Updated Thursday, July 31, 2014 as of 11:36 AM ET
Practice - Practice Management
What Successful Advisor Teams Get Right
Tuesday, July 15, 2014
Partner Insights

Working cooperatively may not come easily to many entrepreneurial advisors, and teaming up may not always work out. But there are also a lot of advantages -- both for advisors and their clients -- when planners work together.

“Of course, there are disadvantages—primarily the surrendering of control over your clients—but the advantage of the increased leverage you get by having someone else, or several people, sharing the job or having different areas of expertise is much greater than the downsides,” says Alex Smith, a financial advising coach in Atlanta.

For clients, one advantage is the benefit of having players with varying strengths all working together on the clients' behalf. Instead of having one advisor who’s a whiz at figuring out markets but who is terrible at sitting down and working out a financial plan, or one who’s great at discussing and explaining planning issues and options but doesn’t have a great record when it comes to investment strategy, the client can have both—an investment whiz and an empathetic planner who knows how to get to the heart of the clients’ concerns and hopes for retirement.

Alternatively, instead of depending on just one advisor to know all the best investment strategies, clients have a team. Perhaps one member is an expert on equities while another may be great at bonds and annuities. It could also be that one advisor specializes in tax strategies or estate planning while another focuses on investment management.


“There are all kinds of teams,” Smith says. “You can have a team of equals, or a senior guy and a young person who’s being groomed, perhaps to take over eventually, or you can have a team of people with different areas of expertise. They all work or fail at about the same rate, and the reason is almost always the same—issues over money and control over client relationships.”

The answer, he says, is for teams to have a written agreement that addresses not just the starting grid, but the grid over time and also how that grid will change as roles in the partnership change.

“You see a lot of people team up with a handshake,” he says, “and that’s a beautiful thing in theory. But, usually, unless you’re talking about two people in a family or people who have a friendship that goes way back, these things tend to break up. There are just too many things that can come up, like maybe a couple of big clients that one person brings in.”

He adds, “A written plan can solve this. You think about issues in advance, and you also work out a plan for dissolution of the team while you’re friends, so that if you decide to break up, there’s an agreed-upon way to do it.”

That plan, he adds, should not just be put on a shelf to gather dust. “You should go over it and amend it every six months or year, like a business plan,” he says. “That gives the members of the team a chance to go over things and bring up issues before they have a chance to fester.”


Clients can be reassured too, knowing that the partnership has a long-term plan—one that should help keep together the team that is handling their money, and one that will also make for an orderly transition if the team should, for some reason, later split up.

“Teams are like a marriage,” says Rick Rummage, principal of the Rummage Group in Herndon, Va., another advisor coaching business. “With the right people, they work well, but like marriages, half of them end in disaster.”

He recommends the equivalent of a prenuptial agreement for all partnerships. Clients may want to check how such a pre-nup addresses the assigning of “custody” when it comes to the “kids.”

Dave Lindorff has contributed to Businessweek, The Nation and Salon.com.

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