Generally speaking, there are two types of unhappy financial advisors. One is the advisor who is having trouble just making it in the business in the first place, who is struggling to find enough clients to make ends meet. The other type is the advisor who might have all the outward markers of success (clients, revenue, profits) but has reached a point in their career where they are supremely unhappy… and often end out feeling trapped, too.
Because, as is often the case for advisors practicing under the recurring revenue AUM model, clients tend to stick around. And while that is undoubtedly a great thing, it can also end out being a double-edged sword, and lead to “practice creep”… where, after a certain number of years of building a book of business, an independent advisor with an otherwise solid lifestyle practice may grow past their personal capacity and find that they have accumulated more clients than they can service by themselves. Which then forces the advisor to hire some staff to help. And (again) while that’s not a bad thing, the advisor can ultimately reach a point where they’re the CEO of a small advisory firm and are spending most of their time managing employees rather than doing what they set out to do in the first place, which was to serve their clients! Which ultimately leads to the question: How can advisors avoid this “accidental business owner” trap, and instead build a business that is optimized to maximize your own happiness?
In our ninth episode of “Kitces & Carl”, Michael Kitces and financial advisor communication guru Carl Richards sit down to discuss why some advisors wind up being unhappy in an otherwise “successful” practice, how some advisors have maximized their happiness by being intentional about building their business the way they want – or even “right-sizing” the advisory practice if necessary – and a few actionable ideas for advisors to do the same.
One strategy that has worked well for advisors is to figure out what outcome you’re trying to reach in the first place (whether that be a certain level of income, or amount of time you have to spend with the people you care most about) and make that the primary thing that you measure in the business. After all, our natural tendency is to direct our efforts to improve whatever we see measured and look at on a daily basis… so it a good idea to make sure that we’re measuring the things that really mean the most to us. Whether that’s the number of clients or amount of revenue in the business… or the number of hours we work, the number of hours we don’t work, or the vacation days we take.
And for those advisors who have already reached the point where they’re feeling unhappy with their current business structure and need to figure out how to get off the proverbial rollercoaster, it’s essential to understand that, although we have a duty to our clients, we also have a duty to ourselves as well. Because if we are absolutely miserable with whatever situation that we are in, we will eventually (and inevitably) experience a negative impact not only for ourselves, but for our clients as well. Which means it’s our responsibility and even our obligation to try to fix it.
So, if you’ve gotten to the point where you’re feeling squeezed by practice creep – unhappy with the business despite it being outwardly financially successful – or if you simply want to avoid that in the first place, then remember that it’s perfectly okay to give yourself permission to build your business in a way that actually makes you happy. And measure and optimize for whatever really matters most to you!