Having explored the pros and cons of making the move from solo to partnership in the first part of this series, along with the various partnering options to consider and how to find the right fit, we will now examine best practices for transitioning from a solo practice to a partnership, plus strategies to help ensure the partnership flourishes in the long-term.
When he isn’t working out of his office in Scottsdale, Arizona, chances are, Randy Morris, ChFC, CFP, AIF, is in either Mississippi or Colorado, where Summit Wealth Group, the wealth management firm he founded in 2002, also has offices.
On this particular mid-September day, Morris, Summit’s CEO, is in Colorado, working to finalize the firm’s acquisition of an accounting and tax practice in the Denver area. It’s merely the latest maneuver in Morris’s plan for growing the business by acquiring established practices run by people who share a vision for building a partnership-based, multi-region, multi-faceted advisory enterprise.
For Morris, it’s also another step in a three-decade journey in which he has gone from solo practitioner to presiding over a firm with close to 40 employees spread across six offices in three states (three offices in Colorado, two in Mississippi and one in Arizona). Through it all, what propels him is a desire to build something bigger than himself: a business that will thrive long after he retires.
Not that Morris has much time to contemplate retiring or the legacy he’ll leave when he does. These days, fulfilling the responsibilities to Summit as the firm’s chief executive and to his own 180-client book of business keeps him plenty busy.
Having built the solo practice he founded in 1985 into a multi-advisor firm, a venture he ultimately dissolved because its siloed structure fell short of the collaborative, team-based enterprise he envisioned, Morris says he has finally found fulfillment developing Summit into exactly that type of enterprise. “I love the business side of this industry, so being able to find partners who share a vision of growing this organization is very gratifying to me personally. We’re growing at a 20 percent to 30 percent annual rate and I’m spending most of my time doing what I love to do, so that’s fulfilling. I also have peace of mind knowing the success of the organization doesn’t all rest on my shoulders.”
Seven years after leaving solo practice behind, financial planner Jim Beverly, CLU, ChFC, CFP, has found a similar sense of personal, professional and financial fulfillment as part of Partners Wealth Management, the Naperville, Illinois firm he joined in 2007 after more than 10 years running a solo Northwestern Mutual life insurance practice, a responsibility that nearly ran him into the ground.
“I feel I have more energy and enthusiasm about the business than I’ve ever had,” says Beverly, who manages an estimated $70 million in assets for a client base that includes a large share of holdovers from his solo days. “It’s revitalizing to be part of a team, to understand where you fit and where you bring value. It’s also nice to have partners, teams and a support infrastructure to rely on so that I know every clients’ needs will be served.”
Keys to a Smooth Transition
Once an advisor resolves to move out of solo practice into some kind of partnership arrangement, be it one with a silo structure or more of an integrated enterprise, and once they have identified an individual or a firm with which to partner, they face the hard work of transitioning from one model to the other, and of laying the groundwork for a prosperous long-term partnership.
What the transition process entails depends largely on the nature of the partnership. The requirements and steps will be different with a partnership that’s giving rise to an entirely new firm than with a partnership involving an already established firm, for example. And there will be internal as well as external factors to consider during the process. Whatever the case, the transition is likely to go more smoothly if you:
• Communicate well with your new partners from the outset. From business and investing philosophy to compensation and the client service model, there are major issues to work through, particularly with a partnership that’s resulting in a new venture. Honest, frank and candid conversations are a must early in the process, according to Maria Considine King, vice president of practice management at Commonwealth Financial Network.
• Proactively plan by developing a formal business plan (if it’s a new venture), preferably with a SWOT (strengths, weaknesses, opportunities and threats) analysis, Considine King suggests. Also put in writing a vision for the firm’s future, built out with employees, additional partners, additional offices and the like.
• Enlist an attorney to help with succession and continuity planning (including buy-out agreements), ownership structure and other legal matters related to establishing the business (particularly if it’s a new venture). Having an airtight buy-sell agreement is “absolutely imperative” when moving into a partnership, says Morris. “I can’t imagine not having one for the protection and clarity it provides all parties.”
• Clearly define and assign roles within the partnership. Because you’re managing a business as well as a client base, you’ll likely need to don multiple hats beyond that of advisor. Among the “C” and director-level roles that need to be defined and assigned, those of CEO, CFO and chief investment officer are usually the most imperative to address, according to Considine King. Other posts might include chief marketing officer, chief operation officer, chief compliance officer, chief technology officer and director of HR. “Developing clearly defined roles is extremely important,” Morris says.
• Part and parcel to the discussion about roles is determining decision-making processes, including voting methodologies and a protocol for breaking impasses.