#FA Success Ep 276: Integrating Tax And Legal Services Under One Roof To Truly Scale A ‘One-Stop Shop’, With John Hagensen

Resources Featured In This Episode:

• John Hagensen
• Keystone Wealth Partners
• DALBAR
• Envestnet Tamarac
• Rethink Your Money With Keystone Wealth Partners
• Track That Advisor
• White Glove Marketing
• Steep Marketing
• Creative Planning
• Kitces & Carl Ep 63: Delivering A One-Page Financial Plan And A Full-Plan ‘Technical Appendix’

Looking for sample client service calendars, marketing plans, and more? Check out our FAS resource page!

Full Transcript:

Michael: Welcome, John Hagensen, to the "Financial Advisor Success" podcast.

John: Thanks for having me, Michael.

Michael: I'm really excited about today's episode. And talking about what it means to try to be a one-stop-shop to clients, I feel like that's a label that the industry has used for a long time to try to say, "We're comprehensive financial planners. We'll cover everything. We advise on everything, that's why we're the comprehensive planners that we are, and we got this one-stop-shop offering." But then when you kind of dig into it further, it's usually, "We're not literally the one-stop-shop," and usually more of, "Well, really, we're the quarterback that interacts with all the other professionals. We're not actually an accounting firm. We don't prepare returns. We're not actually a law firm. We don't do the estate planning documents. But we help you with the tax planning, and estate planning, and the insurance, and the investments, and all the things that are under the financial planning umbrella." And I know that you have gone a little bit of a different direction in really actually trying to be the one-stop shop. Having the CPAs on staff, having the lawyers on staff, which I want to ask you more about because, as far as I always knew, you actually can't do that because there are laws about non-lawyers owning law firms. And so I know you have gone this route of trying to really operate as this one-stop-shop effect by having the lawyers, by having the accountants on staff.

And so I'm excited to talk today about how you bring that together. I know we can all say on paper, "Wouldn't it be cool if we just have all the people under one umbrella?" but then you have to actually structure it and manage it and figure out the pricing and figure out the staff structure. There's a lot that goes into making that happen. And so really appreciate you joining us today to be able to talk about what it takes to actually try to deliver on that one-stop-shop promise.

John: Yeah. Well, I think, in general, the industry as a whole has drifted to very low cost or you need to figure out ways to add additional value. Because we haven't seen that fee compression that I think a lot of people have expected. That may come down the road, but I think we've seen value compression. Just in the sense that it's difficult now to maybe do what we were doing 15 years ago and say, "We're going to charge 100 basis points." So it's, "Do I want to get really good at one thing and have this niche where, if somebody fits that, 'I'm the best, I'm delivering deep value,' that others can't compete with, or how can I add additional value propositions that clients care about and differentiate from the masses that you're competing against?"

Michael: Well, I think you make an interesting point around...we've had all this discussion for, particularly, the last 10 years that fee compression is here, fee compression is inevitable between the compression in investment costs from mutual funds, so moving to ETFs and even the downward pressure on ETFs, to the arrival of the robo-advisor that was supposed to collapse the 1% AUM fee. And then you look 10 years later, and basically, fees haven't moved. It's just the average revenue yield if you take all the revenue of the typical advisory firm and divided into the total assets. It basically hasn't moved a basis point in 10 years. But what I do see happening in real-time is, as you put it well, the value compression is there. Doing the same thing we were doing 10 years ago to get that full fee today is a lot harder to justify than it was before, but the response with the industry, by and large, has not been, "Okay, well, then, we're just going to accept the pressures of fee compression and cut our fees as well." Instead, it's been this kind of value expansion, value-add, "Then I'm going to value-add my way back up, and I'm going to defend my 1%. I'm going to do what it takes now to get back to that line," with the caveat that some firms I find actually add so much value, and they are now raising their fees at the end of it because they realized, "We're doing so much now. I'm not even sure that 1% fee cuts it anymore." But this phenomenon that we were supposed to be fee compressed and instead we just value-added our way up instead, to me, has been a really interesting shift in how all the technology has played out over the past decade.

