#FA Success Ep 242: Navigating A Family Succession Plan As The Successor To Build Your Own Future Vision, With Charlotte Geletka

Resources Featured In This Episode:

• Charlotte Geletka
• Silver Penny Financial Planning
• Morningstar Managed Portfolios
• Morningstar Tortoise & Hare Stock Baskets
• Brinker
• Envestnet PMC
• FP Transitions
• Stephanie Bogan's Limitless Advisor
• Proper ATL
• Riskalyze
• #FASuccess Ep 007: Matthew Jarvis On Building a Highly Profitable Lifestyle Practice by Age 35

Full Transcript:

Michael: Welcome Charlotte Geletka to the "Financial Advisor Success" podcast.

Charlotte: Thank you, Michael. Thanks for having me.

Michael: I'm really looking forward to today's discussion and talking a little bit about succession planning, which has certainly become a dominant topic in our advisor world, just the age demographics of advisors with the average advisor in their 50's, a significant number in their 60s' and beyond, there's a lot of succession planning that's happening.

But I find that in practice that the reality of succession planning is always a whole lot messier than the theory. Where the theory is, “I find someone who can take over my clients and the business, and then I ride off into the sunset, and then they go do their thing.” And in practice, it never seems to really quite run that smoothly. Usually because, at the end of the day, the founder is selling a business and their particular vision of what they created. A successor at the end of the day really doesn't come to buy a founder's business to do it the way the founder did it, usually they buy the founder's business as a foundation to build whatever their vision of the future is and taking extend that business in whatever direction they think is going to happen. And usually, that process starts before the succession has already transitioned, which can create a little bit of clashing and some tension along the way. And that only gets worse when the founder and the successor are not just a founder and successor, but also a parent and a child.

And so I know you have been through a version of this transition, having bought the firm from your father and taking it over and taking it in your own direction over time. And so I'm looking forward to talking a little bit about the challenges and the realities of succession planning, in general and succession planning from a parent, in particular, and how you ultimately make all this work.

So I think to kick off, why don't you just share with us a bit about your advisory firm as it exists today so we can get an understanding of what the business looks like now, and then we can talk a little bit about how we got from the start to where we are.

What Silver Penny Financial Looks Like Today And How She’s Integrated Stand-Alone Financial Planning In Her Business [04:30]

Charlotte: All right. So I'm the managing partner and owner of Silver Penny Financial Planning, based in Atlanta, Georgia. We have six advisors. We managed close to an aggregate of $500 million. And we run as silos under the same brand. I own the brand. So when you break it down and talk about my individual business, I manage about $240 million. $110m is employer-sponsored institutional business, and about $130 comprises of our individual clients spanning over about 150 families.

Michael: Okay. So, because I want to make sure I've got a handle on this. So 6 advisors overall with $500 million under the umbrella. That's essentially six advisor teams that kind of run the silos, they each do their own thing, but with one common shared brand and platform. You both own the firm at the firm level, but are one of the 6 advisors in the silos of advisors with what I'm just presuming, mathematically, is kind of the largest of the silos with $240 million under management. So almost half of the assets of the firm, of which $110 million is employer-sponsored, retirement plans, $130 million is individual families across about 150 families. So just napkin math in that average client household sits just under $1 million dollars, or $800,000 or $900,000, at least as an average.

Charlotte: Exactly. Now, it's an average. So, of course, you have some more, some less, but over the transition, that's where we are at this point.

Michael: Okay. And so, what is the focus of the firm just in terms of what you do for clients at the end of the day? Like how do you explain and position the firm and what you offer?

Charlotte: Our focus, which we'll talk about as we kind of go through the transition, but is serving individuals. So the employer-sponsored is part of the legacy business which I purchased, but our focus every single day is helping individual families in what I would call... We serve three different types of clients, I call them “everyday retirees”. I do not love the term "mass affluent." I like "everyday retiree." We serve women who have become financially independent, usually through death and divorce, and HENRYs. We have about 8% HENRYs. And we do financial planning for a fee separate from asset management. So I didn't really want my business model to dictate how I serve clients. There's a need for younger people that maybe don't have the assets to get good financial advice.

And so, when you come to Silver Penny, I'll say, “We can work together on a fee financial plan,” which is the traditional comprehensive financial planning that most people in our industry move towards. And then we also offer asset management. You can do it separately, you can do it together. A lot of times our retirees will do financial planning for a fee, will do the retirement plan, and then they'll end up hiring us to manage their assets as well. But as I've kind of grown up in this business, I realized there's a huge difference between hiring an investment advisor and getting good financial advice. So I really wanted to have a way that we could help people to be able to receive solid financial advice, whether they did or did not have the assets to be managed.

Michael: And so, what does that look like in practice? Like, what kind of fee structure are you using on the planning side to be able to do this?

Charlotte: So, on the planning side, we traditionally have done $2,500 per plan. What I've realized, though, is that that price point is too low, because I'm getting a lot of traction right now. And so you're catching me right in the middle of a fee increase. So we are going to raise fees on this plan. And then also, as everyone in our industry knows, they're labor-intensive, time-intensive. It is difficult to really do that to scale as well as running the retirement business and run the asset management side of the individuals. But I have a passion for this. This is something that I'm working with my paraplanner to make this more efficient. So at this point, I only take on a certain number a month, but I really get a lot of joy from working on those types of cases. It kind of keeps me going. And so, I've really enjoyed that this past year doing those.

Michael: So I'm curious for a few things. One, just what are you looking at raising fees to? Do you know what you're aiming for? Is it just like we're going from $2,500 to $2,800, or like, we're going from $2,500 to $5 grand?

Charlotte: You hit it on the nose. We are going to $5,000 a plan.

Michael: Okay. So that's a big increase.

Charlotte: It's a big increase. Yes. I think that I've come to realize that the value that we provide for that, we were undercharging.

Michael: Okay. And so, as you look at that transition, I mean, I was struck, I think the words you used was like, "We're growing really well, we may be getting too much traction with our plans right now," which is leading you to raise fees. So I guess I'm just wondering like, how do you think about that? What's too much traction and growth that you feel you want to raise fees? I know for a lot of firms it's like, “Hey, this is working great. Let's just keep the volume going and do more.” Obviously, if you raise the fees, you run at least some risk that slightly fewer people will say yes. So, how do you look at that trade-off and that decision of when to actually put through a fee increase, especially when you're talking about a 100% fee increase?

Charlotte: I think you're kind of across different spans, meaning our different market segments. So we have retirees, we have young professionals, which our industry calls HENRYs, but when we're getting all those types of people and no one's pushing back. Everyone's saying yes. So I feel like the last few prospecting calls, everyone's is like, “Yes.” People kept signing contracts. And then I started to panic and think that I don't have the capacity to deliver all these financial plans and do the work at the level at which I want to. So I either hire more people or I raise the fee. And we sat down as a firm, when I say firm, I usually refer to my team within Silver Penny, the people who are working next to me every day, and we decided that that's where we need to be. And the paraplanner said, "Oh good, this is what you need to do. I was hoping you were going to do this." So then I realized, okay, it's time.

Michael: Yeah, it's a striking thing to me. It's just part of the evolution of what we tend to go through with advisory firms. Like, there's this early stage of just, “I just want everybody to say yes and agree to be my clients and pay me and generate some revenue.” Like we're in that early phase that's really hard. But then at some point, it's like, “Okay, a good number of people are saying yes”. And then eventually, you can get to a point of, “I actually feel like so many people are saying yes. Like, maybe I'm just not charging enough.” But there actually is such thing as having too high of a close rate. Like it doesn't feel good to have some people say no, but the truth is, if everyone says yes to your fees, you almost certainly could have charged materially more, and maybe a handful of people would have said no, but as you're noting, if you double your fees and only a third of your people start saying no, you actually generate more revenue with that approach.

Charlotte: Right. So it's just when you're in it, you cannot see that because of the fear that's kind of outside of, “If I raise my fee, what's going to happen?” And I'd also started to view financial planning different where I was kind of taught that financial planning is what you do to generate business. And I now view financial planning as what I do that's could be a standalone service. And so it was a mentality shift for me as well.

