“High-Performing Advisor Teams,” a recent research study produced in collaboration with Janus Henderson Investors, concluded that collaborative team environments can significantly drive growth and success for financial advisors.
Conducted by Cerulli Associates, the study analyzed 2,800 practices operating across both solo and team-based models. Study participants included advisors operating in branch networks (wirehouse and national/regional broker dealers) and independent channels (independent broker dealers, RIAs, and hybrid RIAs). Teams were ranked by assets under management (AUM) per producing advisor, AUM per total headcount and average client size, and were then segmented into quartiles based on overall performance. These factors were crucial representations of an advisor’s ability to attract and retain clients, as well as the team’s overall efficiency, ability to scale its practice and success attracting high-net-worth (HNW) investors.
Key findings indicated that:
- More than 60 percent of advisors work in a team, while only one-third collaborate in their decision-making processes. Shared decision-making could be a lost opportunity for some practices, with teams sharing in the decision-making process overseeing more AUM.
- The top-quartile teams have a broader mix of advanced credentials and are 1.5 times more likely to hold a CIMA or CPWA compared to peer firms.
- The industry’s largest advisors with $100 million or more in individual AUM are more likely to operate in a multi-advisor team.
- Over 60 percent of advisors with $100 million to $250 million in AUM operate as a team, as do 77 percent of advisors with $250 million to $500 million in AUM, and 90 percent of advisors with $500 million or more in AUM.
- High-performing top quartile teams substantially outperform other quartile teams, managing 4.2 times the AUM per advisor compared to their peers, excluding junior advisors.
- Nearly two-thirds of clients in top-quartile teams have $2 million or more in assets.
- The average advisor in a top-quartile team manages $280.4 million in AUM compared to $67.3 million for peer teams.
What Characteristics Define High-performing teams?
Based on the results of the study, we’ve synthesized three categories high-performing teams excel in:
When analyzing top-performing teams, several distinguishing factors emerged in regards to specialization and advanced education:
- Top-quartile teams offer an average of 3.8 HNW services compared to 3.2 for peers.
- Over half (52 percent) of top-performing teams hire specialized staff roles, compared to 37 percent of peer teams.
Client service and communication were components that set successful advisor teams apart. Nearly half (48 percent) of top-performing teams hold quarterly in-person review meetings with clients, compared to only 29 percent of peers. Outreach methods also played at the forefront for successful advising teams. Responses showed that these successful, high-achieving teams are more likely to leverage proactive marketing and personal relationships help them to find new clients.
Top quartile teams value education beyond their own. Their members consist of a range of ranks, demonstrating the value placed on training the advisors and industry leaders of tomorrow. The study showed that half (53 percent) of top-quartile teams employ at least one producing junior advisor, compared to 39 percent of peer teams, and nearly half (44 percent) of top-quartile teams employ at least one nonproducing junior advisor, compared to 28 percent of peers. Additionally, in peer teams, only 27 percent of advisors nearing retirement are uncertain about their succession, and in hierarchy-based teams with multiple leaders, only 16 percent of advisors are uncertain about their succession.
From the three categories that define high-performing teams, one can deduce that it is likely a combination of the items above that make the difference between a high-performing team and a mediocre one. The challenge is to define for your team the key drivers of growth.