Why is it that some financial advisors max out at 100 or 200 clients, yet others continue to grow by thousands? What’s the difference between the growing firms and the ones that plateau early?
The first reason advisors hit a growth ceiling is that they aren’t really interested in growing. A few years back, I met with my physical therapist to discuss some ideas for expanding his practice and improving his quality of life. He was working more than he wanted, he had some patients he didn’t particularly like working with, and others underpaid him as a result of their insurance coverage.
I laid out a plan for him to supercharge his practice by leveraging his skills with a handful of new staffers, implementing additional modern technologies and moving to a new facility in a better location. He clearly understood that if he made these changes, he would be able to serve many more clients and his income would double or triple.
After contemplating the implementation of my suggestions, he instead went 180 degrees in the opposite direction. He scaled back on his existing staff, raised his fees, discontinued taking insurance and blocked off personal breaks throughout the week.
A year later his income was up slightly, and he had more free time. Granted, he knew that he would never double or triple his income, but he was perfectly content with his lifestyle.
This business owner’s path is a common one for many financial advisors. They stop growing because they're happy with the status quo.
The second reason advisors don’t grow is because they dislike the challenge of finding new clients. Prospecting and marketing are not what most advisors want to do. People get into this line of work because it enables them to solve complex problems while improving the lives of others. It's rewarding work and most of our clients are grateful.
Prospecting, on the other hand, can be downright painful. It's so much easier to spend time with existing clients, along with running the office, than it is to invest the time and energy, or face the inevitable rejection that's a part of finding new assets to manage.
The third main reason that advisors reach a plateau is because they can’t manage the added complexity and they aren’t comfortable delegating. As businesses grow, they become more unwieldy. A structure that worked well with two advisors and three support staff won’t be effective when the organization has half a dozen advisors and several support staff.
Although an advisor might have a desire for growth, the more entrenched the business model becomes, the more difficult it is to remake the business structure and modify staff to move to the next level. Many advisors who plateau quickly simply aren't comfortable taking the risk of hiring new people, giving up control by delegating, or even implementing innovative technologies that could help them break their self-imposed glass ceiling.
To be sure, there's plenty to be said for contentment. But if you yearn to grow and haven’t, I’d wager it’s the result of either one of the reasons I’ve cited here, or a combination of those reasons.
Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with $15 billion in AUM.
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