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Episode 63:

Conflict Management’s Interplay with Leadership and Mentorship

Philip Palaveev


On Episode 63 of The Upstream Leader, Heath Alloway welcomes Philip Palaveev, CEO of The Ensemble Practice, for a discussion on leadership, mentorship, and conflict management. Feedback and trust play a vital role in making emotional discussions productive, and Philip covers helpful information on nonverbal communication, active listening, and the concept of relationship deposits and withdrawals and how to manage them.

About the Guest

Philip Palaveev is an industry expert and highly sought-after consultant focused on creating team-based financial advisory businesses aimed for sustained growth, profitability and value. The owner and CEO of The Ensemble Practice, a business management consulting firm that defines the evolution of growing a multi-professional advisory practice, Philip specializes in helping independent financial advisors grow their businesses from solo practices into thriving and profitable ensemble firms. He also works with broker-dealers and custodians on creating impactful practice management services for their advisors.

Philip has authored two books: The Ensemble Practice, which explores the process of building a multi-professional enterprise, and G2: Building the Next Generation, a guide to accelerating the careers of future advisory firm leaders. He is also known for his industry research papers and articles, frequently speaks at industry conferences and contributes regularly to industry blogs.

Highlights / Transcript

Welcome to the Upstream Leader Podcast. I’m Heath Alloway, your host for today’s episode, and our topic today is focused on emotionally charged situations, conversations that we may have, and really how we navigate through those. And today’s guest is Philip Palaveev, the CEO of The Ensemble Practice, and Philip, we were just together for a couple days, but it’s always good to connect with you. So welcome to the show.

Heath, it was a pleasure to see you last week. It was a pleasure to work together side by side, and a pleasure to continue this conversation, of course.

Philip, I had a blast. So maybe we’ll even get into that as we get into the conversation. But, Philip, something we ask each and every one of our guests: What has really molded you into the leader that you are today?

You know, I asked the same question of one of my mentors. Bob Bunting was the CEO of Moss Adams when was there. I learned so much about leadership from him, and I asked him the same question: Where do leaders learn to be leaders? So I’ll replay his answer and then I’ll give you the rest of my answer, the personal version of that answer—but his answer was that, look, about 70% of leadership you learn by experience. There’s no substitute for actually being there: being in the office, being in the client meeting, being in the business development meeting, being in the coaching sessions—that’s how you learn to connect to other professionals, that’s how you learn to lead, that’s how you learn to follow, and that’s how you learn when to lead and when to follow. So 70% of that is the experience.

According to Bunting, 20% of that is actually mentoring, and I want to underline that. I have learned so much from my mentors, including Bob, who I’m quoting these days, including Mark Zilberman, who is a partner in Moss Adams. He influenced my career profoundly. And that includes also Sam Allred, your mentor, and to a degree my mentor. I learned so much from Sam as well. So mentors allow us to process our experience. Mentors allow us to not just go there and sit in meetings, but allow us to also learn from those meetings and learn the right lesson. So the 20% learning—doesn’t sound like much—but it’s the catalyst that allows you to actually process everything else and take the right lessons out of it.

And then about 10% of that is the formal training. Formal training like the work that you do, formal training like the books that we all read, it sounds like not a lot, but it’s actually quite important. It’s a little bit like all the spices that go into a meal. By volume, they’re not a lot, but by taste, they are. So all of this formal training, formal learning, once again, it will give you the tools, it will give you the perspective to actually learn from everything else. So 70% experience, 20% mentoring, 10% formal learning.

And then the rest of it is just circumstance. I have been part of three different organizations that shaped my career, that were quite different. One of them was a public accounting firm, and a very large one, where I learned a lot. One of them was a tiny little advisory farm that grew really, really fast, and I learned about fast growth, and adding people really quickly, and expanding from a small practice to a national business. And then the third one was my own business today, The Ensemble Practice, where I learned also how to be a founder, how to be a CEO, how to start from scratch. So very different perspectives, and different experiences, of course, will shape your leadership experience in a different way and in a different dimension.

Yeah. Philip, hearing you talk about that, It’s a journey and not a destination. So I love hearing how you describe that. So, Philip, you kind of started to walk us through your history and how you got to where you are today. You mentioned Sam already in that discussion. Tell us a little bit more about The Ensemble Practice and your G2 Leadership Institute, because I think for our listeners, that’ll be a solid foundation to help understand your perspectives on our topic today.

