Many moons ago, I believed everything I had been told about partnerships. I believed they were even less stable than marriages; that 90 percent of them broke up, and since one plus one equals two, why bother?

But after observing successful partnerships, often decades old, I changed my tune.

Well-structured partnerships work. In fact, I would forecast that long after the solo practitioner in financial planning has slipped into the wisps of memory (along with solo practitioners in medicine), financial services partnerships, backed by a team of support professionals, will thrive.

Granted, I have witnessed some spectacular and bitter breakups. But overall, a well-structured partnership has at least the survival potential of a marriage — and where they do make it, can offer benefits to clients and advisors alike.

I am preparing several articles on partnerships, and I need your help. If you are in one, had one, want one, or are just considering one, please go to www.billgood.com/surveys and take my partnership survey. As my way of saying “Thanks,” I will send you a compilation of all my Research articles on partnerships. In addition, I will send you a special report based on the survey and additional interviews. This special report will be titled, “Partnerships: Challenges and Opportunities.”

Since I’ve now closely observed several hundred partnerships, I’m probably (in all modesty) the most qualified person you know to lay down the rules for successful partnerships. So here goes.

Division of Labor The first and most important rule is that there must be an economic or family reason for the partnership. By “economic” reason, I mean a division of labor — some difference in the partners’ product specializations, selling techniques or prospecting skills.

The “family” reason is normally the desire of an established FA to pass on a business, intact, to another family member, generally a son or daughter.

Other reasons undoubtedly exist for forming partnerships. These include taking vacations, providing continuous coverage for clients, companionship, and the belief that one plus one equals three.

But it’s the economic or family reason that seems to bind the organization together. After all, two 35-year-old advisors doing the same kind of business do not have an economic reason for forming a partnership. If they do form a partnership, it will probably not, in my experience, survive.

Here are some models of successful partnerships I’ve observed that were formed for “economic” reasons:

Prospector-Developer. In this model, one partner concentrates on bringing in new clients; the second partner concentrates on developing the clients.

Conservative-Speculative. Here one partner focuses on more conservative investments, and the other works the more speculative side of the street. An obvious variation of this is that one handles fixed-income, the other, equities, or one might do investments and the other insurance.

Senior-Junior. Family partnerships are usually this model, although I have seen many senior producers team up with an energetic, newer producer. The split here is usually uneven, in favor of the senior producer, but the understanding is that as the senior producer fades away, the business will go to the younger person. This is the best model for senior baby-boomer producers to gently fade to black, while insuring that a clientele developed over a working lifetime are properly cared for.

Planner-Trader. One partner takes the conceptual, logical, planned approach. The other deals with that portion of client assets involving trades.

Bonds of TrustA good economic reason alone won’t guarantee survival. You also need complete trust.

Recently, I spoke with an advisor who was considering a partnership with another advisor in his office. There was definitely an economic reason for it. They were different ages, and had different skills; they seemed to complement one another.

“What about the trust factor?” I asked. “Could you trust this person enough to go away for a month and completely enjoy a vacation?” There was a pause, and then, “I think so.”

I advised against proceeding with the partnership until the question of trust had been resolved. Once you’ve established the economic reason and the trust, you can now proceed to resolve issues of fairness, the split, and a possible breakup.

FairnessA few years ago, I mediated a partnership breakup. Here’s what happened:

A crack prospector teamed up with another advisor who seemed to have good client-development skills. The prospector’s plan was: “I’ll go out into the forest and hunt new business; you keep the camp going.”

In a fairly short period of time, it became apparent that there was a marked difference between the two parties’ work ethic. New clients weren’t getting called and developed — so that was the end of that partnership.

Yet I’m also familiar with another partnership where one partner works much harder than the other, but the second partner works longer. In this case, the increased hours make the situation fair.

The Split Surviving partnerships seem to split everything 50-50. This doesn’t mean that the split needs to start out 50-50. But it needs to trend toward that goal.

It obviously wouldn’t make sense for a senior producer with $100 million in assets to take in a junior partner with $20 million and immediately start with a 50-50 split.

Let’s say the partnership production is $1 million; in the last 12 months the senior partner produced $750,000; the junior partner, $250,000. At the beginning of the partnership, they would split at 75 percent for the senior partner and 25 percent for the junior. But at $1.25 million, the split might be 65-35.

After all, the senior partner is making more money than he or she alone was producing at $750,000, and probably working less. And the junior partner’s income is certainly up.

At $l.5 million, the split might be 60-40. At $2 million, it might go to 50-50.

Breaking UpWhile the blush is still on the rose, sit down on a Saturday or Sunday afternoon, with spouses, away from the office — and decide what would happen if the partnership were to break up. Take notes, and then give these to a lawyer to craft into a binding agreement.

Here are some key questions to answer:

How are accounts that are pooled in the beginning to be divided? What if one of you contributed the account in the beginning, but the other was the primary advisor afterward? What about accounts brought in by the partnership? Are they to be divided equally, by assets, by revenue, or by some other formula?

What happens if one of the partners becomes sick or disabled? What if it’s a permanent disability? Is there a buy-out clause, or does the business just go to the remaining partner? What about the death of a partner? Does the surviving spouse have any rights?

How are disputes to be resolved? If you haven’t worked out an answer to this question, a disagreement can paralyze you both. A suggestion: Agree on a third person whose vote will break a tie. Then you can get on with the show.

What Tends Not to WorkA “yours, mine and ours” arrangement on clients is not stable. In this arrangement, I have my accounts, you have yours, and we have ours. “Our accounts” tend to be neglected because today it is always more profitable for me to work on mine.

Trial partnerships, as with trial marriages, more often than not, don’t work. There is a commitment required. Jump in, make the commitment, and tie the knot in a binding agreement. You’re more likely to survive as a unit.

Of this I’m sure: Partnerships, when they do work, are great for clients.

With a partnership, clients have access to a second opinion and additional expertise. Perhaps most importantly, they should always have access to one of the partners. If you’re out of the office, your partner should be there.

Bill Good is chairman of Bill Good Marketing Systems in Draper, Utah; see www.billgood.com.