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Diamond Teams: A Solution to Finding the Best Talent

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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. 

But to make the solo model work, you need to find an associates who have no aspirations of ownership or of working with their own clients; The problem is that those folks are very few and far between. What usually happens is that the firm experiences what has become an industry norm: ridiculously high turnover rates which sap both profitability and the time and energy of the owner-advisor, who must recruit and train new associates over and over again. 

What these—and most—firm owners fail to realize is how much they are leaving on the table in terms of revenues, profits and the quality of their owner lifestyle by not training associate advisors to work with clients as quickly as possible. I’m not talking about shortcutting training. Rather, I’m talking about much better training to create great advisors who can deliver great client service. I’m also talking about years of training: but two years, not five or 10 years.

It’s becoming increasingly clear that firms that have well-designed programs to train young advisors to work with clients, and a clear structure that shows where those clients will come from and the timeframe involved, will have their pick of the best candidates coming out of financial planning schools or other firms in what we are seeing as a crisis level talent shortage right now. Moreover, they can pay these “blue chip” associates a competitive, but not a ridiculous, salary. The combination of lower turnover, lower recruiting costs and reasonable comp will by themselves markedly improve a firm’s bottom line. Add in better-leveraged rainmakers and a pipeline of qualified advisors to handle new clients, and advisory practices suddenly become real businesses. 

Finally, I didn’t previously plan on doing this, but as a result of the record number of people who emailed me about our Diamond Team model and research, we decided to write a detailed white paper on how to create them. It will be released mid-May. To request an advanced copy you can email us at [email protected]


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