#FA Success Ep 245: Leveraging The Entrepreneurial Operating System (EOS) To Scale An Ensemble Practice, With John Kennedy

Resources Featured In This Episode:

• John Kennedy
• CandorPath Financial
• Traction by Gino Wickman
• Ensemble Practice by Philip Palaveev
• #FASuccess Ep 040: Building A True Ensemble Practice Beyond Yourself And Training G2 Successors with Philip Palaveev
• David DeCelle
• Model FA
• The Virtue Of The Weekly Advisory Team Staff Meeting

Full Transcript:

Michael: Welcome, John Kennedy to the "Financial Advisors Success" podcast.

John: Michael, thank you so much for having me today. I'm a big fan. So I'm excited to be here.

Michael: I'm looking forward to the conversation today and the discussion of what it takes and what happens when you want to start scaling up an advisory firm. I find there's more and more conversation today in the industry about what it takes to scale a financial advice business. And to me, it's sort of an inevitable thing that as the industry has shifted to not just assets under management as a business model, but more generally, a recurring revenue business model where you get clients and you can accumulate more clients and you keep serving them over time and you get very high retention rates. Advisory firms often have 95%, 97% retention rates. And so, if you run a recurring model, and you have a really high retention rate, and you keep going out and getting new clients, it's sort of inevitable that at some point, you're going to have more clients than you can handle yourself. You're going to need other people on, and it's like, Welcome to scaling.

John: Exactly. I think I've actually heard this on your show before where you've used the analogy of "you can only have so many people on the bus before the bus is full." And I totally agree. Early on in my career, it was just, "fill the bus, get clients, work with people." And as we've matured and grown through our business, scaling was a relatively new term to me just a few years ago, but now that's something we talk about almost daily.

Michael: And the challenge me is we don't actually talk about what it takes to scale and how to start scaling an advice firm. Like we talk a lot about how to get clients because that was sort of always the root of the industry of go get clients. We talk some, at least, about our advice processes, we may talk a little bit about business management. We're starting to have lots of conversations about technology and how technology can make us more efficient and "help scale the business." But we never really, I find, talk as much about literally, the systems and processes of how you run a business to scale a business. Like just to get a whole bunch of human beings on the same page, rowing in the same direction to actually gain momentum and focus in the business.

And I know you have started going down that path as you're going through the growth and scaling process with a system that's kind of out there that I'm seeing gaining some momentum in the advisor world called EOS, Entrepreneurial Operating System. And to me, just it really is kind of a template on how to start scaling a business, any business. EOS is not even specific to the financial advisor world at all.

But I'm just excited today to talk a little about what happens when you try and start scaling an advice business beyond yourself, and how you do that. Not just from the, “Yeah, we try to buy technology that makes it more efficient,” but literally, how do you get all the human beings focused in the same direction, to the same thing? Because it's almost like all the pain points I see in advisory businesses, “Yeah, there was some technology stuff that maybe doesn't work as well as we want. And we wish it worked better. But most of the hard problems that really come in a business, it's human problems, it's not technology problems, really. It's human problems.” It's human beings that are getting human and all the difficulties that come from that. And when you're a solo advisor, that's relatively manageable because the only person that you have to deal with is the one that you see in the mirror. But once you start scaling, all these human beings are there, and we need them to be doing the same thing too. And the scaling thing gets a lot harder.

How John Got Introduced To EOS [06:11]

John: That's absolutely right. And it's easy to feel isolated in our industry as you're growing your business. And I think that's one of the main reasons that my business partner, Matt Marcoux, and myself have always been such avid listeners to your show because it helps us feel we're connected to a community of advisors that are sharing their struggles, their challenges, how they're growing, how they're scaling.

And it's funny, you mention the EOS model. It's inspired by Gino Wickman. And he wrote a book called "Traction." And I would say, probably, we started our firm in 2018. Sometime around 2019, someone suggested the book to me. In fact, it was our business coach, David DeCelle through Model FA. You may have heard of them. But we have a business coach too. And we think that's really important, just as I said, to be able to have a broader scope of what we're doing and not just Matt and I talking to each other all the time. Like, "Are we doing this right, or we need somebody to bounce ideas off of?" So "Traction" was brought to us, that book. And I probably sat on it for a year. Truly, it literally sat on my desk, it was one of those ones where I didn't put away in a closet because I knew it was an important book, but I couldn't motivate myself to read it for some reason. I don't know why.

And then fast forward about a year later, a good friend of mine whose leadership at a company that has over 100 employees, not in our industry, by the way, but he said, "Hey, have you ever heard of this thing called the EOS Model? We're running our business off of it, we're doing quarterly rock meetings from it, and we're doing weekly meetings. And I said, "That's so funny. I've looked at this book every single day for the last 365 days." And because of his story, and realizing, “Whoa, this isn't just a couple of guys who started a financial planning practice. This could translate to any business, big or small.” That was my motivation to read it. And Matt and I made it our goal that quarter, in the beginning of 2020, to really dig into that book. And I don't have to tell you what happened in March of 2020 that brought a lot of chaos and confusion in our lives, but we stayed steadfast in not only... And I think that almost kept us sane, a little bit, and all the craziness that happened last year was this is something we're working towards, we know we need to implement this and build internally if we want more growth. Because we were hitting a point where there was too many people on the bus and how are we going to grow from here? So, super interesting.

Michael: Yeah I know we've mentioned "Traction" as a book on the podcast before, but no joke, if you're listening, this is your moment of John having had the book on his desk for a year. So, no more just hearing that it's out there. Just go buy the book. Well, we'll put a link for it in the show notes. This is Episode 245. So you can go to kitces.com/245, we'll have a link for it in the show notes. It's okay, you can pause in a moment, go to the site, order the book, it'll get there from Amazon tomorrow, then you can come back and finish listening to the episode because the book is not going to be there until tomorrow. But go order the book.

I think frankly, either if you are more than three team members in your business, or you have a partner, even if you are just starting from zero, fundamentally, to me, what "Traction" is built to do is help make sure that human beings who are coming together to build a thing are building an alignment. And so, anytime you have partners, you have to make sure that you're aligned, if you're not, you start building in different directions, and at best, it doesn't grow well, or at worst, you're eventually going to break apart. And anytime you've got multiple team members, this becomes an issue.

I find it's usually not when you hire your first team member, because most advisors, the first team member is essentially their assistant with whom they're in constant communication and contact. So you don't really need to do a lot to keep the two of you aligned because you're talking all the time every day, you're going to be aligned because they just kind of end up attached to the hip to you. But the moment you get to three people, and you can have a world where the two of them have to make a decision on something when you are not there, alignment matters and traction starts to become relevant. And the bigger the business, the more important that gets if you're at 5, 10, 15, 20 people and you're feeling like the business just doesn't have a lot of traction, isn't really growing. It doesn't seem to have much momentum anymore. That's literally where the name of the book and Wickman's traction analogy that you'll get when you read the book comes from is sort of that phenomenon of we have all these great people and it seems great things should be happening. But the firm is barely growing and we're just not really moving and making momentum forward. And it's that whole phenomenon of you've got great people, but the business has no traction.

John: And what was interesting about it, when we started this, and when we started reading the book, it was just Matt and myself. We didn't have any other employees yet at this point in time. And we had some virtual assistants and such that we'll probably talk about later, but we didn't have employees. And we felt before reading the book that we were aligned, that we were on the same page. We have conversations multiple times a day, numerous times, probably 15 plus times a day. But what was interesting about doing these exercises independently, and then coming together, was there were components where I would say, "Matt, I didn't realize that this was really meaningful to you." Or he'd say the same thing to me, "Okay, this is how you see us growing." And we really came together, ultimately, when... There's this component to the book called the Vision Traction Organizer, or the VTO, we really came together with our VTO to come up with what we felt like mutually expressed our collective desire for the company. But it was an interesting exercise.

And a lot of people would assume you need to have 15, 20-plus employees to really feel like you need to do this, but it was also helpful when it was just him and I. Just two business partners that are a couple of knuckleheads trying to figure this thing out.

Michael: Yeah, to me, as soon as there's more than one person that may have some opportunity to make a decision while the other one isn't there that you need a way to make sure the 2 of you or the 3 of you, or the 5, or 10, or 20, or however many of you are aligned so that everyone's making the decisions to move the business in the same direction, even when the primary or the sole or the lead decision-maker isn't in the room.

And so partners, I think that's relevant the moment that you launch. If you're hiring up as a team and trying to scale as sort of the theme of the day, that really starts, kidding, I find once you get past three or four team members, because just the first one or two, usually, you're really still revolving all decisions around yourself, consciously or unconsciously. That's just how it tends to happen. Once you start getting more people than that, your team starts making decisions without you in the moments of things that they're dealing with. And all of a sudden, it really matters about whether you're actually lined up and moving in the same direction.

