Kitces & Carl Ep 55: Implementing A Waiting List Or Just Referring Clients Out When Hitting The Capacity Wall

Kitces & Carl Ep 55: Implementing A Waiting List Or Just Referring Clients Out When Hitting The Capacity Wall

For most of its history, the financial advice industry has been almost exclusively transactional in nature, which meant that advisors would usually interact with clients only when there was a new sales opportunity. The need for interaction only once every few years meant that advisors could have literally hundreds of clients, and it was virtually unthinkable that an advisor would ever choose to or have to turn anyone away. But, as the industry has shifted towards a more ongoing, relationship-driven model, it’s become increasingly common for advisors to find that they’ve hit a capacity wall and simply can’t take on more clients. And once at capacity, many advisors have either raised their fees (so that more prospective clients self-select out of the engagement process before ever reaching out) and/or sought to add capacity (by bringing in additional advisors and staff).

However, for those advisors who aren’t interested in increasing headcount (because they aren’t keen on managing people) or don’t want to raise fees (because their current pricing works for the particular niche they’re targeting), many have turned to implementing waitlists as a way to manage their capacity, at least in the short-term. Which, in turn, raises the question: is implementing a waitlist really the best way to handle capacity limitations, or is there a better alternative?

In our 55th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss the motivations that might drive an advisor to implement a waitlist in their practice, the unintended consequences of a waitlist, and a key mindset shift that advisors can make when thinking about their desire to manage their limited capacity with a waitlist.

As a starting point, it’s important to distinguish amongst a couple of different circumstances behind the use of a waitlist. On the one hand, for the advisor who is actively expanding their capacity by hiring more staff, a short waitlist might be unavoidable if there’s been a sudden influx of new clients, and it’s logistically impossible to onboard everyone all at once. On the other hand, some advisors have intentionally capped their growth pace, and implement a waitlist that (in some cases) might be up to 18 months.

For that second subset of advisors, it’s important to recognize that their decision to put prospective clients on a waitlist comes from a deep desire to help, while realizing that it’s impossible to help everyone (because an advisor who says “yes” to more professional opportunities than they can handle is also actively saying “no” to other things in their life). Unfortunately, though, that decision comes along with some unintended consequences, as people who reach out to financial advisors invariably do so when they have an acute pain point that they need help with right away, and telling those people, “yes, but” means that they often aren’t getting the help they need when they need it (and will just go elsewhere anyway). Instead, it’s perhaps the better response for advisors to simply say they aren’t accepting new clients at the moment and (as an alternative) recommend those prospects out to other advisors who do have the capacity to offer the immediate help the prospective client is seeking.

Ultimately, the key point is that, while it may make sense to implement a waitlist as a way to manage growth and capacity, the reality is that the longer the waitlist gets, the more the risk that advisors end out rejecting clients who, not knowing where to turn, may not get the help they need (or worse, seek it from an advisor who doesn’t do a good job for them). And while some advisors may worry that referring potential clients out will empty out their pipeline and leave them without prospects when spots do open up, it’s important to realize that simply getting to a point where there isn’t room for more clients means that the advisor must be doing something right, and can move away from the scarcity mentality all advisors have as they build their businesses. Because advisors who are at capacity and choose to refer prospective clients to good advisors, at the end of the day, are actively helping those people and moving the profession forward.

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