You know this because we were doing this together last week, but I work with Financial Advisors. It’s a profession somewhat closely related to accounting firms, to public accounting. I grew up in the world of public accounting, as a consultant, and then started specializing in working with financial advisors. Sort of they’re like cousins. If you’re learning Spanish, you can probably understand Italian a little bit. So between what you teach and what I teach is a little bit like Spanish to Italian. You can transfer a lot of the verbs, you can transfer a lot of the grammar. And really for advisory firms, they’re mostly young. The typical advisory firm was started statistically somewhere around 1990 to 1994, is when most advisory firms were started, which means that today, they’re about 30 years old. And much like a 30-year-old individual, that means they have accomplished a lot, but they also have a lot to learn.

And that’s what I realized in my work with advisory firms, especially after I met Sam for that matter, that one of the most pressing challenges that they have is actually training their professionals—and training them not what to do with clients. They’re really good with clients. Training them what to do with their colleagues. How to relate to each other, how to build an organization, how to lead an organization. And that need became very apparent. In Moss Adams, I went to new partner training, and it occurred to me that that kind of training, and that kind of program, is badly needed in the advisory industry as well, because the advisory industry, unlike the public accounting industry, actually has very little training available in that direction.

So even the example that Sam Allred set, and the example that you and Jeremy are setting today, that to some degree inspired the creation the G2 program and the launch of the G2 program as well.

Well, Philip, with what you just described, and when you talk about financial advisory type professionals: We were pretty intentional about this topic around emotionally charged situations and conversations, because I don’t think that most people enjoy those kind of conversations, but then Philip, they don’t always have to be bad either. When I say emotional, you probably see things working with retirement planning or, you know, family situations and things along those lines. So with what you do, and the professionals that you work with, what are some of those, I’ll say maybe common situations when you see those emotions start to elevate and run a little higher?

Yeah. I mean, Heath, our clients, the advisory firms we work with, typically have anywhere from about three to about 300 employees. They’re relatively small organizations. Compared to accounting firms, they’re quite small. And in a small office and a small team, everything is very personal, and because everything is very personal, everything is very emotionally charged. What may be a relatively benign or relatively kind comment in a larger organization, in a small organization, it may very quickly escalate into an emotionally charged situation. And to make it even more complicated, very often, our clients are family owned businesses, where multiple generations or multiple members of the same family practice together. It’s not uncommon to see partners arguing. In my case, it’s not uncommon to see partners who are brothers arguing. It’s not uncommon to see tension between founders the first generation and the next generation—what we call G2. And imagine that when the founder is the lady who started the business, and the G2 is her son, that becomes even more emotionally charged.

So these very private connections within the office create a lot of situations where the emotions may run high. And, of course, advisory firms work with money, and money can be very emotional. Money can be what we have created for all of our work, money can be the resource that we’re hoping fuels our future dreams. So losing money, managing money can be very personal to clients as well, can create a lot of tension in those conversations as well. So when things are not going well, like 2008, 2009 or the beginning of the COVID epidemic where we had a brief decline in the market, the atmosphere in an advisory firm can be very tense, leading to a lot of conversations where the blood pressure is high, and so are the voices and so is the tone of conversation as well.

Yeah. Well, Philip, let me ask this—it’s going to be maybe kind of a two pronged question. I’ll start with the first part of it. When you talked about those emotionally charged situations, how often do you see people, or leaders, maybe avoid those, if they’re uncomfortable, they know they’re going to be a hard conversation. Do you see people avoiding those? And if they do, what happens when they do that?

Well, when you sweep garbage under the carpet and you know what’s going to happen—it’s going to start bulking and smelling. So, you do not want to do that. But it’s also very important that you pick the right time, and that’s the lesson you learn, is difficult conversations should be had by the right people at the right time, and in the right environment. And all three are very important.

Heath, if I am doing something I should fix, If I’m doing something that’s not quite right—either professionally or personally—if you need to give me some feedback, that’s going to be difficult to hear, ideally, that feedback comes from the right person: Someone I can trust, someone whose intentions are not second guessing. So the first foundation behind difficult conversations, the first foundation behind emotionally charged conversations, is really to build trust. And leaders know about that, that before I start criticizing you, before I start correcting your behavior, I really need to earn your trust, so that you have the feeling that what I’m trying to do is help you, rather than hurt you.

