Within the wealth management industry, career trajectories can often resemble a winding road rather than a straight path.
But amidst the clamor for constant growth and expansion, it's crucial to pause and reflect on what truly matters to you. Whether it's striving for exponential growth or opting for a more steady, sustainable model, the key lies in charting a course that resonates with your values and ambitions.
Every advisor should know there are many nuanced considerations of career progression – legacy building and finding fulfillment beyond the conventional pursuit of growth. So, ask yourself what goals you would like to achieve in your career. What's important to you?
Industry consultant J.D. Bruce, who is the former president of Abacus Wealth Partners, addressed this topic in a recent Action! article about navigating the life cycle of a financial advisor. I had an opportunity to continue the insightful conversation.
Bruce, drawing from his extensive experience in financial planning, emphasizes the necessity of understanding one's endgame early on and the importance of aligning personal goals with professional aspirations. Click on the video to watch the entire interview.
Transcript:
Suleman Din: What would you say is the importance of really understanding where you are in your career and how to make sure that you're cycling forward if you will?
J.D. Bruce: There are lots of reasons that people might want to stay where they are. And they say, hey, I've reached a point where I make enough money, and I'm good. They don't need to grow necessarily. This hyper-focus on growth is great, but it isn't for everyone. Some people have different reasons for either starting their firm or working in a firm.
When I talk to firm owners, I'm like, okay, what's your end game? How big do you want to get? When do you want to stop? And let's make sure that any strategic plans you have around growth match up with your own personal goals. Otherwise, you're one of those financial planning clients that says, hey, I don't know what I want. And your advisor says, well, let's just make you more money. And that's not a really satisfying transaction now, is it?
Din: It's not just about the material. I guess it's more – I hate to use the word – but there has to be a holistic sense of what it is that you want to achieve and where you want to go.
Bruce: Well, you need to be able to navigate. Imagine you're planning a vacation with all your friends and you're like, let's go on vacation together, and you say, yeah, that sounds good. It's like, where do you want to go? Well, I don't know, we'll just figure it out as we go.
Well, that doesn't lead to a satisfying vacation, right? And the same way that if you're talking to your team as a firm owner, and you're telling everyone, hey, we want to grow, and I don't really know what it's going to look like, but it'll be great when we get there. That's not very motivating. You have to have that guiding star that you can follow. Now, the path isn't going to look like anything that you've planned for. It's going to be different than what you expected. And that's okay, as long as you're still moving toward whatever it is that you're moving toward.
Decide in advance, this is what we're moving toward. Are you going to sell your firm? Are you going to keep it forever until you retire? Are you going to make sure that your staff is able to buy your firm from you at some point? At some point, anyone who owns a firm won't own it at some point, right? That's just the nature of life itself. Someone will own your shares eventually. If you don't know who that is well in advance, it's probably going to be a worse outcome for everyone involved.
Din: Is there a specific time that you would say that folks should think about the culture of the firm that they're building, the legacy that they're creating. If you're still in that business-building phase, or does that come later after you hit certain career milestones or business accomplishments that you've wanted to attain?
Bruce: Well, as your firm grows, there are kind of natural stopping points. It's very difficult to stop growing if you get bigger than about four to five million in revenue. At that point, your firm is going to keep growing and there's not much you can do to stop it other than tank the firm.
It breaks at that point if you stop growing just because of the size you are, the number of people who want a good career path that you've had to hire. Stopping growth actually just creates a lot of problems for firms over that size.
Before that size though, if someone wants to stop at around $4 million or so in revenue and just have a stable state firm that kicks off a lot of cash, man, those are very lucrative firms. It's one of my suggested end games for firm owners is that, oh, hey, you want to get to $4 million and stop and make a couple million a year for your owners? This is a pretty easy path, actually, and it's very lucrative, probably one of the most lucrative ways from a cashflow perspective.
You could stop at a million and a half of revenue pretty comfortably and just hang out and have a good practice and not have to stress too much about reinvestment and kick off some good cash for yourself. It's only when you want to grow past that kind of $4 to $8 million that you have to suddenly plan for it all. You don't have to plan to stop or you have to plan to grow and if you plan for nothing, then you get nothing.
Din: I can totally see the logic to what you're suggesting: make an attainable goal, achieve it, and then sustain it, which I think a lot of people would say is actually a really good plan. It seems counter to a lot of the messaging that I'm hearing lately about organic growth, organic growth, growth, growth, growth, growth, growth. What's happening here? Where's that concern cutting out of? Is it people who think there's never enough, you have to keep pushing, you have to keep growing? Or is it just simply, if I don't keep growing assets and at some point, the clients I have are going to deaccumulate, and then I won't have anything to back it up, and my firm evaporates?
