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May 17, 2013 at 05:00 AM
This blog posting is a follow-up to my March Investment Advisor column “Diamonds in the Rough,” about our radical reorganization of advisors firms into what we call “Diamond Teams.” These are groupings of four advisors, led by a senior advisor, with two lead advisor, and one associate at the bottom (think baseball diamond). Each team handles its own group of clients, with the lead advisors freeing their senior advisor to spend the majority of his or her time rain making, and the associate sitting in on every client meeting, taking notes and writing reports of necessary follow-up work.
To recap, we initially created Diamond Teams to solve the chronic problem of training younger advisors to work directly with clients, which they do amazingly well. But we also found that this structure also solved many other challenges faced by independent advisory firms, including:
- creating a clear career path for young advisors
- a succession plan for lead advisors
- a exit strategy for owner-advisors.
This team approach also raised productivity and tied clients more tightly to the firm. Perhaps the most important unintended benefit of Diamond Teams, however, is that it creates a huge advantage for firms in the currently hotly competitive market for recruiting young advisors.
This recruiting advantage was demonstrated again following the publication of my column. As you might imagine, nearly every time I write something I get email comments from readers. However, after my Diamond Teams column I received an all-time record number of emails about the piece—more than 250. The mostly astonishing thing (to me, anyway) is that 90% of those emails came from younger advisors asking how to find Diamond Team firms to work for. It’s possible that I underestimated the recruiting power of Diamond Teams, which also leads me to believe that the entire advisory industry has underestimated the demand for, and the need to create, better programs to train young advisors to work with clients, sooner.
In my experience, a larger part of this problem is that most owner-advisors don’t hire young advisors with an eye toward training them to work with clients. Instead, they see associate advisors in much the same way they do other employees of the firm: their job is to provide leverage to increase the productivity of the senior advisor. Now don’t get me wrong, there’s nothing inherently wrong with this model. In fact, I work with some solo practitioners who use this model to generate more than $1 million in revenues a year.