John: Yeah, well said. And I would like to highlight, we created a business partnership when we started CandorPath in 2018. And the framework for that was creating an ensemble approach, which actually, we discovered from listening to Episode 40 on October 2017, Michael, of your show.

Michael: Excellent. It was Philip. Yes

John: So, Philip Palaveev. And what is so interesting, you can't know how influential you've been in our journey. Well, you're about to know. But what was so interesting is I remember listening to that show in the car, re-listening to the show, ordering the book, and sending it to Matt, and saying, "Hey, we're onto something here. This is what we've been trying to talk about doing, but there's a framework for this." And four months later, we started CandorPath. Four months after that show aired, which was the first time I had ever even heard the term, the Ensemble Practice.

And what's interesting is, if you asked Matt, it was a difficult decision to go into a business partnership with somebody else. And for him, we had known each other for a long time. So his answer is "Nope, didn't consult anybody, gut feeling," which is kind of funny. For me, I did consult some people. And what was interesting is, almost every single person I consulted, they didn't necessarily know Matt, but they said, "No, don't go into a business partnership. That's a bad idea. That always ends badly." But you don't hear that same advice, or maybe sometimes you do, but you don't always hear that advice about marriage. People say, "Oh, if you love the person, if it's a good fit, if you're meant to be, you should be married."

And so I like the idea of normalizing business partnerships. I feel a lot can get done when there's this collective effort working towards this bigger goal for the company. And obviously, there's a lot of right things that have to happen with a business partnership. You have to have trust and confidence in the other person the way that Matt and I have in each other, which doesn't happen overnight. But I do want to normalize that idea that business marriages exist too. And that's a pretty okay thing. In fact, I think that's a pretty awesome thing.

How John Thinks About And Implements EOS [14:39]

Michael: So, I want to dig deeper into both the EOS theme and the Ensemble Practice theme and what led you to make a hard turn in your business trajectory in four months. Let me start on the EOS side, though. So, I guess just a starting point. Can you describe a little bit more for everyone just what is EOS? As a firm that's doing and living this system, what is EOS? How do you describe EOS?

John: Well, I think I would describe it as a framework, a step-by-step instruction manual even, of how to properly run your company. And if you're entrepreneurial spirited, you've probably read a lot of different books as far as scaling and growing already. And maybe some of these themes in those other books are very similar to EOS, but what I like about it is all of these different components of what they describe for creating this framework, whether it's your weekly check-in meetings, or your quarterly rock meetings, or your scorecard to keep track of key performance indicators of your company that you should have a pulse on at any given moment. All of these things really fit together like nice puzzle pieces. They layer on top. And the way that the book goes through from chapter by chapter, rather than just fire-hosing you with information, it really breaks it out in segmented ways where... like how we chose to do it was, for example, we decided, Okay, in this book there's 7 to 15 key performance indicators that Gino Wickman is suggesting that we should be tracking. And he gives you a bunch of anecdotes and a bunch of examples of types of key performance indicators.

But Michael, you know as I do too, in our industry, A, we can get very data-driven very quickly. So...

Michael: It's glorious.

John: I think we came up with no less than 50 key performance indicators when we first did this, and we're like, "Okay, we got to throw out..." we just kept going through a round of edits until we got down to 15. And to be candid, we have a couple more than 15 now. But we started there. We said, "This is Chapter 1, let's really focus on this chapter and figure out what are our key performance indicators." And some of those metrics and measures are what really, really truly help us make clear business decisions. Within a company, someone might feel, Oh, it's time to hire. We're growing, we're so busy, we can't keep up with demand, we got to hire, but your financials might tell a different story. And so we want to make sure that our scorecard is representative currently of what our numbers show us so that we can make business decisions faster.

And so I would say that EOS is truly a framework and a step-by-step guide on how you should create your business. And I know, Michael, I believe you guys have implemented "Traction" as well in some of your businesses. Do you agree with that statement? Do you find EOS to be the same thing for you?

Michael: Yeah. Yeah, I do, and we have. I've at this point, completely separate EOS installations, applications in three of our different businesses. Actually like four. So XY Planning Network uses EOS. They were the first. AdvicePay was second. Our actual Kitces platform and the 18 people that are part of the Kitces team now, we use EOS. And fpPathfinder also uses EOS. So, a wide range of company sizes there. XYPN is coming up on 100 team members. The Kitces team is just under 20. fpPathfinder is only five. So it works at varying sizes of businesses as well. But yeah, to me, ultimately, it's just about telling us and giving us guidance of just literally, like here's how you run a business. Here's how you do it. Like, okay, so you should do weekly check-ins and quarterly goals, right? There's all this different debate out there of, “Should we have long vision plans or short vision documents or annual planning goals or three-year planning goals or quarterly goals?” Really, as you noted, there's no shortage of business books if you're an entrepreneur. You tend to read a number of them over time, because you're basically trying to figure this out.

And the fundamental challenge is most of those books, they have some great parts, but it doesn't really come together into a whole system. And so what most of us as entrepreneurs end out doing is kind of cobblestoning it together. Like, “I got a thing from this book and I do that, and then I got a thing from this book, so I do some of that, and I got a thing from this book, and so I sort of work that into our process.” I mean, we get far enough along that. Often we still grow businesses that go okay, but to me, what makes EOS unique is just, well, A, that it's really meant to be a whole system. It's all the different parts. The EOS framework is sort of, you set a long-term, like 10-year core target vision. Then you set a 3-year picture of where you need to be to be on track for the 10-year. And then you set 1-year goals to be on track for the 3-year to be on track for the 10-year. And then you set quarterly rocks. Like the big things you're going to do this quarter to be on track for the 1-year goal to be on track for the 3-year picture to be on track for the 10-year target. And then you drill all the way down to the weekly to-dos we're going to do to make sure that we're on track for the quarterly rock for the 1-year goal for the 3-year picture for the 10-year target.

And it's not complex stuff at all. The joke I often make in talking about EOS when people ask me about is, this stuff isn't rocket science. It's not that complex. The book is really not actually that complex. The whole system is not that complex. But that's actually the point. It's just made to work for real human beings, how real normal, messy, easily distractible human beings work to try to keep you decently on target. I feel the whole thing is sort of built around this framework of you know what, we're going to make this whole plan, and like the 10-year, to the 3-year, to the 1-year to the quarterly, to the weekly. And it still assumes that at best, you'll hit maybe 80% of your quarterly goals. In fact, it's usually viewed as great if you're hitting 80% of your quarterly goals.

And just even that is, to me, sort of really redefines the nature of what it means to run a business and just how messy it is to run a business to say, "Oh, we missed almost a quarter of the stuff that we were going to try to do this quarter. That was a success.

John: Yes, we've been so much worse.

Michael: Like, “Wow, we got almost 80% of it done. Mark that a win, and then let's set a new set of things. And we'll try to do those and manage to not get distracted in 90 days, although we probably still will." It just acknowledges to me the frailty of being human or the challenge of being human and still lets you break down business goals and objectives and actions into something that works in bite-sized manners.

John: Well, I like a couple of things that you said. I'd like to mention we dove headfirst into the EOS model. And by no means are we perfect. So we had to learn the hard way how to properly conduct a quarterly rocks meeting and how a quarterly rocks meeting can go pretty poorly and big be a big waste of time. And what I will say, though, is that yes, that is one of the objectives is to complete 80% of what you set out for these five to seven quarterly rocks to be for the company.

But even if you don't hit them, even if you don't hit them, just by simply having them there, you've helped to create the focus, and you've put some momentum behind the work to achieve that goal. So what we've noticed with our quarterly rocks is it's rare that a quarter goes by where absolutely nothing gets done to complete one of those goals. Right?

And so I think that that's the other positive thing is not being too hard on yourself, because it'd be easy to look at that and go, “Oh, you know what, Gino said we got to hit 80% of our goals and we didn't.” And so there's got to be some level of accountability. Sure. But I also think that there's a momentum that happens. And that's really important.

It's easy to be, the term you used, I think, was "easily distracted." And as a financial planner, who has an entrepreneurial spirit, as I imagine many people listening are, I don't have to tell anybody listening, we're all distracted. And being a financial planner, it wouldn't be different from most people listening to this, but a normal day where you have a really important client phone call, and then you go from that to an interview with a potential new hire And then you go from that to a client meeting. And then from that to possibly placing trades on a portfolio or something. The scope of work that we do in a day can vary so much. And what I think more than anything this does is help us create focus.

