As I’ve written before, perhaps the biggest mistake advisory firm owners — and business consultants — make is to assume there is a model or a template for building a successful advisory firm. Instead, we’ve found that every advisory business is unique, with different clients, target clients, services, service delivery, local markets, skills, personalities and goals of the owners and employees. All these variables interact in different ways, creating very different circumstances that require very different strategies for success.
A good example of this is the need for different marketing strategies. As you’re probably aware, some very successful advisory firms have been built on attracting new clients through financial radio shows. Yet very few financial advisors have what it takes to be a media success. (And if I knew the formula, believe me, I’d be the next Suze Orman.) Consequently, a successful marketing strategy needs to be tailored to fit each firm.
In our experience, success in the independent advisory business is largely a matter of moving up a learning curve based on enhanced trial and error: taking what appear to be the smartest next steps, evaluating the results and making appropriate adjustments, or pulling the plug and trying something else. Of course, a good consultant or an experienced owner can narrow down the choices to those with the greatest potential success. At the end of the day, successful advisory businesses are built on learning what works for them — and what doesn’t — one step at a time.
The advisory consulting business works very much the same way. One example of that is our “Diamond Teams” strategy.
What Your Peers Are Reading
Warning: Sports Analogy
About six years ago, we created Diamond Teams as a strategy to better train entry-level advisors to get them up to speed and productively working with clients faster. Rather than the traditional pyramid structure, with the firm owners at the top and increasingly larger layers of senior advisors, lead advisors and associate advisors at the bottom, picture a baseball diamond. At the top, on second base, is a senior advisor (usually the firm owner or partner); on first and third bases are lead advisors, who work directly with clients (and tend to specialize in either financial planning or portfolio management); and at the bottom, at home plate, is an associate advisor.
What’s different about a Diamond Team is that rather than supporting the lead advisors (which is done by a non-professional client service specialist or what we call a “centralized client service team”), the associate advisor’s primary job (where she or he spends at least 75% of their time) is sitting in client meetings, taking notes and learning how the firm’s lead advisors work directly with clients.
Associate advisors also take notes, write follow up to-do lists for the other advisors, draft a recap letter for the client, schedule their next appointment, delegate work to the back office and update the firm’s CRM. In the associates’ free time, they help the team’s lead advisors with investment screening and monitoring, and drafting financial plans.
As firms grow and a Diamond Team reaches its full capacity of clients — usually between 255 and 285 clients — one of the lead advisors will split off to form another team as senior advisor; at first with a lone associate who is fast tracked to become the second lead advisor. His or her role in their former team is taken by the associate advisor. A new associate is hired, and the training process begins again.
We’ve implemented Diamond Teams with great success in many advisory firms across the country ranging from $75,000 in AUM to firms with well over $1 billion under management. The result? Senior and lead advisors usually have time to bring in new clients, and the pipeline of associate advisors are trained and ready to step up and work with the new clients. We’ve also found that the Diamond Team structure provides other benefits to the firms that use them. Those benefits include:
An automatic career path for advisors from entry to partnership
A built-in succession plan
Reduced recruiting costs (entry level advisors are much cheaper than experienced advisors)
A timetable for when to hire new associate advisors
Recruiting and new-hire retention improves because you can offer client-facing experience from virtually day one.
How We Improved the Diamond Team Concept
Building successful independent advisory firms is a learning process: not only for firm owners, but for their consultants, too. While Diamond Teams were already successful, we quickly realized that they could be even more successful if we introduced them in a firm a little differently.