Two to Tango

To help advisors sort through the issues surrounding whether to add a partner or even other staff, I usually ask them three questions. The first is about them: What problem are you trying to solve? Usually, their answers go something like:

• I don’t have time to manage my business and serve my clients.
• My clients depend on me, making it difficult to find free time.
• I’m not getting enough of the right type of clients.
• My revenue is growing but so are my costs.
• I don’t know other advisors in the community who could serve my clients if something were to happen to me.
• I can’t find people, keep people, or pay them enough.
• I’m not making enough money for my effort.

Then I ask whether adding a partner will solve the issue they are facing. For some advisors, the answer becomes clear at this point, while to others, this list sounds more like kvetching than a revealing fact pattern. These are all solvable issues–quite often by adding a partner or two. So to resolve whether adding professional staff on a career path that culminates in partnership is the right solution for these advisors, I then ask about their practice: What’s the gap between your vision and your reality?

• Where are you experiencing stress–time, money, management, people, growth?
• What do you want your business to be known for–which clients, which services?
• What are your biggest client service challenges?
• What will drive your future revenue growth?
• How do you ensure that your clients are served should something happen to you?
• How do you continue to serve your growing list of clients at the level they’ve come to expect and deserve for the fees they are paying?

If you’re like many advisors, the answers may lead you to conclude that as your practice grows, adding partners is an inevitable solution. There are at least two compelling reasons to consider this course. The first is because it provides practice continuity; the second is that retaining good talent allows you to better serve your clients.

One of the ironies of the business is that the more advisors help their clients become financially independent, the more they increase the clients’ dependency on them as advisors. As clients get older, they start worrying about the continuity of advice they are getting from this great font of knowledge. Unfortunately, financial advisors have not resolved the mortality challenge yet, so part of their quest is to find or develop qualified successors to serve their clients when they’re no longer able or willing to do so. As I observe the aging of the advisor population, I am becoming increasingly concerned that clients will be left in the lurch once their advisor checks out without providing a plan for continuity of advice.

At the same time, as advisory practices evolve through typical business cycles, advisors wake up one day and realize they have a real business on their hands. Their concerns have evolved, too, from getting and keeping clients, to getting and keeping people. We find that money alone doesn’t attract people or keep them–it’s opportunity and challenge. In the professional services arena, one definition of opportunity is to be an equity owner in the business you are helping to grow; one definition of challenge is to persuade the owners that you are worthy. Without this carrot, you run the risk of training your competitors or, worse, retaining employees who resent you for exploiting them.

Of course, adding partners is not the solution for all advisors. The solo state is indeed a valid course for advisors. Remaining solo and staying successful, however, requires a conscious choice. Unfortunately, too many practices these days are “tweeners,” meaning they have grown too big to be successful solo practices yet are too small to succeed as ensembles. Consequently, they suffer the stress of trying to serve existing clients while drowning in new business opportunities. They have staff and a growing list of clients, but their principals are conflicted between spending time on the business and spending time practicing their profession.

The alternative to adding more professional staff and, ultimately, partners is to narrow one’s focus. Solo advisors can reduce the client load, or change their service model, or modify what they provide, or even outsource more. If becoming an ensemble helps you fulfill your definition of success, however, it will be much easier to build the enterprise to critical mass and recruit good people if you have a career path for them. Further, once you have built a dynamic and effective service model, established a profitable pricing structure, and are consistently generating new business, your firm will be a more appealing place for good people to work.

Adding partners is not your corporate responsibility, nor is it something that every advisor should do: it may be out of sync with your definition of success. It is a vehicle for preserving the business, building leverage, growing your practice, and keeping your best talent. So when I say “your goal should be to have employees become partners,” this is only true if you’ve made the commitment to build your business beyond yourself.

By creating a career path in which motivated people can embrace your strategy, vision, culture, and values; practice the way you want all your clients to be served; and help to build your brand, legacy, and value, you win, they win, and most importantly, your clients win.

Mark Tibergien is a nationally recognized specialist in practice management for financial services firms, and partner-in-charge of the Securities & Insurance Niche for Moss Adams LLP, the 10th largest CPA firm in the U.S. You can reach him at [email protected].