In our last article, we wrote about the importance of developing and maintaining partnerships within an advisory firm. We want to continue that discussion, but this time focus on the partners often forgotten: those outside the firm who have purchased equity in a business but don’t participate in its operations, as well as strategic partners who provide critical resources.

The rapid pace of acquisition in our industry has led to hundreds of firms with investing partners—who own a substantial amount of equity. These partners enjoy a variety of contractual rights allowing them to participate in the governance and perhaps also management of advisory businesses, though they mostly try to leave the firms to operate the way they did before the deals were struck. However, when firms simply forget about their capital partners and don’t nurture the relationships, it can lead to resentment.

Strategic partners are different. They might be CPAs who both offer tax help to advisors and bring in business. Or they might be custodians offering leads out of their branch offices. Again, these relationships can turn sour and dysfunctional if the partners don’t communicate and don’t understand each other’s goals.

Are We Really Partners?
Just because you have a relationship with somebody, that doesn’t make them a partner. To earn that title, they have to play a role in your life—or your firm.

Take a private equity team, for example. If they own shares in your company, they are your partners. It doesn’t matter how passive their investment or how often they make business decisions with you. They’re on your tax return. Which means you have an obligation to share your plans with them, seek feedback and tell them what the true state of the business is.

Advisory firms often come up with elaborate plans without ever asking these important partner questions:

• How would our investment partners perceive these plans?
• Are our plans congruent with their goals?
• Could our partners contribute resources or perspective to these plans?
• Should we invite them to participate in the creation of the plans rather than just inform them?

Strategic partners are more complicated. How you treat them depends on how important they are to your success. For example, if you own a restaurant and buy your produce from a supplier, that supplier is not necessarily your strategic partner (just your vendor). But if you market yourself as a “farm to table” restaurant, the farmers are your partners. Why? They’re an integral part of your business strategy.

The same goes for advisory firms: If half your growth comes from the branches of your custodian, then that custodian is your strategic partner. If advisors join your firm because of your affiliation with an accounting practice, that practice is also your partner. (And its partners will also typically own some of your shares.)

How Does Your Partner Measure Success?
A good way to measure a relationship’s success is by understanding how the partners measure the success of their goals.

For example, firms acquired by private equity often assume that it’s enough to stay profitable and just mail the checks to the PE co-owners. In reality, acquirers are often looking for growth, specifically same-store sales growth—which was likely one of the assumptions they used when valuing a firm before its acquisition. The disappointment that follows a failure of profit growth can be severe: The private equity team will likely feel the acquisition has failed to perform, and the advisory firm will be confused about why the checks they’re writing aren’t winning them any goodwill.

Broker-dealers’ and custodians’ relationships with advisors are different in nature, but the problem is the same: Their ideas of success and the advisor’s might be different. For example, a custodian’s idea of a reasonable growth rate may be very different from an advisory firm’s.

So it’s important for you to understand and openly discuss with your partners what they define as success. When you skip that conversation, mistakes happen.

How Do They Relate?
So how do you deal with your partner? Whom do you call to stay in touch? And how?

Many companies have designated relationship managers trained and empowered to connect with your advisory firm and bring resources to the table. These contacts are meant to be the “door” to the resources of your partner company and can initiate contact with other parts of the organization.

Unfortunately, advisory firms often bypass the relationship managers and look for resources or support directly from a department or an executive. In doing so, they often arrive at the wrong person or department and leave much confusion in their wake, and this can cause a disconnect with the partner.

Sometimes, of course, it’s important to play the “executive access” card and seek out a high-ranking person directly, especially when it involves strategy or approach, the repricing of the relationship, significant staff departures or personnel issues, contractual challenges or other problems that could greatly affect the relationship. If it’s a problem of great sensitivity, one that involves confidential information, that might make it difficult for an advisor to use the normal channels.

Understand Your Partner’s Culture (And Politics)
Perhaps it’s starting to sound like working with a strategic partner is a complicated and political process. Yes! It is! Large organizations are complex, and the larger they are, the more political they become. You’ll work better with your partner firm if you understand its culture and know its politics. It’s the same as when you drive a new car and want to take the time to learn what all the buttons do.

For example, many advisory firms partnering with accountants fail to grasp the unique culture. CPAs are trained to exercise “professional skepticism” and objectivity, so it’s unrealistic and counterproductive when you expect them to be enthusiastic early adopters or approach clients with exciting but untested ideas. Just as waving a French waiter to your table will get you an evil eye and slower service, pushing CPAs in the sales direction will increase their resistance.

Accept Differences
You shouldn’t assume that your partners’ cultures will function like yours. Most advisory firms have very little staff turnover, and their leaders might work at their firms for their entire careers. This stands in stark contrast to the worlds of private equity, custodians, technology and broker-dealer services, where the staff changes often and a tenure of five or six years is the norm. Advisors often panic when relationship managers or executives leave their partner’s company, suspecting it’s somehow a sign of mismanagement. In reality, it’s normal.

