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Building the Business 101: Anatomy of a Partnership

Maintaining a partnership requires ongoing communication and adjustments to expectations.

Veena A. Kutler and Annette F. Simon, 08/03/2006

This monthly series of articles will describe the many steps and occasional missteps we took in building our financial advisory business, Mosaic Wealth Management.  This is the fourth in the series.

Mosaic is a fee-only comprehensive financial planning and investment management firm located in Bethesda, Md., a suburb of Washington, D.C. At this writing, we have about $50 million under advisement, 40 plus clients, two employees, an 1,100-square-foot office suite in a Grade A building, and the two of us--Annette and Veena--the principals and equal owners of the firm.

A friend and panelist at a NAPFA conference session last year was discussing the pros and cons of working with a partner.  He said, "Having a partner is just like being married - without the perks." In five years of partnership, we've observed that maintaining the relationship between the two of us requires ongoing communication and adjustments to our expectations of each other.  We've previously discussed how we learned, through trial and error, that our clients are more satisfied with our services when we proactively set and manage their expectations on an ongoing basis.  Using the same and occasionally painful process, we've figured out that conflict arises in any partnership, but it can be tolerable and even productive if the parties are committed to the relationship and willing to accept and acknowledge each other as multi-dimensional people with strengths and weaknesses.

The majority of independent financial planning firms are solo enterprises even though the most profitable businesses tend to be multi-partner, larger shops.  There may be good reasons for this.  Our industry attracts independent, tough-minded individuals.  Most have strong beliefs about the best way to run a practice and often choose to forgo greater profit in order to maintain complete control of their business.  When partners who were formerly solo choose to merge, conflicts can arise and partnerships fail.

Solo practitioner colleagues have told us:  "It would drive me crazy if I had to consult someone else before making a decision."  "I'm too bossy to have to defer to other people.  I have to be in the driver's seat."

However, successful and collaborative partnerships do exist in the financial advisory business.  In those cases the partners have come to the conclusion that the rewards of the partnership far outweigh the hassles of having to get along with others.  One planner in a successful partnership told us "the way I make it work is by not trying to make my other partners think and act like me."

We believe that the sum of our partnership is greater than its parts and have no interest in having a single owner practice. Our clients undoubtedly benefit from working with two experienced professionals with different backgrounds and temperaments as do our employees.  Anyone who has been practicing for a few years knows that maintaining long term relationships with clients depends heavily upon a strong emotional connection - developing trust and conveying that we, as advisors, see our clients as people, not just accounts.   While it is not always efficient, we meet together with all of our clients.  This allows us to back each other up on the facts and analysis, but just as importantly, it allows both of us to develop a bond with the client. Because we are very different, sometimes one of us is better able to connect with a client than the other, but our clients know and work with both of us on different aspects of their financial lives.  If an issue arises, and one of us is on vacation, the client has absolute confidence that the other partner knows and understands his or her complete situation. 

For us, having a partner to rely upon and to share the stress and responsibility of creating and running a business far outweighs the occasional conflicts that arise between us.  When we formed Mosaic five years ago we agreed that running a business alone was like being a single parent.  With five children between us we both know and appreciate the comfort of not being single parents.

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