In the early days of the financial advice industry, an advisor’s most valuable service for clients was simply providing access to financial products (as stocks, bonds, insurance, etc. couldn’t be purchased directly by consumers). However, the advent of online brokerages not only drove down the cost to purchase investment products, but made investing (as the slogan went) “so easy, a baby could do it”. As a result, advisors turned their focus towards building customized portfolios for clients, and rather than earning commissions on the products they sold, began charging recurring fees for managing those portfolios on an ongoing basis.  

More recently, however, ongoing technological progress has automated portfolio management to the extent that it’s now “so easy, a robot can do it”, and once again, advisors have evolved to make their main value offering the advice that they provide across their clients’ entire financial lives. Yet, despite the introduction of alternative fee structures (including hourly and subscription models) based on the delivery of advice rather than management of assets (as well as the growing consumer demand for flat fees), growth of the AUM model remains robust. 

In our 64th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how disconnects can sometimes arise between what potential clients may expect and how advisory businesses are structured to deliver advice, why the demand for quality advice continues to combat industry-wide fee compression, and why it’s been (up to this point, at least) such a struggle for alternative fee structures to gain better traction. 

Over the past several years, as more options for automated investment management have become available, consumers have increasingly sought out ‘compartmentalized’ planning engagements (i.e., advice on ‘just’ one or two, rather than on all seven, aspects of the planning process), but often run into difficulty when trying to find an advisor that has the capacity to accommodate their requests, particularly when it comes to higher-net worth clients. As while there are advisors who are able to accommodate limited planning engagements, their numbers are limited. Moreover, clients who are further along the complexity spectrum may expect the sort of service found at larger firms, which simply aren’t structured in such a way to provide compartmentalized service. 

Compounding the conundrum is the fact that it’s difficult for consumers to differentiate between advisors who actually offer advice and those who simply assume the title but may not be in the advice business. The supply of fiduciary advisors remains scarce, which (in turn) means that an advisor’s limited number of available spots can fill up quickly with clients who do want comprehensive planning (which is why so many of those advisors end out implementing wait lists). And with the high costs that advisors face to acquire clients in the first place, it just becomes impractical (at least at this point) to build a sustainable business that (primarily) serves clients on a limited basis. 

Ultimately, the key point is that, while fee structures and advisory models continue to evolve to provide better and more varied services to clients who may not want (or need) comprehensive planning, the fact remains that it’s expensive to not only acquire clients, but to service them as well. Which, at the end of the day, is why a fiduciary standard is so important for the industry, as it would drive down the cost of advice in the aggregate and would make it more practical to profitable and effectively serve clients who would benefit the most from flat-fee engagements.  

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Back in 2015, Carl Richards made a bit of a stir in the financial planning community when he published his book, “The One-Page Financial Plan”, which suggested that most important aspects of a full financial plan could (and should) be delivered to clients on a single page (effectively a form of executive summary). The appeal of this approach was offering a useful and easy-to-produce deliverable for clients (that could be updated on an ongoing basis to account for the fact that conditions and circumstances are in constant flux), and more generally was a way to reframe the concept of the ‘full’ financial plan by drilling down to just the most actionable points of advice (which is all the client really ‘needs’ to implement in the end anyway). Yet if advisors are really going to encapsulate their entire recommendations into a single-page financial plan, the question arises: can financial advisors really get away with eschewing a full financial plan, and if most clients never read the full plan after it’s presented anyway what is the real purpose of producing the financial plan in the first place?

In our 63rd episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the origin story of the one-page financial plan, the key elements of a good one-page financial plan, and why it’s not meant to be a replacement for a full financial plan (which then exists as a form of “technical appendix” to provide in-depth support to validate the one-page summary), but instead, act as an executive summary of the full plan as well a reference-point that advisors and clients can use when making decisions.

As a starting point, it’s important to understand that the full financial plan is incredibly important. The breadth and depth of the work that financial planners do cannot fit on one page. But it’s equally important to acknowledge that the full financial plan becomes ‘outdated’ the instant that a client walks out of the presentation meeting, and in the end, most clients simply can’t absorb the full extent of numbers and details that are encapsulated in a comprehensive financial plan (which really functions more as support calculations to ‘prove’ that the recommendation itself is technically accurate).

