Episode summary
Ep 505: Using A "Pillow Test" To Make The Hard Business Decisions On The Way To $3.5B AUM with An...
Financial Advisor Success (Kitces)
· · Hosts: Michael Kitces · Guests: Andrew Rosen
Summary
Andrew Rosen argues that difficult business decisions become clearer when you test not only the downside, but also what happens if the decision goes exactly as planned. His “pillow test” asks whether he can still sleep at night after weighing the full chain reaction of a choice, especially when a seemingly good outcome could still violate his values, reduce control, or create new problems later.
He traces that mindset to early career choices and to how Diversified was built. At one point, he chose a smaller firm over a higher-paying institutional job because the smaller path offered ownership, upside, and a chance to build something meaningful. At Diversified, that same lens shaped the firm’s buyout of its founder, later restructurings of ownership, a decision to hire an external CEO, and a series of mergers and acquisitions. The firm moved from a founder-led shop to a partner-owned business with more deliberate governance and a clearer operating system.
Andrew also says leadership requires candor and values-based management, not just technical skill. He emphasizes Radical Candor, clear executive-level expectations, and being willing to tell people hard truths. For him, the best decisions are the ones that align with promises made to partners, employees, and clients, even when the short-term economics would point another way.
Key takeaways
- Andrew Rosen’s “pillow test” requires asking both what happens if a decision goes wrong and what happens if it goes right.
- Rosen says he passed up a higher-paying TIAA role because Diversified offered ownership upside and a path to build something bigger.
- He says private equity can look attractive on the upside, but even a successful deal can mean loss of control and value clashes.
- Diversified grew from a founder-led firm into a partner-owned business, then added an outside CEO to let advisors focus on clients.
- Rosen says Radical Candor and values-based leadership are essential because hidden problems usually get worse if they are not addressed.
Notable quotes
“what happens if this goes exactly as planned”
“Can I put my head on my pillow tonight, fall asleep at ease”
How the episode opens
Welcome to the Financial Advisor Success Podcast, where you go behind the scenes with financial planner, speaker, and consultant Michael Kitsus to hear stories of how leading financial adviserss navigated the inevitable challenges that arise on the path to success and get insight from leading industry consultants about how to break through to the next level in your advisory business. And now, here's your host, Michael Kitsus.
Welcome everyone. Welcome to the 5005th episode of the Financial Advisor Success Podcast. My guest on today's podcast is Andrew Rosen.
Andrew is the executive chairman of Diversified LLC, an RAIA based in Wilmington, Delaware that oversees approximately $3.6 billion in assets under management for 2500 client households. What's unique about Andrew, though, is how he has navigated career and business decisions using what he calls a pillow test that helps him assess all angles of a given choice and ensure that his ultimate decision aligns with his or his firm's values. In this episode, we talk in depth about how Andrew not only considers the implications if a particular decision goes wrong, but also what would happen if it goes right, including the follow-on effects for the business.
how Andrew applied this framework earlier in his own career by choosing to accept a job offer from a smaller RAIA which offered a much lower salary but significant professional and financial upside rather than one from a larger financial firm which offered a higher salary to start but might have come with a more limited set of professional opportunities. And how Andrew has also applied his pillow test when thinking about potential private equity investments in a firm as even if everything goes right with the transaction, it could still involve a loss of control and a potential clash of values. We also talk about Andrew's journey towards ownership at Diversified, which started with him working as an adviser before eventually buying out the firm's founder alongside other advisers on the team.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- pillow test framework
- career decision making
- advisory firm growth
- acquisitions and ownership transitions
- private equity investment
Companies and tickers mentioned
- Diversified, LLC
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Financial Advisor Success (Kitces), this episode and its artwork belong to Michael Kitces. Octagon is not affiliated with the show; this page is an independent summary.
