A wave of financial advisors were planning to retire in the coming years but they can’t ease up just yet. Advisors have been as busy as ever during the Covid-19 pandemic. This year has many dreaming of simpler days ahead, kicking back and staring endlessly over the horizon from an oceanfront condo with a frosty drink in hand.
And perhaps starting or transition to a “lifestyle practice.”
For any advisor that has made it past the financial hurdles of mortgage payments, education funding, and other big-ticket items, a move to a reduced workload can reduce stress and result in a better work-life balance.
“You eventually realize it’s OK to step off the gas,” says Robert DeHollander, an advisor with South Carolina-based DeHollander & Janse Financial Group. He made the move towards a lifestyle practice around a decade ago, freeing him up for example to spend weekends with his family rather than popping into the office. The move was a long-time coming. “It’s what I signed up for when I became an advisor, but it took me longer than I expected.”
For advisors like DeHollander, such a move can allow for a higher standard when it comes to taking on the kinds of new clients he wants to work with, instead focusing more on an existing base of retained clients as a source of steady revenues.
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Like many advisors, DeHollander has seen the pitfalls of a lack of work/life balance when working with some of his more successful clients. He’s seen many high achievers end up dealing with divorce or health issues as they pursue ever more wealth. “I never wanted to be that guy,” he says, adding that advisors are great about talking about balance with clients, but don’t always take such advice themselves.
Older advisors may also find their workload shifting to a lower gear as long-standing clients begin to pass away. For these advisors, the pursuit of a lifestyle practice may not have been intentional but could prove to deliver a more relaxing transition, nonetheless.
A lifestyle practice may be equally appealing to mid-life career changers that have already built up a comfortable financial cushion through a prior career. For experienced advisors and new ones, the challenge remains the same: How to handle a base of business while limiting the hours and days you spend providing planning advice.
To be clear, the phrase “lifestyle practice” may have a certain stigma and go against the grain of what advisors are expected to strive for. “I hear so much “I Should…I should have a growing team in place, I should increase my revenues,’” says Arlene Moss, the executive business coach for the XY Planning Network.
In a 2018 article on the topic, Moss wrote that “as an industry, we tend to glorify ‘busyness’ (and stress, for that matter) and disrespect people who have chosen to build their business around the lifestyle they want.
Still, advisors need to work past the potential stigma of a small firm that lacks the apparent team depth of a larger one. Moss says that lifestyle planners can benefit by being part of a larger member organization such as XYPN, or the Alliance of Comprehensive Planners (which is known in the industry as “AICP”). Such member organizations also typically provide a range of resources and counsel that help small solo practices replicate the knowledge and reach of larger firms.
While throttling back growth and the size of your practice can reduce income, not all advisors see a trade-off as inevitable. Moss says that it’s important to focus on the profitability of each client, which can help maintain income levels, even as a client base isn’t on a growth track. “Just because you see fewer clients doesn’t mean you are a bargain basement planner,” adds the XY coach.
With one or two key support staff in place, clients can stay in constant contact with the firm, even as the advisor takes blocks of days off for travel and other leisure time with family. Of course, those staffers must be highly trusted and well-compensated to ensure that high-paying clients receive the care and responsive feedback they expect from pricey advisory relationships.
Ultimately, it is nearly impossible to generate a reasonable level of income while working fewer hours if you are not consistently productive and efficient. A robust tech stack can help enable that. Coordinating with support staff and clients through Customer Relationship Management (CRM) programs such as Redtail and Wealthbox are just one piece of the advisor tech puzzle. And while planning software and easy-to-use custodian platforms are already well utilized by many advisors, the use of rebalancing software can be crucial for advisors to efficiently address quarterly portfolio reviews.
Make no mistake, technology has become the true enabler of lifestyle practices, says Moss. “I saw advisors trying to migrate towards lifestyle practices 15-20 years ago, and it had been a challenge to handle. Now, thanks to advisor technology, it is so much easier,” she says.
For advisors that don’t want to log on to the computers five days a week (and don’t have a support staff to speak for them), automated responses to inquiries are the way to go. Links to your calendar, for example, can set them up on your schedule, and you can use that email to direct them to your fee schedule or other salient pre-client messaging.
Seasonality is another key variable for lifestyle advisors. It’s important to synch up your schedule with the peak times of interest for clients. That means carving out extra time for quarterly portfolio reviews and also developing a clear sense of when clients tend to engage with advisors. For example, many clients tend to steer clear of planning efforts during the summer and during the final six weeks of the year when holidays come into view. Those are ideal times for advisors to step back and reduce their own time commitments.
One aspect of efficient time management involves segmenting clients into groups, based on how many times a year they will need to meet with the advisor. There are limits to how many early-stage clients an advisor can support, since these clients will need an extra amount of time to get their financial plans in order. Over time, such clients will need to meet with an advisor less frequently, perhaps as seldom as once or twice a year.
Specialization is another key driver of an efficient lifestyle practice. Focusing on the same types of clients, such as retirees or a certain kind of professional, can yield the scale economies required to deliver repeatable specialized expertise. And as you specialize, you can do an even better job of screening out clients you realize will be a bad fit for you.
Dave Grant, who runs Illinois-based planning firm Retirement Matters, has taken efficiency, specialization, and client segmenting to heart as he shifted his practice towards a more lifestyle-oriented approach. One of his first steps was to raise his fee structure to earn more without working more. “Some clients decided to leave,” he says, “while many more chose to stick around, despite fee increases.”
To obtain a better balance between work and downtime, Grant also decided to group his clients into monthly buckets. For example, he works with financial planning retainer clients in February, asset management clients in March, and his higher-fee wealth management clients in February and September. “It can make for some very busy months,” he notes, adding that the structure enables him to spend more time on other parts of his practice and enjoy some downtime on the other months.
Grant is among a growing number of advisors that work efficiently by focusing on a specific target market. In this instance, he works with teachers in Illinois as they approach and then enter into retirement. “I know their pension issues and other key topics that are specific to them, which means I don’t have to spend a lot of extra time researching a clients’ issues,” he says. That kind of specialization “also makes the planning relationship stickier,” he adds, as clients may be loath to switch to advisors that lack such domain expertise.
To be sure, a lifestyle practice may be ill-suited to serving very high net worth clients that have expectations of excessive levels of communications and firm hand-holding, or require very complex levels of estate planning, business succession planning, or other such topics.
For many in the advisor community, the notion of a lifestyle practice is somewhat taboo. It may inadvertently create the impression that an advisor is less than fully focused on their clients. Indeed, many advisors interviewed for this article requested to speak off the record. They simply didn’t want to create adverse perceptions about their practice. As a result, it may not make a sense to talk too much with clients about your desire and ability to have a less-than-full workload.
The final factor in deciding to pursue a lifestyle is the matter of long-term wealth creation. Many advisory firms are built as enterprises that can grow, and eventually garner a good selling price. Lifestyle practices, which tend to show little growth or scale at the end of their life cycle, are not as readily sold when the true retirement date arrives.
Reflecting back on his transition towards a lifestyle practice, DeHollander dispenses an old maxim: “You can always make more money, but you can’t make more time.”
David Sterman, CFP, is President of New Paltz, NY-based Huguenot Financial Planning
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