For over a decade, financial services industry observers have been predicting that industry consolidation will continue indefinitely-eventually gobbling up the small practitioner and/or rendering him profitless. A bold prediction-the kind headlines are made of. Too bad it simply doesn't coincide with reality.

The fact is, small practitioners have always had a strong presence among personal service professionals. I would submit there's a place for them in our industry that will not diminish over time, just as there has always been a place for small practitioners in the accounting world and the legal and medical professions.

How prevalent are smaller practitioners in our industry? According to the latest FPA Member Demographics Summary, almost half (46%) of the association's membership works in offices of only one to five employees. Another 15% work in offices of six to ten employees, leaving less than 40% of the membership working for larger firms.

The accounting industry is even more skewed toward smaller practitioners, if we consider the membership of the American Institute of Certified Public Accountants. Says Mark Koziel, the director of specialized communities and firm practice management for the AICPA, "There are 44,000 accounting firms in the U.S. and of those, 33,000 are sole practitioners who work alone or have one assistant."

In fact, smaller shops may be the current trend in accounting. Adds Koziel, "The profession is ever-evolving. We have more and more CPAs who hang out a shingle and start their own shop. They may or may not want to grow; what they have in common is they want to be on their own."

The point, says Koziel, is that mainstream America wants to work with sole practitioners. Which may be good enough for tax preparers. After all, everyone needs to do a tax return but not everyone needs to do a financial plan (or so they tell themselves). But just as most tax preparers work with a range of clients from individuals to small businesses, so do small-shop financial advisors work with both small and large-even institutional-clients.

The inescapable conclusion is that a large segment of U.S. consumers-both affluent and less affluent-prefer to work with smaller firms. They value their ability to stay close to the firm's founder, and possibly work with him or her directly, and they feel they get better service from the smaller entities.

That's what's in it for consumers; what's in it for advisors? Lifestyle. As an advisor, you can easily get swept up in the growth of the firm you work for to the point where company business pre-empts the personal side of things. Some advisors value their lifestyle-specifically their ability to be good spouses and parents-above all else. The business comes second, but because it's critical to the advisor's livelihood, the advisor has structured it to support his or her desired lifestyle-not the other way around.

David Goad, president of Succession Planning Consultants, Inc. in Newport Beach, Calif., says there are more lifestyle boutique advisors in the profession than many realize. "There are two permanent landscape changes that occurred after the market meltdowns of the last 18 months that will continue to support this practice model choice," says Goad. "First, economic events of late have influenced clients to be less impressed with 'bigness' [think of the huge amounts of assets recently repositioned from banks and wirehouse firms] and more impressed with a financial advisor who connects with them, including the ability to help address their own lifestyle planning concerns related to finances."

The second change, says Goad, is a mounting trend that is evident in the late-career advisor space where more advisors are seeking to reduce the workload and stress in their practices, resulting in a new succession strategy they did not anticipate: enjoying their work so much that they intend to die with their boots on and transition their practice via a buy/sell agreement to a colleague in the profession.

And so, says Goad, the large number of advisors practicing as solos is here to stay. "We have been involved in numerous studies each year over the last decade and the only measurable change from solo to multi-owner firms was a period four to seven years ago where independent broker-dealer advisors moved into the pure RIA channel, resulting in a small increase in multi-owner firms.
Otherwise, the demographics of today's profession are still within a few percentage points of the previous numbers: solo advisors 85% and multiple owner firms 15%. Obviously, most advisors want to be solo practitioners."

Let's look at four such practices to give you a better feel for this phenomenon. 

Craig Duvarney
Craig DuVarney, a CFP licensee, is clear on one thing: "Many solo practitioners are trying to add support staff or merge their practice to form an ensemble firm. They invest hundreds and thousands of hours working towards this goal. Once the new firm is formed, they invest even more time managing the office, adding and training staff, and meeting with their partners. Was their effort really worth it? What impact did this additional time spent at the office have on the advisor's relationship with his/her spouse and children, not to mention the advisor's health? While I have never seen a study done on the qualitative impact of this work, I can tell you that the financial planning model for an ensemble firm has never been something I've been interested in."

DuVarney works in his Concord, Mass., firm with only his wife, Joanne. He runs the practice from his home but also has office space in Concord where he meets with clients. "My clients are all aware that I work from home, and this has had no impact on the growth of my practice."

