When forming a team, advisers searching for improvement are going to be those most receptive to change and the most willing to shift their behaviors in order to grow their practice. These advisers realize that to maximize the potential of their practices, they must constantly evolve the way in which they do business, according to “The Cerulli Edge—Advisor Edition: The Differentiation Issue.”

The first key issue for the successful formation of a team of advisers is to ensure that component personalities and expertise are complementary, the report says. Although team members should be like-minded in their goals, the most successful adviser teams combine complementary personalities and business expertise. Therefore, advisers looking to become a part of a team must understand what they are good at and what they like to do, while also understanding those parts of running an advisory practice in which they are not quite as strong.

Team Structures

In general, Cerulli notes that successful adviser teams have one adviser who specializes in business development and client acquisition, while others then complement him by having expertise in investment management, client service, or another advice discipline. However, the report notes three adviser team structures:

• one in which a senior adviser dictates responsibilities to junior advisers (this is the most common for small teams with two or three advisers). “A common scenario is one in which the senior adviser sells qualified plans and the junior adviser assists with enrollment meetings and capturing smaller rollovers from the plans,” the report says.
• a partnership-style structure, in which multiple senior advisers share compensation and responsibilities
• a team wherein the component advisers act as specialists with expertise in different advice disciplines (this is the least common of the structures, Cerulli says)

Broker-Dealer Involvement

Broker-dealer firms must be careful not to force teams together. Likening it to an “arranged marriage,” Cerulli cautions that such situations will have inherent tension from the start. However, the report says that, since there are clear advantages to adviser teams for both the advisers and the B-D firm (such as the fact that advisers operating on teams report being far more satisfied as a member of a team than they were as sole practitioners), B-Ds should be publicizing these advantages and providing advisers with examples of successful adviser teams.

The report notes that it is important for the B-D to provide structure around the team by clearly articulating the practices of successful teams that a new team should emulate and by helping the prospective team execute the necessary team organization details to help advisers achieve efficiency.

The team structure is often most effective when its key components have been put in writing during the formation process. There are three primary areas where new and existing teams formalize their agreements:

• Compensation: Successful compensation agreements establish rates of pay but also discuss how compensation might shift over time. If, for example, Cerulli notes, a senior adviser brings in a junior adviser, this agreement might detail what milestones (such as revenue, assets under management, and specific training) have been agreed upon after which the junior adviser’s share of practice revenues might increase. This agreement would also go beyond strict compensation to detail how client relationships will be divided if the team were to break up.
• Division of Responsibilities: The second place where a team should formalize a written agreement is in the division of responsibilities. As the team begins doing business together, it will make the transition much easier if the team members have already agreed on the division of labor.
• Mission Statement or Value Proposition: Establishing a mission statement or value proposition in writing is valuable and compliments the division of responsibilities so that each member of the team understands what makes the team unique and what their role is in that.