Bruce: Well, I think ultimately that's an excellent point and it's the danger of taking general advice and not specific advice to you. It's like, you know, watching, you know, some money show and taking that advice as your personal financial plan.
It's not for you. It's for, is it for a lot of people? Absolutely. There are a lot of people that need to focus on organic growth. These are people who've grown past $4 million in revenue and they're sitting here trying to create an enterprise firm and they're working to create high valuations and they ultimately want to sell it to someone else or they want to sell it internally or they just want to keep it and have it be a good cashflow engine and a growth engine over time.
That's a totally appropriate way to have a firm and to grow it and focus on organic growth and focus on inorganic growth and focus on the balance between the two so that they feed each other. That's a totally valid strategy, but it isn't for everyone.
Some people don't want that. I was once talking to a firm owner and I said, what's going on with you? And this is someone I'd mentored for years. And she said, I don't know, I just can't get my firm to grow, it's really disheartening. I don't know what's wrong. I can't figure out what the problem is. I said, well, what do you want? Why did you start your firm? She said I wanted to have a good income so that I could work part-time and pick my kids up from school while still having a fulfilling career and not being unavailable for my family. And I said, well, how's your life look right now? Does it kind of look like that goal or where are you? She's like, oh no, we're making enough money and I'm able to pick up my kids. And she described the fact that she had met all her goals. And I said, you know what, you don't need to grow. You achieved the goal that you set out to achieve. And she burst into tears because no one had ever told her that it was okay to just stay still.
And that's, it's a really important consideration because you have people who've started these firms for specific reasons. And if they start taking advice that they hear at conferences or in the books or on the podcasts or on whatever, they suddenly take other people's goals and internalize them as if they're their own, even though they're not. And then they become unhappy and then they hate their firm. And then they just wanna get out because that's not what they started to do in the first place. So it's really important that people, especially the firm owners, that they do what they set out to do and remember what that is and move toward that goal and don't let other people convince them that somehow their goal is wrong and that their values are wrong. That doesn't work. That just makes everyone unhappy.
Din: If you're not growing and capturing that next-gen, gen-two, gen-three kind of client, you're gonna be dead in the water. So even that kind of like happy medium is the window, I guess, what people are suggesting is closing on just keeping that book of business and just sailing with that. But the other thing, I guess, is to consider too why people might feel and compelled to do so. Let me just throw it out there is that we've seen consolidation. And so there is a shift in the market to those firms that acquire enough, get big enough, have the assets to be able to scale and provide that competitive edge to their advisor firm, whether it's through technology, whether it's marketing, and so on and so forth. So it's harder to be independent when you're up against the Karstens of the world, if you will.
Bruce: Sure. I mean, that's true, but look, we're a relatively new range of professional services, right? Lawyers have been around for hundreds of years, right? Accountants have been around for hundreds of years. Financial planners have been around for what? Like 50, maybe, at most. And even then, what we look like now isn't what we looked like even 20 years ago; it's a very different industry.
So we have some rapid change and some rapid maturing that is happening here for us. When I look at the law industry, I see a bunch of massive international law firms that control all the big cases and all the big clients, and that's fine because I also look around and I see plenty of just solo lawyers working their magic for small cases, and that's all great.
And the solo lawyers who have them and maybe an associate and a legal assistant and paralegally of these four-person firms, they're thriving. They're doing great because those people don't want to go work at some big international firm and wear thousand-dollar suits every day. They saw the show Suits, they don't want that for their life. And I feel like when I watched that show Suits, I went, wow, I don't want that for my life, I hope financial planning doesn't turn into that. It’s a different experience working in a firm like that.
I worked at Price Waterhouse. I know what that's like doing professional services on a massive international scale. It's a thing. And I've worked at small firms and that's a thing too. And I'll find the thing that matches my own personal goals. And that's the important thing to remember is that even inside a firm, the advisors have different goals. You look in your firm and you may have some people and I've had these people before where you say, hey, let's talk about the future of your career path and they're like, I'm good. I've kind of reached the level that I want to be. I just want to kind of have the number of clients I have and make the level of money I'm making and I don't have any desire to have anything more than I have today.
There's a degree to which that's a little scary to a firm owner. You're like, how do I motivate you? How do I do anything with you? I don't understand the lack of ambition. I don't know what that means, right? And I don't know how to serve you well. But if we really want to grow and understand and be able to capture talent, we need to make room for people like that.
There's a degree to which I always have conflicting advice for firm owners and financial planners who work in firms. I tell firm owners not to require anyone to sell. In order to capture talent, you can't be someone who insists that their advisors bring on a certain amount of business. At the same time, I tell any advisor that I talk to, you need to learn to sell. If you're an advisor and you don't know how to sell, it will limit your career, just period. People who do business development will ultimately get paid more and financially do better because that's a huge value activity.