This morning, I had to take my cats to the vet—I have two cats, and taking them to the vet is an endeavor. They don’t understand that I’m trying to help them. They think I’m trying to punish them or something by putting them in carriers and taking them to this strange place. So there’s a lot of meowing and a lot of scratching going on. And if you want to do that, you’ve got to earn the trust. So they at least, they trust you to pick them up and put them in a carrier because otherwise, things are not going to go well. And the same is true about correcting behavior or trying to have difficult conversations. You’ve got to be keenly aware of who are you talking to, and do they have your trust.

As the leader, you’ve got to understand, you have the responsibility to do it. But you also have the responsibility to do it at the right time, in the right place, and you have to be the right person for it. So I’m not a fan of sweeping it under the carpet, but I am a fan of finding the right time and  the right place.

So, Philip, with what you just described, and I think—we all know trust is a critical part of a relationship, being open and honest with each other. When do you know that you have that level of trust, that you’re in a position to be able to have a productive conversation? When you know the level of emotions are going to be high, how do you know when you have that relationship with someone?

You know, typically when someone trusts you, they are likely to perhaps initiate, or at least hint at, those conversations themselves. We are all aware, mostly aware, of some of our challenges, some of our flaws, some of our weaknesses. And we tend to signal to people whose feedback we want, that we want that feedback. Generally speaking, if you have someone’s trust, you’re not unlikely to already be hearing sentences starting with “What else could I be doing? What else can I do better? Was there something in the last meeting I can improve? Do you have some feedback for me?”

Generally speaking, the people that trust you will already signal in some way that they’re ready for your feedback—particularly people you’re mentoring—if you have earned their trust, they are already coming to you. And a very positive sign is if they start coming to you with some of their challenges and problems, not just coming to you for information or for guidance or for opportunity. So if you start seeing the people you mentor coming to, you think I have this problem and I can’t figure it out, or I have this relationship and it’s bothering me, those are the signs that you’re mentoring someone who’s ready for perhaps a more difficult conversation other than just yeah, you did just did great, and that was a great client.

And if I can just expand on this a little bit, I think it’s also and this is something I’ve learned from from Sam to a degree—it is not a bad idea to build a pattern of feedback as well—gradually increasing the level of feedback, gradually increasing the level of criticality, if you will. But it doesn’t hurt to debrief after each and every client meeting, debrief each after each and every business development meeting, and regularly provide feedback. If feedback becomes a habit of our interactions, gradually, you can start actually introducing more and more challenging feedback, perhaps the kinds of things that are a little more difficult to hear. If I’m used to receiving that feedback, it’s probably easier for me to hear some of the things that I don’t want to hear.

Yeah, and Philip, let’s maybe even flip the script here on that a little bit. So a lot of what you talked about was mentorship and signals from those you work with internally. So and Philip, I don’t know if I’ve ever told you this, but back right out of college, I actually had my Series 7, my Series 6/63, insurance licenses.

I didn’t know that!

I was in my 20s, and we were focused a lot on the insurance side, and I wasn’t there very long. I learned some lessons through that, but I was in my early 20s, and trying to have conversations with people that were much more experienced than me, much more—they’d probably had a lot more experiences, they probably knew more than I did in a lot of cases. But how do we, I guess, build that trust or get those signals from our clients whenever maybe they they have their wall up or their guard up when, say, we’re dealing with their family wealth, how do we create those signals or give them that space to where they feel more comfortable having those maybe more emotionally charged conversations?

I mean, a couple of things happen in human relationships over time. The first one is when clients choose to be vulnerable with us—and the same applies with the people we mentor, the exact same interaction applies—there will be moments of vulnerability. When a client slips and says something perhaps they didn’t mean to say, or when they offer a piece of information that’s not very easy for them to share, or where they disclosed to us a fear that they have, it’s a moment of vulnerability. So it’s very important what happens in that moment of vulnerability. If we dismiss it or become uncomfortable with it or deal with it in the wrong way, then clients will stop trying to be vulnerable and will probably withdraw a little bit. But if they’re vulnerable with us, then we actually help them, or at least we process it the right way, we give them the sense that they’re being heard and seen, that their vulnerability is accepted and that we at the very least commiserate with them and perhaps try to help them, that’s when we signal that more vulnerability is welcome, and we will accept it, and we will help them. So when, in the beginning of a relationship, a mentoring relationship or a client relationship, when those moments of vulnerability appear, it’s very important that we send the right signal, that it’s okay to be vulnerable. We can process it the right way. We can embrace it, we can help.

