Culture Clash

Since the great recession has put companies and businesses into lock-down in the Fall of 2008, there's been little activity other than cost cutting, downsizing and basically staying alive while waiting out the storm. But there are signs that this paralysis is about to give way to consolidation and convergence in the financial services sector. We've seen it forced already in the wirehouse world where today there are literally only 4 major firms left. In the cover story for this month's "On Wall Street" magazine, the lead article is titled "The Front Lines of the Culture Wars" taking the mergers of AG Edwards into Wachovia into Wells Fargo as cases in point. And it raises the question, does culture matter?

Culture is like the air we breathe. We can't touch it or see it (except in LA on occasion), but it's always there for our sustenance. If it's good, we feel good. And if it's bad, it can likewise make us feel bad. I've had the experience of having worked with consulting firms who assist senior management in developing strategic plans. They are masterful at creating "decks" of charts, data and bullet points explaining all the "metrics", as they call it in consultant speak. Consultants have a knack for taking simple concepts you already know, give it a fancy name, and sell it back to you. Their general philosophy is if you can't measure it, it's not a factor. And this is where they're dead wrong.

 Every leader worth his or her stripes knows that the culture they create will determine the success or failure of their organization. Why is it that within the same company with the same products, training, recognition, compensation, support, etc a branch say in Dallas succeeds exponentially where a branch in Boston fails miserably. The quote "the speed of the leader determines the rate of the pack" is in play here. It happens at a local, regional and national level. Leadership makes a difference...both positive and negative, but a difference nonetheless.

That brings me back to the issue of what I see as a spate of mergers about to happen. About 5 years ago, the firm I was with, AXA-Equitable, merged (bought) MONY. Each brought its own style, way of doing business, traditions, values, beliefs, attitudes and character to the equation. All those "intangibles" were lost on the consultants advising on the merger strategy. They couldn't measure it so they didn't get it. MONY had a field force numbering in the thousands and today only a handful are left. Why did they leave? If you ask any of them, the overriding theme they'll say comes down to culture. Unfortunately, in attempting to maintain two different cultures, often you damage them both as was the case here.


It's a big question mark as to whether the cultures that had built and kept the likes of Merrill Lynch, AG Edwards, Smith Barney, etc intact can survive the influence of the vastly different banking cultures they are now affiliated with. It's going to come down to leadership at all levels of the companies. It's a constant balancing act between maintaining the culture that made them successful while eliminating the one's that led to their failure. And having lived a merger, the best advice I can give is if you must use consultants, use them for what they know and not that for which they do not. Those in leadership positions would do well to focus on creating and maintaining success cultures rather than listening to consultants tell them what they are supposed to already know.

Conventional Stupidity

Have you ever heard someone sarcastically and somewhat self-deprecating say, "The best thing you can do is take my advice and then do the opposite". When it comes to making smart financial decisions, this may in fact be the best advice you can take. Most of us follow conventional wisdom which ironically is seldom wise. It tells you to get out and stay out of stocks after their prices have already tumbled, invest in gold after it has already made it's run up, put your money in bonds when interest rates have nowhere to go but up or put it all in Treasuries where the likely real returns will be at a negative over time. Yet, people are more comfortable following the crowd using yesterdays news as guidance as if they're like the proverbial lemmings jumping off the cliff. Smart investing is more about controlling your behavior than it is your investments...keeping you from yourself...and from conventional wisdom.

I was recently a speaker at an industry conference and Sarano Kelley was also making a presentation about financial literacy. One factoid he stated hit this point home. Of all professions, the two that are ranked lowest in financial literacy are teachers and the media. Now think about where most Americans get their financial education and guidance from?...yup, teachers and the media. And if not, then from Uncle Bob or Sister in Law Jane...who got their guidance from teachers and the media. The system and our human nature are wired to make bad financial decisions.

We live in an era where there is more information available than ever before to help us make our own financial decisions and again, conventional wisdom tells us that we could and should do it all ourselves. And once more, conventional wisdom is wrong mistaking more information for quality information. Never before has there been a greater need for professional financial advisors and planners. And this is not to develop fancy spreadsheets and Monte Carlo forecasting that are almost always inaccurate. It's to keep you from yourself...from listening to the teachers and media. While the value of the trusted financial advisor has always been true, I can't think of a point in time where the need and demand for true professional financial advisors has ever been greater than today. Driven by demographics , that demand for advice from a real live qualified advisor (not a computer program) will steadily increase over the next two decades.


While the demand for financial professionals is reaching all time highs and on the increase, unfortunately the supply of qualified advisors is coming down and gaining momentum in the wrong direction. The average age for practitioners in the business is approaching 60 while the on boarding of new young talent, the next generation, has slowed to a trickle. Add to this the pending financial re-regulation which will likely force even more out of the business and the disparity in supply and demand gets all the greater.

So, is this bad news?...it depends. Out of the post recession rubble of new regulation, tax law change, and new economic realities, I truly believe a new model for delivering financial advice will emerge bigger and better than before. But until then, without enough access to good professional advice, the best most can do is take what conventional wisdom tells us...and do the opposite!