Advisors are partnering up. More than half of financial planners now operate with others. And the big teams — those with over $500 million in client assets — hold nearly two-thirds of all managed assets, despite making up a fraction (11%) of the entire industry, according to the
While the majority of advisors are consolidating into groups, differences in personality and processes can complicate day-to-day operations. Should you form a team?
Most of the wealth management industry looks favorably upon forming groups. In total, 73% of advisors believe that teaming improves the client experience. However, nearly half of advisors still operate alone, according to Cerulli.
Wirehouses are leading the charge when it comes to team formation — and especially mega teams, says Marina Shtyrkov, research analyst at Cerulli. About 45% of the teams managing over $500 million in client assets operate in the wirehouse channel, she says.
“That’s just where we’ve seen consolidation happening most quickly,” she says. A reason may be that wirehouses encourage teaming as a means to protect against poaching, she says. “It’s more difficult to recruit away multi-advisor teams.”
The independent channel has seen significant consolidation as well. RIAs are consolidating in order to achieve growth. The expertise needed to serve large clients — and maintain a healthy client relationship — can be a Herculean task too much for one person, says Philip Palaveev, CEO of the consulting firm, Ensemble Practice.
“There is no doctor that works without a nurse,” Palaveev says.
Larger clients prefer working with a group, he says, because they gain access to specialists. More advisors means a broader scope of knowledge and information. “The larger the client, the more they favor the team-based model,” Palaveev says.
There are other benefits, too. Teams can integrate next-gen advisors and support one another’s client relationships, according to the Cerulli report. In addition, bigger teams are attractive distribution opportunities for asset managers, as they usually have more sophisticated portfolio management and clients.
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However, there are risks to consider when working with other advisors. “Teaming can be detrimental when it’s not done effectively,” Shtyrkov says. For example, personalities can cause friction. There may be difficulty integrating back offices. Any matter of things could go wrong, she says.
Palaveev agreed. “It’s just like any other relationship,” he says. “It’s not easy to build it. It’s not easy to maintain it.”
Some firms — like Edward Jones — mandate advisors to operate alone, unless a succession plan is underway, according to Katherine Mauzy, principal of financial advisor talent acquisition at Edward Jones.
“What I think is enormously valuable about having one FA working with a client is there is complete transparency of who is giving them advice and guidance, and who is keeping their portfolio on track,” she says. When teams get larger, and more advisors get involved, it can become complicated who is accountable for that relationship, Mauzy says.
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For the advisor, working alone can take away the anxiety of potential conflicts. “In this business model, you don’t have to worry about a junior advisor taking a bigger percentage of your book of business every year. You don’t have to worry about the potential of splits,” she says.
Advisors that want to scale a practice can get help from others without having to team up with other advisors, Mauzy says. Edward Jones advisors hire branch office administrators (dubbed BOAs) as their books of business grow, and utilize firm resources when they need specialized advice, including time with CPAs, estate planning attorneys and other specialists for clients with complex needs.
Advisors like Charles Adi, a sole practitioner who left a larger firm last year to open Blueprint 360 in Houston, Texas, wouldn’t have it any other way. Adi says operating alone gives him the freedom to run his business, and his schedule, the way he chooses.
Still, it’s not all easy.
“To be honest with you, sometimes it gets a little bit lonely,” he says.
