Handling The Up-And-Down Stress Of Being A Financial Advisor

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#OfficeHours with @MichaelKitces Video Transcript

Welcome, everyone! Welcome to Office Hours with Michael Kitces.

For today's episode, I want to talk about a very real challenge that all of us face as financial advisors that really rarely gets discussed. Which is the emotional roller coaster of actually being a financial advisor and the toll it can take on us and our mental health, and the need to have some kind of support system for yourself as an advisor so that you can keep it all together. This issue was highlighted to me recently in a question that came in from Paul, who asked:

"How do advisors handle the stress and pressure when they go months without signing a new client, especially, if they've gone through a period of fairly consistent growth in the past?"

Ultimately, I think Paul's question is actually really good for two reasons. The first is just that it's a good reminder that as advisors, it's really important to track your business metrics in prospecting and sales so that you can actually identify if you have a problem and what the problem is.

Are you receiving fewer prospect inquiries than you were in the past? What's your trend in leads over the past one, two, and three years? Is the lead flow trending down? Well, that's a marketing and prospecting problem.

Or are you getting leads and inquiries, but they're not closing? What's the conversion rate? How many people that you talk to that are qualified to do business with you actually end up doing business? If your conversion rate is low, that's a sales problem, not necessarily a marketing problem.

And what's been your sales and marketing activity? I mean, is this just a bad luck streak of prospects not closing? Because random slumps happen in baseball and in getting clients. Or is it because you need some deeper change? Most advisory firms, I find, you don't take on a lot of new clients in a year. And because of that, it can take a while for these numbers to average out, which is why I actually prefer to track activity, "What things are you doing that move you towards getting clients?" and measure it against long-term results. Not just looking at shorter-term results of, like, "How many clients did I get over the past one or two quarters?" Because the numbers are just a little bit too small, that it's kind of lumpy from time to time.

But aside from the issue of just tracking and measuring your marketing and sales process, I think Paul's question actually highlights a second and potentially even more important issue. Which is, "When these inevitable ups and downs of the business come, whether it's a slump in closing new clients, losing a big client, losing a key staff member, what do you do to maintain your own mental and emotional stability?" Not just with respect to the growth in slumps that come, but even just the stress of actually working with clients. There was a study a few years ago that found that, after the financial crisis, 93% of advisors were exhibiting symptoms of post-traumatic stress disorder from, essentially, the impact of being the emotional support for all of our clients through those turbulent times.

Which then raised the question, "Who is your emotional support system as an advisor? Do you even have one to maintain your own mental health, especially, while we're bearing all the brunt of the stress of clients?"

First Tier Advisor Support System: Spouse & Close Friends [Time - 3:17]

For most advisors, your first support system for all the ups and downs of the business is really the support system you have for all the ups and downs in your life – your spouse or significant other or your close friends. I mean, after all, we're social animals. We rely on our relationships with the herd for support. When we have stress in our lives, we look to destress by spending time with friends and family. And spouses, in particular, are for many people our deepest confidants and our biggest supporters. Now for others, I know, it's a close group of friends or maybe a particular friend that you go to when you need to vent about something that's frustrating in your personal life or your business and get some support.

Of course, the biggest caveat to going to friends and family as support in your system for the business is just that they don't necessarily know anything about the business. So you may get a good shoulder to cry on, you may get someone to vent to, or just someone that gives you an outside perspective that maybe you're blowing a problem out of proportion (because we all tend to do that sometimes). And the great thing about having a good relationship with a spouse or other family or friends is that you've got someone to turn to with a trusting relationship that lets them say, you know, either, "You need to get over yourself," or, "You need to stop freaking out. The problem isn't that bad." Or to commiserate with you and say, "Yeah, that's pretty rough. You want to talk about it?"

And it's important because sometimes that business slowdown or the loss of a client, or the bad thing that happens at work, sometimes it isn't that bad and you need an outside perspective. And sometimes it is that bad and you need spouse, family, friends... someone to provide emotional support that you can deal with it. For me, for most of my life, it's been talking to my father, a good friend, and a business partner. You know, those are my three close people for finding my support when I've got to talk through a challenge.

Second Tier Advisor Support System: Peers & Associations [Time - 5:04]

As I noted earlier, one of the big problems with relying on friends and family as your support system as an advisor is that they are usually not advisors as well. And so while they can provide some support, they don't always have the context sometimes to know what really is a big deal or not.

And it's harder for them to be empathetic for situations we face as advisors if they've never actually been through it themselves, which is why you see so many support groups out there for people to get support from other people with similar problems. Right? Those who are struggling with alcohol go to Alcoholics Anonymous to get support from other people struggling to overcome alcoholism. Those who are struggling with a family member with Alzheimer's go to a support group for others struggling with family members with Alzheimer's. Now, the support we usually need as advisors doesn't necessarily escalate to the level of dealing with family with Alzheimer's or trying to beat alcoholism. But the point remains, sometimes the best people to go to for support are your peers who have similar experiences.

