The practice of asking questions has always been an integral part of the financial planning process. In the early days of the advicer industry, those questions almost exclusively dealt with facts around a client's or prospect's financial situation to determine (ultimately) what products the adviser should recommend. However, given the industry's ongoing transition away from being primarily transaction-focused and towards being relationship-based, advicers have had to learn how to develop meaningful connections. One of the best ways to accomplish this is by having deeper conversations that go well beyond basic data gathering. Which, naturally, gives rise to the question: How can advicers foster an environment where these conversations can develop, and what are some ways that they can help their clients go deeper?

In our 141st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore some key concepts around facilitating meaningful conversations, ways advicers can help clients take time to focus on more foundational topics (so they can have a clearer picture around where they want to go), and some conversational strategies to give clients the 'permission' to open up.

Since much of an advicer's work centers around finding (and communicating) concrete answers to help solve problems and issues (like, "How big of an emergency fund do I need?" or "When can I retire?"), it's not too surprising that many view the process of facilitating meaningful money conversations from an analytical perspective (e.g., "Just tell me the best questions to ask and give me a flowchart to navigate the rest!"). However, finding the perfect questions and being skilled at asking them can also be cultivated through a sense of curiosity and a space where vulnerable conversations can happen. As while an advicer might want to implement the sort of life planning questions pioneered by George Kinder, the process may feel awkward in a more traditional "financial institution" setting and/or without a genuine interest in what the client has to say.

It's also important to recognize that clients typically don't seek out an advicer so they can explore their dreams, goals, and desires or to discuss their deep-seated feelings around money. Instead, meetings (especially initial meetings) happen because there's some 'presenting problem'. And that's where an advicer is in a position to create the space where meaningful conversations can happen by expressing empathy ("Mr. and Mrs. Client, I hear you. That is a real issue, and just to make sure we get to the best answer, can we back up a bit? Tell me why this is important for you?") and showing what a real financial planning relationship looks like.

The key point is that advicers who can develop their conversational skill set will not only do a better job of getting their clients to buy into their financial plans, implement the advice they're offered, and (ultimately) achieve their goals, but they'll also be better equipped to stand out in an increasingly crowded marketplace. And by greeting a client with genuine empathy, an advicer can create space in a conversation for the client where they can both explore deeper issues, arrive at impactful decisions, and engender a long relationship built on trust and meaningful human connection!

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As the financial advice industry continues to move toward providing full-blown professional services rather than focusing primarily on product sales, advisory (advicery?) firms are increasingly experiencing similar stages of growth in their practices. From the initial stage of onboarding their first clients to the point of hitting a capacity wall and deciding whether to increase their headcount, and later to a threshold where an ensemble business eventually becomes an enterprise, advicers face many of the same challenges and opportunities along the way. Conversations around these commonalities often work their way into the broader advicer community, and one topic that frequently crops up is the concept of scale, which denotes a disproportionate increase in revenues over expenses (often because of increased efficiencies within the business), and is distinct from "growth", which involves a proportional increase in both revenue and expenses. Often, advicers whose firms are still in the early stages of development begin thinking about how they can scale their business, which begs the question: Are advicers worrying about how they'll scale their business long before scale is even an issue?

In our 140th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how early-career advicers can sometimes get distracted by questions around how they can scale their practices, the issues they should really be focusing their time and energy on instead, and strategies they can use to identify what sort of business they want to build in the first place.

Advicer concerns around scaling typically present in a couple of ways. The first is based on the fear that, if the advicer introduces a new service, scaling it will be difficult because the margins are too low. Put another way, the advicer has a pricing problem and hopes that the economies of scale can correct for not charging enough. Another concern centers around increasing headcount, where advicers who don't want to hire and manage staff begins looking at technology as the key to achieving better margins while keeping headcount low.

The reality is that most advisory firms run profit margins around 25%, which means that the better way to increase profitability isn't to 'scale' margins by another couple hundred basis points but to grow the business and make the same profit margin on a larger number. In fact. worrying about scale can really be an excuse the advicer leans on to not do the next thing that would help move their business forward. Instead, an advicer's business would be far better served by prioritizing the most immediate problems, and more often than not this involves focusing on how to add more clients to first reach capacity, and then figuring out where to go next. Or put another way, is a major software upgrade really necessary for an advicer to serve their next 10 clients more effectively, or would the advicer's time be better spent re-examining pricing structures, marketing strategies, or service offerings?

