As the advisor industry continues to expand, broker-dealers who focus their attention on solo practitioners may lose out.

"Broker-dealers are still working to understand advisor teams," says Jim Crowley, Pershing's chief relationship officer. "Broker-dealers still often view and treat advisors as individual reps, rather than as talented groups."

Pershing's latest research identifies team-oriented advisory firms as "the future of the advice industry." Firms, rather than individual reps or advisors, constitute the most important client for the broker-dealer sector, Pershing contends.

"These larger, multi-professional teams ('ensembles') have a great track record -- they're growing faster than their solo-practitioner peers, they're achieving better financial results, and they attract superior clients while consolidating smaller, aging practices," according to its report.

Pershing describes the modern advisor as a team leader whose focus has expanded beyond simply wooing affluent investors, and is now looking to grow the whole of the business, taking on more of the functions that were historically provided by brokers.

That trend could pose a risk for broker-dealers, as more team advisors consider moving to a pure-play RIA or hybrid business model and scrapping a BD that continues to cater to individuals or boutique practices.


Pershing cites a study it sponsored in 2014 highlighting the growth of ensemble advisors, finding that those practices are acquiring clients with several times more assets than solo practitioners, and that many are in acquisition mode, looking to buy or merge with other practices.

"Because of their size, ensemble teams attract better clients and give advisors the opportunity to focus on their individual strengths," Crowley says.

Pershing argues that broker-dealers, traditionally, have clung to affiliation models pegged around the individual, in the process creating a cultural environment that hasn't been entirely welcoming of team practices.

In part, Crowley argues, that comes from a fixation on the production numbers that has long characterized the broker-dealer world, but that may not appreciate the full-service, client-driven model that defines many team practices and emphasizes back-office support.

One of Pershing's chief recommendations is for broker-dealers to rethink the way that they approach their relationship with ensemble advisory teams, and to provide a full complement of services ranging from custody to reporting and billing tools.

"The relationship with a firm should resemble a business-to-business relationship in the way it is structured but still retain some of the personal touch that creates a long-term partnership," the report notes.

"One of the biggest challenges is that the traditional affiliation models in the broker-dealer industry have been set up for individuals and not necessarily for teams," Crowley says.

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