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Practice Management > Building Your Business

Look Before You Leap Into New Business Relationships

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Over the past decade, the independent advisory industry has gone through a major transformation — outgrowing it’s “mom and pop” business roots and maturing into a serious business sector. 

That’s the good news, as are the increases in client numbers and wealth, higher revenues and increased profits.

But here’s the bad news. The industry’s expanded size has put it on the radar screens of an army of businesses that aim to “help” financial-services firms grow and/or operate more efficiently. 

Of course, this is exciting news, and there isn’t anything inherently wrong with firms that provide help to advisory firms and their owners. Still, I would encourage you to consider the risks involved in these relationships. 

There are many “kinds” of financial “advisors/advisers,” offering investors a broad range of services — financial planning, investment management, investment recommendations, insurance sales, etc. At the same time, historically advisors have handled a broad range of responsibilities for their clients, and that’s led to everything from a fiduciary “best interest” standard to the brokers’ “suitability” standard. 

While many other types of firms (consultants included) offer a broad range of services to advisors and advisory firms, they aren’t subject to a set of responsibilities and regulations which is comparable to those of their business-owner clients. This includes the responsibility to disclose “conflicts of interest,” and therein lies the problem. 

The range of possible “helpers” for advisory business owners is quite broad— venture capitalists, business consultants, marketing agencies and technology specialists, to name a few. These businesses have the potential to adversely affect your business through their conflicts of interest. 

I’m not saying that all companies that want to sell advisors products and services have such conflicts or give advice based on them most of the time. But I am saying that it’s worth taking these possible downsides into proper consideration and that today’s advisory firms should employ deep due diligence and scrutiny. 

Consequently, it’s very important for advisory firm owners to understand these dynamics and to carefully consider situations in which an existing (or potential) “helper” firm might have such conflicts and how they might affect the advice, products, tools and even financial resources they provide.    

Much of these conflicts will depend on the type the business the “helper” is in. For instance, many institutions offer business (i.e. consulting) advice to affiliated advisors.

While I don’t doubt that most of these businesses are interested in helping their advisor clients, I’m sure readers can think of a number of areas in which the financial interests of an institution may conflict with those of its affiliated advisors and/or their investor clients. 

For instance, I’ve seen firm owners who didn’t want to significantly grow their business but were pushed to do so by an affiliated institutional consultants. And of course, there can be pressure on the product side. 

Finally, many “helper” firms offer multiple services to advisors, such as marketing, technology, etc. Many of these services are quite good, but they run the risk of having advisors grown dependence on them. 

To help sort all this out, I suggest that owner advisors ask themselves this question: Is the business that’s helping you truly building your business? Or is it building its own business and hoping to make yours part of it? 

If you’re reaching out for help in building your business, then your business partner should have the same intention as you do — giving it their all and not taking what you have. 


Angie Herbers is Managing Director and Senior Consultant at Herbers & Company, an independent growth consultancy for financial advisory firms. She can be reached at [email protected]


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