Across the industry, it's increasingly common to see family members form advisor teams. The benefits are clear, perhaps most so for parents and their adult children who take pride in keeping the practice within the family. But experts and advisors already in those types of partnerships warn that making them a success takes just as much work as any other advisor partnership.
Advisors can stave off problems down the road by clearly defining roles, responsibilities and rewards at the outset.
D.A. Davidson advisors Bob Hutchins and his son Rick have been a team for 15 years. When the younger Hutchins joined the practice, his father laid out how the revenue would be shared. They would start out at an 85/15 split, and Rick's share would increase thereafter by 5% a year.
"The agreement was very simple," says the elder Hutchins. "There were no expectations that Rick had to do certain things for that partnership change. At the end of 7 years we were going to be a 50/50 partnership no matter what."
For his part, Rick credits that arrangement for easing the transition. "Because that was spelt out in black and white, that was never an issue."
The Hutchins, who are based in Medford, Ore., made sure that responsibilities were clearly understood between themselves, and that they also communicated to clients that they were equals.
"We sat in almost all [client] meetings together. Consequently, I think it made it easy for them to see him as a full partner," explains the senior Hutchins, who has been in the industry for about 46 years.
Experts and insiders suggest that both parties enter the partnership with a clear willingness to be open to each other's suggestions, particularly as the junior partner is likely to broach ideas about changing practices that the senior partner may have had in place for years, if not decades.
"I think it's important the senior partner is flexible about that, and that the junior partner can take a step back because the senior partner has a lot of experience, been around a while and not every new idea is a good one," says Alex Tucker, a producing branch manager at D.A. Davidson who is in a partnership with his father, Tim, a five-decade industry veteran.
Tucker, who is based in Bellevue, Wash., adds that junior partners need to demonstrate a clear willingness to roll up their sleeves; they should not appear to be caretakers waiting to inherit the practice.
At some point parents also need to let their children come into their own. After three years, the Hutchins rearranged their partnership, making Rick the team leader. The elder Hutchins jokes that he told his son, "I'm putting you in charge of me."
He says, "I think it's important for the parent to be willing to turn loose of things.
You got to let the young person develop. It can matter a lot in the long run."
Once a partnership is established, open communication is a critical element in keeping a team's synergy and chemistry positive. It can be particularly challenging to be honest about each other's faults, says Kevin Wallace, a professional development manager at Janney Montgomery Scott.
"The challenge is that people often won't or can't acknowledge the deficiencies in family members," he says. "Sometimes as a parent, you say 'Oh my kid's great at everything.' Well your kid might not be great at everything. They might be really good at some things and less so than others."
Family members enter partnerships with an intimate understanding of each other; while that can help a partnership function smoothly, it can also mean that annoyances or pet peeves can easily add up, says Wallace. "I was once working with a consultant on family dynamics in teams and he said, 'Your brothers and sisters can push your buttons faster than anyone else. And do you know why? Because they installed them.'"
Tucker says that he and his father have maintained a well-functioning partnership, in part, because they address differences head-on.
"I think in any partnership you're going to have those disagreements. For us, it's the ability to go straight to the heart of the issue and not let it fester. And frankly, not pull any punches," he says. "I think it's important to go to the heart of the matter and ask, okay, what are we disagreeing about? And is there any middle ground?"
The Hutchins agree, adding that it is equally important to note one another's successes.
"If there is a problem then you deal with it openly and fairly. And if there are good things happening, then you compliment people and you do it immediately. I think that helps keep a relationship functionally smoothly," says the elder Hutchins.
A FAMILY LEGACY
"I've never had a family team or partnership break up," says Kirk Mandlin, a complex manager at Wells Fargo Advisors in Portland, Ore. "They really have some staying power because there is a sense of trust and respect right off the bat. That can develop in other teams, but that is helpful."
Mandlin says that these types of partnerships can be a wonderful opportunity for parents to pass on a legacy to their children.
Tucker, the D.A. Davidson advisor in Bellevue, couldn't agree more.
"For me, working with my dad every day, he's been able to impart what he's learned over his fifty years in the business. That's something that I'll always have," Tucker says.
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