When and How to Build Your Financial Advisory Team

8 min read
December 03, 2018

Most of today’s successful financial advisory firms were started by individual advisors who built their businesses from the ground up. They were responsible for every facet of business ownership—prospecting, marketing, defining their client service model—all while figuring out on the fly how to best serve their clients and build a successful, profitable business.

Many of these advisors got their start at product manufacturers or wirehouses where the revenue models were based on sales and commissions with little to no recurring or predictable revenue being generated by the business. This business model made it difficult for advisors to plan long-term and specifically commit to hiring and developing employees who would be essential to sustainable growth.

The flaws in sales/commission-based revenue models became increasingly evident as the number of new advisors decreased, as did the success and retention rates of advisors operating under this model. According to Q3 issue of The Cerulli Edge US Advisor Edition, the average advisor age is 50. Only 11.7% of advisors are younger than 35 years old, and the number of advisors exiting the business is expected to continue outpacing the number of advisors joining.

But as the industry has evolved, independent firms have started to build recurring revenue models based on ongoing advice and financial planning instead of commissions and product sales. This shift to comprehensive financial planning continues to attract more young talent to the profession.

Advice-centric, fee-for-service planning creates a more predictable revenue model that allows advisors to plan how and when to invest back into their businesses. This new model also gives advisors ownership and equity in their businesses. This not only creates an asset they may someday be able to sell or transition, but it also provides equity ownership opportunities for the next generation of financial advisors. 

When is the Right Time to Start Building a Team?

Chances are if you are an advisor who has started your own firm and built up a solid client base, you have contemplated if and when you should hire.

There are so many questions and concerns for any advisor who sees the need to grow their practice after recognizing that they are either at or approaching capacity. 

Should I bring on another advisor? Or do I need someone to handle operations instead? And how will I compensate them? 

Many advisors will look at a revenue number to decide when they should start hiring ($150-250k, for example), while others look at total number of clients (i.e. 50-100 clients).

While both of those numbers will ultimately be important in deciding if you actually can hire, it’s also important to consider the current needs and long-terms goals of your practice.

To assess the current needs of your practice, you should conduct a self-evaluation of how you are spending your time and what parts of running your practice you enjoy most.

As your practice grows, you can no longer be 100% involved in every aspect of the prospecting, marketing, client onboarding, planning, investment management, etc. anymore.

Determining where you are spending your time, and where your time would be best spent if you had more help, will help you identify the role of your first hire.

Conducting a client survey is a great way to get feedback from your existing clients about how they perceive your service model and client experience, which also plays an integral role in determining where your time is most valuably spent.

Next, you must think about the long-term plans for your business.

Do you want to run a lifestyle practice that allows you to continue to provide exceptional advice and planning to your clients, while also providing you with work/life balance? 

Or do you want to build an enterprise practice that might include hiring additional advisors and continuing to grow your client base and revenue? 

Your answer will likely change over time as your career progresses and your life priorities change.

The hats you enjoy wearing most may also dictate this decision.

Advisors who enjoy the planning work and the client relationships day in and day out may choose to hire operations support while remaining the lead planner in their lifestyle firm.

Conversely, those who enjoy the details of running the business may look to hire additional advisors to do the actual planning and to nurture current and build new client relationships.

How do You Start Building Your Team?

More and more individual advisors are deciding to build enterprise financial advisory firms and in doing so, are creating the best opportunity for new advisors to enter the industry, learn the ins and outs of the business, and ultimately develop the next generation of planners and firm owners.

There are a number of factors that have limited the quantity and quality of individuals joining the financial planning industry, the first being a general lack of awareness of the profession. 

Many still view the profession as commission-based and "salesy," with an emphasis on product pushing.

The other major factor contributing to this limited talent pool is the lack of a defined career path for those who are looking to enter the industry—this includes defined roles, training, compensation, and career progression. For advisors who are looking to build a financial advisory team and hire the best talent, it’s important to define all of these up front.

In doing so, you will create a team that will service your existing practice and support you in building a business that will last beyond your career.

One way to build your advisory team is by developing a career path that can take someone from an internship to equity partnership. This allows you and your employee to evaluate the right next steps for their career and your business within each stage.

It also provides them the experience and training needed to properly learn how to be an advisor, with the predictable income of being a salaried employee.

Most importantly, perhaps, is the fact that you are providing them the long-term upside of equity ownership in a business that supports individuals in achieving their most important personal and business goals.

Sample Advisory Team Career Path

Below is an example of what a career path from internship to equity partnership might look like.

