Are team-based advisory practices better positioned for growth?

In recent years, a growing number of wealth managers and financial advisors are adopting a team-based approach to running their practices, which provides them with opportunities to drive growth by offering a broader range of products and services to their clients. But does being team-based provide a better foundation for growth?

New research from Cerulli Associates and Osaic, Inc., titled, Top-Performing Teams: Exploring the Benefits and Approaches of Building a Team-Based Advisory Practice, finds that team-based practices outperform other practices across key measures, including assets under management (AUM), services offered, and productivity.

Key survey findings

The wealth-management industry has seen a widespread rise in the development of multi-advisor practices to drive growth and increase scale, the survey said, and nearly half of advisors now operate in a team-based structure. This trend is even more pronounced among the largest advisory practices: 94.5% of practices with more than $500 million in AUM operate in a team-based structure, compared to only 5.5% that are solo practitioners.

Why a team-based approach pays

The advantages of teaming are multi-faceted. Teams benefit from streamlined resources, processes, and services as a collective group and typically operate at higher levels of productivity compared to solo practices, Cerulli said. The firm’s research has also found that team-based practices have a median of $100 million in AUM per advisor, compared to $72 million among solo practices. In addition, team-based practices serve a higher core market, with an average client size of $1.6 million, compared to $1 million for solo practices.

Advisors looking to move upmarket or enter a new client segment have had success forming teams to broaden their service offerings to include more financial planning and high-net-worth (HNW) services, the survey said. On average, solo advisors offer 4.5 financial planning services and 2.2 HNW services, compared to 4.7 and 2.9 for team-based practices. An expanded set of services typically results in higher levels of wallet share, as clients tend to aggregate held-away assets with teams that can deliver comprehensive services.

“One of the key benefits of multi-advisor teams is the diversity of complementary skills, experience, and expertise. Combining each team member’s experience allows practices to leverage their individual strengths and provide specialized services, including lending, estate planning, tax services,” said Asher Cheses, director at Cerulli Associates.

“Teams are able to accelerate their growth by better leveraging platform resources such as financial planning, high-net-worth and advisory solutions, as well as business development resources and capital solutions,” added Kristen Kimmell, executive vice president, business development, Osaic. “Osaic has been recruiting more teams and partnering with solo advisors looking to evolve their practices to meet the increasingly complex needs of investors across the entire spectrum of wealth management services and capabilities.”

“In choosing their team structure, advisors should aim to maximize their drivers of growth while limiting existing areas of efficiency within their practice. Teaming creates natural opportunities to retool existing processes and establish new frameworks for success,” added Stephen Caruso, senior analyst at Cerulli Associates.

Teaming at work

As the survey pointed out, working collaboratively with other professionals is helping many wealth managers drive growth and take their practices to a higher level of success. Here is what some MDRT members shared about the benefits they are deriving by using a team-based approach:

• Ann Baker Ronn, director of insurance at The AFP Group:
  “I have worked alone and as part of a team. None of us is strong in every area of our business. Working as part of a team allows each team member to work on tasks in which they excel and let other team members maximize their strengths and abilities. It is, in my opinion, the best and most efficient way to be successful in our industry.”
• Kasey Massatti, vice president, Fairfield Financial Solutions, Inc.:
  “Collaborating as a team invites additional insights from advisors. A team approach also allows for depth of product expertise and finding the best solution for each client’s individual needs. I believe that a team approach elevates the client experience and provides the best possible outcome.”
• Kyler Spencer, financial advisor, FSM Wealth:
  “Over the last several years, I’ve adopted Angie Herbers’ Diamond Teams concept in my practice, which our entire firm has also embraced. This approach has significantly enhanced our growth and service quality.”

“As a younger advisor, working within a team-based system fast-tracked my training, enabling me to quickly immerse myself in problem-solving and client management responsibilities. The collaborative environment helped build my competence and confidence early in my career, which ultimately allowed me to step into a senior advisory role working directly with clients.”

“From a client standpoint, the team-based approach pools diverse skills and perspectives, addressing a broader range of needs and delivering more personalized, effective solutions. Additionally, having multiple team members available ensures a more consistent and comprehensive service experience. “

• Amanda Cassar, founder and director, Wealth Planning Partners:
  "We enjoy using a team approach to split the workload and allow us to play to our strengths. Our client service manager gets the ball rolling to ensure our information is all up to date and correct on file. Our junior adviser prepares the review documents and does research to ensure all is still in order and in the best interest of the client. And the adviser gets to do what they do best: sit with the client, present the review, and catch up on what really matters – the family, the holidays, the pets, and making sure the goals are met.”

 

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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