The ‘Great Resignation’ is for advisers, too

Financial planner Mike Powers had been working for a decade, with stints at two different RIAs, when the pandemic hit and he suddenly saw the possibilities of having a more flexible work life.

In May, he struck out on his own, a month after leaving his position as vice president at Virginia-based Verus Financial Partners. The decision was driven by the freedom afforded by the remote work arrangement he had had for 18 months. He was spending his time better, personally and professionally.

“I went from seeing my newborn son and 2½-year-old daughter maybe 30 minutes a day to 2½ hours a day,” Powers said. “I just thought, ‘There’s no way I can go back to my old life.’”

Before deciding to quit, “I waited a while to make sure that feeling didn’t go away,” he said.

Powers is one of many in the financial services business who have participated in the “Great Resignation,” leaving traditional jobs with good pay and benefits for less certain independent ventures with the possibility of more freedom.

In August, about 4.3 million U.S. residents quit their jobs, the highest number on record with the Bureau of Labor Statistics. That figure was up from 4 million the prior month, which itself was remarkably high. Earlier in the pandemic, when the labor market was decimated, quit rates were just over half those figures. Prior to Covid-19, the quit rate in January 2020 was about 3.6 million, according to BLS data analyzed by The New York Times.

It’s too early to know how many of those exits from the labor market were permanent, as some people retired early and others are finding themselves going back to their previous jobs, according to some reports.

BURNOUT IS HIGH

“We’re working through a backlog of resignations,” said Anthony Klotz, an organizational psychologist at Texas A&M University. “Burnout is extremely high right now.”

Klotz, who coined the catchy Great Resignation term, cited several distinct factors leading up to it, including a catch-up in resignations following a period when they were very low.

“Some people just need a break from this burnout,” Klotz said. During the pandemic, many had more of an opportunity than usual to save and are in a comfortable financial position to temporarily take a break, he noted.

Others, especially high-wage earners, had “pandemic epiphanies” and are starting businesses, traveling the world or spending more time with their families, he said. Some are unlikely to go back to traditional employment, and the fact that employers in some cases are offering huge retention bonuses that are being turned down could be an early indication of that, he said.

The era of remote work is affecting people differently. Those who are thriving in it but are now being asked to return to offices are probably more inclined to quit, Klotz said. The same will be the case for people who have been miserable away from their offices and now have no choice but to work remotely.

Early retirement, or at least minimizing work, is something a lot of people are considering. People cut back on some aspects of their lives during the pandemic, and they have realized that reducing expenses can put retirement — albeit a financially simpler one — within reach.

“Everybody started saving money. A lot of what we did, from a social standpoint, got stripped away from us,” Klotz said. “They lived a simpler, cheaper life, and many people are thinking, ‘I’m not going back to my expensive life.’”

FIRSTHAND EXPERIENCE

Leaving employment to hang out a shingle isn’t something to be considered lightly, advisers who have made that decision said. Even though flexibility comes with independence, people who go out on their own should expect to put in more hours than they did before.

It’s also a big financial change, as income can drop substantially, at least at first. And benefits are perhaps the biggest hurdle, with a lack of insurance, 401(k) matches and other perks keeping some prospective entrepreneurs from taking the plunge.

After working at a large brokerage firm for six years, financial adviser Brittany Wolff left her job in March to start her own firm, Wolff Financial.

“I’ve always thought about the option of going out on my own, but Covid made it seem more possible, because of [the ability to] work from home,” Wolff said.

There was also so much uncertainty that stemmed from the pandemic, including work, which made the decision easier, she said. The flexibility and reward of owning a business was a big lure.

Giving up employer-sponsored benefits required careful calculation, as her husband is an independent worker who had also relied on the insurance from her former employer. That, along with working more, was the price of starting her own business.

“If you start a small business, you’re wearing all the hats,” Wolff said. “Being an entrepreneur, your highs are higher and your lows are lower.”

Leland Gross, who recently founded PeaceLink Financial Planning, described a similar experience. Being able to operate “under freer terms” was a deciding factor.

“I had thought about resigning for a while. When the pandemic happened and we went to remote work, things became more restrictive,” Gross said. At the same time, “we were told to do more.”

His job included good compensation and benefits, and “the work-from-home life provided enough freedom for me to begin building what I wanted to do,” he said. “It gave me the freedom to execute on it.”

His wife was a contract worker, so the benefits question weighed heavily in the decision.

They came to the realization that their income was going to drop, but “with the current ACA market subsidies, we were actually able to find insurance that was relatively affordable for us and our child.”

The process has helped inform his discussions with clients who are in the same boat, he said.

“I tell all my clients, ‘Don’t rush to leave your employer,’” Gross said.

People tend to focus on income replacement when starting their own businesses but neglect to fully consider the costs of health insurance, disability insurance and 401(k) contributions, he said.

SEP or Simple 401(k)s are a good alternative, but “you still need to be making a fair amount of income” to allow for contributions, Gross said.

But small business owners also have something that employees don’t, he noted.

“You’re building an asset … that one day you can hopefully sell,” he said. “But that takes risk.”

When adviser Mike Hunsberger this month launched a practice focused on military families, risk was a smaller consideration. He retired from the Air Force after a 25-year career, which left him with a pension and health care, he said.

Prior to retiring, he spent two years planning the transition, taking CFP courses and using resources from the XY Planning Network to prepare his own firm.

“I was looking for flexibility versus being tied down to a full-time, steady job, and I’ve always enjoyed financial planning and investing,” he said.

One adviser whose client base is largely small business owners decided in May to leave a job at Ameriprise after 10 years.

“My fiancé and I are proud members of the Great Resignation and took different paths,” Mike Turi, founder of Upbeat Wealth, said in an email. Two months after he started his own business, his fiancé “left the biggest New Orleans advertising firm to take a remote job with a massive global firm.”

Long or odd hours can be expected, he said. “This can be lonely, and worst of all, you may not receive any sort of recognition ‘for staying late at the office,’ if working remotely,” Turi said.

Keeping a timesheet can help, he said. “Not only does this keep you accountable for how you are spending your time, but it’s also extremely valuable when negotiating your next salary.”

POWER TO THE WORKERS

“As a financial planner, the Great Resignation has me rethinking lots of the retirement assumptions I’ve made for my clients,” said Michael Jones, who recently founded his own firm, Boulevard Money.

“A client of mine who recently turned 60 is about to leave the job she’s had as an editor for 35 years, because she is sure she can replace her income through freelancing until her full retirement age at 67,” Jones said in an email. “There’s no way she would have taken that risk years ago.”

Advisers who are leaving jobs to start their own practices say they know that feeling well.

Powers, who recently founded Manuka Financial, works with retirees but is focusing on clients who want to stop working in the traditional sense before 65.

“This was definitely not the best financial decision I’ve made, in the short term,” Powers said. “I’ve been fortunate — it’s been really busy.”

His daily commute is now a walk downstairs to his basement office, a welcome change from pre-Covid times that has freed up time for him to spend with his family, he said.

“I’m having the time of my life.”