In this episode of The Trusted Adviser, Rob Pyne sits down with Eliza De Pardo, founder and director of De Pardo Consulting, to discuss the key insights from her latest white paper, 10 Fast Track Insights: Clearing the Pathway for Growth. With over two decades of experience advising financial firms in the U.S. and Australia, Eliza shares practical strategies for tackling compensation challenges, aligning leadership teams, improving hiring practices, and leveraging technology effectively. They also dive into the critical role of human capital in driving business success, the impact of workplace culture on growth, and how firms can avoid the pitfalls of poor decision-making. Whether you’re leading a financial planning firm or looking to refine your business strategy, this episode is packed with valuable insights to help you build a high-performing team and achieve sustainable growth.

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SHOW NOTES

Topics discussed

Compensation and performance alignment

Common mistakes in structuring incentive compensation
Balancing incentives without creating entitlement or internal competition
How firms can better align compensation with individual and firm performance

Building a strong workplace culture

How toxic behaviours silently erode company culture
Addressing and preventing workplace incivility
Leadership’s role in setting expectations and maintaining a healthy work environment

Effective hiring and retention strategies

Why poor retention often stems from weak hiring practices
The role of structured recruitment and cultural fit assessments
How firms can improve long-term retention with better onboarding and career development

Leadership and decision-making

Signs a founder or executive should delegate leadership responsibilities
The difference between a consensus-based vs. consent-based decision-making model
How leadership alignment directly impacts business growth and efficiency

Business growth and client acquisition

Why relying on a few key individuals for growth is unsustainable
Training junior advisors to take on business development responsibilities
The most critical benchmarks for measuring true firm growth

Technology, AI, and execution

Why investing more in technology doesn’t always lead to efficiency
The risks of relying on an internal “tech-savvy” team member without a strategy
Best practices for AI adoption and outsourcing technology expertise

Quotes

“Hiring is like investing. We can improve the odds, but we can never guarantee the outcome.”
“Toxic behaviours act like death by a thousand cuts to company culture.”
“In the land of the blind, the one-eyed woman is queen. Don’t rely too heavily on someone who’s just tech-savvy—you need real expertise.”

Resources

TRANSCRIPT

Welcome to The Trusted Adviser Podcast where you get a deep dive into the world of financial planning with industry leaders who shared their stories of winning and learning as they chartered their path to success. This podcast is for the curious, those of you that like to dig into the detail, if that sounds like you get ready to listen and learn.

Rob Pyne

I’m excited to introduce our guest today, Eliza De Pardo, the founder and director of De Pardo consulting. With over two decades of research and consulting experience across the US and Australia, Eliza is a recognised authority in the financial advisory industry. Her firm specialises in delivering data driven strategies to advisory firms and financial institutions, helping them navigate complex business challenges and achieve sustainable growth. Eliza’s journey includes co-founding FA insight, where she co-authored the respected annual study of advisory firms and leading consulting initiatives at Moss Adams. She’s also a sought-after speaker, frequently sharing her experience and insights at industry conferences. Welcome Eliza De Pardo to The Trusted Adviser podcast.

Eliza De Pardo

Rob, thank you so much for inviting me along. I’m happy to be here.

Rob Pyne

Eliza, obviously, we’ve kept in touch. You’ve done some work with us historically on our staffing structure and compensation and the like, and it was really valuable for us. And you’ve recently just published what I found to be really powerful. White paper titled 10 Fast Track insights, clearing the pathway for growth, where you boil down years of consulting experience into practical strategies for financial planning firms looking to achieve sustainable growth, you begin by saying, for the typical advisory firm, human capital features strongly as a leading indicator for success. You talk about compensation and other people related expenses as an investment in the firm’s greatest asset, and at 30% of total expenses for a typical advisory firm, you place people front and centre as the most powerful source of success. So, we’ll get into leadership strategy, execution, technology, adoption shortly, but let’s begin with people and talk about perhaps the most challenging area of all compensation. So, what are the most common mistakes firms are making with their compensation planning? How can they better align their compensation with performance?

Eliza De Pardo

Well, it’s a great question. Compensation is probably the one area that firms struggle with the most. It is a complicated area can become complicated. It can be a prickly topic, and we happen to do much of our consulting work in this space, as well as other related human capital areas. And what’s really interesting is that irrespective of whether you’re a very large advisory firm, you might be managing several billion dollars in assets, or you’re a smaller business, the challenges are often very much the same. That is, firms really struggle generally. In general, they struggle with developing a compensation plan, but incentive compensation is the one area that really stumps executives how to get it right, how to make the most of it. It’s a significant investment that firms are making. You know, some of the data out of the US market in recent years indicates it’s around 7% of revenue that’s been allocated towards revenue generating positions by way of incentive pay. And then, of course, beyond that, you’ve got any incentives that you’re paying to non-revenue generating roles in the business. So, it’s not an insignificant investment. But what we observe time and time again, and this is why it featured heavily in the white paper, is that whether you’re a very large, mature business or a smaller business, firms are struggling to connect incentive compensation with individual performance and firm wide performance, there is a disconnect, and one of the first questions that firms have to ask themselves, if they’re serious about using incentive compensation, is this idea of whether or not we’re trying to pay for performance, whether that’s an important part of our compensation philosophy, our beliefs around pay, should we be paying above and beyond baseline base pay for individuals that contribute above and beyond baseline role, their role accountabilities. So, you know, as an example of that, you might have some special projects, special initiatives each year, and that could represent above and beyond contributions for a team member if they’re playing a role with those projects, special projects. So, do we want to pay people and reward them for doing things that are really a stretch, that are driving strategic initiatives, that are driving overall firm performance? So that’s the first question you’ve got to solve for, and at that stage you’ve got to think about, well, how do we go about defining objectives? And that’s the other area where firms typically fall short.