John: Well, I think the tangible value adds are important, because we operate in a world where we ask clients to trust us and pay us an ongoing advisory fee, and basically say, "You really can't evaluate us from an investment standpoint for 10 or 20 years." It's, "Well, I noticed, against this benchmark, you've been underperforming for three years." You say, "Well, three years isn't near long enough." Look at the growth value cycles, and that doesn't really tell you anything. So they say, "Wait a second, so I'm supposed to pay you and have no idea. Because anytime I ask whether we're doing better or worse because I've hired you from a performance standpoint, you just tell me I have to wait longer and continue to pay you." And so, when you bolt on services that are valuable to people and they understand it tangibly, you're going to have a CPA, and an attorney, and a CFP, all sitting in this conference room, discussing, in coordination with one another, my estate plan, my tax plan, my financial plan. You're then going to draft estate documents that I need done from that attorney that knows everything about my situation. You're then going to file my tax returns from the same CPA that just built the mock tax return from my Roth conversion in the fall. Okay, I see where there's going to be measurable value and also is going to make my life a whole lot easier than driving across town to try to explain to my CPA what my advisor just told me to do that I don't understand or I don't want to have to understand. And they couldn't pick each other out of a lineup, let alone have any sort of integration on the planning. And so it's important that when you're saying, "Pay us this fee and we're going to add value in excess to what you're paying," to have some tangible things that they go, "Oh, I could see that. That makes sense to me."

Michael: And is that...that thought process was literally your journey as to why bring in CPAs, why bring in attorneys in-house? Was it kind of a conscious decision of, "Yes, we're managing portfolios, but the cycles of how those get evaluated just plays out over too long. I need things that I can show service value over more finite time periods. Hey, this legal work, this tax work, this stuff we can show value year to year, so this is where we're going to go?"

John: It was partly that, and it was partly that I think that is where the primary value lies for most clients.

Michael: Okay.

John: Meaning, I don't think we're differentiating a whole lot as an advisor community by saying, "We're going to beat the markets." We're going to trade individual stocks. Some people maybe can do it. I think that's very difficult. And so I think where you actually truly are adding more value, not just from an optics standpoint but for the end client, is by saying, "We understand your tax situation. We are involved in an ongoing estate plan." Most people are going to an attorney and spend a couple of thousand bucks, and they basically wheel their estate plan out of the office in a wheelbarrow as the attorney's saying, "Refer your friends and family. Let us know if you need anything." And they just go set it on a shelf in their home office, and it collects dust for 10 years. And so I think when you say that to somebody, they go, "Yep, that's exactly my situation." And you say, "Well, wouldn't it be helpful to have an attorney involved?" So when your kids go from being 17 to 18, or you have 2 new grandkids, or you don't even like John anymore, you want everything to go to Suzy, that there's somebody involved in that and being proactive in your planning. It should be dynamic. And so I think that's something that people understand has been deficient in their planning, and it's very attractive to have those professionals all working on their behalf.

Where Keystone Wealth Partners Exist Today [09:55]

Michael: So I get it conceptually. I think a lot of us have felt the draw in that direction. Then you just get down to the CPAs, and attorneys are not inexpensive, to have on staff. And I also got to do all the advisory stuff as well. So, how does this come together in practice? Can you maybe just start by talking just a little bit more about the advisory firm itself? What do you do? How are you structured? What's the size of the firm and the client base? Help paint us the picture of the firm, and then we can dig even a little bit further into how does this actually work from a staff and team structure with all these different departments.

John: Absolutely. So we started in 2014. I left an independent broker-dealer, wasn't feeling a lot of excitement or passion for what I was doing, didn't have a lot of conviction, thought there was a better way to do it. Started Keystone. We're about 650 million right now of AUM. We have a team of 30 people, so 3 attorneys, 3 CPAs and EAs, about 8 CFPs, a CFA, and we also have a...one of our CFPs has a doctorate in psychology and, heads up, sort of behavioral finance component of the practice that we think is important as well. Our average client is around 60 years old, and our average advisor age is about 36. So we're a young firm in terms of the age of our CFPs and CPAs and attorneys.

Michael: And so, how many clients with the asset base?

John: About a thousand.

Michael: Okay. And total base is?

John: Six hundred and fifty million.

Michael: Okay, $650 million. So I'm just kind of doing my napkin math, $650 million across 1,000 clients, so the average household is $650,000. So you're living squarely in what the industry would call the mass affluence space, the kind of hundred thousands to million-dollar investable asset space.

John: Absolutely. And it's like a lot of firms in the sense that we have kids of clients and some things like that. So our typical kind of active client is probably closer to a million, but right in that range, exactly. And I think that's also why our offering has been so attractive, because if someone has $1 million, they haven't, up to this point, expected to have this depth of service. So they're sort of thinking, "Well, I understand if somebody's a high net worth client that they're going to have a lot of disintegration. But for the person that's a millionaire next door, they have been driving all around town trying to coordinate these things." And so I think that it's a very unique offering for the size of clients that we have.

