Regardless of the size of a financial advisory firm, clients are a constant necessity to sustain a profitable business. And while some form of advertising is how firms have traditionally attracted clients, some advisors have asked if not actively marketing themselves can be a viable option, where new clients find their way to the advisor through a referral network who vouches for the good service they provide. Notably, while some businesses have achieved phenomenal success with little to no marketing efforts, is it realistic for financial advisors to anticipate success without promoting themselves, but by simply providing exceptional work for their clients?

In our 121st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the importance for advisors to advertise their expertise, and whether focusing on providing exceptional work can be enough to attract and acquire clients to sustain a healthy and remunerative business.

As a starting point, there are unconventional marketing principles that can help advisors who do not want to engage in traditional marketing campaigns to effectively attract and acquire clients. For example, by getting very specific about the financial issues they can solve – whether they involve optimizing tax loss harvesting opportunities or helping professionals negotiate better salary and compensation agreements – advisors can establish credibility and build the trust that is essential in establishing a steady stream of referrals. Because if clients know from the start that an advisor has the knowledge and expertise to solve their specific financial problems, they will be more likely to engage with that advisor… and then to let others know about their positive experience.

Importantly, whether advisors choose to advertise themselves by using traditional marketing strategies or by focusing on more unconventional approaches, being very clear on how they can solve specific financial issues for their clients and delivering exceptional service to their ideal client can help them build a reputation that naturally attracts clients to engage with their services. And as advisors build a reputation based on their expertise, their visibility – and their chances of creating a robust stream of word-of-mouth referrals – will also grow.

Ultimately, advisors who can provide exceptional service to their clients don't necessarily need to promote themselves through commonly used avenues of advertising (e.g., creating social media content or using SEO tactics), because satisfied clients can be a powerful source of referrals, especially when their advisor has expertise in solving a very specific set of financial problems. And by projecting this message, an advisor's referral network can help the advisor maintain a profitable business without the advisor needing to spend any advertising dollars – all while attracting precisely the type of clients the advisor enjoys serving!

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A recent McKinsey report surveying growth in the wealth management industry predicted that the struggles of small RIA firms would increase as larger firms continue to grow and overshadow the industry... again. Although the messaging that smaller RIAs must scale to survive has been offered many times before over the past few decades, many smaller lifestyle firms and solo RIA practices have thrived in their preference to stay small. Yet, despite that many smaller firms have enjoyed success, scaling the business remain to be challenging prospects for those aiming to grow.

In our 120th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges that small to mid-size RIAs face when trying to scale and grow and how the pressures of competing with larger firms can affect those endeavors.

Even when smaller RIAs didn’t have access to many of the resources that help advisory firms operate and grow decades ago, they were still successful because many of them learned how to leverage their relevance by intimately and impactfully understanding and addressing their clients' unique financial challenges. And for many firms, this specificity and relevance has been amplified by homing in on a particular client niche, allowing them to focus on very specific types of problems that their clients face. Yet, while cultivating impactful relationships with clients has always been a powerful means of maintaining a firm's relevance and success, many business owners are challenged with growing their firm, even with the boon of abundant technology and platform solutions available today that make it easier than ever before for small firms and solo advisors to be successful.

As while a business grows, there are more employees, clients, and operational logistics that come with growth that the firm must manage. And as these elements of growing a firm increase, problems also increase, and more solutions are inevitably needed to solve for those problems. Some firm owners believe the solution to address these problems is to add resources and grow further until they reach some attainable point they imagine where all their problems will become manageable and their growth can be capped, allowing them finally to maintain their firm at a comfortable equilibrium level. The reality is, though, that as a firm continues to grow, new problems will always arise and it is very rare for a firm to address with growth, to the extent that at some point they no longer need to grow! Which suggests that identifying a firm's expectations for success is what's most critical, as a firm who wants to stay small needs to define what success means to them in terms other than growth – whether that means they earn more revenue per client, develop a more focused niche, or enjoy a shorter workweek.

Ultimately, the key point is that despite surveys that may foreshadow the demise of the small lifestyle practice, small (and mid-size) RIAs are not going away anytime soon. Small firms who want to stay small can increase their success by finding more impactful and/or efficient ways to remain relevant to their clientele and provide meaningful financial planning services. And smaller firms who truly want to grow have more options than ever before that will help them succeed – from choosing the right platform, merging their business, or acquiring other businesses to help them grow and scale more efficiently and effectively. In the end, understanding which path to success a firm owner wants to pursue can help them decide whether scaling for growth is really the solution that will give them the best options for solving the issues they face today, or whether they need to remove themselves from the constant cycle of growth objectives and identify the real objectives that represent a successful future for the firm!

