To remain competitive in today’s environment, it is no surprise to most:  the stand-alone financial advisory practitioner must often team up with others to establish better payouts, operational efficiencies to build capacity and, ultimately, increase profitability. There are, however, inherent risks to practices comprised of multiple owners, members and/or partners – regardless of the type of configuration, whether as an RIA or through a broker dealer affiliation.

This article provides a high level overview of the things you’ll need to consider about teaming. Subsequent articles will provide deep dives into the complexities and solutions of team practices, so you can be confident in your decision to join forces to build your business.

The advantages of strategically forming a team practice

You’ve spent years growing your practice, building your client base and expanding your financial advisory expertise.  You’re likely to have brought on staff to help with the “back-office” aspects of running a practice. As you have grown, you have compounded the complexities and liabilities relating to employment practices, taxes, compliance, benefits offerings and the like.

You may now be at a crossroads. Ask yourself, are you spending more time dealing with business issues within your practice than quality time with your clients? Has your growth outpaced your capacity to both run a sustainable business and meet your clients’ expectations? Are you keeping up with the ever-expanding set of financial services rules and regulations, as well as relevant employment laws both at the state and federal level?

Now is the time to look at the competitive landscape and determine if joining forces with others in the industry is the right move for you.  There is a myriad of advantages to formally working with other financial advisory practitioners, among them consolidating expenses, efficiently leveraging administrative staff and taking advantage of economies of scale.  You may also find an opportunity to work with others who share your expertise (working with Federal employees, for example) or those who bring complementary skills to the table (like a deep knowledge of complicated closely-held businesses).   Or you may be brilliant at understanding the industry regulatory requirements, but your colleague might be a master at supervising employees, marketing and/or building your shared brand.

The bottom line is building a formal team practice will almost certainly increase your capacity to see more clients and efficiently run a profitable business in a heavily regulated and competitive marketplace.

It’s complicated, but worth the work

Once you’ve decided to make the move to formally join with others, the real work begins. Setting the appropriate groundwork in a couple of “buckets” will be critical to the success of the team.

One bucket is the form in which your group will operate.  Will it be an S Corp? A LLC? Will you share equal ownership, or split ownership with varying percentages? How will you best mitigate the risk associated with legally joining with others? What happens to the business if one of you is disabled or dies?  What about succession planning?

Another bucket is the broker-dealer and regulatory requirements of a joint entity.  Your Broker Dealer may have rules for office sharing, revenue sharing, metrics, supervision issues, marketing and lead generation. The SEC and FINRA have rules governing the payment of transaction-based compensation, books and records requirements, sharing revenue and expense between licensed individuals, etc.

The third bucket relates to a possible “blended workforce.” In order to avoid new and emerging organizational dynamic issues that could derail your team, a careful eye toward human resource issues will be required. You’ll need to ensure you effectively create uniform policies and procedures, synchronize wage and benefit offerings, and streamline and unify performance management. In other words, a comprehensive HR program on Day One of your consolidated business is a must.

Final thoughts

While “going it alone” may be less complicated, retaining the status quo is unlikely to result in a strong business down the road.  The financial services regulatory environment will continue to remain onerous despite the new administration in Washington. The Internet will continue to impact the industry and your practice in ways we can’t even imagine, and differentiating yourself in a sea of advisors will become even more difficult. Pooling resources, sharing intellectual capital and increasing capacity are all strategies that will benefit you as your business grows and evolves.

Our next column will focus on the many legal entity options available and how each one can elevate or undermine your short- and long-term business plans.

If you have questions or need help taking your practice to the next level, contact us.  We’re here to help.

Contact Dan D’Alio at or 330-856-9770.