Level One: Internship

Overview. As an intern, you will have the opportunity to get firsthand experience with a financial advisory firm. This will include observing client appointments, assisting advisors in the firm with entering client data for financial plans, and helping advisors and firms improve their marketing and business processes. The goal of this internship is to provide you with exposure to all aspects of the financial advisory business and help you determine if this career path is right for you.

Timeframe. The ideal timeframe for this internship is between your junior and senior year in college. This allows you to get firsthand experience with an advisory firm and evaluate both the career and the firm itself to determine if it’s a fit when you graduate. 

Compensation. As an intern, you may earn an hourly rate or a fixed amount, depending on the office you join. You may have the ability to receive course credit, and you should consult with your school prior to the internship to determine if that option is available.

Level Two: Support Advisor

Overview. Begin your career in the financial advisory business by joining a firm and becoming part of a team that helps clients prepare and achieve their financial goals. In this entry-level role, you will help support the financial advisors in the firm, obtain your investment licenses, and learn the business with hands-on training and mentoring from experienced advisors and firm owners.

Timeframe. This role is anticipated to last 1-3 years depending on licensing and career progression. It is designed to prepare you to start working with clients as an associate advisor. This will include Series 65 licensing and enrollment in the CFP program. 

Compensation. As a support advisor, you can be compensated either on an hourly basis or with a base salary. Firms may also offer the ability to participate in bonuses based on personal performance and firm success.

Level Three: Associate Advisor

Overview. In this role, you will typically begin to work with firm clients servicing their accounts and helping prepare and implement financial plans. You will be a key member of the client service experience, participating in meetings and following up to ensure clients are meeting the goals and objectives detailed within their plans. During this time, you will also start to help generate new business for the firm.

Timeframe. This role is anticipated to last 3-5 years and is designed to train and prepare you to be a lead advisor. It would be expected during this time to complete your CFP designation.

Compensation. As an associate advisor, you can be compensated in two ways: 1) a base salary for firm activities or 2) variable compensation in the form of a quarterly bonus. This bonus is calculated based on a number of factors, including job responsibilities, business growth, client satisfaction, and firm/personal goals. These factors can be weighted differently and also could change as you progress in the role. The goal would be to transition from salary to variable compensation as you progress in your career.

Level Four: Lead Advisor

Overview. In this role, you will be identifying new business opportunities and working with clients to design, implement, and track their financial goals. As a lead advisor, you will be responsible for generating new business for the firm, which includes increasing the firm presence in the community. You will also be the primary planner for clients.

Timeframe. The timeframe for this role will depend on overall contribution to the firm, including client acquisition and retention, revenue, and risk management. During this time, you would be expected to continue pursuing advanced designations based on your specialty in the firm.  

Compensation. As a lead advisor, your compensation will start to shift to a more variable basis. Compensation will be based on the revenue you generate for the firm, which includes new planning clients, ongoing fees from advice, and fees from assets.

Level Five: Equity Partner

Overview. As a partner, you are responsible for not only the financial advice provided to your clients, but also the overall success and growth of the firm. This includes hiring the right staff, enhancing client support, reducing risk, and focusing on long-term growth. You are now not only running a financial practice, you are also a business owner.

Timeframe. Once you become a partner and/or business owner, you will likely hold this role until you decide to sell the business or retire. In either case, protecting your firm and your clients is of the utmost importance. A large part of this is having continuity and succession plans in place that clearly outline what would happen in the event of death, disability, or retirement. This will ensure your clients continue to receive the service they deserve while you maximize the value of your business.

Compensation. In this role, you will continue to receive variable compensation based on revenue and will participate in firm revenue based on the overall success of the firm. You will also be building equity in your firm so when you implement a succession plan, you can realize the value of the equity and firm you have built.

Building an advisory team in this manner has some specific benefits.

First, it will provide your existing practice with the service model to continue to serve your book of business while also growing through new client acquisition.

Next, it will provide a clear path to hire and retain the next generation of financial advisors.

Finally, it will help you create a sustainable business that will last for generations to come.

Malcolm Thomas 300x300

About the Author

As XYPN's Director of Advisor Success, Malcolm is tasked with doing just that—helping advisors succeed. After graduating from Gettysburg College with a B.A in Management, Malcolm jumped straight into the financial services industry and never looked back. With a drive to help shape the future of financial planning and a passion for bringing financial advice to the next generation of clients, he has a lot in common with the advisors in the Network.

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