Kitces & Carl Ep 129: How Autonomy, Experience, And Team Drive Advisor Wellbeing

***Editor's Note: Can't get enough of Kitces & Carl? Neither can we, which is why we've released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and Stitcher.

Show Notes

• Kitces Research Study on What Actually Contributes To Advisor Wellbeing
• Gallup
• Cantril Scale
• Daniel Pink
• The Happiness Curve: Why Life Gets Better After 50 By Jonathan Rauch
• Who Not How: The Formula to Achieve Bigger Goals Through Accelerating Teamwork By Dan Sulivan

Kitces & Carl Podcast Transcript

Michael: Greetings, Carl.

Carl: Michael Kitces, how are you?

Michael: I'm doing well. How are you?

Carl: Things are good. Yeah, yeah. We're rolling into... I know people will hear this afterwards, but we're rolling into holiday season and that's always fun.

Michael: Yeah. We're rolling into end of '23. It will be the start of 2024 by the time this airs. So, this time of season always has a special connection to me because December is when we publish our research studies, and I get to nerd out over data.

Carl: I'm so excited.

Michael: Some people celebrate it for the holidays, I'm told, but I celebrate it because it's the time that we get to release new data.

Carl: Oh, so fun. I'm so excited for you.

Michael: I appreciate it.

Carl: And us. And all of us.

Michael: And us because, of course...

Carl: It's like a gift. It's all of us, a gift.

Michael: We're releasing new data, which means now I have new numbers and I feel a compulsion to talk about new numbers. Can we talk about new numbers today, Carl?

Carl: That would be so fun. Let's talk about some new numbers.

Kitces's Advisor Wellbeing Study [01:14]

Michael: New numbers. So, the study we just wrapped up and put out is our advisor wellbeing study. So, literally, trying to say everything. There's lots of stuff out there benchmarking who's profitable, who makes money, what are the metrics of the advisors who are the most financially successful or the growthiest. I'd always mentioned, no one has a... There's no top advisor list for the happiest advisors. Just for the growthiest ones who either make the most money or usually who make the platforms and advertisers the most money because that's why most top advisor events are run because advertisers want access to them, and they know you're going to come to the top advisor events and then they can market to you there. But it's always bothered me, no one was doing the research, who are the happiest advisors? What's descriptive of the advisors who may or may not be making the most money in their practice, maybe money is connected as we'll find, but just who is happiest in their lives based on the practices they run. So, this was a study we started doing a few years ago called it our advisor wellbeing study, where we dug into with thousand-plus advisors who go through these fairly lengthy questionnaires, thank you to everyone listening who's been through one of our research surveys, trying to understand what are the factors that actually drive wellbeing?

And we've published this study a couple of times now. We did, basically as the timing worked out, one in 2020 just as the pandemic was getting underway and then one at the end of 2021 when we were in pandemic lull, it's off again, on again, off again, on again. And so we came up on our every two-year cycle to run the study again, and I was pretty excited to dig in and find out, just how's advisor well-being doing since the pandemic and just what are the drivers because we look at 87 different variables. And the thing we really wanted to do in this study was drill down and figure out, what are the primary things that actually matter. There's a lot of stuff that correlated to well-being. For the stats nerds, correlation does not prove causation. They can get all things linked. What's really the driver?

And so we found, coming out of this study, 4 or 5 main drivers that seem to actually be materially associated with advisors who have better well-being, and well-being in this context, for anyone that wants to nerd out with me on it, is built around what's called the Cantril scale. It asked just a very simple question around how you rate your current life on a zero to 10 scale. And it's actually been used... Gallup uses this to do their world well-being study across a million people in 160 countries. It's actually a very, very well-vetted remarkably simple but effective to-measure question.

And so it was interesting as we dug in, we found, on the one hand, the average advisor basically has the same well-being as the average American. There's no magic advisors as a population are happier than the general population. The average advisor is almost exactly the same as just the average person in America, which I just take to be we're all wonderfully human. Live all the challenges that everybody lives and deals with. But what we found when we drilled in further was there were a couple of factors, groupings of variables that were particularly associated with the advisors that had the most well-being, which we rated. People who were at the top of the well-being scale, so they rated themselves a 9 or a 10 on the zero to 10 scale.

Autonomy And How It Contributes To Increased Happiness [05:15]

Michael: So, the number 1 that we found that was most associated with advisor well-being was how much autonomy we have to just run our practices, serve our clients, do things the way that we want to be done for clients. We actually had all sorts of fun data points. We found the happiest advisors weren't the ones who worked from the office or the ones who worked from home, they were the ones who made enough money to have an office and then could have the choice not to go to it.