So building some relationship with friends in the advisory business who can better commiserate with you on the challenges and give better context for what's really a big deal or what's not may be more helpful. For many advisors, these relationships come from the coworkers in our office. If you're in a larger advisory firm, that can be a large RIA or a wirehouse, there's often a lot of other advisors who are around as coworkers. And even with a lot of independent broker-dealers that are in a branch with a lot of other advisors, there may be peers and colleagues there that you can connect with and talk to when you're struggling with something in the business.

For the more independent advisors though, those who start their own independent practices under a broker-dealer without being in a big branch and, especially, those of you who start as an independent RIA, you don't necessarily have colleagues around because you're on your own as an independent. Heck, if you're starting up, you might not even be in a formal office setting. You may be working from home all by yourself.

And for those in this situation, this is actually one of the reasons why I think it's so valuable to join advisor networks or membership associations for advisors. So groups like Garrett Planning Network, Alliance of Comprehensive Planners, our own XY Planning Network, thrive in part because it's a community of advisors, almost all of whom are independent, often solo advisors, who can connect with other advisors in similar situations, talk through the challenges you're facing, and get a little emotional support sometimes.

Membership associations like Financial Planning Association (FPA) or NAPFA are similar. NAPFA has not only a national community with forums but helps facilitate local meetups in a lot of bigger metropolitan areas. And the FPA has almost 90 chapters across the whole country, most of which hold regular local meetings that bring out dozens or hundreds of advisors at a time. Younger advisors even have subcommunities under FPA and NAPFA (either FPA NexGen community or NAPFA Genesis community) specifically to help support younger advisors with their own unique set of problems that they want to commiserate with. All of which are opportunities to form a deeper support system with other advisors who can better commiserate with the challenge of being an advisor and the ups and downs that go along with it, and maybe lend a little bit of emotional support when you need it.

Third Tier Advisor Support System: Study Group [Time - 8:08]

Unfortunately, though, for most advisors, just being in an office with other advisors or in a network or member association with other advisors isn't enough to really get the support you need when the tough times come. Because the reality is that you only get to see these folks in the hallway, at the water cooler, maybe occasionally at a chapter meeting every few months, in an online forum where you're maybe typing messages but not talking real-time, and it makes the support value somewhat limited. It's still not the same as either having a face-to-face meeting with someone to really feel more connected or at least a face-to-face video meeting or a phone call, just to actually talk live, real-time.

Which is the reason why I'm such a huge advocate, as well, of having a study group. Sometimes they're also called "mastermind groups", because the idea is you're not really with them to study (the way you might have had a study group in college when you were preparing for a big test), the point is to have a group of peers and colleagues who can challenge you, hold you accountable for improving yourself and your business, and be a support system for when you need a little lift.

Personally, I've been involved in a support group since very early in my career... Or, I should say, a study group who is my support group. My study group actually got formed in the early days of NexGen (so going to the NexGen conference back in 2006), when most of us were in our late 20s to 30s. We were almost all employee advisors at mid to large-sized independent firms where we didn't actually have much of a support system for ourselves outside of the four walls of the firm that we were in. Which is, I think, actually not the best place always to get emotional support, when the problem you're dealing with is frustration with the firm you're working for, right? Because even in a good firm, everyone gets frustrated from time to time. But if your coworker is the one you're aggravated with, that's kind of hard to talk to your coworkers about. So our study group formed back then as, you know, a group that we could bounce things off of. We keep a private mailing list for ourselves. And there are still 11 of us meeting in person twice a year, almost 12 years later now.

And a lot of organizations actually help to facilitate the formation of study groups. NAPFA creates what they call "local mix groups." XY Planning Network puts all of our new advisors who are launching firms into what we call "launcher groups" of fellow advisors going through a similar stage of the launch process who can be your friends and help support you. Because the key distinction here is that the smaller and more committed study group, the deeper trust you can form. You can make yourself a little bit more vulnerable, which is the real key to getting support. If you're not comfortable in wanting to make yourself vulnerable and actually talk about the problems you're having, and where you're struggling and where you're hurting, you can't get the feedback and support that you need.

Study groups work because the smaller and more intimate setting makes it easier to make yourself vulnerable so that you can get the help and interaction that you need. That's how it works. So if you're not in a study group and don't feel like you have the close group of advisor friends and colleagues that you can go to with real problems, find one. Make one. We have a guide to it on Nerd's Eye View that you can look up. The process isn't that complex. Find half a dozen advisors or so that you want to trust and get to know better, invite them into a study group, start meeting regularly, and start building those connections. There are lots of even different formats about how you can structure a study group. Some meet regularly in person, some don't. Some like to do monthly calls.