Similarly, advisors are used to receiving quick and convenient support from their own teams. They can simply walk over to the operations area, receive immediate attention and priority and resolve whatever problems they are dealing with in minutes. Their strategic partners don’t give them the same immediate attention, and they often think wrongly that it’s bad service. In most cases, nothing could be further from the truth. Advisors must get accustomed to these differences, especially when work that was previously done internally has been taken over by the strategic partner.

Treat Their People With Respect
There is some malfunction in human nature that leads an otherwise polite individual to go into rant-and-rage mode when communicating with a service professional. Airline employees and restaurant servers can readily attest to this. It can also happen when CEOs and other advisory firm leaders approach junior relationship managers or service professionals at their broker-dealer, custodian or private equity partners. Suddenly, people who pride themselves on their communication skills can turn into red-faced “beraters,” betraying their impatience in both their tone of voice and poor choice of words.

It’s not only right but profitable to treat the entire team of your strategic partner firm with respect. Those junior employees can make a lot of difference when it comes to finding creative solutions and spending the extra time and effort to help you.

Let People Meet People
People who know each other will generally be much more friendly and understanding when things go wrong. This is why it’s a great idea for your service team to meet your strategic partner’s service team.

We learned this one from our friends at Kestra Financial. James Poer, the CEO, started bringing employees on his service team to the annual advisor conferences and encouraging advisors to bring their operations people. When the operations teams met, the number of complaints and service issues dramatically declined. Suddenly, the voice on the other end of the line was not just an anonymous employee but Meghan, whom we met in Austin, and who has two kids and likes mountain biking. While it is easy to let your frustrations erupt at an anonymous voice, it is much harder to do that to Meghan. She is such a nice person.

Share Your Plans
If you have a truly strategic partner, it only makes sense to let that partner know what your strategy is. Unfortunately, advisory firms don’t often let their partners in on the construction of their plans or even listen to their perspectives and ideas.

Strategic partners can really add value to a planning session or process. They see the industry and can point to competition or new ideas and opportunities. They are also very aware of case studies of success and failure and can provide valuable perspective. Finally, many of their people are highly trained MBAs who have a lot of experience in management decision-making and can be skilled facilitators in the process.

Never Blame Your Partners
It’s perhaps human nature to express frustration with “higher powers,” whether it’s the government, the airlines or the banks. When a firm is struggling to grow, it is particularly tempting for its leaders to blame the big company that it’s working with for its issues, particularly a strategic partner like a custodian or broker-dealer. This is toxic behavior that always leads to long-term damage.

And when you train the next generation to also blame the partners, you’re setting them up for a long career of frustration and dissatisfaction. If you tell your kids daily that their school is full of incompetent teachers, don’t be surprised when they don’t earn the best grades and struggle to graduate. Where there are problems, it is best to share some of the responsibility and seek a constructive tone rather than spend years in frustration.

Reboot, If Needed
Relationships sometimes go south. Partnerships can sometimes involve emotions, which means that when they malfunction it’s often painful. It can be difficult for human beings to wipe the slate clean, but we must try, and those who can do it successfully have a valuable skill. A reboot is sometimes needed and is much better than the alternative: years of protracted toxicity, damaging to both businesses.

It’s especially true when the relationships are permanent—if a firm has been acquired and the sale of equity can’t be undone. It’s better to improve a relationship that’s damaged and spend the time and energy necessary to recover than to spend years in a bad dynamic that saps a firm’s energy.

Leave, If Necessary (And If You Can)
Unfortunately, some relationships can fray beyond repair: If that’s the case, it may be better to just part ways rather than endure additional years of frustration and poor results.

But can you really leave? Most equity deals are irreversible. Once they are done, there is usually no mechanism for a firm to acquire its equity back. This means that if you are entering into such a relationship, you should a) be very careful about choosing your partners, and b) manage the relationships accordingly, knowing that the partnership will never be dissolved. In other words, spend even more time taking every step we have discussed here.

Mutual Empowerment
A partnership is a relationship of mutual empowerment. Being partners with a person or an organization means they can help your success or impede your progress. Institutional partners are still partners, and they need the same attention, communication and cultivation required by all long-term relationships. Advisories that fail to approach their strategic relationships in such a manner are likely to suffer frustrations and obstacles. Firms that do spend the necessary time and attention will build and maintain partnerships that last and foster the success these pairings sought in the first place.

Philip Palaveev is the CEO of the Ensemble Practice LLC. He’s an industry consultant, author of the books G2: Building the Next Generation and The Ensemble Practice and the lead faculty member for the G2 Leadership Institute.

Stuart Silverman is the CEO of Bluespring Wealth Partners, an M&A firm focused on acquiring and partnering with high-end wealth management firms.