Happiness was being able to afford an office and then saying, "I don't want to go to it." It's better than having one or not having one. And lots of drivers that we found around just being able to serve clients the way we want to serve them and believe they should be served was a huge driver of advisor well-being, which on the one hand, helps explain why the whole industry has this ongoing migration towards the independent channels. A lot of us seem to have a little bit of an autonomy streak. So, curious, does that connect to you as you think about advisor landscape?

Carl: Yeah. And I'm actually curious. I'm assuming...for some reason it strikes me that that is no different than the rest of the population. Autonomy ranks pretty high in terms of a source of happiness for humans generally, isn't that correct?

Michael: Yeah. I think there is... I'm remembering Daniel Pink's stuff around drive, we want...what was it? Autonomy, mastery, and purpose are the things that tend to drive us. So, yes. I think that's maybe not unique to advisors as a specialized population where autonomy love is more than the average human being. But in an industry where there are some firms and channels that have a lot more autonomy and some firms and channels that have a lot less autonomy, we seem to load quite strongly on to how much autonomy we have in the work that we do. Which is I think there's interesting implications around the industry is migrating from a lot of what were, historically, employee channels, wirehouses and the like, into more autonomous independent channels. But now the independent firms are growing so big that they're hiring a zillion employee advisors and recreating the not-so-autonomous jobs that a lot of folks were leaving 20 years ago.

Carl: Yeah. That's interesting. Yeah. I have always... I don't know when I discovered it, like, became aware of it. But once I became aware of the idea that I had always been optimizing for freedom, right? I wasn't really optimizing for happiness, per se, and I definitely have not optimized for money. And I say definitely because I think there could have been plenty of choices I could have made that would have resulted in a better... Not going to New Zealand for 4 years would have probably resulted in more money if that was what I was optimizing for, maybe. But optimizing for freedom has always been the most important thing for me. And I think the kind...and I may be self-selecting, but the kind of people that I have most of my conversations with seem to feel the same way, right, whether that's freedom to go travel or it's just freedom to not choose to go to the office, or make decisions, or do the marketing I want to do it or call the firm the name I want to call it or build a model portfolio the way I wanted to build the model portfolio. We all seem to have plenty of fancy feelings.

Michael: Yeah. Well, it's probably I need... I don't like my planning software because it doesn't quite do planning the way I wish it did planning, which is what 99% of advisors say. None of us are totally satisfied with our planning software, yet, in theory, we're all doing more or less the same financial planning process. Yet, we're all simultaneously not quite satisfied with the same tool that was built to satisfy us all. I think it's a version of this.

Carl: Yeah. No, no, I agree. And again, whether you choose to build your custom spreadsheet to fix the problem in the planning software that you perceive or not, the idea that you have a choice, the idea that you can do it versus being forced to use a specific set of whatever does seem to show up in a lot of the conversations I have. And it makes total sense to me, especially at a certain point in your career. Did you find any correlation there? Is autonomy more or less important as it relates to experience, how long you've been?

Michael: We didn't necessarily see a direct connection of autonomy mattering more as years go by. In fact, we actually found, as a general category, associate advisors do tend to be the least happy in their roles. We looked at associate advisors, service advisors, senior advisors, director of planning folks, people who take on more of an executive role and do less clienty stuff. And I feel like a lot of us seem to self-sort into what we like. Look, if you really like the spreadsheets more than the clients, you find your way to that role. If you actually love working on the business more than you love working in the business, you tend to migrate the business that way.

Associate advisors, though, tend to be a little bit more stuck in, this is the job, you do what you do, this is the setup because you're learning your trade and cutting your teeth, and all that stuff, which I think is good and positive from a learning perspective to some extent. But you're also basically the lowest possible thing on the autonomy totem pole. And, yes, as you get more experienced, you tend to move on from that job as you move up the career ladder. But it seems to be less a function of experience and more just the early stage when you're at a stage of your career that has less autonomy, just makes this lack of autonomy thing more frustrating, if you can't at least grow your way through it and move on.

Advisor Happiness As Influenced By Experience [11:40]

Michael: We did find, though, the second big driver of advisor well-being was basically just experience. Raw years of client-facing experience was one of the biggest drivers. And I think some of that, the longer you've been doing it, the more clients you have. So, you're usually out of the painful startup, getting my raw clients stage. Most of us tend to move upmarket over time, so your clients tend to be a little more affluent and pay you a little bit more. If you are in the wrong firm, or the wrong channel, or the wrong fit, at some point you tend to find your way to the right firm, and the right channel, and the right fit. There's also even just some research out there of the general research on happiness that, like, we're happier when we're young. Our happiness tends to trough in our 40s when life comes at you and kids, and parents, and all the dynamics, and you start getting happier again as you get into your late 40s, and your 50s, and 60s, not specific to advisors. That's the Rauch's happiness curve research that's been out there for a long time.

