HNW-Oriented Practices Are Reaping the Benefits of Team-Based Structures

February 17, 2022 — Boston

Teaming Allows HNW Practices to Move Upmarket

High-net-worth (HNW)-focused practices operate as a team with far greater frequency than those serving less affluent investors, which operate more frequently as solo practices, according to the latest Cerulli Edge—U.S. Advisor Edition.

Cerulli finds the organizational structure of an advisory practice is correlated with the core market served by the practice, with practices oriented toward serving HNW investors more likely to operate in some form of team. 43% of practices with core markets between $500,000 and $2 million, and 60% of practices with core markets between $100,000 and $500,000 operate as solos, compared with only 29% of advisor practices serving more affluent investors.

While there are a variety of ways to organize a team of advisors, team structures in general provide a variety of operational and service-level advantages. As opposed to many solo advisors who must act as generalists, teams provide an opportunity for specialization. “This can drastically improve the quality and range of financial advice that is administered, particularly among practices with fewer home-office specialist resources,” says associate director, Michael Rose. With more personnel available to support the operations of the practice, teaming allows practices to operate at a greater scale, with practices that operate as a team comprising the largest share of practices with greater than $500 million in AUM.

Specialized teams are often better equipped to meet the needs of the HNW and ultra-high-net-worth (UHNW) investors with services that cater to their needs. Practices oriented toward households with greater than $2 million in investable assets are more likely to offer comprehensive wealth management service as a core service than are practices that serve households in lower wealth tiers. This is largely a result of HNW households being more likely to need, and benefit from, more sophisticated tax planning, charitable planning, equity-based compensation planning, and advanced estate planning, among other types of advanced financial planning services. For advisors with a core market of $2 million to $5 million, 59% offer estate planning, 54% provide tax planning, and 60% offer charitable planning. In comparison, of advisors with a core market of $100,000 to $500,000, 50% offer estate planning, 41% provide tax planning, and 36% offer charitable planning. “Those with larger core client sizes often utilize a wider range of resources to provide advanced services and the personnel to deliver them,” says Rose.

Additionally, depending upon how the practice is affiliated, advisor teams can provide a number of otherwise unavailable succession planning opportunities for practice owners who can groom the next generation of talent to accede to the business while providing an exit strategy for the principals. “The efficiencies that team-based practices realize can’t be ignored—from the sophistication of service offerings to operational efficiency and succession planning,” says Rose. “We expect the transition toward greater levels of teaming among advisors to be slow, but ultimately, successful,” he concludes.

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Advisor Edition, 1Q 2022 Issue.

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