InvestmentNews INsider

The INsiderblog

InvestmentNews reporters offer their take on intriguing or controversial articles from around the web.

Breaking up is hard to do – especially in business

Avoid splits with longer “courtships” – what's your story?

Jan 17, 2014 @ 12:36 pm

By Liz Skinner

It turns out advisory partnerships aren't that different from marriages, and with both, breaking up is no easy task.

Professionals who help pairs of advisers decide whether to separate say the aftereffects deserve serious consideration, particularly because clients also will feel the heat.

“When breaking up a team that has worked together for years, it's going to have a massive impact on everyone involved,” said consultant Karl Gretz, president of Gretz Consulting Group.

(Do you have a story about a failed adviser partnership? e-mail Liz Skinner.)

Most formal partnership agreements will define in advance how the assets, clients and team members are to be split under different circumstances, including how a partner's half of the business will be monetized if one side walks away.

But there are emotional impacts of a division that advisers may not recognize they'll face.

The entire team, including the partners, should pursue counseling before the split, just as couples considering a divorce should seek such help, Mr. Gretz said. In both instances, even if the relationship fails, such a move will help minimize the baggage they bring into the next one.

While there are situations in which partnerships had spectacular blowouts that lead to their separation, many advisers split up because they have different business goals or personal ambitions that couldn't be pursued within the current structure.

Every week, pairs of advisers leave wirehouses together to create independent firms, but in some cases, only one partner is truly ready to jump ship and accept all the added business responsibility and risk.

One former broker said it was very difficult for him to leave his partner behind to become independent because the pair had been friends for more than a decade. He also knew he was walking away from some client relationships that he'd had even longer.

Your story

If you know of other reasons adviser partnerships have failed, and especially if you have a personal story to share, please e-mail me . I'd appreciate hearing about more situations for a longer article I have in the works.

Consultants say partnerships are most likely to fail if the individuals rush into without a substantial “courtship” in which the advisers get to know each other and each other's teams to make sure they are compatible, particularly when it comes to client service.

Another major reason for a team to fail is that the members don't establish the division of responsibilities ahead of time and don't have a clear agreement on their primary objectives — specifically in terms of the type of clients they'll serve, the price they'll charge and how often they'll use outside resources.

Economic pressures such as a drop in revenue also can affect partner relations, as each one becomes anxious about his or her own income. This could be especially difficult if there wasn't a trustful relationship from the beginning.

I look forward to hearing your stories.


What do you think?

View comments

Recommended for you

Sponsored financial news

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Featured video


The power of data

Your clients have financial news and data at their fingertips, but donít know how to interpret it. Katy Gibson of Envestnet|Yodlee and Blake Kannady of Envestnet discuss the power of leveraging aggregated data.

Recommended Video

Path to growth

Latest news & opinion

Tax reform: 7 essential strategies for financial advisers

While advisers face the difficult task of analyzing the law's impact, they will also have a significant opportunity to prove their value by implementing money-saving strategies for clients as well as their own businesses.

Tax law: Everything advisers need to know about the pass-through provision

The provision is tricky, but could provide advisers and business-owner clients with sizable tax savings.

Bill requiring fiduciary disclosure reintroduced in New Jersey

Measures would obligate financial advisers to tell clients they do not have to act in their best interests.

Merrill Lynch to let advisers text with clients

Texting has been a popular mode of communication for years, but in the past the firm's regulations have prevented advisers from using it.

Bear market for bonds has arrived, Gross says

10-year Treasury rate's move above 2.5% confirms outlook for fixed income, legendary bond manager says.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print