We see a version of that in our advisor well-being data as well. But it creates really interesting implications because, in general, we find the more experienced the advisor, the happier they tend to be. Obviously, exceptions occur and your mileage may vary, but across the advisor population, there's a clear drive that more experience is associated with greater well-being, which to me just gets really interesting when you then look at all the industry discussion around succession planning and advisors retiring and exiting. And a lot of the challenges that associate advisors had coming in, "I'm supposed to be the advisor succession plan, but he or she doesn't seem to want to get out of the way." I look at our data and I'm like, "Well, no kidding. Advisors in their 60s are happier than any other group of advisor and make more money than any other group of advisor." Both of those tend to be correlated with how many years you've been doing it. So, it turns out the advisors who are happiest to make the most money are not very interested in leaving and getting out of the way. Why would you? Unless you've structured your practice not well and you're not at a good place in the happiness curve. When you are, why would you leave?

Carl: Totally, right? A built-in sense of purpose, a bit of a social connection, sometimes more than others.

Michael: Significance, impact.

Carl: All of those things. That is interesting. What do you make of that in light of this thing we've been talking about for, its feels like 20 years, but it's definitely the last decade, of this pending wave of people retiring. Is this more a pending wave of people dying? Is that what we're really talking about now?

Michael: Yeah. I think that is the effect. Yeah, it's sort of the point. We've been talking for 10 years about the impending wave of advisor retirement and how the advisor headcount is going to crash and there won't be enough advisors. And in practice, the advisor headcount basically hasn't gone down in any material way in 10 years. It wobbles around by a percent or 2%. But this whole "40% of the advisors are supposed to be gone in 10 years" that we've been saying for 10 years and it's 10 years later and most of them are still here. They're not moving en masse. Now, obviously, individual circumstances, some of us are just, "Look, I got enough money and I want to do other things with my time in my life. Clients were fun, but grandbabies are fun and I want to spend more time with them." Or some of us eventually, like, health and other circumstances do come and maybe forces a change.

So, I do like... Yes, age will come to bear at some point, but I feel like there's a lot of research out there that was basically saying, "Well, advisors are going to be hitting their 60s and be eligible for Social Security, so they're going to start retiring en masse." I'm like, "Not really what makes you decide on retirement as an advisor in peak earnings, peak happiness years." Why would you leave? You need a reason to leave. So, some of us have reasons, health, or family, or life, or other circumstances, but if you don't have a pretty darn concrete reason to leave... Our research basically says, "No one's interested in leaving unless they really have a reason to leave."

Carl: Yeah. Yeah. So, what is the takeaway from all of that? Do you feel like it's this idea of, okay, pay attention to autonomy, realize that it turns out there is a period...what did we used to call that if you were a welder and you went and did your... What'd you do when you were a craftsman and...

Michael: Apprentice and then a journeyman?

Carl: Yeah. It turns out there is something to the idea that, look, it can be hard. That can be perceived as less happy because you don't know the way around and there's more complexity in those early years, and you're trying to figure out, and it seems like you get asked questions all the time. You have to be wrong and things are out of your control and you thought you'd built this beautiful plan and it blew up. It turns out that's just part of experience. And you can perceive it as hard and unhappy if you want, and most of us do. Then the idea of, "Oh, as I as the," I don't want to use the word training wheels but guard...I don't want to use the word guardrails because we have all these guardrails in our industry. But as you gain in experience, you actually gain in autonomy as well. And that happens to also be correlated with gaining an income often and...

Michael: Usually.

Carl: What about experience autonomy and income wouldn't make you feel a little happier if you're a normal human?

Michael: Yeah. There were a few implications to me around this. On the one end, this whole "It gets better with experience," good to know. Not terribly helpful when I'm in the early stages and I would like to hit the accelerate button. And I think part of the challenge is, there's only so much you can do to accelerate it, right? Someone has said to me a long time ago, "If you want to actually be in the wisdom business, you have to be a little wizard." It is like that. Wisdom by definition means you've got some age and time, right? Just you're...

Carl: At least reps, for sure.

Michael: Yeah. You need to get a certain number of reps in, for which me, my biggest takeaway from that, on the one hand, if you're in the tough early years, it really does get better. It really does get better. Yes, individuals may bury. I realized we're making slightly generalized statements about broad population with advisors. But truly, experience, raw years of client-facing experience and the other things that tend to accumulate with experience was one of the single biggest drivers predicting where advisors were on the well-being curve.

