Back in 2004, Jon Walton saw the future and realized it meant one thing: forming a team. A solo practitioner in Hockessin, Del., for 10 years, Walton knew the smartest way to rev up revenues at his practice, Independence Wealth Services, was to bring on people with skills that complemented his own strengths. Assets are $100 million, up from $60 million five years ago.
When Ivan Illan left investment banking five years ago to become a registered principal for MML Investors Services in Los Angeles, he knew he needed help building up his book. So, he decided to build his practice by creating a virtual team comprised of other specialists affiliated with the company. Team assets are now $100 million.
Five years ago, Brian Holmes, president and CEO of Signature Estate & Investment Advisors in Los Angeles ran a practice with 10 other advisors, each of whom operated on his own. To boost growth, they created a complex structure of multiple teams, through which they served their own clients but also shared a common support staff. With $1.6 billion in assets, revenues have grown 25 percent over the past three years.
You’ve heard it before, ad nauseum. The way to boost revenues is by forming a team. Client needs and the demands of the market are too complex to be served adequately by a lone cowboy or even a loosely associated group of colleagues. “Teaming is where the industry is headed,” says Jeffrey Rohwer, head of field development and talent management at UBS. According to Rohwer, teams at UBS are 20 to 30 percent more productive than solo practices and have significantly larger asset bases.
Trouble is, saying you want to be part of a team is a long way from actually putting a successful team together. Look under the hood and you’ll discover that, when it comes to teams, one size definitely does not fit all. For example, it’s widely accepted that teams come in two categories: horizontal, where the advisors are equals, and vertical, with a senior advisor at the top. But, in fact, the choices are much more diverse, encompassing everything from a team with one advisor and a group of support people offering complementary skills to a full-blown wealth management operation.
What’s more, there’s no one, universal definition of just what a team is. For David Lee, branch productivity resource manager for Raymond James Financial Services, for example, a team is simply “a collection of individuals working together toward a common goal.” On the other hand, Bank of America’s official definition focuses specifically on the role of the rep—a structure in which an advisor collaborates and shares more than 50 percent of the practice with at least one other colleague, according to Steven Samuels, managing director, client solutions and global practice management at Bank of America Merrill Lynch. Add to that the subtleties of finding people who are the right fit with one another, setting up systems and defining the best compensation plans, and team building begins to seem quite complex.
Most important is deciding why you want to form a team in the first place, and the structure best suited to achieving those goals. If, say, you’re after attracting wealthy clients who expect comprehensive planning and services, then you’ll probably want to build a team with a phalanx of the usual experts—estate planning, taxes, financial planning, alternative investments—all of whom will probably serve the same clients. If, on the other hand, you’re more interested in making sure there’s a financial professional able to cover for you when you’re out, you might simply want to find one other compatible colleague to partner with.
Or, you might prefer something in between. That was the case for Independence Wealth Services’ Walton when he decided six years ago it was time to take a break from the solo life and start heading a team. “I was the chief cook and bottle washer, but I was reaching a ceiling of complexity I couldn’t break through on my own,” he says. But, for Walton, that meant gradually bringing on board people who excelled at areas other than his strongest suits, which were financial planning and building and maintaining client relationships. What’s more, he hoped to zero in on skills most likely to appeal to high net-worth clients without forming a full-blown wealth management team.
To that end, his first move was to hire an office manager; before, he’d used the resources of the insurance b/d with which he was affiliated. Then, two years later, he hired a CFA to do financial analysis. A year after that, he brought on a business development manager in charge of not only marketing, but also community outreach, networking and general activities aimed at what he describes as “enhancing the client experience.”
In some cases, like Illan, you might decide to choose the virtual route. After 15 years in investment banking product development, he joined MML Investors Services in 2005. But, how to develop a client base? “I wasn’t about to make the transition to the retail side by cold calling all day,” he says. “I saw people do that and it was brutal.”
As Illan analyzed his situation, however, he decided the swiftest route to finding clients was to team up with CPAs and other experts in the network who already worked with potential clients. Thanks to his years in investment banking, he had a lot of expertise to offer such folks. Eventually, he was able to develop relationships with a CPA and an insurance specialist. “One thing led to another and the business exploded,” he says.