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For many next-gen financial advisors who start with or move their careers to an established firm, eventually earning an equity stake in that firm can be an exciting prospect and is often a major career goal that many advisors aspire to achieve. However, when these aspirations are delayed or blocked by senior advisory firm partners who choose to delay their retirement plans, it can leave younger advisors frustrated and in a place of uncertainty about their futures with their firm.

In our 119th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how frank conversations between younger advisors and firm owners about succession plans and career-track expectations can mitigate the repercussions of retiring advisors who may reconsider their original plans to retire or scale back from firm activities.

As a starting point, it's important for younger advisors to acknowledge that for many long-time financial advisors, their professional success and lifelong career experiences have become an integral part of their personal identity. Whereas many senior advisors can spend decades developing client relationships and honing their craft, it can be challenging for them to transition to a lifestyle where their main focus is no longer on working with their clients. At the same time, it is also important for firm owners to understand the frustration a rising financial advisor may experience when their own goals and career aspirations are sidetracked by unexpected delays in the retirement plans of senior advisors and partners.

However, having candid discussions about the firm's succession plans and how they mesh with newer advisors' career goals can be the best way for owners, retiring advisors, and successors to understand each other's perspectives. Such discussions can help ensure that the firm's succession plans best support all interested parties, whether that means adhering to the current plan or amending the plan with compromises, which could entail offers of partial equity or decision-making control to succeeding advisors or gradually scaling back the engagement level in firm activities by senior advisors. And if a mutually acceptable plan is not agreed upon, having direct, upfront conversations about the process will better position the succeeding advisor to determine whether to part ways and pursue a new path on their own or with a different firm.

Ultimately, while firm owners and next-gen advisors may have very different opinions on what succession means to them and the timelines that succession plans may follow, allowing all interested parties to clearly communicate their priorities and expectations can help the firm customize a plan that can support everyone's goals, or at least maintain clear communication to ensure that potential successors will be able to decide if the firm's goals align with their own or, if they don't, whether it would make more sense for them to part ways. Because when a workable succession plan is created, it not only helps the firm owner ease into retirement when they are ready to do so, but it also gives the succeeding advisor the opportunity to set realistic expectations around fulfilling their own career goals – potentially furthering the firm's legacy for years to come!

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Financial advisors who have established and successfully built up their advisory firms over several years can often go through many stages of firm development, requiring them to hire staff and additional advisors to manage their growing clientele. When a firm becomes large enough, though, the firm owner may be compelled to consider stepping away from their long-standing work as a client-facing financial advisor into a more pronounced business leadership role to manage the growing business. Yet, for owners who have invested years into developing their skills as financial advisors working directly with clients, considering a new professional identity in a non-advisory leadership position with little client interaction can be challenging.

In our 118th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisory firm owners can manage the transition from a client-facing role into a firm leadership position and how they can come to terms with their new career identity in the process.

While there are many business resources available to help advisors address the tactical perspective of making a transition into a leadership role, a fundamental challenge that advisors must also negotiate is the identity shift that tends to come with leaving a long-time position working with clients, as many wonder if they would still be considered a financial advisor if their primary function is to oversee other advisors serving their clients… and they no longer work with those clients directly themselves?

Even though it can be difficult for firm owners to imagine who they will become in their new role, the transition can become easier by understanding and defining what their new responsibilities will entail and acknowledging that, even though they may no longer be working directly with clients, they will still have a substantial impact on how their clients are served (as becoming CEO or president offers firm owners the opportunity to shape how clients are served by managing those who will be serving clients). Additionally, having a clear and detailed vision of what their new role involves (perhaps created with the support of other advisors who have navigated similar trajectories) will help advisory firm owners reconcile the change in their professional identity by connecting how their current responsibilities relate to, and perhaps will even support their new role.

Ultimately the key point is that transitioning away from a client-centric role that a firm owner has dedicated years to develop can be a challenging process, but investing time to visualize the impact and change the firm owner will make (including the responsibility of charging their staff to uphold a standard of excellent client service) can help them appreciate the new opportunities – and accept the new identity – that will come with the new role!