Accordingly, one approach to address the full financial plans that some financial planners have adopted is to also include an executive summary, or, one-page financial plan, that is meant to provide not only a quick reference that advisors and clients to use as a guidepost, but as a living document that is easily updated as life happens and things evolve. Beyond which the entire remainder of the financial plan serves as a “technical appendix” for that executive summary.

While various planners have adapted these one-page plans to fit their needs, items that are commonly found on such a document include: a Statement Of Financial Purpose, which acts as a sort of guiding star, or overarching “Why”; a list of goals, which can be listed in such a way that prioritizes those goals which carry the least desirable outcome if not achieved; and finally, a list of the things that need to happen over the next 90 days. Put another way, the one-page plan summarizes the Why, What, and How of the larger plan, and is a tangible deliverable that advisors and clients can use as a yardstick against which financial decisions can be measured and that can (and should) be regularly updated as action items are completed and goals are achieved (or get shifted).

Which, again, isn’t to say that the full plan doesn’t (or shouldn’t) have a place in the planning conversation. Rather, the action items on the one-page plan are necessarily the result of a rigorous analysis of the client’s situation to demonstrate that it is technically accurate. And while a relatively low percentage of clients have an interest in digging in to examine the nitty-gritty of how final recommendations are calculated, for newer advisors (in particular) who are still establishing their credibility, the full plan can act as an audit trail of sorts to not only show where “that number” came from, but as a tool to boost an advisor’s own confidence levels.

Ultimately, the key point is that one-page summaries of the most meaningful and actionable information in a financial plan (i.e., the Why, What, and How) can be a powerful tool that financial advisors can use both as a living document that can be regularly updated as “life happens” and as a filter through which advisors can help their clients navigate important financial decisions as they arise. Which, at the end of the day, acts as an executive summary of the valuable analysis in the full plan and as a way to keep advisors and clients focused on what matters most.
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Although “statements of purpose” have, in one form or another, been around for centuries, it wasn’t until the 1970s (and especially into the 1980s) that the corporate mission statement really began to gain traction as a tool for businesses to state publicly what they do and who they do it for. It wasn’t long after that mission (and vision) statements began to elicit eye rolls, particularly from those who were all too familiar with businesses that would go through the motions of writing up such a statement… and then completely ignore it in practice (as Enron infamously included “Integrity” as a core value… right up until it collapsed in an accounting scandal). Yet, the practice of creating mission statements has persisted. And for the plethora of financial advisors who are striking out to become first-time entrepreneurs and are facing a mountain of tasks that need completing and decisions that need to be made, the question arises: is it really worthwhile to take the time and effort to come up with a mission statement (when starting the firm, or later once it is more established?).

In our 62nd episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss what it means for financial advisors to have a mission statement in the first place, some of the key benefits mission statements bring to the table, and some practical and actionable ways that financial advisors can uncover and codify their core principles and personal code, both as advisors and as business owners.

As a first step, it’s important to recognize that most financial advisors who started their own practices did so because they decided that the only way they could help the clients they wanted to help in the way they wanted to help them was by simply going out and doing it themselves. In other words, there’s some core reason that they get out of bed in the morning, and that, in effect, is the anchor for a mission statement that clearly defines what it is that the financial advisor can uniquely do that their clients can’t get anywhere else.

From a practical perspective, the biggest benefit that a mission statement brings to the table for financial advisors is that it makes subsequent business decision-making exponentially easier. Because in practice, a mission statement can serve as a filter through which advisors can be intentional with the choices they make as they build their practices. Without a clearly articulated vision, it’s hard to be consistent when making key business decisions… which can eventually result in the business losing traction.

When it’s time to actually codify a mission statement, advisors have a few options. A less formal approach could be a brainstorming session facilitated by a series of questions that starts with, “Why does this firm exist?” and then digging into that answer by asking, “Why is that?” and “Why is that…” and “Why is that!”, several times over to uncover the advisor’s (and firm’s) underlying Why. Advisors who prefer a more structured approach can look into the EOS framework, which relies heavily on establishing a foundation of purpose and value, from which literally everything else that the firm does is built.