Rob Pyne

Do people in firms that are making these big decisions around compensation incentives. Are they concerned, principally around upsetting culture and the how do you compensate someone for doing above and beyond? And yet they’re supported by a team around them that’s helped them achieve that, and they’re afraid that it’ll become a more siloed mentality for people if they are really pushing for their own level of compensation through an incentive scheme. Do you see that kind of being the stumbling block for firms around this?

Eliza De Pardo

Yeah, I certainly see. Culture concerns around upsetting the culture has been one of the reasons that firms have kind of held back from making incentive compensation more performance oriented, more connected to individual performance. But the flip side of not of not rewarding directly for a well-defined performance objective, whether that’s an individual one or a firm wide one, or a combination of the two. The downside to kind of keeping it loosey goosey and just putting an incentive out there up for you know assessment at the end of the year is that we start to create what I call, in the paper, a kind of entitlement program, which is where team members start to expect incentive pay to just become a given, where there is nothing additional or specific that we’re being asked to do through the course of a 12 month performance cycle in order to generate the incentive and then shareholders start to become resentful over time. They’re disappointed that we’re not really getting anything for this investment. Maybe it worked okay in the past, but particularly if you’re having a year a year that’s not as you’re not doing so great. Then in those instances, it starts to weigh on the executive team, it starts to weigh on owners, and it also starts to weigh on people who are really performing well, but everybody else is getting the credit for all the work that they’re doing and so the culture of the business really matters here, and what you’re trying to accomplish, what you believe is the right way to reward success in the business. But I think, I think you can make the case that the downside is, is as complicated and should be avoided, as much as you know, unintended consequences on the other side of creating kind of individuality and driving sort of, maybe internal competitiveness with within the business, which we want to avoid. And there are ways of avoiding these things for sure.

Rob Pyne

Yeah. I mean, you mentioned in your white paper that toxic behaviours can act like death by 1000 cuts to company culture. What steps should firms take to address and prevent workplace disharmony?

Eliza De Pardo

Well, this is a big one, and I would say that if I look back across all the firms that you know we’ve worked with over the years, probably in 90% of the cases, there are instances of some serious what we call incivility in the workplace, behavioural, attitudinal issues, where you may have one individual in particular, or maybe there are two, or maybe there are more, hopefully not. And generally, most of these businesses are fantastic, but they there are these experiences that that happen where individuals are not in alignment with the culture of the business. Now, some firms will do the right thing, which is to act really quickly. And that, and that’s the advice in the paper, is certainly where you see instances of behaviour that’s not in alignment with the culture that you’re trying to build within the firm. It’s to nip it in the bud. Really act quickly, promptly. Don’t let it go on. You’ve got to make the expectation very clear early on around behaviour within the business, and a failure to do that can create just an endless drag on productivity within the business. It will certainly slow your growth. It will certainly impact on your profit margins. And I think this is one of those habits experiences that can go unchecked for many, many years, because, because executives, people leaders are scared to address it with team members. And so, what tends to happen over years, in some cases, is you’ll get higher turnover of talent because other people don’t want to be around that kind of behaviour in the business. And we’re talking about, I mean, it’s kind of be clear on what we’re talking about here. You know, broadly and broadly, it’s attitudinal, behavioural issues, but if you’ve got team members that are refusing to work with others, that are refusing to talk to others, that refuse to train others and transfer information, transfer knowledge, because they don’t want to, they want to protect their lot, stonewalling, refusing to respond to emails and so forth, just all just plain rudeness. Which happens, this is the sort of stuff that becomes a huge distraction in the business. Other team members become demotivated. They don’t want to turn up to work. They certainly don’t want to collaborate. Teamwork goes out the window, and productivity declines because folks are more worried about their own wellbeing and steering clear of issues in the firm, it does nothing to improve business performance. So, the point is, really nip this one in the bud. It’s an easy one to do if you are aware paying attention to what’s going on in the business and. And the other point that’s really important to make here is that your whole team is watching. If you’re a business leader, if you’re a people leader, if you’re an executive, if you’re a shareholder, everybody’s watching how you’re responding to this kind of incivility in the workplace. And if it goes unchecked, the message that it’s sending to everybody else is that we accept it, that everybody else will just have to deal with it, that it’s okay. And that is that, again, is a recipe for turnover, very dissatisfied team members. Really great people will be lost to that kind of issue in the business.

