Mastering your own destiny

When you’re alone in your own practice, you feel the magic of a work-life balance that’s unencumbered by other people’s agendas and by office politics. You can set your own hours and decide which days of the week to work. You report to no one and have no one reporting to you. You’re the captain of the ship without a crew to mutiny against you. Your days are free of petty arguments, broken promises, and betrayals. You answer only to yourself and your clients.

That’s the ideal. Unfortunately, reality can fall short of that ideal. When you’re your own boss, you may discover that your boss is far more demanding than any other boss you’ve ever had, and you may have trouble drawing the line between work and life. In addition, you may miss the daily banter and shop talk with coworker. Being master of your own destiny can be a lonely position. Of course, you can overcome all of these challenges, but you should certainly consider them when making your choice.

Benefiting from the consensus of one

Working alone gives you the power to be decisive. You don’t need to ask for permission, form a committee, sit through team meetings, rely on input from others, or explain your reasoning for taking a certain course of action. You decide and act, which makes your business responsive and agile.

Of course, the flip side is that you’re at risk of becoming myopic (narrow-minded) and falling victim to your own bias. To avoid this trap, consider consulting a trusted mentor or advisor when making important decisions. The decision is still yours to make, but having someone to bounce ideas off of and provide insight into factors you’re overlooking is always valuable.

Capitalizing on your responsiveness

As a lone wolf, you can move fast on opportunities, and you don’t have to share your hard-earned revenues. You can say yes when larger, slower-moving firms need to consult with the board and realign their resources. This level of responsiveness is the sort of agility that larger firms can only dream of.

Owning it when you have no one else to blame

In a solo practice, you, and only you, are accountable for your business’s success or failure. After all, who else is there to blame? Your ability to survive and thrive in this model is rooted in self-sufficiency and self-reliance, core values that have driven the success of many of the greatest financial advisors.

However, self-reliance isn’t for everyone, and it can hold you back. Although you have no one else to blame, you have no one else to support you when the going gets tough.

Recognizing that generalists can do only so much

You’re one person, there are seven days in a week, 24 hours in a day, and you need about six to eight hours sleep every night to stay healthy. When you do the math, you quickly realize the limitations of operating as an independent contractor.

When you’re building your practice, a realistic time commitment is 60 hours a week. This includes meeting with clients and prospects, marketing, networking, staying current through reading and education, handling the paperwork, and keeping the books (or at least organizing financial information so someone else can keep the books).

Having to spend time doing anything other than delivering value to your clients limits you in three ways:

• Client capacity: You can effectively serve a fixed number of clients, which caps your growth.
• Product selection: Ultimately, you’ll probably have to focus on one or two product lines, which means other advisors will be able to angle into your client relationships if the solutions you offer fail to meet their needs.
• Efficiency: You end up spending too much time on nonrevenue-generating activities, such as office management and paperwork.

To improve your efficiency and capacity, consider hiring a full-time or part-time assistant or even a virtual independent contractor with experience in the field to handle the more mundane tasks. This is an added expense, but if you’re charging $100 or more an hour and paying an assistant $20 an hour, hiring an assistant is a no-brainer. Besides, wouldn’t you rather be spending more time honing your skills and meeting with clients?

Limiting your growth and client impact

As I explain in the previous section, given the natural limitations of time and energy, you can effectively serve a limited number of clients. Before I added team members to support various aspects of my practice, I often had to queue clients many weeks in advance, which resulted in missed opportunities. In today’s fast-paced on-demand world, people don’t like to wait.

Focus on servicing clients and conducting your initial due diligence — the iron-clad pillars of your practice. You need to develop and master a sharp, crisp due diligence process that’s both effective and efficient (see Chapter 13), and this can take considerable time. The catch-22 is that to execute well in these two areas, you must limit the number of clients, which means you need higher revenue clients, but you don’t have the credibility at this point in your career to acquire and retain those clients consistently. The solution is to offer a limited number of products to a limited number of mid-revenue clients and start to work your way up gradually.

Certainly, working by yourself means you can spend time on one client at a time, but you can probably add value in at most two areas effectively — for example, asset and risk management. Such limited impact is better than nothing for your clients and may make for a nice career, but it’s not the pinnacle of success for most financial advisors.