Ultimately, the key point is that a financial advisor’s mission statement is something that is already in them and is being used to make business decisions, regardless of whether they are aware of it or not. But without being cognizant of what that mission is, it’s easy to unwittingly make business decisions that aren’t well aligned. Thus, by discovering and articulating what that mission is, the financial advisor can gain the clarity of purpose that makes all the subsequent decisions around owning and operating an advisory firm much easier. In turn, when the advisor starts to add team members, the mission statement becomes even more important, because once there are more team members than can be practically managed by the advisor/owner (which usually happens once the headcount reaches about five or six), then the mission statement becomes the reference point from which the rest of the team can base their decisions on as well. As in the end, when team members have the tools to make the same decisions as the advisor/owner would make, it gets much easier to take the practice to the next levels.

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Up until the last twenty years or so, it was relatively uncommon for financial advisors to strike out and launch their own practice without the support of a larger advisor platform (e.g., a broker-dealer or insurance company). However, technological advances, a shift towards holistic financial planning (versus the more traditional transactional model to which broker-dealers and insurance companies were historically attached), and evolving fee models, have come together to make it exponentially easier for advisors to become entrepreneurs (particularly under the independent RIA model). However, one thing that hasn’t changed is that, even for advisors who are starting from zero, there is still a need to be sufficiently capitalized, not only to actually open shop, but to survive the first few years with little-to-no income as the advisory business ramps up. Which means that insufficient starting capital remains a common blocking point for advisors who may otherwise be ready to launch their own practice.

In our 61st episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss why a lack of capital may not always be the root cause for an advisor’s reluctance to start their own business, a key mindset shift advisors can make to get a little more comfortable with the risks associated with being an entrepreneur, and some practical tips for sourcing the necessary funds to launch.

As a first step, it’s important to consider that, for advisors who have never done it before, the thought of starting a business can be scary. As while a lack of capital may actually be a blocking point, sometimes the real reason advisors are reluctant to begin the process of starting their own practice is simply that they’re scared that they’ll fail. Which, of course, is perfectly normal. Being ultimately responsible for every aspect of running a business is daunting for many, and it’s important to understand that there’s more than one way to have a successful and fulfilling career as a financial advisor that doesn’t involve starting a business from scratch.

However, advisors who are ready to take the entrepreneurial fork in the road, but are still concerned about not succeeding, can always take a moment to consider what the worst-case scenario really would be. After all, advisors who are ready to “go solo” should already have the technical and interpersonal skills to both bring in new business and provide great service to clients. Which means that, at the very worst, if the business proves to be unsuccessful, then the next logical step is to simply go find a job as an experienced advisor at an established firm (for which there is only a growing demand for hiring and a shortage of talent to fill the roles), and earn a healthy salary to get back on financial track!

And when it’s time to solve the “not enough capital” puzzle, there are a few options. As a first step, advisors can leverage their skills (and natural proclivities) to plan for their goal of saving and/or raising the necessary capital. And if time is of the essence, then they can follow in the footsteps of other successful advisors who have either taken out a loan, found someone to partner with, or taken on equity partners.

Ultimately, the key point is that the reason that advisors hesitate when launching their own firm is often less about not having enough capital, and more about being worried about things not working out. But, by acknowledging that it’s perfectly normal to be anxious about starting a business, and considering the worst-case scenario (and how there’s often still a very strong fallback choice!), advisors can make a more informed decision about whether or not they truly want to hang their own shingle. And if they do, there are several ways to source the necessary capital for those who conclude that they really do want to scratch that entrepreneurial itch.

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For most of the financial advice industry’s history, financial advisors’ success first hinged on survival… which meant getting enough clients to generate enough revenue to survive. Which meant those who survived typically had exceptional “people skills”, which gave them a leg up when convincing people to purchase whatever financial products their companies sold (even with limited industry experience). However, as the industry has become less about financial products sales transactions and more about ongoing advice relationships, financial advisory firms have increasingly needed to hire “support” advisors whose job isn’t to bring in new business, but rather to service (and be awesome for) existing clients. The good news is that these pathways have led to wider opportunities for people to enter the profession (even and especially if they aren’t necessarily business-development oriented). But because bringing in new clients is harder than keeping existing ones, those who do the former inevitably earn more than the latter. Which means that support advisors who decide that they want to level up their careers often have to learn the interpersonal skills necessary to develop (and lead) client relationships.