The key point is that advicery (😊) firm owners may find it tempting to explore projects that keep them from addressing their most immediate problems. However, the most successful entrepreneurs are those who are able to quickly identify the most pressing issue they face, and solving for whatever may be blocking their progress/ And it's by focusing on doing the next hard thing that will ultimately be the most effective means of moving their practices forward and improving the trajectory of their bottom line!

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Over the past couple of decades, the financial advice industry has seen a tremendous shift as the focus has evolved away from being primarily transaction-based and towards forming long-term service-based relationships with clients. Yet, one of the hurdles advicers have faced along the way is figuring out how to demonstrate the seemingly intangible value of financial planning as a service. The good news is that the profession has been blessed with an ever-expanding supply of credentials and software solutions to give advicers the tools and opportunities to expand their expertise and create deliverables to demonstrate their value. However, since advicers tend to be service-oriented and enjoy helping their clients in as many ways as possible, the challenge is that there can be a tendency to always do more for clients. Which begs the question: Is there a point at which advicers might be doing too much where they should stop pressing so hard to expand their service menu and even cut back on some items on their client service calendar?

In our 139th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore ways for advicers who may feel like they are doing too much for their clients to identify the service offerings they can eliminate, implement strategies for phasing out superfluous services, and think about how their own personal learning journeys fit with their visions for their business. 

One challenge that advicers may face when figuring out what they can remove from their service calendars is that it's nearly impossible to get all clients to agree that a certain offering is unnecessary. As while most clients would be perfectly happy without certain services, all it takes is for 1 or 2 to say they want to keep them for advicers to feel obliged to continue delivering them, even if eliminating them might create better efficiencies within the practice or help the advicer achieve a better work-life balance. 

One workaround advicers can try is to simply stop doing a 'thing' (e.g., quarterly performance reports) and see if anyone notices... and if they do, it's perfectly okay for the intrepid advicer to say it was simply an oversight. Meanwhile, an even more effective (and data-driven 💙) approach would be sending clients a survey asking them to rate the perceived value of all the services they're receiving. From there, the advicer can jettison the lowest-ranking offering, knowing that the odds of a client moving on in response would be relatively low… and even if they were to leave, then maybe the advicer would get the added benefit of realizing that the client wasn't a good fit after all!

Meanwhile, for advicers on their own learning journey, it's important to note that just because they learn something new doesn't mean they have to bring it into their business. Instead, advicers can (and probably should) stop adding to their business as soon as what they're charging aligns with the value they're delivering. And if, along the way, they find something they do want to add, they can always find a lower-value offering for the new thing to replace.

Ultimately, the key point is that, just as clients can experience 'lifestyle creep' as their earnings increase, so too can advicers experience 'service creep' as their businesses grow… especially since many advicers are hard-wired learners and helpers. The key is understanding that it's okay for advicers to stop stacking on additional services even as they continue to expand their knowledge and expertise. And if there's a question around whether or not they're doing enough, advicers can take stock and observe whether they're getting referrals and if their attrition rates are higher than normal. In the end, the odds are that they'll find they are, indeed, enough!

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In the initial stages of their careers, many financial advicers find that, with little revenue coming in and less than a full load of client-facing work to do, they spend the majority of their time on operations and marketing as they try to establish their practice. As a result, an advicer often has the capacity to say "yes" to any opportunity that comes along as they try to keep busy and (hopefully) improve their cash flow. However, as the advicer's practice grows and their calendars start filling up, they can find themselves at a point where they don't have enough time to start doing anything new until they stop-doing something else. Which begs the question: Is there a systematic way for a financial advicer to determine when it makes sense to say "no" so they can say "yes" to something else? 

In our 138th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore the concept of a "Stop-Doing" list (as opposed to a "to-do" list), various ways to figure out what should go on that list, and how advicers can go about executing the list (so they can go on to doing the things that can move their practices and the profession forward).

From a conceptual perspective, saying "yes" to something also means saying "no" to something else. For instance, saying yes to taking on an operational duty might not leave time for going to more networking events. Yet, while saying "no" isn't always easy (especially for many advicers who were attracted to the profession in the first place specifically because they like to help others), one effective way to get more comfortable saying "no" to an item on a "stop-doing" list is to identify and stay focused on a much more meaningful "yes". By having a strong sense of what their ideal practice would look like, advicers may find that it gets easier to filter through those things that impede progress toward their goals. (Not coincidentally, this is also a useful way advicers can help clients stay on track with their financial plan when clients are tempted to overspend or make detrimental changes when markets get scary).

