Many newer advisors, after completing training ponder the question: “Am I better on my own or should I join a team?” At some firms there might not be an option. Sometimes it’s a question of timing. At some stage in their career, an advisor might consider whether working as a sole practitioner or joining (or forming) a team makes better sense. There are pros and cons for each alternative.
The Pros and Cons of Being a Sole Practitioner
Let us assume you are a newer advisor. Having passed your exams, you are now in production. You are considering if you should build a sole practice.
- Getting clients. You will need to build your book all by yourself. If you have the gift of being a great prospector, you will have it easier than others in the office. Experienced advisors will try to get you onto their team as the rainmaker. You can make your own rain.
- Getting paid. All of the business you bring in flows to your bottom line after the firm takes their portion. You are not splitting it with other team members.
- Portability. If you are a one-person operation, you are more marketable if you choose to move to another firm in the future. It’s easier for a competitor to persuade one person to move vs. a multi member team.
- Client relationships. Each client has a personal relationship with you. You are their advisor. That can be a strong bond.
- Depth of resources. Although you can bring in knowledge and support from other departments of the firm, it’s not the same as having an advisor who is an insurance expert sitting in the next seat.
- Staff support. As a sole practitioner you might be doing most of your paperwork yourself. If you have sales assistant support, you might have a sliver of a person because you are sharing with others.
- Office space. As a newer sole practitioner, you might be in a cubicle in the bullpen in a large office. You don’t have a fancy space a team might have available.
- Vacations can be tough. When you go away, you need to arrange coverage. If you are the only advisor your client knows, they want to talk with you when they call.
The Pros and Cons of Being a Team Member
Many new advisors enter the business as a member of an established team. Experienced advisors might consider the team structure as a way to make life easier or enter semi-retirement.
- It’s impressive. When you take on a new client you explain: “Your relationship is so important, four people are assigned to handle your account.” Teams often include specialists. One might focus on financial planning, another knows lending. You can explain: “Our four-person team has a combined 60 years of industry experience.
- Coverage. Everyone knows the team’s clients. When you take vacation, clients get seamless attention.
- Retention. If a team member is recruited away, the remaining team members contact each client, letting them know everyone else is still here, ready to help them. They are a client of the team and the firm, not an individual. Clients stay when a team member retires.
- Greater share of wallet. A team member skilled in insurance can bring in new business from existing clients who were doing their insurance business elsewhere.
- Pay can be murky. Although everything is usually spelled out on paper, you are getting a portion of the total revenue. Your brother-in-law might want all his business to go to you, but it goes into the pool.
- Getting stuck in an unpleasant role. The team has the major skills already in place. They need a pipeline of new prospects. These team members despise prospecting. They outsource it to the newest team members, which they are expected to do forever. They wonder why turnover is so high. One reason teams fail is they don’t hire complimentary skills and personalities.
- People don’t always get along. Successful advisors are often Type A personalities. They want to be the boss. “It’s my way or the highway.” You might be good at the job, but always treated as the junior partner.
- Are you getting trained or stuck in a box? Is there room for advancement? Years ago, a firm’s executive training program might have rotated a newer manager through several departments, giving them an opportunity to learn the business. Today, you might be typecast as a specialist, always doing the job you learned to do well, but not learning how to run the team yourself.
There are good reasons for each structure. A major factor is the personality of the advisor.