Journal of Financial Planning: September 2023
Danielle Andrus is the editor of the Journal of Financial Planning. She can be reached HERE.
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Among the benefits of a career in financial planning is the wealth of opportunities available for a professional to design a career that supports the lifestyle they want. For entrepreneurial planners who crave autonomy, a solo practice offers flexibility, but comes with challenges.
A Head Start
Maureen Demers, CFP®, EA, is a fee-only financial planner and owner of Demers Financial Planning in Massachusetts. She works with retirees and people about to retire.
Maureen had a background in finance before she decided to run her own firm. After working for an investment management firm in Boston, she got a front-row view of life as a sole practitioner when she later got a job supporting another solo planner.
“When I got married and knew that I was moving and considered starting a family, I didn’t think that I wanted to be commuting into Boston every day,” she said. “I ended up working for a sole proprietor at the time that was close to my new home. I wanted to learn all the ins and outs of running a business, which is something that I did not learn at the other firm.”
She took 10 years off while her children were young. When she was ready to come back, she was shocked by just how much had changed. She had learned from her previous experience that running a financial planning business required a whole new skill set beyond the financial planning she would provide clients, but she quickly realized how much the business side had changed.
“One of the things I said to my husband was, ‘I’m going to need a computer, I’m going to need a fax machine’—nobody does faxes anymore.”
Creative Opportunities
The freedom and flexibility of the financial planning profession is alluring to people with no financial background as well. Ben Henry-Moreland, CFP®, EA, is an opera singer-cum-financial planner.
“I never took a finance or econ class really at all through college. I was a total arts and theater nerd and got a music degree in college,” he said.
While a music program will do a great job of teaching you how to play your instrument, they are less focused on teaching you how to ply your trade. When it came to how to price services and choose gigs, manage income, pay taxes, and save for retirement, Ben had to learn it all on his own.
“When you’re a musician, you’re basically always self-employed. You don’t have someone withholding taxes for you. You don’t have someone making 401(k) contributions, setting up a plan and matching contributions and those kinds of things,” he said.
He realized that a lot of his fellow musicians, including those who had been in the business a lot longer than him, were struggling with the same financial issues. His final push into finance came in 2008.
“There were these big events that seemed very complicated and esoteric; there were these banks in New York that were failing because of these weird derivative products, but at the same time, they were also affecting people who I knew. That also was, I think, a big motivator for me to start to learn more about this world.”
Today, Ben is on the staff at Kitces.com, running his firm on the side.
“It’s really good to also have my feet on the ground of financial planning as well. Still working with clients, still dealing with all the things that come along with being a firm owner. So that helps my writing, and I think the writing helps me as a practitioner as well.”
Operational Support
As a sole proprietor, planners will be responsible for everything that happens in their firm. That doesn’t mean they have to do everything themselves. Outsourcing tasks where they have less interest, capacity, or skill allows planners to build a practice doing exactly the kind of work they want to do.
“I learned pretty quickly that I hate bookkeeping, so that was the first thing I outsourced,” Maureen said. She also engaged a TAMP to provide portfolio support.
“I knew what I was doing, but it wasn’t enjoyable for me,” she said. She added that outsourcing the portfolio management aspect helped her follow some of the same advice she was giving her clients.
“We say to our clients that we want to take the emotion out of [investing]. I could say that to the client and I understood it from a consumer perspective, but when I was doing the trades, I was very emotional about it. So when I decided to use a TAMP, [the] trading is automated based on the parameters that I set based on my conversations with clients, and I don’t have to sweat about it.”
Ben uses technology to keep compliance, bookkeeping, and accounting functions in house, tapping other partners for specialized tasks like website design and marketing. He’s considering working with a paraplanner to take some of the laborious aspects of financial planning off his plate.
“There are now virtual paraplanners that can do some of the—it’s sort of derogatory to call it the grunt work; it’s still important work, but it is manual and time-consuming to actually be setting up financial plans and inputting data into the planning software and setting up scenarios and things like that. It requires some expertise, but it’s a lot of manual work.”
Community and Development
In addition to finding operational partners, solo planners should also think about where they will find moral support. Networking with professionals is a valuable source of insight and experience. Maureen noted that finding the right organization to support her was a “turning point” for her business.
“At the time, the options were Garrett Planning Network and ACP,” she said. She gravitated toward the tax planning support offered through the Alliance of Comprehensive Planners.
“They have a training program, they have mentors, they have support and coaches and the materials and all of the things that I was missing.
“My biggest piece of advice is to get support,” she added. “Join an organization, find a mentor. I guess people can do it on their own depending on your personality, but I’m very much an introvert. For me to go out and start marketing myself was not within my comfort zone.”
Vision and Objectives
When Maureen decided she was ready to focus on growing her business, one of the first things she did was change her fee schedule. She acknowledged that while she recognized it was important to charge fees in line with the industry average, she struggled with the impact it would have on her clients.
“I love my clients. I don’t have a lot of clients, but they’ve been with me for a long time. They trusted me when I was starting out,” she said. “Maybe it’s not fair to raise the rates, but this is one of the things I need to do for my business.”
She’s also learning more about marketing and pushing herself out of her comfort zone to connect with potential clients.
“I don’t like putting myself out there. On the flip side, as a business owner, I am my business. I am the face of my business, and if I don’t expose myself to potential clients, people in the industry, it may be really hard to get traction.”
Since writing has become Ben’s main focus, he is taking a measured approach to his firm’s growth.
“I do a quarterly CEO day where I sit down and plan out what my goals are for the firm,” he said. “When I started out, I needed it to be a full-time source of income. I tried to find ways to get clients wherever there was demand for them, and one of the big ways to do that was to offer financial planning on a one-time basis.”
He added that when the bulk of your planning business is project-based, it can be hard to scale up beyond a certain point because they are time intensive. “You can charge more for them than you would charge [for] ongoing planning, but they are just very hard to scale because they take a lot of time.”
Most of his clients today are paying a monthly flat fee for ongoing planning services. Ben acknowledged that it’s harder to find clients who want that style of service, but those are the clients he enjoys working with.
“It’s a slower path to growth, and it naturally shrunk the size of my firm, which I needed to do anyway when I joined Kitces, but it was a good way to refocus on the clients that I actually enjoy spending time with.”
Ben projects his capacity is around 30 clients.
“I still really like the experience of having a solo firm, and I think there are ways to stay a solo firm now that weren’t [available] in the past, where you can outsource some of these services like paraplanning, some customer support, or virtual assistant kind of services.”
Advice for New Soloists
Running a solo practice comes with challenges as well as benefits. It can be a slow grind with a low ceiling for capacity.
“Be prepared for a slow start,” Ben advised. “If you’re starting from scratch, it’s going to take a long time to even really be profitable, much less have a high-income generating practice.”
He suggests planners who are thinking about starting a solo practice have at least a year’s worth of living expenses saved or a partner whose income can support the household.
Maureen noted that what looks like success for one planner might be a burden to another.
“Another thing that I would caution people about, and I think it’s pretty common—I know I experience it—is comparing yourself to other planners. It’s apples and oranges,” she said. “I went to classes and training programs with people who were so much more successful in terms of clients, in terms of revenue, in terms of building their business, and I would feel bad when I was comparing myself.”
There are many ways to measure success, and planners have to set clear objectives to determine the metrics that matter to them.
“I took a step back and realized the business I’m building works for me. I like my hours. They’re probably doing at least 9-to-5, 40 or 50 or more hours a week. I’m working part time, picking up my kids, doing what I want to. It truly is a lifestyle practice, and that’s what I want,” she said. “I’m happy for everybody who’s building what they want. This happens to be what I want.”