How John Uses The Vision Traction Organizer Document To Create Focus [23:07]

Matt and I, when we sat down, and the Vision Traction Organizer, which is actually probably some of the first exercises that somebody would work on as they're reading this book, as I recall, the beauty of the simplicity that you described, Michael is it's a two-page document. You have a two-page document that if you forget, which it'll start to just become ingrained in you, but you can look back and say, "These are our core values as a company. This is our core focus. And this is our marketing strategy. This is our 10, 3, and 1-year strategy, here are quarterly rocks." It's all written out there. And it's meant to be a very simple tool to be able to recall. In fact, I'm a little old-school in this way, as is Matt, my business partner. We have this printed out. We carry this with us everywhere we go. I literally have this printed out and folded up. And I probably look at the VTO no less than twice a day. And it's that important to what we're doing. I think if anything else, as we're talking about this, and we're talking about the Vision Traction Organizer, it creates focus, which is huge for somebody who's easily distracted, and our business, our industry kind of lends to being easily distracted.

Michael: So can you share a little bit more of just what's on the magical two-page document? What is this thing? And what is it actually telling you or saying to you or reminding you since I guess you wrote it, so you're talking to yourself, but what's on the two-page document?

John: So the first couple of things I'll go over is our core values and our core focus as a company. So, one of the exercises you go through is trying to identify what are the four to seven core values that you feel represent your company. And for us, I won't go through each one of them, or I will if you want me to. But the couple that I really to point to is the first one which is honesty and integrity. So we use this term, radical candor, a lot, internally. And with clients. Obviously, our company's name is CandorPath Financial, so that's a good play on words. But for us, radical candor means not just that you're being an honest person, but you're also being authentic with clients.

And then the second core value is servicing clients above all else. And we have this mantra that we say to each other quite often that we refuse to maintain marginally satisfied clients. And I think that most people listening to this feel the same way. Having that written down and reading that every day is so important for me to stay focused on what we're doing. And there's other things. Having a positive mindset, comprehensive teamwork, and believing in growth and self-improvement. But those first two I mentioned, honesty and integrity, and then servicing the client above all else, refusing to maintain marginally satisfied clients, those drives what we do every day.

And I'm very verbose when I type and when I write things. And the benefit of the VTL, Vision Traction Organizer, is it makes you be very succinct and short. So the core focus where you're supposed to kind of write out in basically, one sentence, what your purpose, cause, and passion is.

And what we ultimately brought this and distilled this down to is that our purpose and our passion is to enrich the quality of your life and redefine your relationship with money. So that's us speaking to the client. To enrich the quality of the client's life and redefine their relationship with money. And that's something that is so important for us to continually look at in terms of how we feel like we need to really stay focused.

And then beyond that, on the first page of the VTO, there's a 10-year target and a 3-year target. And what I like about the 3-year picture is one of the exercises that you go through when you're doing this is what do you want life to look in three years?

And not just what's our AUM going to be? And what's our revenue going to be? It was more about what's our work-life balance going to look like? What are the things that we no longer want to be doing within our industry?

And when you start a business, you wear many hats. So you're the finance department, the marketing department, the social media, and branding department, the financial planner. You're everything. And we've kind of learned as we've grown that we really want to focus on what we call our “Zone of Genius”, which is not only focusing on the things that we are good at or skilled at doing that we think clients compensate us for doing, but also focus on the things we enjoy. So that was one big area where we really went deep of what does life look like in three years?

And it wasn't about the money necessarily, it was more about work-life balance. I want to be able to spend time with my kids. Matt, he has two small children as do I. And so we want to spend time with our family. And it was interesting because up until this moment, which we completed our VTO in March of 2020, up until that moment, everything was geared towards growth. You got to add clients, build clients, maintain clients. It was like this one-track mind of thinking, and we realized we're never going to develop into an advisory firm or a true business, we'll always just be this practice of adding clients if we can't get out of that cycle somehow and start thinking bigger picture. So that's what it did for us.

Some Of The Long-Term Goals That John And Matt Have Defined For CandorPath [28:16]

Michael: So, can you share with us a little more just... You talked about some other areas of like what your focus is, your Zone of Genius, what life looks in three years. I'm just wondering, were you comfortable to share just literally what are some things? Like, how are you writing them out as you go back and look at this document every day?

John: Yeah. Yeah, a lot of this revolves around this very collaborative, team-based approach that we're applying to how we do financial planning.

And so for us, and when we describe what our three-year picture looks like, one of the big emphasis of focus is trying to deepen this idea of being an ensemble of working as a team. If I recall back to components of your show, Episode 40, with Philip Palaveev, he kind of talks about this idea of an ensemble is aspirational. Like it's a commitment to evolve and continually work towards getting better in that area. And usually, it starts with shared overhead first, as a company, and then it goes to shared employees, and then finally, shared clients and shared client responsibilities.

And so that's something where we feel like we do that well, but we know there are ways that we can get better at working together with our clients. And so that's one area. And to be super specific with you, Michael, and this is maybe a little more industry talk than then you care to go into. But right now, when we started CandorPath, Matt had clients, I had clients, we brought them together. And at the time, we had separate rep codes with our brokerage. And so working on integrating our clients into one rep code where they see both of our names on the statement there, they see CandorPath Financial, and they know that this is truly a team approach. Versus, "Yeah, yeah, I get what these guys say. I get it. It's an ensemble, but Matt's my guy, or John's the person I talk to."

To some degree, there always needs to be a lead on that relationship. But where we have really started to put this to the test, and I'll give an example that's very recent. This past month, Matt went on vacation, it was the first vacation of his career where he actually tried to unplug because you know, and I know, and everybody listening knows, when you take a vacation, you're hooked to your phone. Client calls, someone needs money, an emergency happens. And we might not define it as an emergency. But if a client defines it as an emergency, it's an emergency. So this was the first time in his career where we had systems in place, there are certain things that staff can do. And in a worst-case scenario where it requires an advisor, I can step into that conversation, and because of the nature in which we share notes, how our style of planning is so cohesive and similar, there were numerous occasions over that week where I stepped in. For us, that's very aspirational. We feel like we do it good. And we want to continue to get better. And for us, our three-year picture is very much centered around that and around work-life balance, focusing on what we call our Zone of Genius, which is kind of a term we use internally quite a bit.

Michael: Okay. And I guess, ultimately, for you, that also just draws on once you write down, this is the balance you're trying to achieve, then, lo and behold, there it is.

John: Yeah, we try at least. I think when we started in 2018, and honestly, even through today, as I record this. I'm a work in progress. I love work. I love work. I love what I do. Matt and I love what we do for clients. We're inspired by it.

And I think what's interesting from a client perspective, prior to starting CandorPath, I don't think a client really saw it necessarily as a big change. When we started CandorPath, they sort of viewed it as "Oh cool, Well, you're CFP or advisor, and that's what you did for me before. That's what you do for me now." But I wake up with such a different fire in my belly to do what we do. And I'm so excited and inspired by what we do. So I love work. And I could do it morning, noon, and night. Yet I have a two-year-old and a five-year-old, and as we've talked about this before, Michael, our kids are rapidly growing before our eyes. And so, striking that line and trying to create that balance of “Okay, I said I was going to take a vacation with my family and I'm not going to answer the phone unless it's an absolute emergency.” Like that type of thing is really hard to do. Wouldn't you agree?

Michael: Oh, yes. Yes. When you're immersed in your business, it's always hard to put it down or step away in any way.

John: Yeah. And it's fun. But that's the other thing. A lot of it, there are definitely days where it feels like work. But then there are days where I'm having a conversation with you. And this doesn't feel like work. This is fun. I'm enthused with what we do. So it's hard to step away. But that balance is really important. And I care very much about my health. My dad passed at a relatively young age. I was 24 when he passed. I want to be there to walk my daughter down the aisle, see my son, get married, see grandkids, all those things. So that balance matters to us. And feeling like we have a track that we're working towards to better create that balance versus just sort of plodding along daily and getting excited about big client wins, or... We do. We get excited about all those things, but being able to take a step back and go, "This is awesome, but this isn't what life is all about. And we do need to take breaks from time to time." That's been something I think, this year, I've really started to focus on that more and recognize that that's a goal that we're working towards.

How John Uses Quarterly Rocks [33:45]

Michael: So we've also talked a bit about this phenomenon of quarterly rocks. So can you explain a little bit more like what are quarterly rocks? And literally, what are some of your quarterly rocks? Just to give maybe, examples and context?

John: Sure, yeah. Sure, I'd be happy to. So, you sort of distill it down, as you described earlier, a 10-year vision of what you want your company to look like, what some of those goals are, you bring that down to a 3-year picture. And then you create a one-year action plan. And those are five to seven goals that you create for the company to be completed by the end of the fiscal year. At least that's how we did it by 12/31. And we live quarter by quarter. So we've then scoped that down to what are the most important significant things that we should be doing this quarter to get to the achievement of those goals that we're trying to achieve by the end of the fiscal year, or for our one-year plan?

