Advisors who build an ensemble are achieving rewarding results and transforming the industry. This practice model is highly effective for creating a profitable and lasting structure. Discover why.
“I like building a business, but I don’t like managing people!”
Many advisors relate to this phrase that has defined the landscape of the financial advisory industry for decades.
However, there is a model of practice that combines the skills and energy of multiple professionals and focuses on cultivating relationships with clients and employees to build a profitable and lasting structure. This multiprofessional practice, called ensemble, is already being adopted and perfected by thousands of firms. Acquatio can guide you in implementing this model effectively.
What is an Ensemble Firm?
In his book The Ensemble Practice, Philip Palaveev defines an ensemble firm as a team of financial advisory professionals that relies on teamwork rather than individual efforts to service and manage client relationships. The essence of an ensemble firm lies in its ability to assemble diverse talents and resources on a project-by-project basis, fostering collaboration, innovation, and flexibility.
Ensembles also employ diverse levels of professionals, combining the enthusiasm, energy, and lower cost of less experienced advisors with the experience, wisdom, relationships, and network of highly experienced team principals.
An ensemble is defined not only by its organizational structure but also by a collective behavior that prioritizes the team goal over individual agendas and emphasizes ‘we’ over ‘I’. Ensemble firms often decentralize decision-making, avoiding reliance on a single centralized authority. This allows for quicker responses to changing circumstances and opportunities.
Why Have Independents Firms Adopted This Model?
For independent advisors, the ensemble model offers several compelling advantages, as Acquatio’s experts have observed:
- Flexibility and Scalability: By working with an ensemble firm, advisors can access a wider range of talent and resources. This means they can easily adjust to changes in demand without the need to maintain a large, fixed infrastructure.
- Specialization and Expertise: Ensemble firms enable independent professionals to focus on their areas of expertise while collaborating with others who bring complementary skills to the table. This allows them to deliver high-quality results across a wide range of projects.
- Risk Mitigation: By spreading risk across multiple projects and collaborators, ensemble firms are better equipped to weather economic uncertainties and market fluctuations.
- Creativity and Innovation: By bringing together individuals with diverse backgrounds, experiences, and approaches, these firms can cultivate a culture of creativity and innovation, promoting ongoing improvement and value creation.
- Autonomy and Empowerment: Ensemble firms empower individual members to take ownership of their work and contribute meaningfully to the firm’s collective success. This sense of autonomy and accountability fosters a greater sense of fulfillment and satisfaction among members and enables faster decision making and problem solving.
- Adaptability and Resilience: Ensemble firms, with their decentralized structure and emphasis on collaboration, can quickly adapt to emerging trends, market shifts, and customer demands, keeping a competitive edge in an ever-evolving environment.
Ensembles Are More Profitable and Valuable
Ensembles have performed better than other types of financial advisory practices:
- They have proven to grow faster, attract larger client relationships, achieve higher levels of profitability, and create long-term value for their principals.
- Ensemble practices tend to survive the founding generation and pass their resources and knowledge to a new generation of professionals.
- They develop new methods and ways of servicing clients and original analysis and planning processes.
The numbers
Clients have shown a clear preference for working with ensemble practices. According to the Top Wealth Managers Survey conducted by Fusion Advisor Network and published by AdvisorOne.com in 2011, large ensembles have relationships that are 7 to 8 times larger than smaller firms (mostly solo and silo firms), and this trend has continued to the present day.
Based on the results of the 2011 Moss Adams Survey of Financial Performance, a well-established ensemble firm generates twice the income of a mature solo firm on average.
Profits, particularly transferable profits, create equity value, and financial advisory firms have established their equity value over the last two decades. There is an active market for advisory practices with reliable and frequently published valuation information. All research reports state that firms with multiple professionals are more valuable, as measured by the price paid for a dollar of revenue.
Ensemble firms can have a significant impact on driving innovation, creativity, and collaboration in the wealth management industry. The ensemble model provides an attractive alternative to traditional business structures, enabling you to reach your full potential and achieve greater success.
Are you ready to embark on this journey?
Acquatio is here to help you navigate the transition and unlock the full potential of the ensemble model for your practice.
