It’s easy to feel like a lone wolf when you’re a solo advisor. Your attention can be turned in many directions as you juggle working with clients, managing operations, and weaving through compliance requirements that get trickier every year. Solo advisors have tremendous freedom, but the environment presents unique challenges as well. We’ve asked the question before if an advisor can manage 100+ clients, and while it’s possible, it requires focus against stiff competition.
The solo advisor competes with the large wirehouses, robo advisors, and other advisory firms for the same pool of business, just without the titan marketing budgets of the Vanguards of the world, or the Wealthfronts and Betterments for that matter.
The challenge to grow a book of business only gets harder as the foes get bigger.
How do solo financial advisors set themselves apart from the Goliaths of finance, keep costs low, attract and keep clients, and still maintain the freedom they sought in the first place?
It’s a balancing act that requires a lot of focus without much support.
It Can Be Lonely At the Top
An advisor has to wear many hats throughout the day and is still expected to provide world-class service to clients. That’s not easy with a full team of admins, marketers, and big wirehouse coffers, let alone as a team of one. With this much freedom some thrive and some go mad.
Staying in touch with other solo advisors through networking events, trade shows, or conferences can help put efforts into perspective. How are other solos handling billing challenges? What are some time-saving techniques they use with their clients?
Solo advisors rely on this valuable information from their peers to get a sense of trends, but more importantly, to feel like they’re part of a network.
Comparing notes at events is just one way that advisors keep an eye on the advisory landscape. Keeping up with publications, awards, and regular publishers is another way solos stay in touch with the outside world. Even still, the responsibility of running the business can be daunting. So daunting, in fact, that many predicted the “death” of the solo advisor over a decade ago—a prediction that couldn’t be farther from the truth.
In an article in Financial Advisor IQ called “The Solo Advisor Is Anything But Dead,” Eric Roberge, who works alone at his three-year-old RIA Beyond Your Hammock, has seen advantages to working as a solo. “Technology is actually making it cheaper to run a solo shop like mine,” says Roberge, whose Boston-based RIA’s compensation models include by-the-hour planning and outside-investment supervision. “I work in a virtual office and therefore my overhead undercuts every standard advisory firm.”
It’s estimated that top solo advisors keep between 70-90 cents from every dollar they earn—something the large firms could only dream of.
How can solo advisors be on the verge of disaster and yet still have operational advantages to their multi-advisor counterparts? The truth is that solo advisors have the freedom to adapt—but there are still some that try to make their advice the same as everyone else’s, and that’s where solos can get into trouble. In a piece of tough love, Michael Kitces says, “If you think you can be a better generalist financial planner than Vanguard at 30 bips with a $5 trillion dollar head start on their base of clients, you’re fooling yourself.” And to a certain extent, he’s right.
Large brokerages have the resources to undercut, whereas solo advisors do not.
If a solo can’t win with pricing alone, a solo advisor has to justify their cost in other ways.
Specializing is an excellent way to stand out that requires few resources and little cost. The strength of a solo isn’t just freedom, it’s singularity: they can build stronger relationships, adapt to new technology, make quicker decisions, and declare a specialty while still making a great living.
One point to consider: an advisor who creates a niche and specializes their services (retirees, divorcees, or lawyers, for example) can live very comfortably with 80-120 clients. A large, generalist firm couldn’t sustain itself on your 100 client niche. If you’re able to provide highly-specialized service that caters to their needs like no one else can, clients won’t want to leave anyway. Specialization is a barrier to competition and an acquisition advantage that is unique to the solo advisor.
At Riskalyze, one of our company’s core values is Focus. We think in the long term and focus on doing a small number of things really well. We choose to make a deep impact rather than trying to boil the ocean.
Consider if your approach might benefit from a little more focus, as well.
King of the Hill
The other benefit to being a solo advisor is the ability to adopt technology with fewer barriers.
Large wirehouses and firms often go through months, if not years, of compliance evaluations when adopting new tech. Smaller firms with less than 20 advisors have similar struggles. As a one-man shop, an advisor can utilize the technology that best meets their needs, without the endless back and forth with multiple departments over features, price, and access.
Fintech experienced a boom after the 2008 crash, leaving advisors with myriad options to serve their clients and implement investment decisions. One of the hallmarks of post-2008 fintech was the focus on user experience, and it’s one of the main reasons robo advisors got the spotlight early on. Today, clients expect their advisors to have all the great tools the robos have AND the winning personality to sell it.
As a solo advisor, you can adopt technology with less hassle. If you offer a great user experience with a specialized focus, and give great service to your clients, there’s no limit to the success you can achieve.
There’s the saying that “No man is an island,” but solo advisors tend to feel differently. It’s sometimes a solitary life, but it comes with benefits that far outweigh any cons: freedom, independence, great revenue, and the ability to serve clients in a personal and approachable way. To make the most out of your freedom as an advisor, keep the tips above in mind:
- Network with other solo advisors and get their perspective.
- Read about the industry and assess trends.
- Specialize your services so that you stand out.
- Adopt new technologies that embrace great user experience.
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