Within the independent financial advisory industry, many use the term “business” to describe their firms. But what does the term “business” actually mean, and what are the challenges businesses face as they strive to evolve beyond their current state?

Before we answer these questions, it’s important to have a general understanding of how advisory firms operate and evolve. As is the case with other service professions such as law, accounting and medicine, most financial advisory operations begin as “practices.” Eventually, some practices evolve into “collaborations,” which, in turn, can evolve into “businesses.” That is usually the final stage of evolution, though certain organizations can evolve from businesses into “enterprises.”

The Evolution Of A Financial Advisory Organization


We define a “practice” as:

1. One or more people working together and in concert;

2. Under the supervision of one person;

3. Substantially all of whom are directly focused on providing or administratively supporting financial advisory and ancillary services.

When almost all the people in an organization are working in concert, either directly involved in providing services or offering support, the organization is likely a practice. Practices tend to have few (if any) people focused solely on management or operations.


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