In the 1990s, there were dire predictions about the demise of the independent advisor channel and the solo practitioner. Nevertheless, more than a decade later, according to Insights Into Financial Teams, a study completed by the Oechsli Institute in 2011, 54% of advisors are solo practitioners.

Still, 54% is probably a smaller percentage of total practices than it was 10 years ago. And advisors will likely continue the current trend of teaming up with each other: The Oechsli study revealed that 31% of solo advisors expressed an interest in either joining or forming a team within 12 months after the time they were surveyed.

As the industry marches forward, it is helpful to know some reasons why advisors choose to band together.

Younger advisors like to join established firms. Many mid- to late-career advisors began their careers by hanging out their own shingles, but these days it's not as easy as it once was to start out that way. New advisors need to be more knowledgeable about more topics-not to mention the three years of experience they need to use the CFP credential.

Teams offer increased leverage and scale. Advisors who work together can negotiate lower rates, obtain more favorable vendor and broker pricing, and participate in a broader range of pooled investment vehicles. Economy of scale is a key reason that advisors seek group arrangements.

Profitability. As margins in financial planning firms are squeezed, business size has become a factor in managing profitability. For example, many overhead expenses are fixed, and larger organizations can spread the cost over more advisors.

Succession and continuity. As advisors of the baby boomer generation age, more of them are looking to bring on a successor. This is spawning multiadvisor offices, since those advisors must bring on their successors long before they transition out of their jobs.

The focus on wealthy clients. Over the years, advisors will accumulate more clients who are wealthy, yet they may still want to serve those smaller customers who have been with them for a long time. Rather than prune these clients, the advisor may bring on another advisor to work with them.

After all is said and done, despite the advantages of merging, many advisors remain fiercely independent. Even if they can earn more money under a multiadvisor arrangement, they don't want the hassle, loss of control or required compromise.

What Do The Terms Mean?
Solo? Multiadvisor office? Ensemble? Enterprise? A number of terms have been used to describe today's financial advisory organizations, and it can be confusing. For example, two advisors who share space have a very different arrangement than eight advisors who own equity in a single firm with the same business name and processes. Yet in one sense they are both a type of multiadvisor office. How would we differentiate between them?

Think of a continuum, with solo on the far left and enterprise on the far right. Between the two ends are multiadvisor offices (a.k.a. silos) and ensembles. As one moves from solo to multiadvisor office to ensemble to enterprise, one would expect more consistency and formality in the business and more need for compromise from the advisors who are part of the organization.

A solo firm has just one professional. All the other organizations described have multiple professionals. (Here, the word professional refers to advisors with client management responsibilities who also have business development responsibilities.)

A multiadvisor office is called a silo. Frequently, multiple advisors share space but little else. These situations require minimal compromise, since they involve several advisors doing their own things their own way.

Ensembles and enterprises are more formal and more structured. The more components of a sophisticated business the advisors share-the firm's name, clients, marketing efforts, investment strategy, technology, profits and so forth-the more the advisors need to compromise. In an enterprise, for example, one would expect to see consistency in the business vision, the way work is done, investment products and management, career development within the firm, succession planning, and revenue sharing, to name a few similarities.

Where Are You Along The Continuum?
You may want to consider the following 15 questions, which will help you determine where you are in the solo-to-enterprise continuum.