Wealth Management Team Structures
Consensus-building is critical, no matter how your team is organized.
Editor's Note: Portions of the following article are excerpted from the authors' most recent book, Wealth Management: the New Business Model for Financial Advisors.
Last month, we talked about how to build a wealth management advisory team whose members you can partner with to deliver a full range of financial products, services and solutions. We considered who might be on that team, what skills, both professional and personal, they should have. We also addressed some of the key challenges in putting that team together, such as what to do when they try to steal your client or when the client already has preferred experts on board.
This time around we'll take a look at the three wealth management team structures, and examine what each can mean for you and the way you do business depending on your particular situation-whether you are, for instance, part of a large firm or work for yourself. These are the parent company as team, the self-contained team and the virtual team.
Conceptually, the parent company as team is the most straightforward organizational structure, whereby all of the various experts you might need are available to you on an as-needed basis: a securities lawyer; an income tax, derivatives, valuations and charitable giving specialist; an actuary; and a trusts and estates lawyer.
In the self-contained team, a number of the specialists whose expertise you need on a regular basis, say an actuary and trusts and estate lawyer, are formally part of your core organization and are "employed" by you.
They're usually paid a salary and a bonus based on the profitability of the entire team and their individual contribution to that profitability as measured by you, the team leader. Because some other experts, such as a derivatives specialist or securities lawyer, are less frequently required (who is needed when will vary from advisor to advisor depending on their client constituency), they wouldn't be part of the core team but would be summoned when needed.
Lastly, there's the virtual team, where you would work on your own and bring in specialists as you need them. In this case, it's not uncommon to have well-defined relationships with some experts-a life insurance specialist or a trust and estate lawyer, for example-who would in turn bring in the specialists they work with and manage them.
Team Structure Pros And Cons
Of course, each of the wealth management team structures has it advantages and drawbacks. The cost of maintaining a self-contained team, for example, can be high compared with the other structures, but it can be justified when there's enough business. For the parent company as team, the financial institution bears the cost and it's economical by virtue of being distributed over many advisors, but your percentage of the revenue might not be as high. With the virtual team, presuming the expertise is only paid for when used, the cost is variable.
For the self-contained team, you-and your clients-can get help in a hurry, whereas in the other two structures the experts could be busy and unable to respond to your requests as promptly as you might like.
When it comes to industry trends and knowledge, the parent company as team is generally able to stay state of the art because of its resources and people, though it's an open question as to whether or not that information is gathered in one place and readily accessible. The virtual team can stay up-to-date because of the specialists selected and the need for those specialists to maintain their positions as leading authorities. Often they're aware of, or even involved in, industry innovations. It's somewhat more difficult for experts on the self-contained team to stay at the cutting edge due to their constant need to apply their talents and knowledge to client situations, sometimes to the exclusion of other activities such as training and research.