Launching an advisory firm can be a daunting endeavor, requiring advisors to take on significant financial and responsibility with no guarantees of success. Given these challenges, advisors may consider bringing on a business partner to share both the costs and the burden of decision-making. By pairing with a partner in the firm’s early days, advisors can benefit from their business partner not just by having someone to split costs and risks with, but also to consult with as a sounding board and strategic partner across the highs and lows of launching a business. While this can be an appealing option, it’s important to recognize that not all partnerships are created equal, and a business partner may not always be the best solution for challenges advisors are trying to solve.
In the 149th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the common fears that advisors often face when considering a business partner, explore alternative solutions to address these concerns, and explain when joining forces with another advisor may be a good idea.
For advisors contemplating a partnership, the key question is often, “What are you solving for?” For example, if an advisor’s main concern is the high upfront operational costs, they may want to explore fractional solutions to lower the prices of issues. Advisors have more options than ever before to address these costs independently. Some of these solutions include fractional compliance, administrative, and even office space, which can all significantly reduce expenses and manage up-front costs without the need for a business partner.
Another common issue is the sense of loneliness and isolation that comes with ‘hanging one’s own shingle’ and launching a solo firm. In this case, advisors may benefit from joining “launch groups” through organizations like XYPN or even their broker/dealer, where they can find resources, solutions, and camaraderie to build community without splitting equity or the need to make business decisions together with a partner. Other options – such as mindfulness practices or study groups – can also help advisors manage the emotional toll of running a business on their own.
However, there are times when a business partner is essential to successfully launching a business, especially when both parties share the same vision and excitement for building the firm. When their vision and excitement align, a partnership can be a powerful force for working together to build a thriving business in the long-term!
Ultimately, the key point is that while there will be some issues that can be solved with a business partner, not all necessarily should be. Whether an advisor seeks a business partner or finds support through peer groups and fractional services, finding like-minded people who are “in it together” can make all the difference in managing the stress of launching and running a successful firm!