How John Structures Fees For His Expanded Services [12:15]

Michael: So, now, help us understand how this comes together. I think I want to actually just start on the pricing and fee structure end. So, is this kind of a la carte services, "Here's our investment management fee for investment management, and then here's our document fee if you want estate documents, and here's our tax return fee if you want tax return?" Is it charged by the service, or is this all bundled under one AUM fee, or is it a little bit of a mix and match? How do you start bringing pricing together when you're trying to deliver all of this?

John: Sure. So existing clients, when we started the tax practice, we just said, "Here's an extra fee if you'd like to do it with us." We didn't increase their AUM charges. For all new clients, once it was started, the underlying AUM costs were a little bit higher, and it includes taxes. And they're not required to do taxes with us, but they're paying the same fee. So pretty much everyone does. And we think that's a value to them to have that integration. And then, from an estate planning standpoint, a tax document standpoint, all the guidance and advice, there's no extra cost. So for an attorney sitting in there, they're not billing hourly, obviously, or anything like that. But if they need a new trust or they need documents, we do charge separately for that, and that's a compliance thing. So that's per the Bar Association. We can't do legal work and then essentially be reimbursing back through a financial planning firm. So we have to keep that totally separate. And these are all three separate LLCs.

Michael: Interesting. So the Bar itself, I guess, from the legal ethics perspective... I’m almost envisioning, I guess... it's the legal version of the fee-only framework. The fee has to be paid directly by the client. You can't "give legal services" that get reimbursed by the financial planning or covered by the financial planning entity. Clients got to be billed and paid directly.

John: Yeah. You've had scenarios where attorneys, that I've read about, would say, "All right, we're doing all this estate planning work for you," and at the end of all the estate planning work, they need some massive life insurance policy. And they're an insurance agent. So I don't even worry about paying the legal fees because we're going to make $300,000 on this life insurance commission. The Bar doesn't look favorably at that. Because it's considered an inducement, basically.

Michael: Right. So it started there, and then it evolved into...I don't think it's quite the same level when you say, "Client has hired us for a holistic wealth management service of which we collect one centralized fee and dole a part of it out for the legal services," probably not quite the same kind of conflict as the insurance sale they were trying to limit. But you get the same rule that you got to comply with, which is the legal documents have to be charged separately.

John: Exactly.

Michael: And you said this is three separate LLCs. So I guess, just from a practical perspective, three separate LLCs that roll up to one holding company, or do you literally walk around with three different business entities and got to file returns across all of them and figure out how to allocate costs across all of them and handle that across each separate entity?

John: Basically. This is why it's nice to have minority partners in both of the other businesses that are lawyers and CPAs, because they have to figure some of that stuff out. But, yeah, the idea is basically that we want to be very clear with clients that these are three separate businesses that are all working with one another.

Michael: Why? Why the need to explain to clients that these are separate but working together as opposed to these are all one?

John: Well, I think just purely from a liability standpoint too, do I want someone's tax return to be messed up, and then they come in and say that there's some legal implications that could happen in terms of affecting the IRA too? So I think part of it is just having three separate contained entities. Now, for the estate planning, the law firm, that has to be a separate entity. That's not even an option. That would have to be. But when we were setting up the tax practice, I have a different ownership structure as well. I have the CPA as a minority owner of the tax practice. He doesn't have ownership in the IRA. So that was part of it as well is just that we have different ownership structures on the different entities for the operating partners.

Michael: Okay. Because part of the incentive, I guess, for a CPA that wants to build with you and run the tax practice portion of the firm is that they can actually be an equity partner in the tax practice.

John: Exactly.

Michael: Okay. And so you said you were originally...you had a base AUM fee, you ruled out tax, you started charging them separately for the tax service. Then you adjusted the AUM fee and just said, "This is going to be bundled in all-in-one for the tax services." So, can you talk to us about what the AUM fee structure is or even what was it and what did you go to as you tried to figure out how to reconfigure your fee structure for the new service?

John: Sure, yeah. So we are 1.5% on the first million. It's graduated. We're 1% from a million to 2, and then 50 basis points above 2 million.

Michael: Okay. So the 1.5% on the first million, at least relative to the proverbial 1% benchmark fee in the industry, having a higher fee schedule on the first million is part of, "This is how we price." Having a more premium all-in-one service is we're a little bit more expensive on the base tier, and you're getting what you pay for in additional services.