And then the second part of it is vulnerability is one of those things that that ideally are somewhat reciprocal. Generally speaking, we as professionals are in a position to help our clients. But I also make it a point in my experience to make it clear to clients, and I’m also vulnerable too—I make mistakes too. And I will accept and acknowledge those mistakes, and I will signal to clients, look, I’m not perfect, that you’re vulnerable with me, and I will be vulnerable with you. When we put up our guard, when we button up, when we try to present ourselves as somehow this sort of a perfect professional that knows all the answers and has no cracks in their armor, the response that clients have to that is they feel confident in your skills, but then they shut down in these sort of more emotional or more difficult things to share.

Human relationships tend to be very reciprocal. If you talk fast, I’m going to try to talk fast as well. If you’re calmer, it will calm me down. So if you are vulnerable, and I’m vulnerable, we’re going to help each other feel safe in that environment. If you’re vulnerable and I button up, I’m going to make you feel bad about it. I’m going to make you feel imperfect. And you will probably not share with me as much. So it’s important that when clients open up that we open up at least a little as well—that we become human beings too. We can’t expect clients to be crying in front of us while we’re keeping a stone face. We have to react with empathy and sympathy, and from time to time, we gotta show them the cracks in our armor too.

Yeah. Well, I mean, Philip, gosh, we’re all human. Everyone of us are going to make mistakes, and a lot of those emotions are very natural. So, Philip, I’m going to shift gears a little bit here in thinking, you know, one of the things with emotionally charged situations or conversations—I’ve watched where people react in the moment. Maybe they say something, maybe they send an email, maybe a text, whatever it may be. And when they do that, a little bit later, they start to regret it. Maybe they’ve hindered the relationship—they can’t take it back. So whenever things, when you start to feel those, maybe those emotional situations, where does self-awareness come into that? You know, because once we know that they’re there, I think we can address them, but how do we get better at having self-awareness when those emotions really start to elevate?

Well, no matter where you are on the career track, and no matter how advanced you are in everything you know and everything you manage and everything you lead, there should always be someone in your corner that can give you some advice and can give you some direction. Heath, you know this—I’m a boxer. When you box, you want somebody in your corner to tell you what’s happening the ring, because to be honest, you don’t see it very clearly. In particular, you don’t see your own reactions, you don’t see your own behavior very clearly, because this other person is hitting you on the nose the entire time. So it’s very difficult to see the picture through the punches.

So once again, it comes back to, there should always be someone who gives you feedback—no matter what level of a leader you are, somebody should be able to pull you inside and say, look, that last situation, you didn’t handle it very well. But, also, you’ve got to just, like you said, the key is self-awareness. And that was, you provided me with the answer even though it was part of the question. A big part of this is developing the self-awareness to recognize my body and my mind are not in the right frame of being for me to make good decisions. As a boxer, by the way, you learn to recognize that. There’s the fight-or-flight reflex that gets triggered, and it doesn’t just get triggered by someone hitting you on the nose, it gets triggered by somebody writing you an email, or sending you a text, or saying something in a meeting. And there’s literally a physical reaction. Your blood pressure goes up. Your adrenaline goes up. Your breathing shortens. Your muscles tense up. Your face becomes a little more angry. Your vision actually narrows. All of those are well known signs of fight-or-flight. And you’ve got to realize when you’re in that frame of mind that you’re not in a good place to actually provide feedback. You’re not in a good place to respond to that email.

