#FA Success Ep 244: Taking A ‘Financial Gym’ Approach To Financial Coaching For Next-Generation Clients, With Shannon McLay

Resources Featured In This Episode:

• Shannon McLay
• The Financial Gym
• Martinis and Your Money
• VC Brags on Twitter
• Raising AdvicePay Capital And How Misaligned VC Incentives Strangle Advisor FinTech Innovation

Full Transcript:

Michael: Welcome, Shannon McClay, to the "Financial Advisor Success" podcast.

Shannon: Thank you for having me. I'm excited to be here today.

Michael: I'm really looking forward to the discussion today and just talking about the advisory business that you've been building over the past few years. In fact, I don't even know if you call it an advisory business or think of it that way, I guess you live at sort of the intersection of advising and coaching, working with a much younger type of clientele than what a lot of us typically do as financial advisors. But as just more and more business models are getting out there to provide advice in an ever-widening range, I was really excited to have you on the podcast and talk about what it's like when you really take a...to me, what's interesting, both a much more coaching centric model for a younger clientele and you try to do it at scale. Because I know you are in the process of trying to build kind of a nationwide network of Financial Gym locations to do what you do.

And I think in the...the world these days seems to be very built around if advisory businesses are going to exist, they're sort of very focused service-based businesses because if you're going to go big and scale something, it's all about technology and just putting an app in everybody's hands to do everything. And I feel like you're crossing that path of like, "No, no, we can do advice and coaching and scale it and have reach and help a lot of people who are not traditionally helped." And so, I'm just excited to hear how that's been going because I know you've been doing it for a few years, a wee little pandemic got in the way in the middle. And so, I'm excited just to hear what it looks like when you start trying to build advising and coaching for, I guess, as our industry calls it next-generation clients and try to start scaling it up.

How Shannon Is Building (And Scaling) Her Business To Provide Financial Coaching To Next-Generation Clients (05:05)

Shannon: Yeah, what do I call it? We call it financial training and our "advisors" are trainers. But I came from Merrill Lynch advisory, traditional advisory space, so I tell people, "At the end of the day, it's financial planning with some marketing around it." The core of what we do is very aligned with best practices from the CFP but with a little bit of nuances to address...like our generation, we call our training program the Certified Financial Trainer program, CFT, because we do take a lot of traditional planning practices in place but also with the added education around the behavioral finance component of money that we know, that we've seen with coaching clients' success over the last eight years, with the nuances of this different generation, understanding student loan debt, understanding other debt options, and the like, understanding financial independence is the concept. So, some unique things as well in our business.

Michael: So, I think to get started, can you just tell us about the business? Just what is the business? What do you do for advisors who are not familiar with what you've been working on for the past couple of years?

Shannon: Yeah, so like I said, I was a financial advisor at Merrill Lynch. I became a financial advisor because it all kind of looked and felt the same. I was working for Bank of America/Merrill Lynch at the time, and I was working with Merrill Lynch advisors, and I needed an advisor and I thought, "They all kind of look and feel the same," and I thought there could be some diversity and a different kind of way of doing financial advisory. And honestly, I wanted to help more women kind of get into the space. So, I knew a branch manager, he was a good friend of mine, he was like, "I will hire you," and I was like, "Great." And then the day he hired me, a day before when he told me I had the job, he was like, "Hey, I used a chip on you, so don't fail me," and I thought he used a chip on me because I'd negotiated for more of like a bigger base salary. I found out over a year later, it was because I interviewed with seven people, seven men and six of them did not want to hire me as an advisor and he was the only one who did. So, that was the chip he used and none of them thought I could...

Michael: The chip he used was, "Even though she's a woman, let's try it."

Shannon: Yes, yes. They all said, "She's a woman, she can't do it," was the feedback. And my argument...and I kind of got that feeling in my interviews. I've been in sales for 13 years at this point, I was like, "Sales is sales, it's just different products." And my argument back to them was like, "Hey, 85% of this space of my competition are men, so I'm not going to win every deal but I'm going to just be different in picking up the phone and calling somebody, so I'm going to get something," was my argument. And so, six of them didn't buy it.

Michael: "Someone out there just doesn't want to work with another dude and will come work for me just because I'm literally not one of them."

Shannon: Because I'm literally not them. I don't know how big that market is, I literally said that, "I don't know how big the market is but I know there is a market for it."

Michael: "It's not zero and I can call a lot of people. I'm just going to shake loose here, give me a chance."

Shannon: Something, something. So, yeah, it was funny to hear that. And I found out a year later because I was one of the top advisors not from the advisory class, and they wanted to know how to replicate me and I was like, "Well, if you hire me to begin with, that would be great practice." So, I was a financial advisor, and building my business with the high net worth clients, I was supposed to get...you had to have a minimum of $250,000 in assets to work with us. And I say this all the time that I laughed that the Gym would never exist if I took my Merrill Lynch mentor's advice. And he said, "Shannon, pre-screen all your calls, make sure they have money before you even meet with them because they won't even count as a household unless they have $250,000 assets."

And I remember just thinking, "That's the craziest thing ever, I'm not going to ask somebody how much money they have in the bank before we have coffee, that just doesn't feel right to me." So, I smiled and nodded. That was actually one of my prerequisites before becoming an advisor. I told my branch manager, the guy who used the chip on me, I said, "As long as I hit my goals, I know what my goals are, as long as I hit them, do I have to follow your rules?" And he was like, "No." I was like, "Okay," I was like, "I will hit my goals but I am not going to do 5,000 cold calls in a week and I'm not going to do that...there's certain things I'm not going to do." And he was like, "Yeah, no, as long as you hit your numbers, it's your business to grow," I was like, "Okay."

So, I had that in my head a long way, so when I hear this advice of pre-screening my calls, I was like, "Yeah, not going to take that, so I'm just going to take every meeting." So, I took every...so if somebody was like, "Hey, I need a financial planner," I was like, "Yeah, let's meet, let's chat." And one of my first meetings was this woman, she was like, "I need a financial planner," I was like, "Great," we were talking, and she was from a family with money so I was like, "Okay," all the signs, I felt like it was going to be something. And she was like, "I have $250,000 of student loan debt and I make $50,000 a year doing discovery work for a law firm, not the six-figure law job my private law school told me I was going to have." And she went on and on and my mind just kind of racing and I was like, "Oh, I don't know what the hell to do with this person," and she said...

Michael: You lost me at negative $250k. The minimum is positive $250k, you're $200,000 short, this isn't working well.

Shannon: Yeah. I mean, I heard $250k, I was so excited and then I was like, "Oh, the wrong side of the equation, $250k, okay."

Michael: "Oh, wrong side of the balance sheet."

Shannon: Yeah. Okay. And then she says, "And I just feel unlovable. Who would want to marry me with all this debt?" And I remember thinking, "I wouldn't want to marry you," so I get it, I get it, but I didn't say that to her. But I remember thinking because, at Merrill Lynch, it was like, the wealth management tool was what we had that you would do these plans and I was like, "Yeah, she's not going to like what that wealth management tool produces for her." So, I was like, "Well, let me help you," I was like, "I can't really open or do anything at Merrill, but I wanted to help her out." So, I just started figuring out, taking kind of some of the things that were going on in there, and just kind of figuring out how to create some kind of roadmap for her.

And then I started doing that for a few other people and it was like this dirty little secret that I was helping people with no money on the side and bringing in new clients with money but doing these little...I called them my pro bono clients. And then I just went on the path of becoming the worst financial advisor ever because I loved my pro bono clients more than the people with money. It was just more interesting work for me and I was doing that for a few months and then had like the Oprah "Aha," the big week of my life that just kind of changed everything. And the week started with a quarterly review with a high net worth couple, they had $1.3 million invested with me, they were two doctors making six figures, and we're going over their portfolio, it was down 3% because the market...and I think any advisor who is listening is going to be like commiserate, it was down 3%, the market was down 6%.

But I'm having to talk them off the ledge because they're just like, "I mean, what are we going to do? How are the kids going to go to college? I mean, where is our money?" Blah-blah-blah. And I tell people, I spent an hour of my life making them feel better about being a little less rich and I was like doing all the things we all have had to do in the past to calm people down when markets are down. And again, this is like...I've thought in the last year, "Oh, I can't even imagine if I had to talk to these people last April." But. yeah, so I was like, "Okay," talk them off the ledge, walked out of their house, and I thought, "That was really soul-sucking, is this what my job is as an advisor? It doesn't feel good."

