Creating an Intentional Path to Partnership Can Produce Lasting Benefits

Becoming a partner in a professional services firm is a significant sign of achievement and a desire for many next-generation advisors. A multi-partner group, functioning well, also is critical to the long-term success of a growing financial advisory firm.

The experience for clients and team members of the firm is directly tied to the health and effectiveness of the partner group — at least that’s been our experience in our multi-partner advisory firm of 35 years.

Advisory firms have matured and succession planning has become a top practice management issue. More focus is on executing internal succession plans for the benefit of their clients, team members and retired partners.

While an internal succession plan doesn’t require the founder to be in partnership before retirement, in most cases there is a transition period with additional partners (and please do not refer to them as “junior partners”).

Additionally, many firms are still 100% owned by the founder and they realize that it may take two or three successors to not only provide the buyout capital but to perform the day-to-day duties (founders, in general, are highly productive!). Simply put, as firms grow beyond founders, internal succession plans require a new focus. Partnership matters.

Creating ‘Centergy’

Our firm has had multiple partners since its founding in 1985 by three individuals (two women and one man). Since then, there have been a total of 12 partners. As of January 2021, our current partner number is eight; we have successfully retired three, and we chose to part ways with one.

All three of our founding partners have successfully retired both as a practitioner and owner. The clients that they served for years are now handled by professionals that they trained. Each has been fully bought out and received considerable compensation for their ownership. Each remains a client of the firm, something that makes us extremely proud.

Our founders laid an important and stable foundation for the concept of partnership and the need for additional partners as the firm grew beyond their individual capabilities and timeline. They knew that for the firm to be successful and relevant for many years, it must attract and develop future candidates for partnership.

Over the years our Path to Partnership plan has evolved as the profession, professionals (non-boomers), and needs of the firm evolved. However, the foundation — that a group of like-minded professionals can contribute more than the individual parts — was laid many years ago. I like to call it our Centergy — the sum is certainly greater than the individual parts.

In general, being a partner is a sign of achievement and a commitment to invest in and improve the business. There is a strong recognition of the responsibilities of partnership:

•  The need to take risks
• The desire to dedicate the balance of one’s career to the firm
• The ability to provide capital for the business and absorb the market downturns

This sense of responsibility is a great asset to the firm and the partnership group. Partners in financial advisory firms:

• Actively shape a business that fits within their passion and vision
•  Enjoy the long-term opportunity that equity brings
•  Share in the year-to-year financial rewards when there are profits to be distributed
• ·Enjoy the camaraderie of partnership
•  Have a chance to make a positive difference in the lives of colleagues and clients

What to Look For

Over the years we have developed a list of characteristics or traits that we desire in future partners:

1. People who are passionate and live our firm’s mission, value, service values, and vision each day;
2. Professionals who act like they are owners — they are self-starters and view themselves as the one who must step up to deal with any issue because they know and act like the buck stops with them;
3.  Individuals who love the day-to-day work that ownership entails — not people who seek mainly the prestige or power they believe ownership will bring;
4. People who provide leadership and mentoring to team members (“manages” self and then others);
5. Those who buy in to our service ethic and want to create a profitable, financially healthy business;
6.  Leaders who are dedicated to helping create a great place for people to work, who respect and treat all team members well, who derive their personal sense of gratification by attaining a balance between serving others and building a great profitable business;
7.  Individuals who can deal with the paradoxical struggle between autonomy and intra-partner cooperation by being willing to be challenged and open to different opinions;
8.  Professionals who seek success for the entire firm, not just for themselves, who are fully committed and loyal to the firm, who don’t accept recruiters calls and can’t imagine working anywhere else.

While it is customary that the majority of the partners of a professional service firm will be the professionals (CFPs, CFAs, CPAs or J.D.’s, for example) involved in the day-to-day servicing of clients, we do not have restrictions on the number of partners or the type of position that can become a partner.

We currently have partners who perform lead financial advisor roles, operational roles and investment department roles. Advisor partners generally have revenue responsibility of $1 million or more; manage client expectations well, with high retention of clients; and they have demonstrated growth in contracted revenue/business development.

We embrace the concept that there are other non-financial advisor roles that can have a meaningful impact on the future of the firm and since 2012 we have had at least one operations-focused partner.

Operations or investment department focused partners impact the firm by managing a sizable team, a critical function, or a significant budget. Their leadership improves the skill of team members; improves quality, efficiency and profitability; and enables future revenue growth. While not every great employee will become a partner, our plan welcomes those who can significantly or materially impact the business.