref: The Peter Principle

You might also be interested in this related article:
 Even Great Practitioners Can Use A Coach
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Comments (2)

  • Very good, as usual, Tony.

    I’m sure no one understands the Peter Principle until they are aware of how it applies to them. Sometime ago I created the saying/ meme (is that the right term?), “I’m smart enough to know that I don’t know everything” … so I introduce and add other advisers to my professional services as much and as often as possible.

    Kind regards, Wayne

    cid:part1.08020901.05060009@platinumdirectfinance.com.au

    Wayne Slager DFS (FBM) C Dec

    Mortgage & Property Adviser

    For all personal, property and business finance advice

    Platinum Direct Finance Australia

    Direct: (02) 8913 5735

    mob. 0438 959 133

    Office: 1300 554 553

    http://www.platinumdirectfinance.com.au

    Wayne Slager, Professional Property Solutions
    • Thanks Wayne. People understand it instinctively when they get to that level of incompetence of course, but then generally feel that it is a problem with them – not a normal situation that simply highlights the need to acquire new knowledge and skills.

      tonyvidler
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