Kitces and Carl: Setting A Personal Growth Goal When You Don’t Need More Revenue For Success

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Kitces and Carl Podcast for Financial Advisors

Although there have been some incremental shifts in recent years, the financial advice industry has traditionally (and remains) geared towards attracting individuals who thrive in a career where their earnings have the potential to increase depending on how hard they work. Viewed through the Maximizer/Satisficer lens that Barry Schwartz introduced in his book, “The Paradox of Choice” (where Maximizers are those who continually strive for more, while Satisficers are those who are happy with having ‘just enough’), the advice industry is built to attract, reward, and celebrate those who tend to land on the Maximizer side of the equation. Yet, recent Kitces Research on advisor wellbeing indicates that, while an advisor’s self-perceived wellbeing steadily improves as their take-home pay increases (i.e. money really does buy happiness), the rising revenues only contribute to an advisor’s wellbeing up to a certain point (about $1.5m), and once firm revenue grows beyond that, there’s a direct inverse correlation between advisor wellbeing and revenue. And for financial advisors who want to avoid that sharp decline in wellbeing and have reached a point where their business is doing well enough that they don’t feel the need to press as hard to grow, the question arises, how can they shift their focus away from growth… and towards something else?

In our 67th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can think about optimizing their own practices for something other than revenue, why figuring out how to manage towards something other than money may contribute even more to happiness, and what advisors can do after having gone through the optimization process.

As a starting point, the first shift that an advisor can make to move away from an aggressive growth mindset is to start thinking about ways to increase their take-home pay rather ‘just’ than their revenue. Some strategies include identifying the practice’s most profitable clients, ‘transitioning’ the other (less) profitable clients by referring them out to an advisor that can do a better job of serving them, and then trying to replicate those ideal clients. Meanwhile, advisors who are satisfied with their level of income and how their practice is set up can begin to optimize for whatever it is that aligns with their own interests and goals, such as, number of days off per year, hours spent with their kids, or number of tennis matches played, to name just a few!

From there, advisors can then turn their attention towards what to do once they’ve optimized for whatever (new non-revenue) metric they want to manage to. And it’s at that point that advisors often need the most help. Because, as is often the case with our own clients, few advisors have taken the time to really think about what we would ideally like our lives to look like, and as a result, could also benefit from going through their own life planning process, such as those offered by George Kinder or Money Quotient. For many advisors, setting audacious stretch personal goals for themselves can provide a path towards getting off the growth-for-growth’s-sake cycle and help them focus their incremental time and energy in a completely different (and more positive) direction.

Ultimately, the key point is that there are specific steps advisors can take to improve their own wellbeing once they get to a point where they don’t have to work as hard to grow their business and can start reaping some of the rewards for all the hard work they put in order to get to that place. And while not all advisors have reached that point (yet), the takeaway remains that simply going through the exercise of thinking about what their goals will be, once they’re making enough in their business that they don’t need to keep growing revenue just for growth’s sake, can help ensure that they are building their business with intent and are focusing on the long-term goals that really mean the most!

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MICHAEL KITCES BIO

Michael Kitces is Head of Planning Strategy at Buckingham Wealth Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors.

In addition, he is a co-founder of the XY Planning NetworkAdvicePayfpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

 

 

 

CARL RICHARDS BIO

Carl Richards is a Certified Financial Planner™ and creator of the Sketch Guy column, appearing weekly in the New York Times since 2010.

Carl has also been featured on Marketplace Money, Oprah.com, and Forbes.com. In addition, Carl has become a frequent keynote speaker at financial planning conferences and visual learning events around the world.

Through his simple sketches, Carl makes complex financial concepts easy to understand. His sketches also serve as the foundation for his two books, The One-Page Financial Plan: A Simple Way to Be Smart About Your Money and The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money (Portfolio/Penguin).

 

 

 

This podcast first appeared on the Nerd’s Eye View at Kitces.com at  https://www.kitces.com/blog/wellbeing-take-home-pay-optimize-goals-maximizer/  and has been reprinted here with permission.

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