Dealing with limited resources

If you’re going it alone, focus on two areas where you can add substantial value to a client’s life: asset and risk management, the two core financial planning areas. I often refer to these areas as flip sides of the same coin. To create an even narrower niche, focus on one product line or service in each of these two areas. If you go too broad, you won’t be able to provide your clients with effective and efficient service.

On approach: Laying the groundwork

When you have a lead on a joint-work opportunity and someone in mind to team up with, approach the situation carefully, so you get started on the right foot. Here are a few suggestions:

• Research your potential joint-work partner’s LinkedIn page. Look for areas of connection or similarity — common ground. By understanding your audience, you’ll be better prepared to appeal to their sensibilities.
• Don’t initiate a full-blown discussion in the hallway or near the water cooler about the possibility of working together. Instead, mention in passing that you’d like to schedule time to discuss a business opportunity and ask what might be a convenient time to meet.
• Schedule the meeting over a breakfast or lunch, but don’t schedule it for dinner. Dinner is too formal, and you’re just getting a feel for the potential. Also, alcohol is more likely to be consumed at dinner than at breakfast or lunch. When alcohol is involved, you run the risk of making a new friend instead of a business partner.
• Host the meeting in a professional setting. Do it in your office or in a conference room.

Developing your relationship

After you’ve agreed that there’s potential for synergy, formalize the terms of your agreement and develop a strategy:

• Draw up a joint-work agreement. This agreement should spell out the terms of the relationship, including who does what (and when do they do it), how revenue will be shared, who maintains ownership of the customer or client relationship should the agreement end, and under what conditions the agreement can (or will) be terminated. You also need to have a nondisclosure or confidentiality agreement that you both sign to prevent partners from stealing clients or disclosing trade secrets during the relationship or after it’s dissolved.

  Head to RocketLawyer.com for a boilerplate letter of agreement that you can customize to meet your needs (you may be charged a fee). Better yet, hire an attorney from your network to draft a letter of agreement. The latter option gives you the added bonus of a having a potential center-of-influence and referral source witnessing your growth and professionalism. Of course, adding an attorney adds to your costs, but that’s offset by the potential opportunities generated by your broader engagement with outside collaborators.

• Hold a strategy meeting. During this meeting, develop your game plan, specifying your responsibilities — what each of you agrees to do and refuses to do. Many partnerships fall apart due to misunderstandings over each partner’s role and responsibilities. The more time and detail you each put into this phase, the more invested you’ll be, and the better the outcomes.

Operating as a team

When you’re working with someone else toward a common goal, you need to be on the same page. Team performance trumps individual performance. To coordinate your efforts and complement one another, follow these two suggestions:

• After your first joint meeting, have a debriefing session. Review how you each think the meeting went and what could have happened to make it better. Be honest about items that confused or upset you. If you think the meeting was perfect, then let your partner know it. Honesty is key.
• Welcome any criticism and use it to make positive changes. I’ve had partners tell me that they thought a certain meeting with a client couldn’t have gone better only to find out much later (after we had acquired the client), that they thought I spoke way too fast for the client to follow, and they had been worried that the client was put off by it. When I get excited and passionate, I can get carried away, which is fine as long as it doesn’t make our client or my partner uncomfortable. When I finally received the insight, I was able to make the necessary adjustment.

Terminating the relationship (if it doesn’t work out)

I always assume that every new partner will work out great. But that’s not always the case. Winding down a relationship or being clear that it’s best not to pursue further clients together is just a matter of time.

The tricky part to breaking up is determining who gets to keep the clients. If you signed an agreement letter, that letter should establish the rules for determining who gets to keep any given client. Without a clear agreement in place, determining client ownership is difficult. It’s even more challenging when an insurance-focused advisor partners with an investment advisor to manage a client’s investment portfolio. Often, the client views the investment advisor as the responsible party and the insurance advisor as the connector or referring party. Without a clear separation clause in your agreement, you’re bound to encounter confusion and discord.

Never put a client in a position of having to choose between you and a partner. It’s unprofessional and makes the client feel uncomfortable. In addition, it’s bad for business — for both advisors involved.