Rob Pyne

Yeah, really well put, and such a critical point, isn’t it? Because the impact, it’s like an infection. If someone is being difficult person in the workplace, it’s not just their work and their, I guess, productive output for their own work, but actually the impact have on others. And as you say, the worst scenario is then it creates turnover in the workplace. People that are actually people you want to retainer then saying, well, the message it’s sending is that that’s okay, and it’s not okay with me, and I’m not sticking around for it. So, you quote the Gallup research on that estimating the total cost of replacing an employee can be up to two times employee’s annual salary. Yeah, what hiring practices should firms adopt to improve retention and reduce that costly turnover.

Eliza De Pardo

Yeah, this is a big one, and this is really a kind of a call out to firms that have a bit of a revolving door of talent, where they’re very quick to hire people and they’re quick to fire people. They tend to be businesses that get really enthusiastic about having met someone that they think is a good fit, that might have. We refer to it as really Sparky personalities that you know are appealing to be around, and even if they don’t have any of the experience required to do the role, there’s sort of this temptation to give them the opportunity in the role and time and time again. You know, either I love the idea of being able to just give people a chance something just oftentimes it falls flat, and it doesn’t take all that long before that individual has to be let go, maybe moved into a different role for a period of time. It just never really works out. And of course, the cost, as you mentioned in that Gallup research, is really significant. You’re talking about, not only the cost of using recruiters onboarding, there’s always a ramp up period. There might be a few months before somebody becomes really productive in the role, or the training and development, the interview process, etc., significant, right? So, I think you know, the best counsel I can give to firms in this area is to just be really disciplined about your recruitment structure, your recruitment process rather, and that just means, you know, figure out what kind of skills you need to be conducting the interviews. Do you have the skills? Are you working with a recruiter? Maybe, if you don’t have the skills or the time to be able to allocate to this work, have several interviews in the process, do a cultural fit interview. I always think that’s extremely valuable to have really trusted team members come into the process, spend a bit of time with a candidate and figure out whether or not they think that this individual is going to cut it in the business, whether they are aligned. Be really, be really like thorough in that process, do all of your due diligence the way you would in other areas of the business when you’re making these kinds of decisions.

Rob Pyne

in the personality piece and the culture fit the sort of test that you put someone through. Do you have a particular preference or a few that you’ve used, like Strength Finders or the DISC profile, or others that you would use to kind of point to a person’s fit in terms of what their personality is and how it would likely fit in culturally, or is it something more designed by the firm that suits their culture?

Eliza De Pardo

I think you can certainly do both. I always think there’s value in having great team members that are already reflecting the culture, living the culture, contributing really well to the business, weigh in, give their opinion on a candidate. I think that can be very valuable. And you’ve got to be, you know, selective with who you choose to involve, but that, in itself, can just be really telling they might pick something up that you didn’t pick up, sure. But in addition to that, you’re correct. I think you’re exactly right. If you can do like a Myers Briggs, or you can do a DISC profiling, just to kind of get a sense for you know, the individual’s personality styles of communicating working preferences, that can be really, really helpful. The truth in this is this is not an exact science. There is always risk involved in these big recruitment decisions, and to some extent, you just have to do the due diligence as best you can. But it doesn’t guarantee, it doesn’t guarantee that things are going to work out. It just improve increases your chances significant.

Rob Pyne

just to. Improving the odds, yeah, much like investing, much like investing, we can improve the odds. We can never guarantee the outcome. Yeah, correct, that’s exactly right, investing in people or investing in the markets, yeah,

Eliza De Pardo

yeah. Generally, though, I think if you’re a firm that has retention issues, you can be sure that that reflects on your recruitment, right? Poor retention will always come back to poor recruitment.

Rob Pyne

Yeah, the lagging indicator poor retention says that the indicator at the front end, it’s the hiring process is not robust enough. So many, many founders become accidental people leaders. Yes, what signs you talk about this in your wipe? But what signs indicate that a founder or executive should delegate leadership responsibilities, and how do they how do you suggest they approach that?

Eliza De Pardo

Yeah, okay, so, I mean, you went through this experience yourself at some point in the development the growth of your business. You know, I work with executive teams. I work with shareholders and boards. And you know, many of them have been in business for many, many years they started out doing what they love, which is working with clients and selling. And that is a very different skill set, to leading people, to managing people, to coaching, mentoring. And for some of them, they love it. They’re fantastic at it, but I would say it’s a majority that do not enjoy it. And like all of us, I think when there’s something that you don’t enjoy so much, you’re less likely to commit the time to it. So, I can’t tell you the number of experiences I’ve had consulting where people, leaders in the business are also founders and lead advisers, and they will do everything but manage people so that and they are traveling a lot, they are out of the business. They are with clients a lot, so it’s very far down the list of priorities. They don’t have a lot of time to commit to it. And the team members feel that they know that you’re not committed to their development or their career path or having compensation conversations or helping them to manage capacity in the business. So, if, in general, you’re not dedicating time every second week, one on one with a team member, maybe it’s even once a month. If you’re not able to do that, to talk about all those important things, to stay close to team members, chances are your team members will get lost in the wash, right? They can probably get by for a period of time, but, but they won’t be getting what they need from the business. So, I think you to reflect on sort of the level of investment of time and effort that you’re able to put into it. Generally, if you’re not putting much time into it, you’re probably not very good at it. Maybe don’t have much experience in people leadership. That’s the that’s the that’s really when you’ve got to think about bringing in dedicated management and hiring individuals that can really bring in brand new strengths into the firm, in human capital management, that’s the ideal scenario, right? Where you can bring in, depending on the size of the firm, someone in a COO position, or even in a more smaller firm, in an operations manager position that has some human capital management expertise. And ideally, as you expand, you’re always thinking about, you know, what are the extra strengths we could do more with more of in the business, trying to add recruits that have some history in human capital management, people management, if that’s not the case, and you can’t you’re not in a position to recruit dedicated management. Think about how else you could utilise existing team members to take on parts of that role, individuals who maybe have those skills, who’ve done some people leadership in previous roles that would like to step in and happily take on responsibility for day-to-day people management for a period of time. It’s not a it’s not a full it’s not a permanent fix, but it might get you to the stage where revenues at a level where you can now afford to hire somebody who’s more dedicated in that space.