The second, to me, corollary that goes with that, though, is you can't get to the good years later if you get knocked out in the early years of the beginning, which to me comes back to, what you pick in the early job matters. And the input is, like, it matters less of, I have to find the magic early job that gives me the super amazing experience that slingshots my growth forward. Yay, if you can find that. Certainly not against it. But to me, the biggest implication is, you got to find an early job you can tolerate and survive in. I'm going to keep the stakes really low. Tolerate and survive while you get the reps and get to the better stuff later. It's like, if you're in a firm you can't stand, and doing this job is going to burn you out, you need to get to a different job that isn't going to burn you out. If you're taking a job that creates income constraints, you can't survive, right, you're in an eat-what-you-kill model, and you're not great at killing, and therefore you can't get enough to eat, and you're not going to make it to 5 and 10 years because you're going to be out of a job in 2, you're not getting yourself there. So, picking jobs, again, I'm going to keep the bar low because it is tough for everybody in early years. Picking something that just you can survive and tolerate while you get the reps to then make the change to whatever it is that's going to move you forward on the scale, to me, it becomes really important in that dynamic, right? You can't finish the marathon if you can't get through mile 2.

Carl: Yeah. Yeah. And I think of the implications for the senior, let's just call it business owner planner that needs to hire folks and wants to hire folks. And I would just... Yeah. So, one thing that this... Well, here I'll start again. So, my takeaway from all of that too, though, is I think about the owner, right, the senior planner or owner of the business thinking about hiring people. And why not be more thoughtful, to the degree that we can, right, and in a metered reasonable way, be more thoughtful around autonomy, right? If we can think, and I'm hesitant to use the term guardrails or training wheels, but if we can think very carefully about allowing people to make more decisions, and this gets back to something we talk about all the time, which is we're optimizers, and the idea that somebody might only do it 97% correct kills us. We have to do the last 3%, but if we can find ways to let go of those things as appropriate and just be more intentional about the idea of optimizing for autonomy for the people who work at the firm, that's one of the things that I would take away as well.

Michael: Well, so one of the interesting facts, though, that struck me around this is there were advisors who were happy and happy about their autonomy across most different types of firm structures. There wasn't just a magically... There were some tendencies of independent channels tended to have more autonomy than not, but we could find advisors who felt okay about their autonomy across most channels. And to me, there's an interesting takeaway from this, even as I look at advisors with autonomy, but then also the fact that almost all advisors want some platform to affiliate with. It could be BB, it could be Corporate RA, it could be a network, whatever it is, almost all of us want some platform to affiliate with. A lot of us use TAMPs, which, as a whole big outsourcing function unto itself. It strikes me that there's an aspect around autonomy that, we all want autonomy in the things we want autonomy in and we don't care about having autonomy in the things that we don't care about having autonomy in. The trick is we care about different things. I don't know why, maybe that's God's gift of how we were wired or something else. But I'll see advisors that will say, "Right, I have to have the autonomy to set the portfolio exactly the way that I should be set." And I'm fine to use the centralized planning team to queue up the financial plans, but the portfolio has to be built exactly the way that I want it.

I'll see other advisors who are complete opposite, like, "I have to make the whole financial plan exactly the way I think and believe it should be made, but the investment side is not really that important. So, what they do in their process seems absolutely fine, and I'm happy to just use someone else's investment process. So, I work with a team." That to me there's sort of an implication, we seem to have a streak towards autonomy but not all of us care about autonomy in the same ways for the same things. And the implication of that is, are you generic, you, listener, you, not you personally, Carl? Are you clear about the things that actually matter or are deal killers for you, and recognize your deal killers may be completely different than another advisor's deal killers who might otherwise seem similar to you? And I feel like there's this aspect of this because there's so many different channels, and platforms, and affiliations, and structures, and choices that I think, in practice, one of the biggest drivers around well-being is not that there's a magic channel, or company, or role that's better, but that you have to find the version that aligns for the things that are important to you. Now, if you literally don't feel like you have the ability to change firms, that's a negative autonomy thing unto itself. But if you've got some means to make a change, figuring out the parts that are actually important to you and finding a platform that can align to that seems to be a pretty big driver.

Carl: Yeah. Yeah. It's so interesting to me how often this all comes back to the same thing, which is just start paying attention and be a little more intentional about the building. So, many of the advisors that I see that are the happiest, they're all over the place in terms of where, how, what. What they have in common is they were really thoughtful, or at least they became really thoughtful, at some point, about this is the thing that I care about, this is the thing I want to build, and this is what it looks like. And I find many of them to be pretty opinionated about it.