And it's interesting, Gino Wickman talks a ton about this in the book. And I believe in it. I've really believed this now that humans just have a hard time focusing past 90 days Right?

Michael: Guilty as charged.

John: It's so fun. I could sit here and talk to you, Michael, all day about what is life going to look like in 10 years. And vision cast is a really nice way of calling it daydreaming. But I could daydream about 10 years from now, but the quarterly rocks are then meant to put that in motion. Okay, how are we going to get there? We're not going to get there without hard work. And so what are the things that we need to do, the most significant things to get to completing these goals that we have set out for ourselves? And the quarterly rocks meeting, we're all busy, and there's so much going on in the course of your week. I got to tell you it's really hard to take a day out and focus on what the next quarter will be like. Because that's sort of the mandate that we've stuck to is you do a one-day, off-site, no distraction meeting with leadership, and you sit down and you go through what are these quarterly rocks going to be? How are we going to get to achieving our one-year? And there's a script for how this meeting should go. You review the prior quarterly rocks, you talk about what worked, what didn't? Did you achieve up to 80% or more of them? And then talk about the next quarterly rocks and you brainstorm and come up with ideas. There's a great process for how that whole day works.

But what I will say is the incredible thing about that day is when you put that time into that day, I think it saves probably 10 times the amount of time on the back end, because of the focus it creates. Everyone's on the same page. We all know what we're working towards. And I'll get to the weekly check-ins after this, which is then sort of the check-ins for the quarterly rocks, but it creates and really focuses us on what we're trying to achieve.

So, in our case, in particular, some of our quarterly rocks, our most recent one was to hire and train an admin position. So we realized we were at a point where we really, really needed someone who all this person was able to do was the backchannel support for paperwork. And I talked earlier about wearing a lot of hats. At the start of a business, you're doing everything. But over time, I don't think a client necessarily wants their financial planner also updating their beneficiaries on their paperwork and submitting that paperwork for them, and doing all that backchannel work. And so we've really focused on training or hiring and training the admin position. But more than just finding the hire, we also said, "We want this person to be fully operational by the end of the quarter." Meaning, we'll be ready to make the next hire, which is a really important hire for us by the end of the year, more of like a support advisor type role. Paraplanner is a term that's used a lot too.

So right now, one of the quarterly rocks was to create the job description and the outline, and understand what our projected net profit margin needs to be to hire the paraplanner. We've already hired the admin position. But one of the rocks that we haven't completed yet, which we're very, very focused on is making sure that she is fully operational. I'm talking, all the workflows work, it gets to her, she knows what to do. And she's learning. So the incredible component to Sherry who is in this role is she's actually a CFP, which is amazing. So we have three CFPs. But she doesn't necessarily want to work in a client-facing role or aspect. And so she's really gotten up to speed great. And Sherry, if you're listening to this, you're amazing. But that's big for us. We wanted to make sure that fully operational for the next hire. And those are a couple of really, really big ones that I'd to point out.

Another one that's, or maybe a couple more that are really unique to us is we set a goal to have what we're calling client feedback sessions. So we wanted to have 24 client feedback sessions completed by the quarter-end. And these are separate conversations than meetings. These are anywhere from 15 to 30 minutes where we talk with our clients. We sort of have a loose script of conversation that we have with them. But it's meant to get an idea, and having an open environment where we can talk about are we doing well? Are there areas that we can improve? Those are the types of things that we're trying to figure out through some questions that we ask. And at the beginning of the year, we said, "Oh, let's do these feedback sessions." And what we realized is we can't just say that. We have to have that as a goal. And we have to be hyper-specific about that goal so that by the end of the year, every client that we want to have completed that feedback session has completed by the end of the year. So that's one of our goals is to do 24 of those between now and the end of the quarter.

And I think another one I just like to point to because it's kind of fun and it stretches our comfort zone a little bit is we have a podcast. It's called "Above Board with CandorPath." And we wanted to have 8 to 10 shows scheduled, recorded, post-edited, and ready to go by the end of the quarter, which, I think, Michael, you could probably attest to, you've done so many of these. And you're a pro now, but those first few it's kind of hard.

Michael: Oh, yeah, that's very stressful. Like, “What am I doing”? Yeah.

John: Yeah. Yeah. So that was one of our goals too. And it was, does that necessarily bring clients in? No, you can't draw a direct correlation to that. But we feel like it deepens a skill of communication of being able to talk off the cuff and have different interviews and things. So we thought that that was an important one for us as well.

Michael: One, I'm struck by these, and I know it's part of the point of EOS ultimately that they're not huge things, right? Like we want to make a job description and outline for our next hire and make sure we're clear on what the margins have to pull the trigger. This is not the most rocket sciency of a thing. And like, you've given yourself a quarter, like 90 days to make the job description that I know, businesses, I think, I've certainly been guilty of this in prior businesses as well of "Oh yeah, we need to do that next hire. I think it's about time." So like, "Hey, go make the job description. Write it up so that we can post the thing next week."

And it's like we could probably do this and get it posted in a week. But to me, there's an interesting effect of you're sort of forcing yourself to look at it a little bit further ahead. So you have also "the luxury” of figuring this out and realizing it's coming a quarter in advance. So you're not just trying to pull the trigger at the moment." And that it only takes a couple of things at that level that you do with conscious deliberate intention in the coming quarter. And when you do that every quarter, quarter after quarter, a lot of stuff gets done.

John: I like how you said that, Michael, that these are not difficult things. Because if you think about it, it's meant to be steps to completing the one-year plan. Depending on how quickly things move, we might accelerate the rock and get it done sooner, for example. But the goal is to have these are the things we said at the beginning of the year that we'd complete by the end of the year. And so we're just trying to continue the momentum and create those micro-steps to getting there.

So one of those things was simply to hire that position of a support advisor by the end of the year. But this quarter, we're not necessarily worried about stressing ourselves with, “Okay we got to make sure that Sherry's fully trained and all of our back-office automation (which is another one of our goals for the year) is working perfectly,” because everybody wants everything to be perfect when they bring someone new. And we've decided that it's safer for us to create those micro-steps because then those things do get done, rather than feeling the overwhelm of, “Oh, no, it's October. And we didn't even think about this yet. We were supposed to finish this three months from now!”

And I will say that I'm guilty of it too, Michael, where we go into these quarterly rock meetings and I want the world. I'm like, "Let's do this and do that. And we can do all these things." And Matt's that way, too. We get very visionary in those meetings. And Megan, she's our Director of Operations. She's so good at bringing us back to reality in a very tactful way. And saying, "Guys, let's take a breather. Remember the one-year plan?" I'm like, "Yep, that's right." And I think that's really, really important. And where we probably got lost the first few times we did these rocks meetings where we bit off more than we can chew, then you end the quarter and you feel a little disappointed about yourself. And that's why I mentioned earlier, not to beat yourself up so hard because as you first start doing these quarterly rock meetings, you start to understand what's realistic, like just after a couple even. After a couple of quarters, you start to understand, “Okay, I'm finding that I have the tendency to overshoot what these rocks are, and there's a reason we have the one year plan. I can't get everything done in these next three months for the one-year plan. It's a one-year plan, not a quarterly plan.”

And what was really helpful, they talk about this in the book quite a bit. I'm curious to hear if you guys do this in any of your quarterly rock meetings, but we brought in David DeCelle from Model FA as our facilitator. We toyed with the idea of hiring a traction facilitator because that's what they know and do. Ultimately, we're having two coaching calls a month with David where he knows our business pretty intimately. And so we invited him and asked him, "Hey, would you be interested in doing this with us? We really need help. We need someone to guide this meeting." Because it's really hard to be a contributor to the meeting and a facilitator to the meeting. We needed somebody who was neutral to that discussion, that could provide some input along the way, but keep the conversation flowing. Because otherwise, Matt and I could talk all day about our grandiose visions.

Do you guys do that? Do you have a facilitator that you bring into the meetings or have someone sort of moderate or?

Michael: We do for all of our different company EOS implementations? So the EOS folks, like the just the people who, Gino Wickman's organization made the system, trains people to specifically coach around using EOS. They call them EOS Implementers. And so, yeah, we hired an EOS Implementer for the very first time we went out to do EOS, just I think basically saying, "Yeah, system seems really neat. This looks handy. We'd read the book. And I don't really know how to do this." I mean, if we knew how to do this, like actually do it and get everybody on the same page and get it done, then we'd probably would already be doing that. We wouldn't be needing the system and looking for it.