Rob Pyne

Yeah, you make a great point. I mean, it’s if your people are your greatest asset, then they have to be interested in, don’t they? And if you aren’t able to do that yourself, you have to find the ways to give that the attention that it needs and we talk talking about essentially founders who build a business as you say, they’re frontline, they’re building a greater growing the business, but that people management piece becomes sort of secondary, and really relying on a founder’s personality for growth is unsustainable. Ultimately, how should firms build a scalable, team driven business development strategy for everyone to be contributing. So, there is a little bit more, perhaps, growth across the board in the firm, and does give you that potential to hire in people to help with the people management?

Eliza De Pardo

Yeah, a really huge one. Again, this is something that’s observed in very large firms, which is quite surprising, I think, for many to learn that even when an advisory firm is managing several billion dollars in assets, dependency on one or two key individuals for brand new client acquisition, that business development work is still very high often time, right? It’s not something that resolves itself unless the business is really intentional about the. Way, it recruits as it creates scale. Sometimes the founders are so good at it that they think that, you know, they when they go to hire, they look for other skills. They look for servicing advisers, sure, so they can transition relationships as they bring them in. But at some point, in every firm’s development, there comes a time where founders or partners, shareholders, not necessarily. Founding partners become overwhelmed with the constant pressure to the reliance on them to be the rainmakers, and they want to stop doing that work. They don’t want to be out having dinners, doing the networking, doing everything to create the opportunities, and that’s when things really go south, because they just haven’t created any systems in the business to help them to step back from that work. So, as we talk about in the paper, one of the one of the biggest things that you have to do is to transfer your capabilities. You have to spend dedicated time with more junior advisers, coaching, having them sit in on your meetings, so that they can observe in particular, you want them to observe the rapport building skills, how that happens in practice. You want them to observe how you talk about the firm’s value and services, how you talk about pricing. The pricing conversation, I think, is what scares most advisers out of wanting to do brand new client acquisition work. But if they can have a first front seat to those conversations, that can be a very, a great way to accelerate the transfer of knowledge, right? But for sure, some structure to do that.

Rob Pyne

Yeah. Speaking of pricing, you’ve raised that, that it’s an issue for all firms to its there’s no perfect way of doing it, but everyone has a has a way. Many firms use an AUM pricing model or other, although I think in Australia, it’s becoming less common, although I think hybrid is still very common. The US is certainly more AUM centric, and businesses often rely on that market appreciation for growth rather than organic client acquisition. We don’t rely on it, but certainly of contributing significantly to their revenue and their growth, what benchmarks should firms use to truly measure their growth success? In your experience

Eliza De Pardo

it’s a really another great question, and I always counsel firms to really focus heavily on client growth rates. It, to me, is the most genuine indicator of a firm’s ability to expand, and this is just a percentage increase in the number of total clients over a 12-month period measured relative to the previous 12 month period, to show you know, the addition of new clients every year, and that is a reflection of the activity, the effort, the time you’re putting into being able to attract prospects and convert prospects. That is the hardest work that takes place in an advisory business. It is also, if we look at compensation, the highest value work, right? This is what the market will pay for at the highest rate relative to other roles. So, we know the value that’s that that comes with that particular accountability. So, client growth rate is, to me, the foundational metric. And you know, if I look over years of data in the US market, we produce research on this for many, many years. But the most recent data comes in at around this was an ensemble practice data, 8.5% client growth rate in 2023 and that was actually quite high. The numbers generally going to be somewhere between 6.5 and 8.5% roughly as a median for all firms in the research. Now, if you’re anywhere sort of seven and a half to 8.5 you’ve probably had a pretty good year, but one of the best things a firm can do is kind of benchmark against their own historical performance. Not everyone’s going to have access, easy access to industry benchmarking data, although there are a few sources here in Australia, also, I encourage businesses to think about, you know, what has been their client growth rate in history, in previous years? What were some of the factors influencing that growth rate? Were there special efforts made in brand new client acquisition marketing? Maybe a new marketing strategy that was rolled out that helped, helped along the way to figure out, you know, what moves the needle here in terms of client growth rate, the second metric is revenue growth. And then lastly, asset growth, which everyone loves to focus on, but it’s not necessarily indicative how the business is performing from a revenue and profit perspective. If you’ve got your pricing model lined up well, and you’re growing clients the right rate, then everything will follow.