So you have to kind of recognize that if my body is behaving this way, if I’m feeling anxious, if I’m feeling high blood pressure, I should probably give it a break. And there’s a lot of old proverbs about don’t go to bed angry, and don’t react right away and, like, really follow those. Kind of follow your physical reaction and let it subside first, before you do anything. But also this is experience, and experience should tell you that if you feel angry, don’t respond by email. Wait for a conversation. Like if an email gets you upset, never respond to it. I think the kids will call it a flame war? Never respond to an invitation to a flame war. If you see an email that gets you angry, just don’t respond to it. Wait for an in person meeting. If you see a text message that gets you angry, don’t respond to it, or at least respond to it with a phone call.

Generally speaking, in emotionally charged difficult conversations face to face, it’s so much better. And then the second choice will be some sort of a Zoom meeting or some sort of a video conferencing, followed by phone, followed by emails. The more context and the more information you give to the other party, the better off you are. If you’re just sending an email, there’s no context, there’s no a nonverbal communication, there’s no tone of voice—so it’s very difficult to perceive your intentions. And because we already started fighting, I’m probably expecting you to be aggressive, and when I’m reading that email, I have no way to tell whether your face is calm or whether you’re smiling or whether you’re angry. And now everything I read, I’m going to interpret the wrong way.

So if you’re having difficult conversations, have them in person. And if you have them in person, wait for that fight-or-flight to subside. Because even if you carefully measure your words, but your face looks like you want to scream at somebody, the person is going to hear you screaming, even if your tone of voice is calm. In the conflict, you and I just saw a presentation to that matter—with verbal and nonverbal communication conflicts, the nonverbal always wins. If your words are calm, but your face is angry, I’m going to think you’re angry. Doesn’t matter what you say. So we have to kind of develop this self-awareness that if my physical reaction is not the right one. I’ve got to wait for that to subside before I have a conversation.

Yeah. Philip, it breaks my heart whenever I see someone react out of emotion and they can hinder or ruin a relationship in a matter of seconds—it was something that they built, you know, over a period of 5 or 10 or 15 years. I just hate seeing when that happens. Or what ends up, they end up having to invest a ton of time and energy on the back end to try to repair that relationship. And that’s hard to watch in those situations.

So, Philip, let me ask you this: You mentioned earlier, you work with a lot of up and coming leaders, the next generation of leaders. You work with, you know, leaders within firms. So let me read this stat, and I’m going to see how you respond to this. So this is, I found this so intriguing, 95% of people claim to be self-aware, research shows it’s closer to 10 to 15% of people that are truly self-aware. Here’s the part that really got me: Out of that, those stats said CEOs and top tier leaders are less likely to be in that top percent. Do you think that that’s accurate? And then I guess if it is accurate, how do we help our leaders become more self-aware in those situations?

Well, I will start with the last portion of the question, which is how do we help them? And once again, everybody needs a coach. Even the best of boxers still have somebody who’s their coach in the corner, because that’s the problem, is no one is particularly self-aware in the middle of a fight. Just the situation is going to make it very difficult for you. So whether you’re a CEO or managing partner, whether you’re a president or chief operating officer, whatever your title is, someone should be your coach, and someone should help you with these difficult conversations, difficult decisions. Someone who has the chance to observe you. Someone who has the ability to see you in action during those meetings and during those interactions, and can help you correct those things.

The second part is, you know, there are studies about what type of personalities seek leadership positions, and also what types of personalities become effective as leaders. And notice that those two things are different: who seeks leadership position versus who’s an effective leader. It turns out the people who emerge as leaders, the people who are more likely to seek the leadership position are people who tend to be extroverted, people who have some high degree of conscientiousness—of course, they get their job done—and generally speaking, people who are ambitious. But the people who are actually effective as leaders? So this is who becomes leaders, but the people who are effective as leaders tend to be people who actually have that self-awareness, who have a better ability to listen, and they’re not just trying to talk, but they actually listen very well, who are very empathetic, and who are very good communicators.

Notice it’s the ambitious that get the position, but it’s the patient and good communicators that actually play the position well. So some of that also has to do with the organization itself being very careful of who the leaders are that emerge, but also who are the leaders that we elect? Each of us as a leader has the responsibility to improve, but collectively, as an organization, we also have the responsibility to choose the right leaders, and to me, that would suggest that when choosing leaders, we should also be asking the question, who do people trust? Not just who wants to be a leader, but who do people trust?