And this started for XYPN, in particular, was the first that went down this road, and very much in the vein of what we're talking about at the beginning. like that is a business with co-founders. And so you've got two partners, you just got to make sure the two of you are really, really aligned. Like you say you're aligned, but to me, ironically, it's sort of like the planning conversations that we sometimes have with couples, like we will work with couples who may have literally been married for decades and they're coming in to talk about retirement, and we start talking about what retirement is going to look for them, and they discover for the first time their visions of retirement are completely different from each other and they never realized that before. Y'all have been hanging out together for like 10,000 days... literally.... and you never figured out that your vision of your future is completely different from each other. And it's just sort of one of those things. Like yeah, sometimes you actually spend so much time together you get so caught up in the daily conversations that you never really have some of the big picture conversations to make sure you're aligned.

And I think that can happen with, I guess, I'll just say almost any couple. And that couple can be you and your spouse, and that can be you and your business partner. I often say or view, I think good business partnerships often have a lot of resemblances to good marriages and bad business partnerships to bad marriages. And just if you approach it kind of looks like a marriage or a second marriage, if you've already got your first one with your spouse, that all the same challenges and traps that can crop up with couples in marriage, we're living our day-to-day lives, but it's really hard for us sometimes to take a pause and have the conversations about the bigger picture of things, which is why couples therapy is often a very good thing for couples. The same phenomenon can happen with business partners.

And so I think for us just recognizing that upfront, particularly for XYPN. Alan and I are both very strong personalities. Like, yes, someone's got to make sure this conversation stays on track, or we're just going to go our own highly engaged passionate direction and then may or may not really get to the resolutions that we needed to get to.

So we hired an EOS Implementer from the start and had such a good experience with it that we have hired an EOS Implementer for every business' EOS implementation. I will say for most of them, though, it's the same person. He did such a wonderful job for the first one we've continued to hire for other businesses now as well. But it is not inexpensive. It is very worthwhile, just for making sure those conversations are on track and that you're really getting the clarity that you need because it's amazing how much easier this stuff gets when you actually have clarity about where you're going.

What Level 10 Meetings Are And Why They’re So Important [49:41]

John: Agreed.  And I'll go from the rocks meeting to the weekly, we call them L10s or Level 10 meetings where it's a Monday morning check-in. And those are just meant to be basically micro sessions about the rocks and things that you have going on.

Those conversations aren't about our visions, our focus our goal, our quarterly rocks, and that's where the Level 10 meeting comes into play because basically, we like doing them on Mondays. And I got to be honest. It's really easy to resist. Let's face it. Who's excited about a staff meeting? Because that's what that is. It's a staff meeting. It's a staff check-in. It's really easy to resist. But we ultimately found our groove with it, and then leaned into it, because it brought us all closer during a time where, when we started this last year, we weren't coming into the office at all. And so it really brought us closer in this whole virtual environment. And it gave us space for those important conversations. So we typically give 90 minutes for that meeting, we're often done in 60, but we give 90, and it just creates space for that communication, which, like you said, it's so important.

Michael: Well, and in the theme of EOS, right, just even the weekly meeting has a basic agenda structure to it. And I know that EOS prescribes of like a segue into it, share one personal point professional win for the past week, look at your scorecard, look at your rocks and how you're doing, check in on your to-do items, and talk about any client issues, and then just dive into problems. Like whatever problems you want to identify, discuss, and solve for. And just in the same theme, it's not a complex agenda, it's actually really simple, straightforward agenda, but just, it gives us structure. It doesn't have to be the perfect structure. The truth just it's a structure, it's a reasonable structure, and that pretty much gets done 95% of what you need to get done, which is way more than most of us will do on our own. Ninety-five percent is really good.

John: Amen. And I will be the first to admit the structure at the beginning is really hard to follow because one of the components of it is a five-minute rock review, where somebody literally just pulls up the VTO and reads the rocks for the quarter. And if someone says, "Hey, are we on track or not on track?" It's like a checklist. Are we, Yes or no? And then if it's a no, if we're not on track, we just move that down to what we call the IDS, which is the issues discuss and solve portion. So we move down those conversations. But at the beginning, those first few weeks, it's like, "Okay, we're going to read this again?" That's how I remember feeling as I was reading this, people were in their heads having inner dialogue going, "John, we get it. We can read too." But we've stuck with that because that consistency has really helped us. And I think just the more you see it, the more it starts to become ingrained in what you're doing.

And that's sort of the idea of those meetings, right? I think he calls them in the book, A Weekly Meeting Pulse. And the analogy he uses is not that different than a pulse when you're looking at an EKG read or something where you see that pulse. The idea is with each tick-up that you see, that's another check-in, we're focusing on that again. And so the more pulse check-ins you can have, the more these things get done. I think I kind of butchered that analogy, so I apologize, but you probably got the spirit of where I was going.

The Numbers And Metrics That John Tracks On His EOS Scorecard [51:00]

Michael: So I guess the last piece of this just for the EOS discussion, just circling back on what you'd said at the beginning about scorecards and like the numbers and metrics you track. So can you talk a little bit more about what is on the scorecard? Like what are the numbers and metrics you're tracking every week in the advisory firm?

John: Yeah, yeah, I'd be happy to. Like I said before, I think we started with 50. But we were trying to stay true to it. And I believe 7 to 15 is the number that, he suggests tracking anything more than that just becomes overwhelming. And so identifying what those are. We broke them up in a little bit of a unique way. I'll drill into these in a moment. But how we broke them up, or I think four main segments. So we're looking at several components in sales for our scorecard, several components of what we call client satisfaction and retention. We look at our client segmentation, which includes understanding our total number of clients, our total number of revenue, and then most importantly, what our average per client revenue is.

And then we look at finances, which focuses on several main areas. And I think that's the one that most people would assume the scorecard is meant to hold is the finance stuff. So we were focused on what our cash balance is, what our AUM and assets held away are. And then the two most important ones that we care greatly about is our trailing annual net profit margin and our forward-looking net profit margin. So the reason we like those numbers is, as you know Michael, you could draw a line in the sand today, and look back at the last 12 months and see what your revenue was and know that the next 12 months will vary greatly if you just onboarded 4 clients, and that's $40 grand of revenue.

And so we want to have an understanding of both. What did the last 12 months look like? And what do we think the next 12 months look like? And we distill that down to a percentage of our net profit margin? And I think the other one that's perhaps a little unique are the sales and the client satisfaction. So with sales... I hate that word. It's not a great word. But what we enjoy about tracking this is we look at, every week, what are the number of leads and referrals that we get? What are the number of intro calls that we book? What are the number of committed new clients that we onboard? And what's the revenue number associated with that? And the reason that we started tracking that a year ago is... there was a point in time where, you guys know this, it's like we live and die by the referral. And so some months or weeks it's like, "Wow, we're on fire. This will never stop. We're getting referrals every day." And then months will go by and is like, "Is anyone going to call? We think we do pretty good work."

So that was a metric that we wanted to specifically track because we wanted to understand from the moment someone's referred to us, how many of those are we actually having a call with? Because a lot of times clients will tell us, "Hey, I sent so and so your way or whatever." And we wanted to sort of track that. And then just over the course of time, we have a percentage for how many initial meetings do we need to have for a client to come on board? So for example, for every 10 meetings we have, are 8 clients coming on, or are 2 clients coming on? And that was in and of itself a really important self-discovery. We realized at the growth rate we were at that if we had 7, 8, 9, 10 out of 10 clients coming on board, that we were probably not priced right. And that wasn't necessarily a good thing. Because we were recognizing, at some point, at the beginning of 2020, that there's a difference between healthy growth and unhealthy growth. And that's where we really tried to get better at it.

And so that's why we started tracking some of those sales metrics and client satisfaction and retention. So we look at the number of meetings booked a week. And we log what we call client problems and incidents. So does a client send us an email saying, "Hey, this is really frustrating trying to schedule with your calendar, I couldn't find a time "? Or just voicing any sort of... It could be the most mild concern, but we want to fix those things. So anything that they voice we want to know. And then we also track communication sent. Mass emails, that type of thing. And then social media posts, which we do quite a bit of.

So those are the things that we focus on intently in our scorecard. And like I said, there's a few more than 15. But I think we're at 17, total.

How John Segments His Clients And What His Firm Looks Like Today [55:39]

Michael: So, just out of curiosity, because you've talked in some detail about the sales numbers, the satisfaction numbers, the finances numbers, so just can you share a little bit more of what's in the client segmentation numbers, since I think that's the only category you haven't talked about in further detail?

John: Definitely. Yeah, we have 163 active engaged clients that Matt and I work with. And so we want to understand what's our total client revenue, and then what's our average per client revenue. And we actually have this segmented out, though I hide some of these cells for the scorecard meeting just to not overwhelm people with data. But we're looking at what we define as clients, account holders, and then we call them non-revenue, but they're pro bono circumstances. So if we take an adult son or daughter of a client, or we're doing some different kind of charitable work, then we track them as a pro bono client. We're doing the work, but there's no revenue tied to it. But we want to know how many of those cases can we reasonably take on before we feel like need to be a little careful.

