Big Is Beautiful

I can’t help myself. After reading a series of commentaries in the trade press about the simple perfection of tiny practices, I debated whether to take the bait. On one shoulder, Angel Mark was saying, “Leave it alone. They’re just pandering to the masses of solo practitioners who are feeling abused, maligned, and disrespected.” On the other shoulder, there was Devil Mark. “They’re going to die a cold, lonely death if you don’t get them to change,” that voice said. “Stop them before they shrink again.”

Alas, Devil Mark won out, though he was neutered by the Voice of Reason. It whispered, “This is not about right or wrong, despair or hope. This is about the Business of Financial Advice.”

What tugged at me as I listened to the word volley from one shoulder to the other was the struggle many advisors have over whether this is a profession first, or a business. This should not even be a dilemma. Of course it’s a profession first, one in which the client’s interests should always prevail. After all, this is not another Scopes Trial over whether to teach practitioners evolution or “Divine Creation.” We seem to be having a screaming agreement, but we are blotting out the relevant discourse about what problems advisors are trying to solve. The debate over quality versus quantity is a distraction and misses the point.

The financial planning profession emerged from the ashes of a transactional world, moving advice from product-driven to client-driven. The foundation is set and unchanging. But the evolution of the financial advisory business is causing many who remember its birth to experience discomfort with its growth. We are seeing the Modernists against the Traditionalists reincarnated. Is it really legitimate to argue that with leverage one loses his soul? That bigness compromises ethics, values, and commitment to the client? That size removes you from your calling to help others address their financial concerns? That those who chose to build an enterprise beyond themselves are greedy money-grubbers who are despoiling the profession’s image?

From Underdog to Mighty Dog

There is an odd psychology in Western civilization. We admire the underdog, that long-suffering yet rugged individual who against all odds scrapes his way to success. Yet when that underdog reaches the top of the success ladder, we take out our guns and start shooting him in the bum. Think Starbucks and Google as examples. When did they go from awesome to awful?

Now that we have financial planning practices with staff counts in the dozens and revenues in the millions–such as Balasa Dinverno & Folz, Regent Atlantic, Sand Hill Financial Advisors, Sullivan Bruyette Blaney & Speros–can we honestly say that small is better? Or have these once-struggling entrepreneurs shown us the path to how a proper financial advisory firm should be designed and built?

What firms like these long ago recognized is that the financial advisory business has many challenges that will not dissipate just because we will them to. Most of these challenges arise as the industry ages: margin compression, practice continuity, demanding clients, compliance and regulatory pressures, competitive forces, an aging advisory population.

One choice is to go blithely along, ignoring the chaos. Another is to respond strategically to each challenge and create a blueprint for what you regard as the optimal practice model.

This is not an argument about growth for growth’s sake. That’s trite and tiring. This is an argument for growth as a way for professional advisors to construct a business that fulfills their personal definition of success, maintains excellence in client service, minimizes business risk, creates opportunity for staff development and yes, even enables them to achieve a greater financial reward.

Solo or ensemble is a personal choice. But from a business perspective, it might be helpful to evaluate your choice through this filter: Clients; Personal Income and Profits; and Risk Management.