Well, and Philip, you hit on an important point I’ll go back to. You mentioned as part of being a good communicator, how important, truly, listening is. Do you continue to see hurdles around listening? Because, I mean, you think about how many emails you get, how many text messages, the distractions during the day. I guess the way I’ll ask the question is, how many emotionally charged conversations, or situations, do you believe surface because we’re not truly actively listening?

I know this from personal experience—I even know this from this morning. This morning, I wake up, I’ve got to take my cats to the vet, because it’s the only day when I can do it because I’m traveling a lot for work. And then something went wrong with my bank account, so I’ve got to call the bank and see what happened to that wire transfer. And then by the way, I have three meetings at work, and then we have this conversation. So even arriving at your door, arriving at this podcast, I’m already rushed, I’m already frustrated, I’m already aggravated, and I can already tell my blood pressure is higher than I wish it was, and I’m already behind on 20 emails, and this happens to us a lot. It really does happen to us a lot. We have kind of created for ourselves the type of environment that perhaps allows us to be productive or we think we’re productive, but also it’s the kind of environment that very likely is frustrated and perhaps emotionally on the wrong side of the ledger. And we’ve got to find a way to do something about it.

I know a lot of leaders meditate. I have tried that and it works really well. And not meditation as a religious practice—meditation as a way of sort of cleaning your mind, of clearing your mind and learning to focus. So I’m not reading emails while I’m talking to you, and then I’m not listening to three other voices in my head while I’m nodding my head and saying “uh huh” talking to you as well. Being able to focus on one thing and one thing at a time is a skill, and it’s a very important skill. I actually play chess, and I’ve noticed when I multitask and try to play chess while I’m distracted, my rating drops by about 200 points. Which is like losing 20 points of IQ. It really, it means going from a high level player to an average player.

And that’s what happens with multitasking. When multitasking, it doesn’t matter how smart you are, you decline dramatically in your performance. So somehow we gotta actually work on that. And one of the better ways of working on that is meditation, but also one of the better ways of working on that is just doing something physical: Exercise and things like that. That will help you also decompress and lower blood pressure and everything else. And some of that is also learning how to manage your schedule. If you’re cramming everything in a single day, if you’re trying to go back-to-back-to-back, you are likely to fail. You’re likely to be exposed to these situations when you’re listening to one person while corresponding with another. And that’s just the recipe—you know how they say the road to hell is paved with good intentions? That’s you putting some pavement pieces down on that road. Don’t do that as much as you can.

Well, Philip, if it helps at all, I could not tell any of that happened before our conversation. But I think it’s great background, because you’re right. What you described, Philip, is life. And I think I shared this example at G2, but you think of busy as a status in our culture. And, unfortunately, the more meetings, the more things we have going, the more clients—sometimes helps, I guess in our minds, elevate our status—but you alluded to a point, that if we do that, and we’re not truly tuned in to people are saying, and truly listening, you know, we’re trying to do all these different things, in my mind, it sends the message that you’re not important. And it sends the wrong message, and it kills the connection with someone whenever that’s going on.

So let me ask this. What role does a cell phone play in that? Like, How have you seen, because sometimes those send the wrong message to us when we’re actually trying to communicate, but I don’t know. Maybe I’m going off topic here, but I think it’s important.

No, no. It’s super relevant. I mean, Heath, remember you and I were in the middle of recording this, and I don’t know what’s going to happen with the final edit, but in the middle of recording this, my cell phone started ringing actually! You could hear it. I apologize for that. But you know, if the road to hell is paved with good intentions, the cell phone is the steamroller. It has paved a lot of miles there. It is an amazing productivity tool, but it also is the tool of massive destruction. Destruction mostly about our attention span, because It’s constantly there in our pocket, it’s constantly buzzing, and there’s constantly something going on. There’s 27 apps that need my attention, and many of those are highly productive, but many of those are also the kinds of things that will take me away.

You know, everyone develops their own habits for dealing with time pressure, dealing with anxiety, dealing with the needs of their schedule. But generally speaking, I will put my cell phone away, and I’ll turn it off the moment I walk into the office because, otherwise, there’s no there’s no way I can focus on what I need to focus.