And then, two days later, I did a plan for a pro bono client and it's literally so much like we do at the Gym now. It was just a Word doc and it was bulleted tasks of what she should do about saving, how much she should be saving, how she should do with the credit cards, the student loans, and just in plain English, and that was it. And I was giving it to her and at the end of the meeting, she said, "You know you're saving my life, right?" And I was like, "Oh, this meeting feels so much better than that meeting." And it literally hit me all at once, Michael. I was like, "I need to do something to help people like this," which is the majority of Americans because every financial institution is trying to go after the small population of people and nobody is trying to help these other people. And it's because it's inherently flawed, the system, I always say the financial services industry shouldn't be called the financial services industry because the only way they provide the service is by selling products, it should be the financial products industry.

And the problem with this larger population is there's not really a great product other than debt products, which don't really help you build wealth, but those are like the only products they can really kind of give them to consume. But what I was seeing is the need for an actual service and my altruistic side wants to help this population, my capitalistic side was like, "I want to take their money because they all wanted to pay me." They all said, "I'll pay you to help me with my money," and I was like, "I got to figure out a way to take their money." And at the same time, I was on a weight loss journey and I'd lost over 50 pounds of Weight Watchers and working out and a few things, and I remember thinking around the same time like, "When I wanted to get physically healthy, I had so many places to go to get physically healthy, so many different things to do to get physically healthy."

But if people want to get financially healthy, where do they go? Where do I send these pro bono clients to that I can't take care at Merrill, but I can send them there and say, "Hey, go here, you're going to be in good shape if you go here?" And I thought, "Well, if you want to get financially healthy, you go to a financial gym," and it all came to me...it was like a lightning bolt. I was like, "It's like, H&R block but fun and cool, advisors are trainers, they wear jeans and T-shirts, people pay a monthly membership fee just like a regular gym, and just like a regular gym, anyone could work out there." And that was eight years ago and I laugh because it's been a long eight years, but I saw it very clearly. I was like, "This is it," and started kind of talking to people about it.

Everyone thought I was crazy, they were like, "No way." And a few people were like, "Yeah, maybe this makes sense," they were like, "Well, bootstrap the idea." Because I wanted to raise money, I was like, "Let's get this going, let's build it out," and they were like, "Yeah, why don't you bootstrap it? Prove the model first, prove that people will pay you to help them with their money, and then try to raise money." So, that was eight years ago, 2013. Actually, this July, this month, I left Merrill Lynch to start building what will become the Financial Gym. I knew nothing about starting a business. I knew nothing about what financial training would look like, what to charge, what results I could expect, I knew zero. The only thing I had was that I literally could not sleep at night, I just knew I had to do it, I knew no one else was going to do it and I had to be the one to do it.

What Shannon’s Business Model Looked Like As She Bootstrapped The Financial Gym [16:55]

Michael: So, where did it start? What was the initial, "Bootstrapped, okay, off we go," model out of the gate?

Shannon: Well, what's funny, I assumed some portion of my Merrill clients would come with me, pay me on a quarterly basis to monitor them, work on their different things. And one went with me, that was it, everyone else was like, "Oh, you're going to look at our expenses, I don't know about that." Which is a funny thing about advisory, everybody like, "Oh, I want to show you my assets," that's a great part of it. But I would do all these plans for people, I would give them the goals, I would say, "Here's your investment portfolio, here's how much the markets are going to give you over a period of time, and here's what you have to do to save more and get there."

And every quarter we'd meet, I'd show them the market returns and they didn't do their part of it and I was like, "What happened?" And they're like, "Well, we had this or this happen." And I just had this sneaking suspicion that something was going on the expense side but I couldn't see it and I was like, "I just feel like something keeps happening." And so, that was kind of part of my thesis was looking at all of it and, yeah, they didn't want me to look at all of it. So, I really only had about one...

Michael: Because that really wasn't what they signed up for, there apparently really was a distinction that they hadn't signed up with you for advice about everything including their spending and expenses, they really just actually wanted you to manage their assets, which is fine until you went and launch the business to do other things and they were like, "We don't actually want to open that door with you."

Shannon: "Yeah, we don't really want to go there and we hired you to be a magician and outperform the markets and have really smart ideas and do all these things," and I was like, "Then that was just not the meaningful work I wanted to work on." So, I only had one of them, so then it would just became a kind of word of mouth thing. And I didn't put the Financial Gym concept out there eight years ago because I gave myself two years. I left Merrill, I gave myself two years until my licenses are about to expire, so I said...

Michael: The infamous 24 months for the mysterious license to go away.

Shannon: Yes, that was it. That was what I gave myself, I was like, "I had two years to figure this out." And so, that was what I had in my mind, and so I didn't want to put the gym concept out there because I was like, "Well, if this doesn't work out, I don't want this fail concept." So, I called it Next-Gen Financial and that was what I was testing out. So, I was just putting the word out there, I launched in Facebook, my groups, I imagined that it was going to be a one-year program and that we'd meet four times I would do a financial plan, and then we'd have three other meetings, and then you would be on your way after the one year and then live your best life. And I was looking at charging $500 for the year and that was what I started out with. And my first client was in a book club with my sister, my sister was saying, "Oh, my sister is helping people," and so she reached out to me.

And I told her, "Here's what I do, here's the thing," and she was like, "Yeah, that's too much money for me and I don't think I can do that," and I was like, "All right, well, that's it, so good luck." And then I wasn't getting any other bites for the next few weeks or whatever and I was like...and I was thinking about it and I was like, "Well, why can't I create something for her? I'm the boss, what am I saying? "There's only one thing, that's it." So, then I created this Kickstarter program where I said, "How about I do a plan for you, it's $250, and then give it to you and I'll check in with you for any year to see how you did, and that's going to be $250." And I threw that out at her and I was like, "We're going to try this other..." I was like, "Here's this new program we're going to try," and she was like, "You know what, that makes sense to me."

So, she did it and so I did the plan for her and she went on her merry way. And then Client 2 also wanted a Kickstarter, Client 2 was also in the book club with my sister, which is funny, we ended up having every person in that book club at some point has been a member of the Gym and longtime members of the Gym, it's funny we get these pockets of friends. So, Client 2 wanted the Kickstarter and I did one for her, and then she told her boyfriend, Client 3, about me, and Client 3 started and he was an attorney then and he was like, "I need hand-holding, so I'm going to do the full year plan because I need you to ride my ass, I need accountability, and so I'm going to do the full-year plan," so I was like, "Great." And one of his first goals was to save for an engagement ring for Client 2 and I was like, "Oh, this is fun."

And I was like, "I'm glad she did the Kickstarter because I'm not going to see her for a year. Hopefully, you get engaged before then and I don't have to worry about keeping a secret between the two of you." And one of my best favorite emails in the last eight years that I ever got was from her and the subject was, "I said yes," and the email said, "We want to meet together with you now and get it all together." And they are still clients, they have been with me eight years, it'll be eight years as of October, and they are married, they just had their second baby and they've bought a home in London, we're looking at a second home for them. He has changed jobs, she's still at the same one making more money, and they just invested in the Gym, actually, because they're now accredited investors and they invested in the Gym.

So, yeah, it all started with the Kickstarter, being open to other potential options, especially when you're the boss. So, then it kind of just grew from there but not a lot, it was mostly just word of mouth and things here and there. And then I was doing that and realized… it was getting to that two-year mark and I was like going through everything I own personally because I had to pay my mortgage and other things and I was only charging people $125 every three months. So, I was getting to the end of my two years and I literally did my last withdrawal out of my IRA and told my then-husband, now ex-husband, I was like, "I'm literally worth nothing, nothing." I think I had like $250-something-thousand dollars in the 401(k) when I started and it was all gone.

And I was like, "I'm worth nothing, thank God I have life insurance, I'm literally worth more dead than alive now," and I'm contemplating that a few times like, "How well off you would be without me and, yeah, I should just go back to work for the bank and make six figures again." And he's been watching me helping people along the way and I've had clients for a solid two years. Client number one hit her one-year mark and realized she needed more accountability, then signed up for the ongoing support. So, I was getting results but it wasn't anything substantial. So, he was like, "No, you're onto something, though, I have money left in my IRA, let's keep it going." And around that time, I'd also met with a woman and I was thinking about going back, I was just going to stop doing what I was doing.

