Demand from high net worth clients -- particularly those who are business owners -- is driving a shift in the financial services industry to a comprehensive, multidiscipline approach. The most savvy financial advisors are capitalizing on this movement. The results of an effectively run multidiscipline practice include more satisfied clients who generate more consistent referrals and improved profitability. In addition, these practices find it easier to attract younger advisors, helping to manage the challenges of succession. However, research suggests that less than 20 percent of investors have a multidiscipline relationship with their advisor despite their desire for one. This leaves plenty of room for growth. Every advisor should consider how to deliver more holistic services to their clients. This will help position their practices for long-term, profitable success.

The benefits and challenges of this trend are discussed in detail in "Multidiscipline Practices: The Business Model of the Future - Today," a white paper based on a survey of more than 1,000 investors, another survey of about 500 independent financial advisors and interviews with five owners of multidiscipline practices. The research was conducted by the Aite Group, an independent research firm, and commissioned by NFP Advisor Services Group. For the purposes of this research, multidiscipline practices were defined as practices deriving at least 10-15 percent (depending on product type) of revenues from each of the following products: insurance, investments, benefits and fee-based financial planning services.

Total Package Increases Client Satisfaction
Clients of multidiscipline practices expressed significantly higher levels of satisfaction than other clients. Almost half (49 percent) of multidiscipline practice clients, versus 32 percent of other clients, said they were "very satisfied" with their advisor's service (See Exhibit A).

The satisfaction advantage for multidiscipline practices was largest when comparing multidiscipline clients with others on the survey criteria shown below in Exhibit B.

In addition, multidiscipline practice clients expressed greater satisfaction across the remaining three criteria included in the satisfaction section of the investor questionnaire. When advisors broaden their understanding of their clients' goals, they can serve clients better and clients trust them more. As one founder of a multidiscipline practice said, "If you are talking to someone about an estate planning strategy, you can state with confidence how it will affect their lifestyle in retirement. This comprehensive approach allows us to eliminate many common client objections to working with us, because we truly understand all of their needs."

Given the higher levels of client satisfaction, you might wonder why there aren't more multidiscipline practices. However, the growth of these practices is a phenomenon of the last decade. The original model was pioneered by insurance broker/dealers. Now advisors who have gone independent are taking the model to the next level. This new level of independence means advisors aren't limited to proprietary products, making it easier for them to serve their clients' best interests. Open architecture is an essential component of today's multidiscipline practice.

The Great Recession also contributed to this shift. On one hand, it drove clients to seek refuge from stock market volatility in the security of guaranteed income products from insurers. On the other hand, as advisor revenues from single lines of business faltered, this spurred advisors to stop relying solely on investments or other business lines.
This shift toward multidiscipline practices fits well with younger clients and advisors. Both have grown up accustomed to getting all of their needs met in one spot. The multidiscipline practice evolution is likely to accelerate as the influence of the next generation spreads, making it essential to advisory practices' business development, client retention and succession planning.

Advisor Benefits: Better Referrals And Client Growth
Multidiscipline practices typically have higher rates of referrals and client growth, according to our advisor survey. In addition, our investor survey suggested that, as a whole, the clients of multidiscipline practices have more desirable profiles.

Close to half (45 percent) of multidiscipline practices generated at least one-quarter of their 2011 revenues from internal partners. Less than 30 percent of other practices achieved this standard. We believe that multidiscipline practices have an advantage because both internal and external referral sources prefer to limit the number of referral partners they work with to a smaller, trusted group who can meet all or most of their client needs. Client growth rates for multidiscipline practices exceeded those of other practices (see Exhibit C).


This is due partly to referrals and partly to the greater stability that comes from lower economic sensitivity and greater client loyalty. Multidiscipline practices weather market downturns better than single-discipline practices, because demand for benefits and insurance tends to be steadier than the demand for investment and financial planning advice during those periods. These practices also develop higher client retention rates as they uncover and meet needs across all areas of their clients' financial lives.

Multidiscipline practices also tend to have a desirable client profile. They attract a higher percentage of clients with characteristics that advisors value, including higher levels of investable assets, business ownership and willingness to pay for a financial plan. They also are more appealing to young advisors, who are a critical component of practice growth and succession planning.

Biggest Challenge: Access to Expertise
An expertise gap separates successful multidiscipline firms from the rest of the pack. Successful multidiscipline firms earn significantly higher revenues than their competitors. Multidiscipline practices with at least six staff members averaged revenues per client of $4,020, almost 80 percent more than their smaller peers. They also outpaced the other practices in our survey, which averaged less than $3,200 per client regardless of the number of employees. We believe this is because the most successful practices have staff with expertise across all disciplines. This enables them to cross-sell to satisfy clients' holistic needs.

While larger firms are currently realizing the greatest benefits from multidiscipline practices, we believe it's possible for smaller firms and firms with a single-discipline focus to achieve the same benefits of their larger counterparts. While it's difficult for a young firm -- or a traditionally single-discipline firm -- to immediately hire in every discipline, such a firm can partner with a multidiscipline broker-dealer to get up to speed quickly and cost-effectively. The advantages of a multidiscipline practice can be achieved without overwhelming overhead costs, allowing a practice to evolve and fully adopt the model over time.

Build a High Performing Practice While Increasing Valuations
Find a partner that offers multidiscipline product expertise and access. Especially in the early stages of building your multidiscipline practice, your company can't afford to hire full-time experts in every field. Get help from a firm that has experts in areas outside your core expertise. Areas to consider include:
-- Insurance: Life insurance, annuities, long-term care and wealth transfer solutions.
-- Benefits: Health/wealth/welfare, retirement planning, executive benefits and corporate property and casualty.
-- Access: A firm that can offer you access to institutional-level investment and advisory products with features and pricing that you couldn't offer on your own, along with consulting to help you identify, prospect and sell them.

Grow smartly. You can start offering multidiscipline services by working with a strong partner. As your business grows, you can add staff with various skill sets selectively.

Use integrated technology. Technology requirements for multidiscipline practices are complex. You need technology that's easily integrated so you gain a holistic view of your business. Good technology means you don't get bogged down with manual calculations and workarounds. The right independent broker-dealer can help eliminate your technology hassles.

Offer and charge for financial planning. Clients don't always value what they don't pay for. You need to charge enough to support the services you offer. This makes your practice more productive and profitable.

Your Next Steps
You'll find more details about multidiscipline practices in the white paper, "Multidiscipline Practices: The Business Model of the Future - Today."

To obtain a copy of "Multidiscipline Practices: The Business Model of the Future - Today," click here or call 800-966-9474.

James L. Poer is president of NFP Advisor Services Group, which provides a unique integration of service and technology for successful advisors to use with their clients in whatever capacity they choose.