How an advisor’s practice is built may have a big impact on the range and quality of services that he or she can provide, as well as affect professional satisfaction and personal happiness. The choice to be a solo advisor versus ensemble advisory practices can be a difficult one because both paths come with benefits and drawbacks that must be balanced against larger, and sometimes conflicting, objectives.

If you find yourself evaluating the best path for you, here are some considerations:

Benefits of a Solo Practice

• Possess complete control over the decisions that affect the practice and its clients
• Profits may be higher since solo practices often run lean
• Greater freedom to pursue the work/life balance that best suits the individual
• Less pressure to engage in activities and compete with production levels of other advisors

Drawbacks to a Solo Practice

• Creates a ceiling on earnings since efficiencies and scalability have their limits
• Succession planning is more difficult and may lead to concerns by clients of what happens should they outlive their advisor
• Solo status may limit the ability to gain more profitable, high net worth clients

Benefits of an Ensemble Practice

• Multiple advisors offer the opportunity of economies of scale, providing a cost advantage
• The social and professional reward of working with, and learning from, other professionals
• The ability to provide a wider range of services if the group is comprised of advisors with different areas of expertise
• May be easier to attract high net worth clients who place value in a larger practice
• Succession planning is easier

Drawbacks to an Ensemble Practice

• Achieving economy of scale is harder than it looks as marketing and increased employee expenses may outstrip revenue growth
• Individual advisors may have less control over the direction of the firm and decisions about client makeup and requirements

As the financial and investment advisory world has grown more complex, moving to an ensemble practice may make increasing sense to the solo practitioner. Alternatively, solo advisors may want to consider forming a “virtual” ensemble practice that incorporates a network of trusted professionals (e.g., estate planning lawyer, accountant, insurance agent) to whom they can refer clients for expert counsel in areas outside their immediate expertise. In this way, solo advisors can maintain a primary client relationship, while expanding the scope of client services without adding to the expenses that may come with adding staff.

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