By gaining clarity on a deeper "yes", an advicer can start to identify the best things for them to stop doing. One approach is to determine the dollar value of an hour of their time, and from there, make a list of all the things that they do for their business and identify those tasks that they can outsource at a lower rate. Another method is to conduct a time audit by installing a time-tracking app. As while there might be a menu of small tasks that an advicer might love to take off their plates, the real power of a comprehensive time audit is in the ability to identify large chunks of time that an advicer may be spending on low-value activities (I'm looking at you, TikTok!).

As Parkinson's Law posits, work will expand to the point where it completely fills an advicer's calendar. Ultimately, by conducting a time audit and making a connection with a deeper "yes", advicers can gain a better understanding of how they're spending one of their most precious resources (i.e., their time) and figure out what they should stop doing so they can start doing things that will move their practices forward!

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A career as a financial advicer can be remarkably rewarding, as it offers the opportunity to have a meaningful impact on clients' lives all while making a good living. However, the main hurdle that almost every advicer faces, particularly those who launch a practice from scratch, is that the early years are often a struggle as new advicers try to attract clients, generate revenue, and start to build their businesses. And, even for those advicers who have deliberately identified a particular niche to serve, the need to generate cash flow can sometimes mean onboarding clients that might not ideally fit into their long-term vision. However, many advicers successfully navigating those first few years can find that they've reached a point where they've taken on too much and need to be more selective about using their time and the clients they serve.

In our 137th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the most important factor that determines an advicer's eventual success, issues that can arise from early-stage dynamics in their career, and strategies to implement once they've reached their own professional capacity.

The financial advice industry is notorious for having a high failure rate among new entrants, which makes getting through the first few years crucial. In fact, research shows that the single greatest determinant of an advicer's success is the number of years in the profession, and it's often the case that the only way to stay in the game long enough to get through those difficult early years is to say "yes" to any source of revenue they can generate. For many advicers, though, the challenge isn't always about taking on the 'wrong' clients; instead, it's more often about making unsustainable promises around pricing and relationship length; advicers who have successfully built viable businesses can feel guilty about having to break promises made to early clients who might be better served elsewhere.

Meanwhile, targeting a particular niche is one of the most important decisions an advicer can make to help them focus on serving ideal clients and transition out of those initial difficult years. While newer advicers might chafe at the notion of marketing to a smaller audience, the reality is that, while growth rates for advicers who niche versus those who don't are similar over the first 3 years, over the ensuing years, the niching advicers tend to grow much faster, not because they decided that they wouldn't serve anyone who wasn't their ideal client, but because they put all their marketing 'eggs' in their niche 'basket'!

Figuring out where an advicer's own personal capacity tipping point lies can also be a challenge. Instead of determining where that point is ahead of time, advicers often realize that they've reached their limit only after they've blown past it and are starting to feel uncomfortable. It's at that point where implementing some sort of filtering mechanism can be most helpful, whether it be creating a "stop-doing" list, getting accustomed to saying "no" to tasks that don't benefit their business and wellbeing, or implementing an "automate, delegate, or delete" framework.

Ultimately, while many advicers face the same initial challenges, those who avoid making unrealistic promises early on and focus on serving a niche often transition out of those first few difficult years more easily. The key point is that, by being intentional about the market they serve and the work they do, advicers can put themselves in the best position they can to offer their clients the excellent service they deserve!

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For over a decade, the financial advice industry has been bracing for an "any-minute-now" tsunami of advisor retirements and concomitant sales of financial planning practices. Although that wave has yet to materialize (as many advisors may find that they'd prefer to stay engaged and earn well past the 'traditional' retirement age), the fact remains that, at some point, many aging advisors will have the opportunity to capture the enterprise value that they've spent their careers building. For many firm owners, an internal succession plan can be an attractive strategy to sell their practice, as it provides both continuity of service for clients and opportunities for the next generation of advisors to become firm owners themselves. However, younger advisors don't typically have the same deep pockets as large 'serial acquirer' firms, making affordability a hurdle that both buyer and seller must navigate. Which begs the question, to what extent should an advisory firm owner discount the sale price of their firm for a next-gen successor?

In our 136th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore the extent to which a firm owner might consider selling their practice at below-market value to an internal successor, why both buyer and seller might reconsider the valuation metrics that have been common in the industry, and ways to structure an internal succession deal that can make sense for both parties.