Staying small has its perks. "This arrangement has allowed me to balance the various aspect of my life, and therefore helps me achieve my definition of success. My morning commute is about 30 feet-from my master bedroom to my home office," DuVarney quips. "By eliminating commuting time, I am able to get to my office earlier in the morning, and therefore get more work done in a day. In addition, most days I have lunch with my kids, and unless I have an evening appointment, I come down from my office at 5 p.m. sharp to have dinner."

What kind of practice could this 33-year-old have developed with this philosophy? Doing various forms of planning for just over a decade, DuVarney is now on his own with 150 clients and $60 million under management. Like all of the advisors profiled in this article, DuVarney provides comprehensive financial planning and asset management to his clients. Providing award-winning service (he's a five-time qualifying member of the Million Dollar Round Table and a two-time member of the prestigious MDRT "Court of the Table," based on his outstanding product knowledge and client service).

DuVarney manages to take six to eight weeks off per year. In 2009, his practice grossed $300,000 with expenses of just $35,000. "I literally run my practice with a laptop, Internet connection and phone," he says.

How is this possible? To smaller advisors struggling to realize a modicum of efficiency and larger firms that hire more and more employees without a commensurate increase in revenues, DuVarney's business model may seem a fluke. (It's not, as we'll demonstrate later in this article.) But what DuVarney does any advisor can do. He takes full advantage of technology.

With a Web-based CRM, a paperless office, form-filling software, aggregation tools and a unified communication system that channels all voice mails and faxes into his e-mail inbox, DuVarney is truly a one-man band.

"The lifestyle business model appealed to me because I always want to be in sole control of my practice; I don't want the distraction of employees or a partner to oversee my decisions," he explains. "And while multi-member firms may generate more revenue, they don't necessarily generate more to the partners."

DuVarney raises another issue that should weigh appropriately on the minds of advisors facing these business model decisions-namely, diversification. We guide our clients in diversifying their portfolios, yet we put most of our eggs in one basket called "the business." Maybe advisors who keep things lean, extract generous income from their businesses, reinvest that income in a diversified portfolio and still have something to sell when they retire (albeit at lesser value than a firm that emphasized growth) know something the rest of us don't.

And who's to say the lifestyle practice can't grow? Not only does technology make one able to handle more client households than industry averages would imply, but growth occurs in other ways too. "I'm handling 150 households now," says DuVarney, "and I've transferred smaller clients to another advisor at Royal Alliance. I'll keep doing this such that the number of households I serve won't change, but the value of the assets I manage will continue to rise, as will the profitability of my client base."

OK, you say, but how does a "lifestyle planner" take time off? "There is the perception in the industry that you must be constantly available for clients, that you can't work from home, that you must have a big fancy office. None of it is true," DuVarney argues. "I don't interrupt time off with client calls. Because any emergencies in the form of voice mails come to my e-mail inbox, I check in every morning for about an hour when I'm away, but I don't carry a cell phone on vacation."

DuVarney, in spite of his success, says his practice is by no means perfect. "I continue to look at how to outsource more tasks as my practice grows, and there are technology solutions I'm still evaluating. When I can buy a software program like LaserApp Enterprise that retails for $399 up front and $199 annually, and that program then saves me eight hours of time annually, that's a no-brainer because when I am working at my highest and best use, I am worth more than $50 per hour."

What's important about technology, says DuVarney, "is the power it gives us as financial planners, husbands, wives and parents to be more efficient so that we can do other things, either work- or pleasure-related, with our lives. In my case, my technology and outsourcing solutions are helping me be a successful financial planner, father, husband, friend and family member. There is nothing more important to me than this."

Mitchel F. Keil
Like DuVarney, Mitchel F. Keil, CFP, owner of Integrity Financial Advisory of Fountain Valley, Calif., sees himself working with a fixed number of clients whom he gradually refines.

"I've never had more than 100 clients in 28 years of practice, and now have about 50. Over the years, I've kept working toward a more refined client base," he explains. "I've never needed a lot of employees or other partners, nor a large practice infrastructure, to do this."

Keil is more than satisfied to run with a small boutique practice of older, wealthy, retired business owners and executives. The fact that most have a similar makeup in terms of what they need and want just makes him that much more efficient.

Keil runs Integrity with just one assistant: his daughter. At capacity, his gross revenues come in around $350,000 with $20,000 in technology costs and $76,000 going to his daughter, much of which goes toward her college expenses.

