Advisors launching their own firms often wear every hat – from marketing to compliance to client service – and while solo practice offers flexibility, it also comes with inevitable limits on time and energy. Eventually, growing client demands push the advisor to a key decision point: remain solo or hire the firm's first employee? Historically, the "capacity crossroads" emerged around $250,000 to $400,000 in annual revenue, or 30–40 clients. This crossroads also implies a risk, as hiring too early can lead to financial strain, while hiring too late can result in burnout and a decline in service quality. For growth-minded advisors, the first hire is not a matter of "if", but a question of "when" – and advances in technology are rapidly shifting that timeline.
In this article, Sydney Squires, Senior Financial Planning Nerd, discusses how technology has shifted the 'new' capacity crossroads for advisors looking to make their first hires. Data from Kitces Research indicate that hiring patterns have undergone notable changes in just a few years. In 2022, most firms made their first hire at $200,000–$300,000 in revenue, and the second at $400,000–$500,000. By 2024, those thresholds had risen: the first hire now often occurs between $250,000–$400,000, and the second between $600,000–$800,000. More telling, however, is the dramatic increase in productivity between those milestones. In 2022, firms with one support hire serviced 86 clients and generated $517,500 in revenue; by 2024, comparable firms handled 111 clients and earned $591,000, despite lower revenue per client. This jump highlights how much more effective teams have become, particularly when leveraging automation and process improvements.
This evolution is tied closely to the nature of advisory firm work. While front-office tasks like client meetings are resistant to automation and retain fixed time demands, middle- and back-office tasks – such as scheduling, meeting prep, and follow-up – are increasingly streamlined through technology and delegation. Today's first hire spends far less time on these tasks than they would have even a few years ago, thanks to tools like AI-generated meeting notes, automated email summaries, and scheduling software. These time savings not only boost the productivity of support staff but also free up lead advisors to focus on high-value, revenue-generating client work.
The result is a compounding effect: advisors can push their capacity threshold further before needing to hire, and when they do bring on help, they can leverage that new employee far more effectively. This trend is expected to continue as AI and automation technology advance, though limitations remain. Most advisors still view technology as a way to enhance efficiency, not replace human interaction, particularly in client-facing roles. As such, growth-focused firms will still need to hire eventually, but technology-savvy advisors can delay that decision until their firms are on stronger financial footing, reducing risk and maximizing return on investment.
Ultimately, the capacity crossroads can be extended and shaped by the advisor's willingness and ability to optimize operations. Those who embrace technology and process improvement can extend their capacity and delay hiring, while others may benefit more by hiring operationally strong staff who can build those systems for them. Regardless of approach, the key is a mindset of continual refinement – because as firms grow more efficient, they also create space to offer more value, serve more clients, and scale more sustainably!