At that point, I'm charging $1,000 for the year and she wanted to work with me and I was about to leave, so I was like, "You know what, it's $2,500 for the year," and she was like, "Okay, I'll pay that." And so, she didn't have the assets, but she made good money and wanted to pay $2,500. And I remember thinking, "Oh, my God, this is a Merrill Lynch value client," because Merrill Lynch wants you to have a client with $250,000 in assets and charge a 1% management fee, so that's like $2,500 a year, and I have a Merrill Lynch...what they value but without the assets, so I was like, "There's something here."

And then I had coffee with a former boss of mine and I was telling him about what I was doing and he was...about helping people and all that, and he had just been let go from Merrill and so at the end of our conversation, he was like, "How do you think I should invest my severance payout because I'm going to get this cash payout? How do you think I should invest it?" And I was like, "Well, some in ETFs," blah-blah-blah, and I was like, "And then I think you should invest in a small financial services company that's about to run out of money." And he was like, "I'm going to do it," so he was my first investor and he invested $100,000 into me and the idea of continuing to build the Financial Gym brand. So, that was 2015, so I never got the licenses back, Michael, and they have since expired and then I just kept going from there.

How The Process Of Raising Capital Worked For Shannon And The Financial Gym [25:37]

Michael: So, share with me what that was like. Very few advisory firms or those of us in the advisory business ever really go a route of raising capital, of taking outside dollars from someone to invest into their advisory businesses to run, build, scale, grow them. So, how did that work? What was the deal? How did that get structured? And, yeah, just how did that come about?

Shannon: So, it's funny because I always imagined the Gym as being something bigger than me. I've had times over the years where I'm like, "I could just build my own practice and just take a handful of clients and I have a lovely life and lifestyle," but I always saw it as being something bigger than me. I was like, "It has to be something, there has to be this bigger thing," so I always felt like there was something more outside of me. And at that two-year mark when I was talking to Bob, who was my first angel investor, I was like, "I figured out what financial training looks like, I figured out the success, and I know I could teach other people how to do it, I know that."

And that was what he was investing in was the concept of teaching...other people can do this too and we could service more people in a bigger market. And so, the way it was structured, literally, I did a partnership agreement on...I got some software online like legaldocuments.com or something like that and it was like a partnership agreement between he and I, and it was like a 50/50 partnership agreement where he put in the $100,000 and then I had whatever I had from it and it was just between the two of us and that was it. And he's truly the greatest angel investor because he was like, "I don't really want to know how the business is going, this is money I was going to take to Atlantic City anyway, so just good luck," kind of thing, and I was like...

Michael: So, basically, he actually mentally accounted for you in the gambling bucket.

Shannon: Yeah, yeah. I mean, I was about as safe as a trip to Atlantic City, which is totally fair, totally, it was. I mean, I think Atlantic City, at least you get free drinks, I didn't have that much going for me at the time, so that was he just kind of wrote it off. And then that was when I put the Financial Gym concept out there and started to really work on raising more money too... because it was interesting, once I put the Financial Gym concept out there, I was getting more and more clients because people...I was going on podcasts and talking about the Gym and the gym concept and a monthly fee and people got the concept of a gym. Once I changed my name from Next-Gen Financial to Financial Gym, people got it. People didn't know what Next-Gen Financial is but you say, "Financial Gym," and they're like, "Oh, yeah, okay, yeah, I need a place to work on my money."

Michael: So, ironically, you were slow launching the name because you were afraid it would look strange if it didn't work and you had to go back to where you were, but the problem was actually holding back on the name probably held back the growth of it in the first place because it actually was the right name.

Shannon: Yeah, it was. And to this day, if you look at my LinkedIn, people are like, "Oh, so what were you doing? You were somewhere else before Financial Gym," and I was like, "No, that was Financial Gym work, it's just different name." So, those clients, those early clients, they have contracts with Next-Gen Financial that has since been assumed by Financial Gym. But, yeah, so then I started...then it started growing more and I was like, "Okay, I'm ready, I'm ready to raise more money, I want to hire somebody, we should have a physical location," I saw the physical location. I was in a WeWork at the time and I was like...people were coming in but I was like, "Money is still very personal," and I was like, "I want it to be like a safe space."

And so, I tried to raise money, then I found the person that I wanted to hire, my first trainer, and I was like, "I'm ready to hire her and do the thing." Nobody would give me money again because they were like...a number of the investors I talked to were like, "Well, you're great and these results are phenomenal, what you've done with people, but you can't replicate you, we're going to pass." And I was like, "I can't replicate me?" I was like, "First of all, Merrill Lynch and Morgan Stanley and UBS, they pop out advisors all the time and that's not necessarily quality." I was like, "They're replicating something," and I'm like, "I think I could do something better than that, and I know how to do it better than that," and there was not a high degree of confidence in that.

And I said, "What they're looking for are people..." I literally was in an advisor training program with...I met two different guys who both sold cars as a previous job before they became Merrill Lynch advisors. So, I always love when people say, "Well, what were your trainers doing before they were trainers?" I'm like, "Ask an advisor what they were doing before they were an advisor, okay? I literally worked with two people who were car salesmen because that's what Merrill Lynch values in an advisor, somebody who can sell anything." And I said, "I am not looking for that, I'm looking for somebody who's got compassion and empathy, wants to help people, and an interest in personal finance." Because I could teach anybody what an ETF is or about mutual funds, I can't teach compassion and empathy when somebody is crying because they don't want to open up their credit card statement, or they're scared to look at their student loans, or they are scared to open their first investment account, I can't teach that.

I could teach the rest, that's easy. So, yeah, I couldn't raise the money, so I went back to Bob and ask him for more money and he gave me another $200,000. And I hired Bridget, our first trainer, and I said to her, I was like, "Look, I don't know, I can't promise you anything," I said, "I can get you a year, I think we should be fine for a year and then after that, all bets are off." And I said, "You'll at least have startup experience for a year and you should be able to do any number of things," and I was like, "I don't know what I'm going to do in a year if this doesn't work out, I'm going to be...I don't even know." So, that was my promise to her when she started and she is celebrating her five-year anniversary at the Gym next month.

What Shannon Was Doing For Clients As She Spun Up The Financial Gym [31:45]

Michael: So, I guess, two questions. One, just what was the business model at this point? Because it sounds like...you have gone from $250 Kickstarters to the person who you threw out $2,500 a year and they actually said yes. So, what was the business model at this point? What were you charging? What were you doing?

Shannon: It was three different plans now at this point. So, there was the Kickstarter that we still have to this day, it's just $350 now. And then we have the core model, which is $85 a month, and we were charging that for individuals and couples. And then we were charging $250 a month for higher net worth, higher-income earner clients. So, those were the three plans, all on a monthly. Now, at this point, everybody's on a monthly payment option.

Michael: And so, what do people get for these? What did you get for the Kickstarter? What were you getting for $85 a month core? What were you getting for $250 a month high-income premium?

Shannon: The Kickstarter, all the plans are...you get a financial plan based off of our model, which back then it was done in a Word document with updating things, numbers manually and all that kind of stuff, and it was a plan with the roadmap. And then we have a site we call Training Zone, which was at the time, we were white labeling a product that essentially just did...it was kind of like mint.com, so we could track their expenses and do quarterly reviews based on that. So, it was the plan the access to the technology where we would track your expenses, and we meet quarterly and you'll get quarterly...you have access at any time to ask questions and things like that like kind of your on-call person, but we were formerly meeting quarterly for the people who are paying the monthly fee. We were formerly meeting...really, the monthly fee was just a way to balance out the expenses and not charge for a full year.

Michael: So, not necessarily a "We're going to meet with you every month, just, it'll be easy for you to pay every month because it fits your budget but we're going to meet quarterly and you'll have access to the Training Zone and all that piece that goes with it." And I'm struck that even, I guess, relative to the traditional advisor world, you're not using planning software, you're doing plans in a Word doc, and your software is not like retirement projection tools, it's cash flow tracking tools.

Shannon: Yes, yes. And I looked at a lot of different planning tools when I was deciding on what to use and the site we were using had those options, but I was more interested in the expense side of it, especially for our target demo(graphic). Because I would always say...I would look at it and I would say and I tell clients, I'm like, "If you give me $1,000 to invest for you, over a period of time, it's going to earn somewhere around 6% to 7%, the markets are going to do that." Let's just say, conservatively, 6%-7%, "So, on $1,000, that's $60 to $70 bucks a year that I can get for you investing it, but if I can help you save $100 a year or $200, that's a 10% return or 20% return."

