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.

The Changing Team Roster

As your wealth management practice evolves, you'll often alter the roster based on the skills you need, the level of their expertise and how they partner with you and other members of your advisory network. This is most easily accomplished in the parent company team structure, because everyone is already in the firm somewhere and there's generally no stigma in adding or subtracting experts. It's somewhat harder in the virtual team since ending a professional relationship, however informal, and establishing new ones can be difficult (if the expert wants to stay on board) and time consuming (if you have to find a replacement).

It's most challenging, however, to change the roster on the self-contained team because they're employees, or at least have a more formalized relationship with you. If you do let them go, either because they're not up to the job or because it turns out to be a field of expertise you don't need as often as you thought, be sure they've signed a noncompete contract so they won't go after your clients (such contracts should be signed when you hire them).

Team Consensus Building

No matter which team structure is right for you, you'll also have to meet with prospective team members to hammer out your shared goals and visions. Some of the issues where consensus is crucial include:

Whose client is it?

Why these specialists (and disciplines)?

How will all involved parties communicate?

How are ideas going to be presented to the client?

Under what circumstances (if any) will the specialist be before the client?

Some of these issues are especially challenging in a financial services culture built around the hand off, where clients are usually passed from one expert to another for specialized solutions, an approach that is antithetical to the idea of wealth management.

In some instances, formal team development training can be used to help a team come together. The training can involve experimental exercises in which team members come to understand the benefits of relying on others and see how a group is often able to achieve what individuals cannot, an important lesson for the solo artists in our industry.

Building cohesiveness is not a one-time event however. You'll have to regenerate the feeling over and over again. In the fast-paced world of advisory services, it's all too easy to fall back into old ways of thinking. So you'll have to be constantly aware of how members of your team are faring, and be imaginative in devising ways for them to recommit to their shared goal of comprehensive and client-centered wealth management. One effective way to promote teamwork is to involve all of your specialists in strategic scenarios sessions, even though their expertise may not be needed in a given session, because it reinforces their importance to the team as a whole.

In The Driver's Seat

Keep in mind that as the team leader you have certain advantages. First, most advisors will see that within the context of wealth management, the team can get more business than members can get on their own. You're the one that put the team together, after all. The professionals on board already will have been vetted to some extent by the firm, clients, other experts who referred them, or by you-and if you're independent, they will have likewise examined you and your business to see if it's worth their while to work with you.

That means you'll have talked to them and their references, know they're capable of being team players and have established at the very least a working level of professional respect and trust beforehand. This spade work will make it that much easier to keep the group together and contributing.

Strategic Scenario Sessions

No matter what steps you take, some members of your team may not have the time or inclination to engage in the more touchy-feely aspects of team building-and that's not necessarily a strike against them, at the outset anyway. If they're so inclined, the best way to create cohesiveness is through the strategic scenario sessions that we've already mentioned, during which members of the team can brainstorm actual wealth management solutions based on an affluent client's specific financial situation. The issue on the table could involve a complicated business succession plan, a messy divorce, dissolving a trust or realigning a bond-heavy portfolio. No matter what the scenario, the act of bringing the team's combined knowledge to bear on the subject-and the respect shown for each advisor's expertise-will be binding when you convert those ideas into better serving the client and generating revenue.

During these sessions, it's important that there are no constraints on time or feedback. Specialists should be encouraged to offer an opinion or share an idea, even if it's still germinating. This is where your facilitative skills will come in handy. Constantly seeking feedback sets a valuable precedent for the give-and-take between experts, and it's also a sign of respect-you're making it clear to your team members that you, and the rest of the team, want to know what they think.

As anyone who's ever been on the receiving end can tell you, positive feedback from fellow professionals works wonders. And if you keep rewarding teamwork with public affirmation, you'll be communicating and reinforcing your client's interests as well as your business goals. Hannah Shaw Grove is managing director and chief marketing officer of Merrill Lynch Investment Managers. Russ Alan Prince is president of the consulting firm Prince & Associates.