When, Why and How to Move to an Ensemble Practice

Next generation clients will inherit trillions of dollars over the next few decades. But these clients have more wealth management options than ever before — between franchise firms and robo advisors, competition for their business will be stiff. Small firms are uniquely positioned to deliver high-touch service that sets them apart from these alternatives, but they can’t do it without adapting to this changing market. 

To succeed and thrive, growing firms must be able to do more, and do it better — keep offering personalized service, while making sure client requests are fulfilled quickly and accurately. It isn’t easy, and most advisors find that, at a certain point, traditional ways of organizing their practice — ie, the ‘lone wolf’ attitude — are no longer effective. 

The Need for Teams

A hierarchically organized practice is a natural extension of the solo shop — at the top, the lead advisor has a hand in everything, while below them, operations teams, paraplanners and support staff do their best to manage the back office without friction. While this traditional model allows for more autonomy, solo advisors who have a hard time delegating will quickly find themselves spread too thin, and client service will suffer as a result. 

What’s more, when clients strongly associate with an individual advisor rather than the firm as a whole, the firm will struggle to survive if and when the advisor retires (it also will be less valuable should the advisor want to sell at any point.)

To avoid this, the lone wolf has to join a pack. Previously in the blog, we’ve written about the benefits of organizing your practice around ‘service teams’ — the working model for around 55 percent of advisory firms, according to Cerulli Associates. This can take many shapes, but one of the most popular right now is the ensemble practice model. 

Enter the Ensemble Model

An ensemble practice requires two things: a shared vision and a shared bottom line. 

In an ensemble practice, advisors follow the firm’s methodology and best practices, rather than vice versa. Creating that methodology, and the strategy for bringing it to life, is a collaborative process, in which all team members bring their expertise with various specialized tasks and functions. Often, we see that one advisor will lead strategy on, say, tax planning across the firm, while another handles investment planning. Meanwhile, the back office triages corresponding client tasks based on expertise, workflow and availability.

As a result of leverage, specialization and a larger pool of combined resources, ensembles are better equipped to achieve higher levels of profitability, attract larger client relationships (with more complex financial pictures), and go deeper for their clients.

To operate as an ensemble, advisory teams also need to have a degree of a shared bottom line. For some it’s the complete share of revenue. For others it’s shared infrastructure, vision, strategy or all of the above. This flexibility means that solo advisors can phase in elements of the ensemble model to build a more resilient and future proof business.

Often, compensation frameworks change to align with this model. A successful ensemble practice requires incentives for advisors to prioritize the success and profitability of the firm over their own interests. Leadership and advisors may receive a salary, or salary plus a percent of profit sharing, or other variable compensation.

Making sure all this works requires clear leadership; in a small ensemble practice, this typically involves one person serving as a CEO or COO; in a more mature practice, individual departments dedicated to operations, marketing, planning, etc., emerge: 

Benefits of the Ensemble Model 

Firms that adopt an ensemble model benefit from:

• Pooled resources: Pooled resources make it possible to employ specialized roles, centralize processes and build out departments, which allows firms to be more efficient in delivering a deeper client experience. 
• Standardized processes: Centralized roles and departments lead to the development of core processes, which compose the backbone of a firm’s infrastructure. When core processes and workflows are centralized, advisors can automate repetitive tasks, reach a higher level of efficiency, and leverage automated tools to enhance productivity across their team.
• Improved client service: Clients will feel the downstream effects of standardization through an improved level of service — advisors will be able to step into conversations with minimal prep and provide more personalized advice, while back office staff can fulfill requests quicker and with fewer errors/NIGO docs. 
• Scalability: Finally, when every element is working in harmony — when the ensemble team is truly an ensemble — firms will find it much easier to scale and grow. If, for example, an advisor leaves the firm, the handoff to a new advisor will be frictionless.

Making the Ensemble Model Work

The ultimate “win” of an ensemble practice is that all employees, partners and advisors are aligned on the strategic, long-term goals of the firm. A firm in which everyone “rows the same boat”— and, as a result, is better equipped to tackle the complexities of growth. 

This is, of course, a cultural change, but it can also be a technological one, too. Documenting and centralizing workflows across the entire organization will make it possible to introduce automation that makes everyone’s job easier. What’s more, when these processes live in a centralized hub instead of an advisor or ops person’s mind, the organization can accommodate growth more easily — whether it’s training new staff or a larger expansion/acquisition. Here's how it works:

Want to learn more? We go into detail about how Hubly can facilitate the transition to a mature practice here.