#FA Success Ep 260: Breaking Bread Together To Build New Client Relationships As Their Financial Chef, With David Ortiz

Resources Featured In This Episode:

• David Ortiz
• Financial Chef
• Retirement Income Certified Professional (RICP)
• Equitable
• Agile Financial Planning: Replacing “The Plan” With A Process Of Continuous Planning Improvement
• Holistiplan
• fpPathfinder
• Nasdaq Dorsey Wright
• eMoney
• Truebill
• Tiller
• Mint
• Microsoft Sharepoint
• MindManager
• Knudge

Full Transcript:

Michael: Welcome, David Ortiz, to the "Financial Advisor Success" podcast.

David: Thank you very much, Michael.

Michael: I'm really excited to have you on the podcast today, and just hear more and share more about I think it's this amazingly unique advisory firm that you build and how you work with clients. For so many of us, we've learned that one of the ways that you build relationships with clients is not just that you spend time with them, but you spend time breaking bread with them. I had learned early on that just meetings with clients are great, meetings with clients over meals are better. There's something about the warmth of eating good food that tends to open us up a little, to make us a little more comfortable to expand the conversation a little bit more.

And I feel like you have, I guess, taken this to the natural logical extreme. Your firm is called the Financial Chef. I know your background is as a classically trained chef. You have, I guess, an RV, a sprinter van fitted out with a kitchen so you can actually go to your clients and cook for them while doing financial advice for them. And I'm just fascinated to hear how this evolution comes about to go from, "Hey, it's a good idea to..." you meet with clients over meals to let's actually bring the meals to them, cook using your background as a professionally trained chef, and then do some financial planning. How exactly does that come about as a journey for a financial advisor?

Building Client Relationships With Homemade Biscotti And Nespresso [4:26]

David: Well, it definitely took some time to mature and to grow into that, but I got into this business really later in life. This is my third career, food first, technology second, and then financial services. And I fell into financial services just by accident because I was working for a small publicly traded software company in the early '90s. And we were developing workflow automation software for companies like Motorola, and Chevron, and the United States Postal Service. And like many small startups, the founder made some errors in judgment that kind of tanked the company, and they were selling it off for pieces. And they said, "You can keep your job, but you have to move to Boston." And I was married with two small kids. And my wife basically said, "You're not moving." Or she said, "No, your children are not moving to Boston. I don't care that your name is David Ortiz, we're not going to Boston."

And so I needed something to do. And I answered this blind ad, and that just sounded amazing. And it was for my first employer, which was Equitable...actually AXA Equitable, it was Equitable at the time right before they switched over. And because, of course, you would never go and go to an ad that says, "Come be a life insurance salesman." So it was this wonderful sales management ad, and I went in, and it sounded good. I said I could do it. And then when you start in the business, it's like, "Oh, how do I get clients? Or how do I get clients to like me and want to deal with me?" And so I was a pastry chef for Disney World. That was my first job out of culinary school. I worked in the central commissary for Epcot.

And so I decided, "Oh, I would bake biscotti." And I had a portable Nespresso machine, their very first machine. I had this big case, and I would go to my clients' offices, mostly was trying to deal with business owners, doctors. And I would set up shop in their conference room, and I would break out the biscotti and set up the cappuccino machine. And we would just sit and talk about the world. And all of a sudden, everything became easy, and the relationship just started opening up. And I said, "Wow, that's really cool." And then I also would always make sure I would bake extra for the receptionist. Any other time that I show up, it was like, "David. David's here. David is here." And everybody's happy to see me. So I then said, "Wow, that's really awesome." So then I started...

Michael: So, wait, let me pause you there for a moment though. I'm curious about this and maybe I'm just reflecting some weird baggage of my own past life for training. But I feel like there's this certain expectation that we have or maybe that we put on our own shoulders about...I'll just call it "professionalism," and what it means to be a professional, and a certain expectation sometimes about how financial advisors are supposed to show up. And certainly, if you go back to our roots, and even 20-plus years ago, in the time frame you're talking about, we had a lot of suits, we had a lot of ties, we had a lot of offices with a lot of mahogany, right? There was a certain kind of style presentation around how financial advisors show up. And I feel like you showing up in the conference room with a Nespresso machine and homemade biscotti is not quite on that theme, not quite on that style. So I guess I'm just wondering, did you ever have second thoughts about that? Did colleagues ever push back on you of like, "David, that's not how things are done. What are you doing going to your clients' offices and bringing your own Nespresso machine?"

David: No. Actually quite the contrary. My manager at AXA, "That's brilliant. Oh, my God. Oh, my God." And South Florida is a little different because of all the heat down here, and the Latin flair, if you will. Yes, there's lots of suits, and they used to try and require us to wear suits. But our clients were all like, "Don't come here in a suit. I don't want to see you in a suit and tie."

Michael: "I don't need to see you sweat to believe that you're a dedicated professional."

David: Or it's only the IRS or Immigration that shows up in suits. So you go to a business owner, and they're not in suits. Maybe some of the attorneys are. So no, that did not stop me, I felt, because of just the tremendous feedback from the clients, that I was really on to something. And that was the very beginning of it. And just understanding how it really changed things. And from there, then I got the idea that, "Okay, now you become my client, I'm going to go to your house and do a welcome dinner to welcome you as my client. And you invite 4 couples, so that I do a dinner for 10 at your home where no business is talking." This is not a plate licker seminar. And it's really about me celebrating them and their decisions to become financially aware, whatever that would mean in the relationship. And that was now the next thing because their friends would say, "That's your financial advisor? I don't have a guy who does that." And then that really became...

How David Leveraged His Classical Chef Training Into Building A Financial Firm [10:34]

Michael: So literally, just that became the onboarding process for clients? Like, "As a new client, I'm coming to your home, if you'll open up your kitchen, and I will cook dinner for you and a couple of your friends. Please invite them over, and just let me know what your food preferences are so I can make something you all like?"

