You’ve been an accomplished solo financial advisor for years, working hard and building a successful practice at the wirehouse where you’ve been employed for, perhaps, your entire career.
Yet something’s missing. Often, that “something” is “somebody”: a business partner.
Team-based practices have been a trend at wirehouses for a number of years. But now these firms are encouraging them even more as a way to help guide clients through the increasingly complex financial landscape — and as a strategy to keep assets in-house: teams leave less frequently than solo practitioners because all partners must agree to the move, says Mark Elzweig, an executive recruiter whose eponymous company is in New York City.
Compared to other channels, wirehouse advisors are more likely than other FAs to operate in teams, according to 2015 research conducted by Cerulli Associates. The research and analytics firm forecasts that by 2020, partnerships at wirehouses will rise to 30% versus 20% in the IBD channel and 24% of advisors overall.
The trend that’s picking up steam within big-firm teaming is the super- or mega-team — large groups of multiple advisors, both senior and junior, backed up by plenty of support staff.
Such teams often start out with just two solo FAs. In many instances, they are well-established, even veteran, advisors who are equally successful. Indeed, “horizontal” teams of seasoned FAs, as opposed to “vertical” teams — large producer at top, junior FAs below — are on the increase.
“We think the teaming model around veteran financial advisors, in particular, can yield an ideal client experience,” says Kimberly Ta, senior vice president-director of teams and succession planning at Wells Fargo Advisors, based in St. Louis. The firm supports new teams with coaching and programs on how to set up infrastructure to facilitate a joint practice.
Merrill Lynch is similarly as enthusiastic about teams of established FAs. “Some of our most successful advisors have joined together to form teams. We have fully embraced teaming because we think it helps us serve clients better in a 24/7 world,” says Racquel Oden, Merrill’s managing director-head of advisor training and development.
Finding a Partner
Successful advisors comprising a horizontal team can be as young as two twenty-somethings. Other partnerships pair veteran middle-aged FAs or an older advisor with an accomplished decades-younger FA.
More than a decade ago, Reed Yates was a mid-level producer at a Wells Fargo Advisors predecessor in Fort Worth, Texas, whose partner had exited the firm. Yates was looking for another FA with whom to team. Mark Maness fit the bill.
“I knew I needed a partner who was capable of pushing me a little bit, and Mark seemed like the ideal candidate,” recalls Yates, 70, first vice president-investment officer.
Working in the same branch, Maness had observed Yates long enough to know that the two shared a common work ethic. Further, what they brought to the advisory table was complementary: Yates was heavy into market analytics; Maness, strong on interpersonal communication.
“I wasn’t actively seeking a partner; but when Reed came to me and we talked, it was an easy decision to say yes. I could see great opportunity for us to leverage our skill sets,” says Maness, 59, managing director-investment officer, whose production at the time was in the same range as Yates.
Now, 12 years after they partnered, and added two younger FAs, the Maness-Yates Wealth Management Team of Wells Fargo manages assets totaling more than $300 million.
At the outset, it is essential to nail down a clear vision of how your partnership will function and develop a corresponding business plan.
Exemplary of such foresight and organization is the team of Hansberger & Merlin at Morgan Stanley. Atlanta-based, it is pioneering the concept of an RIA inside the wirehouse as a compelling approach to practice management. The two FAs joined up four years ago.
Jim Hansberger, 70, an MS advisor since 1979 and team head for several years, wanted to find an accomplished, but younger, team leader with whom to partner.
“Michael [Merlin] was only 37, but he had extraordinary experience and success,” says Hansberger, managing director-wealth management and senior portfolio managing director.
Merlin, who had joined [Morgan Stanley predecessor] Smith Barney in 1997, and was running his own team, knew he needed scale. Both advisors were determined to build a super-team. Here was an ideal potential match.
“We were very much aligned with the idea of creating a firm within a firm,” says Merlin, 41, managing director-family wealth director.
Today, their team of 17 manages assets of $2.5 billon.
“We’re a comprehensive wealth management platform with a proprietary investment management entity embedded within it,” Hansberger explains. “We’re very much focused on being the preeminent wealth management practice, not only at Morgan Stanley but in the industry.”
A key challenge facing ex-solo FAs is how to best introduce their new partner to clients. Some hold special events, where both client bases can mingle and hear what new products and services the team has to offer. Beyond that, partners must accustom their clientele to being served by a second FA.
“We made a concerted effort to reach out to each other’s clients and in some instances, almost forced them to talk to the other advisor,” Maness says.
