Team-Based Adviser Practices Outperform Solo Practices in Growth and Service Offerings

Teaming has gained momentum in the wealth management industry due to its numerous benefits, including higher organic growth rates and expanded service offerings. However, to be effective, strong teams require collaborative leadership, consistent communication, and a shared vision among members to realize synergies, according to an analysis from Cerulli Associates.

Cerulli’s research finds just over half, or 51%, of all advisers operate in a team structure, with 64% of advisers in the wirehouse and hybrid registered investment adviser channels most likely to work in multi-adviser teams.

Most advisers, 55% express some interest in acquiring a practice, whether they are actively searching or not. Advisers between the ages of 45 to 54 are the most interested in acquiring a practice, with three-quarters showing interest.

Operating as a team offers numerous advantages for advisers seeking organic growth. According to the research, the average assets under management for team-based practices are more than three times higher than solo practices, while annual organic growth is more than double: $20.3 million versus $8 million.

Also, more advisers are breaking away to operate under a hybrid or independent affiliation. Many advisers are drawn to these affiliation models due to the higher payouts, ownership of clients, and increased flexibility in how their businesses operate. Consolidation has also been a key theme in the changing landscape, with notable acquisitions such as LPL Financial’s purchase of Commonwealth.

• Mega teams, which manage assets exceeding $500 million, control 66.8% of total adviser-managed assets, making them the primary target for many asset managers, service providers, and firm recruiters.
• The average adviser manages $125 million, a 12.2% increase from the previous year’s average of $111.4 million.

Additionally, team-based practices are more likely to employ dedicated professional and administrative staff, which fosters greater specialization, creates capacity, and allows for offering a wider range of services through expanded expertise. According to Cerulli, 37% of team-based adviser practices employ specialized staff, and 28% of practices have dedicated financial planning or investment staff.

“Financial planning is a fundamental service provided by many adviser practices and is crucial for attracting new clients and encouraging them to utilize a wider range of available services and products,” says Andrew Blake, associate director. “Adviser practices that incorporate at least one planning specialist or paraplanner will be better positioned for expanding their financial planning capabilities.”

As practices grow their adviser headcount, Cerulli recommends they scale their specialized staff, especially the number of financial planning specialists.

“Large multi-adviser practices are expected to become more common as consolidation continues and as pooling resources becomes increasingly feasible,” said Blake. “Larger adviser teams will require greater support, and firms will need to add resources and hire more specialized staff to make them as efficient as possible.”

Othe recent research from Cerulli Associates explores how model portfolios are rapidly becoming the preferred solution for financial advisers looking to overcome hurdles and effectively implement private market alternative investments in client portfolios. Researchers note that leading model providers are including alternative strategies – semi-liquid and illiquid funds – alongside traditional public equity and fixed-income exposures.

Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business.

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