The Kitces.com research team has published its latest advisor productivity survey, highlighting that teams with a pyramidal structure with fewer lead advisors and more support staff perform more productively.
“It’s also clear that solo advisors generally cap out in terms of revenue per advisor at about the third the amount of revenue compared with ‘supported solo’ advisors and ensembles,” Michael Kitces said during a presentation at the Future Proof Citywide conference in Miami. “Our research shows teaming is the most powerful way to boost productivity — far above and beyond what technology alone can deliver.”
A more ideal team structure “crushes” the potential productivity effects of technology, Kitces emphasized.
“I say that as someone who loves technology and who runs a technology company, but it’s undeniable in the data,” Kitces said. “The reality is that the best users of tech have, perhaps, a 35% margin versus 32%. It’s meaningful, for sure, especially as you get bigger and bigger and this additional revenue flows into the bottom line. But teaming is the far bigger factor.”
Of course, teaming itself requires a certain degree of momentum, and new advisors often have to start solo and build the business to a point where they can invest in support staff or associate advisors.
“Having enough revenue per client is critical to have the resources needed to reinvest to hire the team,” Kitces explained. “In our data, we see that about $3,000 of revenue per client is likely a minimum floor in terms of bringing on that first support staff. When it comes to bringing on that support staffer in, you’re going to want to see $200,000 to $300,000 of revenue. For an associate advisor, it’s more like $500,000 to $800,000 of revenue."
The new analysis also notes that not all teams are created equal when it comes to revenue per advisor. As noted, it’s far more effective to have one lead advisor supported by one or two associates compared with having “rectangular teams” that have perhaps three or four lead advisors supported by the same number of associate advisors or administrators.
“To be clear, these structures can help to free up a lot of time for the lead advisors, which could then be used to grow the business,” Kitces observed. “But what we often see is that the lead advisors instead decide to take Fridays off and spend more time with the family. More power to them, but they’re not creating more productivity, in general.”
To boost revenue and productivity, Kitces said, it’s generally better to split these four or five lead-advisor teams into smaller units.
“So, you could consider moving from a three lead-advisor team supported by three staffers into three individual ‘supported solo’ teams,” Kitces said. “In our data, this is a far more efficient way to boost productivity.”
One notable distinction is a multiple-lead advisor team supporting highly wealthy clients.
“When teams have multiple lead advisors and highly affluent clients, you tend to share the clients — for lots of good reasons,” Kitces said. “It’s much higher touch services and greater continuity of service, but it’s a drag on productivity, just as a mathematical reality.”
However, with the uber-wealthy, the revenues per advisor are already high enough that spreading them across multiple advisors doesn't limit reaching business goals.
“Up to clients with average net worth of $2 million or $3 million, it’s hard to make the multiple-lead-advisor math work well,” Kitces concluded.
Pictured: Michael Kitces
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