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Should You Follow the Siren Song of Consulting?

By Chris Latham February 19, 2014

Good advisors learn over time what works well about their practice and what doesn’t. Some share these pearls of wisdom with colleagues when asked. A scant few sell their insights to peers, while continuing to do financial planning for clients. And then there are those who transition to full-time consulting.

Above all, consultancy requires a passion for teaching other professionals, says Keith Johnson of Curian Capital’s practice-management group, who ran his own financial-advice firm for nearly 20 years before becoming a consultant. Advisors often realize this passion by accident — answering colleagues’ random questions, or falling in love with a particular aspect of the business in which they then become expert — Johnson says.

Yet advisors who decide to start consulting on the side could usually benefit from some mentoring themselves, warns his Curian colleague Melissa Mrazek. Those who try to juggle both careers need excellent time-management skills and at least one more pair of hands, she says. Long-term, she adds, one career track tends to win out.

Michael Kitces manages to wear several hats — indeed, as his website boasts, “Michael seems to be everyplace, all the time.” The director of planning research at Pinnacle Advisory Group in Columbia, Md., which manages over $1 billion, Kitces has adjusted his role at the firm as other activities consume bigger chunks of his attention. These days, he says, he spends more than half his time writing, speaking, blogging and consulting outside Pinnacle, where he still works with clients on occasion and where he lends his expertise to business-building strategies. He makes it all work by figuring out as accurately as possible how much time to devote to each commitment and how much he expects to earn from it. “The model for consulting is not that different from the model for financial planning,” Kitces argues. “It just so happens that your audience is another advisor instead of a retail consumer.”

Kitces consults to businesses that serve financial advisors, including technology and insurance providers. He updates his extremely popular Nerd’s Eye View blog every week, with exhaustively thorough essays on financial planning and industry news. Every other month he publishes The Kitces Report, a newsletter whose subscribers can earn CFP continuing-education credits. He is a paid public speaker at national industry conferences. And he tweets constantly.

Measurable goals are what turn a consulting hobby into a business, says Kitces, adding that advisors will naturally gravitate to where the income stream proves most rewarding.

Overcoming Obstacles

Some advisors begin consulting to help peers overcome obstacles they have faced themselves. For example, David Grant, who is married to an educator, worked for several firms that didn’t particularly welcome people such as his wife as clients. They also, he says, lacked career-path programs for their advisors. So last May, Grant launched Finance for Teachers in Cary, Ill., a planning firm exclusively for educators, which charges hourly fees and doesn’t manage assets. Then, in October, he started Fee Only Consulting, which helps advice firms design career tracks both for rookie advisors and for experienced ones who want to make partner. To help get the word out about these new ventures, Grant writes a column for Financial Planning magazine and speaks at conferences.

He says he worked with a mentor, herself a dual-career advisor and consultant, who helped him hone his marketing message and figure out how to carve up his workdays. Currently, Grant spends about 70% of his time advising teachers. Revenue goals for his consulting business remain a work in progress, but for Grant, quality time with his family outweighs the bottom line right now. “I’m creating all these different revenue streams for a work-life balance,” he says.

Bill Winterberg

Other advisors switch to consulting because they realize it suits them better. But that’s not easy to do unless your clients don’t mind letting you go. Bill Winterberg, a software engineer who became a financial advisor in 2005, mainly served young doctors doing their residency in Portland, Ore., who paid him hourly or by annual retainer. After a few years, Winterberg realized he enjoyed improving the tech side of his business more than crafting financial plans for savers. Because his clients tended to relocate after they finished their training, he was able to wind down his practice and begin consulting to RIAs on technology strategies and evaluating vendors, moving first to Dallas and then to Atlanta. He also writes the FPPad blog, contributes to several financial publications and speaks at conferences.

Yet Winterberg doesn’t feel he has left clients behind. “If I can help 100 advisors build a scalable business, there’s the potential to help 10,000 clients,” he says. “The scope and reach are greater.”