Michael: It's a good way to frame it that when you use financial planning to generate business, you tackle and view it one way. Like, “I need to charge enough to cover my time and maybe make sure clients are really serious about it and so we want some nominal fee there.” When you really say, “No, this is my core value. I'm worth this and this is the primary thing I'm providing,” then all of a sudden it’s, “Wait, I should be charging more. I provide real value here. I shouldn't even need them to do something else to implement on the back-end just to get paid for all the value that I did. Yes, I wouldn't mind also getting paid if they do some follow-through stuff. But I should get paid for this. This is darn valuable.”

Charlotte: Right. And another thing too is that, as the paraplanner, this is actually teaching her how to be a great advisor. Every time we go through a financial plan, she's learning the back story of why this certain portfolio is the right fit for the client.

Michael: And for planning for you in these fees, is this a one-time fee for a plan, and then either they do or do not do something else for ongoing implementation? Or is this like an ongoing fee? Like $2,500 a year for ongoing planning every year?

Charlotte: Currently, we're sort of doing it you have access to me for six months. And then once we're kind of finished through that, you can still call me for a year. But we are evaluating how we're going to make it more of an ongoing situation. We have not previously, but I've realized that that's a missed opportunity.

Michael: Okay, that's a growth direction for you to say maybe we'll have ongoing planning fees, because historically, I'm presuming like, charge upfront planning fee, then if they do AUM business and the AUM was the ongoing, and you can do planning support along with that, but the AUM fee was what was driving it.

Charlotte: Right. And we’ll have an offset. So if you have $X assets under management, financial planning is included for you. But like I said, I don't want that to be the only way to work with me. I don't want my business model to dictate that. So if there's a lot of these young professionals that are coming to me, they need the financial advice the most. And so those individuals, it makes more sense for them to be getting that annual planning fee as a way of doing business with me rather than me... They don't have the assets, they're not ready or they're moving over some, but maybe it makes more sense maybe to leave it where it is.

Michael: And so, from your end, this isn't necessarily like, I don't think AUM is going to work in the future, I want to do retainer fees instead. This is I want to get paid for the clients who don't necessarily have assets yet, but they're willing to pay me so I just need a way to charge them. So this is how I'm going to charge them.

Charlotte: Yeah, I'm not completely changing the business. This is still a really small part of our revenue. But this is something that I want to be able to do well. And I get a lot of traction on this. So also, when you're running a business, you have to think, “Okay, what I'm doing now might not be exactly what I'm doing next year.” And so I need to beta-test is this working? Do people like it? Do I enjoy it? Can we deliver good value? All those types of things.

Michael: Interesting. And is that literally kind of how you're mentally thinking about it? Like this is a beta test.

Charlotte: When you look at it as a percentage of revenue, right now it makes up, gosh, 5% of our revenue, because we're only doing one or two plans a month. But what's happening is I'm just trying to be open-minded. And of course, maybe that's my background, and where I'm coming from is that business models are fluid, right? So I can tell you this. And then by the time you hear this podcast, we could have had a line-in-the-sand moment and say, “Okay, this or that.” So, I want to be clear so the clients know what they're getting, consumers know what they're purchasing. It has value in the marketplace. But at the same time, I can pivot if I need to.

But this is something that people really needed right now, after the pandemic. And my center of influence kind of network started coming to me with, "Hey, we have people in this situation and that situation, and they need good financial advice. They may or may not need an investment advisor. But they need financial advice."

What Charlotte Does For Her AUM Clients [16:20]

Michael: And so, help me understand then the rest of the business and the business model. Like, what else is happening on the AUM side and the employer plan side? So like, what's the AUM model and what do you do for AUM clients?

Charlotte: So we're currently, 31% of our business is AUM fee-based accounts. And on the AUM side, we are using primarily TAMPs. So, third-party asset managers that are working with us. Most of our assets under management clients are retired. So we're helping them go through the traditional asset management and what's the proper allocation. We do distribution planning. We're helping a lot on, "Let's set up your monthly check. I got into the retirement side." I will always love the retirement side. I love distribution planning. So we're doing that. A lot of RMD stuff.

Michael: And so I'm just wondering, on the structure side for investment management itself, you said you're primarily using TAMPs. So I'm curious, what TAMPs are you using, and just at a size of $500 million, certainly a size where some firms say we're going to start hiring and building out just our own internal investment team. So I guess I'm wondering like, what TAMPs are you using? And do you see this as like a temporary thing because you're going to build this internally, or a long-term thing because you like using TAMPs and you're going to hire and stuff in other areas of the business?

Charlotte: That's a great question. I'm flexible to do either, but currently, I evaluate that on an annual basis. So we're using Morningstar Managed Portfolios a lot. We use Brinker who was originally purchased by Orion, and Envestnet, which is through my broker-dealer. So they have some TAMPs there that we have access to. So those are our three primary TAMP providers.

Michael: And how do you pick which you're using for a particular client?

Charlotte: So yeah, we've got that pretty dialed in. Morningstar, we started using them for their active/passive models, which let's say we started using that a lot in 2017, which were great. They have great ETF, low cost. So if a client’s sensitive there, they're more value-focused. And a lot of their portfolios have a little bit higher international concentration than some of my clients are comfortable with. So, Brinker, I will use for people who maybe don't want as high of international exposure.

And then Envestnet, honestly, the people that are there is because their cost basis is such that it's just difficult to move some of our legacy AUM business. And it just doesn't always make sense to move those people. It's working for them. It works.

Michael: So it sounds like, in practice, Envestnet was more of a TAMP you used historically for business, but in practice, you shifted primarily to more active/passive ETF lower-cost models. Morningstar managed as a baseline, Brinker as an alternative for clients who don't want as high of an international exposure, in particular.

Charlotte: Mm-hmm. And then Morningstar also has stock baskets that I really like. And in the stock basket situation, it was something that I didn't have the capacity or time to evaluate stock portfolios, but Morningstar has some great ones that are there. They have one called a Tortoise and one called the Hare. And my clients really like that. And that's a great kind of sleeve if I want to actually hold the stocks. So I've used that with great success. Like for fun, my dad has the Tortoise portfolio and my husband has the Hare. So it's kind of fun, who's beating who.

Michael: So for advisors who aren't familiar, what are the stock basket portfolios? And how is that different than the other TAMP models that they're offering or that you're using?

Charlotte: Yeah. So the Morningstar Stock Baskets, I think they call them Equity Baskets are a collection of let's just say 30 different stocks where your client actually holds the stock. So it's great because you can avoid pass-through gains. Or, for instance, like right now, we're in a situation where you might not want to put somebody into a mutual fund with non-qualified funds for risk of pass-throughgains. Well, you can go out and buy a stock basket and your client is immediately owning the different stocks outright. And their cost basis starts today. And then if they want to be kind of more domestically concentrated. And then clients actually really like the transparency of “Oh, okay, I'm owning this much Apple, this much Alphabet, this much…” They can see the actual stocks and the name recognition. And I have a lot of clients that really like that.

How Charlotte Integrates TAMP Fees Within Her AUM Structure [21:13]

Michael: So, how do you handle AUM fee structure? I guess I'm wondering both overall, just like where you set AUM fees. And the classic challenge always with TAMPs is like how do you handle the TAMP fee? Is it like you charge your fee and the TAMP charges their fee? Do you pay the TAMP fee out of your fee and just adjust your fee as appropriate? So, what does your fee structure look like? And then how do you handle TAMP fees?

Charlotte: So this is how we've handled it. I charge 75 basis points, that is my fee. It goes directly to me. I tell all my clients. And then, whatever investments that we choose have a fee on top of that. So Morningstar is running about 30 basis points, the clients all in at 1.05.

Michael: Okay.

Charlotte: Now, once again, you're catching me right in the middle of a fee increase. I have also realized that I'm undercharging here. So we are currently in the process of reevaluating that fee. If a client has $5 million or more, it's 50 basis points.

Michael: Okay, so you were historically just 75 BPs, with just a flat fee all the way up to $5 million, and then $5 million was the breakpoint?

Charlotte: Yep. Correct.

Michael: Okay. And so, how are you thinking about it going forward?

Charlotte: I think that the value that we're providing is higher than the BPs that we're charging. So I think what we need to do, and especially, what happens is when I set this in 2017, what we were doing, we were providing, and we have up-leveled in so many areas. And what we're providing to our clients is now a better experience. I've changed. Our team has changed. We've higher-level professionals working here. So we are considering 1% fee, up to $5 million. Leave the $5 million where it is. And then whatever the TAMP fee is on top of that it's on top of that. Now, at some point, I'll have to evaluate do I want to hire in-house or keep using the TAMP?

And what's interesting, not to get ahead of your questioning, but when I was at the point of buying the practice, and I had to do a lot of things really fast, I needed to scale quickly and I needed some solutions that would help me do that in the most effective way possible.

And so, when you start a business, you get to make all these decisions, and you don't have a capacity issue of clients you have to work with because you're starting and you have more time to deal with all these other issues. But when you buy a business, the business that you were kind of running, you are what I call a restart. So there's a huge difference between a startup and a restart. I would classify myself as a restart. Then at that time, hiring another person to manage the portfolios did not make sense. Nor did I have the time and capacity to do a good job in that role. Insert TAMPs. So now I'm four years down the road.

Michael: And do you get any just pushback or challenges with clients saying like, "Wait, why are there two fees? If we’re already paying them what do you do?” Do those come up in practice? Or is that more of a, we fear that, but no one actually asks that when the time comes?

Charlotte: A lot of it is we fear that no one actually asks, but, like a good overthinker, I did write out exactly what we do, what's included in our fee. So I have a one-pager to say, "This is our fee. It is transparent. This is what we do for our fee." So I have a very detailed way to explain to clients, this is what you're paying me for.

Michael: And just curious like, how do you explain that when when you've got this split fee and you have all the pluses and minuses of showing it so transparently that we can get crystal clear on here's what we do and here's what the TAMP does, but then it can really make people zero in of “Okay, I see what the TAMP is doing because they're trading stuff, like, what do you do again, Charlotte? Around here? For that fee?”

Charlotte: Yeah. Well, I think early on, I got questions, but it's funny that I'm getting less and less questions, which tells me I'm doing the right thing because people are asking less and less. I say, "Listen, our job is to know your financial situation inside and out and all the complexities that are surrounding retirement, tax laws, changes in the investment environment and help you determine if this is still appropriate for you, help you determine how much money should come out, what your withdrawal rate is, how it's going to happen, where's the money going, how much taxes are you withholding? We kind of have a drill-down of all of that. And I also say, "Listen we're partnering together. I'm serving in a coach capacity. I'm your financial coach. I'm going to help you make all these decisions. And my job is to do due diligence on all the investment partners out there. And I say it's checks and balances, it's not just me. I like to utilize the research of the people that are the best in the industry.

You can actually flip your questioning and say, “Okay, why do people not question more the one financial adviser sitting in their office deciding when it's time to rebalance and do they know when is the right time to make shifts in the portfolio? Or are you leaning on a team of professionals that that's all they do? Morningstar, their job is research.” And so, in that sense, people are like, “Okay, yeah, that makes sense, you know.”

Michael: Interesting. And so, the AUM model for you, it sounds like is a big core of where growth is happening, because you've got this third pillar, which is the retirement plan business. I think you at the beginning kind framed as, "This the legacy business." So talk to us more about the retirement plan business.

Charlotte: Okay. So the retirement plan business, I do have some 40(k)s, some 403(b)s, they are primarily in what we consider paid-up annuity contracts, which, before everybody gasps on how terrible annuities are, these are primarily group annuities from products that were developed in the '80s, which have extremely high fixed rates.

Michael: Yes, back when interest rates were double digits, and it was like, "Hey, just for the heck of it, like, let's write in something silly, like 3%, 4%, or 5% minimum interest rate." Like anybody would ever care about that when we're paying 12%. And it now sounds like, I got an annuity with a 3%, 5% minimum interest rate. It's a pretty fixed-income investment.

Charlotte: Yeah. It gets better too. And you open up the prospectus on these things. Some of these do not charge on the fixed account. So not only do you have that percentage of your portfolio, it is a zero-net fee to the client. So, to all the naysayers who were telling me how terrible annuities are, I said, "Okay, let's line up your clients' fees next to these." And it's very difficult to beat them.

Michael: Yeah, when you're like, “I've got a zero-fee fixed-income investment paying 3%, 4%, or 5% that you just can't buy today.”

Charlotte: Right. Now, is that appropriate for everyone? No. And that's part of the process that has happened over the past four years. Anybody that annuity was not appropriate for, they're no longer in the annuity. But there are so many people where you know what, if I'm acting as a fiduciary, I can't move them because they're in an investment that's appropriate for them at a very low fee. So that's a huge asset size, but it's a lower percentage of revenue. So you can do the math on that. It's about $100 million over there, but it's only about 30-ish percentage of our revenue.

Michael: Okay. And so, it sounds like then you're not necessarily actively doing annuity business into retirement plans. You're not even soliciting retirement plans, necessarily, just you have this block of business that was part of what you acquired, you're continuing to service it, which works fine because it provides ongoing trail revenue to service it, but it will, I guess, just naturally winnow itself over time as they pass away, retire, or transition out, whatever life circumstances change has happened to them and that that percentage of revenue just gets smaller for you every year.

Charlotte: As it stands today, that is accurate. Yes.

Charlotte’s Pathway Into The Advisory Business [29:38]

Michael: Okay. Okay. All right. Makes sense to me. And so, now help us understand a little bit more of the journey of how you got to a business where you're building primarily in planning fees and retirement portfolio management, but you have this big old block of retirement plan business. So how do we get here? I know just, eventually, that led into the business that led into a family practice that led into a succession plan. So let's just start there. Like, did you always want to be a financial advisor growing up? Like, how did you land in the industry?

Charlotte: Yeah, I never wanted to be a... (Capital N) “Never” wanted to be a financial advisor. And I interned, for a summer, even in high school, then I (All Caps) “NEVER” want to be a financial adviser. Then I went to college. And I graduated in 2003, right after the dot-com bust, so there was all of zero jobs available. And I did well in college. I graduated summa cum laude. So it wasn't like I didn't do well enough, but it was just a really tough job market.

So, my first job out of college was as a claims adjuster in a really large property-casualty insurance company. That was not fun. The person across from me in the cubicle was named Milton. And if you've ever seen office space, then you can just imagine walking into this huge just corridor full of cubicles, and the person across from me is named Milton. I'm like, "Oh, great. What have I gotten myself into?"

So I stayed there for 15 months. And then I was also a spin instructor at the time, way before Peloton and spinning was a cool thing to do. And someone in my class said, "Hey, you know what, you would be great at working in the financial services industry. Why don't you come and like, we got a role open, it would be great. And you could work the retirement plans at Duke." I was in North Carolina. And I said, "Oh well, that sounds great." I went interviewed, and of course, they've pitched the whole, “You can help service the retirement plans. And it's a market. You don't have to depend on your natural market. You can work this employer-sponsored case.” And it was more of a plan representative, I guess.

So I tell my dad, "Oh, look, I'm going to get this job." And he said, "Oh, man, you can't work for them. That's one of my largest competitors." He said, "You can't do that." And this was back when all the retirement plans were full-service advisor and it was a competitive market. And he said, "Let me just ask my broker-dealer. They might have a similar role in your area." And lo and behold, they did. No one ever thought to look at this before.

Michael: So, how do we get so quickly from I never want to be a financial advisor growing up, interned in school and never want to be an advisor, and then like 15 months after the claims adjuster job like, here we go into financial services?

Charlotte: Yeah, I think the short story is I realized I didn't want for work for a large corporation. So that taste in my mouth of the whole clocking in and clocking out, getting paid the same no matter how hard you work. That was not me, that did not fit my personality. And then I started reflecting a little bit about my childhood And my dad loved his job. He was helping people. He loved that. He always seemed to be available when it was time to have... He was at all the high school plays and the dance recitals and all the things that we did growing up. And he made a good income. And I thought, "This not so bad. Maybe I'll look at a version of that. I don't want it to look just like that. But maybe it's not as bad as I thought." You get a little bit of real-world experience on you and you realize that maybe what you were looking at isn't exactly as bad compared to everything else that is out there.

It was Lincoln, they had a new retirement division where they hired a bunch of young people. And so when they interviewed me, it was very smart on their part, they brought in three other young professionals that had just started, they were in their 20's. And they seemed like really cool, fun people to work with. And at the time, I was working in this very stodgy insurance company, very antiquated. Like, just not a fun work environment. And so looking across I'm like, Okay, these are fun people, and we got to travel. At the time they were like, " Oh, yeah, you might be traveling." Well, they sold large retirement plans to hospitals. And so the traveling was like I would be in the middle of nowhere, Mississippi, in a large hospital for 12 hours a day. But at the time, when they interviewed me, traveling with other fun people in their 20's seemed like a really great idea. So I took that job. And I was an enroller in a 401(k) company.

Michael: Okay. So where did it go from there?

Charlotte: So, the 401(k), let's just say that was 2004. So '05, '06, and a half of 2007. It was great. I loved it. I took the Series 6, enrolled people in their 401(k)s all day. And then they said, "Hey, we want you to work in the North Carolina State Pension opt-out plan." So the universities in the North Carolina system, the faculty level or higher could choose to go in the pension or they could do a pension opt-out plan, which was a 401(a) plan. So they needed people to go to the universities. And essentially, there were four providers. So if they decided to go and ORP they could choose their provider. So I got put on that. I would go to ECU, East Carolina University in Greenville, North Carolina, and I would sign people up.

And that became a little bit deeper work with clients. So it wasn't just kind of show up enroll people and leave. It was a relationship where I would...it was a little bit more in-depth planning. I'd have to run the numbers on, "Does it make sense for you to go in the pension, or are you only here for a short stint? Then if your accounts do well, over time, this is a mutual fund-based platform, you can move it to a 401(k) down the road if you're if academia is not your long-term career."

Michael: And I guess they really had two choices. Like do they take the pension plan or do they do the ORP? And if they do ORP, are they doing it with you, with Lincoln, or one of the other providers on the platform? So like, this is more directly a sales-oriented or a business development-oriented role than the enrollments were like plans have been sold. You're trying to get them on board, just still a sales process at its core. But it's a different kind of sale when you're just trying to get them to enroll in the plan versus you actually have to sell them on the plan and you as the provider.

Charlotte: Yes. And mind you, I was 24 at this time. And everybody thought ECU, because North Carolina, who's the jewel of North Carolina? You've got UNC, NC State, these are the big campuses, so nobody wanted to go to ECU. It's out in a rural part of the state. Well, they have a med school there. So I very quickly befriended the HR director of the med school. And I think she felt pity on me because here I was, this young thing in the south that didn't know what was going on. And July 1 is when all the new doctors start. And even in this very unassuming rural town, was this medical development, the person who developed the Gamma Knife, which is a cardiac procedure type, big technology at the time, was there. So there's people from all over the world coming to be fellows under him. And they had the option for ORP.

So the very first July, July 1, they all come in to HR. And then I had to have a speech. And it was myself. And the other company shows up with three “more distinguished gentlemen”, who have been doing this a very long time. That very first time was really scary, and difficult, and challenging. And I just about fell flat on my face. But the next year, I was determined that when July 1 came around, my speech was going to be good, I was going to be ready, I was going to know what I was talking about. I still wanted to dress like them. So I still wore a Brooks Brothers gray suit. So everyone was there in their suits. And I started to have success. And I started to learn the chops about how the ORP worked and the investments inside of it, and why that would be more appropriate for a young person that was only going to be there for four years.

And I really liked the individual relationship side. And so I thought, "Maybe I do want to be more than an enroller. Maybe I want to work with individual clients and get to know their stories." And I think I had some intellectual curiosity. And I think anyone starting out to be a 401(k) enroller is a great way to start. You get a taste for investments, you get a taste for people's risk tolerance, people. Like, you work with the masses too, so you get to see some behavioral finance. It's a really good learning lab for behavioral finance. But at a certain point, you might grow bored of that. So I grew bored of that. And I've been two and a half years into it. And I said, "Man, I really want to be an advisor."

So I lived in North Carolina, my dad lived in Georgia. And at the time, he had a lot of these large cases still, in hospitals and schools. And one of his partners was retiring. So he said, "You can come down here and be an associate." And I had gotten married. I convinced my husband to leave... He had finally reached the top of his career and gotten a coveted position at Duke. And I said, "Hey, you want to go to Emory?" And he was willing. He did it. So we moved to Atlanta in 2007. Just in time for the world to fall apart.

Michael: So what was the role that you were going to be taking in your father's firm when you initially went down there?

Charlotte: Honestly, it was a glorified enroller because they needed someone to go in the hospital two days a week and sign people up in the hospital. So I did that. And they said, "Okay, well, if you can get some individual clients you can do that. You can help us a little bit." So I would say I was part enroller, part paraplanner, and every now and then I would get a crack at getting my own client.

Michael: Okay. And so you do this, you make the transition. So I guess, what happened next? Like what happened next in the career and then what happened next in your career given the world went bonkers a year later, because the financial crisis broke out?

Charlotte: I mean, I literally show up, I'm like going to be an advisor, get all my... I'm an advisor now and everybody needs... And I show up in the south. And this is 2007, yeah. So, not only there, but I'm a young, blonde, female, still in my 20’s at this point.

And then when the financial crisis happened, I remember distinctly, everybody does, it's like that moment. If you worked in finance, you remember where you are and what you were doing. It was a series of days. And I remember the fear, like never having been through this. I remember my father just immediately hit the phones, I remember that. The other partner in there hit the phones. And then the fear of people talking. It kind of felt like that eye before the storm, though. And I remember some kind of quiet moments where everyone's like watching the financial markets. You're waking up and it's like, “What could happen in Asia, and collapse.” And I'm still super young and green. And so I'm trying to figure out which end is up. I had also just bought a very expensive home because that's what everybody did in 2007. Looking back, I honestly, I just want to give that girl a hug and tell her it's going to be okay.

And then, when you work in employer-sponsored plans, people don't know they've lost money until the next quarterly statements come out. And then the next quarterly statements. So I remember the next year being a constant barrage of phone calls. I literally just had to sit at the desk and the phone would ring and they would just push transfer phone calls to me. And when you work these huge employer cases, these are people that you've never talked to. They're calling crying, they've lost money. So it was just client after client after client upset, upset, upset. And these were not people that I had had long-term relationships with at that point. These are people I barely knew, some of them had had relationships with my father or the other financial advisor that was there before me or the other partner. And so you're sort of trying to pick up whatever relationship equity you could.

But the panic, the concern, the drama, and I just remember, it went on for a long time. People that are younger in the industry, we've been through some quick blips. But when you go through a prolonged down like that, it wears on you. A year into it, you're just... It beats you down too. And you're sort of like, “What am I doing and why am I choosing this industry?”

And I made the mistake at that point of I felt like an island. I did not meet other financial advisors that were around my age. I didn't get involved... I've heard you speak of it. And a lot of the people that were in it, during that time, got quickly plugged into next-gen and those types of things. I didn't have any of that. So I was very alone, in that sense. And there wasn't a lot of people my age in the industry. So that felt really lonely for a long time to be in that position. I just logged it out, I think.

There was enough business to kind of keep me going, but I had a lot of doubts at that time. Like, gosh, I just don't know if this is something I want to do for the long term. This is something I'll do for now. I'm desperately needed here. People need to talk to someone who knows more about the financial markets than they do. But this is not a mental state that I want to be in for like the rest of my career dealing with people that are devastated and upset and losing their homes and that kind of stuff.

Michael: So, I guess, what kept you in that you didn't go somewhere else and find something else? Or was it just like “The economy is so bad, I don't know if I can get another job anyways, so I'm just going to stick it out here?”

Charlotte: You go back in your thought process that time. I had a baby in 2010. And when it came time to determine what my maternity leave was going to look like, the broker-dealer told me, "You can do what you want, but if you are out two years, you have to retake the 7." And I was like, "I don't want to do that. I don't really know what I want to do, but I don't want to retake that test." Or the 65 or everything. Your licenses go bad. But you know what? I will just continue to... I was really digging into retirement distribution at that time, and there was all these people that had been in the retirement plans and now needed someone to help them get down the mountain. The accumulation to the decumulation. And so I would just work on cases with my dad in a paraplanner role, helping people to do that. And we still had some active employer cases. I would do that as well.

But I didn't have as much exuberance, let's just put it that way. That was not a more exuberant... I was a young mother. I was not connected with other financial advisors. And I think honestly, the mentality then was just kind of get through the day, get through the week, weeks add up to another year, kind of get through the new baby haze, and I'll reevaluate.

Michael: And so what came next in this path? Because this is not exactly the most upbeat phase for staying with it as a long-term financial advisor, you're obviously still here. So something shifted at some point.

What Turned Charlotte’s Career Trajectory Around [47:48]

Charlotte: I know that does sound kind of downer. It wasn't all bad. It wasn't all bad. Obviously, there were moments and people and clients that kept me going. You get this ray of sunshine moments or someone you really helped to kind of feed you with some energy.

So what happened next is that the employer business landscape was changing rapidly. And I had a front-row seat to something that was changing. Where that was no longer a marketplace that was going to be serviced by the full advisor servicing model. Consultants came in and they would reevaluate all these plans, reprice them, determine if they needed to... And the fee compression in the employer-sponsored plan happened. And so there was less fees, which is great for the consumer, but there was also less compensation for a full-time advisor to be on site. And we were on-site a lot. When I look back at the access that these people had to great financial advice it's amazing all the different “financial planning light” that was happening inside hospital cafeterias and inside schools.

And so as this was shifting, I started to see the writing on the wall. But it's not a quick process. And so, in the firm, we had to go through RFPs and consultants. And so what I was starting to see was that this was not going to be a long-term situation. And I had a really big sense of loyalty and obligation to all these people that needed financial advice, also to my father, and what they did. And he's a helper at core. So his true belief was that people needed financial advice that were in the lowest payroll positions. That everybody should have access to. It's very altruistic the way that it happened. It just wasn't going to continue in that way.

So there were definitely days where I felt like we were a dinosaur model. I mean, I kid you not, when I felt like I was the last brachiosaurus , kind of like looking around and being like, "Wait a minute, there's nobody else here. This is not going to be for very long."

And so, 2015 was sort of the final straw. And the cases at this point had become like mutual fund-based platforms. And so what happens is, when you lose a case, you lose it overnight. Meaning I think there was a hospital case, it was $60 million, that the next day, all $60 million is gone. It goes to the new provider. So if you were an advisor that had built your business doing institutional business and you had maybe half a dozen really large institutions, when one of them leaves, a huge source of your revenue is gone.

So 2015 was a huge RFP year, and we lost kind of the last big case. It went to an online type of provider. And we weren't doing, as a firm, what we needed to do quick enough to pivot. And I guess I started to get out of the baby fog. I had a second child by then. And I started to get more confident in my abilities as a financial planner. And as my ability to help people communicate some of the complexities of personal finance, I was into financial planning. Lincoln had this really cool software at the time that I loved, and I worked a lot on.

And so the year after we lost the last case, in 2016, I just sort of had a line in the sand moment. And I thought to myself, "You know what? I'm going to take this ship and turn course or I'm out." And I remember telling my husband, who's a physician, and he had recently switched to pharma, and I said, "Okay, are you going to do the pharmaceutical thing where we have to move all the time? Like, is that something that you want to do? Do you want to be an executive?" And he said, "I don't know. I really like being on a medical team. I think I want to just do this." And we had lots of discussions. If I do this, I'm going to do it.

And I came to my father in 2016, and I said, "You know what, I need to buy the business and take it over. And we need to change some things, or I need to leave and do something else." I'm not sure exactly the conversation was exactly that stark to him, but in my mind, it had reached the point. I'm a go-getter by nature. And I think after the financial crisis, those few years of just like making it through and kind of staying in it, keeping my licenses active, but maybe not growing as much, that wasn't me. That was not aligned with who I am and my core beliefs and just my makeup.

And I was ready at that time to do something. I felt like all my energy had kind of been diverted to family. And at this point, my kids were getting a little bit older. And so I was ready. And by older, I'm not talking that much older. Like, my youngest was two at this point. But you know what, I had had like a year of sleeping, which is amazing when you go through several years of not sleeping. So I had a full year of sleep. And I was like, “Wow, I can do things now.”

So I told him, "This year, it has to happen, or else I need to do something different." And I said, "It's okay, it's your business, whatever you would like to do. But if it's going to involve me, it has to happen by the end of this year, 2016." And he said, "Great. I'm ready. I didn't know you were ready. I was waiting on you." Okay, he was still early-60's. So he still had some juice left. But I think that losing the individual cases at which he had such an emotional attachment to, that was difficult for the change to happen and for him to lose those relationships. And he had put a lot of heart and soul into those over the past 20 years.

That was March of 2016. And then the rest of that year was dedicated to working out the terms. You alluded to in the beginning, though, when somebody sells their advisory business, they are selling their business child. And I am the actual child that bought this person's business child, which was a fascinating experience.

Charlotte’s Experience Buying Her Father’s Firm [52:14]

Michael: So, tell us more about that. Like, how does that start coming together? Because figuring out terms and structure and the rest is hard enough for any founder successor, before you layer all the family dynamics on top of it.

Charlotte: Yeah. It was hard. And I think one is that we had had a triggering event. So a lot of times I am seeing that people can't let go. But it became very clear that something had to happen. What had gotten him there wasn't going to get anybody anywhere. At that point, it was over. Certain parts of that were no longer.

Michael: And it sounds like losing his biggest firm client in 2015, the year before, was kind of the ultimate moment of realization just to accept that dynamic. Like “No, no, really, it's different.”

Charlotte: Right. Right. I think saying it out loud and knowing it. But actually, because I mean, when I first showed up in 2007, it was phrased, "Hey, we have all these cases, we might not forever, they're definitely going more direct service, Fidelity, go online and do that." They're like, "But we don't know how long we have." And so when you live in that mentality. Yeah, it could be a very long time. And I've also learned through this process that inertia is one of the strongest forces in nature. Never underestimate inertia.

And I think he was sort of like, "Whoa, Charlotte, she's back... I mean, because he knew me as a super-high achiever, go-getter. And then having children, and 2009, all those types of things just kind of knocked me around a little. So he's like, "All right, great, like she's back, she's ready to go."

March is when it started. And I think being a family member does a few different things. Yes, it adds complexities, but it also allows there to be more concise, you don't have to qualify what you're going to say, you can just say what you're going to say.

So there was a lot of closed-door meetings that... And another thing is when we became buyer and seller, we were no longer operating as a loving father or a caring daughter. He wanted a good price for his business child, and I wanted, as the buyer, the best price for the opportunity because I understood that the opportunity does not equal success. And that with this particular opportunity, I knew the work that had to be done.

At one point, I had considered having other partners come in to share the financial burden. We decided early on, that was going to be too complicated to work that out. So then it became just he and I. There was CPAs and lawyers. And I think it made them very uncomfortable because we would get in heated discussions around them in there. Full, open, "Well, what about this? And what about that?" And because his business, a lot of it was commission-based and then you had these other things, it was really hard to break down. So there were a lot of different pieces that were difficult to value, that had to be valued differently.

But we worked through it. There was some heat. I think the CPAs probably got the brunt of it because he took it as long-term capital gains, as he should. I had to take phantom income, pass-through income. Which, of course, when I figured that out and did all the math and realized how painful that was going to be for me I felt differently about the price.

And he sold it to me for above fair market value in his mind, but I knew I was buying a great opportunity. So we worked it out to what I would say is the best... And we both had to give and take a little. But we both were committed to getting it done. And I had sort of set the deadline of by the end of the year. Like this has to happen by the end of the year or I am walking away. My husband's a physician. So we would have been okay. And I'm a good saver and all those things so.