David: Correct. Correct. And so I never asked them, "What do you like to eat?" Because they have no idea of what I could do. So it's always been, "Do you have any allergies? And do you have any food dislikes?" So I'd get that and then if they're, "No, no, no," so then it's all up to me. So that became the onboarding process, and that was really it. I would then also donate. And actually, this is probably the single biggest contributor to the success of my practice early on was that I would donate for silent auctions for chambers of commerce and community foundations. I would do a dinner for 10 at somebody's home. So what I was doing for my clients, I was now donating for silent auctions. So the charities loved me because they'd get $1,000, $2,000 as a bid. And I would go to the person's house and do the dinner. And I would never...I'm just always...there's that China wall, I never talked business. I would never say that.

But invariably when they would bid it up and I'd go to their house, and they'd say, "Oh, my god, can I use you again? My daughter's having a bat mitzvah. Can we use you for that?" I said, "Well, you can't use me for the food, but I can manage the money that she gets from there." So I was always very...I guess I just...it wasn't about me trying to sell somebody that's there. That, to me, is the worst thing you could ever want to do. And then I just really got known in the Coral Gables community, which is where my practice really grew. And I don't know if you know Coral Gables, but it's where the University of Miami is, and it's an affluent suburb of Miami proper. And so I became known all over Coral Gables. And I was solicited all the time for charity dinners, and I would do them all the time. The best marketing I could possibly ever do, I would do a dinner for 10, it would cost me $80 for the food. And I'd have 10 people that just were like, "Oh, my god, this is the most incredible thing ever." And I built a relationship and a reputation to the point where people would say, "Oh, my God, he's a chef, he's a chef. There's the chef." And then the next iteration of that, and that's really...so that was the first 10 years of my career where it was all done informally. I was not the financial chef, I was David Ortiz CFP, or financial advisor or whatever.

Michael: And I'm struck by this in how you frame it. One of the classic things always just around marketing activities, good marketing strategies for advisors ultimately comes down to building relationships with prospects who are reasonably affluent, so that there's enough there should you be able to build enough relationship to get to do business with them. And that just when you live in a world of you're the most popular thing to join a silent auction, there's a really interesting self-selection process there of just who's outbidding up fancy dinners at silent auctions, dropping $1,000-plus. This isn't the $25 bid. This is like the $1,000 bid item. I think about when you consider who's probably bidding on that and able to drop that kind of dollars for a charity that they want to support, pretty good odds that's a decent prospect. And if they invite their friends, because it's a dinner for 10, pretty good odds that the people they invite will be people in their socio-economic circle, otherwise known as more good prospects. I'm really struck by this in what an incredible way you end out just very systematically in front of high-quality prospects in a business where a lot of advisors struggle just figuring out, "How do I get in front of high-quality prospects?"

David: Well, that definitely was a factor, I would say. I said, if somebody could afford $1,000 for me to come to their house just to entertain their friends, and that was just for the food, they had to provide their own wine or whatever they were going to drink, I said it was pretty good probability there's somebody that could be in the target market I'm trying to approach. And what it really did was it helped me on both sides because the organization that got the $1,000 was like...when they hear my name, it is like, "Oh, my God, he's always helped us. He's always helped us. He's always helped us."

Michael: Right, now they love you, they want you back. Every time there's a marketing opportunity, aka another silent auction, they call you and tell you there's an opportunity.

David: Right. Yes. And so I did that for a good 10 years where I think I did over 100 dinners for the area. It was certainly work. It helped me, though, develop a lot of my style of cooking. And then one day, literally in the shower, the whole idea of Financial Chef as a brand came to me. And the idea...actually I came screaming out of the shower. My wife thought that I cracked my head. I said, "Honey, honey, honey, I got." And she was like, "Oh, my god." And the idea of...I took a restaurant that had gone out of business in Coral Gables, and we remodeled it into an office, it was a small cafe. And we had a commercial kitchen in the back. And we remodeled the front to look like a regular office with a conference room and a couple of support and associate advisor workstations. And then that became the office of the Financial Chef.

And what happened is that I would then start doing...I looked at every meal slot as a client opportunity. So we would start out with a breakfast in the morning, so I could do a breakfast with somebody at 7:00 or 8:00. We'd do a mid-morning coffee, and it would be biscotties. I also would do scones that became very popular. And then I would do two seatings for lunch, so I could do an 11:30 lunch meeting, and then a 1:00 lunch meeting. And then we would do a 3:00 coffee, a 5:00 happy hour, and a 7:00 dinner. So I had six opportunities for client meetings over food every day. And I had a sous chef, I had a chef, an assistant in the kitchen that would do all the prep work for me and execute the recipes. And so it was this commercial kitchen in the back, and we're cooking up a storm, and my assistant would serve the food. And the whole thing though...

Cooking Up Gourmet Meals And Financial Plans [18:21]

Michael: I was going to ask just where do you find the...if you're meeting clients for the breakfast, the mid-morning coffee, the lunch, the afternoon coffee, the happy hour, the dinner, when do you actually find the time to go back and then do the food? So you had your recipes, but then the sous chef in the back is actually helping to prepare all of it up so that you can be in meetings with clients through the day?

David: Absolutely. And I also strategically would plan out, "Okay, what can we serve? What can we cook?" And I was very clear in my mind from the beginning that it wasn't about trying to make really fancy food, it was really about making spectacular food, but was deceptively easy in how much time it took to prepare things. And so I started actually calling myself SWAT chef, because I could go into somebody's home for one of these dinners that I would do and never have seen their kitchen, and I would just show up. And we'd be done in two hours, from start to finish, because I figured out all of these ways to prepare food. One of my favorite methodologies is something called sous vide. I don't know if you've ever heard of that, but it's a water oven, it's a precision cooker that's totally hands-off.

So I always...I put so much time and energy into developing food that people would look at and just drop dead on. But we didn't spend hours and hours and hours in the kitchen because I was very clear in my mind that my job is not to cook for people. My job is to serve people financially and make their lives better. And the food is just the message is how we communicate through that. So we did that for six years that we had this wonderful place in Coral Gables. But unfortunately, what wound up happening is that people that wanted to do business with me but lived in the northern part of the city or way south, they wouldn't come to Coral Gables for lunch because just the driving and the traffic and the congestion in a major city in Miami is awful for that. So it limited the amount of people that I could really have there.

Michael: Because the whole thing was really built around, "You come to David's office, you come to the Financial Chef office, we do our financial process, but you get this hosted dining experience as a part of the engagement." So just the whole point and the whole angle was, "You come to our office," which is problematic for any client who doesn't want to come to the office.

