Few service industries have as much potential to impact lives as financial advice, and it’s that very ability for financial advicers to help their clients achieve positive outcomes that can often compound for decades and beyond that make the profession deeply satisfying for so many. It’s no wonder, then, that the profession attracts individuals who are highly service-minded and enjoy helping others. (It also doesn’t hurt that advicers can earn a good living, and can also build their practices in any number of ways that fit their personal preferences, needs, and goals!) Not surprisingly, the most recent Kitces Research Study on What Actually Contributes To Advisor Wellbeing shows that, while advicers who have a service mentality are typically happier in their roles, service-minded advicers who are also on the higher end of the income spectrum tend to be the happiest. Which highlights an interesting tension in that some households reaping the greatest benefit from an advicer’s help might not always be the most profitable for the advicer, and sometimes may not be profitable at all!
In our 130th episode of Kitces & Carl, Michael Kitces and Carl Richards explore this duality of solving for both providing service and earning income, the key metrics that separate advicers who are “thriving” from those who are “struggling”, and why advicers who intentionally build towards having a highly profitable business don’t need to forego being of service towards underserved individuals who truly need help with financial planning, even when those clients may not be profitable.
Conventional wisdom holds that an effective way to increase the chances of having a successful practice (and being happy) is to simply move up the proverbial food chain by finding wealthier clients and jettisoning the least profitable clients. Taken to a logical extreme, then, it would seem that the ‘happiest’ advicers would only serve the highest-of-high-net-worth clients. But the reality is that it doesn’t take a big leap in client affluence before advicers begin achieving material gains in happiness. Notably, ‘struggling’ advicers had clients who averaged having $600,000 or $700,000 in assets, while ‘thriving’ advicers had clients with an average of $1,000,000 in assets. The difference also resulted in material benefits, including fewer hours worked, fewer clients, less overhead and staff, more autonomy and freedom, and greater profitability.
In other words, there appears to be a threshold where, once achieved, advicers can reclaim a non-trivial number of hours each week when they can focus their efforts on other rewarding endeavors… like offering pro bono financial planning services or creating broader content that addresses the widespread need for financial education. That way, an advicer can have the satisfaction of getting paid well while still being able to serve the underserved.
Ultimately, the key point is that being a happy advicer who’s paid well for doing good work doesn’t necessitate sacrificing service to those who need real financial advice the most. By being intentional around building a client base of profitable clients, reasonably reducing overhead, and learning how to say “no” to prospects who aren’t a good fit (and helping them find the help they need), advicers can increase their take-home pay and reduce the number of hours they work. And a focus on building a profitable business in which an advicer is paid well for the good work they do isn’t only about being happier… it’s also about having the satisfaction of being able to create the freedom and capacity to serve those who are truly in need
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