Why Form a Team?
The age of the sole practitioner advisor is giving way to team-based advisors for many reasons.
- There are too many products and services for a sole practitioner to be an expert on all of them.
- The price compression in the industry requires gathering and managing larger numbers of assets to maintain or increase productivity.
- The industry has an inability to raise prices due to the competitive nature of the business. Especially when you consider the digital advice channels offering products and services between 25 and 65 basis points.
- The role of an advisor has evolved in complexity which makes it difficult for the sole practitioner to work on new business development and leave the office when needed
- The sole practitioner who leaves the office during business hours has clients wondering, 'Who’s minding the store?' This is a question that team-based FAs can use as a competitive advantage when competing for the same client.
There are essentially four reasons to form a team:
1) Improve productivity and grow revenues
2) Deliver the “wow” client experience
3) Create a retirement succession plan for your practice
4) Improve the personal quality of life for you and your family
Improving productivity and growing revenues
All of the big firms who studied the impact on team productivity decided teams are more productive than the sole practitioner model and then implemented incentives for FAs to be on a team. Most have key initiatives around team formation. Teams must be structured in a way that is more than cobbled together solutions and also provides the basis for leverage. In other words, 1+1=3, or by pairing two individuals the team has the leverage equivalent of three producers.
Let’s review a few statistics surrounding team productivity. According to a study conducted by Price Metrix, '55% of advisors are on teams and manage more assets, generate more revenue and maintain more client relationships than sole practitioners.'
The average team manages $260m and generates $1.7m in revenue across 280 relationships, compared to the average sole practitioner who manages $110m, generating $830k across 140 household relationships".
Unfortunately, when teams are being formed, they can skip many of the strategic and operational issues and go straight to, “how are we going to split the production?”
Teams need to establish a strategic plan that identifies the team’s value proposition, mission statement, and elevator pitch.
These are necessary components of a team-based strategy that should be discussed to determine if each team member is aligned with the strategy. This also provides unity of purpose.
Teams should also go through the exercise of performing a SWOT analysis. Identifying (S)Strengths; (W) Weaknesses or developmental needs of team members; exploring (O) Opportunities for productivity improvement; and examining (T) Threats associated with team success. While going through this analysis, action items should be identified along with the delegation of duties and responsibilities for team activities or initiatives. Once a team is sufficiently organized around specific processes, strategies can then be developed for the development and penetration of niche markets, building new relationships via centers of influence, and gaining referrals from existing relationships.