Grow with the flow: How to expand your firm

Recognizing the need for expansion

When Jay Zigmont started his financial planning firm Childfree Wealth in 2021, he intended it to be a one-person shop forever. But as he rapidly outpaced every benchmark for growth, his business appeared to have other plans. “I could never have guessed how much need there is in the childfree community,” says Zigmont. “Somewhere between 20 and 25 percent of the U.S. is childfree, and the [standard] financial advice all assumes you have kids.”

With savvy marketing and media outreach, Zigmont soon became known as the expert in his niche. He recently added seven clients in a month, which is well beyond the one or two clients he expected to accrue in that period as a fledgling solo practice. He also realized he needed to grow so he could register his company under the U.S. Securities and Exchange Commission
"I could never have guessed how much need there is in the childfree community." to protect his clients’ privacy.

“I’m trying to staff up to meet the growth rate, but I probably should have done it a little earlier,” says Zigmont. “It has been a bit more reactive than I would like.” Zigmont currently contracts with a compliance officer and a paraplanner, and he‘s in the process of hiring two full-time paraplanners, whom he will train to become associate producers/agents or financial professionals. “We’re actually growing so fast that I had to stop taking on new clients while I’m hiring.”

Zigmont’s experience is not unusual. Lacking sufficient time is the biggest indicator to producers that it’s time to grow, according to Ben Henry-Moreland, a financial professional and senior financial planning nerd at Kitces.com. The problem, he says, is that hiring requires a large upfront time investment before it can pay any dividends in greater capacity. “So waiting until your time crunch to do it means that you're all of sudden in even more of a time crunch.”

Balance planning and flexibility

It’s important to think through your growth strategy from the outset. At the same time, understand that—no matter how much you plan—you’ll always encounter factors outside your control. When two major national publications ran articles featuring Zigmont on the same day, he was faced with an unexpected windfall of more than a dozen prospects in one day. “Because you’re an entrepreneur, you kind of have to be able to roll with it,” he says.

You may also find your initial business assumptions aren’t borne out by reality. “I thought I knew where the greatest demand for my services would be, and I was wrong,” says Penny Miller, owner of the HR consulting and outsourcing firm My HR Department, which she founded 16 years ago. “Listen to your customers and be flexible.”

One way you can help plan for an uncertain future is by developing multiple growth strategies. Zigmont suggests mapping out how you would manage both slow growth, with limited revenue coming in, and rapid success, where time quickly becomes limited. “Those two are pretty far from each other,” he notes, giving you tools to manage the full spectrum of scenarios in between.

Who do you want to be?

Another vital aspect of growth planning is getting clear about your long-term vision. “Do you want to have [a practice] by yourself until you retire, and then you’ll just end it?” asks Henry-Moreland. “Or do you want to build a business that sustains itself beyond the point where you retire?”

If you decide you want to build a business beyond yourself, then finding a good partner—and possible successor—becomes a high-priority task, says Henry-Moreland. If you don’t, remember that “growing and hiring is not a requirement,” he notes. “Many people do just stay as solo advisors and are happy with doing that.”

Being intentional about your goals can also help you figure out which jobs to outsource and which ones to hire for. Invest in hiring and training people for roles in which there is some path for personal and professional growth. “As the firm grows, then that person can sort of grow into their strengths,” says Henry-Moreland. By contrast, if you’re looking for someone to take care of a specific task that you don’t particularly like doing yourself, outsourcing may make more sense.

Where to begin?

Regardless of your firm’s size, ensuring regulatory compliance is top priority, experts agree—whether you do so by retaining an HR consultant, hiring an HR professional, or using an advisor-specific partner like RIA in a Box or Synergy RIA Compliance Solutions. “There's so much [to know], especially when you’re starting to hire employees,” says Henry-Moreland. “Trying to DIY all of that may technically be possible, but it is tough.”

“Don’t rely on common sense,” says Miller. “Common sense and the law are not the same thing.” She also emphasizes the importance of doing your due diligence to ensure you’re getting guidance you can trust. “Remember, even if you hire someone to do the work, when it comes to employment laws, the employer is responsible if anything is done incorrectly, even with an indemnity cause in the contract.”

She also notes that employment laws vary from location to location, so understanding compliance requirements in all applicable states is critical if you’re considering expanding geographically. “If you hire remote workers, the laws that apply are where the employee resides, not where you are,” she points out.

Hiring tips

“When hiring, think about fit with your philosophy and the culture you’re seeking to build,” advises Eric Tyson, former personal financial advisor and author of Personal Finance for Dummies. “With a solo practice, hiring administrative help is usually a good first move. In a larger practice, assess what you're good and not-so-good at doing and map that against what functional areas you're needing most,” says Tyson, who also co-authored Small Business for Dummies.

"People are not only your greatest expense, they are also your greatest opportunity to enhance revenue.”

Miller is also a proponent of hiring to complement your skills. “In my own business, I took the position to hire people who can do the things I am not expert at, so I can focus on my own strengths, which are the basis for bringing in revenue,” she says.

She believes that having an HR partner from the get-go can give you a strong competitive advantage. “Compliance is necessary, but it is a risk-management tool. It does nothing for your bottom line,” she says. “People are not only your greatest expense, they are also your greatest opportunity to enhance revenue.”

Understanding the compensation landscape is essential as you grow. Henry-Moreland recommends researching salaries using surveys like the one published by InvestmentNews, which includes salary benchmarks for every type of employee a financial practice would have.

Before making the leap, make sure you understand the realities that come with taking on employees. While hiring a team will ultimately allow you to expand, producers typically overestimate how much of their time it will free.

“People think that, if they hire an administrative assistant or an assistant or a client service associate, they will be able to open up a whole bunch more time to work with clients,” says Henry-Moreland, who has written extensively on Kitces.com about how solo RIAs can navigate making their first hire. But “all of a sudden you have all these other management and compliance and additional tasks associated with having an employee.”

As time-consuming and tedious as those tasks can sometimes be, it’s worth putting in the effort to get them right. “Hire carefully and treat your best employees as if your business depends on them,” says Miller, “because it does.”