The Ensemble Practice: A Team–Based Approach to Building a Superior Wealth Management Firm

Praise for The ensemble practice

"Philip Palaveev has done something remarkable. His step–by–step examination of how to build and manage a complex ensemble advisory practice completely removes the intimidation factor from one of the biggest challenges in the financial services space. This is ′how–to′ writing at its most valuable."

Bob Veres, Publisher, Inside Information

"With this effort, Philip Palaveev advances the thinking about how to transform ideas from a book of business into an enduring enterprise. He uses relevant anecdotes, insightful sidebars, and his vast personal experience to deliver a game plan for any leader of an advisory firm to create a successful ensemble business. Philip coined the phrase ′ensemble practice′ for a multi–owner financial advisory firm, recognizing an emerging trend a number of years ago. Once again, Philip is helping to turn an idea into an application that anyone interested in the retail advice business should pay attention to."

Mark Tibergien, CEO, Pershing Advisor Solutions LLC, a BNY Mellon company

"Philip′s experience and insights in this critical topic of building an ensemble wealth management firm are invaluable. This is a must–read book for anyone serious about building a lasting, profitable, and successful business!"

Gregory H. Friedman, MS, CFP®, President, Private Ocean Wealth Management; President, Junxure

"Philip Palaveev is one of the most brilliant practice management minds in the industry, and this book is a great gift to those of us in the business. Philip is a talented writer, and he intertwines deep content with great humor, effective examples, and the occasional proverb from his grandma. The Ensemble Practice is a compelling read. I found myself nodding along, laughing out loud, and taking lots of notes about ideas I would like to implement in my own business."

Rebecca Pomering, CEO, Moss Adams Wealth Advisors LLC

"This book holds the secret recipe I have long needed. Although I consider myself a skilled financial planner, I have never been as confident in my role as a manager of my growing ensemble. I felt like Philip′s book was written just for my practice each chapter was so appropriate for one of my managerial dilemmas! I owe any future success to this book."

Jennifer Hatch, CFP®, President, Christopher Street Financial

Introduction xiii

Acknowledgments xv

PART I: STRUCTURING AN ENSEMBLE

CHAPTER 1 The Ensemble Defined 3

The Ensemble Concept 5

Ensemble Demographics 7

Ensembles Are More Profitable and Valuable 10

Clients Prefer Ensembles 12

Should Everyone Be an Ensemble? 14

What s Next and Who Should Read on 16

Notes 17

CHAPTER 2 The Ensemble Structure 19

The Service Advisor Model Leverage 21

The Emerging Partnerships Sharing 24

The True Ensembles Leverage and Sharing Combined 28

The Super–Ensemble Firms 34

When Large Becomes Too Large 37

Notes 37

CHAPTER 3 Growing into an Ensemble 39

The Right Time to Hire 39

Whom Can You Hire? 41

Structuring Client Service 45

Service Advisors and Client Relationships 47

The Hiring Process 50

The Selling Question 53

The Equity Question 55

Making the Decision 57

Notes 58

CHAPTER 4 Merging Together 59

Your Shared Strategy 62

Your Shared Values 63

The Data 65

The Business Plan 67

Partner Roles and Compensation 68

The Deal 69

Mergers of Not So Equals 70

The Deals after the Deal 71

Owner Rights 72

Making Decisions as Partners 73

Buy–Sell Agreements, Retirements, and Breaking Up 75

Communicating the Deal to Clients and Employees 76

Notes 78

CHAPTER 5 From Silo to Ensemble 79

Creating a Shared Bottom Line 80

The Mine, Yours, and Ours Model 83

Assign Management Responsibilities 83

Share Client Meetings 84

The Prenup 85

Change Your Thinking 86

Note 88

CHAPTER 6 Partner Responsibilities and Partner Compensation 89

Labor versus Equity 89

Using Profit Centers or Silos 92

Setting Owner Base Compensation 94

The Role of Equity Ownership in Income 99

Discretionary Expenses and Perks 100

Partner Compensation Discussion Worksheet 100

PART II: MANAGING AN ENSEMBLE

CHAPTER 7 Creating Ensemble Culture 105

Establishing Priorities and Values 106

Customers Service as Culture 108

How We Deal with Each Other 110

Who Owns the Client? 115

Mom and Dad 116

Tribes 117

Manage Yourself 118

Notes 119

CHAPTER 8 Making Partner 121

When Can You Add a Partner? 122

Whom Do You Want as a Partner? 124

How Do They Buy–In? 128

Alternatives to Full Partnership 131

Why Do You Promote Partners? 134

Notes 135

CHAPTER 9 The Big Idea 137

Four Stages of Growth 137

Steps to Institutionalizing 140

Notes 144

CHAPTER 10 Managing Professional Compensation 145

Compensation Philosophy 146

Setting Salaries 148

Payout–Based Compensation 150

Incentive Compensation 151

Benefits 155

Compensation Management Process 156

CHAPTER 11 The Bottom Line 159

The Owners Personal Income and Income Bogey 160

The Income Statement 163

Managing Engagement Economics 166

Unit Economics 167

Managing Staffing Cost and Productivity 174

Overhead Management 176

Key Ratios on Your Dashboard 177

Budgeting and Financial Management Discipline 178

Notes 180

CHAPTER 12 The Devil in the Details 181

Agreement on Service Process 181

Investment Committee 183

Leadership in Operations 184

Customization and Efficiency 185

Technology Selection 186

Quality Control and Risk Management 187

Vendor and Strategic Partner Choices 188

PART III: WHAT HAPPENS NEXT

CHAPTER 13 Recipes for Failure 193

How to Fight with Your Partner 194

Losing Control of Your Own Firm 196

Agree to Disagree aka Avoiding Difficult Decisions 198

The Porch of Indecision 199

People Who Don t Develop 199

Protecting Your Ensemble 200

Note 201

CHAPTER 14 Doing Deals 203

Equity Planning for Ensembles 204

Consolidation Deals 207

Other Acquirers 209

Finding Your Deal 211

Note 211

CHAPTER 15 The Future Belongs to Ensembles 213

About the Author 217

Index 219

Philip Palaveev is a financial industry expert and consultant focused on improving the profitability and value of financial services firms. The owner and CEO of The Ensemble Practice LLC, a management consulting firm helping financial advisors build better businesses, Palaveev also works with broker–dealers and custodians to create impactful practice management services for their advisors. He has written numerous research papers and articles and is a frequent speaker at industry conferences.