For the thousands of advisers across the country who work solo, one of the biggest issues that they face is adding a partner.
A solo adviser can take on more business for a while by adding staff, but at some point the workload will reach a point where adding clients will require adding another adviser.
At that point, the adviser needs to move very carefully and deliberately. Adding a partner, whether as an equal or as a junior member of a team, is a big step, fraught with challenges and potential pitfalls.
Two experts, Matt Oechsli, founder of the Oechsli Institute, an adviser coaching firm in Greensboro, N.C., and Rick Rummage, principal of The Rummage Group, an adviser consulting firm in Herndon, Va., shared their thoughts about the issues.
These are three things to consider.
1. Get to know the potential partner. "If you're bringing in a partner, you need to know the individual has integrity, a work ethic, and whether he or she will be compatible," Oechsli says.
"Competence alone is not enough," he says. "When these things fail -- and more new partnerships fail than succeed -- more often than not it involves a casual hire."
Rummage also stresses the importance of finding a compatible partner.
"What I've found is that with financial advisers in a partnership, you're dealing with two alpha personalities," he says. "So 80% of them turn into a fight for control and to get ahead."
2. Have a worked-out and written-out operating plan and exit strategy for dissolving any partnership before setting one up. "You've got to understand and agree beforehand what will happen if the marriage doesn't work," Rummage says.
"People tend to go into these things thinking positively and not about breaking up, but it's the most important thing that can happen. And get it in writing so there's no ambiguity," Rummage says.
"If it's a partnership of equals, both people have to buy in to the same goals, and there needs to be a clear understanding of roles and responsibilities," Oechsli says. "Also, there needs to be a clear plan for handling disagreements and dissolution of the partnership."
Such a plan might even include naming an advisory board to help resolve any disputes, Rummage says.
3. Decide in advance on how to divide up the income. Here both Oechsli and Rummage say that they favor sharing the partnership's revenue, not keeping separate books of clients.
"In a real partnership, you share the income, and everyone helps in better serving the clients. Otherwise, all you have is a shared office and shared office and staff expenses, not a partnership," Oechsli says.
"You can have different revenue splits, especially if you're starting out with a junior partner, but don't keep separate books," Rummage says. "If you're going to have a partnership, go all the way."
This story is part of a 30-30 series on transitions.
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