In our 60th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss some steps that support advisors with limited client experience can take to learn how to communicate effectively, habits they can adopt to develop their own approach when taking point on client relationships, and ways they can position themselves within their firm to get the opportunity to expand their role.

As a starting point, it’s important to recognize the amount of progress that the industry has made in prioritizing ongoing relationships with clients and that there's no longer just one pathway into financial planning as a career. And it’s equally important to acknowledge the fact that advisors can craft a very rewarding career as a support advisor without worrying about bringing in new business. However, for those support advisors who do want to move into a lead role, developing solid communication skills is key. And while not everyone is born with the proverbial gift of gab, the good news is that striking up a conversation, listening actively, asking good questions, and building rapport are all skills that can be learned.

Accordingly, initial steps that advisors can take include joining groups and taking courses designed specifically to help get people comfortable speaking with (and in front of) strangers, communicating effectively in professional settings, and thinking quickly to respond in real-time to the unexpected (or incongruous). Some examples include Toastmasters and Dale Carnegie (for public speaking and professional training, respectively), as well as improv classes, where advisors can practice responding genuinely to what’s happening “in the moment”.

Other proactive measures service advisors can take to learn how to lead client relationships is to seek out opportunities to sit in on meetings with lead advisors (especially discovery meetings where the client/advisor relationship is just taking shape), not necessarily with an eye towards participating in the meeting, but rather simply as a silent observer to listen and absorb as much as possible. From there, advisors can look for opportunities to develop a ‘mini-specialization’ proficiency in a particular planning topic (think ESG investing, equity compensation planning, or student loan planning) and become their firm’s internal expert for a subject that’s impactful for their clients (which can help get them invited into more client meetings!).

Ultimately, the key point is that there are specific actions that support advisors can take to give themselves the tools they need (beyond “just” solid technical chops) to move into a lead advisor role. Becoming a good communicator is an essential first step, and lead advisors within the firm can be great resources to learn from as well—but developing unique expertise and bringing additional value to clients can really give those looking to advance their careers a big leg up!

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Over the past several years, the ever-expanding technological landscape has given financial advisors a plethora of tools that they can use to expand their reach, market their services, communicate with and serve their clients, and manage and grow their businesses. Yet, those same technological tools that have been so useful for advisors (i.e., email, social media, team communication platforms, CRMs, etc.) can also serve as irresistible distractions that can fill an advisors’ days with low-impact tasks as they react to an endless stream of notifications and, in the process, end out sacrificing their ability to do the things that can move their practices forward and allow them to do their best work for their clients. Which raises the question: how can financial advisors create the space in their schedules for high-impact work and actually leverage technology to do so (instead of sacrificing real productivity for ‘unnecessary’ responsiveness)?

In our 59th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss a key framework that advisors can use to prioritize their tasks, actionable strategies to create an environment that’s conducive to spending sufficient time on those things that are the most important, and how to manage their own natural tendencies to get distracted by life’s constant stream of interruptions.

The best place to start is by using the task prioritization framework introduced by Steven Covey over 30 years ago, which uses a container to represent the unalterable amount of time that we all have in any given day or week. The container, as the analogy goes, can be filled with rocks (the big, important stuff that moves us forward), pebbles (which are the things that have to get done but don’t necessarily move the proverbial needle), and sand (which is just the constant stream of communication and distraction). And the challenge that every advisor faces is that, if they don’t actually prioritize their rocks, then the sand and pebbles will naturally fill up all the available space in their container (which is why it’s easy to feel as if there’s never enough time to tackle the big rocks).

From there, the best way for advisors to make time for their rocks is to put it on their calendar… not mentally earmark a slot at some point during the week to get around to the rock, but literally book the time on the calendar, just like it was a meeting with a big client that can’t get moved or interrupted. Because when something inevitably comes up, advisors can (without missing a beat) respond that the time slot is already booked on their calendar. And, in order to create an environment conducive to the sort of deep concentration that working on rocks requires, advisors can turn off all incoming email and text notifications and set messaging apps on Do Not Disturb.