That's significant, that's what I was seeing with the work I was doing in those first two years, I was like, "Investments are great and everybody should do that, but there's something at the core missing on the spending side of this that could be truly transformative to your financial profile if you just focused on it." So, I was more interested in the, "Let me save you $100 bucks," versus, "Let me invest and make you $60." So, I was trying...when I was looking for software opportunities, I was looking for ones that could help me pinpoint and identify those and that was what we used.

The Lessons Shannon Learned About Developing A Proprietary Software Tool [35:50]

Michael: So, what did you end up using? What was the software of choice just to be able to do that collaboratively with the folks you were working with?

Shannon: Yeah, it was now...I think it was called Balance. And the funny thing is, so a funny story about that, I think it was called Balance, Balance Financial, and I was paying for whatever the users were doing. They could input their information, I could see it and generate these reports, these spending reports, and it was really a great tool. And then we were about a year into using that and we get this email out of the blue, "Balance Financial was acquired by TaxAct, and TaxAct is no longer going to support this tool," and I was like, "What. The. Hell?"

Michael: So, basically, the Balance Financial people got acqui-hired by the TaxAct folks to make something for TaxAct who just wanted the people and not the software, so “fare thee well, software.”

Shannon: Yep, "Have a nice life and we're going to stop supporting it in two months," and I was like, "Okay." And at this point, we had, I don't know, like 70 or 100 clients, and I was like, "Oh, great, so what are we going to do?" And I knew nothing about technology, we were like, "Do we white label again?" But then we didn't want to white label again and be in the same predicament, so then we looked at building our own thing. We built our own thing, it was a disaster, an absolute disaster, and it was probably like a $40,000 issue. And Bridget, that was kind of her project.

Michael: One of those like the dev shops that reach out and say, "For just $30,000 to $50,000, we'll build you any piece of software you want."

Shannon: Yep. Yeah, and we were like, "Oh, it was like cost-effective, we knew nothing about it." We had no advisors at the time, it was just she and I kind of looking at some things. And so, we met with them in person, it just seemed like a great fit, so they built the thing and it was like sort of function...it was functional, it was a very clunky thing and there's a lot of challenges with it. And so, I was like...so we did that and Bridget was the primary point person in building it out and I remember one day, she was just yelling at the developers and I was like, "Bridget doesn't yell, wow, this is bad."

Michael: "This really can't be going well."

Shannon: Yeah, I was like, "This is bad." And then we had...then when we did get our investors who started kicking the tires and looking at our technology, they were like, "Yeah, we think you need better technology, you might have to rebuild this and we had something...

Michael: "But that's why I'm coming to you for money."

Shannon: Yeah, exactly, I was like, "I do want better technology." And then we had a bunch of people look at our tech platform and, literally, every dev shop was like, "We don't know what this language is, it looks like hieroglyphics if we had to guess," and I was like, "Oh, okay, so it wasn't a good investment?" "Nope." So, now we're on what we call Training Zone version three that is on a language that other developers actually speak. So, yeah, a lot of lessons learned there on the technology side but it is the key to our success is that tracking, that accountability.

Michael: So, I have a couple of things I'm moving around here. One, just, I guess even in retrospect, what did you not know or miss about picking and hiring the dev shop the first time you end up with one that was a disaster, but now you've got something you're happy with that's powering the business?

Shannon: So, we knew nothing about languages and the different types of languages that you could use to build technology on. So, there's two predominant languages, Ruby on Rails and Python, we had no idea. There's a lot of different languages and different platforms because we've further built out our technology but the lesson learned was if you hire somebody who doesn't build in a language that other people know, then you can't really make changes to it because nobody understands the language. So, picking something that is in a language...and I'd say, so, that, and also the lowest cost isn't always the best, speaking to more people about it, not being afraid of doing it in small pieces, there's a lot of lessons learned there. And, actually, having...just with anything, in an area you don't know, finding a trusted advisor who has that knowledge or can guide you. So, our investor connected us with our tech who became our tech guru that we learned a lot from, but having that trusted advisor especially in an area that is very unfamiliar with you, and tech is that for me. It has been a bane of my existence since the beginning of this but a necessary evil for us to help with our clients.

Michael: But I'm struck that the ultimate conclusion was, "Now that we've got tech that's working for us, it's a big part of what's making the business work." So, can you talk a little bit more about just what is the tech do at this point? What is it that your tech does that no one else's industry tech does that makes it so effective for serving clients under this model?

Shannon: Yeah. Well, what's funny is I could...when we had Balance, we could see when clients would log in and see their information, so clients could see their progress and track their progress and log in all the time. And what we noticed was clients would only log in right before a quarterly review and that was to update their accounts to make sure they're refreshed, that was pretty much it. So, that was an aha for us of like, "Clients aren't coming to us because they want the technology, there's plenty of technology and there's great apps and tools that track your spending and do these things, but they're really coming to us because they want to outsource that, they want us to tell them what they're doing."

And that's what we do when we meet quarterly, we're like, "Hey, you made this, this month," let's just say you made $10,000, you spent $9,000, your goal was to spend $8,000, "And here's where you spent it and let's kind of talk through it." And then also we update and go through all their other accounts like the investment account, kind of track everything, but that spend report and that awareness of it is a key component to our clients. And it's a way we deliver it too. And so, the expense side of the equation is what most people are hiding from everybody, including their financial professionals they're working with and it is kind of like this dirty little secret. And for us, we're leaning into it and we're like, "Hey, we're not giving you these reports, we're not showing this to you in judgment and to mock you or whatever, we just want you to be aware of how your spending is going." And part of when we first meet with clients in their first session, we asked them, "What's important to you? What are your non-negotiables? What do you need to survive and thrive in life that is going to...because we want to budget your life around what you love, so what are your non-negotiables?" And at the Gym, the top non-negotiables across the board are travel, health and wellness, fur babies, and family kind of things, those are like the big ones that pretty consistently come up.

And meanwhile, we track spending for all of our clients and the top spending areas of all of our clients are Amazon, Seamless, and Grubhub, back in the day when people were taking Uber is Uber, and some kind of CVS drugstore shopping option catch-all like that. That's where people are spending their money and we're like, "There's a mismatch, right? There's a mismatch with how you want to spend your money and how you're actually spending your money." And it's helping our clients become aware of that and not to judge them but we're like, "Hey, you said this was your non-negotiable, yet you just funded Jeff Bezos going to space. Did you want to do that? If you did, great, but that's probably not what you wanted to do and so how do we kind of realign how we're doing our spending?"

And the funniest thing is when we do those spending reports and we show clients, they don't even know, they were like, "Really?" "Did you really just spend spent $800 last quarter on this?" They were like, "What? No." And you're just kind of helping them identify it or finding like they're paying for X number of recurring expenses they don't even need, you find so much in those reports, so it's actually really helpful for clients to kind of get a grasp of that. So, that part of our technology, that's the ongoing kind of tracking progress, yeah.

Michael: And just curious, is that like an automated thing? Is this an account aggregation pulling spending from connected bank accounts and credit cards?

Shannon: Yep, yep, so we use Plaid as our aggregator and it's very similar to mint.com, except that your trainer sees it, and unlike mint.com where you have to go in and categorize everything, your trainer does that for you so you get a full report with all the breakdown of your total household expenses, which is...

Michael: So, your trainers are manually categorizing whatever just isn't automatically categorized in the transfer over from Plaid?

Shannon: Yep, the majority gets categorized and it's smart enough to know like if you allocate something one month, it knows where it goes next time, so it doesn't take that much time. Our Training Zone 2.0 would take hours for trainers to categorize that because it wasn't very smart, but this is like the bulk go into the right categories but sometimes a trainer does like a spot scan and you'll see something in there and you know the client and you're like, "Oh, that should be in this category or whatever, that category." One of my favorite early clients was...I told her I was going to track her expenses, she was like, "Okay, well, all of my ATM transactions, that's my pot habit that I buy," I was like, "Oh, okay." It wasn't legal in the state that she was living in at the time.

Michael: Do you just tag that under hobbies?

