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Should you close your planning practice to new clients?

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When I changed careers from medicine to financial planning in 2004, my big idea was to take care of my closest 20 physician friends — and not work too hard doing it.

Life seldom takes you where you expect. Since 2008, Life Planning Partners has grown to four advisors and an office manager with a part-time administrative assistant. We now serve 95 client families: Our niche is the millionaire-next-door DIYer who recognizes that their finances have become too complicated to do well on their own.
We’re committed to great client service and a comprehensive planning approach of which investment management is only a small part. We have a high referral rate and have long had a waiting list for new clients. This year, we reached capacity and closed the door to new clients. Why did we make this decision?

The industry press continually reinforces the message that your practice either grows or dies. News flash — even if your business grows, at some point your business as you know it will die.

My firm died once already. In 2008, I realized how much I love financial planning and that my value to the profession was in educating other planners on the intersections of health and personal finance. To do that, working alone as a solo practitioner was no longer an option. So I killed my old model and started on a new journey of hiring the right people to make my vision happen. So much for not working too hard.

In 2011, I was invited to join Capstone, a study group comprised of a dozen highly-successful firm owners. My company was tiny compared to the other enterprises — but was growing dramatically. One of my goals in joining the study group was to figure out how to take that next step to become a larger enterprise. Wasn’t that what I was supposed to do?
The beautiful thing about Capstone is we all got vulnerable with each other. We shared business plans, looked at the nooks and crannies of how our businesses operated and lovingly — and sometimes ruthlessly — tore each other apart to make certain we were creating great practices.

Capstone was instrumental to my development and I wouldn’t be where I am today without that study group. But my biggest takeaway? Enterprise owners work very hard at running a business and managing people. They invest much of their revenue back in the business, so their take home pay may not be much more than the owner of a small practice. However, the value of their firm becomes significantly larger and one day they cash out. That is when their business as they know it dies.

It took a couple of years, but eventually I realized that my heart was not in managing large groups of people and my passion was not in growing a big business. My joy was in education.

My practice became a test bed for ideas, and our clients gladly became guinea pigs for new services like aging planning, quality of life discussions, and testing new technology. We made the decision to stay small and proudly announced that we would close the door to new clients when we reached about 100 client families.

As we approached serving 90 client families, we grappled with many questions.

Was 100 client families the right number? We had a reputation as a great value for clients with a net worth in the range of $2 million to $10 million: Our flat fee structure is based on complexity, not assets under management.

Our typical new client had a higher net worth and a more complex financial life compared to the clients we attracted in the beginning of the practice. Servicing these newer clients took a lot of time, and we charged for the effort. We realized we didn’t need 100 client families for our financial well-being.

How would we communicate our decision? We had announced our intentions a few years before and laid the groundwork. When we hit 92 families and still had three more on the waiting list, we decided it was time. We sent out a newsletter, announced the decision at a client appreciation party and took our name off the NAPFA and CFP referral sites. Finally, we put a notice on our website.

I wondered if we would stay fresh by not taking on the challenges of new clients. Guess what? We know that we will eventually take some new clients. Our goal this year is to catch up, refine processes, decompress, cross train, change some software and improve overall, for our clients and each other. Once we feel refreshed, we will let our clients know that we will take a few more families into the fold. We also fully expect to lose some clients over time; people die and sometimes clients marry people who don’t want our services. That will open up some space.

We do face the big question of how our pay will be affected by our decision. The long-time advisors and staff are paid well now and welcome the break from the treadmill of new clients. We revisit our fees with clients every two years, and invariably, some people’s situations become more complicated and warrant a fee raise. This should help us keep pace with inflation.

The bigger pay challenge is our 27-year-old advisor. He is learning fast and contributing more every day. He will deserve significant raises as his experience and contributions grow. How can I make those raises happen?

I’m now 55 years old and, like we preach to clients, I plan to work until it is no longer possible. But my work is morphing. I’m fortunate that my passion for education has translated into a software company, speaking engagements and writing. These side hustles provide me with plenty to do and supplement my income.

My deal with the next generation is to shift more of my duties in Life Planning Partners onto their plate — and send them a share of that income. Yes, I’m going to reduce my pay over time. Too many advisors wait too long to let go and that is how they lose their successors.

My role in Life Planning Partners will eventually be serving as the firm’s culture keeper, planning for aging clients, and taking care of the nontraditional financial emergencies that pop up for our clients. It will take a few years to get there, and who knows what will happen between now and then. I’ll keep you posted on how it is working out.

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