And, frankly, I have started doing that at home. I have started putting away my cell phone in a drawer, for at least two to three hours while I’m spending time with my daughter, because otherwise, the same thing happens. Like, literally, I will find myself texting her a message of, hey, dinner’s ready, even though she’s in the next room next to me. So, those things become habits. We are creatures of habits. There’s a great book called The Power of Habit. That book will tell you that something along the lines of 80 to 90 percent of our daily activities are actually habits. We’re on autopilot. And if part of that autopilot is checking your cell phone and responding to each and every message and each and every text, you will never be focused on what you need to focus.

Quality over quantity is a big theme in our conversations—it’s a big theme in our lives as well. To me, having the high quality—relatively few—but high quality relationships with clients is the only recipe for success. If you have more clients than you can work with, you will never be able to provide each of them with the type of attention that they deserve. And if you don’t have the quality of relationships that can create the right economics for your practice, you’re constantly going to be chasing your own tail. There’s constantly going to be something you can’t get to, because you’re working with too many clients, but they’re not paying enough to drop some clients. But if you drop some clients, you’re going to miss the money, but if you miss the money—and you can see the vicious circle we develop. So a lot of this, it starts with choosing the right activities to be involved in. Otherwise, the treadmill gets too fast too quickly.

Philip, I only laughed earlier because I’ve done the same thing with my daughter.

We all have!

She’s upstairs, and I’ll message her that, hey, dinner’s ready, or I’ve caught myself, like, shutting down my laptop, been checking my email, on my phone ten minutes later. It’s like, there’s nothing that important that came in, in that ten minute time frame, but you’re right, it was a habit, and sometimes those habits are hard to break.

Oh my god. It’s not just teenagers that are on their phones all the time. So am I! So am I! I’m scared to look at the statistics that my iPhone will generate in terms of what my screen time is.

Well, Philip, as we get close to wrapping up here, something you talked about was the quality relationships, or the quality interactions that we have. There is a concept you talked about at your G2 conference you talked about with relationship deposits. Tell us about that, and how that impacts those, maybe, emotionally charged situations, or I think the example we used was, when you go and ask a client for a referral because something’s implied that there’s something in it for me. So tell us about that concept and how the quality plays into that.

You know, Heath, I’m simply a very visual person. When I’m trying explain a concept or even understand a concept, I tend to use analogies. It’s just my brain works that way. And, to me, relationships resemble a little bit like bank accounts, in the sense that we make deposits and we make withdrawals. In every relationship, we make deposits, mostly by creating positive experiences. You and I had a great conversation, that’s a deposit. You made me laugh, that’s a deposit. You gave me a good book to read, that’s a deposit. You were my expert professional, and you did something wonderful for us or for my company or for my family, that’s a huge deposit. You did something that I didn’t expect you to do or didn’t have to do, but you actually went out of your way to do it for me or for my company or my family, that’s a huge deposit.

But then come the withdrawals. There’s a bad conversation we had. There’s something you said that I didn’t quite appreciate. You used the wrong word or the wrong sentence. You made a mistake. You were late with a project. You forgot a meeting we had. I called you, and you couldn’t call me right back because you were somewhere. You were busy. Something went astray—maybe not your fault, but it was your office’s fault. Those kinds of things will happen. Those are withdrawals.

Now here’s the key: If the account has a high balance, in other words, you and I have been making deposits in that relationship account for a long, long time, then we can make some withdrawals, we can afford some mistakes, and we can afford some difficult conversations. Because difficult conversations are always a withdrawal. On the other hand, if the deposit is low, then any kind of withdrawal will send you into an overdraft. And this goes back to our early conversation of who can have difficult conversations. If you want to have a difficult conversation with someone, you better have a high balance in the bank account, in the trust account, in the relationship account—otherwise, it will not go well. Even if you mean the best, and even if you present your feedback in the best possible way, if the other person does not trust you much, if the relationship balance is low, you’re going on overdraft.

So whenever you can, however you can, you should be making deposits in those relationships all the time. Have good conversations, socialize with your clients and your colleagues. Do things that you’re not supposed to do that benefit them. Give them good advice. Return their phone calls as quickly as you can. Sort of, they say that the seeds of destruction are sown in good times. When times are good, make a lot of deposits and you avoid withdrawals. And then when the time comes for difficult conversations, for feedback, or news that are bad, then you have the deposit to handle it.

If the clients trust you, if your colleagues trust you—because you’ve been making those deposits over a long period of time—you will be so much more capable of handling the difficult conversation. If the balance is low, there’s no amount of good works or somehow positioning it or financing it, that’s going to make it work.