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While many financial advisory firm owners have long-term goals that involve building a career based in a profitable and sustainable advisory firm, there are some firm owners who develop their firm as a means to explore and pursue other business endeavors. These firm owners may opt to take a backseat role in running the firm, yet must still entrust client relationships and firm management to their advisors and support team. And while it is already challenging for firm owners to develop an advisory business that is both profitable and sustainable, it can be even more challenging to do so when the firm owner is not actively engaged in operating the firm.

In our 117th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards consider how advisory firm owners might approach building internal structures in their firm so that they can eventually step away from an active role and rely on others to sustain the firm's viability.

For business owners who choose to build a financial advisory firm without the intention of assuming a central role in its daily management and development activities, establishing long-term values and organic growth strategies with a central focus on client retention and satisfaction is one way to ensure that the business will remain viable. And without the owner taking an active role in managing client relationships or creating business development opportunities themselves, it is important that other advisors and/or support staff are capable of and motivated to prioritize client service and efficient operation of the firm. Which means that a key part of the process is finding and retaining employees with a strong mix of client-centric service and business development abilities, who have the right set of strengths and skills that will allow them to uphold the firm’s values.

At the same time, giving employees the opportunity to advance and grow with the firm over the long term (e.g., through training and development opportunities and even potential equity ownership), will increase the probability that the firm will sustain and grow over time. Because with no process in place to ensure team members feel valued and have a growing role in the company (either through responsibility, compensation, or both), cultivating an environment for a successful business that supports organic growth would be very challenging, if even possible at all.

Ultimately, the key point is that building a sustainable advisory firm for an owner who chooses not to play a key role in the firm's operation depends heavily on finding the right resources to maintain business development and client service in ways that align with the firm owner's goals, while providing meaningful career development opportunities for team members to support the health and profitability of the firm. And by encouraging a client-centric culture and providing advancement opportunities for employees, advisory firms can create an environment where both clients and team members thrive – and where owners have the opportunity to pursue other endeavors, with the confidence that their advisory firm is on track for long-term success!

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Establishing successful client relationships as a financial advisor relies on good communication skills not just to present information persuasively and with confidence, but also to establish client rapport that allows meaningful and engaging relationships to be built. For many who are new to the financial planning profession and who have no experience working with clients, participating in client meetings can trigger feelings of anxiety, especially for those who share the common fear of public speaking.

In our 116th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss different ways that new advisors can deal with their anxiety over working with clients – depending on the source of their anxiety, most may find that increasing their competence or building their confidence can be good ways to address their discomfort.

Given the tremendous breadth of knowledge that financial planning encompasses, many new advisors often fall prey to ‘imposter syndrome’ and build their confidence by gaining more subject matter expertise. For some, this means acquiring more credentials, while for others, it can mean devoting more time reading books and articles, listening to podcasts, and/or attending workshops or seminars. While gaining more subject matter expertise can help advisors develop their confidence in providing good advice to clients, some advisors may struggle more with the anxiety that comes with presenting themselves and speaking in front of others. One of the most effective ways to deal with this challenge is to practice public speaking, whether by engaging in more client meetings, preparing a script to rehearse out loud, or roleplaying potential client scenarios with a significant other, friend, colleague, or mentor playing the part of the client.

Though client-facing roles are a central part of financial planning, there are other roles for those seeking successful, satisfying careers in the profession that do not require working directly with clients. Newer financial planners may find it more appealing to take on a more behind-the-scenes role by focusing solely on plan preparation as a paraplanner, while others might find it more enjoyable to work in parts of the business indirectly involved in financial planning such as operations or marketing. More senior advisors might find opportunities for non-client-facing roles (usually in larger, more established firms) as a research or investment analyst, or as a subject-matter expert in an area that a firm specializes in (or may want to grow into).

The key point is that by reflecting on the root cause of their anxiety, advisors may find it easier to overcome their discomfort with client work by building up their subject matter expertise, preparing scripts to help them talk through commonly recurring (or challenging) meeting points, or roleplaying scenarios with friends or colleagues. And for advisors who don’t feel energized by working directly with clients, there are still opportunities for them to consider that don’t require much (if any) client interaction. Because ultimately, by improving their weak points, leveraging their areas of strength, and understanding the type of work that is most satisfying for them, advisors can identify the career path that will lead to the most happiness – and then decide what they need to do to create the most success for themselves on that chosen path!

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