Shannon: I tagged it under recreation. Yeah, it's actually under recreation. And I said, "You know what, I'm not here to judge." We talked about how we're like the backseat driver of our clients, I'm like, "I'm not here to judge, I just want to make sure it's your road trip and I just want to make sure we budgeted for it. So, if that's recreation and we know X hundred dollars a month goes to recreation, so that's what we do." So, that's a part of it. And then what we've built out since then is our plan generation technology, which we are no longer on Word or Google Docs, and our plan generation technology is like...I think it's truly game-changing. I've joked that...and I'm not joking, I'm serious, I could sell the business on that. It's unique to us and it's game-changing because you can literally work with any...it takes our trainers less than 30 minutes to do.

Usually, they're constructing most of it while they're talking to clients, but it contemplates a whole series of life events in the plan. So, our debt categories go from anything to student loans to family debt to IRS debt because we know these come up in how we contemplate and deal with those. We acknowledge credit scores and how to...based on the inputs of credit scores and opportunities or challenges for clients there, we literally will guide our clients onto how much they need to make. So, 72% are living paycheck to paycheck, that's just because they don't know how much the paycheck should be. So, the plan literally will take all their life goals and everything they're looking to accomplish and calculate the income that they should have, they should be earning.

How Shannon’s Trainers Help Clients Focus On What They Need To Make As Well As How Much They Need To Save [46:38]

Michael: So, not just what you need to save but what do you need to earn so you can go figure out what to ask for your raise or get a promotion or find another job or find another industry or whatever you have to do to get to the earning power it takes to be able to save what you need to save to be able to get to the goals you want to get to.

Shannon: Yeah, we literally quantify and that's where we're like a gym. If you just tell everybody, "You got to go on the keto diet and not eat bread," no one's going to go on that, right? No one want to stay on that diet. So, we're like, "All right, if you want to do that, here's how we level up, either, A, here's how you're cutting expenses to get to your budget number, or, B, if you want all these things to happen..." A trainer just posts this in our Slack channel this week, a client was making $75,000 and her plan told her she need to be making $116k. And when you tell clients this, trainers sometimes, new trainers are like, "How are they going to react? Are they going to be like, "Yeah, if I can make $116k, I make $116k?" But the way we share it is like, "Look, this is just your number, these are your goals, these are your wishlist items, if money wasn’t an object, this is what you'd like to accomplish. And here's the number that would take to get you there and perhaps that's an option."

And so, $116k was her number, she just had her first-quarter review, she just got a new job, she's making $115,000, so from $75k to $115k. And what happens is clients just don't know or then they start shifting like, "Well, maybe I should start looking for jobs in that pay range, am I qualify for that?" We help with salary negotiation, our trainers, and we kind of helped shift their goal towards something like that. Or we have clients who are like, "Yeah, no, I'm going to keep making what I make, I love my job, I'll just cut expenses," and we're like, "It's your choice, your road trip, you pick." We give clients financial independence number, we talk a lot about financial independence as an opportunity, especially because we're working with people in their 20s, 30s, and 40s. That was a big challenge I always had at Merrill Lynch that was really a struggle for me is that you would get these individuals who were in their 60s, mid-60s, they've got $250,000, just barely, whatever their number is, and they want to meet with you to talk about retirement.

And you do this wealth management plan for them and based off of their spending and whatever else life choices they made to that point, I'd have to tell them, they have to work a few more years, it's best if they continue to work rather than collect social security because of X, Y, and Z. And it was like telling somebody who just run a marathon that they have five more miles to run, it was so...I hated having those meetings. And I said so many times, I'm like, "If I could just get somebody at the beginning of the marathon and I love to tell them, they're at mile 15 and they're done." That's what I want to do. And we see that, I've had multiple clients now at this point where I've told them, "You don't have to work so hard anymore," and they're in their 40s and 50s because of the work we've been doing in the last seven, eight years.

Michael: And I'm noticing you're not even calling it a retirement number, you're calling it a financial independence number.

Shannon: Yeah, that work for me. I never resonated with retirement. I always said, "I'm never going to retire," so it never was a word that resonates with me. And then we were having this presentation at Merrill Lynch, one of the companies was speaking to us, and the guy used the word financial independence and I was like, "That sounds interesting to me." That is a better number and it's the ability to work because you want to work and not because you have to work and that's more appealing than retirement. So, we rarely use the word retire, we don't use words like budget, we don't use the word like retirement because they're just not...they don't get people excited.

So, I always say, "Budgets are like diets, no one wants to be on one," so we don't really use those words around the Gym. And we don't really use retirement because it seems like such a lot...there's a connotation to it, especially when we're dealing with a younger demographic, it just doesn't sound like something you get excited to make life choices about to get to, versus financial independence or living however you want to live and the job and the lifestyle you want. That's something that is exciting that you're going to not spend so much on Amazon or you're going to make some hard choices because that's more exciting than retirement.

Michael: So, what is, I guess, one of the output or the deliverable of the plan? Do you still end up with kind of a thing that looks similar to what a lot of us historically have done in the industry? There's a printed plan and some recommendations and some analysis and projection stuff and just you built your own version of it with your own outputs, but ultimately, it's a similar kind of plan, just your version, your outputs? Or are you making just a totally different thing in the deliverable that the clients get?

Shannon: It's an output that's 70% traditional, 30%, non-traditional, unique to us.

Michael: And the more unique to you is the credit scores, earnings projections, just that sort of stuff that the industry historically doesn't do because...

Shannon: Yeah, you want to buy a house, the home analysis is there, student loan analysis is there. So, maybe it's more like 60% traditional, 40% non-traditional. I haven't seen a traditional plan in so long, Michael, I have no idea.

Michael: And so, ultimately, the engagement with clients is offer a plan that gets ongoing projections, tracking in the Training Zone, which is essentially kind of financial management portal with the account aggregation so they can see and track their spending. And then ongoing quarterly meetings with their advisor, with their trainer, to check in and see how they're doing and get feedback.

Shannon: Yeah. And then the secret sauce too is in the quarterly meeting. So, I remember when I was at Merrill and guys would say, "Anyone could do a financial plan," and we tell that to clients, "Anyone can do a financial plan." There's things unique to our plan but anyone can give you a plan, but the hardest part is sticking to the plan and actually doing it and implementing it. I remember all the time hearing that at Merrill and it's true. And the secret of our sauce is that we are actually holding people accountable to a plan and implementing it and tracking it. And what happens is our clients when they hit first-quarter reviews, about 50% are hitting their goals, they just need to be told what to do, they've put the systems in place, the automatic transfer, they're doing it and they're doing great and you're reaffirming their goals and that feels great for them.

The other 50% are not, but part of the secret of our success is we find the positives because not everything is negative, so we gave people goals and people feel like they failed because they didn't hit it but we're like, "Yeah, I gave you a goal of saving $2,000, you didn't, but you saved $1,000 and that's something to celebrate, you did good, that's a good thing, we're moving in the right direction." And then that's when we have the analysis of how they're spending their money and can make some even more practical decisions to help things for them. Because something also happens too and it happens with every advisor, whatever people tell you at the first meeting, it's not pure information, it's not 100% accurate, it's like what they think is happening or what's going on or whatever.

And what happens is once clients put everything in our portals and it's like...and I tell them that, I'm like, "You're just telling me everything at Day 1, I have a good idea about what I think is going on, but in three months, I'm going to have a really good idea of what's happening and I'm going to have some really specific things now to help you with because now I get a better idea of what's really going on behind the scenes." And we can drill down to different things and challenges and create more exercises or homework that's going to be more unique to them, even more unique. And so, then by Q2, 75% of our clients are hitting their goals, and then by Q3, we're at 90%.

And we tell clients just like, "Financial health and changing financial behaviors is just like the physical health, it takes time, not everybody is going to get results right away, and it is a mindset shift, it is other work, and it's going to take time," but by nine months, we're really getting strong results from clients. And then people ask me, "What about the 10% that don't hit their goals?" There's some people who are never going to hit their goal, they just never are. And the trainers, we joke, we're like, "Why do they keep paying us and they don't take the advice? And I think it's like they just need hand-holding or just like this is a support person for the road trip and it seems less scary with somebody in the car with them.

Michael: Well, and I dare say if a lot of us in, I'll call, the traditional advisor world actually measured how many clients...what percentage of your financial plan recommendations are implemented and on track with your clients within nine months of when you get started, I actually suspect our average is a lot lower than 90%.

Shannon: Yeah. Yeah, no, it's work, Michael, and this is where the behavioral finance component that we know and we train trainers on is unique to us as well because we know why we...and we can get to why some things aren't happening and we have tricks and tools and ways to get those results from people. But we have to because I say this all the time, "We have to prove our worth because they're seeing it on their credit cards or their debit cards statements every month," so we have to earn it every month in what we're doing.