Yeah. And, Philip, do you believe that in those situations, because you said that the hard conversations, when emotions are high, it’s usually a withdrawal. Do you think over time that can actually become a deposit?

You know, at least initially, the conversation is always a withdrawal. Like, sometimes—we’ve been taught to think positively, so sometimes we think that if we spin it the right way, it’s going to be an opportunity to correct the mistake. Well, spin it all you want, but if you’re telling me I should change something about the way I behave in a client meeting, you might be right, and I know you’re right, but I’m not going to appreciate it in that moment. I may appreciate it at some point in time, but I will not appreciate it in that moment. So I don’t think there’s a need to sugarcoat it. Difficult conversations are a withdrawal. They’re always a withdrawal. Now eventually, hopefully, the other person comes to the conclusion that, wow, I really needed to hear that, and maybe that turns into a deposit. But let’s be clear. It’s a liability, and it will be a liability. So let’s build the balance to be high, before we make that withdrawal.

Yeah. And Philip, the reason I asked that is I when I reflect on, you know, my career, gosh, even before my career, anyone that was willing to have the hard conversation, when emotions were high, I’ve always looked back, and I know those are the people that truly cared about me, and they were willing to invest in me. But I think your point though, is, those people that did that is because I had a high level of trust in them and they had a high level of trust in me, and so we had that foundation to be able to have those type of conversations.

So, well, Philip, gosh, I feel like we could probably talk for another hour or two on this topic and probably others as well. But, we are at our time, but as we wrap up, Philip, a couple of things: One, any resources, any books, podcasts, anything that has just truly made a big impact on you that you could share with our listeners?

Probably the single best resource when it comes to difficult conversations is a little book called Difficult Conversations. It’s a funny story—somebody gave me that book many years ago, about 15 years ago, somebody gave me that book. And it’s a it’s a thin little book, but it’s extremely, extremely good. It is very specific and gives you a lot of technique, and gives you a lot of guidance on exactly what to do and how to do it. And here’s the story: Someone gave me that book, I started reading it, I left it on the kitchen table, I come back home from work, my wife is waiting for me. She said, is there anything we should talk about? Like, what’s this book going here? What is the conversation that’s coming up? I had to tell her that this is for work, it’s just for work.

But that will probably be the single kind of best resource. But interestingly enough, I was actually reading philosophy, Ancient Greek philosophy. And somewhere in there in that book, I found a lot of guidance, actually, exactly about difficult conversations. Even the Ancient Greeks were thinking about it. And Aristotle had a lot to say about difficult conversations and who should have them and when to have them. So, look, if you’re seeking guidance, you will find it in a lot of places.

Well, Philip, I love that story. That’s a good one. So Philip, as we wrap up too, I’ll just ask you to share—a lot of the firms we work with, they may have financial advisors, you know, wealth advisor type practices. So if someone wanted to get in touch with you, Philip, how would they do that?

Oh, we’re very easy to find. First of all, you probably should have some financial advisors. It is always a little sad to see how much competitive advantage accounting firms have when it comes to working with business owners and their wealth. And I grew up in an accounting firm, so, you know, it’s always in my heart to see accounting firms do well. They have so much potential. So you should probably have financial advisors. You have such wonderful relationships with business owners. They already trust you. They’re willing, perhaps eager, to hear what you have to say about Wealth Management.

That said, if you’re looking for us, we’re very easy to find—just literally googling my name or googling “The Ensemble Practice,” which is the name of my firm, we’ll take you there. Hopefully, we’ll take you there, but I’m pretty sure my colleagues have done their job in terms of marketing and putting the name out there. But just simply google “Palaveev,” or google “The Ensemble Practice,” and you’ll find me there.

Yeah. And, Philip, I guess, if people don’t can’t find you that way, and if we know them, they probably have our email address, and I’m always happy to connect you as well. So there’s multiple ways to get in touch.

And vice versa, I always enjoy these conversations, Heath—always look forward to the next one.

Well, Philip, it was great to have you on. It was great to spend some time with you at your G2 Leadership Conference as well. Appreciate the time, Philip, and I look forward to the next one.

Thank you very much, Heath. See you soon.

Take care.




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