If you’re not sure what your strengths are –and, as a result, the other skills you need to bring into the firm--you can hire a coach to help. Another tack is to ask some trusted clients what’s most important to them. “Then you can figure out the best way to get those skills, whether it’s a support person, a CFP or someone else,” says Lee. Some of the biggest brokerage firms, like UBS and Bank of America, have full-blown team-building programs with practice-management specialists who can help.
Of course, for the team to work, you need to find the right people. If you’re lucky, you can join forces with someone who is already a colleague. Take Peter Izzo. About three years ago, after 13 years at Merrill Lynch as a solo practitioner, he started going out on occasional sales calls with a new coworker, a fixed-income specialist who had come on due to the recently purchased Lebenthal. After about a year, the two realized they were a good match and formalized the arrangement.
If you’re in a big firm or affiliated with a broker/dealer and you don’t immediately spot someone you would like to work with, you can cast a wider net, letting colleagues and managers know what kind of person you’re looking for. Or you can try the usual sources for suggestions—CPAs and lawyers you work with or professional organizations. When you meet with them, make sure you explicitly describe the type of team you want to create and the specific role the individual you would partner with will play. Once you’ve chosen team members, it’s a good idea for everyone to take a personality assessment, like the DISC, so you develop a better understanding of each others’ styles.
Expect the process to last anywhere from a few weeks to a year. But, it can take longer, too. Illan started by gathering the names of 45 CPAs and insurance specialists in his firm. Then, after he contacted them, he offered to do an analysis of select clients and, with their permission, come up with a 20 to 30-page financial and investment plan. According to Illan, it took about two-and-a-half years to develop the relationships and formalize the team.
You’ll also need to set up a well-oiled machine to define responsibilities and coordinate and track each individual team member’s activities, including client contacts. You’ll also need a formal meeting schedule. Walton is typical. He holds a meeting every Monday morning to discuss the week’s activities and make sure everyone is on the same page about his or her responsibilities. He also checks in with team members individually throughout the week. He and his CFA meet with all clients together; much of the time, his marketing specialist also attends. Similarly, Izzo and his teammate have a clear schedule for meetings: client service on Monday, business development on Wednesday, and investment updates on Thursday.
Then there’s the matter of compensation. If you’re at a brokerage house, you’ll need to follow the firm’s policy. For RIAs, if your team structure includes a more-senior advisor, that individual probably will get the largest chunk and divvy up the remainder to those team members who get a share. If there’s a group of equals, partners will divide up revenues according to a specified formula. (See our story on team compensation in the June issue of Registered Rep.). In most teams, non-producing members tend to receive a salary.
But there are a myriad of permutations. Take Holmes of Signature State & Investment Advisors. His firm now has 12 teams of two to five people, each headed by a senior advisor. About 25 percent of each team’s revenues go to support a shared support staff of 12. Each senior advisor decides how to divvy up the rest among team members.
The fact is, a poorly thought-out compensation structure can be a symptom of larger problems. Lee points to an advisor who, five years ago, decided to start his own firm and bring along an operations manager he had worked with previously to set up office systems. Each of them had an equity stake in the new LLC and divided up revenues just about equally.
But, as the business grew, the senior advisor realized he’d made a mistake. “He had an office manager who set everything up, but now was simply doing the work of an office manager,” says Lee. Eventually, the team split up, with a lump sum buyout of the operations manager.
Ultimately, no matter how airtight your team plan is, your needs are likely to change as the practice grows. Nine years ago, John Hammond, an advisor at Merrill Lynch in Northbrook, Ill, decided he needed to bring on someone skilled at financial planning. That person ended up being his son, John III. Now, with $450 million in assets, father and son recently decided the time was right to add a third team member to focus on marketing and client education. To that end, they put together a detailed plan both for the skills the individual needs and for how to grow the business. They’re now in the process of hiring someone from a list of three finalists. Says Hammond senior: “For the business to expand, the team has to keep growing.”