Rob Pyne

Everything takes care of itself, doesn’t it? So that client growth rate at one that the front end, how many clients are you adding? Is a is a really key, important one, followed by, as you say, revenue and asset growth, which tends to fall into line, doesn’t it?

Eliza De Pardo

Yes, it tends to. That’s correct.

Rob Pyne

Yeah, it’s a good insight. It’s something that people often don’t think about, because they’ll measure the thing that gets the percentage of assets. And so, asset growth is kind of the primary focus, or revenue, even client growth is a really important one. So, you mentioned in your white paper, the challenge you see in some businesses is leadership misalignment. What? What steps, what practical steps can firms take to ensure the leadership team are all rowing the same direction, and we don’t get sort of fractured leadership and really, which sends a poor message to the rest of the team, what practical steps to firms take to make sure leaders are all on the same page, in line with what they’re trying to do.

Eliza De Pardo

So, it’s a really super important one, and the bigger the business, the bigger the leadership team, the more and more important it is to get this right, the harder it is to get this right within bigger businesses. So, you know, going back to your the growth discussion just a moment ago, the misalignment amongst leadership teams that we observe over the years, you know, could be some really big stuff, like they can’t get agreement around the growth aspirations for the firm. Perhaps partners have very different views. Executives may have very different views on what they should be shooting for, and that lack of alignment creates obviously a drag, because we’re unable to really commit to any one direction and execute and make the plan come to life. So, it could be something as big as that, right? We can’t get alignment around a strategy, or it could be something more petty, like we have disagreements around where we should be holding our holiday party. I’m not even joking when I say that these are the silly things that come up between partners that create not just partners, I shouldn’t say just partners amongst executive teams, that creates division. So could be very big issues, and it could be very small, petty issues that are creating kind of challenges within the way that the executive team is operating. And generally, what will happen is these issues will go on for many, many years. They’ll go on unchecked. Executives will stop talking to each other. If people are working across different locations, that’s a great excuse to not be plugged into the rest of the executive team, and to avoid conversations, we will stop collaborating on certain things if we have personality mismatches, long standing grievances, and before we know it, we are duplicating efforts because we’re not talking to each other about what’s going on in the firm. We are missing opportunities, sometimes missing opportunities that no one will even know about because no one’s talking to each other. It’s much easier to see this happening as a third-party external consultant than it is for executive teams to see it for themselves, especially when it’s been going on for a decade or more, and that’s oftentimes what’s happening. So, this is one way that, you know, we see this drag on growth that can go on for many, many years, go on unchecked. It’s really, really important. Going back to, you know, some of the, some of the points we’re talking about before, around culture is to really gain agreement amongst the executive team, amongst the partners around what is the culture that we’re trying to create within this business, and what is sort of the expected level of behaviour and the contributions that we all commit to making to the culture of the firm? What are our leadership team meetings for? What are we trying to accomplish together? Are we just sitting there resenting each other, arms crossed, not wanting to talk openly. That’s not helping the business. So how do we break some of these old habits, right? But we’ve got to be open about it, by having conversations around the culture of the leadership team and what we’re trying to accomplish together, grassroots effort are really-efforts are really important, being the bigger person, reaching out, having a cup of coffee with somebody, and trying to, like, really open lines of communication, but also doing those really helpful Myers-Briggs, DISC profiling, personality profiling, whatever one you choose, to use something that opens the door to conversation amongst the executive team to help start to break down some of these silos that have been created to try and bring people closer together. The truth is that there is no excuse. It’s non-negotiable for executives to be collaborating effectively. They’re getting paid a lot of money to do the work for the business, on behalf of the business. So, there’s no excuse for it, in my view. But this is one of the pieces of work as a consultant that is perhaps most intriguing, but also most important that if you can break down some of these silos and work with individuals, one on one, work with a group and help them to step one step at a time, move towards alignment and agreement and break the grid locks that have been in place. For years, this can have the biggest impact, perhaps, on firm performance, because we free ourselves up to move forward on whatever the big decisions are that are not being made.

Rob Pyne

No, I’m sure, in your role, you would often be acting in circumstances such as that as a real circuit breaker, someone who actually can provide an objective viewpoint that’s seen it before and has worked with so many firms. It’s not new, it’s just a different flavour of whatever the issue is, and you can actually bring an objective set of eyes and hopefully bring people closer to that leadership alum, which is so crucial. And one thing you talk about in your white paper that kind of speaks to this as well is this concept of circuitous decision making and how it can really erode profitability and morale and haven’t got aligned leaders. Decision making becomes a really challenging thing and circuitous. Decision making, I’m sure, is a function of just trying to get everyone on the same page, and it’s very challenging. How can firms in their executive teams streamline the decision-making processes, but still ensuring always there’s thorough analysis. How do they do that really well?