Michael: Right. Rather than what a lot of us tend to do. It's just like we keep taking a combination of clients because, Hey, it's just one client, that margin, they've got an unfortunate circumstance, I really want to help them. And then at some point, you may have a lot more of those than you probably should, and you’ve sort of lost track of it, because you're not really tracking how many accommodation clients you've got. So you're just calling them pro bono and tracking them upfront. And we can have a conversation later about whether it's adding up to too many or not, but at least it's there, and there's a number on it. So we can't hide from it.

John: Well, that's exactly right. And at the beginning of all of this, it didn't matter. Because it was we all probably...

Michael: [crosstalk] a lot of clients. Yeah, we have a lot of flexibility when we first get started.

John: Yeah, yeah. We all say yes too much because the time is on our side. And then eventually, over time, little by little, you probably don't even recognize it. But then one day you wake up and you go, "Whoa, we gotta fix this. This has become a problem." And so that's something that we really try to track. And the differentiation between clients and account holders I think is important. And I say that because sometimes someone will onboard as a client. And what we define as a client. So I'm talking about engaged planning sessions, comprehensive financial planning, helping them with their cash flow, their investments, rebalancing 401(ks), and retirement accounts, all that stuff, tax services, and so on. So sometimes they start as a client, and then they might evolve to an account holder.

I'll give you a really good example. Last year, I started working with someone. She's a young executive and works for Amazon. And so when we started working together, I'm like, "Let me tell you about all the cool things we do. Look at our core values. Look at all this stuff. We do all this." And the comment was, "That's great, John. Yeah, I'm interested. That's great. Let's do it." I thought, "Oh, okay, cool." Well, not as excited as I was. I definitely came in with a lot of energy. But she came on as a client. We managed her portfolio. And predominantly, over the course of time, all we've focused on is the investment management side. And not all the things that I thought we would be doing.

And so we had a conversation, and she kind of just said, "Hey, listen, you guys. I get emails from you all the time. I get communication. I follow you on social media." She's like, "Honestly, John, I feel we're kind of hearing from you a lot anyway. And there's nothing going on." Like there's no life event or pain point for her that really made her feel I need to have an annual review or a quarterly review with John and Matt. So it kind of evolved into, okay, well, she's now what we sort of internally consider to be more of an account holder. And if that changes, if all of a sudden she's like, "Hey, we're ready to add on some of these other layers of service," then that's great, too. That's awesome. But there is a differentiation between what we define as a client and an account holder and the level of service and work that goes into those relationships.

Michael: So, now help us understand just the overall size and scope of the firm at this point. Like we've talked a lot about how EOS applies within CandorPath. So just tell us about CandorPath as an advisory business.

John: Yeah. Yeah, I'd be happy to. We started in the beginning of 2018, with approximately $400,000 in revenue. And is one of those moments where, maybe call it our Jerry Maguire moment, even though it really wasn't that dramatic, but it's fun to say. We left. We decided to create this team-based approach and this Ensemble Practice with CandorPath.

And I'll be honest, man, I've read all the statistics. We were stress-testing things when we made the decision. I thought we'd lose 40% of our clients. And what ended up happening is a true testament to getting in front of that conversation, sitting down in coffee shops, and living rooms of clients' households, doing Zooms with clients that didn't want to meet face to face. We literally told every single client face to face, "Here's what we're doing. We're excited about creating CandorPath. We want to do something that's significant and make a difference in the community of our clients as well as our lives. We're excited. We hope you come with us. You don't have to. By no means will we ever be upset if you choose not to." And nearly every client came. And that probably was, for us, the first I guess, sigh of relief. We're like "Okay, we could take a collective breath. Most of our clients came.”

And then 2018 was focused on keeping our clients. And we call all those clients foundational clients. They're the ones that were there with us from the beginning. And what evolved over time, and what we started to notice, which was interesting, because I think the natural inclination, at least from my point of view, would be to think, "Okay, I'm going to go with Matt and John, but let's see the viability of this." And we'd sort of be on the chopping block. But what actually happened and what our real experience was, clients would be having conversations with us, and one, in particular, was so excited to refer clients to us now.

And I had this very honest conversation with them. And I said, "What's changed? I mean, we've worked together for seven years and you never referred someone." And his comment was, "Really, John, I figured you were a salaried staff position. And you just got fed clients or you had your own set of work. Like you weren't looking for clients." Which shows you, Michael, and everybody listening, how bad I was at the referral conversation long ago. And I'm still getting better at it. But that was so transformative for me to hear a client say, he followed that up with, "I feel I'm a part of this with you guys now. I want to see you grow. I'm so happy to see what you guys are doing." We have an Alexa Skill called CandorPath365, I don't want to say too loud so mine doesn't turn on in the background. But if you say, Play my flash briefing, we come up with a 30, 60, 90-second snippet Market News of the Day, Money Discipline, Money Finance, stuff like that. And so he's like, "Man, I hear you on my Alexa Skill, I log into Facebook, I see you guys there." He's like, "I'm just so happy to see what you guys are doing. And I want my friends to be a part of it."

I feel like that was a pivotal moment in my career where I realized, wow, these clients are like family and they want to see us do well too.

And so, 2019 sort of became having that discussion with clients and really growing. So 2018 the theme was, keep our foundation clients. 2019 was grow. And we were in that mindset. Like, never say no, bring everybody on, we want to be Yes men, we want to make everybody happy. And then in 2020 we kind of realized, okay, we're on pace, potentially for an healthy growth, and we got to fix this and build this thing internal and know what our vision is going to be, other than just get clients, get clients. Because that's not what we're really about anyway. So that's where 2020 we really kind of reset things and said, "This is how we're going to build this." And we did that through Traction.

So again, I think a huge footprint on how we do things today is inspired by your show, Episode 40 and Philip Palaveev's book, "The Ensemble Practice," and "Traction" by Gino Wickman. I think if I could give advice to anybody that's aspirational and growing an advisory firm and wanting to scale, it would be those two books were so transformative for Matt and myself.

And we sit here today. And obviously, it depends on which number you look at. So if we look at trailing 12-month revenue or projected 12-month revenue, but I'll do trailing 12-month revenue, it's at about $800,000. So, in that timeframe of 2018 through now, we've gone from $400k to $800k. And our projected is quite close to a million.

What John And Matt Were Doing Before Launching CandorPath [01:04:23]

Michael: So, talk to us a little bit more just about this transition that you talked about of taking the leap and not sure if clients are going to come along. And sort of the proverbial Jerry Maguire moment. Like, where were you? I mean, what did you leave or transition from that you had the ensemble story and had the revelation moment and decided to change a few months later? Like, where were you? What was the prior business or structure?

John: Yeah, we were at a local in-town independent advisory company. And the irony of all of this and how Matt and I know each other, which is a good question because I didn't get to mention this. Matt actually hired me in 2008. And 2008 was obviously an interesting time to get into the industry for all the reasons we all know, but he hired me in 2008 and was my mentor. So we worked together alongside each other for a long time. So we had developed that trust. We knew each other very well. He was in my wedding. I'm the godfather to one of his boys. We're very close. Both in work and outside of work. And we had a lot of progressive conversations about what does forming a partnership look like where we previously were.

And honestly, listening to that podcast in October 2017, it was like one of those things where you were meant to hear it at that right time. Like, "Traction" is the best example I can give for me. I heard about that book. It sat on my desk and collected dust. And then when I heard it again, at that right time, it was like the motivation to pick it up and do it. And so your podcast with Philip Palaveev came at that right time where we decided, this is how we want to do things and how we'd to create things. And it's okay. It just didn't work out where we were. And so we made that decision of, okay, we're going to bet on ourselves, and we're going to do this together.

And that was a big, big decision of leaving a comfort zone of what I always knew. And the same for Matt. Leaving a comfort zone that he always knew and trusting each other so wholeheartedly that we could do this thing together. And the confidence developed over time after we did this. And I can look back now and say, “Yes, this is obviously the best decision I've ever made in my career.”

Michael: So I guess I'm just wondering what was making the itch that you wanted to leave the firm and go on your own? And what was the catalyst that actually said,okay, notwithstanding all the scary stuff you noted and the naysayers and the warnings and the rest? Like, what was causing the itch? And then what led you to say like, "I want to make this leap. We're going to do this?"

