Succession Planning for Financial Advisors: Building an Enduring Business, + Website

Chapter 3 Transforming Your Practice into a Business

Assessing What You Have Built

There is a clever use of terms and concepts in this industry such as describing the organizational structures of independent financial practices as “silos” or “ensembles.” The basic notion is that a silo is a single book of business. The term ensemble is reserved for an actual business with multiple professionals who truly work together as a team, pooling their resources and cash flows, creating a bottom line, and then distributing profits to the owners of that business.

Silos can exist as part of a group, or they can exist as stand-alone offices, but effectively, they each have their own books of business regardless of the employment or compensation approach. Almost every one of the advisors we’ve ever worked with technically falls into the silo category. Even most of the advisors who have been around for 30 years or more and own fast-growing limited liability companies (LLCs) and call themselves ensembles are most often a group of silos. That has been our firsthand experience year after year. In fact, if we restrict our discussion to advisors with a value of $25 million or less, those for whom we have seen the data and that comprise most of the independent industry (at least in terms of a head count), we come across just a handful of true ensembles every year, out of thousands of engagements—that’s it.

Still, these terms have been very useful in that they have focused attention on what you ...