Like DuVarney, Keil relies heavily on technology to make the magic happen-both desktop and online systems such as MoneyGuidePro (financial planning), Morningstar Office (financial planning), ProTracker (CRM), IPS AdvisorPro (IPS creation), FinaMetrica (risk assessment), et al. He also maintains a paperless office.

How does he mind the store when away? "When the market crashed [in 2008], my wife and I were in Italy for three weeks. I had with me a netbook and my iPhone. I talked to my daughter every day and, having GoToMyPC, would log in, look at client e-mails and respond then and there," says Keil, who apparently has clients who are conditioned to accepting market volatility. "But I didn't really get that many e-mails. My clients accept my traveling."

Bill Bengen
Bill Bengen, CFP, owner of Bengen Financial Services Inc. of El Cajon, Calif., since 1988, is another advisor who works with just one associate-his wife, Cookie. While he is famous for his ground-breaking research into retirement withdrawal rates, he divides his time between his home in the San Diego suburbs and a getaway place near La Quinta.

Offering comprehensive financial planning and investment management services, Bengen says, "I try to run a low-cost operation that's very personal for my clients. I'm in very close contact with all my clients, not just once a year, but fairly frequently."

Many of Bengen's clients are friends and/or golfing partners. "I guess my practice is like that of the family doctor model from many years ago," he says, as Bengen is even available to his approximately 85 clients on nights and weekends, if necessary.

To make it all work, Bengen uses technology-in particular paperless office technology-and outsources where possible (e.g., accounting, compliance, computer IT). "I outsource everything possible so I can focus on the things I do best and enjoy the most: financial planning and managing money."

Bengen looks forward to modest growth, desiring to increase his $50 million under management to $55 million to $60 million. Above that, he sees the need to expand staff, which, for lifestyle reasons, he won't do. It would also force him out of his home office, which is unacceptable.

In fact, Bengen has two home offices. "For vacations, Cookie and I mainly spend time at our vacation home in La Quinta, Calif., where I also have a home office setup."

Bengen, who holds two engineering degrees from MIT, charges clients relatively low fees. He earns about 60 basis points on his assets under management and his overhead comes to about 15%-18% of his gross, leaving him with annual take-home of approximately $250,000.

Glenn Meyer
At fee-only GDM Advisory Group Ltd. in Jenkintown, Pa., Glenn Meyer, CPA,/PFS, CFP, ChFC, CLU, serves 220 individual clients whose net worth ranges from $200,000 to $20 million. He has just one administrative assistant.

Meyer got his training in big accounting firms, having worked in financial planning at Ernst and Whinney in 1989 and later at KPMG Peat Marwick. "In neither case did I get the support from partners and the audit departments that I'd hoped for," says Meyer, so he built his own practice in 1993. I had to decide whether to grow with employees and partners, or have the freedom of sole ownership. I decided spending time with my family was the most important thing to me."

Meyer has discovered the boost one can get from technology but, even more important, some of the newer technologies on the advisor market today. In addition to mainstays like PortfolioCenter (portfolio accounting) and ProTracker (CRM), Meyer uses Tamarac ("a game-changer for us") and Assemblage. Representing two newer classifications of software, Tamarac facilitates portfolio rebalancing and Assemblage automates the process of compiling and sending quarterly reports to clients. Both are newer technologies offering compelling efficiency results to those advisors who have tried them.

If you wonder how much a lifestyle firm can grow, Meyer proves the sky is almost the limit when the right technology is employed. His assets under management are currently $287 million residing with 220 clients, and he says he's still on a modest growth path. "Two hundred fifty to 300 clients would be challenging. From a service standpoint I could handle it but not without sacrificing the relationships," he admits.

When away from the office, Meyer stays in touch with clients via his BlackBerry, letting his assistant check his voice mail. "On vacation, I always take a laptop and BlackBerry so I'm always available. But I can't remember having had a client emergency while away, although I know it could happen."

At his level of practice, Meyer's net annual compensation exceeds $500,000.

What DuVarney, Keil and Meyer all have in common is, first of all, the conviction that one's business model should follow one's desired lifestyle, not the other way around. They also have the know-how to pull it off. It's not magic, though it may seem to be to those advisors toiling away in larger firms who aren't in control of their own lives.

Want to transform your practice along these lines? Use technology wisely and keep your priorities straight and you too can have a comfortable and fulfilling "lifestyle practice."

An independent advisor since 1981 and journalistic voice since 1993, David J. Drucker, MBA, CFP, is a frequent speaker at industry events.  To learn more about his availability for your next event, contact him through www.DavidDrucker.com.