The Embrace Of The Employee/Partner Model 

If every advisor has a goal to be rewarded for their hard work and have the opportunity to build enterprise value, then, alongside a growing number of breakaways, it's also likely will see the employee/partner model gain wider acceptance. 

In short, this approach gets to the heart of why so many advisors have become frustrated with founder/owner models: It allows everyone to participate in the growth and profitability of their firms. 

More than that, it also yields more cooperation, ensuring that all interested parties work toward outcomes that benefit them equally. That manifests in many ways, but one of the most important is cost-sharing, especially at the crucial startup stage, when most advisors are worried about the opportunity costs involved in either switching firms or starting a new one from scratch.  

Yet another advantage involves succession planning. An alarming number of advisors don't have an exit plan. That isn't just a problem, it's a crisis, and it haunts our entire industry. The employee/partner model provides a framework for a solution. 

For sure, this approach requires navigating some thorny issues as a group, like the size of each partner's stake, divvying up roles and responsibilities in a way that makes everyone happy, and setting up a compensation plan. 

But as the wealth management industry evolves and becomes more professionally managed, the equity partner model will begin to become an attractive option for the burgeoning number of "traditional" and RIAs breakaways. It is the best way to offer fiduciary advice, to properly serve clients, to add much-needed expertise and support services, and to create real value for an advisor's eventual retirement. 

Carolyn Armitage, a managing director with Echelon Partners, a Manhattan Beach, Ca-based firm that provides M&A advisory, valuation, consulting and investment banking services to registered investment advisor (RIA) firms across the country.

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