After making rocks a priority and eliminating distractions comes the hardest part, which is maintaining focus to actually do the work (and avoid the temptation of taking a quick look for any messages that may have come in). Maintaining focus, just like any other worthwhile endeavor, requires practice, but one effective strategy to get started is by setting milestones, and when a milestone is reached, the advisor can take a break and do something pleasurable (like going for a walk or getting an afternoon coffee).

Ultimately, the key point is that advisors who want more time to tackle the important things that will push themselves, their clients, and their businesses forward can start by actually booking time on their calendar to force time to be made. And if that causes issues because other urgent tasks aren’t happening, then the next logical step is to find someone to help handle them. Because, at the end of the day, there will always be more things to do than anyone has time for, and advisors who don’t actively take control of their calendar will always find themselves reacting to the sand and never have enough room for rocks. Or, put another way, no one has a magic machine that allows them to do more than anyone else. Rather, the real secret of time management isn’t about being more efficient; it’s about making the things that matter most (but aren’t necessarily the most urgent) the real priority.

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Over the past couple of decades, the financial advice industry has evolved from being based primarily on one-off transactions with dozens or often one or several hundred individuals that an advisor may interact with (often only once every few years), to being focused on providing ongoing advice for a tighter group of clients that the advisor meets with several times each year. One of the greatest features that has emerged as part of that evolution (and attracts people into the profession itself) is the depth of ongoing relationships that advisors develop with the clients they serve. The feeling of playing a key role in helping families reach their financial goals provides a high level of both personal and professional satisfaction, and can become deeply gratifying personally as those relationships last for several decades (and across multiple generations). Sometimes, however, advisors can become so attached to their clients that it becomes difficult to separate a client’s stress from their own… which can eventually take its toll on the advisor’s own health.

In our 58th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss some of the things that advisors can do to stop thinking (and worrying) about their clients quite so much, strategies to regain some mental health balance in their lives, and ways create (and maintain) some separation from work outside of regular office hours.

As a starting point, some initial steps advisors can take in order to stop thinking and worrying so much about whatever may be stuck in their heads is by simply writing it down! Whether doing it digitally (with a dedicated note-taking app like Evernote) or by going ‘old-school’ with a pen and paper, the physical act of just typing (or writing) out the client issue on the advisor’s mind can often have a purging effect, as it gives advisors a way to get whatever it is that they’re stuck on out of their heads and into a place where they know they’ll be able to go back to it… with the caveat being that they have to make reviewing those notes (at an appropriate time) part of their routine (but at the same time, can let go of the issue for the immediate time being!).

From there, advisors can become proactive about making small changes to their routines and habits around sleep, exercise, and diet, to preserve their own mental health. Incremental steps, like going for a mid-day stroll, doing anything that doesn’t involve a screen before going to bed, and turning off notifications from work-related apps after a specific time, can go a long way. Or, in other words, taking those incremental steps can help advisors put “air in their shocks”, which can help them build up the resilience they need to better react to and manage stressful situations as they do inevitably arise.

Ultimately, the key point is that financial advice is, at its core, a helping profession, and as such, attracts people who want to have a positive impact on other people’s lives. However, it's crucial for advisors to realize that they are also important, and if they don’t protect their own physical and mental health, they simply won’t be able to help their clients. By focusing on getting some exercise, eating healthier, getting better sleep, and jotting down whatever it is that’s stuck in their heads, advisors can be proactive about making sure that they’re able to serve their clients to the best of their ability!

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If there’s one thing that just about every financial advisor can agree upon, it’s that surviving the first few years in the advice business is very difficult. As a result, there’s a natural tendency for newer advisors to not be terribly picky about who they take on as clients, as getting any new clients that can generate any new dollars flowing into the business is often necessary for survival. However as advisers begin to find success, they have the opportunity to start building their practice with focused intent. For some, that means growing and scaling by hiring staff to support a growing number of clients. For others, that may mean remaining a ‘solo’ lifestyle practice and serving a (relatively) small number of (often highly profitable) clients.

But, no matter what a practice may look like, many advisors reach a certain point where the clients that helped them get off their feet early on are no longer a good fit… whether because they “can’t be serviced profitably” given new staff infrastructure, or don’t generate enough revenue to fit the more focused lifestyle practice, such that they can even become a drag on overall business results. In the case of no-longer-profitable clients who aren’t pleasant to work with in the first place, the solution is often straightforward. But what if they’re not unpleasant, just “unprofitable”? Which raises the question: How should advisors handle clients who they otherwise know they are helping and truly enjoy working with, but just aren’t profitable to serve?

