Financial advisors at RIAs are joining forces to create mega teams as a way of coping with the growing complexity of clients' planning needs, investment products, industry technology and regulations, according to research firm Cerulli Associates.
In a report based on a survey conducted this year, Cerulli calculated the average number of total professional staff per practice at 4.5 for RIAs, compared with 3.3 in the wirehouse channel.
What has made multi-advisor practices so popular in the independent channel?
"They can leverage the complementary attributes of multiple advisors, for example, by pairing junior and senior advisors to work with intergenerational clients. The efficiencies and scale they achieve as a team position them ideally in the market for acquiring other practices," Cerulli analyst Joy Greenberg writes in an email.
"In addition, carving out distinct roles and career paths for employees makes these teams an attractive hub for high-quality talent in the industry," she writes.
GROWTH & PRODUCTIVITY
As independent practices grow, they often "hit an inflection point where servicing existing clients and prospecting for new clients become untenable," Greenberg writes.
"Growth and productivity reach a plateau, and the founding partners may be spread too thin. A strong advisory pairing enables practices to surmount these challenges and grow," Greenberg writes.
"Advisors who want to form integrated teams need to sort through a complex web of processes, technology and people," she writes. "This should be a priority during their strategic planning process and should receive ongoing attention."
The teams gain savings and efficiencies by putting together their individual specialties, such as estate planning, financial planning and investments.
"Offering more services has helped large advisory practices win high-net-worth clients who have complex financial needs," Greenberg writes. "Building a team with a junior advisor can free up senior advisors to focus on these higher-net-worth clients and provide them with a viable succession strategy."
'GET EATEN UP'
Brent Everett and Bob Lamse lead a six-advisor team at their firm and are engaged in negotiations to add two more advisors.
"We are always looking for people," says Lamse, who is president of Talis Advisors, an RIA in Plano, Texas.
An advisor going it solo these days, or even a pair, will fail to have either enough time to perform all the tasks needed to handle firm needs or they won't have the budget necessary to pay for all the alternative outsourcing, says chief investment officer Everett.
"They will get eaten up," he says.
Moreover, clients, particularly high-net-worth ones, want the assurance of working with more than one advisor.
"They feel much more comfortable when they are surrounded. They don't believe one guy can have all the expertise they need," Everett says.
Other benefits stem from multi-advisor teams, including that it allows for professionals to take relaxing vacations, often an impossibility for those at one- or two-person operations, Lamse says.
Miriam Rozen is a reporter for Texas Lawyer who writes about financial planning and services.
This story is part of a 30-day series on going independent.
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