I got a call the other day from an owner-advisor who wanted me to work with him.
He told me a story about his mother (now deceased) who was a doctor and had selflessly helped many people during her life, including taking in foster children over the years. She’d had little concern for her own happiness, with one exception: She’d bought a beach house where she’d spend time whenever she could. But she’d had to sell it to make ends meet after her retirement.
At this point in his story, the advisor started choke up and told me: “I see this happening to me. I just don’t have enough time to focus on my personal finances, and they’re not in very good order.”
Now, I’m not a financial advisor (although my degree is in financial planning), but I talked with him about the relationship between his advisory business and his personal finances.
It turned out that rather than having a financial plan for either his business or his personal life, he was simply increasing his personal spending, and taking more money out of the business to pay for it. It shouldn’t be surprising that this was creating problems on both sides of his life.
(Related: Zen and the Art of Advisory Firm Management)
The vast majority of advisors who own smaller advisory businesses that I have come across have exactly the same problem. It stems partly from a failure to understand the importance of a profit and loss statement, or reinvesting in the business to grow that bottom line.
However, it’s also the result of the reality that very few financial planners have financial planners of their own to help them balance their personal finances with those of their businesses.
So, the main message of this blog to owner advisors is this: Get your own financial planner, and listen to her or him. Now, as my experience tells me that most of you aren’t going to take that advice, here’s what I tell my clients to do until they see the light:
1) Stop treating yourself as a client.
You can’t approach your personal finances the way you do your clients’. Unless you work in a special niche market, your clients’ annual incomes are largely predictable, as are their future increases as their careers progress, but the cash flow from most advisory businesses isn’t predictable. It fluctuates with the markets and with the coming and going of clients.
2) Find your “number.”
Finding “The Number” made millions for author Lee Eisenberg, and it can work for you, too.