In our 57th episode of Kitces and Carl, Michael Kitces and client communication expert Carl Richards discuss how to determine if a client doesn’t meet the profitability goals of a business, how to think about serving unprofitable clients who are otherwise a pleasure to work with and need good financial advice, and how to communicate with those clients when there’s no other choice but to let them go.

As a starting point, it’s important to first identify which clients are actually unprofitable for the practice. Accordingly, a common rule of thumb is to take the average revenue per client across the firm (by taking total revenues of the firm and dividing that number by the total number of clients) and then dividing that number by three. Since most advisory firms have overhead somewhere in the neighborhood of 30-40%, those clients who are generating less than about a third of the average revenue per client simply aren’t covering their slice of the basic costs of running the business.

From there, advisors can make a deliberate decision to designate a certain number of clients as “pro bono” and continue to serve them. But after those proverbial pro bono seats are full, there may be even more clients that now need to be transitioned. At that point, the best way to handle that conversation is by being candid and honest, and by explaining that, because of the level of service that’s being provided, the firm needs to charge a higher fee commensurate with the services it’s providing… and that it wouldn’t be in the client’s financial interest to pay the firm’s (new, higher) minimum fees. At that point, the advisor is communicating that they aren’t a good fit for the client (rather than the other way around, in a manner that could hurt the client’s feelings), and can best help by finding a different advisor who is!

Ultimately, the key point is that advisors chose this profession because they want to help people, but it’s equally important to acknowledge that advisors can’t help everyone… and that there are also other advisors out there who do great work, and for whom one advisor’s unprofitable client could still be a very good client for them. In other words, just because a client can’t be served profitably by one advisor doesn’t mean they can’t be served well by any advisor (as one advisor’s “C” client may still be someone else’s “A” client!). Which means transitioning clients who aren’t a good fit isn’t simply about “rejecting” them or leaving them to fend for themselves… instead, it’s an opportunity to help them find the advisor who will want to service them at the level they need and deserve, for the benefit of all!

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For the past several decades, the prices that consumers pay for financial products have been trending lower and lower. From the rise of discount brokerage in the 80s, to no-load mutual funds platforms in the 90s, online brokerage in the “aughts”, and robo-advisors in the 2010s, the cost of investing has decreased steadily and dramatically. Accordingly, a recurring concern over the past decade has been whether the “fee compression” in financial products will eventually spread to financial advice as well. Instead, though, the opposite has been true, as our own Kitces Research shows that there has actually been fee expansion when it comes to financial advice, as the typical price that advisors charge for standalone financial plans, retainers, and hourly rates has been on the rise (and even AUM fees have remained remarkably stable!). Which suggests that, as the industry has become more focused on the advice side of the equation (and less on product sales), advisors have had to up their game… and in practice really are delivering far more value to their clients than they ever have… to the point that they’re even able to charge more for it!

However, as the advisory world transitions fully to advice fees and the debate between commissions versus fees begins to fade, a new sort of industry conflict is rising to take its place: where advisors who charge fees are criticizing each other for whatever fee model they’ve chosen to utilize within their practices, and the suggestion that their particular fee model is superior to all the others. Which raises the question: is the debate about the “best” advice fee model another version of consumer education (akin to teaching consumers about the difference between fees versus commissions), or are advisors charging fees becoming too focused on differentiating on price (or pricing model) instead of focusing on the range of value that a range of advice fee models can support?

In our 56th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss the emerging new advisor fee debate, why advisors may be missing the mark on the core issue at play, and how advisors could reframe their discussion in order to help move the profession (and their own practices) forward.

As a starting point, it’s important to remember that in an industry with a lot of compensation excesses, it has been a tried-and-true tactic for financial advisors to build their businesses over the years by pointing out that their costs are lower (making it more feasible to deliver better performance) than their competition. Yet at the same time, it’s important to remember that there’s a difference between advisors who charge a lot for very little service, and advisors who charge a lot for a lot of service (that not all clients may want to buy and pay for… but some do). In other words, while there are certainly advisors whose rates are “high” (in absolute terms), the central debate shouldn’t be around the fee itself (or what it’s based on), but rather the value that a client is actually getting for the fees they pay. Or stated more simply, the issue isn’t whether a certain fee (or fee model) is good or bad, it’s whether the fee itself is justified for the value it provides to the particular type of clients being served.