What Shannon’s Business Looks Like Today [56:14]

Michael: So, now help me understand this from kind of the business model service perspective. So, you've got advisors who are doing this coaching work with clients, as you noted, you call them trainers. So, how many clients does a trainer serve? How many relationships are they managing? How does that portion of it work to just do the amount of quarterly ongoing work it takes to do the model you're talking about?

Shannon: Yeah, it depends on the trainer, but an average of 150 to 200 clients is about what trainers are capable of doing. And what's interesting is in raising money, I had a lot of pushback at different times from people saying, "Oh, well, working with clients one-on-one individually, it's going to be a lot of work, people are going to require a lot of time, a lot of energy." The reality is most people don't want to look at their money all the time, most people don't want to meet with their trainer all the time. What happens is there's work upfront with doing the plans and the meetings and getting things and the system in place. But then what happens is you do get to a point where you're on autopilot with clients and they'll reach out when they need you, you'll reach out and say, "It's quarterly review time," because it's their time and they may or may not schedule time. And then the longer they're in the program, the less time they are really utilizing because then the trainer just becomes like on retainer.

Michael: Okay. And I'm just sort of thinking mathematically, so $85 a month is about $1,000 a year, so 150 to 200 clients at a time, it's kind of like a trainer is servicing $150,000 to $200,000 of revenue, which is not dramatically different than a lot of advisors. Certainly, there are advisory firms serving very high net worth clients that have bigger numbers but when you look across a lot of large brokerage firms, it's not uncommon to see average revenue per advisor right around $200,000. And you're right in that same space, just a different type of clientele who may be paying an average of $1,000 a year.

Shannon: Yep. And some clients pay more, couples pay $145, we now have a couple's pricing, so there's different prices, different revenues trainers can earn. And we've just started an affiliate program, so there's other revenue streams. And then we also work with companies providing financial literacy and education to their employees, so that's another added revenue stream the business is growing. So, there's other things other than the one-on-one client work but, yeah, that's the model.

Michael: And so, I guess I'm thinking of this from the trainers and if you're going to try to have 150 clients with quarterly meetings...granted, not everyone schedules every quarter but in theory, most of them at least may. So, if I've got 12 weeks over the quarter, I'm doing a dozen meetings a week, which is a couple of meetings a day, that's pretty manageable. A lot of us do 10 to 15 meetings a week for clients when we're pretty full on our client base.

Shannon: Yeah, the best part for our trainers is that also...and I think any advisor knows, is they don't have to find new clients. We, the mothership, is the one that assigns clients to them, so that's also a benefit they have is we're the ones...they don't have to worry about new client generation.

Michael: And so, they really just literally get to spend all their time servicing their client base because they're not in, I guess, the traditional eat-what-you-kill model.

Shannon: Yep, which I always hated at Merrill because you know what I saw at Merrill? It was the guys, the salesman out front, and they would say, they were the ones who the hunter-gatherers and then they were like, "Oh, everybody always loves Hope, everyone always loves Susan," and that was their client associate, the behind-the-scenes person. And I was like, "Yeah, but they had to get through you to find her and that doesn't seem fair." And I said, "I pretty much just created the model of the client associate model," where we worry about the hunter-gatherer but I really just want the people who are going to just take care and develop relationships with clients that want to stay around for a while.

Michael: So, out of curiosity then, just how does this work from a job career opportunity perspective for trainers? The industry's sort of traditional model has hinged around payouts, payouts as a percentage of revenue. Are you on a similar kind of model, or are trainers all just like a flat salary? How does it work?

Shannon: Yeah, they're salaried, and then they have the ability as their revenue grows to increase salary, there's bonus opportunities with different products now that we have, and there's different management type growth opportunities as well or different areas of the business, like we're growing our content area, they can move into other things like that. And some just get to a point where they just have their clients and that's it, and they're happy, they're just doing the training thing. If I could just do that all day...I still have 50 clients myself, I love the client work, it's always reaffirming to me. If I could do that all day long, I would.

Michael: Interesting, interesting. And so, can I ask even just neighborhood of just what kinds of salary opportunities are there in a model like yours? I feel like the industry's view is like, "There can't be much money in these jobs because you're not serving affluent clients." So, what are these opportunities look like in practice?

Shannon: Yeah, so every trainer starts at a $60,000 salary. And what's interesting is that's our starting salary because when I raised that second round of money, I was going to pay myself $70k and I was going to pay Bridgette $50k and she negotiated, she wanted to make $70k. And I said, "Well, I can't afford that," so I was like...or she wanted $80k I think, I can't remember. And I was like, "I can't pay you more than I'm paying myself," so then we both ended up making $60k. So, it's $60,000 plus benefits, so we pay for health insurance for the trainers and that is the starting salary. And for the first period of time, we lose money on them because as they're ramping up and growing the business and we're training them and all that kind of stuff, and then it gets to a point where it's like breakeven and then return and that's usually about the point where we look at promotions and things like that based on work and revenue and things like that.

Michael: And I have to ask as well, I was struck even looking at your team page of advisors, of trainers. You have a much more diverse team than most of the industry. So, I'm curious for your thoughts, you've seen a lot of the industry, you experienced some of those challenges in your own interview process and journey, but is this just a nature of your company that you're more focused on diversity? Is there something about just the nature of the model and what you're doing that you're attracting different kinds of advisors?

Shannon: We intentionally have a very diverse trainer base because we have a very diverse client base. And I saw this when I was at Merrill, there was always this joke of like, "There is an advisor for every client." You'd have like some really wacky advisors and you're like, "How does anybody work with that guy?" And then you'd meet their clients...

Michael: Oh, there's a client for every advisor.

Shannon: Yeah, and you'd meet their client and you're like, "Okay," and there's always like that kind of joke of like, "Well, did you meet their clients?" And you're like, "Oh, okay, I get it." And so, that was like a funny joke but it's true, there is really...there is a trainer for every client too and because we have such a diverse client mix, we really want our clients to kind of see and work with the type of trainer they want to work with. And I love all the trainers, I would work with any of them personally, but people are specific, they want to work with a woman or they want to work with a woman of color, or they want to work with somebody who understands LGBTQ+, or they want to work with whatever their thing is they want to work with, and we want to have that for them because money is very personal and people's money stories and cultures are very different about money and talking about it.

And we've got Spanish-speaking trainers and we've got just a diverse mix of trainers to meet the needs of the population, which is a very large population of people and a very diverse population of people. So, it's very intentional. It was funny, though, at one point, somebody gave us feedback of like, "I can't believe you don't have a trans member on your team," and I was like, "I mean, come on, I'm trying the best I can." When you get that kind of feedback, you're like, "All right." And for some things like that, it's like, "By the way, Person, I can't screen for that because that's not something we can do if I really wanted to, so, thank you." And then it was funny because one of my employees who is a queer person, he was offended, he was like, "How can we get any more diverse? Are they going to give us crap about we're just not diverse enough?" So, yeah, it's very intentional, and every single one of our trainers has people who specifically requested them based on certain things about them.

How Shannon Designed The Training Program For Her Trainers [1:04:54]

Michael: So, talk to us a little bit more about the...you said the training program that you build for getting all of your advisors, all your trainers up to speed. I'm curious to hear more about that and just like is this built around the CFP program or CFP certification? Do you not go that road? Do you not want to go that road because you rather build your own program? What is training look like, and how do you see it relative to other industry pathways out there like CFP marks?

Shannon: Yeah, we have our own proprietary training program we call Trainer Academy and I talked about all the ways I could sell and get value for the business. Our training program, I think, is...and we've had large institutions ask us about it, it is game-changing as well. And we've done...Trainer Academy, we've done nine iterations of it, so the trainers, we call it T1 through 9, so like you're in Training Class 1 or 9. And it's funny because the trainers identify...it's like, "You're freshman class," or, "You're sophomore class," so like the T9ers, there's a T5ers or whatever. So, that's their group. And then we've done nine including two versions of it virtually because we had two classes that started during the pandemic with equal success.

