Advisor Team Model

The advisor team model remains a growing trend in the investment services industry. According to Cerulli Associates 2018 Advisor Metrics study, more than half (54%) of all advisors operate in a team structure. Merrill Lynch is leading this trend with 77% of its advisors operating within a team-based arrangement, up from 48% in 2013. There are numerous advantages of the advisor team-based model; however, it is not without pitfalls. Here are the key benefits of advisor teams and ways to overcome common challenges.

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Advantages of Advisor Teams

Increased Production

Research from PriceMetrix shows that advisor teams are more productive than sole advisors averaging $130 million in assets and $950 thousand in revenue, compared to $110 million and $830 thousand. The study also found that teams grew revenue 17% faster and 11% faster asset growth than sole advisors. According to Doug Trott, President, and CEO of PriceMetrix, “Teams grow faster than sole practitioners, not because of a division of labor or some magic of ‘synergy,’ but because they do the fundamental things that drive growth. They manage fewer accounts. They create deeper relationships, and they are more likely to become the primary financial advisor for their clients.”

“Teams grow faster than sole practitioners… because they do the fundamental things that drive growth. They manage fewer accounts. They create deeper relationships, and they are more likely to become the primary financial advisor for their clients.”

Improved Client Satisfaction

According to Cerulli, 73% of advisors believe that teaming enhances the client experience. “Teaming allows advisors to build specialized roles and responsibilities, thereby delivering broader and deeper advice to clients with more complex financial needs,” explains Marina Shtyrkov, a research analyst at Cerulli. Teams tend to experience lower rates of client attrition, and their clients are more likely to have their retirement account serviced with advisor teams.

Advisor Recruiting and Retention

Advisor teams help junior advisors get up-to-speed more quickly and enable firms to stay ahead of the industry’s talent shortage. These younger advisors typically start as salaried and serve in a support role to a senior advisor. Advisor teams help firms recruit the next generation of talent being millennials usually prefer working in teams and value mentorship. Lastly, teaming can deter poaching as it is harder to recruit away multi-advisor teams.

Avoiding Potential Pitfalls of Advisor Teams

It goes without saying that not all teams will be successful, and there are potential hurdles. Team conflict is a common concern, whether a senior advisor feels that other team members aren’t pulling their weight. Conversely, junior members may feel they aren’t receiving adequate compensation.

Defining and implementing clear responsibilities and expectations is crucial and will help mitigate potential issues. When building your team, take into account the various strengths and areas of expertise of each member so that these skill sets are complementary. Communication also plays a vital role in establishing a strong and healthy team dynamic; communication needs to be frequent and transparent.

Compensation arrangements can also be a source of friction on advisor teams. Compensation based solely on the team’s performance could diminish the overall level of activity. Address this decrease in productivity by using multiple incentive drivers for each advisor, with one of those based on a team-based goal. Some firms establish a minimum threshold that advisors must reach before getting team credit. These tactics will ensure that advisor teams are working together as an actual team.

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