Transform Your Firm with a Successful Advisor Partnership

Commonwealth Staff
Commonwealth Staff

11.06.19 in Marketing & Practice Management

Estimated Reading Time: 6 Minutes (1158 words)


Industry press is buzzing with articles about the value of partnerships in providing for succession, scale, specialization, brand strength, growth capacity, and so on. As a result, we are seeing increasing interest among advisors in creating or deepening a partnership. If you are one of those individuals, it is critically important that you understand the range of partnership options available—and, more important, why you want to partner with someone—before traveling down that path.

Here are tips to help you evaluate whether working with a partner is in your best interest, as well as develop a successful advisor partnership should you decide to move forward.

First and Foremost: Why Do You Want a Partnership?

At a certain point in their career, many advisors feel limited in their ability to manage a firm with enduring value, tied to their firm so closely that they cannot live life fully, isolated by being a business owner, or overly reliant on the satisfaction of the work to rationalize an imbalance in their life as a whole.

Be honest with yourself: do any of those feelings resonate with you?

A partnership has the potential to turn these experiences around completely. But a partnered firm is entirely different from what you have now, and forming one requires a lot of work up front to transform your firm into what you want it to be. Ask yourself these three questions:

  • What will a partnership model give you that you don’t have now?

  • What unique contribution will you give to the partnership?

  • What will a partnership require you to do that you don’t do today?

If your answers to these questions compel you to join forces with another advisor, then a partnership may be right for you.

The partnership spectrum. A partnership is not one specific state or structure, though; rather, there is a spectrum of approaches ranging from a low level of commitment and integration to a high level of both. To determine what level of commitment and integration would work best for you, do some soul searching into the issues you want to solve by partnering.

For example, you might be looking to simply share space and expenses with your partner and bounce ideas off of each other, or you might want to combine your books of business and share a pool of staff that supports all advisors equally. Or maybe you want to create a new firm with an entirely different business methodology, taking the best ideas of another advisor and marrying them with your own.

Once you determine how a partner will help you in theory, identifying your ideal place on the partnership spectrum will get you thinking about how your partnership could function in practice.

The Importance of Shared Values: What Matters Most?

A successful advisor partnership is a commitment, not a convenience. And, like marriage, it isn’t for everyone. But if you have determined that working with a partner is the right choice for you personally, as well as for your business, it’s time to consider what kind of person you want to team up with.

Think in terms of both personal and professional attributes. In your experience, do you work best with people who have similar personality traits, lifestyles, and organizational methods, or does working with someone who is your opposite bring out the best in you? Would you like to partner with an advisor who is in the same place in his or her career as you are, or would you benefit more from teaming up with a younger advisor who could potentially become part of your succession plan?

In addition, you and your partner should be integrated on the following four qualitative elements:

  • Vision: Do you see the future in similar ways?

  • Goals: Are the goals you have identified to move you toward your vision similar?

  • Values: Do you share and demonstrate the values that are important to you?

  • Work ethic: Do you have similar work ethics? Do you agree on what it means to be “at work”?

Partnership means shared decision-making, shared voice, and, in highly integrated firms, shared revenue and compensation schemes. It’s essential that your core business values are in alignment, so that creating a shared business comes naturally and your firm becomes easier to run, not more challenging. Be willing to let someone in who will help make decisions that propel the firm toward a positive, successful future.

The Operations Perspective: How Will Your Firm Function?

To take your partnership from an idea to a fully operational business, there are several functional elements you and your partner will need to decide on in advance. And the more sophisticated and integrated your partnership is, the more important these elements become.

Processes. How will work flow through your firm? Decide how client work will be handled, including the technology tools that will support the processes, so that the client experience is consistently excellent.

Investment strategies. Will you develop a comprehensive investment strategy that is followed by all advisors, or will each advisor specialize in a different strategy? Integrated partnerships typically follow one agreed-upon investment philosophy with clearly defined parameters. This ensures that partners are fully aware of the cost and risk they will absorb.

Leadership team structure. What will your leadership team look like? Who will oversee the firm’s financials, operations, compliance, marketing, and human resources? How will decisions be made and disagreements be resolved?

Staffing. Fully integrated partnerships lean on a pool of staff that supports all advisors. Which roles will existing staff members perform? What training is needed for new hires?

Compensation of partners. How will partners be compensated for their work? As firms evolve into fully integrated ensembles, partners tend to fill multiple roles. They are paid a salary for their work as advisors, as well as for the C-suite role they play in managing the firm. Partners may also receive bonuses for the sweat equity they put into getting the firm started, as well as a performance bonus for continuing to grow the business.

Be sure to document the decisions you and your partner make so that you have a firm foundation off of which to build and grow your partnership. Set aside time each month to review the dynamics of your partnership and address any concerns before they evolve into a problem.

Keeping Your Partnership Thriving

As you make your way through this process, continue to come back to why you’re in the business you’re in and what you want to accomplish. It can be easy to get caught up in the day to day and to lose sight of where you’re headed. Be sure to keep this conversation going with your partner, too. Reminding each other of your core values and your vision for your firm—and, ultimately, how you want to live your lives—will help you stay on track toward building a successful business that has meaning for you, your partner, and all the clients you’ll help along the way.

This material is for educational purposes only and is not intended to provide specific advice.

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