David: Correct. And I mean, they'd want to but literally, some parts of Miami, it takes like an hour, it's still Miami, during the day to get there.

Michael: We go through the same thing here in the D.C. area. Remarkably short distances take remarkably long to travel. Yes.

David: Right. So that just limited it. So then the idea of going mobile came to me, and I said, "Wow." Now, I also had a huge overhead in having the restaurant/office because there's obviously the overhead for food, and all the meals, and the equipment, and the maintenance, and everything to run it. I was looking and saying, "Where's the balance here?" And then I found the sprinter idea. And it's actually an Airstream. So it's a Airstream, the silver bullet Airstreams. They also make a sprinter van version of that that was perfect for what I needed because it had a full kitchen inside, and it had a little dining area with a table. So I like to call it the Ritz-Carlton of food trucks. I have a full kitchen inside and a private dining room. And now I do, I roll up to my clients' location and they hop in, and along with our meeting, I serve them a gourmet meal. And actually, I've really equipped the RV, I put in a huge electrical upgrade so that I can be cooking inside of it and not popping off breakers and having to run generators. We did have to run the generator in the beginning, and that was not conducive to asking people to sign a check or give you money when there...with the generators. We put a big solar panel...

Michael: "Hey, can I charge this thing with you guys really fast? Will that be okay?"

David: Yeah, exactly, exactly. But the restaurant office, it was really very, very successful. And we got written up in the "Miami Herald," I was on the cover, and on public broadcasting, and the local stations, and everybody was very intrigued in it. And I always would say I have the most expensive restaurant in the world. You come, you have lunch, and you leave behind a check for half a million dollars.

Michael: But you try to grow that half a million dollars.

David: That's right.

Michael: It's not all consumed.

David: That's right. That's right. That's right.

Michael: I like that. You come in for a meal and you leave half a million dollars behind.

David: And so... it's been such an amazing journey, I just feel so, so blessed that I was able to put this together. And I think I have created the ultimate in a lifestyle practice. And just that the whole thing about how clients relate to it because, and you alluded to it, talking about money is really stressful, and legacy, and your dysfunctional kids, and so everyone is always tense in those financial meetings. Or they show up and the guy's in a suit in the ivory tower. And our whole approach was as if we're sitting on your kitchen table because food is the ultimate in comfort. In everybody's homes, we all make important family decisions around a meal. You sit with grandpa and grandpa's talking about, "What I want to have happen," and all of that. So my whole idea has been to emulate that. And it's just such a different atmosphere when you are breaking bread with somebody. But it's so different than taking somebody to a restaurant because that doesn't make it that, that's not there. And so the ability to be as if you're in somebody's home, very private, they feel very comfortable. They're eating, they're enjoying, we're drinking a glass of wine. I made sure, though, that they were not loopy when they signed anything. So any FINRA regulators, there's no inducements that were ever there.

Michael: A glass of wine, a glass of wine.

David: Yes. Yes. And so it really helps to build that trust, that relationship. I become part of their family. And that has been the genesis of the way I have always viewed my practice and is totally being out of the box obviously, and becoming part of their family. So I have a personal screening, if you will, that you can't be my client if I don't want to sit down and have a meal with you. If I can't relate to you and I would be comfortable sitting with you and just having a meal, then you're not going to make it as one of my clients. That's always our litmus test. And it just really is about how you connect, how people open up based upon the fact that they just feel like they're at home.

Michael: So, help me understand a little more, just how does this transition work just in practice from chef to advisor? Do you have clients who get stuck on thinking of you as the chef and not the advisor? Or is that just...am I too in my head trying to think about this and what it's like for our clients or prospects sitting across from you, where you're the financial advisor, but you're also the person who cooked the meal that they're eating while they're talking about financial issues?

David: Never an issue. Never even once. More just thrilled about how cool the whole experience was, but never anybody, "I don't want to do it. You're a cook? What do you know?" Now, I will say that I have certainly worked very, very hard to be at the top of my game educationally. And I went and got my CFP, got my RICP. Actually, I will be taking the third part of the Enrolled Agent exam in about three weeks. And then that'll be, I'm rounding out, I guess my triumvirate of what I think are probably the most salient designations that give me the ability to really have learned that. So I've always made sure to work really hard, to be the guy that knows stuff. And when I worked in AXA, I was always...they asked me to teach classes because I'm a perpetual student and a lifelong learner. That's never come up as an area because it was always obvious that I did my homework, and I knew what I was talking about.

How David Developed And Evolved A 7-Step Holistic Financial Planning Business Model [28:21]

Michael: So talk to us about the actual financial advisor business model. As you went through this, it sounds like there were a few different iterations from the chef end because you went from the silent auction dinners and building your business to having the office/restaurant space and doing that for a number of years, and then transitioning into the sprinter van version and doing the mobile version for a couple of years. But what has this been like from the business model end? You had said you started out at Equitable, so I'm assuming some of the early years was ultimately coming back to variable universal life insurance sales because that was the thing at the time. But what does this look like from the business model end? And how has it evolved?

David: Well, I'm kind of ashamed that I called myself a financial advisor back then. I know you're leading the charge on the whole titling of that. Because at the end of the day, that's all they really wanted you to do was sell variable life insurance. They looked at it kind of like Windex from the Big Fat Greek Wedding, "Everybody, Windex. Oh, you got a problem? Oh, variable life, oh, you need variable life." So even though they said we're financial advisors, it was really you were a product salesperson. And unless you sold their products, you just...you had to do it that way. And so that was my only indications in the business. I didn't know anything else other than that. And that's when I started realizing, "This model is just not the best model."

Also, back in '99, in the State of Florida, CPAs could get licensed in our business. And so AXA was very big about getting people to get licensed, to get CPAs licensed and match with advisors. And because of the relationships I had built with a couple of CPAs in food, we had them in, and it just became obvious that you couldn't be objective. And the CPAs were like, "Well, why is it always an AXA product? Why is it always that?" So that really led to my exodus from working for a captive company and saying, "There's a better way," because I very much was trying to be the CFP and doing things the right way. And not saying that they don't want to do things the right way, but their model is, "Let's sell products."