Therein lies “the real benefit of the teaming process,” Maness continues. “Although both Reed and I can give the same message to the client, it may come across differently in our presentations; and one presentation might resonate better with a particular client than the other.” Hence, “we began to uncover more assets our clients had, and they began bringing them over.”
Tearing down a wall separating two spacious offices, the then-new partnership of Mark Verschuur and Shankar Iyer, in Chicago, employed the big space for joint client meetings. Sharing the same office also allowed them to keep abreast of important client developments as they occurred since they could hear each other speaking by phone.
“During the integration process, it was really important to be in one office,” Verschuur says.
The two FAs partnered 16 years ago when they were both age 29. Both started at Merrill Lynch in 1992 and worked at the same branch. Each gathered assets quickly, rising to the firm’s First Quintile level and taking incentivized trips together.
Soon, they began to back up each other during vacations. Indeed, Verschuur and Iyer, both now 45 and senior vice presidents, had become tight personal friends before they were business partners.
Now the Verschuur/Iyer Group at Merrill Lynch has about $600 million under management.
A “secret” to the FAs’ success is their 50%-50% compensation split, Verschuur says.
“It’s always been 50%-50% from Day One, and I assume it always will be,” Iyer notes.
At UBS, a recent comp shift reflects the firm’s intention to be “the industry leader in supporting wealth management teams,” Jason Chandler, head of wealth management-Eastern U.S., said, in a statement.
Under the new UBS system, the highest producing teams earn a bigger payout, plus all team members who meet certain standards will eventually receive payouts based on that of the team’s highest producer.
“We believe our current compensation plan supports our strategy of being the firm of choice for high-net-worth and ultra-high-net-worth clients, and the advisors who serve them,” Chandler noted.
Communication — clarity, style and frequency — is of course a critical aspect of teaming. To be sure, personality differences between partners offer heightened opportunity to click with a wide variety of clients. Such variations can even help resolve conflicts between partners — instead of causing them.
“We’ve done a good job of being able to compromise, all of which has to do with the fact that Mark has the ability to talk things through in a logical manner, whereas I tend to jump to conclusions and react a little more emotionally,” Iyer notes.
Partner disputes typically occur over practice management issues rather than investing philosophy. That’s been true for Maness and Yates.
“I would defer to Reed,” Maness say, recalling the early days. But “what really cemented the value of having a team,” he says, was during the financial crisis, when Yates was out of work for 60 days with heart valve-replacement surgery, “and I was sitting here in the office by myself.”
Pair-ups of established FAs are not always made in heaven. Sometimes the relationships need work.
“Financial advisors who are experienced and successful have big egos. You need to check your ego at the door,” counsels Maness.
Focusing on both the current big picture and planning for the future is essential. First-rate partnerships, such as Hansberger and Merlin, have that down pat.
“We dubbed 2012 a seed year, when the seed to our partnership was planted,” notes Hansberger, team visionary and marketing expert. “We called 2013 the year of laying down roots; 2014 was the year of growth; 2015, the year of challenges; and 2016, the year of maturity, when all of that would have worked really well.”
At inception, Hansberger and Merlin listed 10 challenges the team would need to confront.
“Any innovative entity is going to run into challenges once the honeymoon is over, but there are [bigger] challenges facing the whole industry,” Hansberger says, noting, for example, “significant regulation, much more competition from RIAs and robo-advisors, and the debate over active versus passive management.”
Right now, a top-of-mind issue for Verschurr and Iyer is whether or not to start expanding their team of five into a mega-practice. The question is: What will it take to continue to grow?
“We’ve talked at length about [becoming a super-team], and management has talked to us about it on numerous occasions. But we have some trepidation about taking that path,” Iyer says. “It can cause problems once we start bringing others into the mix. We’ve done a good job of being pretty lean with just the two of us.”
Likewise, Verschuur notes: “Once you start adding more people, our 50%-50% split will change; and all of a sudden you’re no longer a horizontal team equally divided. We hesitate to break something that doesn’t need fixing. But we don’t want to be blind to opportunities that would take us to the next level.”
Hansberger and Merlin have carefully mapped out what it will take for them to reach that next plateau. Their five-year plan is themed: “What got us here won’t get us there.” That is, “expecting the same results from what you’ve done in the past may not necessarily lead you to the same level of success [in the future],” Hansberger explains.
Substantial expansion typically morphs a horizontal team into a vertical one. That’s what’s been happening in the Maness-Yates practice. Such evolution is a good thing, the advisors say.
“My career is winding down. Mark’s is reaching the crescendo; so he’s not going to work forever. Eventually, our two junior partners will bring on new people. Therefore,” Yates says, “in about 10 or 15 years, the name of this practice is going to change. But what we’ve built here is a team with some permanence.”