And I had a deep desire to honor and build upon his legacy. He could have just kind of let it ride out and be done with it. And he said that. He's like, "Yeah if you don't want to buy it I can just let these trails kind of ride off into the sunset." But I didn't want that for him. And there were so many clients that I knew needed really good financial advice. So I would say the deep desire for legacy, loyalty, and also, commitment to getting it done. And the broker-dealer helped. They came in and had some people that kind of came in and provided some counsel, some coaching. They brought David Grau in from Succession Planning [FP Transitions]. So he did a session with us. But it was a back and forth. So I would consider under good circumstances, it still took a good nine months to work out the pricing.

Michael: And so, just how did you arrive at pricing?

How Charlotte Arrived At A Final Price For The Business [57:07]

Charlotte: It's hard. I mean, we spreadsheeted every business segment. And each different business segment has got different multiples. Which is hard. And we had to guess a little on some of the retirement plans because we knew that the compensation, which was not under our control was going to change. That did not change in my favor. Just put it that way. But I knew that was a risk going into it.

And I also think that there is a huge mentality at play when you're buying a business. A, you have to realize you're buying someone's business child. You have to consider that. They have built this out of nothing. B, you are not going to be able to control every single thing. So there has to be some willingness to jump into something, and you have to make it go as the buyer. In any purchase situation, it's not going to be worth anything unless you make it worth something. People just think that, “Oh, you just buy this practice, and then you show up the next day, and you have all this flow coming to you.” And I don't think it works that way, in a majority of the situations.

So we arrived at the terms. We decided to do seller-financing. I decided to do it super-fast. It was a three-and-a-half-year payback. Which, if you do the math on that, it's painful. And I did that intentionally.

The broker-dealer put me through this great kind of program as I bought the business that helped give me, and some coaching, kind of a five-year plan. "Okay, this is what you're doing, this is what you... And it was very clear to me, day one, that we had to really start to think differently and hit the ground running because I had to turn the ship a little bit.

The business that was there was not going to be the business of the future. And so I had to implement the changes. And I wanted to put my back against the wall. It was a little aggressive. I don't think I would recommend doing that unless you... And plus, I wanted to give myself the underdog mentality. I knew, in order to make it successful, I wanted to give myself kind of a three-year timeline. I wanted to make it aggressive. And I wanted to be operating... And I essentially didn't pay myself the first year. It all went...

Michael: There's not a lot of dollars left if you're doing a reasonable valuation buyout and trying to pay it back in under four years.

Charlotte: Correct. Correct. And we had been smart, my husband and I, and we had constructed a reasonable financial plan. But it's still painful, especially because I was doing pretty well. So it was still hard to go from... And it's hard to work that hard and not have the instant gratification of bringing home a lot of money. But I treated myself, like in my mind, I felt like I was a startup. Because that's how that mentality is. And I had this plan. And I owed more money than I'd ever owed anybody. This was more than my mortgage. And it was to my dad. Like, I wasn't going to...

Michael: Yeah, having this not work out and defaulting on the loan is not even just personal financial consequences, now like, you're blowing up all family holidays at that point.

Charlotte: Yeah. And it's funny because my grandmother, she's like 90. And she called me and she's like, "Charlotte, you mean he just didn't give it to you? I thought he was going to give you that business." And I'm like, "No, he didn't. I'm paying for it.". She was funny. She was a little nervous. So I'm going to work for it just like anybody else. This is...

Michael: I'm assuming dad actually needs his retirement checks so he can retire too. There's a math part to this.

Charlotte: Yes, there is a math part. But yeah. So then, 2017, I remember we had the final legal documents. It was over Christmas, I think was December 28th, I had to go sign them. And then January 1st, 2017, was like off to the races. It was crazy.

Why Charlotte Opted For An Accelerated Payback Schedule [01:01:02]

Michael: So help me understand again, just why the intentionally fast payback? Like, why that structure?

Charlotte: Well, due to what happened in 2015, the loss of revenue to the business, in order for it to be successful, it needed to grow quickly. And so I wanted to put pressure on myself in order for that to happen.

Now, did I know in the back of my mind that I probably could have restructured the payment and he would have been okay with it? Yes. But I really wanted to give myself an aggressive payback because what's a greater motivator than putting your...?

Michael: Yeah. So, the idea was a faster payback will force you to grow the business faster and change it more rapidly. And that was the pressure you intentionally wanted to put on yourself.

Charlotte: Correct. I think I had a lot of motivational sayings posted everywhere in my life at the time, but I think I said, "Pressure is a privilege." So here's the pressure. I have a bunch of them. And I knew myself and I knew, like, give me the challenge. Things had to change. I had to change. I had to grow into the leader that I needed to be. I had to get clients to change. I mean, just everything sort of had to restructure. And so, I changed my mentality from the inside out. Like I was kind of going through this metamorphosis of I really made this like a big thing. This was this monumental thing in my life. I remember my husband at New Year's eve, he bought a really nice bottle of champagne, told all of our friends like, "Yeah, Charlotte's going to be the...she's gonna take over the business." And there was like a quick second of happiness. And then it was just like the next year was insanity.

Michael: I'm just envisioning the like... "Wait, you spent how much on that? Do you realize how much debt we're in right now?"

Charlotte: Yeah. And he had no idea either because I had been sort of a more of a supportive role at home. Like he had no idea what we were about to go through.

Michael: So what came next? Is it just you, you dive in? Like, okay, it's now January 1st of 2017, you've acquired this firm, you're pretty clear you don't want its future to look like the past and you just like lit a fire in yourself that you have to make changes happen relatively quickly, given the debt payments and the commitments. So what happened? Like, what did you do as you came in and had to start changing the direction of the ship?

How Charlotte Hit The Ground Running After She Closed The Deal [01:08:18]

Charlotte: Get excited, Michael, here comes the good part. So the first thing I did was hire somebody new, right? Because I had no money. Hardly any. So I took the little revenue that I would have had and hired somebody. I knew that the staffing situation as it existed was going to need to change. But because we're a micro-business, you can't just come in. And so I went ahead and hired the future. Step one. And this was an interesting situation. This person, I hired her in December, actually, before things started, and she was a professional organizer who ran an individual organization business. And someone gave me a gift certificate because my closet is woefully disorganized. So I hired Claire.

And I said, "Hey, I want you to work with me. I've got this great business, but it's going to change. And what it is today isn't exactly what it's going to be like. I got this great vision. And this is what I want to do. And I want to serve all these clients, and we have to meet with all these people. And you're highly organized. And I really like your dedication." And she at the time had been a personal assistant for 10 executives. And she had come to me and said, "I just want to work for one person and make their business great, rather than being spread out between 10 people." I said, "Great, you're hired." And I said, "Come with me, I'm going on this journey. I can't pay you a lot right now. But just trust me and work with me."

And the office was out in the suburbs. And I said "You got a year to learn everything that everyone here does so that you know." And I said, "And by the way, there's 100... Like we went down to the top 100 clients. A business coach said, “They needed to think of you as their lead advisor within a year.” So you have to meet those 100. I took the employer-sponsored book and I identified 200 people. And I said, "We have to meet with all these people." And so she and I said, "Here's the deal, we just have to schedule as many meetings as possible. I'll analyze all the investments, you schedule all the meetings, I'll go through the process. And we need to let these people know that we have a great plan for their investments, we can offer financial planning. We got an eye on the future. And the name of the game is as many people as possible. Volume at this point in terms of the meetings. Game of numbers."

So I think I called it Project 200. And so she and I made up all these goals. And I think everyone else in the office thought we were crazy. They thought we were crazy because we'd rip up papers and put them on the wall. And she and I would give each other motivational speeches. And then I had to tell the office staff, I think my dad and I marched in and he literally gave a speech. "He's like, "Okay, I had gotten fat and happy, and that just isn't going to work anymore. So now Charlotte's in charge," which they should have seen this coming. I mean, we had all these closed-door meetings.

Michael: So this staff didn't know that this was coming?

Charlotte: Ish. They did. I don't think we ever explicitly, like I think that they thought it would be gradual. I mean, literally, that first January, he's like, "Hey, Charlotte's in charge of everything. Every leasing, copy her in her name. I'm no longer..." He was still there. He was going to work there. But he was no longer in charge of anything. It was like ripping off a band-aid. Like, all of a sudden, I had to hand them their contracts. And I'm like, "Oh, yeah, I have a new employee."

The best change, though, so there's two support staff and then I had hired Claire, and she comes in. And I said, "Well, Claire's not going to be doing your job. We have to meet with all these people. And they also knew that we lost the case. I mean, it was very clear like, “Hey, we lost our largest client.” So Claire’s on this project, goes to meetings. I said, "We have to adjust a few things." So I adjusted everybody's contract. And then we had these little pink pieces of paper that said, "While You Were Out." And you wrote the messages. And then there was a plastic office organizer with slots in it where it had everybody's name in the office. And when somebody called, they wrote it on the pink piece of paper and put it in the slot.

It was so inefficient it drove me bonkers. So I said, "You know what, we're no longer going to be writing the While You Were Out messages." And I threw away the plastic thing. And I said, "We're just going to email when somebody calls. Like, “Just email me if I'm not in the office. If I'm there, transfer it to me, and I'm not..."

Michael: Mind blown! You can do this with email??

Charlotte: This was 2017. This just tells you I use a dinosaur analogy. Like I'm only giving you the tip of the iceberg of the dinosaur analogy. Oh, they were not happy. That was bad news. Bad news. That was my first move at the team meeting was to throw away the plastic While You Were Out system.

So we started meeting with people like crazy. We figured out everything from how to sign up with the Department of Labor, how to get your name on a copier. All that stuff that I have been an entrepreneur that I hadn't accounted for. Oh, yeah. And there was a bunch of clients that would call. Like we still had to service people that wanted to change their beneficiary or that kind of stuff. And I was trying to get them to shift. Like, I'm no longer doing those tasks, like the paraplanning task. Like, I have to meet with these clients. And it was fast and furious. I remember I would drive through Starbucks at 7 a.m. and get one of those protein pack things, put it in the refrigerator, and eat it on the way home at 7 p.m. Because I had so much to... And I had done none of that before. I had to get payroll in my name. Yeah, and trial by fire, right? So all those running the business things while I was hitting the phones all day, having meetings.

So that was going well, though. I mean, we were just hitting the targets. And I think too, I'd set a target of “Okay, we need to have $20 million in managed money by…” we need it in 18 months, I think was what I had said, was sort of like the massive target that I set. No, less than that. Let's say a year, somewhere between a year or something. I said we needed $20 million. And it needs to come from the outside or we need to find this.

And I told Claire, I said, "This is great." And she had to drive. That was the big concession, like coming to this office that was not close to her. I said, "You need to drive, but here's the deal. Within five years, we're going to move a little bit closer to the city. And it won't be so far out. And you have a year to learn everyone else's job because I'm going to have to do some shifting and restructuring."

Ten months into this scenario of us just grinding, the office building sold and so we could no longer lease. This was what, November? We had to be out by the end of the year. So, all of a sudden, we're going to have no physical location.

Michael: Oh, good Lord. Like, the building got sold, and I guess the buyer either said they're busting the lease or just they had an out on the lease?"

Charlotte: Well, side story. My father owned that building. And I told him I'll buy the business, not the building. When that particular office complex kind of turned around, I said, "As your financial planner, I think that you should sell this now. As your office tenant, hopefully, it will take eight months. The sort of time-on-market took 10 days.

Michael: Ooooooh... okay.

Charlotte: Yeah. But here's another challenge, as his daughter, that was good because I did not want to be holding this office building that was like 40 miles away from my home. And it had been purchased in 2008. So getting out of that current situation was a critical issue to his individual financial plan.

Michael: Okay. Except a little disruptive for it to work into your world quite that quickly.

Charlotte: Right. Plus, the research was showing eight months. So I thought, “Okay, it takes six months to find out…” I kind of had it planned out, let me get through Christmas, and all this stuff.

So, there was another partner. So it was myself and another partner. And the other partner wanted to keep the same arrangement that my dad had, where we shared staff, we shared expenses, but we basically ran as silos. And so when the office building sold, he was supposed to be looking for a new location. And instead, he found an RIA that he wanted to move to.

So he came in and he said, "I need you to sit down, I need to tell you something." And he's like, "I know this is going to be hard, but I'm going to move with this RIA. And I'm 50-something, if I'm going to make this move, I have to do it now, with all the changes with you and your dad." Like essentially, he was just like, "I don't need the whole office sharing expenses anymore. I'm just going to go and do this other thing." So within, let's just say, a 10-day period, I learned that we were going to be office homeless, partner left me, and the brand was no longer valid because the other partner's name was on the door.

So I had to stomach all of that in November of 2017.

Michael: Ouch.

Charlotte: Yeah. Yeah. It was not cool. I went home to my...

Michael: Welcome to business ownership. Like, “Good news, since you are the owner now, these are all your problems.”

Charlotte: Yeah. And it's funny. I was trying to explain to a friend and I was like, "Listen, it's just some people go to MBA school. But I just got my MBA in the Hard Knocks." Owning a small business is like getting an MBA in Hard Knocks. Oh, gosh, it was right at Christmastime. I had to move into a temporary office location the Saturday before Christmas. Oh, it was awful.

And I, as a mother of young children, I am the magic maker of the Christmas. I'm the CEO of the Christmas magic. And so that was also like really stressful. My youngest was three, maybe four. So we were still in the thick of small kids. But man, we ripped that band-aid off, we moved into a temporary office. At that point, the staffing situation, I no longer had someone to share expenses. And I said, moving the office, and one of the staff members told me that wasn't going to work for her. And I said, "Well you know what I think, this is a natural parting like there will no longer be a job at the end of this year." And then I had to rebrand, but I decided to hold off on that.

So yeah, we moved the Saturday before Christmas. It was my dad, myself, and Claire. And when we moved, that office was like a museum of office machinery because nobody had cleaned out the office machinery in 30 years. So it was much easier to move those old printers than to actually evaluate if you're ever going to use them again and throw them away. It was really like a museum of... My kids were like, "What are these things?" Like these are printers, like version 1.

Michael: So like, you bought the firm in 2017, but suddenly, 2018 is this like fresh, new clean start on the business because the firm's changing, the brand is changing, the location is changing, staffing is changing. Like, so I feel like it's gotten really real, but now the change momentum is suddenly really picking up if only because it has to.

Charlotte: Yeah, the change delta hit. And it's funny because Claire and I had talked about like a five-year plan, and like the five-year plan became an 11-month plan, like an unplanned 11-month plan.

Yeah. So January 1, 2018, we were in this office building. I remember it was really great January, and we were just like, I kind of looked to her, I'm like, "It's me and you. Like, we got this." And see, the clients didn't really know this was all happening. I tried to manage the change information to the clients because they had just had a new advisor last year. And so I wanted to gradually roll out the new elements of change, like the new location and the new name and the new... I didn't want to run on the firm.

So she and I literally just logged out the client servicing kind of what we have, but then we picked it back up again because I had those goals. And so I subleased, like a satellite office, back out in the old location. And I would drive there twice a week and meet as many clients as would meet me there.

And I really believed at that time, like, okay, the interaction that I have with clients has got to be so, like I have to be so confident, so on point. And my confidence grew because I was getting a lot of yeses, and a lot of new dollars. It was a shift in momentum, what was happening. And that's when I started to kind of catch wind of Stephanie Bogan and her mindset work. And I thought, "Man, this girl is onto something." And so I would just like listen to her motivational tracks and some of the articles that she wrote. Just kind of walk in, confident, ready to go, business as usual.

And then we found a location, we moved again. I made our second hire. We hired a branding firm. I realized at that point I did not want anybody's name on the door. Because I had learned that that person may not stay. So whatever the name was going to be, it was not going to be a last name. So we hired a branding firm, which is a great experience. They did, I don't know what you call it in branding, where they go out and survey clients. Where they interviewed 10 of my clients. And I'll tell you what, that makes you feel great. Because I told them, I said, "I'm going to hire you every year to tell me what I do." Because essentially, I said, "Oh, clients like this, and clients like that." And I kind of realized through that process that my unique ability and my gift in financial planning is that I can simplify.

I think our industry as a whole really makes things overcomplicated. And the key is to like, “Oh, it's so complicated so you need to hire an advisor.” It's like, “You can't understand this.” And I really just want to pull back the curtain, like "The Wizard of Oz," and be like, "Listen, our industry has all these big words. Sometimes they exclude people, they make you feel just really the opposite of confident. Like you don't belong. And I feel like so many people in this country walk out of their financial advisors, they just don't want to feel stupid to ask the questions. And I've worked really hard over my career to make sure that when a client walks out of my door, that their head’s up a little higher. They feel a little bit more knowledgeable or confident about their financial situation. And particularly women. I've seen this a lot.

And so I've worked really hard to craft my conversations with them. Like, "Hey, there are no stupid questions." This is in a place where I have a roundtable intentionally, so there's no head of the table. We're sitting together. I'm on the same side of the table.

And so the branding came through in that... I was able to hone in and understand that is one of our value propositions. And I tell clients that. "Listen, my goal is to simplify your financial life. If you are looking for some really fancy-schmancy complex things, I'm probably not the advisor for you."

Michael: And out of curiosity, who was the branding firm that you hired?

Charlotte: It's called Proper ATL.

Michael: Proper ATL because they're there in the Atlanta area, I assume.

Charlotte: Mm-hmm. And they're really cool. And I think they had worked with... Okay, I got lucky because I got them when they had just broken away from a larger branding firm. And so I probably got them on their initial pricing situation.

Michael: Good timing. Good timing. I think now they have big client rosters, Chick-fil-A, and like they have some pretty big names and stuff. But God, they were so talented, and another advisor in the office that I was in at the time, said, "Can I sit in all the meetings?" And so Jason, my partner, is how he became affiliated with Silver Penny as well is because we did financial playing the same, that resonated with him. And so he wanted to get in on the Silver Penny brand.

What Surprised Charlotte The Most About Building An Advisory Business And The Low Point On Her Journey [01:19:22]

Michael: Cool. So, as you look at all of this, what surprised you the most about building an advisory business, now that you're in the hot seat as the owner?

Charlotte: How much courage is involved. I think that there's a lot of courage involved in just what we do every day. Guiding people's financial lives. People are looking to us for like what do we do? Is it okay to buy this or not buy this? I think, courage to invest in the business at very difficult times. I think, courage to keep going when things seem really bleak. And I think leadership qualities are something that I didn't realize was going to be really paramount to success.

Michael: And so, what do you do with that or about that? Like, how is that shaping what you're doing?

Charlotte: Yeah, I’ve go three guiding principles of leadership. I think that a leader needs to set the vision, define reality, and say thank you.

Michael: Oh wait, say that again. I like those. What were the three?

Charlotte: Set the vision, define reality, and say thank you.

Michael: So what was the low point for you on this journey?

Charlotte: Probably the 10-day period where the partner broke up with me. We were office homeless and we had no brand. Although 2009, I would say, the way that it sapped my energy for the business, that was the low point of 2009, 2010. But owning the business low point so far has been that little time period where it felt like the bottom was falling out.

Michael: And, I mean, did you think about giving up, changing, going back? Like, “Hey, maybe I don't want this after all. Maybe I should find someone to sell to and just move on to something else.”

Charlotte: Everyone says the journey, like the hard stuff journey is sort of motivating in itself. Like, there was a part of me that's like, "This is not how it ends. Like, I'm going to get it together." This is just faster than I wanted to. I quickly turned it around. So I'd have to have a mentality shift there. My story that I was telling myself was like, "Well, this is very y painful. But this is exactly what you wanted to happen. It just happened earlier. So now you just have to keep making it happen every single day." Another thing is like you have to fight for energy, I think, sometimes. There's things that will unexpectedly get you down. Like, I don't know how many people the pandemic sideswiped them. It took something from their energy, their motivation, their sense of go get it. But fight for it. Fight for your energy to do great things because there's a lot of things out there that people need to do.

Michael: So what do you do to fight for it? I mean, just like how do you do that in practice?

Charlotte: Oh, a work in progress. I have a strong faith. So that helps. I truly believe that wherever you see incredible things happening there's collaboration. So I have a team... Claire is my chief of staff. She is a core integrator into everything. It's like your tip of your iceberg. Like if you see that one person doing something, there's usually great people around them. And so I really try to get people to speak into me that are also doing motivating great things. I've shifted a lot I think of I try not to hang out with people that are negative or not encouraging. People that want to see me succeed.

What Charlotte Knows Now That She Wished She Knew Earlier [01:23:08]

Michael: And just as you look back at this and thinking particularly over the past five years since you were making the decision that you were going to do the purchase from your father, what do you know now that you wish you could go back and tell you in 2016 as you were thinking about working on the deal?

Charlotte: There are a lot of great people in this industry that are pulling for me to succeed. It took me a minute to find those people. I had taken the more isolationist, like Island kind of career path. But now I've gotten to know a lot of great people through... Riskalyze has introduced me to really great people at their conferences and through coaching programs that I've done. And just don't go at it alone.

Michael: I was going to say, how do you find the people in practice?

Charlotte: Try different things. I know a lot of people have found luck through FPA and those types of organizations. So, for me, it's been like coaching groups. I think it's also been conferences where you see people that are like-minded, and you can tell on LinkedIn and other kind of social media places where financial advisors that maybe have the messages that resonate with you or even this podcast. I mean, how many times that people listen and be like, "Man, I feel the same way about XYZ as that person."

Michael: So like, find people who seem to be like-minded, politely cyberstalk them on social media, and then figure out how to hang out with them. That’s the thing about the digital, you can figure this out about people.

Charlotte: Go to that conference that you don't know. And so like the Riskalyze one, in 2017 I was like, "I'm going to go to one conference where I don't know anybody." And I went. And it was fantastic. And there was this whole room full of energetic advisors that were doing all these different things and using all this different technology. And I was like, "Wow, there are people like me all over the country that are doing it slightly different but that I can be friends with, and I can pick up the phone...." And I did get lucky. Actually, I had one person, not like a broker-dealer who no longer works there, but I called him my friendtor, he's like my friend and my mentor. And at the low point, I called him. And he actually told me, he said, "Listen to Matthew Jarvis's podcast on Kitces number seven." And he's like, "Just go do that."

Michael: So what advice would you give younger or newer advisors looking at coming in and getting started with their careers today?

Charlotte: There's a lot of different ways to do it, too. I think we can easily hear something and assume this is the only way to success. And that's absolutely not the case.

I would also say like never underestimate how much heart... It takes work. It takes hustle and grind. Like going out there every day. And also invest in yourself and your mindset.

What Success Means To Charlotte [01:26:02]

Michael: So, as we wrap up, this is a podcast about success. And the theme that always comes up is just the word success means different things to different people. And so, you're now on this great growth path for a successful business. You're not even five years out from the transition and $500 million and growing quickly. So the business is succeeding. But how do you define success for yourself at this point?

Charlotte: Well, I have three different success, kind of, measure buckets. I want to have an impact in the world, I want independence, and I want income.

So I would say my impact is definite. I get to impact the people who work on the Silver Penny team every day and also my clients.

Independence. I define independence as I want to do what I love with people I enjoy on my own terms. I would say I'm getting there. I'm not 100% there, where I'd like to be, but I'm working towards that.

And then income. I'm constantly taking steps forward and step back, depending on how much I want to invest in the business. And I would say I'm close to hitting my goal targets, but I think the other two filters are pretty big for me.

Michael: I was just going to say I'm also just struck that you have them very well defined. Like your three Is. Impact, independence, income.

Charlotte: Yeah, I mean I'm sure I took that from somebody.

Michael: It works. It works. I love the lens. I love that as filters for what we're doing and how we're focusing our time and energy.

Well, thank you so much, Charlotte, for joining us on the "Financial Advisor Success" podcast.

Charlotte: Thank you for having me.

Michael: Absolutely.

 

Charlotte Gelekta is a registered representative of Lincoln Financial Advisors.