So I definitely moved more towards a planning-based paradigm, the Bill Bachrach, "What's important to you about money," and all of the issues of the real holistic model of planning. And so we then moved very much into everybody does a plan, we use a plan as a baseline. But things are normally, I believe, very rigid in traditional planning because you go and you ask them for a whole bunch of data, and then you do a plan, and you print out a book for them that becomes obsolete the moment it gets printed out because all the values change. And then you implement, but implementation becomes, "Hey, sell a product," because that's the beginning, and that's the baseline, and now we're going to sell you something.

So, my practice has, I believe, really evolved from there into something I'd learned from you and from your podcast, and that's agile financial planning. And that's really where we are today and treating it. So, my time of being a software developer, the whole idea of agile planning and how software is developed in scrums, and we do the same thing now. So, I took the idea that I learned from your podcast and said, "Okay, how do we do this?" And so, we've come up with six major groups of deliverables, and then we set the priorities. And we have a war room that we've set up private portals for each client. And we have the major modules of that. And we find out, "Hey, what are your priorities?" Not what my priority is.

Now, I will certainly say to them, "Hey, I think you need to do this, this, and this if you've missed it. I think you have exposure here, people in your situation should be aware of this." But we always start with, "What's important to you? What matters to you, and in what order?" So, I really believe now that we have been able to fine-tune this and be aligned to our clients' goals. And so I work everything around what is important to them, what are the most important things? And so, we have that punch list of urgent issues. And then once we run out of those, then we go into the important but not urgent, and then we may tackle the remaining items that there are. And so this portal allows us to have a very graphical way to present to our clients, "Here's everything we're working on for you. And here's the order." And we use kind of also a Kanban metaphor, and move things in and out of the list, depending on what their priorities are.

Michael: I have so many questions here. I think just to start, can you describe a little bit more just in your words...you talked about agile financial planning. We've mentioned a few times on the podcast over the years, so for anybody that wants to learn more about it beyond the discussion we're about to have here, this is episode 260. So if you go to kitces.com/260, we'll have links out in the show notes for some additional resources. But, David, just can you describe in your words, when you talk about agile financial planning recognizing that most of the financial advisor world has no background of agile and scrum and all the rest, what does agile financial planning mean to you?

David: Nimble, the ability to react very quickly to current issues affecting the client. So what is the most pressing need for the client at that moment in time? What is going to give the greatest impact for their financial success in the future? So we break that down into cash management protection, accumulation and investments, retirement income planning, tax management called the tax management journey, which is everything of proactively doing tax planning, estate planning. And then we also create something that's called the Family Estate Organizer, where we have a whole kind of simulation of what happens when you die, where everything is, what needs to be done, what's the punch list, what do you do first, from A to Z. With the idea that there's a big picture of everything that we could do, but these are the major groups.

And then underneath each one of those we've started with a pre-defined list of what we call core topics of what are the things that...for example, under estate planning, reviewing the documents, making sure that you have a power of attorney, and that it's not going to fail, making sure that your beneficiary designations are all aligned, where are the documents, what are your charitable strategies? And then we basically have sub-tasks for every major group. So under retirement income spending, we'll look at 4% rule versus bucket planning, segmentation, we'll look at tax planning. So we use...Holistiplan is one of the main drivers of what we do for people. It's really one of the things that has really driven me to go and get my Enrolled Agent, is I never agreed with what the broker-dealer world would say as, "We don't give tax advice." That's garbage. We always gave tax advice. I mean, when you're telling somebody, "Hey, save on a pre-tax basis," that's tax advice, I'm sorry.

So now, we really have gone very deep into that. And we have this seven-step process, I've built my podcast around that. And it's really the things to do every day to raise your income and lower your taxes. We have planning triggers. So what happens with death of a loved one, retirement, a job change? I'm also a client of another one of your businesses, fpPathfinder. My tech stack somehow winds up, I think, the Kitces' kitchen every once in a while. So cash management, all of the different areas. And we're always continuing to ask the client, "What is it that keeps you up? What do you worry about?" And part of this, we'll do the 401(k) allocations for them. I went and got trained as a tactical manager under Dorsey Wright. So I'm a practitioner of Dorsey Wright's investment models. So we really build this holistic. I know everyone uses that holistic, but we sit there, and in many respects, I also consider myself to be kind of like the goalie. And I'm looking out for all of those kicks coming in and blocking them, keeping them out, and keeping the team safe.

Focusing On Smaller Tasks To Reach Bigger Financial Goals [38:38]

Michael: I feel like I'm still not entirely clear on just how you distinguish the kind of planning you're talking about from, I guess I'll just call it traditional financial planning world. I mean, you talked about these segments of cash flow, and budgeting, and protection through insurance, and accumulation investments, and retirement, and tax, and the state, which kind of fits our core CFP curriculum, fits the traditional financial planning software. For a lot of advisors, I know it literally fits the sections of the plan that we print, and produce, and deliver to clients. But I feel like you're trying to describe a version of planning that's different than the traditional approach, although you're talking about a lot of the same areas. So can you help us understand more? What's the difference between how you're doing it in using these versus what we traditionally do when we do our, gather the data, put it in the planning software, and do the plan and deliver it, where I feel like we also cover these areas?

David: No, no doubt that you cover these areas. And I'm not saying that we do anything better than other people. I think we just take it from a different view, meaning that we have a pre-defined checklist of everything that we go through, and the planning software is just one subset of that, as opposed to what I...and maybe it's just what I've changed in my own practice. It used to be that eMoney was the focal point of everything. And this was the plan. And so you did that rather than all of the deliverables that come out of the plan, all of the things. So doing a plan is not then looking and reviewing somebody's 1040 and saying, "Hey, where can we do micro-conversions of Roths? Where can we do that?" So I think the big difference in our mind, in my mind, is we don't use the printed plan or the plan as the focal point. That's just one data point within the entire process. It's more of, "We're your general contractor, and here's the punch list of everything to get your house built. And this is the order that things go in."

Michael: And so does that mean in practice when you go into client meetings and you're presenting a plan or recommendations that literally the main thing you go in with is a page of the issues we're going to be talking about, and focusing on, and dealing with, the proverbial contractor punch list, as opposed to going in with the plan, the planning software output?

David: Yes, absolutely. And really, the plan generally only comes into place when we're doing the retirement income planning thing. That's cash flow base, gold base, whatever that may be. So under the protection aspect of it, what are we looking at? We're also reviewing property and casualty for people, we're reviewing their...we get involved in annual enrollment of their employers, showing them what are the best of the benefits for their situation, which health plan, which deductible, cash management, setting up software for tracking budgets using things like Truebill, or Tiller sheets, or Mint...

Michael: And you're into that level of work with clients using tools like Tiller for cash flow planning, and Truebill to manage all those wonderful subscriptions?

David: Absolutely. Yes. Yes. So we certainly...yeah, all of that. We'll also, for example, take the estate planning aspect of it, and we'll take their...there's an unfortunate phenomenon that a lot of financial powers of attorneys' documents are rejected by financial institutions. And we're huge advocates of vetting those or trialing that power of attorney before you need it because specifically on a financial power of attorney, it doesn't come into play until you need it, and then it can be too late. And I've seen this happen where dad gets incapacitated, and he was the sole breadwinner, and he has a big 401(k) plan. And mom didn't have the power of attorney, she needed money. And she calls up and they say, "Hey, I'm Dan's wife. And he's incapacitated. I need to take money out." "Okay, put Dan on." "No, he can't come to the phone."

Michael: "Just said he's incapacitated. That's why I'm calling."

David: Exactly. "But I have a power of attorney." "Oh, great. Send it in." So you send it in, and then they come back to you, "Oh, no, no, no, we need it on our own paperwork. We need it notarized every two years." And so we go through and do that. And that's all part of the processes is taking, "Okay, where are your financial institutions? What are their rules for powers of attorney?" We then document that, and we put that in as part of our process. It's another one of the checklist of deliverables to make sure that when that happens, and if that happens, we already know about that.

Michael: So, I'm struck just as you're describing this, and I see now, you've been framing this as checklists that you built out, your checklist of all the different things that you might be doing for clients in all of these different areas. And it sounds like you're literally just writing the checklist of, "Here's all the different things that we might touch on." And if it applies to the client, then we have that conversation. If it doesn't, obviously, you get to move on pretty quickly. But just you built out your list of...I'm almost thinking of it as, "Here's all the different ways we can add value to you, Mr. or Mrs. Client," and you just start going through the list. And if you've accumulated enough things on the list, there's always stuff to find, there's always things to do to help.

David: Absolutely correct. I'm a huge tech guy, so we build mind maps of all of the core concepts of this. So what we are providing to our clients is actually an interactive series of visual mind maps for each one of the major groups. And so under the tax planning map, it will then have the tentacles that come out, which is, "What is the asset location of everything? What do we do in an annual tax planning meeting? What do we look for as tax-loss harvesting? Here's how we review your 1040." So we have all of these set up. And again, not everything is applicable to every client, but we try to have this overarching list of everything that you could possibly have in any one of these. And then we apply the filter of what makes sense for the client, and what are the most important priorities of the client to do this.

Michael: And then all of that comes into the page of recommendations that you walk into the client meeting with, "Here's the important that we're working on, here's the important but not urgent, we're getting the rest, and here's the rest."

David: Yes.

Michael: Is that literally what it looks like? Like just there's a big old page of recommendations kind of sorted into three groups, and we just say, "Here's all the stuff we're looking at," because you populated it from your own checklists? And we just start talking through like, "Okay, what do you want to tackle this meeting? What do you want to tackle next meeting? And we're just going to keep working through the list." And that's the planning process.

David: Yes. And we start out by trying to find out what's the most urgent to them to start with, so that we know that we get the biggest bang for what they feel for their buck, by those things that are just glaring that need to be addressed from the beginning. And then we work through. So again, like building a house and, "Okay, here's the punch list. Okay, so now we're working on cash management. Okay, so there's the emergency fund. What's your debt analysis?" All of that. And so I feel it's different than maybe a financial plan using eMoney or something as the baseline, where you've just got this huge book, and it's like, "Okay, well, where do we start," type of thing. So I don't necessarily start from having to do a plan first. We will do some kind of a plan, whether it's a retirement income plan, accumulation plan, investment policy statement, but the process doesn't happen the same way every single time for every client. Everybody's clients, everybody's experience, timeline is a little bit different.

How David Structures The Financial Plan As A “War Room” To Accomplish Financial Goals [48:01]

Michael: So now talk to us about...you had mentioned, I think you have framed it as a war room, private portal for each client, I guess that you're using to anchor a lot of this information. So can you talk to us more about what is this war room, client portal?

David: So this is something we're just rolling out. And it is taking the idea of all of these tasks, and having it as if you were in a war or a campaign, and you got all these sticky notes that are up on the board, and you're moving them around. And at any one time, a client can go into any one of the major headings, estate planning, tax planning, and see what are the sub-items under each one of those, and what is it that...what are we working on? I mean, literally, we could say, "Oh, let's pause the estate planning right now and let's go look at protection." So we are able to shift gears. And not that we've forgotten about estate planning, but we now have this aspect.

So every portion of the plan, of the overall planning, stands on its own in many respects. And so we can go in and the client can see, "Okay, we're waiting on this. This is the task that they have, this is what I have." And the goal here is also for me, at the end of a year, in an engagement with a client to say, "This is everything we've done for you. This is what we did this year. This is what we're going to do next year." So I'm really moving my practice to a planning fee for everyone, and we're moving away from the model of AUM. And again, something I've learned from you. And we are charging fees based on income.

And so I charge 2% of annual income as it is on line 9 on the 1040. So part of it is, they send me the 1040, we do the analysis there anyway. Of course, we tell them everything upfront that we take 2% of that, and we bill monthly in arrears. So it's a monthly...I like to call it, the Netflix model of financial planning, subscription-based planning. And that's what makes things very sticky because as opposed to...in my opinion, opposed to doing a plan once and charging a one planning fee, well, I've done a plan, now what do you charge for? So this, by us always working and keeping to improve and what are we doing, it keeps them sticky. I'm sticky to them because we're constantly doing things for them. And so again, part of that is doing the allocation of 401(k)s.

