There must be an economic or family reason for the partnership. By “economic reason,” I really mean a division of labor. And that means some degree of difference in the specialization of the partners’ investment or planning expertise, selling techniques or prospecting skills.
The “family” reason is normally the desire of an established financial advisor to pass on a business, intact, to another family member—generally a son or daughter.
Other reasons undoubtedly exist for forming partnerships. These may include taking more time out of the office while still providing continuous coverage for clients, friendship, and the often-mistaken belief that 1+1=3. When one of these motivations is extremely strong, the partnership may make it.
But it’s the economic or family reason that seems to provide the force that binds the organization together. After all, two 35-year-old advisors who do the same kind of business in the same market do not have an economic reason for forming a partnership, and if they do form a partnership, it will probably not survive.
Nevertheless, here are three models of successful partnerships I’ve observed that were formed for “economic” reasons:
- Prospector-Developer. In this model, one partner concentrates on bringing in new clients; the second partner concentrates on deepening relationships and serving the clients.
- Senior-Junior.Family partnerships are usually this model, although I have seen many senior producers team up with an energetic, newer producer. The split here is usually uneven, in favor of the senior producer, but the understanding is that as the senior producer fades away, the business will go to the younger person.
- Planner-Investment Manager.One partner prefers the in-depth planning approach. The other deals with managing investments.
A good economic reason alone certainly won’t guarantee survival. You also need: