“Consult not your fears but your hopes and your dreams. Think not about your frustrations, but about your unfulfilled potential. Concern yourself not with what you tried and failed in, but with what it is still possible for you to do.” – Pope John XXIII
There are as many different ways to lead people as there are leaders. The definitions and descriptions of leadership styles can range from rather simple to quite complex. But most often styles can be identified by how a leader relates to others, if and how they access the skills and expertise of others, and how they communicate. Some basic styles of leadership include: autocratic, consultative and democratic, among others such as bureaucratic, coaching or visionary.
There is no one correct style that fits all and typically a leader will need to employ various styles depending upon the situation. With much practice, a good leader is able to recognize when to use one style over another.
For example, an autocratic leader should almost always be the exception to the rule. This style is reserved for extreme emergencies such as during a crisis or when someone’s safety is at risk. These types of situations call for quick decisions about what, where, when, why, how things are done, and who will do them. There’s not time for collaborative input. While maintaining all decision-making power during such rare circumstances may be necessary and appropriate, an autocratic style on a long-term basis runs the inevitable risk of low morale, reduced productivity and ineffective leadership.
On the other hand, democratic leadership can be applied when there is time to deliberate and come to a consensus in which a majority vote binds the entire group to a final decision. This may work best when there is no need for central coordination – such as self-directed work teams.
Consultative leadership would actually move the team forward better when two or more individuals offer their input based on their unique expertise or experience, but ultimately the leader will assemble the collective contributions into appropriate action. Much like a football quarterback, a consultative leader’s job is to direct his team toward the end goal. He calls the plays and must be prepared to change the play if it doesn’t appear that it will succeed. Naturally, a consultative leadership style can be most effective when creative problem-solving and planning are involved.
What’s the upshot? If you take one cup of democratic leadership, two cups of consultative with a dash of dictatorial “to taste,” you will lead based on the need and in a way that advances and inspires those you are leading. Over time you’ll have a winning recipe for long-term success with any team in your life.
I have found that a consultative style has been particularly effective and essential in my life, not only as a small-business owner, but also an advisor to highly successful individuals and business leaders. In fact it is one of the six core characteristics – the “Six Cs” – that I believe are imperative for a trusted financial advisor to have: character, chemistry, caring, competence, cost-effective and consultative.
You may have discovered that some financial advisors tend to be more transactional than consultative, as they focus mostly on selling you products which they think you “need.” However, a consultative advisor prefers to spend time listening to you, getting to know your hopes and your frustrations in order to work together to prepare a portfolio right for your needs.
Being consultative plays a primary role in my ability to build long-term client-advisor relationships. In my practice, that involves even more than working together with clients in an open and honest partnership to meet their goals. Just as importantly, we also work hand-in-hand with our clients’ estate planning attorneys, accountants and other financial professionals. Our expansive professional network includes a talented team of trusted advisors who offer specific expertise and objective counsel when necessary.
Notably, our consultative approach isn’t limited to professionals. Although many times one spouse functions as the point person when it comes to finances, it’s imperative that both partners understand and participate in the management of the family finances. In fact, many of our clients broaden their family’s involvement by bringing their children into the planning process. Even very young children can learn something about managing the household finances; and sharing the estate planning process with adult children can be especially fulfilling.
While there’s no question that in today’s complex environment you may require the expertise and counsel of a range of financial professionals, it’s crucial that when you assemble such a team, you designate a quarterback or your personal chief financial officer. In fact, recent research from State Street Global Advisors and the Wharton School at the University of Pennsylvania found that many investors who work with multiple financial advisors without a lead advisor shoulder additional portfolio risk.
How so? Think about it. Without a consultative quarterback to foster communication and coordinate your financial plan, multiple advisors could cloud your financial picture. For example, without communication between advisors, overlapping exposures could create an unintentional overexposure to a single stock or asset class that increases your overall portfolio risk. Or, if you worked with two advisors and one underweighted small cap, while the other over weighted the asset class, you’d have an unintended market neutral exposure. Additionally, over time, your portfolio would be prone to style drift, or a critical need to rebalance might go unmet.
If you work with multiple financial professionals, I highly recommend designating someone to serve as your quarterback or personal chief financial officer who embraces a consultative leadership approach.
This volume of Profiles in Success features a diverse mix of executive leaders from our community who exercise just as many different leadership styles. While enjoying their personal stories consider the effectiveness of your own leadership style and what you could learn from these winning individuals.
Gordon J. Bernhardt,
CPA, PFS, CFP®, AIF®
President and Founder
Bernhardt Wealth Management, Inc.