In the latest episode of the Challenge the Standard in Financial Advice podcast, co-hosts Nathan Fradley and Jordan Vaka discussed starting an advice business and the decision to start either a lifestyle business or attempting to build an empire.
According to Fradley, when an adviser is considering starting their own business, “the first thing you have to know, because it guides all of your decisions, is why am I doing this? The ‘why’ is everything”.
He explained that advisers also need to ask themselves what they are trying to build when starting an advice practice.
“Is it a lifestyle business? Am I trying to build an empire? Am I trying to have the biggest, most successful financial planning business? So, it’s figuring out what kind of business you’re trying to run, and knowing the answer to that can be, in itself, challenging. It might be a milestone decision,” Fradley said.
For those who want to start a lifestyle business, Fradley said understanding personal priorities is key as they will play a significant role in the structuring of the business, though in reality, many still struggle to balance their personal priorities against their business.
“The lifestyle business is the biggest trap ever, for starters. The reason I say that is I know a few people that are trying to do lifestyle, but they’re not, so it’s a matter of priorities, like everything,” he said.
“It’s your priorities, and then actually living the priorities. If you say, ‘This is important’, make it important. When you’re doing a lifestyle business, the lifestyle, whatever that is for you, is the number one driver.
“The lifestyle business is about the lifestyle prioritising itself over the growth of the firm. The way you run your firm changes, and you have to be strict in different ways, I think. And that’s why I say it’s a trap, because I know too many people who go, ‘I want to do this for my family’, and then they work 15-hour days.”
Building an empire
On the flip side, Fradley said that others may be aiming to build a larger business, an empire, which comes with its own required mindset and priorities, and will also determine the role they take on in the business.
He explained that people seeking to build an empire may be thinking, “‘I want to build the biggest thing, so my goal is not to be a practitioner, my goal is to be a CEO’. Or maybe it’s not, maybe it’s to be the owner and get a CEO in”.
While advisers have a lot of valuable skills when it comes to running a business, Fradley argued that, despite what some may believe, they are not inherently good business owners.
“If you’re planning on building an empire, you need to understand a lot more than just, ‘I get this many clients in and I make this much money’, because you’ve got to start thinking and building your business from the start about the big picture,” he said.
“The reason I say that is when you bring on that client, that first client, that second client, that fifth client, and you’re doing everything you can. You’re working nights, you’re making sure it gets delivered properly. You are the value, they’re buying you, they’re not buying your practice. And then inevitably, when you pass them off to another adviser, and you stop working nights and you stop being as flexible, what they bought into has changed now.
“That’s manageable, but I think you need to have an eye to ‘What is this client experience going to be over the next five years. I need to start living thinking about it now, how I run my processes, how I interact with clients. What’s my marketing like? Is my marketing me, or is it my brand?’ These things fall into the empire category.”
Drawing on his own experience running a lifestyle-oriented advice practice, Vaka explained that the differing goals and priorities between the two business philosophies mean they require “very different skill sets” to run.
“A lifestyle business is you’re prioritising your time, your time with your family. You’re extensively prioritising you as the brand, your operations. You’re trying to be as efficient as possible,” Vaka said.
An empire-building process, he added, takes a more process-driven approach.
“It’s all about delivering a consistent service across a range of advisers. That’s a very different skill set,” Vaka said.