Eliza De Pardo

there’s a few ways of doing it. First thing I recognise what’s going on this again, is probably been going on for many, many years. If it’s happening, everybody knows about it. Everybody’s observing it. It’s not a secret. They can see that decisions aren’t being made. The can is being kicked down the road repeatedly, and decisions are really protracted, and of course, you can only imagine the impact that has on the ability to act quickly on an opportunity that presents make decisions that will ultimately drive performance. This is a really big one, and sometimes it comes out of the culture of the business. Are we too nervous about making a decision. Maybe we’re overly cautious. There is a tendency towards over analysis. You might have personalities that love to be the devil’s advocate, which is something I can’t stand. And I want to know what the devil thinks. I want to know what you think. Let’s be practical about this. I’ll put forward information that’s not helpful. Some people use that as a great excuse to be able to just delay and delay decision making and to create a much longer conversation than what’s required. It’s not always it’s not always additive. So I always, you know, encourage firms to think about whether they want to, oftentimes, continue with what is a consensus model where there is sort of decisions are made on a group basis, where we’ve got to seek input from everybody, and we’ve got to get everyone to a certain level of comfort in order to reach agreement before we can move forward with a decision. Well, that can take a very long time to get to, particularly on big decisions, right? In addition to that, not everyone at that table is necessarily able to contribute equally. There will be some people who are really close to the issue that we’re debating discussing, and others that are very removed from it, that don’t have first-hand knowledge of the decision or the issues that we’re trying to agree to, but we’re trying to get everybody to move along and make the decision together. It doesn’t always work. Doesn’t always create the best possible outcome. So, I encourage firms to think about implementing a consent model of decision making, which is really much clearer in terms of accountability, and one person who’s accountable, and that’s the first decision, right? You’ve got to figure out in your organisational structure who is accountable for what types of decisions within the business? Right figure that out. One person’s accountable for making the final decision, but they will. They are responsible for seeking out input from the right people in the business who either have some special subject matter expertise or a very unique perspective. They’re very close to the issue, and they have the greatest contribution to make to this particular decision. And once you’ve managed to collect all of the thoughts from the key people, only the key people, you then are positioned to make a decision yourself around which way to move forward. I like to reference one of the Amazon principles of leadership in this respect that talks about the ability to make, you know, debate wholeheartedly contribute wholeheartedly. Once a decision is made, everyone must commit and row in the same direction, right? We don’t have this unfortunate tenancy, which I’ve seen repeatedly, and this is a secured as part of it, decisions made. People want to second guess that decision. They don’t support the decision. One month later, we’re still debating the same question, right? We don’t have room for that under the consent model. We’ve made the decision. Everybody has to row in the same direction and commit to the course of action in full, you know, wholeheartedly commit to the right that that direction, and I think that that in itself, really resonates with firms. A lot of the times, they love this idea of just having clarity around how, how a decision gets made, takes all the guesswork out of it, speeds up the process, includes just the people who have the skills.

Rob Pyne

Yeah. Yeah, that makes a ton of sense. Really, a consent-based model with clear direction around who is going to make the ultimate decision, but their responsibility is to engage with the people that are closer to the issue that can offer real insight. But yeah, a consent-based model, I can see that being a really strong framework to get things done, but and not end up in endless cycles of getting everyone to sort of on board and up to speed, which can take a long time. So that’s right, you mentioned it’s, I think it’s your first Fast Track insight in your white paper speaks to strategy execution, which kind of is what we’re talking about here. You remind us of the quote that strategy without execution is just hallucination. So, what are the biggest barriers you see firms are facing when they try and implement their strategic plans, and how can they overcome the barriers that they consistently face here to execute on their strategy?

Eliza De Pardo

This is, again, a really big one, because about it’s around 47% of firms fail to implement their strategies. Right? That’s a pretty huge number. And generally, the reason that firms are failing to execute is because they have overestimated the resourcing that they have available, the time, the money, the energy that they have available to put towards the strategy implementation work. Now strategies is really one of those. It’s one of the areas of leadership that leadership teams love, if they you know, we do a lot of work in strategic growth planning with executive teams and, and they love it generally, because it’s really aspirational, it’s very creative work. It’s exciting to think about the future, and they generally land on a direction that they’re really excited and enthusiastic about. And so, then the tendency is to just want to try to get everything done straight away. And oftentimes, when you’re strategising, you know, we like to use a three-year time frame to build out a business strategy and then figure out what the next 12 months looks like. You can’t do everything in the first 12 months. You’ve got to figure out, what are the priorities, what are the what are the items within the strategy that will have the biggest impact in the first 12 months that we know we’ve got the capability to execute on. There might be some relation. Relationship between the various strategic initiatives which firms have to figure out. So, part A might, there might be a path that has to become before Part B. There are some dependencies that has to be figured out. So oftentimes, firms will make that mistake without, you know, really thinking through the order of the work that needs to get implemented. But trying to take on too much at one time will ultimately overwhelm your team members, and then people will start to lose confidence that we can execute on this strategy, and then the strategy kind of gets put on the back burner and it doesn’t ever come to fruition. That is the biggest danger as a business executive. That is the big danger you want to avoid. So, first thing is to figure out what the priorities are. What can you do in the first 12 months? Realistically, based on the time, the skills, the capacity, the money that you have to invest to get it done right, figure out those priorities, assign team members to support you. Really importantly, owners and executives cannot execute strategy themselves. They will need to engage team members to help on special projects in order to get stuff done within the business. We also want team members to feel empowered. We want them to understand the strategy. We want them to help us. We want them to start thinking like owners and driving the business. And ultimately, hopefully, they’ll become owners in the future. So, I think it’s really important just to focus on discipline and this for many businesses, the challenge, how do we move from big picture thinking, which is the strategy work, to tactical, detailed planning, work that has to get done every single month, month after month for the first 12 months of the you know the plan, and then we’ve got to do it again the following 12 months and so on. So, think about your implementation plan. Assign people to the plan, track regularly, have regular meetings once a month. Is probably not going to cut it. You’ve got to have working groups within the business who are focusing on special pieces of the strategy to get stuff done. It’s not going to happen by itself. So that’s why general guidance is like, this is this is not a set and forget. This is like ongoing what the strategy development is. The easy bit, yes, hard part is the execution.

