Breaking up is hard to do – especially in business

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.