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!
