Advisor Group’s Larry Roth: Communicating a common vision

Larry Roth is chief executive of Advisor Group, the independent-broker-dealer subsidiary of American International Group Inc. In that role, he oversees more than 600 employees who serve 4,800 financial advisers affiliated with FSC Securities Corp., Royal Alliance Associates Inc. and SagePoint Financial Inc.

In April, Mr. Roth assumed additional responsibilities as interim president and CEO of FSC.
He also serves on the board of directors of the Financial Services Institute Inc. and the Insured Retirement Institute.
This interview was conducted May 10.

FG: What is the role of a leader in an organization?
LR: A leader needs to be able to convey to all of his or her constituents what it is they’re trying to accomplish and how meeting that goal is going to benefit them. Basically, a leader needs to spend a lot of time communicating with those constituents so they can say, “I know why I am working so hard.”

FG: When was the first time you found yourself in a leadership role in business?
LR: Quite early in my career, I purchased an independent-contractor firm. Back then, the business was just kind of blossoming and we had to help define what the independent-contractor-broker-dealer space was meant to be. Since I had basically owned the firm, I had to figure out how to do those things while making payroll. I can remember more times than I care to share how I’d drop my paycheck in my desk drawer and keep it there until I was sure we had enough money to cover everybody else’s check.

FG: Did you know early on that you would be an entrepreneur?
LR: I did. My background is as a certified public accountant and a lawyer, but I never really intended to practice either of those. My father owned a small business, and most of the parents of the friends I grew up with owned a small or medium-sized business. I always thought owning a business was really the best way to realize your true potential.

FG: Where do you find good leaders?
LR: The first place to look, in my opinion, is right in your own business. Oftentimes, your current employees are ideal candidates. First, they already believe in the company and its mission. Eight times out of 10, it plays out beautifully — assuming they have the intellectual capacity that you are looking for. Also, it’s a great thing to do for the organization, because other people within the company look at what happened and say, “Wow, they found that person within the organization.”

FG: What do you look for in a job candidate?
LR: First, they have to be of the highest integrity; that’s a must.

FG: But how do you assess a person’s integrity in a brief interview?
LR: In a traditional interview process, it’s extremely difficult. But if you’re looking for people in your organization or you seek help from people in the industry that you have known for 15 or 20 years, you can go a long way towards getting the answer. Still, it’s not a perfect science.

FG: What else do you look for?
LR: Intellectual capacity is right up there, as well. Personally, I love to surround myself with people who are open and willing to challenge management. Sometimes you find people who have a lot of integrity and intelligence but just don’t want to get into a scuffle; that’s problematic.

FG: Why?
LR: If you’re sitting around the table with your team, and somebody there has information critical to your success but doesn’t contribute to the decision, you are very likely to make a bad decision — or at least one that is underinformed.

FG: Give me a question that you always ask in an interview.
LR: I always ask someone to tell me what it is they are hoping to accomplish or what they want to be when they grow up. To me, everyone looks at a role in a business differently and that’s fine. Some people want to work for a company because they want to win. They’ll say, “I think I am really good at what I do, I think our interests are aligned and I want to be part of a winning team.” Other people, who may be just as valuable or even more valuable as an employee, say, “What I really want to do is make an impact in the business. I want to work hard, make a lot of money and retire in my mid-50s because I’d like to teach school.”

FG: Do you worry about whether employees like coming to work?
LR: I always think about what people say when they go home to their significant other. Hopefully, what they’re saying about the environment will reflect our having done a great job in terms of communication. But if they go home and say, “I have no idea whether I am doing a good job” — which is what we learned recently when we lost a key employee after 22 years — then something is wrong.

FG: Tell me about that.
LR: That person was a great employee and he had been here a long time. He resigned, and during the exit interview, we learned that he just didn’t feel at home here. With all the changes that have occurred in our industry and at our firm, this employee felt he was just hanging out here, not sure whether he was important or whether his boss thought he was good at what he did.

FG:What did you do?
LR: When he resigned, we all just sort of looked at each other and said, “What happened?” We realized we had dropped the ball. We were not doing the things we actually needed to do to be successful because we were doing the things we thought we needed to do to be successful.

FG: What do you mean?
LR: What we think we’re doing and what we are actually doing are not always the same. The faster the environment you are operating in changes, the more disruption there is. As a result, there is more opportunity for people to invent the future. In other words, there is more opportunity to make up what they think is going on, or simply fabricate a reality that isn’t really going on.

FG: How do you prevent that from happening?
LR: What we have tried to do historically — and it hasn’t worked — is a lot of mass communication. I have e-mails that go out to the employees on a regular basis. We also do webinars on a regular basis. To me, all that seems very informative, but it’s definitely one-sided. Lately, we have gone back to doing things we did when the environment was less fluid, such as more sit-down meetings and more “lunch and learns,” that sort of thing.