I know a few that do weekly video calls for an hour every Monday where every week, a different person is in the hot seat to share their successes and struggles for the week, bring one challenge to the group they need help with. And then they rotate around so everybody gets a turn going through that process. So you may have to take a little bit of it into your own hands to make it happen. Study groups do take at least some effort from someone to be a point person to form them. But they're a really powerful support system. The other advisors in my study group have become some of my closest friends in the industry and the ones that I still take most of my problems to when I need an ear or a voice of support.

So look even to your local advisor community. Who can you come together with and say, "Hey, you know, I know we see each other sometimes in the chapter, but I'm thinking about forming a study group just to get into this stuff a little bit deeper on the business and practice management, and just to be there for each other. Do you want to be involved?"

Fourth Tier Advisor Support System: Mentor or Executive Coach [Time - 12:27]

All that being said, I recognize not everyone likes to interact with others in, we'll call it a "group setting," even when it's a relatively small, closer, and more intimate study group environment. For some, the most comfortable way to connect is one to one, which to me means finding a mentor. So for those who want to learn more about mentoring and forming a mentor relationship, I highly recommend the book, "The Heart of Mentoring," by Dave Stoddard.

It does a really good job of painting a picture of what mentoring is all about, including some good ideas about how to identify and find and reach out to a mentor. But the essence of it is pretty straightforward. Finding a mentor means finding someone who has at least a little more experience than you, hopefully, a little more wisdom and perspective that comes from that experience, that you can go to with your problems and get some support when you need support and feedback when you need feedback and guidance about when a problem is really a problem, and when it's a slump you need to be patient with and work through. And maybe, occasionally, telling you even to suck it up and deal with it when the problem arises because sometimes that's what we need to hear. But the good news of mentors is that you can form a very close relationship and get some great support.

Now, ironically, the bad news is that some people just have trouble finding mentors. And unfortunately, not everyone turns out to be a good mentor. Even some people who are otherwise great advisors in what they do for clients doesn't necessarily mean that they are good at being a mentor for other advisors. And so for some, that's why they ultimately decide instead to hire it professionally and get an executive coach, to get someone who actually has training and experience in playing that role of coach and mentor and supporter.

I should note that I'm not talking about a consultant here. This isn't someone to come in and give you tips on your business or how to sell more or do more business development or pick better technology (although sometimes changes to those things come as a part of your coaching relationship).

This is about finding someone who just can help you figure out better what you want for your business, help you be accountable to yourself and what you need to do, and sometimes when you need it, just to be a little bit of emotional support when you need some support. Frankly, we could have a whole OfficeHours or blog post at some point about how to actually find a really good financial advisor coach, and maybe we'll do that at some point on the blog. But the point is just to recognize that hiring a coach is another option here. It does have a cost unlike most mentors, and coaches aren't cheap, especially, when it comes to the financial advisory industry. But a skilled coach can have a really powerful impact. Because unlike a mentor or a study group (or friends and family), coaches get trained and have experience in how to help you work through the challenges of your business and persevere through those challenges, while giving you a little bit of support when you need it.

But if there's one thing that you take away from this discussion, it's just to understand that you need to have some kind of personal support system to deal with the inevitable ups and downs that come with being a business owner in general, and a financial advisor in particular. From the challenges of growth and business development, managing employees and the business itself, and just the emotional toll sometimes that it takes in working with clients who are stressed and transfer that stress to us. This is hard work and for most of us. It's our livelihood. And it's our family's livelihood, which can be a lot of pressure. It's our employees' livelihood if you've built up your business and hired them. They rely on you for their jobs. And we maybe are responsible for dozens or hundreds of clients and their life savings.

Being a financial advisor is a high-stakes job. And being a business owner, I think, is actually a higher-stakes job. It just compounds some of the pressure on. So I'm not trying to make you stress, but just to acknowledge that it's going to be stressful. And it's okay that it's stressful, and you don't have to feel bad that you're stressed sometimes and want someone to talk to or to vent to, or to have a little emotional support from.

Just please, make sure you have that support system. Whether it's spouse or family or friends for you... or colleagues or peers in an advisor network or association... or a study group that you join... or a mentor that you find... or an executive coach that you hire. We're all human and we have to keep an eye on our own mental health, which means that we all need some kind of support system. So make sure you have whatever works for you. And if you don't, go find someone. And hopefully, the list of options here are helpful with some directions to go.

This is Office Hours with Michael Kitces. We're normally 1:00 p.m. East Coast time on Tuesdays, but unfortunately, I was caught up in meetings yesterday, so here we are today. Thank you, everyone, for joining us, and have a great day!

So what do you think? Is being a financial advisor an inherently stressful role? Does being a business owner compound the stress of being a financial advisor? Who do you turn to when you need help dealing with the stress of your business? Please share your thoughts in the comments below!