Six years ago, I created “Diamond Teams,” an organizational design to solve human-capital training and career-track issues in the advisory industry. (I wrote about this in recent ThinkAdvisor.com blog and received plenty of feedback.)

I am repeatedly surprised by the unexpected benefits of the Diamond Teams structure for independent advisory firms. After my blog appeared online, a member of one of the larger firms I’ve worked with to implement Diamond Teams pointed out that I had failed to talk about the top benefit of Diamond Teams: “The true benefit is the steady 19% per year growth rate ever since we implemented it,” the person said.

Independent advisory firm revenues almost never grow at a steady rate. When advisory firms grow, they invariably run into predicable “growth barriers,” points at which their volume of new clients and assets out-grow their capacity.

At these points, firms need to increase capacity — typically by adding staff and upgrading technology — which requires a substantial reinvestment of cashflow. Consequently, growth rates slow for a time during these building stages.

Thus, it was a surprise when a Diamond Team firm with a steady growth rate didn’t appear to be affected by any growth barriers. After some investigating, I found the Diamond Teams structure provides several “unexpected” benefits.

The Structure By way of background, I came up with the Diamond Teams structure to shorten the time it takes to prepare and to better train younger advisors to work directly with clients. To do this, firms structure teams of four advisors. Envision a baseball diamond with a senior advisor at the top (on second base), two lead advisors (one each on first and third) and a junior advisor at home plate.

All four advisors then work with each “team” client in various capacities. The senior advisor runs the team and has ultimate responsibility for the care and service of each client. Responsibilities are divided up and shared. The lead advisors provide most of the client services. They usually, but not always, oversee either investment management or financial planning.

The junior advisor, who sits in on all client meetings, is responsible for taking notes in the meetings, putting together a report of the meetings’ key points and updating client profiles with any new information.

The team format gives each client a better understanding of the breadth of services they receive from the firm. Equally important, it gives junior advisors a bird’s eye view of what the firm’s senior advisors do for its clients — and how they talk to, work with and respond to clients.

As a result, the Diamond Teams structure greatly accelerates the time it takes to prepare junior advisors to work with clients and to take on more responsibility within their firm. At the same time, Diamond Teams are increasing the firm’s capacity to work with greater numbers of clients. As the firm grows and the lead advisors in its Diamond Teams become more experienced, they can be promoted to senior advisors, running their own teams. Junior advisors can be promoted to the role of lead advisor, and new junior advisors can be added to the team. This is how the system creates a steady stream of well-trained, experienced advisors to work with new clients.

A Real Gem It’s this stream of experienced advisors that seems largely responsible for the high and steady growth rate of firms organized as Diamond Teams. By continually training competent advisors, these firms are constantly prepared to work with an increasing number of clients and assets. Plus, they seamlessly handle new clients without the usual significant jump in expenses or the long lead time often required for hiring and training new advisors. In the Diamond Teams structure, younger advisors learn much faster and are prepared to work with clients sooner. Diamond Teams also keep firm costs down by reducing the need for management oversite. I call it “automatic management.” By working closely together as an interdependent team, advisors young and old tend to effectively manage each other and themselves.

People are social animals and have a strong built-in desire to not disappoint other members of our family, group or team. What’s more, older advisors’ oversight of younger colleagues in a Diamond Team is serious and ongoing, creating a natural culture of mentorship.

Unlike the typical management structure of some independent advisory firms, Diamond Team members both lead and mentor younger team members, and the success of each team depends on the contributions of every member — creating a system of ongoing group accountability. Also, the monitoring of each team member’s performance happens on its own, because this performance is important to the success of the whole team. And this virtuous cycle means older advisors take a genuine interest in mentoring younger advisors.

This mentoring and team structure isn’t focused on management theories or the telling of old war stories: Diamond Teams encourage hands-on training with constructive feedback and coaching that zooms in on real tasks.

At the same time, this team structure greatly facilitates more — and better — communication between employees and partners. As a result, leadership at the team level is more informed about what’s really going on in the business. Firm owners find they don’t have to spend nearly as much time on people management as they used to. In addition, they can spend a lot more time working on their business — thinking about ways to cut costs, increase services, and attract and retain more clients. These benefits contribute to higher revenues.

There’s More The Diamond Teams structure also is a powerful recruiting tool. Potential candidates can see how the teams will train them and facilitate their path to career advancement, so even top candidates are far less concerned about their starting compensation than they might be otherwise. This gives Diamond Team firms a powerful advantage recruiting in the current context of an advisory talent shortage.

Diamond Teams also are better at retaining senior advisors. Not only are their senior advisors less likely to leave to start up their own firms, but many are so happy working with their Diamond Teams that they turn down opportunities to advance into senior management positions. While this occasionally can be a problem, we find that stability within the teams is a major source of client satisfaction.

This leads us to the increased quality of client services — and client satisfaction — that Diamond Teams create. Working with a team of advisors, rather than just one advisor, has a very positive impact on most clients.

Not only does it greatly increase the availability of advisors, it also enhances clients’ perception that they are working with “experts” in various stages of their work with the firm. Of course, this feeling of better service (which in most cases is real) increases both the number of referrals and clients’ praise of the firm.

Finally, by allowing the advisors to “specialize” and shorten the time they are involved with each client, Diamond Teams greatly increase the number of clients with whom each advisor can work. Each Diamond Team collectively can work with many more clients than each individual advisor is able to. This helps firm profits, too.

In short, we’ve found that Diamond Teams enable independent advisory firms to grow — and to keep growing — by creating a steady stream of well-trained, experienced advisors who supervise and manage themselves.

This lets independent advisory firms avoid growth barriers, industry shortages and management challenges that tend to prevent or slow growth. Here’s the bottom line: If your people aren’t growing, your business can’t grow, either.

Angie Herbers is an independent consultant to the advisory industry. She can be reached at angie@angieherbers.com