FG: How do you find balance between your work and private life?
LR: I used to say — and I don’t say this anymore — that balance is for people in the circus. To be honest, it cost me my first marriage. By anybody’s definition, I had been a workaholic since college. It’s kind of the way I am wired.

FG: You don’t believe somebody can balance the two?
LR: I know people who can do it all. They’re hugely successful in business, and great spouses and parents. I just don’t have that skill set; for me, being effective and successful in business means having to work hard. I was the kind of student in college who had to work really hard to get an A. I was not on autopilot.

FG: What advice would you give to a young person who wants to sit in your seat someday?
LR: I would tell him or her to be very clear on what the company is trying to do. What are the people at the top of the organization trying to accomplish every day?
Then I would tell them to make sure they do two things every day. First, they need to add value every day in their job. They just can’t work hard one day and not so hard the next.
Second, I would tell them to make sure to position themselves within the company in a place where they can have the strongest career track. You can be a superstar in the wrong department of the best company in the industry and get stalled. I’ve seen a lot of supertalented smart people kind of flame out in their 30s and 40s because they just weren’t in the right environment.

FG: Is there a type of personality, you just don’t mesh well with?
LR: I have problems meshing with people who don’t communicate. Often these are very bright, hardworking, articulate superstars. But if they don’t communicate, I find myself in a tough spot. Sometimes you have to force a discussion, and I find that at the end of those discussions, one of us finds it was a great discussion and the other is saying, “Oh, man, that was really uncomfortable.” I’ve had people walk out of meetings — and this is my problem — asking: “Am I in trouble?”

FG: How do you determine whether the person you are interviewing is not a good communicator? Do you try to provoke them?
LR: I do. The only way I’ve been able to do that is to give them an update on our business. I’ll show them data that they understand, and then ask, “What do you think of this? What are we doing right and what are we doing wrong?” If they can’t answer my questions, or if they don’t want to answer my questions, I get really nervous. If they just tell us we are a great firm, I say, “Puhleeze.”

FG: Do you find yourself trying to provoke a lot of debate and discussions in meetings with employees?
LR: I try to put the ball in play, and I find that sometimes one of my weaknesses is that sometimes play too aggressively. Depending on the folks in the room, you can sometimes get a great discussion going. But one of the challenges of this style is that you sometimes end up with a discussion that involves two or three of the eight people in the room. The others sit back.

FG: So you like meetings to be collaborative?
LR: I hesitate to use the word “collaborative.” I would like to think we are a collaborative environment. But sometimes that translates into an environment that is all about meetings and talking without ever drawing conclusions. Something that has evolved rather recently around here is that we are trying to keep our meetings short and to the point. Historically, we have spent a lot of time in meetings updating where we are in our business.

FG: Tell me more about that.
LR: There’s a lot of communication that goes around here on a daily business. But when we go into a meeting, we’re in there to really just deal with the issues that might be a little off track. I try to get the real work — the day-to-day stuff — done in the regular course of business. Then when we actually get together, we don’t sit around and say, “Hey, look at all the great work I did”; we say, “Hey, things are great, but I need your help on this and this and this.”

FG: So basically, you want people to get to the point?
LR: Yes. What I have found is that type of meeting really forces the bright, quiet person to participate.

FG: Sounds like you have a passionate leadership style?
LR: I’d like to think that’s my style. But I have to sometimes temper my enthusiasm for the business so that it isn’t interpreted in a way that makes people nervous. That’s one of my personal challenges, frankly.

FG: Is it a struggle to get employees to relax and be themselves around you?
LR: I’m a pretty informal person. But a lot of people think I am stiff, and maybe I am in some ways.

FG: What did you learn from a terrible boss?
LR: Not much. Just after I left the accounting profession, I had a boss who was a crook. By that, I mean he was trying to take the company public at the time and was not truthful in the dealing with the CPA firm that I used to work for. I guess what I learned from that is, you really need to be thoughtful about the environment you put yourself in.

FG: Tell me about your father’s business?
LR: He owned a painting contract business. But my friends’ parents were in research or manufacturing businesses. So I grew up in an environment where many of the people I admired had made something out of nothing. I always aspired to own a business.

FG: What did you learn from these people?
LR: I learned was that you had to be completely dedicated to your business. If you were not, you probably wouldn’t be successful. One element that I saw in all these people is that they were smart and worked harder than anybody I ever met.

FG: What did you learn from your father?
LR: My father was what I hoped to be as a person. He was a great dad and a great husband. He also worked his ass off and served his customers well. He ran a nice business.

Follow Frederick P. Gabriel Jr. on Twitter @FredPGabriel

Related Topics: The C Suite