What You Need to Know
- There's no one-size-fits-all approach for deciding if a partnership program makes sense for your firm.
- It's good to focus on advisor retention, but not at the expense of adding a partnership for the wrong people or at the wrong time.
One key metric to watch in wealth management today is advisor turnover. A recent industry report found that over 4,000 advisors switched firms in the first quarter of 2021, the most movement ever.
As the pandemic continues, advisor burnout is a concern. The industry as a whole hasn’t figured out what the perfect advisor-to-client ratio is, and capacity remains a question mark for many firms.
At the same time, as more private equity enters the industry, the ultimate objective of many firms shifts to profit margins and returns on these investments. As that happens, advisors may be pressured to take on more clients than they can handle.
The possibility of burnout, then, can come from multiple source. The increase in advisor movement already seems to be indicating that many advisors are looking for a fresh start — and that figure comes on top of a good number who likely are choosing to leave the industry.
An advisor leaving a firm is always a detriment to that business, and it’s an event that creates a long-term threat to a firm’s ability to thrive.
One way a firm owner can prevent advisor departures is by creating a partnership structure that allows individual advisors to participate in the growth of the firm.
In this article, I’ll explain when a partnership structure is appropriate — and when it isn’t.
Not for Everyone
I’ve seen many instances in which advisors put together partnership structures when they aren’t ready for one, simply out of fear that they’ll lose talented advisors they already have on staff.
If your primary motive for creating a partnership is fear, a partnership program could turn out to be risky for your firm. Partnership programs should exist only when you have an advisor you want to retain and who is worthy of a partnership role.