Rob Pyne

makes so much sense. And as you say, it’s often the fun pieces to figure it out, what we want to do, and where we’re going and what it looked like, that visioning process is all very exciting, but it’s the ultimately, the execution of the strategy that’s where the rubber hits the road and there’s parallels there with financial advice. I mean, our Client Services team. When I hire a new person Client Services team, I say, well, advisers come with great ideas. They can give great advice, but unless our Client Services team execute on that advice, the ideas are worthless, so execution is everything and you make a terrific point. Let’s talk about technology, because this is kind of the, the biggest issue I think that firms always tackle first. I think, well, how do I get an effective tech stack that will help me drive efficiency in my team and help me drive growth. You talk about firms allocating about three and a half percent of revenue to technology, and yet they still struggle with adoption, speaks a bit of this execution issue that you’re mentioning. Yeah, what mistakes are firms making with their technology investments and trying to think it’s the it’s a panacea for their challenges, and how can they correct those mistakes, play, and just think more, I guess, thoughtfully about how they approach technology overall.

Eliza De Pardo

Well, the investment in technology is important to pay attention to. You want to be kind of benchmarking yourself against your peer firms, of course, and against yourself in terms of investments that you’ve made in the past. But what we know from the research, we conducted research on this topic, you know, many years gone past, and we look at the data consistently, the level of investment in technology does not correlate to the performance of the business so just because you invest more doesn’t mean you’re going to get better outcomes when it comes to technology, much more important is how you use technology to help inform your business strategy, and the alter the opposite of that is develop your strategy and think about how you’re going to support the strategy With technology. Right? We look at from both perspectives, but generally what we see in our industry. Because for more for the typical advisory firm in the US market, I can speak to the US market, but I expect it’s very, very similar here in Australia, Rob is technology is very much a growing capability within advisory firms. Most firms won’t have smaller businesses, in particular, won’t have a designated technology expert within the business, but what they probably have are team members that are a little bit tech savvy, that help out in certain areas of the business, step in to sort out problems that arise for the business, and maybe then, over time, they start to do more in the area of technology, but they don’t necessarily have a skill set that lends itself to running a technology stack within a business, right? And that is, in fact, the real danger here. And in the white paper, we mentioned, I make this, you know, quote, you know, in the land of the blind, the one-eyed man or woman is king. And sometimes in business, we rely more heavily on any one individual that has a little bit of knowledge on a topic. We rely on them in some in some cases too much, and we end up with all of these dangerous blind spots within the business. And technology is one of those areas in particular, just because of the dramatic rate of transformation in the last few years, like even very savvy executives are struggling to keep up with the pace of change and struggling to figure out how to take new, you know, new technologies, and use them to advance the business model. So, there’s not really a surprise, but the caution here is don’t assume that the individuals that you have working on your tech stack currently necessarily have the expertise they may. If you’re a larger business with a dedicated resource, they absolutely may. But there are risks, real costs of the business. If you’ve got somebody that’s just dabbling in this area, costs, not just in terms of, of course, the 3.5% of your revenue that you’re spending, but think about the ongoing costs of poor technology adoption, where folks aren’t using the technologies effectively, we’re not integrating effectively. What is the cost of that, year on year on year, and nobody knows it’s happening, because nobody knows any better,

Rob Pyne

and it’s harder to measure, isn’t it? That opportunity cost? But I would, I would expect that the opportunity cost of poor technology adoption and getting it wrong would pale that three and a half percent you’re spending on the actual tech investment. Yeah, it just absolutely executing on technology in it in a thoughtful way. As you say, the one I’d been quite I like that. It’s a very resonates. I can see that. And obviously there’s third parties that if you have a one-eyed man in your firm, I guess they can or one-eyed woman. They can tap into specialist expertise to support their development. But yes, relying heavily on one person who really doesn’t have necessarily the bandwidth to devote the time and attention to it can be problematic. So

Eliza De Pardo

so outsourcing is key in this area, like it’s the one here, a couple areas, I said, marketing and technology from for the typical advisory firm, if you’re not at a scale or size where you can confidently build that capability in house, think about finding great outsource partners that you can rely on to test out your technology stack. Help you. Make smart decisions on further investments, help you conduct kind of a return on, you know, understand the return you’re getting on the investment that you’re making. Um, take the guesswork out of it and just spend the money to get external consultants to support you in this area in particular.

