One of the rewarding aspects of my position as Director of Strategic Partnerships is the opportunity to share some of the best practices, as well as warn about the pitfalls I’ve learned from financial planners around the country. There are some common threads to their concerns and the following articles that recently came across my desk touch on them:
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- “Solving the Burnout Crisis: A Report on Time Management and Productivity,” by Bob Veres in Inside Information
- “Doing More with Less,” by FPA Research & Practice Institute
- “How to Avoid the Coming Crunch in Advisor Compensation,” by Dan Richards in Advisor Perspectives
What these three articles communicate is that (1) most advisors lack scale, (2) they overwork themselves and face the prospect of severe “burnout” trying to do everything themselves, and (3) the only way to get “off the wheel” is to have the courage to change their mindset. The third article even goes so far as to suggest that (4) advisors cannot solve these issues on their own and therefore must sell to a large RIA or become irrelevant in the coming consolidation era.
Lack of Scale. Over-worked. Burnout Candidates – let’s look at the evidence:
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- Last year, readers of the Inside Information newsletter were asked if they were suffering from symptoms of burnout. In a recent special report, Veres shared responses from over 200 advisors who believe burnout is a real issue. Comments included: feeling like a slave to the business, growing levels of stress and anxiety, and that the business is no longer fun.
- We receive the same feedback in our own conversations with advisors all the time.
- The FPA Research & Practice Institute survey to measure the breadth of this issue discovered that only 10% of advisors feel like they are in control of their businesses. They learned that 74% of the 750 advisors participating in the survey work more than 40 hours per week and they still are not spending the time they feel they should on meeting with clients and new business development.
While I couldn’t agree more with those observations, based on the hundreds of conversations I have with advisors each year, I couldn’t DISAGREE more with the some of the conclusions drawn by Dan Richards, namely that independent advisors must sell to a larger firm or become irrelevant. Dan compares financial advisors to small retailers before Walmart or to diners before McDonalds came along, because they do not have the scale to compete. Scale is important, but there are ways to enjoy the benefits of scale without capitulating and selling out.
We believe one of the most effective solutions is outsourcing. In years past, the only path to achieving scale was to build it yourself or join a larger firm. This required a substantial investment of time, energy and capital. Many of today’s largest RIA firms did exactly that. Now they have scale and are beginning to leverage it in competition with smaller firms (see What Do Economies of Scale Look Like to Your Clients?). Most of those firms made the investment because there was no alternative, but things have changed. Today there is a robust ecosystem of outsourcing firms in business specifically to provide scale and support smaller, emerging firms. Independent RIAs no longer need to sell to a larger firms or take vows of poverty while they plow back all the profits.
And this is what makes my new position so much fun. At Pinnacle Advisor Solutions, I get to help advisors maintain their independence, obtain scale and provide the services that keep them competitive. One of the challenges of being an entrepreneur is living with the unknowns. We help remove some of those unknowns by forming strategic partnerships with smaller firms, not by being a predator who takes freedom and control away from them. We help advisors find the personal and professional success they seek and help them do it on their own terms.
