What Kind of Advisor Are You, Lifestyle or Enterprise?


One of the perks of my position is that I get to spend a great deal of time with high-quality financial advisors. I not only get to listen to some of the best discuss what’s working, but I get to advise many of them as an outsider, one that can be objective and even sometimes “call their baby ugly.” In fact, Raef Lee and I have created templates and workflows for the meetings that are streamlining our conversations and deliverables. (Ok, it was mostly Raef that created the templates – and by mostly, I mean 100% – but I do use them.)

One of the challenges of our conversations has been when we find a really great “lifestyle” advisor. A lifestyle advisor, by our definition, has a:

  • Business centered on the personality and character of the founder
  • Great work/life balance (but leans toward the life side)
  • Firm that will most likely not live beyond the original owner(s)

These mature lifestyle advisors are doing pretty well, making a very good income and spending a lot of time away from their business. So why would you suggest that they upset their lifestyle and bend to the “norm” of the industry and build a business with “enterprise value” – one that will live beyond you?

Beam me up already

Search Practically Speaking and you will see I have been writing about the enterprise value of an advisory business going back to 2012 (at least). I was quick to quote Mark Hurley from Fiduciary Network, who wrote in the 2010 paper, Creating, Measuring and Unlocking Value in a Wealth Manager, that less than 2% of firms have enterprise value. We even authored our own paper in 2013, Advisor as Business Owner: How Independence, Integration and Intelligence can transform your practice into a Sustainable Business, where we polled advisors around the country on whether they were a financial advisor who owned a business (38%) or a business owner who was a financial advisor (62%). Yet, everybody in the industry is pointing to enterprise. So why are there so many lifestyle firms?

Art as a metaphor

If you have ever been to SEI’s headquarters (or read about it), you know that it is filled with contemporary art. The West Collection shares “challenging and inventive work” of international artists. One piece, “Dumpster” by Geraint Evans, challenges me every day.

The 7-panel piece is lined up in a style that could be out of a comic or early reader. Looking left to right, it seems that a dog is being put into a dumpster. But when you step back and really look at it, it’s not clear if the artist wants you to look left to right or right to left (a dog being saved from a dumpster). Or maybe there is no message at all; maybe it is just 7 panels in no particular order.

As I pass it every day, its message to me is:

  • Look at things from a different perspective
  • Don’t always accept the norm
  • Maybe everyone else is looking at it wrong

So back to the case of your business – maybe an enterprise business isn’t right for everyone. But you should purposefully make that decision, rather than just let it happen to you.

What kind of advisor are you, lifestyle or enterprise? Click To Tweet

The purposeful advisory firm

In the context of looking at things differently, Raef Lee and I, with the help of Bob Veres, recently completed work on our newest paper, The Purposeful Advisory Firm: Maximizing Your Firm by Design, Not Default. In it, we look at the stages/models of advisory businesses and the tradeoffs between valuation and cash flow that advisors make when choosing lifestyle or enterprise. We walk through ways to maximize your decision to achieve your goals. More importantly, we look at the consequences of no decision on your business.

We recently previewed our paper on a webinar last week. If you missed it, you can download the replay and register to receive an e-copy of the paper when it is officially available.

The tradeoffs are clear between enterprise and lifestyle – higher current income and lower valuation or lower current income and higher valuation – maximizing your choice should be clear, too.


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John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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