John: Yeah. That's part of it. And I think, so often, we see people coming in from one of the big broker-dealers. And they're 1.35, maybe it's tiered down a little bit, and they're in proprietary funds that are 65 basis points, and they've got these other fees, and they're meeting once a year, getting an annual review, and they're not having any tax integration, and they're really not getting a lot of financial planning. And so we're around the same price, and we're doing so much more. So we have absolutely zero objections around our costs. Now, maybe some people just say, "That seems kind of high. We're not going to work with you." And that's fine. But that hasn't impacted our growth in any way. We're growing just as fast as we possibly can keep up with.

Michael: Because at the end of the day, you don't compare the same time. I guess, even if a firm wants to try to price shop you and compare, just you don't do the same thing because you actually have tax and legal in-house, and they don't.

John: Yeah. I just think money moves to value, especially if you want to retain clients long-term. You can have good marketing and say, "We do these things," but if you don't do them well, you'll lose clients. And so our retention rate is high, and our acquisitions of new clients just organically are as fast as we can keep up with right now. So I don't think it would be sensible to say, "Let's price our stuff down," when we're not needing additional growth from where we're at right now.

Michael: So help me understand how this works, just from the servicing perspective. A thousand clients is a lot of clients, whether that's doing returns, and I guess a thousand clients across 3 CPAs, and presumably, not every client does tax prep work. So that's a couple of hundred returns per CPA, which is not that unusual during tax season. That's a heavy load but not unheard of. But is that how it breaks out, every couple of hundred clients, you're going to have to hire another CPA to handle the annual tax season?

John: It's right around that, yep.

Michael: And then, how does it work on the legal end?

John: Yeah. So that's actually something that we're continuing to scale. We haven't talked about where our offices are, but we have a couple of offices in North Dakota and a couple in Arizona. And so, obviously, legal is a different animal in the sense that you have to be licensed in specific states. It's very state-specific, unlike being an SEC-registered investment advisor. And so there are some unique challenges with out-of-state clients where we're not able to actually do the offering at the same level as in Arizona. So one of the things is Arizona is very unique in the sense that, just about a year ago, they're the only state, to my knowledge still, I know they were the first at the time, that allow non-attorneys, I should say, to own a law firm. And I think it's a decent proxy. This could spread to other states. I think other states are watching this and saying, "How is this sort of going to work?" But I think it'll be a huge opportunity for advisors listening to this who are in different states if that becomes available.

Michael: Oh, because just part of the practical constraint as an advisor, if you didn't have to start this career by getting your law degree originally, is, for most states, you couldn't bring the tax in-house because you can't pay it from the planning fees, it has to be paid directly by the client per legal ethics. An advisor can't own a law firm, so there just really was no way to bring it in-house really?

John: Absolutely. There wasn't. You could office share. So what we were doing prior to this law change is that we have a sister company who we office shared in one of our Arizona offices, and we'd basically walk them across the lobby to do legal work. And that was the best thing that we could offer prior. But I couldn't retain any of the revenue. I couldn't control the experience from the client perspective as well as I wanted to. And so, once that became available, we were one of the first, I think, 5 or 10 non-lawyers to own a law firm in the country, because I knew that that was going to be a huge opportunity for us to just deepen the value that we were bringing by having better synergies. Because I think, so often, you used the quarterback example, sometimes that can work really well, and then, other times, I know from my experience prior to having it structured the way we are now, I kind of had to self-reflect and go, "Am I being a great quarterback?" You know what I mean? Somebody's, "I'm not really happy without my estate planning and the responsiveness attorney," and you're going, "I wish I had more control over that." You know what I mean? And so I think that was really valuable for us to be able to better deliver, not just say, "Oh, we're going to do this for you," "We will help you do this," or "We'll be a part of this at a small level." It's, "No, we will do all of this for you."

Incorporating Tax, Estate, And Financial Planning In Offered Services [21:45]

Michael: And so, how does this work from a client service perspective? You had mentioned at one point the phenomenon of having everybody in the room at once or the clients sitting across from a CFP who's doing the planning work, a CPA who's doing the tax work, and an attorney who's going to do their estate planning work. But are you literally structured that way, clients have three-person teams, and every time the client comes in, three people are in the meeting? How does the structure work from a servicing perspective?

John: Usually, one or two CFPs in the room for a typical planning meeting, and then they'll have the...one of the CPAs or attorney is looped into a meeting, generally once a year, depending on what's going on, certainly at the beginning of the relationship. We're onboarding a lot of new clients right now. You and I both know there's a lot more work involved in building out an initial plan, and so that really takes a lot of time. Once the plan is built out, then it's generally, "Hey, here's the cadence of our year. Here's when we do certain things, assuming that nothing huge is happening in your life that dictates something different. And this is when you'll meet with the CPA during the year. This is when we'll loop in the attorney." Sometimes it's just you're in that client review meeting and going through things, and something comes up that's important around their estate plan, and then that CFP is either going to say, "Well, let's set up another meeting with the three of us," or, "You know what, that's something that you can probably just have the attorney answer in 15, 20 minutes. Why don't we just set up a call when you're leaving out of the front desk and have the attorney call you?" So it looks a little bit different, but you will have, on an annual basis, some interaction with all three of those departments, so to speak, or professionals.

