Every year, a friend and I go on a kayaking trip to the wildest places we can find. We enjoy tremendously the adventure, the solitude and the wilderness of mountain lakes and Canadian islands. Somehow, last year we had trouble planning our trip, so at the last minute we joined an organized kayaking tour in the San Juan Islands—hardly an adventure of solitude or wilderness. We feared that it wouldn’t be the same, that it would be crowded and devoid of experiences. But you know what? We loved it! There weren’t any bears or glaciers, but we made a bunch of friends, we saw a lot of beautiful places and we also didn’t get eaten alive by the highly organized Canadian mosquitoes.
A lot of younger professionals see their own careers as adventures too, in that they don’t see how much fun they could have with something big and organized. In other words, they think a larger firm can’t give them the same experience they’d have going off the beaten path and founding firms on their own.
For that reason, it’s becoming less attractive to them to aim for partner positions at large firms. As advisories grow larger, young people fear they won’t see any opportunities to become entrepreneurs, and that the large firms, with their slower growth and high valuations, won’t give them an opportunity to create wealth for themselves or earn the kind of control the founders have.
But I want to reassure them: There are still many adventures to be had in our profession. There is still a lot of wealth and income, there are a lot of experiences to be had, and there are many chances to lead the way. Most important, you are not missing anything when it comes to chasing mosquito bites and frozen nights in the wilderness … or bootstrapping a fledgling business.
Today, large advisory ownership involves a complex structure of capital, governance and management mechanisms that allows for a large team of professionals to pursue an ambitious vision. Many firms already have institutional ownership and strategic partners. In a survey performed by our firm, the Ensemble Practice, 16% of the advisories we contacted reported that they have investors who aren’t working in the business. This includes organizations such as HighTower, Bluespring Wealth Partners, Focus, Mercer and others that continue to invest in many businesses. Eight percent of the medium-size firms report such partnerships.
In the owner-operated firms, the picture is not dramatically different—the ownership is distributed across as many as 50 or more partners.
Professionals in large firms often wonder if purchasing 1% or even 0.5% of a firm will still have any positive effect on their careers and lives. They certainly see that making such an investment is very expensive. With a bit of personal experience (I was a partner in a firm where I had 240 partners and I owned zero-point-nada percent of the shares) and a lot of professional experience, I still believe that there is a lot of fun to be had.
‘Intrapreneurs’
In 1899, a gentleman by the name of Charles Duell who ran the United States Patent Office infamously declared that everything had already been invented. I guess he missed out on the Snuggie (a blanket and sweater combination) and Tetris (can’t wait for the movie!)
“Intrapreneur” was a term coined in the late 1990s and early 2000s to label those that invent and create new services and new businesses within an existing organization. In fact, most of the inventions we use today don’t come from a start-up but are instead developed by well-established firms. New partners in advisory firms may become exactly that kind of intrapreneur.
For those who want to create new services and enter new markets, the adventure is just beginning. Our industry is just now starting to explore what it can do for clients and how. The industry is transitioning from generic service propositions to focusing on specific types of clients. In doing so, it is creating processes that better help the distinct needs of groups old and new.