And what I have found is that by moving to an income-based compensation system, now I can work with the HENRYs, right? High earners, not rich yet, people that maybe have tons of equity compensation coming down the road, that need planning, that need to do things, or maybe that all their money is tied up in their 401(k). And so we are really disjointing or removing the AUM planning model and moving towards the income, because what I like to tell people is, "We're impacting your income. Everything we do is to give you more income now through less taxes or in the future." So what we should be aligned to that. Now, we do obviously charge an AUM fee if we're going to be managing the assets in our RIA, but we don't have to. And this is a way that I can be paid and provide value to my clients, and it's based on what we're doing as a plan.

Michael: I'm struck just the way you describe the client portal and these are the tasks they have in these various areas that you're working on, estate planning, protection, cash flow, etc. These are the tasks I have. At the end of the year, you can kind of summarize up all the tasks and show them, "Here's what we've done for you, here's what we accomplished together this year." I don't know, there's this label that's coming to my head of just like financial planning as financial task management. It feels like, literally, the whole center of your planning process is just task-oriented, the topic areas or checklists of tasks, the portal is tracking the tasks, the plan output for clients or just, "Here's all the different tasks, here's what we're working on, here's what you're working," with the sort of natural limiter of clients will just only do so much at any one time. So, you're never getting through the task list quickly, you're always chipping away at it. Life happens, which usually means new things come on to the task list from time to time as well. And just that's the planning process and experience for you, is just continuously looking at the list of tasks that are out there, new tasks that have cropped up, working through them incrementally because no one gets to all of them immediately, and that's the planning work. Is that a fair characterization?

David: Absolutely. Absolutely. I like to say I'm always working for my dinner. Right? Because we do this on a fee basis. There's no contract. It's not like, "Here's the planning fee." It's if you're six months in and you're not happy, no harm, no foul, we move on. And we're more and more developing things that we're doing each year, every quarter, every half year. Because we've seen so many benefits plans over the years, we know how to help clients understand, "Okay, this health insurance plan versus the other," or the 401(k). And so part of what they get in our service is the asset allocation. And again, using a tactical model in many respects based on a lot of the Dorsey Wright's teachings is based...that's part of what we do. So it's continuous modeling of that.

Michael: And I guess just can you help me visualize a little more? I know it's hard because we're on a podcast, but just can you describe just what does this portal look like? I mean, just what do I see when I'm a client and I've logged into this thing that you've created?

David: So, it basically comes up and it says, "The Agile Financial Planning Dashboard." And then there are all these tabs across the bottom. Each one of the tabs is the different areas of the plan, so cash management, protection, accumulation. So, you can click into each one of these at any time, and it will take you to the underlying mind map, if you will. And then there you see this tree. And so, under Legal Documents, okay, there's the four steps, or the documents. Okay, here's the trust, here's the will, financial power of attorney. And then you can click back and go into the next one. So, I also believe very much that clients don't...when I'm just doing traditional financial planning, I didn't know any client that ever read the plan. We printed it out as advisors, and we were so happy about it, and hey, sharing this.

Michael: I was very proud of mine, spent a lot of time banding that thing.

David: Exactly.

Michael: I did, I did. I'm very proud of it. Put a lot of blood, sweat, and tears into those plans.

David: And they don't read it, right? And a lot of it is also because of the whole compliance aspect of what's needed for. So, what we're trying to give to people is that one-page financial plan, if you will. But each one of these modules are broken down into really being able to look at a mind map and see, okay, here are the main groupings, and then the branches coming off the map. So, it's just very simple in its presentation.

Michael: So, are these...I mean, just when you talk about mind maps, is this a mind map of the client situation created for each client? Or is this more of the task...the checklist of the different tasks that you have are organized for clients as a mind map?

David: So, there is a template that we use, and then it gets customized to each client, and some things might be turned off that are not necessarily part of that. So not applicable, if you will. And it's really just for a client to be able to have, at any one time, a check-in and know, "Hey, what are we doing? Oh, what did we do?" We also have built out a document library as part of that where we organize all of the documents for them. And now we're also putting in there each meeting, what we did at the meeting, where we left it, again, so that everything is just very transparent and everybody knows what we're all working on.

How David Utilizes Microsoft Products To Design And Implement His Client Portal [57:55]

Michael: And so where does this portal come from? Is this a tool in application advisor space? Is this a tool outside of advisor space you co-opted into your advisory firm? Is this something you just built from scratch? What are you using to actually make this happen?

David: So we built it in Microsoft SharePoint. We run our practice on Office 365. And so part of that is for my $15 a month per-user subscription, we have access to...everybody can get SharePoint and we have OneDrive. And so we built this on top of it. We use MindManager, which used to be called Mindjet, Mind Map, and that has this great functionality to be able to be integrated into SharePoint and into Microsoft Teams. We set up a team for each client that we do this with. Now, I am not doing this for hundreds of clients. I have a small, very boutique-y, if you will, practice. So this is on kind of a concierge level. There's only so many seats on the bus that we're going to be filling. And again, you have to fit into our world of who we're comfortable sitting down and having a meal with because I feel we put so much into the clients, we're always on call, we're always available. I don't really have boundaries for my clients. Well, I do have boundaries. If I'm out in my RV and traveling, I maybe not get back to them right away. But I believe I have the ultimate in lifestyle practice because lifestyle and practice meld together.

Michael: So I guess just from a purely technical perspective, if you're running all this through SharePoint, which is kind of built for collaboration across teams, and you're communicating by Teams, so is that basically like just you've got a Microsoft domain where every single client gets a Microsoft license under your domain so that each of them can be pulled into your SharePoint space, and then you use all the Microsoft permissioning controls to make sure they only access their space, they don't access anybody else's space? Is that the structure to actually implement it?

David: Correct. So the beautiful thing about SharePoint is you create the template once, and then we just make a copy of that. And so we have that template. And so, now for the Kitces family, we make a copy of that, and then they have their own login, and it's their own site, and everything is separate. So you can have hundreds and hundreds in SharePoint alone. I mean, corporations have hundreds and hundreds of sub-sites and so forth. So I said, "Why can't I do that for the number of clients that we're doing this with?"

