For much of financial planning's history, the only way to be a financial planner was to build your own financial planning business, either alone or with a partner. As the industry matures, though, it is increasingly common for financial planners to begin their careers not by starting a firm from scratch, but by joining an existing one, with the ultimate goal of "having your name on the door" as a partner.
Yet it's not clear if many newer planners really want the risks and responsibilities of being a partner, or are just trying to find a career track that leads to a professional income—after all, in firms where the only options are administrative staff or professional partner, it appears that partnership is the only path to a higher earning potential.
The model emerging at larger firms, though, is to more clearly delineate between compensation paid for working in the business, and the risks and benefits of ownership for working on the business as a partner. Ultimately, the reality may be that only a few newer planners really have the inclination to be a partner—for the rest, the real key is to craft a career track that will leave planners not as partners at all, but simply well compensated for a job well done.
The inspiration for today's blog post is a combination of recent conversations I've had with some young planners, who are all in various ways struggling in their efforts to find and proceed down a path to partnership in a financial planning firm. What was notable was not the fact that they were having some challenges; in reality, the overwhelming majority of firms do not have any concrete career path to partnership, so it's often a "figure it out as you go" process, with all the messiness that comes with such an approach. Instead, what struck me was one simple, nagging concern: I wouldn't want any of them as my partner, either.
What It Takes to Be a Good Partner
There is no standard template on what it takes to be a good partner, especially in the world of small businesses where every situation is somewhat unique—not because of the details of the business, but because of the strengths, weaknesses and idiosyncrasies of the partners themselves. However, I do think there's one fundamental trait that's crucial—a hunger, desire and drive to increase the value of the business.
As the saying goes, "50% of something is better than 100% of nothing"—which is why in general, I'm a big supporter of planning firms having partners. Far too many financial planners I see have taken it upon themselves to do everything in their business at once, and the parts that correspond to their weaknesses are not executed effectively. Most financial planning firm owners would benefit a lot by reading a book like Michael Gerber's "E[ntrepreneur] Myth Revisited" to gain some insight.
By contrast, in my interactions with all of the young planners I mentioned earlier, I don't believe that any of them had any particular interest in building and growing a business. In reality, all they simply wanted was to feel well compensated for a job well done.
In the second part of the post, we’ll look at what proper compensation is for a job well done, as well as how to get on the right career track.
Mr. Kitces, a regular AdvisorOne blogger, will be presenting at FPA Experience 2012 on “Understanding the New Medicare Taxes” as well as signing copies of his new book, The Advisor’s Guide to Annuities, 3rd edition, published for 2012 by The National Underwriter Company.--Ed.