The primary risks when selling an advisory firm are that the deal may fall through, and existing clients may choose to leave the firm. Firm owners can maximize the value from a sale by ensuring that the buyer is a "good fit", which, if they aren't, can have real financial consequences. In the case of an internal successor, some risk is mitigated as the next-gen advisor has likely developed a relationship with clients already and is doing a good job servicing them. And maintaining pre-existing client relationships not only lowers the overall risk of the deal, it also makes the transaction a whole lot smoother. However, while that may be worth a modest discount (say, 5% or so), offering 20%–30% below fair-market value may be unrealistic. In other words, while an owner might have preferences beyond 'just' getting the highest dollar amount possible, there shouldn't be an expectation (or obligation) for the owner to offer a steep discount because the next-gen advisor can't afford it.

On the other hand, there are times when the seller's or buyer's price expectations don't align with the reality of how the firm operates. Traditionally, a standard benchmark for advisory-firm sales has been 2X annual revenue; with many firms running at an average 25%–30% profit margin, this results in 7X–8X earnings valuations. However, firms with margins outside a traditional range might result in unrealistically high earnings multiples for the buyer.

Ultimately, the key point is that advisory firm owners interested in selling their firms to next-gen advisors within their practice don't always have to structure a deal as a high-stakes, all-or-nothing transaction. Instead, the owner can facilitate a gradual sale over multiple years, allowing the buyer to adjust to the logistics of note payments and the firm's cash flows on a much more manageable scale, while the seller can continue to benefit from the ongoing growth in their firm's enterprise value. And while shifting ownership in tranches over time might not feel like the optimal deal for either seller or buyer, the end result is a deal that's fair and beneficial for both sides!

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In its most recent report on U.S. Advisor Metrics, Cerulli Associates predicts that 37.5% (or nearly 110,000) of financial advisors will retire over the next 10 years. And given the industry's ongoing evolution away from being primarily sales-based and towards a more robust profession driven by deeper service models and long-term client/advisor relationships, many in the industry are genuinely concerned that there simply aren't enough new advisors entering the profession to meet the public's need for financial advice. Which, in turn, has prompted some to wonder if firm owners have a specific obligation to their profession to hire and train next-gen talent.

In our 135th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore the question of whether experienced financial planners have a professional obligation to create job opportunities for new advisors, how other professional service industries have traditionally brought in new talent, and how smaller financial planning firms have effectively created programs to hire and train those entering the profession.

At a fundamental level, there are negative connotations around the term "obligation" that, when introduced, are often met with instant resistance by those who appreciate the autonomy to choose their own goals and priorities. Beyond that, however, obligating financial planners to hire and train new advisors could create some unintended (and detrimental) consequences. While many firms are experiencing tremendous growth and have introduced career tracks for new advisors to help with all the additional work, the imposition of being required to create new positions would be felt most by those firms who might not be interested in growing their practice and therefore wouldn't be hiring in the first place. Which would invariably result (after a considerable investment of both the firm owner's time and money) in a less-than-optimal experience for the new advisor and would likely do little to improve the industry's already dismal retention rate.

In other professional industries like accounting and law, the training and development of newly minted CPAs and attorneys are often provided by the largest firms who hire and train in bulk each year, knowing full well that many new hires will move on in just a few years. Accordingly, much of the heavy lifting to meet the demand for new advisors will likely be done by the Schwabs and Vanguards of the world, while professional organizations, like the FPA and CFP Board continue to create systems and structures that make it easier for growing firms to develop training programs and career tracks. On a smaller scale, meanwhile, several firms have implemented residency programs designed to offer meaningful work experience to young planners fresh out of school who are able to take on entry-level work, meet their experience requirements for their CFP certification, and then leave after 2 or 3 years. 

Ultimately, the key point is that there are a number of ways that the financial planning industry can tackle the looming spike in demand for new advisors without imposing an artificial obligation on advisors, which, if not met, would imply a deficiency in professional duty. By leveraging professional organizations, mega-firm training resources, and residency programs, the industry can create pathways for new advisors that address the needs of the broader industry and create a win-win situation for both firm owners and rising financial planners, which offers those who want to be part of the profession an opportunity to have a meaningful impact on their clients' lives and earn a good living in the process!