Michael: Yeah, it kind of reminds me a little bit of Knudge, which is another planning tool made by planners for planners. I think what's similar, they're not as much on the mind map and built their own tools, but similar to have a very client financial planning task-oriented systems. They call it Knudge because you nudge your clients. It reminds me of kind of a similar vein, it's this sort of financial planning value through financial task management, and just helping clients keep on track on account of actually doing them because the world would be in a very different place if everybody always did all their task lists instantaneously on their own. But that's not what happens in the real world. So a lot of value would be created just by helping clients stay on track for their tasks.

David: Right. And it's a thing that when we're in a meeting together, a Zoom meeting or whatever, actually, we're using Teams meeting, that we have the mind map up, and a client can see everything that we're working on. And here it is. It's simple, we're trying not to make it complicated, not to make it overwhelming, and just give them a visual that we have a plan.

Michael: And out of curiosity, just as you talk about all these different financial planning tasks across the different domains, the checklists you've got for them, where did that come from? I mean, is that just a list you've built and honed for yourself having done this for 20-plus years, and you just keep track of all the things you've done for all the clients? Every time there's a new thing, you add it to the list, and over time, it's like, "We got a big old checklist of all of our financial planning issues?"

David: Yes. And I collaborate with another colleague of mine, and he and I have kind of developed this list together. Nothing is cast in stone so we're always looking, "Okay, what do we need to change and do on there?" But what we're trying to do is just have very impactful items that are going to be on there, like reviewing the beneficiary designation. We're doing something that we call the family succession plan. You know, what happens when you die, what's going to happen? Too often people, the survivors, they don't know what to do. So we have a full checklist of, "Okay..." even to, "Here's how you do an obituary. Here's where everything is. In the first 30 days, you have to do this, and 60 days, you do this. Set up a probate estate," all of those things. And so, never really seen that as part of a financial plan. That's not coming out of eMoney. And so what we're trying to do is make it real world. What does a person have to do to stay on top of all of the different aspects that they want to handle in their financial life? Maybe I'm called the Financial Chef, but I also like to call myself a Financial Maître d' because you sit at a table and I figure out what you need, and we kind of serve that to you as well.

Michael: So how does this work from a client servicing perspective? All these tasks on an ongoing basis, all the interaction around it, how often are you meeting with clients just to do all this, to deal with all this? How does that service model work in practice?

David: What I like to say is that in the beginning, we're going to meet as often as I can meet with my clients, and we're going to knock things out. And in the beginning, we'll have lots of meetings and there's no set one. I have a young couple that are super busy and they're doing extremely well and need all kinds of guidance. And maybe we'll talk to them every two weeks, every three weeks. And the idea is to then after, let's say, the first year and we've tackled all these, then get on some kind of a schedule. Definitely going to be a quarterly check-in for the review of the accounts, for the allocations for the 401(k), there's going to be a year-end meeting for tax planning. So then it becomes more of a predictable service schedule.

Michael: And you actually have a structured service calendar of how those meetings line up through the year, or is it more reactive-adaptive just to wherever clients are?

David: I've been trying to develop them by co-oping stuff that I see on your site.

Michael: Fantastic. That's why we put it out there.

David: Yes.

Michael: So as you're going through meetings and quarterly check-ins, kind of getting back to the original model, and you're out to the house cooking for them every quarter to do these meetings on an ongoing basis, is this more of blend like, "We do most of our check-ins by Zoom virtually, but once a year, I'm going to come out and we're going to cook and spend time together" How does the cadence of those meetings tie back to the Financial Chef framing? I'm just wondering, is every client meeting a meal this way, or is that more selective?

David: Well, it used to be that way. But...

Michael: Like I said, pesky pandemic was probably not helpful from a meet in-person to break bread thing.

David: Especially, right, taking the mask off and eating with people, we haven't done. But I do and we have done actually where I pull up in the RV and we drop off a meal, and I do the Zoom meeting from their parking lot. And so they're eating, I'm eating, and we're doing the meal, we're just not in the same room. And actually, what I have found is that I really enjoy the Zoom aspect of presenting. So it used to be you're in person and everything was done on paper or something, but we've all now done all these Team meetings and they are so...we kind of run a Team meeting all the time. Even if we're in person, I'm running a Team meeting and trying to do everything on the screen. I don't like printing paper.

Moving From AUM-Only To An Income-Based Subscription Model [1:07:01]

Michael: So, take us back now to the business model end and just how this adds up. You had said you were more assets under management, you're moving in more of a percentage of income model now, just 2% of line 9 on the tax return, which is just the gross income before deductions line for anyone who doesn't have their tax return handy. So just 2% of the gross and that's the deal. So, I guess a few things I'm wondering, is the model now only percentage of income, or if they have assets, are you also doing a percentage of assets, or does one offset the other? What does the model actually look like at this point?

David: Right. So, my preferred model, or if I had my druthers, you pay a fee for the ongoing services and if you choose to use us for asset management, then you also pay the asset management fee and there is no discount from that, there's not, "Oh, you get a half price." We believe very much in the value that we're bringing to the table.

Michael: So 2% of income for the planning work. What does AUM fee look like? I mean, are you a call it "traditional" 1% of AUM for portfolio side?

David: Yeah, roughly.

Michael: So 2% of income for the planning work, 1% of assets for the asset management work, and clients engage whichever ones they want to engage with?

David: Yes.

Michael: And when you do 2% of income in that environment, how does that get set up and paid? I mean, is that they pay you once a year, you do it quarterly, do you pull it from their investment accounts if they're AUM with you, do you take it all the way down to monthly? AUM, we're all used to billing on a quarterly basis out of the account that we've got, but how does 2% of income work in practice?

David: So we bill monthly in arrears, which I also do with my AUM fee. So we always bill monthly in arrears. So we've set up through our accounting software recurring invoices, and the clients have the capability to pay via credit card or ACH debit. And the bill goes out to them every month, and they pay it, they pay it automatically. And that's how it basically gets done.

Michael: And so you pull out a tax return, multiply line 9 by 2%, divide by 12, "And that's what I'm going to be invoicing you for every month for the next 12 months until we get your next tax return, and then we'll recalculate this"?

David: Yes.

