Why financial advisors should be building teams
Why financial advisors should be building teams
While expanding the team of an advisory practice is not without its challenges, industry professionals and hands-on financial advisors say team building offers significant practice benefits and growth opportunities.
One of the biggest growth-driving practices at successful advisory firms is the adoption of the “team model.”
The teams can be as simple and informal as two advisors with their own separate firms (and locations) assisting each other in ways such as holding joint educational prospecting events, covering for each other during vacations or illness, sharing best practices, or cross-referring potential clients if they think one advisor represents a better fit.
Or, they can be as robust as those found now at “elite” financial advisory firms handling high-net-worth clients and billions in assets under management.
As Barron’s describes it, these top advisory teams have the following characteristics:
- They have an average of 17 members.
- They have a balance of client-facing advisors, experts in financial planning and investing, and client-service professionals.
- They increasingly resemble law and accounting practices, with clear career paths leading from entry-level to intermediate advisor to senior advisor and on to partner.
- They facilitate the transfer of clients from a primary relationship manager who is approaching retirement to another advisor on the team.
- They have about double the business growth of single practitioners.
In the case of Merrill Lynch, Barron’s notes, “77% of the firm’s nearly 15,000 advisors have now joined forces with others,” and they are supported by “a corps of specialists around the country who help advisors establish and manage teams, and institute best practices.”
Most advisory practice teams are likely somewhere in the middle of these two extremes.
While interviewing independent advisors across the country who are generally focused on mass-affluent and retirement-planning clients, we have seen advisory practice teams that range from those composed of one or two senior advisors, a junior advisor, a customer-service specialist, and an operations or administrative professional to firms with a dozen or more advisors with varying experience levels and a large support staff. Some may also have an in-house tax professional or close working relationships with outside CPAs, estate attorneys, P&C insurance specialists, and other third-party professionals. They may also have access to specialized services offered through their broker-dealers.
One of the advisors we have interviewed, Jon McArdle of Summit Financial Group of Indiana, spoke to us about the impact of team building on his firm’s growth,
Mike Zimmerman, founder of Regal Wealth Advisors in Stevens, Pennsylvania, continues to expand the team at his practice while maintaining a close working relationship with another advisory firm in his area. He says,
Ray Sclafani, founder of ClientWise, a premier coaching company exclusively serving the financial-services industry, has been passionate about the issue of both team building and succession planning, especially for solo practitioners. He says research shows the inadequacy of succession planning, with 60% of advisors within five years of retirement having no plan. His firm has developed a focused program to address this issue, called “Success in Succession.” He says of this effort, “[It’s] honestly the most meaningful and noble work I’ve ever done—because it speaks to legacy and a better future not just for our clients but for the industry as a whole.”
But his firm also strongly believes in the team concept for reasons beyond succession planning. In a ClientWise article, Sclafani writes,
Financial Planning Magazine has also made the case for team building:
Source: U.S. Advisor Metrics 2018, Cerulli Associates
Not surprisingly, says PriceMetrix, teams manage more assets, generate more revenue, and maintain more client relationships than sole practitioners.
The firm has analyzed its data in two ways: (1) looking at the practices of sole practitioners versus the average advisor team in their database, and (2) looking at sole practitioners versus individual advisors who work as part of a team.
Their overall findings?
Source: PriceMetrix Insights
While PriceMetrix says it is very clear that “teams outperform sole practitioners,” they also note that,
The opinions expressed in this article are those of the author and do not necessarily represent the views of Proactive Advisor Magazine. These opinions are presented for educational purposes only.
This article first published in Proactive Advisor Magazine on March 19, 2020, Volume 25, Issue 11.
David Wismer is editor of Proactive Advisor Magazine. Mr. Wismer has deep experience in the communications field and content/editorial development. He has worked across many financial-services categories, including asset management, banking, insurance, financial media, exchange-traded products, and wealth management.