It’s not difficult to see why many independent advisors seek strategic partnerships. The synergies to be found in combining forces with another person — especially when the two partners have differing but complementary strengths — can create a whole greater than the sum of its parts. Often, combining clientele can also present competitive advantages for RIAs seeking to scale their practices without ceding more control than they’re comfortable with.
Maintaining a successful and growing partnership requires ongoing effort and constant vigilance about the state of the relationship. If that sounds like something you might hear from a marriage counselor, it shouldn’t surprise you: trust, transparency, open communication, and above all, commitment is required for any partnership to thrive over the long haul.
The truth is some partnerships just don’t make it. “Up to 70% of business partnerships ultimately fail,”¹ typically due to a deficiency in one or more of the qualities mentioned above. Failures or lapses in alignment on goals or strategic direction, disagreements over finances, divergence in practice philosophy, mismatched leadership styles and other incompatibilities can drive a wedge between partners that ultimately leads to dissolution. These disparities may not even have been present at the beginning, but as the two partners evolve individually over time, differences that may have seemed unimportant in the early days can develop into significant obstacles.
In an ideal world, everyone who enters into a partnership would have spent lots of time in intensive communication and study with the prospective partner, thoroughly exploring the areas previously mentioned to avoid the type of tensions that cause partnerships to fail. So, what happens if it’s time to divide the business? Here are some tips to professionally move forward.
Follow the terms of the partnership agreement. Having a solid, written partnership agreement in place is fundamental, even (or especially) if you intend for the partnership to last forever. And when you’ve reached the conclusion that the partnership isn’t going to last forever, the agreement becomes even more important. Sit down with your partner and thoughtfully discuss the agreement and its implications for terminating the partnership. The separation should be fair to everyone, and the best way to ensure this is by adhering as closely as possible to the terms that brought you together in the first place.
Use a mediator. An objective third party may be able to help you and your partner work through the details of separating the business. The job of a mediator is to guide two parties as they work through their disagreement in a way that fairly represents the interests of both. Especially in a situation where emotions are running high, the involvement of a qualified mediator can help avoid the type of escalation that can lead to major legal fees.
Communicate openly. Once again, we come to the importance of transparency. Office rumors travel faster than the speed of light, and the best way to neutralize them is with the truth. As soon as possible, address the pending split honestly and frankly. If both partners can participate in this process, even better. Just don’t let rumors fester, they’ll only complicate things.
Focus on your strengths. Remember that you brought important and valuable skills and resources into the partnership. Chances are, those same skills and resources have only improved with time. Consider that the same factors causing you to recognize the problems in your former partnership are probably important clues for your next strategic direction. In other words, you’ve probably got all the tools you need to move forward on your own with confidence.
At the Wealth Advisor Alliance, we have the experience and resources to fuel success, both for solo RIA practitioners and larger organizations. To learn more, read our recent article, “Business Plan Blueprint: 3 Tips for Your Advisory Practice.”
SOURCE
¹Susan Ward, “Why Most Business Partnerships Fail,” The Balance, September 15, 2022.
We help advisors establish and grow successful wealth management practices. To learn more about how we can help you amplify your life’s work, contact us at team@waalliance.com. You can follow us on Twitter@theWAAlliance and on LinkedIn.
By clicking on a third-party link, you will leave the Wealth Advisor Alliance website. We are linking to this third-party site to share information in a different format and is for informational purposes only. However, we cannot attest to the accuracy of information provided by this site or any other linked site and do not endorse the site sponsors or the information or products presented there. Privacy and security policies may differ.