Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Practice Management > Building Your Business

Two to Tango

Your article was successfully shared with the contacts you provided.

Recently, many of my columns have focused on the need to create critical mass in your practice, to build an environment in which motivated people will flourish, to institutionalize the way you do business. I even challenged advisors by stating: “The goal should be to have employees eventually become partners of the firm….”

Ben Utley, a financial planner in Eugene, Oregon, read this comment and responded by asking a simple question: “Why?” The answer is anything but simple, since many more questions and issues are wrapped up in the query: If all I want to do is work with clients, why bother adding other advisors? If I don’t want to manage people, what would make this appealing? Are you saying that solo firms are no longer relevant? What if my local market doesn’t support a bigger practice? If this is such a good idea, where do I find the candidates? The list could go on and on.

In my experience, these questions constitute friction rather than a wall–they are points of resistance that many advisors impose upon themselves and that limit their practices, their success, and ultimately their satisfaction with their chosen profession. I’ll address each question in turn.

If all I want to do is work with clients…. Studies by both Moss Adams LLP and Advisor Impact Inc., the Canadian practice management consulting firm, show that the more an advisor’s business grows, the less productive that advisor becomes. These advisors become so consumed with tasks like compliance, meetings, and responding to clients’ inquiries that they can’t get off the treadmill. Adding other professional staff actually allows you to delegate many of those tasks and leverage yourself so you can focus on your unique abilities and interests.

If I don’t want to manage people…. The moment you add one staffer, you become a manager of people. It’s likely that you’ll continue to grow, so the challenge now is to get to some level of critical mass where you can afford a professional manager to perform these unfamiliar and less pleasant tasks for you (or find a way to make yourself enjoy it and do it well). Each additional staff person pulls you into more of a management function. Like pregnancy, the only sure-fire way to avoid this is abstinence. If you don’t want to manage, make sure you don’t grow.

Are solo firms still relevant? Yes, they are absolutely relevant. Solo firms represent the vast majority of practices in North America. The challenge is whether this model will get you closer to your personal goals. For many it will, but if you truly struggle with time, leverage, expertise, client service, and market presence, then the question becomes: Is it relevant for you?

My market doesn’t support a bigger practice…. A valid issue, especially if one is operating in a small, rural community that is economically depressed. But one test to determine its validity is to look in the yellow pages to see who else is offering financial advice in your community. As the joke about lawyers goes; one will starve, two will flourish. In most communities, there is a fair amount of competition for financial advice. Competitors may not be applying your business model, but they are competing for the same dollars and stirring up interest in the financial planning process. Your challenge is to differentiate your practice from those competitors so that you are the place to go for both clients and talent.

Where do I find good candidates? In a market where there are more transaction-oriented advisors, you can either try to grow talent from scratch so those folks embrace your values and approach, or bring in somebody from out of town with the same practice philosophy. Operating in a small market may make either choice a riskier decision, but not an impossible one to execute. Both the FPA and Schwab have created job banks to help facilitate the talent shortage, and there are now many universities pumping out graduates with financial planning degrees. This is not to say it’s easy, but there are more resources than ever to solve the problem of adding professional talent.

The inevitable loss of control that comes with adding other people, the intrusion into your management decisions, the need to be accountable to others besides yourself, changes to the way you do business, and so forth are all sources of stress. Individually, they can cause your blood pressure to spike, but together they can bring on a tsunami of emotional conflict. To sign up for this sort of emotional upheaval, as Ben Utley so concisely suggested, you have to have a really good reason.

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].


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.