John: Yeah. Well, we always wanted the ability or the autonomy to be... Think of it this way. We're the ones in those client meetings, right? I'm a certified financial planner, as Matt. We're in those meetings with clients. We're sitting down with them across from a client who just lost their spouse, or who's going through a terrible terminal diagnosis, and we're having really heavy conversations. And I never wanted to be influenced in any certain way by an outside factor of somebody saying like, "Hey, this type of product needs to be used or this type of situation, it calls for this." I always felt like we are in these meetings, we know these clients at a deep, intimate level, and we know what's best for them. Obviously, if I seek guidance and counsel outside of that, that's a different story. But I never wanted that influence. I'm not suggesting that that's what was happening, but I was definitely concerned that over time, it would evolve to that.

And so we just felt this is going to be one of those now or never moments. So we could sit here and we could just kind of deal with it and 10 years go by and play the safe side, or we can bet on ourselves and go out and do this and do it the way we feel like financial planning should be done.

And I got to tell you, for me, I just kept thinking during that time, and even now, I feel I make decisions like this, the biggest regret for me would have been not going out and starting my own company and failing. I could have lived with that. Because I could have come back from that. But staying in the status quo of comfort for any longer stretch of time than I already had and being unhappy with myself and feeling like I didn't personally develop or achieve the things I knew I could have. I knew deep down I could have done that but I didn't because I was scared.

Where CandorPath’s Growth Came From [01:08:39]

Michael: And just where does all the growth come from in the meantime? You've effectively doubled the firm in the past roughly three years since you made the transition. So where does all this growth come from?

John: So I would say it's predominantly client referrals. And what's unique about this, Michael is, and I'll continue to give you kudos throughout the show. But listening to your show, you've had different advisors talk about marketing and how they do things, or different experts discussing social media and things that. And we really decided early on that we needed to, it was 2018, it was time to lean into some technology and put ourselves out there.

And so what we were finding, and this took a while to learn, but Matt and I would do videos. I'd shoot a video. And talk about that iceberg analogy of what people don't see behind the scenes. So we post a video to our social media page, maybe put it on LinkedIn, and Facebook, or Twitter. And it gets like three likes. And it's my mother, and Matt's mother, and my mother-in-law.

And what no one knew is that took probably 16 takes and 4 hours for me to shoot this first video, and get uncomfortable behind the video and do that. And through practice and continuing to do it we're at a pace now where we post multiple videos a week. And we do that across most social media platforms. And you can find us @CandorPath is our handle pretty much everywhere. But Facebook specifically is interesting, because most of our demographic of clients we work with, so let's say retirees, are there. Everyone has a Facebook page at that demographic. And we do a lot on there between raffles and giveaways to videos, and so on and so forth. But what we've learned, which took me probably six months to figure this out, was I leaned into it. I remember telling Matt, "Why am I doing these videos? No one's watching them." But I kept doing them.

And what happened is we'd have a client referral meeting. So a prospect comes in, we'd have our initial meeting. And they're a little different now how we structure them. But I'll say the first meeting was about an hour. By the end of that meeting, they were telling us things that usually took us two or three meetings to get to. They were more comfortable to open up. And they were more comfortable giving us, not that I would ever ask for a verbal yes or no, but you kind of get the feeling or the sense after the first meeting where it's going to go. And they said, "Okay, great what are the next steps? We want to work with you? How do we do that?"

And I remember sitting there thinking, Matt and I are trying to figure out like, "This is so weird. What's happening?" Just evolution of this. We were in this mindset where this took three meetings to get to this point and all this stuff. And by the first meeting, they had already made the decision, yes or no. And I think what we really figured out is, so someone they know, like, and trust referred us, because it was typically a client referral, and it's usually a family member or a close friend or what have you, or a co-worker.

And then they do what everybody else does, which is kind of socially stalk you. And I don't mean that in a weird way. Just they look you up. They go to your website, they may be watch a video on the website, they go to your social media, they see how active you are, and all of that I think develops a sense of confidence from the potential client's point of view. And so they've seen videos of Matt and I talking in the conference room that they had then eventually came and sat in with us. They understood my conversation style. They saw my sense of comfort to talk about maybe a complex financial topic, that, of course, we had to get pre-approved by compliance to talk through our comprehensive topic that was difficult. And they probably thought, "Well, that's interesting that not a lot of advisors would put themselves out there that way."

So, this came out through a meeting where a potential client said to us, "Yeah, you know what, you mentioned that in the video." And in my head, I'm like, "What?"

Michael: “You've seen my video?”

John: I'm like, "My wife barely likes my videos." And so that person never liked the video, never followed us on social media, didn't do anything that would have indicated to me that that person was there watching us, yet they were consuming it.

And so by the time they came in, they felt that comfortable. That's my perception of it is that they've already decided like, I like the way this person communicates, or I don't. And probably, they never booked the meeting, to begin with, if they don't.

And I really deeply, deeply believe that that component of doing social media accelerated those meetings to where we were doing paperwork by the next meeting, or we were bringing him on as a client. We got affirmation from them much faster than we normally used to. So I think it was a combination of client referrals, and then getting really uncomfortable with doing probably, if we watched them now, like super awkward videos. But hopefully, we've gotten a little less awkward as time has gone on.

Michael: And just what are the videos? Just what are they about? What are you doing on these videos?

John: My very first one was about proactive tax planning versus reactive... I forget what I called the video, but it was proactive taxes versus reactive tax return. Because we offer tax services, we shared this video. And this is actually how we got one of our favorite clients that we work with right now. Believe it or not. And the whole concept was, it was right around tax season. And it was like, “Hey, did you get a tax bill that you weren't necessarily happy with? Were you surprised by it? Did you think that you weren't going to have that? Let's talk about proactive planning." It was just like the 60-second video about being proactive and doing a proforma ahead of time and understanding what your withholding should be, and all that stuff. And we got a client out of that video, which I think is amazing to this day because I was probably pretty awkward in that. But a lot of the videos are very topical in nature.

So, last March, when the markets were going haywire and all over the place, there was a lot of managing your emotion, managing expectations of what's going on in the market, and investor psychology. We recognize volatility is happening, let's talk through that. And, hey, that was a busy time for all of us. I know everyone listening to this was really busy. We were working on Saturdays and Sundays doing client calls with clients during that month. Because it was such an unprecedented time.

So the videos are very timely to whatever is going on. We've done a number of videos recently on family budgeting. Like how to talk to your kids about money. Like I shared earlier, I have a five-year-old daughter, and I want to be able to talk with her about what it means to spend, save, and give, and earn money, and have an allowance. And so we just kind of share very personal stuff. Sometimes my daughter sitting on my lap in the video. Or like if we do an Alexa Skill she talks into the mic. So we make it fun, make it very personal. They're not all serious. Like, Here's the Market Minute. Some of them are Happy 4th of July, and we're grateful for you, enjoy the time off this week. It all kind of depends. But more than anything, they get a sense of who we are, and how we communicate, and hopefully, those core values that we talked about earlier shines through.

Michael: And so, launching the Alexa skill, I guess, is just in the same spirit of trying to expand what's been working on the video end? Like, “Hey, let's put these things out on Alexa as well and see if we can build an audio audience the way that we've got a video audience.”

John: Well, yeah. Do you remember a time in our careers, maybe a little more than 10 years ago, where you'd go to a practice management seminar and someone would talk to you about how if you could have two client touchpoints a month, how amazing that would be? Like, outside of the client meetings if you could have two conversation points, and it was probably to sell some type of email campaign.

And so fast forward to 2021, my response to that now is if you could have 365 touchpoints, one for every day, would you do it? And I think a lot of people will be "Well, that's really cool." That's a lot of work, though. And if you called your client every single day, or emailed your client every single day, by day three, they'd say, "Hey, leave me alone." But if you invite them to an Alexa Skill where they passively, while they're drinking their coffee, or having breakfast in the morning, listen to the morning weather, maybe the news stations that they follow, Sports Radio, and then CandorPath365, then every day, they're inviting you into their home to just have some 30, 60,90-second snippet. And you got to make it engaging and make it a little fun so that they'll continue to listen. But that was the main reason behind that. We care so much about client experience. I almost feel all the videos, all the stuff I just shared with you, the ancillary benefit was to get clients. It really was not the primary motivation.

The primary motivation is to stay connected with our current clients so that they feel like they're hearing from us in between those meetings. And so we use social media, we use our Alexa Skill for that. We promote it. We invite them. And a lot of times, the call-to-actions are, "Hey, schedule a quick 15-minute update call with us." I did one a couple of weeks ago, Michael, about some of the FAFSA changes that are set to come through, not this current year, but the next year. And at the end of it, if the call to action was, "Hey, there's still some things that are not clear about how this will go, but we'd love to talk with you and just be proactive and planning for next year if you'd to chat with us." And this is more to clients, not two prospects. And we had 3 clients book 15-minute update calls to talk about that stuff.