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For many financial advicers, helping long-time clients identify and progress toward their goals eventually transitions into conversations around the best ways to enjoy the fruits of their labor once they reach them. Yet, for some clients, making the shift into retirement (or any other new stage of their lives) can often be a challenge for myriad reasons, which places the advisor in a unique position to help these clients understand the roadblocks they face and explore ways to overcome these obstacles.

In our 134th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the unique paradox faced by some clients who may not be ready (or willing) to step away from the work they've been doing to realize their financial goals… even after they've attained the goals they've committed to working for in the first place.

While this disconnect might seem to be a logical inconsistency, there are many reasons why clients may find it challenging to switch gears from their current work. One common reason is that they may be perfectly happy with where they're at and actually find the process of realizing their goals more meaningful than reaching the destination itself. As while many clients may look forward to retiring from their careers to spend time doing something else, others enjoy and experience meaningful satisfaction from the contribution and impact that their work may allow them to make.

Alternatively, some clients may be anxious or fearful about transitioning to a new stage due to concerns about their financial situation and whether they truly have the means to stop working. While reviewing the integrity of their financial plan can often help clients resolve their reservations, sometimes there are deeper reasons for a client's reticence to fulfill their goals. In these instances, it may be worthwhile to investigate these reasons, which may even necessitate professional counseling or therapy.

Ultimately, the key point is that while advisors often have implied permission to point out and challenge the apparent inconsistencies in their clients' behavior, keeping their own values separate from their clients' plans and focusing on what really motivates and concerns their clients will help advisors guide their clients past many of the roadblocks they face. And by ensuring that their clients are equipped with (and know how to follow!) well-designed financial plans created specifically with the client's goals and needs in mind, the advisor opens the path for clients to eventually make the transition to enjoy their realized goals, and to identify and obtain the help they may need to get there along the way!

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For many financial advisors, the traditional way of doing business has generally been based on a transaction-based service model involving functional solutions to clients' practical problems. In more recent years, though, advisors have begun to focus on developing stronger and more meaningful relationships, recognizing the advantage of better understanding clients' values and priorities when it comes to solving for their long-term goals. And with this growing realization, many advisors are also recognizing the profound impact they have on their clients' lives beyond solving their everyday financial challenges. Which begs the question: Is there a missed opportunity for advisors to market themselves as providing value that transcends solving just their clients' functional goal-based needs and that addresses their emotional, social, and even aspirational needs as well?

In our 133rd episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore how many of the services provided by financial advisors often align with those outlined in consulting firm Bain & Company's "Elements of Value Pyramid", a 4-tier model representing different levels of inherent value delivered by products and services. Similar to psychologist Abraham Maslow's Hierarchy Of Needs, the Elements of Value codify some of the less quantifiable concepts of what is important and valuable to clients – including those that are emotional, life-changing, and socially impactful – that are often naturally addressed (but not necessarily marketed as part of the services provided by the advisor) through the advisor's planning process, offering a potential framework for advisors to consider when deciding whether to market themselves as providing these 'higher' levels of value.

As a starting point, while clients often approach advisors with basic financial problems, there are often deeper concerns (and goals) associated with their initial requests. And when the advisor is able to gain an understanding of those underlying issues through active listening and engagement using carefully crafted questions, clients often benefit in ways that naturally address their higher-tier needs in the Elements of Value Pyramid. Which further elevates the advisor's value to encompass broader services that the client may not have even realized they wanted or needed in the first place, potentially increasing loyalty and trust within the relationship and even leading to growth of the advisor's business through increased referrals!

Advisors seeking to market these higher-tier services (e.g., providing hope and motivation, reducing anxiety, promoting wellness) may need to find a comfortable balance between explicitly communicating the intent to provide such services, versus relying on the client to recognize the added benefits as an organic by-product of the advisor's standard process. As while serving in a fiduciary capacity to create a comprehensive financial plan in the client's best interest can result in providing solutions that cascade into the emotional, life-changing, and even social-impact tiers of the Elements of Value Pyramid, sometimes without the client ever realizing they had needs in those areas.

Ultimately, while acknowledging a client's emotional and social needs hasn't historically been a large part of traditional financial planning, the concept of financial psychology has been gaining credence as an important aspect of financial planning. And by considering all the ways they can provide value to their clients (including the evaluation of 'higher-level' elements as outlined by Bain's Elements of Value Pyramid), advisors can be confident about marketing themselves as servicing these client needs in whatever capacity works best for them – whether it involves exploring simple questions about a client's desired future life or delving into the deeper levels of how the client perceives life-changing self-actualization or even self-transcendence!

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