Michael: One, and I can hypothesize that that in and of itself is a thing that takes us time to figure out, which is a reason why age and experience tend to show up better for well-being for us. It's like we're better at figuring our stuff out and then putting ourselves wherever we need to be in this industry to make that work for us. And that sometimes takes time as well. And it complements well, it's the 3rd big factor that we found of 3. One was autonomy, the 2nd was experience. And the 3rd was team, having team support.

Team Support Isn't The Same As A Sidecar Associate When It Comes To Increasing Happiness [26:20]

Michael: And teams showed up really interesting because we looked at different support roles that advisors could have. So advisors who have service advisors on the team who take over a set of clients, happier. Advisors who had para planners, someone I can delegate the financial planning grinding work to, happier. Advisors who have admin support, happier. Advisors who have associate advisors who ride sidecar with them, not happier. Not worse, but not happier. And I was like, we can only read so much into broad-based data. But what the trend seems to be for us is, it's nice when we can delegate the things that we don't want to do. Clients that aren't a good fit to me to go to the associate. Plans I don't really want to manually data input anymore, go to the paraplanner. Admin tasks I don't really want to do, I can delegate to my administrative team. But associate advisor is much more of a sharing function. I got to actually work collaboratively with another advisor on "my clients." And that doesn't seem to give us the same lift, right? So, happiness is having all the support to work with my clients, not needing to share my clients, right?

Carl: Actually, that's fascinating.

Michael: There's an implication. Getting into my specialized function of letting me do what I do best is good. But if that's what I do best, I don't actually really want to share that part. I'm not happier sharing that part. I'm happier letting go of all the other things I didn't want to do so that I can do more of that part with the clients I like working with and serving that work well with me.

Carl: Yeah. Yeah. The second way you stated that, it makes more sense to me, not necessarily that I'm not happy sharing. What makes sense to me is the idea, the thing that would bring me the least amount of happiness in the business I'm building is to hire somebody like me. If you brought somebody on that wanted to do the job that I do in this business... I've tried it. If you bring somebody on that wants to do the job that I do in this business, that will not make me happy. And it certainly won't make the person that we hire happy. It won't make the business better, it would end up just being a problem.

Michael: Which I think may be part of why we see a lot of unhappiness amongst associate advisors. Because when I look at how most of us hire as advisors, the most common thing advisors hire is mini-me, like me 20 years ago, because I see in them what I was. And it's like, "Yeah." But for a lot of those folks, you run your own firm and don't work for anybody.

Carl: Right. Good luck with that.

Michael: So, if you're hiring you, how do you think that's going to work out? You couldn't stay in that job either.

Carl: Right. You would not work for you, for sure. For sure. Yeah. So, interesting. And I think that always gets... To me, the most helpful model for all that has been Dan Sullivan's unique-ability-and-unique-teamwork model of finding people who do the things. And I've been fascinated by this idea that I didn't really realize that there were people on the planet that didn't like to brainstorm, for instance. That was a shock to me. And now I'm like, "Oh, well that's good because if all we did was brainstorm around here, we'd never get anything done. So, it's just really interesting to get clear, okay, what is it the thing that you're uniquely good at? And how can you hire around that? And then how can you give those people autonomy, and how can you give them enough experience that they can get through some of the steep end of the learning curve that can sometimes feel really, really hard to the point of unhappiness, so that they can figure out who they really are and go the whole way, to bring the old Lao Tzu quote into it. I think that's really smart. And it's not so much a function of we don't like sharing clients. It's a function of, it turns out that having somebody just like you around is not a great idea.

Michael: Yeah. Again we didn't find advisors were less happy with associate advisors that they're sharing clients with, but they were not more happy in a way that basically every other support team member actually was associated with a list in happiness and well-being.

Carl: Yeah. That makes sense to me.

Michael: So, yeah. I view it from a similar lens. There's a figure out what's really important to you, which takes time, so you can go find the platform, or the firm, or the role, or the structure that gives you autonomy in the things you actually care about, and then you can let go of the stuff that you didn't care about anyways. Recognize it gets better with time. When you get the reps in, but that means you have to pick paths and opportunities where you can stay in long enough to get the reps to get to the next stage and finding ways to leverage team and resources to do the things you don't want to do so that, per Dan Sullivan, you could spend more time in your unique ability that you like to do.

Carl: Yeah. Totally.

Michael: Compounds in your favor. Well, awesome.

Carl: Amen, Michael.

Michael: Thank you, Carl. Appreciate the discussion today.

Carl: Cheers. Yep.