Rob Pyne

Yeah, I’ve got two more questions for you while we’re starting to take one with the second last one additional tech question around artificial intelligence. It’s a question that many firms are asking and trying to answer for themselves. How they apply it. What are you seeing firms tackle it head on with a dedicated technology resource. What have you seen so far? And what’s your view of artificial intelligence and its role that’s playing in firms now, in the way that they’ve adopted it.

Eliza De Pardo

Well, I think it’s, it’s varied. When I, you know, look across the firms that we work with, that level of interest, level of openness, adoption varies dramatically. Some businesses have, you know, very tech savvy. They have an individual who is accountable for helping to develop the AI strategy, and they’re doing a great, a great job of trying to figure out, you know, across all aspects of the business, decline process and internal processes, you know, how we can, how we can use it to accelerate, really, how we can use it to take to create capacity for high value work in the business, right? It’s not about, not about sort of doing people out of work, but how do we ensure that every one of our team members is put to their highest and best use? And we’re using technology to be able to obviously, pick up the slack in terms of lower value tasks in the business, things that can expedite they occasionally come across businesses that are doing a phenomenal job, that have invested heavily already in using AI tools, that are already speeding up. You know, processes around advice, development, sum meetings very quickly and easily to produce output for clients. Those are the sorts of it’s this very initial stages with where things are. Firms are really able to speed up, drive efficiencies like they’ve never been able to do before. I haven’t seen it. I mean, certainly for many firms, it’s very early stages. Others are much further advanced, much more confident, much more capable, really jumping on the bandwagon and trying to use it across the business model. But when you think about our industry, we’re looking at risk management, fraud detection, investment management, trading, all of these functions we’ve got to figure out, well, what does it mean for all of these functions in the business? How can we best apply it? And we’re not there yet right? We’re figuring it out. I’m sure in the next year we’ll have answers to it.

Rob Pyne

yeah, for sure. And so, taking an overarching view, then of all that you’ve added into your white paper, which covers so much about how businesses are really driving growth and how they’re getting through some of the challenges they realise face. So to close this off, Eliza, how you know, can you share a success story of a firm or firms where you’ve seen the greatest impact of being involved coaching them through some of the challenges, and just seeing a really significant transformation, perhaps, where they’ve seen the light and with some guidance, have actually had such a dramatic impact on their business success as a result of taking some of the initiatives and the ideas that you’ve outlined In your white paper

Eliza De Pardo

Sure, I mean, the engagements we are involved in are predominantly related to business growth and related to human capital management. They are the two areas where we have specialist expertise. So, what I’ve what I’ve really learned over time, is that some of the greatest impact on firms is, are those engagements where we are? We are addressing many of these insights at one time. So, most firms will have, you know, if you look over the 10 insights, there might be one or two that really resonate. Some will have all 10 going on those firms that are really struggling with alignment of leadership, inability to execute on strategy because of a lack of alignment, circuitous decision making, executive team efficacy at that level there, particularly in in large advisory firms managing several billions of dollars in assets. If you cannot break through those issues, the firms will, they will spin their wheels for years, and in some cases, have been spinning their wheels for well over a decade. And so the work in though, the in that area, to me, is perhaps, as I mentioned before, it’s perhaps the most impactful and the most important, and that is the work of helping shareholders and executives to align behind a strategy that they can all commit to, that they’re excited about, but along the way, having to resolve individual grievances, having to resolve personality mismatches, which requires one on one work with shareholders. Work along with teamwork, group work with shareholders, and one step at a time, helping them to progress through the decisions that have been holding them back for many, many years. And I think if you know, in my experience, if we can break through those grid locks and help them to make them really help them all feel comfortable in making the big decisions together and breaking that gridlock. That that is where real change happens. That is where we can say, all right, we figured this out, and that could, that could be the start of a succession plan. That could be, we’re ready to transact, we’re ready to acquire, we’re ready to sell. We’re ready. We’re now committed to this path, some big decision that’s been looming, that they’ve been unable to resolve themselves. But now feel like they’ve, they’ve broken through, and they can do it. And that, to me, is the greatest as a consultant, that’s the greatest impact that I feel I can have, that we can have to be able to, you know, drive that kind of change. That’s it. That’s a really exciting it’s really exciting for me when that happens, because you know that you, you’ve, you’ve had a very positive impact on a business.

Rob Pyne

You know you’ve made a real difference. And it circles back, doesn’t it, to that very first point I made introducing you, which is a human capital, you know, features as strongly as leading indicator as success, and the fact that that’s what you essentially have just summed up, that so much of the impact you can have is coming in and solving those human capital issues with its executive teams getting aligned. It’s about, you know, just driving better performance out of the team. And it does all boil down to great people and execution. So, yeah. Eliza de Pardo, I really appreciate your time today. Thanks so much for joining me today on The Trusted Adviser podcast.

Eliza De Pardo

It’s been my pleasure. Thank you so much. I enjoy speaking with you every time I get the opportunity to so thank you again.

Rob Pyne

The feeling is mutual. Thanks, Eliza,

Eliza De Pardo

thank you.