Michael: Okay. And just what does a typical client look like in practice? If you work with some high-income folks, 2% of income, has to be a pretty big number. If you work with some retired folks, and we're being tax-savvy about minimizing their income for tax purposes, we can get income pretty low for a retiree, which is not necessarily helpful when you're billing a percentage of income. I guess...

David: We do have a minimum.

Michael: Okay, so what's the minimum? And just how does the...what's the typical client that you're applying this to in practice?

David: So, the minimum is $300 a month, that's the minimum. Now, not every client falls into this, right? So, I do have some legacy clients, we have some clients that just have limited services so we may do some smaller subset of this.

Michael: Right, we all have a handful of our exception clients for various reasons.

David: That we're doing something a little different from, but this is really the way we're going. So, I have clients making $200,000 a year, I have clients making $1.4 million a year, and in between there. So, I've got clients making $600,000, $700,000 a year, they don't have a lot of assets yet, but they have a lot of income and a lot of needs. And they're thrilled to pay, they're like, "This is awesome."

Michael: Recognizing someone who makes $600,000 a year, it's a $12,000 a year planning fee. It's a bigger number than a lot of advisors charge for their asset management clients.

David: Okay.

What Surprised David About The Financial Industry [1:11:23]

Michael: So what surprised you the most about just building your own advisory business and all the evolutions over the past 20-odd years?

David: Just how liberating it is when you're not under a broker-dealer and that you're not...that somebody's idea of compliance and how it relates to your practice doesn't really make sense. I'm very, very, obviously very compliance-oriented as well. I was also a compliance principal. We have a compliance firm, that's our consultants. We're very on top of it. But we're just doing the right things for clients all the time, all the time. So surprising to me is how easy it really is to run a practice the right way. Now, of course, my practice is, it's just me. I'm not adding other advisors. My daughter works with me in the practice. Ultimately, I think she'll take over the practice. But the whole idea of it is that you can have a wonderful life, really impact people, and make a very good living and feel that you have left the place better than how you found it. And so what's surprising to me is that how the financial industry puts people into that model, into that other mold. "It's got to be done this way. You can't give tax advice, and you can't do this." And at the end of the day, it's always about them protecting their franchise, whereas I'm protecting my clients' franchise, and I'm on their side of the table, as opposed to what the larger firms require.

Michael: So is that the difference at the end of the day that...well, I guess, in the large firm environment, they are protecting their franchise, even if that means they're protecting it from you in the mistakes you might make. When it's your business, for better or worse, it's your franchise, you want to protect you from yourself, but that's a little more straightforward because you are you, and you look yourself in the mirror, and you don't want to blow up your own business.

David: Well, yes. And starting just with the whole thing, I've always had this thing of having to explain to clients why everybody is not a fiduciary. My mom taught me to be a fiduciary when I was 10 years old. It was like, "You always do the right thing for the other person in their best interest." And so trying to explain to clients the different model of the broker-dealer world versus the fiduciary world, they're amazed to hear that, "They don't have to do what's in my best interest?" Like, "It's a long story." My mother always also used to say, "If you tell the truth, you don't have to have a good memory." And so it always has been about just doing the right things.

And if you're just out to do the right things for people, your practice runs smoothly. Of course, we're all going to make mistakes, right? But there's a mistake, and then there's you did something evil. And I think part of the problem I always used to say is that the issue with the broker-dealers is that they have to make their systems to the lowest common denominator. So they got to put things in for the yokel who's always screwing things up. And so the person who's doing things the right way pays the price for the person who doesn't.

The Low Point On David’s Journey [1:14:52]

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

David: You know, I think maybe the low point was when I realized that the old world was about selling products and that I was part of that, and you had these quotas, and you had to make these numbers, and why aren't you making these numbers? And I just did not ever feel good about that. But I just had a tremendous career, I've been so blessed.

Michael: So was there an event, a moment, a thing that happened that made that a transition for you?

David: I don't think there's one particular thing that made that a particular thing. I like to think I'm a self-actualizing person. And so I've just always been on this quest to get better. And some people say, "Well, if it's not broken, why try to fix it?" And my philosophy is everything's broken, you always got to keep fixing, always got to keep improving. Nothing stays the same, it's always everything is changing around it. And to me, that's what makes it so exciting is that things do always change.

How David Would Have Approached His Career With His Current Knowledge [1:16:05]

Michael: So, is there anything that you wish you'd done differently in this journey? Like anything you know now you wish you could go back and tell you from 10, 20 years ago?

David: Would never have gone into the broker-dealer world.

Michael: How would you start instead then?

David: Maybe would have gotten out of it sooner. I will say that I did get good training. And I took advantage of the training and becoming a CFP, and so forth. And yes, it probably would have been harder, unless going into an RIA-only type of firm. So that may have been something differently to have done. I don't know that that would have been a realistic thing because I was 37 when I got into the business, and where do you start? So I am thankful that they did have a program for me to be...a track to run on. I just don't know that the model of what their ultimate motivation was, it really wasn't about helping people, in my opinion. It was really, "We're a product company, we sell stuff."

Michael: So what advice would you give newer advisors coming into the industry today? I guess it could be younger folks coming out of college, or career-changers coming in as you did.

David: I would try and...if I knew today, I would try to find a financial planning firm that I believed in their values and the way things are done, and to go in under that fiduciary fee-based model really from the get-go.

What Success Means To David [1:17:41]

Michael: So as we wrap up, this is a podcast about success, and one of the themes that always comes up is...even just though the word means very different things to different people. And so as you built this successful career for yourself, as you framed it, a successful lifestyle practice for yourself, so I understand what the business is, but how do you define success for yourself at this point?

David: Well, to me, the biggest success and satisfaction I get is knowing that I have just helped so many families. Unfortunately, I've had clients die young, and I then kind of stepped in and taken over helping the family. And just knowing how worse off they would be without me, and the things that I do, and how I hear from the widows in these cases, there are unfortunately multiple ones of those that are younger. Some have died of COVID, some have died of cancer, just the fact that I'm making a real difference in these people's lives, and that's what I get just...I mean, to me, that's success. And the fact that I get paid on top of that and that I live this wonderful lifestyle of being able to be anywhere, at any place, at any time, and being able to make impacts.

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

David: Thank you for having me.

Michael: Absolutely.