So, it's a two-week boot camp intensive with a number of different things, tests, quizzes, role play, some other secret sauce things. And then after that, clients start working with...trainer starts working with clients and then they're on a 90-day probationary period where they get reviewed regularly like they have their meetings...they record their meetings and they get viewed by their team leads and then they get formal 30, 60, 90-day reviews. And then after 90-day reviews, they are considered fully ready to take on more clients. So, they're taking clients along the way, and we talk a lot internally about, "Should the training program be longer? Are there things that are...how long should it be before they start taking clients?" And I think any advisor knows, every client is different, it's so hard to teach all the things all at once because it's like drinking from the firehose and it's like until you start seeing it, it's really hard.

So, it's really like kind of mentoring along the way as they're uncovering things with clients and getting the experience, but it's really the best training is actually doing it and that's the bulk of how it works and with a very strong mentor along the way. We have our own wiki site that is, again, totally unique to us and very game-changing as well. I joke our Slack channel is worth a multiple of...the amount of things we've seen now...we've worked with over 10,000 clients at this point, the amount of situations we've seen and run into with working with clients of all financial shapes and sizes is like...it's so funny, because in our Slack as a trainer will be like, "Has anyone had an experience with this?" And there's always a response, always, and even some things where I'm like, "Whoa." Like, "Has anyone had experience with the courts doing blah-blah-blah?" And somebody is like, "Yep, go to blah-blah-blah," there's a knowledge base that is very robust from the work we've been doing.

Michael: And so, do you even look at programs like CFP certifications in the future? Again, I'm not trying to harp on it but I'm just fascinated that you're on such a different track of what you're building in training for the clients that you serve, I'm just wondering if you even see that as part of the picture for the business that you're building.

Shannon: Yeah, so it's funny because a few of our trainers are doing the CFP coursework themselves on their own and they were like, "Yeah, I don't need most of this." And it's just kind of interesting to know data, but learning and spending time on the time value of money is just not...when somebody is like, "How do I stop spending money on Amazon?" It's just not a thing. And most of our clients, we don't do the investing, we don't give investment advice, but we give asset allocation guidance and we explain what asset allocation is and explain investment portfolios to them so they know what they're doing but our clients do it on their own. And that's the other thing, we're empowering them to do on their own, so they don't need that kind of knowledge really to work with the clients, that's not the bulk of what clients are looking to get from their relationship with us.

We've got clients with financial advisors and we love working on a team with an advisor because we don't need to do the investing or want to do the investing and we're happy to explain to clients what's going on and be that kind of, "And by the way, we're going to help them stop spending their money so they have more money to invest with you." So, I have one client, a 50-plus woman who has an advisor, she started working with me five years ago because she wanted to buy a house and she was living with her sister. And she was sitting on $300,000 of cash and she had $160,000 with her Ameriprise advisor and I knew she didn't need all that cash for the house but she didn't know what her spending was like, it was like a number of different things. And I was like...and meanwhile, that portfolio has grown and she said other things and I was like...she just now bought the house, so I was like, "Your Ameriprise advisor is going to be so happy when we send her $100,000 out of the blue." I was like, "Does your Ameriprise advisor know about this cash?" She's like, "No, I don't want to tell her about it." I was like "Okay."

Michael: Well, I'm struck from the flip side. So, you have clients who have assets with traditional advisors like with an Ameriprise advisor, and then they were also paying the Financial Gym for their financial advice?

Shannon: Yeah. Well, because it's like most advisors want to spend time on one side of the balance sheet and people don't necessarily feel comfortable sharing some of the other sides with the advisor, it's just like why people didn't want to...my Merrill clients that want to come and show their expenses to me. So, there is kind of like we really do play in the building blocks of financial literacy and education, and then planning and saving and budgeting and debt management and things like that. And we have clients who have advisors and the wealth to have advisors but they also need to know how to spend their money too. We had a client start recently, just a friend over the years but I didn't know...she asked me to look at her money and can I do a plan for her. She has $40 million, I did not know this, she has five advisors, and I'm like, "Do any of the advisors know how much money you have?" She's like, "No." Why did she want me to look at her financial plan? Because she wanted to know if she was going to run out of money. And I was like, "Okay."

Michael: We got a lot of different stuff going on there.

Shannon: I tell people, "The problems are the same, the zeros are different." It doesn't matter how much money you have, people are still scared of running out of money or overspending or not sure how they're spending their money and kind of want to look at all angles. So, yeah, and I did the work for her, I was like, "Pretty much if everything goes wrong," I was like, "$20 million is your number," which is just a ridiculous plan to kind of do for her, I was like, "And you're sitting on $40m," so I was like, "You are going to be fine." But yeah, that's why and she's paying...she's still working with me and I'm like...and they don't like three of their advisors and I was like, "You know you could consolidate advisors, it's pretty easy with an ACAT form to do that." They were like, "Yeah, I think we're going..." They were like, "Well, which one would you pick?" I was like, "I have no idea who these people are."

Michael: You really can't pick one of the five or four even if you have to make that decision.

Shannon: I have no idea, yeah. And then the funniest thing is her husband is probably the smartest person, I was like, "He should just manage your portfolio, he's got some really smart ideas." But I laugh too because I have the other side of the information and there was like a Merrill advisor who has like $2 million of it and I was like, "That guy is probably feeling so good," a $2 million portfolio is good. And I was like...

Michael: “He’s a good client!”

Shannon: Yeah, he's probably feeling great like, "Hey, I'm just glad about my $2 million, I'm not going to ask any question," he's just managing his thing. And meanwhile, if he just even tried a little harder, the guy could end up with a lot more.

Michael: Yeah, he's missing the 10x...literally, the 10x opportunity.

Shannon: Literally, literally. So, yeah.

How Shannon Thinks About Selling Part Of Her Business To Raise Capital [1:13:42]

Michael: So, share with us a little bit more just the part of this journey around raising capital, around going for outside dollars, around not owning all of the Financial Gym because now investors own some of it because that's what happens when they exchange cash for shares. Can you talk to us more about what that journey is like, how you think about selling pieces of the business to get cash, to get capital to do more of the growth? How has that worked for you?

Shannon: Yeah, I mean, the journey is horrible, Michael, it is horrible. If you follow...if anybody wants to know, if you follow on Twitter, there's an account that I just found out about it, it's VCs Congratulating Themselves, I think. VCs Congratulating, I think, is the name of it. Yeah, VCBrags, it's @VCBrags, but it's VCs congratulating themselves. There's so much to this that just feeds my soul that feels very reaffirming about the experience. I tell people, "I have raised $10 million now at this point of investor funds, some from venture capital fund, some from other investors, I've raised $10 million and I've also given birth vaginally and I would give birth vaginally all day long rather than raise money." It is like such a gut-wrenching, trying, horrible experience that when people come to me to mentor them and they ask my advice about raising money and doing things, I'm like, "Any way you don't raise money is probably the best bet."

Because what it is...and I've narrowed it down, it's like you raise money and for whatever type of investors, they were like bullish about the business, they were like, "Where it's going?" and whatever. But what happens is for the majority of VCs, 90% of VC-backed businesses fail, so they only expect 10% to do really well. So, what they really want their businesses to do is either take off very quickly and become something they can brag about that they were a part of, or fail pretty quickly because they know it's going to fail so they just let it go. But in the interim and during that ride is that it's just never good enough until you have that exit or that failure. It's never good enough because you're in this limbo point. So, you could have your best quarter ever, your best month ever, your best whatever ever, and it's just like, "Okay, what next?"

Michael: "Because you need to still grow like a bajillion percent more if we're going to get our good exit from this."

Shannon: Right, or, "Just go the other direction and close shop, please." I remember one investor telling me, he's like, "I have a business that it's just the worst, it's just doing fine and I hate it," and I was like, "A profitable business that's just existing is a good thing in most areas." But the fact that this guy...because he's probably not going to have an exit at some point, and maybe he'll get some money back and dividends or whatever, but that's not what he invested for.

Michael: It is a powerful thing for folks who have never gone down the road with venture capital firms. You can reach the point where very literally, they would rather see you risk the entire business with a very high likelihood of going bankrupt and losing everything if it gives them a shot to have a big exit.

Shannon: Yes.

Michael: They would actually rather see you go bankrupt than never having taken the shot at everything because, from their end, they're just assuming 90% are going to fail anyway, so your bankruptcy is another number to them, your success is what makes their fund but obviously, they do that because they get 100 bets, you only get 1.