From a client-facing perspective, meanwhile, advisors might consider focusing on all the services (and value) they provide when meeting with prospective clients, rather than highlighting the fees that other advisors may be charging. Because, at the end of the day, when advisors ask good questions and emphasize the positive effect that they have on their clients' lives, prospective clients will be able to connect the dots themselves and understand if the service that they’re getting (or not) from their current advisor is worth the fees they’re paying.

Ultimately, the key point is that advisors who win business on price run the risk of eventually losing business on price (and/or simply attracting the most price-sensitive clientele). Which means for advisors focused on long-term relationships, making clear the real value of financial advice (and what that looks like on an ongoing basis) turns the focus away from why a prospective client may or may not be paying too much, and towards their pain points and the issues that they need help with. Because it’s the emphasis on the positive work that advisors do, and the outcomes they facilitate for their clients, that will push the profession (and individual advisory firms) forward.

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For most of its history, the financial advice industry has been almost exclusively transactional in nature, which meant that advisors would usually interact with clients only when there was a new sales opportunity. The need for interaction only once every few years meant that advisors could have literally hundreds of clients, and it was virtually unthinkable that an advisor would ever choose to or have to turn anyone away. But, as the industry has shifted towards a more ongoing, relationship-driven model, it’s become increasingly common for advisors to find that they’ve hit a capacity wall and simply can’t take on more clients. And once at capacity, many advisors have either raised their fees (so that more prospective clients self-select out of the engagement process before ever reaching out) and/or sought to add capacity (by bringing in additional advisors and staff).

However, for those advisors who aren’t interested in increasing headcount (because they aren’t keen on managing people) or don’t want to raise fees (because their current pricing works for the particular niche they’re targeting), many have turned to implementing waitlists as a way to manage their capacity, at least in the short-term. Which, in turn, raises the question: is implementing a waitlist really the best way to handle capacity limitations, or is there a better alternative?

In our 55th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss the motivations that might drive an advisor to implement a waitlist in their practice, the unintended consequences of a waitlist, and a key mindset shift that advisors can make when thinking about their desire to manage their limited capacity with a waitlist.

As a starting point, it’s important to distinguish amongst a couple of different circumstances behind the use of a waitlist. On the one hand, for the advisor who is actively expanding their capacity by hiring more staff, a short waitlist might be unavoidable if there’s been a sudden influx of new clients, and it’s logistically impossible to onboard everyone all at once. On the other hand, some advisors have intentionally capped their growth pace, and implement a waitlist that (in some cases) might be up to 18 months.

For that second subset of advisors, it’s important to recognize that their decision to put prospective clients on a waitlist comes from a deep desire to help, while realizing that it’s impossible to help everyone (because an advisor who says “yes” to more professional opportunities than they can handle is also actively saying “no” to other things in their life). Unfortunately, though, that decision comes along with some unintended consequences, as people who reach out to financial advisors invariably do so when they have an acute pain point that they need help with right away, and telling those people, “yes, but” means that they often aren’t getting the help they need when they need it (and will just go elsewhere anyway). Instead, it’s perhaps the better response for advisors to simply say they aren’t accepting new clients at the moment and (as an alternative) recommend those prospects out to other advisors who do have the capacity to offer the immediate help the prospective client is seeking.

Ultimately, the key point is that, while it may make sense to implement a waitlist as a way to manage growth and capacity, the reality is that the longer the waitlist gets, the more the risk that advisors end out rejecting clients who, not knowing where to turn, may not get the help they need (or worse, seek it from an advisor who doesn’t do a good job for them). And while some advisors may worry that referring potential clients out will empty out their pipeline and leave them without prospects when spots do open up, it’s important to realize that simply getting to a point where there isn’t room for more clients means that the advisor must be doing something right, and can move away from the scarcity mentality all advisors have as they build their businesses. Because advisors who are at capacity and choose to refer prospective clients to good advisors, at the end of the day, are actively helping those people and moving the profession forward.
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