The more the firm has standardized its processes and streamlined the delivery, the easier this is to do. The less experienced the musician, the more he needs sheet music. In this case, the standardized process is the sheet music.

But one common mistake many firms make is to delegate the smallest client relationships to the associates. Theoretically, this allows the lead advisors to develop more “A” clients while giving the associates training with lower level clients. This may be easier to implement, but the strategy of delegating the “unwanted” does little to prepare the associates for their work with premier clients. Instead, it is often discouraging and even leads to turnover. The “minor leagues” can be a good training ground, but they can also teach minor league habits. You can’t learn to hit 95-mile-per-hour fastballs by practicing on 60-mile-per-hour fastballs.

The second big change a firm has to make is cultural, and while this is harder it has much greater impact. It means creating a firm identity that clients can relate to and associates can “wear” for credibility.

Consider the patients in the neurosurgery unit of a hospital. They will likely have no problem with interns directing their treatment if the hospital is greatly respected. Nor do the guests of a great restaurant protest if the sous-chef cooks most of the meal while the celebrity chef mingles with guests. This is the power of a brand—clients accept that it extends beyond the person who created it.

This transformation is extremely difficult and not scientific, but the principles are very clear. To begin with, an advisor must involve and promote people. Give them a meaningful role in the relationship, challenge them to do better and promote them to clients. Advisors must resist the urge to rush in and help their underlings. They must learn to use “we” instead of “I,” and hire talented people who can grow quickly. It’s important to spend time with these people and train them. (I’ve written a whole book about this process: The Ensemble Practice: A Team-Based Approach To Building A Superior Wealth Management Firm.)

Where And When To Begin
Much as you would find while skiing a very steep slope, the first couple of turns are the hardest. Once you begin and find success, it becomes easier to adjust, adapt and repeat. The right time to begin this process is as soon as the firm reaches $1 million in revenue, simply because the financial resources are then available to compensate associates and there are likely enough client relationships to create scale.

Another threshold to consider is the size of client relationships. If these relationships are smaller than $5,000 a year, a firm will likely struggle to leverage them. The smallest tasks will be easier to execute with just one person. There is a certain “overhead” with teams, so if a client relationship is too small, it may be more practical to just handle it one on one. It could be the firm never has enough size advantage. And that’s one reason to be very careful with client selection.

Finally, a team approach requires that the firm can attract and train talented people. That can never be taken for granted. A “top of the class” Wharton or Stanford MBA holder cannot be easily persuaded to join a small firm. The competition is fierce and advisory firms must position themselves as good employers, not just good client service managers. There are many MBAs and even PhDs, as well as graduates from the top undergraduate programs and top postgraduate science schools. But they disproportionately join the largest firms in the industry. The ability to recruit talent is perhaps the most important and least understood advantage of the largest firms. This is another self-fulfilling prophecy—firms that leverage well tend to attract better talent and grow faster and, as a result, leverage even more. Firms that don’t tend to struggle with the first step of the process. The key, again, is to begin the shift and pursue it with persistence.

A Team Approach, Or Not
The fork in the road is critical for the future of any advisory firm. Once you choose a team approach and use multiple levels of professionals, there is no going back. The approach tends to replicate itself and requires the firm to grow in order to provide opportunities for its best professionals. It becomes a chain reaction.

It takes the firm to higher levels of growth—but also to higher levels of management complexity.