Shannon: Yeah, yeah. So, that's pretty much what you're kind of pushed toward. And then every private company that's going public, I love hearing all the time, people were like, "How is Robinhood going public with all these losses?" and blah-blah-blah. I was like, "That's the VC model, it's like as long as top line is growing, you just raise more money and raise more money," which is just not really sustainable if you can't raise more money. But it's almost like that's what they're trying to do is they're trying to get you to that, either you raise money and that reaffirms their choice or you can't and you're bankrupt. So, they're just getting you there quicker by forcing you to kind of spend money and have these big hockey stick growth things and what-have-you.

So, what's funny is four years ago when I raised my first venture fund money, and I remember people telling me to not do it and I was like, "Well, but we're aligned, I want the business to 10x, they want the business to 10x, so we're aligned." And now, what I'm saying is like the reality of what happens, and I talk to my attorney...my attorney is my best friend and therapist, and he's just like, this is...he sees it all the time. He sits in board meetings all the time and he's like, "This is typical, Shannon." Because what happens is you take investor money and it's like a marriage and then it can get very unhealthy, so when the business isn't doing well, when you're struggling like we were in the last year, it's a very uncomfortable place, those board meetings are very uncomfortable to sit through. And they're just like, "Well, just fire people," "Just do this." And you're like, "Well, these are human beings and they work really hard for the business and we're trying to support families," and things like that and that's not something that comes into the board meeting.

Michael: It's not really why they wrote the check for you.

Shannon: Nope, nope. And you're like, "Well, I want to be able to look myself in the mirror every day and feel like I did the best I could for as many people as I could." And we talk about this a lot internally, we've been talking about this a lot because, in the last 16 months, everybody's exhausted, companies are struggling with employee morale, and there's a great resignation and people are leaving and there's all these things. And certainly, the last 17, 16 months have been horrific for me as a founder, as a CEO trying to get this company through it. But for me, I always go back to, "What's my why?" and, "Why do I do this every day?"

And I do it for our clients and it's going back to that first woman who told me I was saving her life is why I do this. And we get new clients to start the Gym every single day, we get a new list, and every time I see that new client list, I just think, "Thank God, we're still here for them." Thank God, we're doing...and even one of my clients, a longtime client just sent me a text and she was like, "I know this last year has been rough but never forget how critical and life-saving your work is," and I'm like, "All right, that gets me." So, that's my counterbalance to the VC Investor drama and the VCBrags Twitter account because I can see that on the other side.

Michael: So, just in retrospect, would you have done this differently around how you tried to grow the business? Or is this just the necessary evil for you to grow it to where you want to grow it or do what you want to do?

Shannon: Yeah, I get asked this question a lot, "What would 40-year-old Shannon say to..." I'm 43, "Forty-three-year-old Shannon say to 30-year-old Shannon?" And I would say, "Do everything exactly the same, every single thing," because every single challenge, every single misstep or whatever, HR challenge, investor challenge, whatever, I learned from it. Some lessons are a little more painful than others but we've never made the same mistake twice. So, you learn and you get smarter, and I tell my team this all the time, "All we can do is get better every day, that's all you can do is learn from today and let's get better and smarter tomorrow and that's what you're supposed to do."

And for me, this year, we are looking at and considering a number of different strategic partnership opportunities and what's really fascinating is a number of companies are interesting in talking to us because we provide human advice, which is the exact reason why it was hard for me to raise money four years ago because all of the investment money was going to tech. And now all these big tech companies have great technology and platforms and data but they don't have human advice, so it's just ironic. But I would do exactly the same, we're exactly where we're supposed to be, we've done the exact things.

For me, at some point, there will be an exit or an opportunity to exit and my next chapter is to start the Golden Girls Fund, which will be an early-stage VC fund that will invest in female founders and do it differently, so encourage them to build businesses that don't have to massively scale and we won't have to get paid back like that. We'll use all of the knowledge that we've had in this company to help them with their business, so it's all valuable. And I do get asked a lot from people for help or they're thinking about raising money, and so I can give them my experience and either help them avoid it or help them through it and work through it. There are different places for raising money and there's certain businesses that are more inclined to raise money easier and better than others and now I have full awareness of that. And so, I take all that knowledge and apply it to the next chapter.

What Surprised Shannon Most About Building Her Business And The Low Point On Her Journey [1:23:00]

Michael: So, what surprised you the most about building and scaling this advice business?

Shannon: Every single founder meeting I've ever been to, if you ask a founder or CEO what's their pain point and what keeps them up at night is HR challenges. Every single person will say that, and I am one that will totally agree with that. Scaling and hiring individuals and working with individuals, I get why investors want to buy tech companies, you'd love to have a business of just robots, but I can see why that's appealing to some people. So, the HR challenges are...they are a thing. I have a weekly meeting with my head of HR and my significant other was like, "You have a weekly HR meeting?" And I was like, "Yeah, and there's always stuff to talk about, like always." So, that's one meeting I'd love to be like, "Hey," to her, "Hey, do we need to meet?"

There's always something and it doesn't have to be really dramatic, but there's just always something because especially this last 17 months, there's a lot...people are going through a lot and experiencing things and how do they interact with each other, the teammates? How do they interact with clients? There's so many different things and there's so little you can control on the human resource side. And I'm a type eight enneagram, I like control and if I'm in control, I feel solidly secure on what's going to happen. But when you have other human beings and you have to relinquish control, you just learn a lot of lessons.

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

Shannon: There has been, I think, five times now, five times since I raised money where we have come close to missing payroll. And close, I mean by a week or two, a week or two. I think we've been...the closest we've been is two weeks we almost didn't make payroll five times. We've always made payroll but there have been five times because of funding challenges and timings and things like that where you're looking...payroll goes out for this pay period and you're not sure where the next one's coming from. Those are tough to get through. Those are tough. It always happens, and always, the money seems to always come in and you do a lot of moving around, it's like a shell game kind of thing to make it happen. But in the five years since I've had employees, I've never missed payrolls but there have been some tough times.

Michael: And just for context, how big is the team overall now?

Shannon: We're on 40 employees now. So, we have trainers and then we've got support team, marketing, and so that's the mix of it, yeah. When I think about that, that was a really challenging time during the pandemic because we have people leave or we had to let people go or whatever, but mostly it's the people leaving. And I remember, there's just so many times where I'm like, "Wow, it's must be nice that you get to leave, I can't go anywhere because if I left, 40 families have no income." So, that pressure, that weight, it's really heavy on some days.

Shannon’s Advice For Newer Advisors Entering The Industry And What Success Means To Her [1:26:10]

Michael: So, what advice would you give younger, newer advisors thinking about coming into the business today?

Shannon: I think the best advice to give is just like always listening to clients. Don't pre-screen clients. It's just like that Jim Carrey movie, "Yes Man," be a yes person to everything and really say yes to everything because any advisor business is you're an entrepreneur at the end of the day, you're building a business that's unique to you with your own unique challenges. And so, part of that journey and that experience is uncovering different avenues and things you're supposed to do and that's what I would say, discover those, say yes to those.

Michael: So, what comes next for you? And I know you are coming off with kind of a fresh round of capital, unfortunate investor dynamics notwithstanding as was discussed. So, what comes next for you?

Shannon: Yeah, we're expanding different products and growing other areas of the Gym. So, we've now launched courses for people who are into more DIY stuff, we're going to be launching a $35 a month plan for kind of like the new model, so trainer on-demand and available whenever you like, and then we're looking at...we're exploring a few different partnership opportunities at the moment.

Michael: So, as we wrap up, this is a podcast about success and just one of the themes that always comes up is the word success means very different things to different people. And so, you're going down the journey of successfully grown the business with all the pains and tribulations of running an in-person Financial Gym business in a pandemic. So, you're navigating that on the business end, but I'm wondering how do you define success for yourself at this point?

Shannon: For me, I feel like success is... I feel it in the success of our clients. So, I went on this journey eight years ago to help other people and every time I see a client post something on Instagram or Twitter or they send an email about some financial success they've had or some hurdle they've accomplished, it's like that feels like my success too. And it's like, "Okay, they were able to do that because I did this thing," and it's like I get to have all these successes along the way because of that. So, their success is my success.

Michael: I love it. I love it, which just helps to emphasize that whole transitional moment of the Merrill client who didn't even want to go with you on the journey after helping them deal with being slightly less rich and the power of the client who says, "You change my life, you're saving my life right now."

Shannon: Yeah, that's who I'm here for, that's who we're here for.

Michael: I love it. Well, thank you, Shannon, so much for joining us on the "Financial Advisors Success" podcast.

Shannon: Thank you for having me.

Michael: Absolutely.