Part 1 of a two-part series.
Advisors who work in teams want to focus as much as possible on their clients. In order to do so, it can be a good idea to draw up a formal and well-structured partnership agreement with other members of the team.
Indeed, having a documented and detailed partner’s agreement with your team members, one that is separate from your contractual arrangements with your dealer, is likely to make your day-to-day operations and planning easier, says April-Lynn Levitt, a coach with the Personal Coach in Calgary. “It’s just one less thing to worry about and you can focus on your clients,” she says.
Here are some commonly overlooked elements of a partnership agreement to watch out for when drafting your own document:
Consult existing agreements or guidelines
To ensure you have covered the bases and have not missed crucial elements in the agreement, consult well-established templates that are typically used for these types of agreements or a set of well established guidelines.
Many dealers have copies of these types of sample agreements, which they are willing to share with advisors who want to form a working partnership with their team members.
Keep in mind however, that these example agreements are just guidelines: each agreement should be customized and tailored to your unique business situation and the type of partnership you wish to establish.
Define the team’s structure
While you and your partner may have a general idea about how the team will work, avoid future confusion by writing it all out.
There are all kinds of different partnerships, says Levitt, from a 50/50 split of profits or revenues to the more common senior advisor and junior advisor team in which shares will likely to split on a different basis.
Once you have clearly outlined the team relationship, you can then work out other important matters, such as how vacations will be dealt with.
Be clear about cost sharing
Make sure you and your partner are clear about which expenses the team will cover.
For example, all partners may decide to split or pay separately for office rent, parking, technology, automobiles for travel, continuing education, marketing, staff and licensing.
Often these details are kept very “loosey-goosey” and not written down, Levitt says. This lack of clarity can lead to disputes later on.
Avoid problems by clearly outlining everything in the agreement document.
Talk to your lawyer
Once you have crafted an agreement, each partner should seek independent legal advice. The final agreement should be drafted by a lawyer and receive the thumb’s up from all partners and their counsel.
If possible, consult with a lawyer who is familiar with the financial services industry, Levitt says. A lawyer who is familiar with the business and regulatory realities that you and your partners are likely to confront will have a better chance of helping you draft an agreement that meets your particular needs.
IE