But if firms are requiring it of everyone, then it's going to break and they're going to lose people who are afraid of selling, even though they shouldn't be because it's super, super easy in professional services. Way easier to sell as an advisor than it is it like a tech company or something or you know selling widgets or whatever. It's a very different experience, and it's way easier because you're just selling your own trust, so it's great to learn how to do that. It's not hard, right?
So you have this conflicting advice for firms and advisors, but both of them work together because it means the advisors can bring on talent and make space for what people are talented in and are willing to do in that moment. Because just because someone isn't focused on sales today doesn't mean that they won't be tomorrow. Sometimes it's just cultivating them until they have a base level of comfort in their own body around talking to people and convincing people, persuading, just understanding people's values, knowing the questions to ask, knowing the answers to give, knowing when to give answers and when not to.
These are all things you kind of pick up over time that make you a better salesperson, but they also make you a better advisor. Because the same skills that make you a good advisor make you a good salesperson
Din: I think we've touched on it, but what's one key takeaway or step that you would suggest to someone who's at that kind of like near exit point of their career and they're thinking about legacy, and you're thinking about leaving a company that can successfully transition to someone else's ownership. What are one or two things that you think are really important for that individual to keep in mind?
Bruce: Snarkly, the first answer I have is to go back in time ten years and make sure you've been moving toward this the whole time. So, really like, if you're talking about people exiting in their mid-60s, I'm saying when you're 50, you need to make sure you have this plan figured out so you have 10 or 15 years to craft your firm so that it will accomplish your own endgame. And that endgame might be selling to private equity or a roll-up or someone external, right?
It might be merging into another firm and then taking five years to slowly gently exit at that point. It might be don't sell to anyone, just hire a manager who can keep managing your firm, give them some level of ownership, and then keep getting distributions for the next however many years after you slowed down and come in maybe half a day a week just to check on your investment.
Now, if you do that, that kind of hiring a manager, your firm will shrink over time. If you've stopped growing it, you'll lose some clients, but your cash flow will continue to maintain a reasonable distribution for a long time, even in the declining growth scenario. You can still make a good amount of money in that situation as long as you're doing good service to your clients and your firm is shrinking and your income is going down over time, but it doesn't really matter because you've made so much cash in your career that it's all kind of extra anyway. Then that's fine. The problem is that if you're not thinking about it well in advance about what you want and you're driving your firm toward a big organic growth engine, but in reality that's not what you want because you don't want to manage that. It's that disconnect that is the problem. Any firm can be successful for anyone's goals. That's just a matter of execution and you either do it or you don't.
If you're sitting here at the end of your career looking ahead and saying, okay, what do I want to do? You're going to probably try and sell it internally, but those people don't have the money to afford it because you didn't spend the last 15 years making those people rich enough to buy your firm from you. You need to make them like partners and have sold it off along the way as opposed to all at the end. If you wait till the end, well, now you're looking at hiring an M &A consultant and they're going to go out there and find you a good exit partner so that you can have liquidity from your firm.
If you don't want to keep it and just let it run into the ground a little bit, if you haven't already made the plans to sell it internally or to keep it going with a second-generation leader who's then going to keep it running and ultimately buy you out, those things take time to execute.
So if you don't do that, then now you're looking at hiring one of the good high-priced M&A consultants who's going to take a chunk of your sales price and that's okay. There's nothing wrong with that at all. There's no judgment implied in that at all. That's a great way out. You've built an asset and then you sell that asset to someone else who can polish it up and create some value out of it for themselves and you. And that's a great outcome for a lot of people.
But if you're sitting there at 60 and you want to retire in five years and you own 80% of your firm, internal sales is going to be really, really challenging. Or at least you're going to have to lower it down. the price so much and carry so much of the purchase price yourself, that you might as well just keep owning it. .
Din: Or at least what you suggested, take that backseat, managing, I guess, kind of like what we saw in Suits, right? The partner that would stroll in often, like, okay, we're going to sell to XYZ, and so on and so forth.
Bruce: Exactly. Where's my money? I just want my check. I don't really care. Again, that's fine, too. These are all valid business transfer choices or ownership choices. There's nothing wrong. Now, look, if you don't have a high organic growth rate, you're going to have higher employee turnover because advisors don't have the opportunity at your firm that they would have at another firm.
It's just one of the costs of choosing that path. If you have high organic growth, you're going to have a lot of hiring, right? That's the cost of doing business in that way, right? It's all fine. It's just a matter of understanding the path you're on and making sure that you're well-equipped to handle the obstacles in your path.