ORLANDO, Fla. -- Want your firm to be more successful? Consider a team effort.
“Teams outperform other models,” Eliza De Pardo, principal and director of consulting for FA Insight, told a room at TD Ameritrade Institutional’s national conference here on Friday.

Revenue growth, profit margins, revenue per professional and AUM per client were all greater for advisors using a team approach outperformed other models, De Pardo said, citing research data compiled by her firm.

“The economic reasons for using teams are very compelling,” Dan Inveen, FA Insight principal and director of research said in an interview after De Pardo’s presentation. “There are clear quantitative advantages we can see with regard to profit and rate of growth. There are also client service advantages, and teams also offer a more consistent career development advantage.”


Break down a team into three levels of advisors -- lead, associate and support -- to attract prospects, converting prospects to clients, provide ongoing advice delivery, develop technical advice and managing relationships and client care, De Pardo said.

But traditional advisors may need to make some adjustments to make teams work, she cautioned. In working with one advisory firm switching to a team-based model, FA Insight identified a number of hurdles -- including a high degree of dependency on the principals, unclear role responsibilities, limited capacity and motivation for business management and limited productive capacity.

Among the changes De Pardo identified: Advisor attitudes toward client ownership, client servicing and collaboration need to change; team members may be required to focus their efforts in new areas; and compensation structures may need an adjustment.


This last area can be particularly challenging, De Pardo said: Firms need to decide if they want to implement a pay-for-performance compensation model, then determine what behaviors advisors should be rewarded for -- and select the right balance between rewarding individual and team success.

Compensation for teams needs to be structured to promote the firms “desired behaviors,” Inveen said -- adding that incentives need to combine both team and individual goals, such as minimum thresholds of rates of growth and profit.

In the case study De Pardo presented, FA Insight recommended that the firm develop a three-year organizational structure transition plan and a new compensation structure that included customized benchmarks for all team members. The firm ended up combining a base salary with incentive pay, looking at 30% of revenue generated from target referrals and 3% of total revenue for clients the team managed.

Other elements of the incentive pay system: setting a minimum of $1 million in assets under management at a fee of 90 basis points for target referrals; defining the client group for each associate advisor at the start of the performance period and not allowing associates to work with more than 70 clients.

“Firms need to find the optimal way to structure both the organization and compensation to motivate the right behaviors,” De Pardo concluded. “And they need to keep it simple so people can understand the model -- and review annually to keep it relevant.”

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