So in between our normal proactive review meeting cycle, we have another touchpoint where we get to talk with them for 10 or 15 minutes about a hyper-specific topic that is when they want to talk about it. Instead of saying to them, "Oh, cool, you want to talk about that. All right, well, three months from now, when we have our meeting, we'll address it." No. They wanted to talk about it right then. And they saw my video and they're like, "Well, John knows about that. Okay, let's see if I can talk to him."

So it's always been about building the client experience for us. Anything that we do with that is more tailored to that. And the ancillary benefit is deepening the connection with a prospect by the time they do call us they do feel more comfortable with us. So it's been an interesting discovery, to say the least.

What Surprised John The Most About Building An Advisory Firm [01:18:27]

Michael: So, what surprised you the most about building an advisory firm?

John: Oh, that's a great question. I think what surprised me the most... Well, definitely in year one where clients were excited for us and not apprehensive. That was my biggest surprise, by far. And I think what's surprised me the most right currently, if I had to think about that, this year, is how far we've come. And obviously, I don't mean to say that in an overly confident kind of way, but man, we just put our heads down and did the work. And we're excited about it. We're enthused about what we do. And we don't take a lot of time to celebrate or recognize when we accomplish a goal because we just keep on moving. But it's so fun for me to see how we're building a team.

And I relish the idea or the opportunity to be a mentor, the way that you've been, to so many to be a mentor to a support an advisor that we may bring on by the end of this year. I'm excited about that opportunity. And honestly, I just didn't think that it would come this quickly. Like when we were starting this in 2018, it was like to survive. And I didn't know that just a few years around the corner, we'd be in that position to do that. And again, it's a testament to that whole iceberg analogy like we talked about. Lots of hard, hard work behind the scenes, and self-doubt but we're really excited to be where we are.

Michael: So maybe given some of that dynamic, what do now that you wish you could go back and tell you from a couple of years ago as you were getting started or thinking about this transition? What do now you wish you had known back then?

John: Believe in yourself. Truly, have the confidence to do something that you know is hard. That took me a long time to come to that realization. And obviously, that was an itch that was there before October of 2017 when I heard the Ensemble Practice podcast with you and Philip. And so there was a lot that took to get to that point. And we tell clients all the time, especially the ones that are in that growth accumulation phase of their lives, this is something we say a lot. “You are your biggest asset over the course of your career and your life. We want to invest, we want to maximize where all of your dollars are going and where your money is being put. We want to be intelligent about how your asset allocation is, we want to be good stewards of your money. But at the end of the day, you are your biggest asset,” and investing in yourself and believing in yourself I think that's something that Matt and I just needed to discover for ourselves. And there was no faster, easy way to that. I mean, that took time. And then it ultimately took a huge leap of faith to start what we did.

And I would say the other thing to that end about Matt and I normalizing business partnerships. I just got a lot of advice that was, I think, very well-intended but was, "Never trust a business partner. Don't go into a business partnership." And obviously, there were a lot of great dynamics that Matt and I had in our favor that I don't think everyone should just go into a business partnership with their friends. That's not what I'm saying. But I do like the idea of being able to get the message out there that normalizing business partnership. One plus one equals three, and you can do more together as a team. And that was not advice that I got when I started.

The Low Point For John And The Advice He’d Give To Newer Advisors [01:21:31]

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

John: I think the low point was probably the debating and the back and forth of should I do this or should I not do this? So a lot of what I've already shared with you, but at the beginning, before we made that jump was is this the right... Should I do this? Should we not do this? Should we stay the safe lane? Or should we believe in ourselves and make the jump?

Michael: And what made you take the jump? Because a lot of people ultimately choose the safe line.

John: Yeah, it's something that I had said earlier, which I think about all the time. And it's I would rather bet on myself and not succeed than stay in the safe lane and be unhappy or unfulfilled later. That type of thing almost scares me more. And it's interesting being in client conversations where I've had the benefit of talking with someone who's sort of, maybe not exactly in the shoes that Matt and I were in, but similar. And they're making that decision of like, do I stay with the salaried safe position with the safety net and the benefits and all that or do I go out and do it on my own? And that's really hard advice to give. But at least, for me, I know deep down that staying in the safe lane and then being unfulfilled later, that's never what I... I didn't want to look back on my life and have regrets on those types of decisions. So that's a biggie for me for sure.

Michael: So what advice would you give to newer advisors getting started today?

John: It's a good question. I think, believe in yourself, have confidence in yourself, and be open to the idea that you don't have to do it on your own. You don't have to be isolated and alone. It's easy to feel that way in this industry. Even in a multi-advisor, practice, if you're coming up through the industry and you're learning, it's still really easy to feel like we're isolated on an island. And that's part of the main reason that I've been listening to your show since the beginning because that allowed me to feel connected to an advisory community that you've created through the show. And wouldn't you agree, it's pretty easy to feel sometimes like you're sort of isolated and out there on your own in this industry?

Michael: Oh, very much so. I was going to ask you, what do you do or what have you done to find that not-alone feeling? Because I do think there's a huge phenomenon of loneliness in the advisor world. Either you're a solo, independent advisor, and just it really is lonely, because it's like literally only you. Or maybe you've got a team member or two, but the reality is, it's not quite the same when they're your employee as well. Like just the connection dynamic isn't quite the same. Or you may even be in a much larger firm and a branch or an office with a lot of advisors, but it's still really easy to basically end out just stuck in your four walls and only seeing the reality of what happens in your four walls, and still basically be just as lonely and isolated.

John: Yeah, yeah. I think, listen, learn, and consume, and put yourself in different networks where people are dealing with similar challenges. So I love to read books. I'm huge on that. And honestly, I think the other piece of advice would be to read Gino Wickman's "Traction," and Philip Palaveev's, "The Ensemble Practice." So really trying to consume as much information as I can. But also making yourself part of a community. Like what you guys have created. That's the reason I started listening to the show. I don't even know, Michael, how I first came across you or heard of you. I know that I recognized the name when I came across your podcast, but I literally think I was googling, financial planner podcast, one day. And I'm like, "Oh, Michael Kitces. He's got this awesome blog. I want to follow him." And that's where it picked up for me.

We also did join a different committee of advisors called Model FA, and that was primarily for the coaching component. So we liked having someone else who was also an advisor be our coach and hold us accountable to things that we said we would do. And obviously, that's a paid service. And that's different than just having kind of a passive community where you share struggles, but that was really transformative for us as well, having that.

Michael: And so again, for those who are listening, this is Episode 245. So if you go to kitces.com/245, we'll have books out too. Gino Wickman's "Traction," and Philip Plaveev's "Ensemble Practice," and Model FA, if you want to check out some of the things from John's journey.

What Success Means To John [01:26:01]

So, John, as we wrap up, this is a podcast about success. And one of the themes that always comes up is just that word success means very different things to different people. And so, you're on this wonderful success path with the firm, and you're doubling it a few years out after having a smooth transition for a transition that was very scary, that it may not have been so smooth. So it kind of seems like the business success stuff is firing on all cylinders for you now. But how do you define success for yourself at this point?

John: Yeah, that's a great question. And I think focusing on work/life balance is how I'm changing my definition of success. Because in our industry, it's about growing and adding clients. And I think that those things might have made me feel successful early on. Like, "Oh, this is great, look at the growth we're experiencing in that." But as the business grows, there's so many challenges and things that come up in the day-to-day. And I said this before, I love working, so I could lean into this and work all day and all night long. But I want to live a long life. And I certainly want to teach my children about discipline and hard work and I want them to see... My wife works as well. And I like that they see both of us working, but I also like that we spend a lot of time with them. We take days off during the workweek to... We do have the benefit of living near Disney World. So we can take a day off and just take a stroll over to Disney and spend the day. And that stuff, man, those memories with them, that means more to me than anything. And I know that, over time, that will mean more to them too. So for me, it is truly finding that work-life balance. And as excited as I am to talk about work. I could do this all day with you. But I think work-life balance is what I'm really striving for now.

Michael: Well, I think there's something powerful, as you said, about changing your definition of success from the industry's default, which is pretty much always like, grow, grow, grow, revenue, revenue, revenue, AUM, AUM, AUM, into, “No, here's the metric that actually really matters for me.” And it can be different. You get to make that decision for yourself.

John: Yeah. Yeah, exactly. And what we're building, I am excited and energized by it. And I think as we're adding employees, it's very fulfilling and rewarding to me too. I think that's also the transition as we've sort of talked through this whole conversation about moving from just growth stage, add clients, and wear the financial advisor hat to now we are business owners and we are running this company, and we have other employees to think about. And it's a fun journey, man. We're enjoying it quite a bit.

Michael: Well, awesome. Well, thank you so much, John, for joining us on the "Financial Advisors Success" podcast.