Michael: So it sounds like there is still, to a large effect, kind of the CFP financial planners, the "quarterback," but they're not quarterbacking across a whole bunch of affiliated professionals. They're just, literally, leading the relationship internally and quarterbacking across internal services at the firm, but there's still one advisor who's the relationship lead. Is that a fair characterization?

John: It is.

Michael: Okay. So, how many lead advisors exist in your structure?

John: About eight.

Michael: Okay.

John: So our actual client to advisor ratio is quite good, from that standpoint per the industry, especially because, when there are tax needs, our lead advisors are involved, but they're handing it off to a CPA to build mock tax returns, to look at projections, to pull their old returns, to look at...right? So you can service people at a really deep level when you have these other extremely high-level professionals that are experts in their fields who are available for these clients that are a part of the team. It's the same idea of just having paraplanners that you can downstream things that aren't as important for you to do as a client-facing advisor. And we have those too, by the way. So we have a couple of paraplanners that assist the lead advisors, and then we obviously have the attorneys and CPAs.

Michael: So, what does the rest of the staff structure look like? I'm just struck that you had said 30 team overall, and there's a half a dozen there CPAs and attorneys and 8 that are lead advisors and a few more that are paraplanners. So not a huge number of kind of operations, investment, back-office staff. So, what does the rest of the staffing structure look like?

John: We've got five or six client service representatives. We call them account managers. We have three what we would call client coordinators that are scheduling, greeting, seating people, and doing a whole lot of other things around our marketing. We have an operations manager. We have a director of marketing, and we have a portfolio manager who's a CFA.

Michael: And so, how does the actual portfolio investment management process work for you? I see some firms that have 650 million under management that have a 6-person team of investment analysts and traders. It sounds like you're down to one core person that leads the charge. So talk to us a little bit more about what the investment offering is at the firm.

John: Sure. And he has a support person on his side as well, but he is leading. And, yeah, we don't have a team of four CFAs or something like that. Our philosophy is globally diversified, broadly, low-cost index funds and ETFs, use DFA, Vanguard, iShares, rebalanced systematically. And other than legacy assets, we'll transfer new client assets in kind, and for tax reasons, there are scenarios where we don't want to...we shouldn't be selling them. But we're not building actively traded individual stock models for clients. It's not our philosophy. We don't think we add value there. I think it's very difficult for anyone to add value there. I'm sure some people do it well. But that is a core part of our story, is if you're approaching or in retirement, we want to manage risk, and one of the ways we can manage risk is save very diversified and low-cost funds and, basically, buy the whole market. And as long as the world doesn't end, you're likely not to blow up your plan.

And so that doesn't take...so when you're leveraging DFA and Vanguard, and these index funds and ETFs, the portfolio manager's job is really just to be rebalancing portfolios, deploying new cash. We do some tax-loss harvesting. That's obviously a busy time when we're doing things like that. But we can accomplish that quite easily. Now, we leverage Tamarac. We're spending a lot of money on software to ensure that these things are getting done efficiently and leveraging technology.

Michael: And so Tamarac becomes your hub for both the performance reporting side and just the raw rebalancing and, I guess, trade model management for you.

John: Yeah, and that's obviously the deflationary pressures that exist pervasively throughout the world. I was talking with our portfolio manager, and he's saying, "John, 15 years ago, we would have needed 10 people to manage this money." There's just no way, but he's got everything built out so systematized within Tamarac that he can do things that would have taken so much time even a decade ago, and it's so much more efficient and so much more accurate. There's so much less room for error on it as well.

Michael: Yeah, I'm just struck. You're effectively a portfolio manager plus investment support person, is actively handling all the trading and implementation for 1,000 client accounts, but more than that, 1,000 clients and more than 1,000 accounts, because, obviously, some people have multiple accounts.

John: Yep, that's how we do it, and it's worked great. We're sort of hitting a point right now where we're going to need to add another person to that team, but even then, you'd be saying, "Well, John, you only have one in two people." It's not like we're looking to need a scenario where we're going to need seven people on that team anytime soon.

Michael: I was going to say, you're comfortable with how that continues to grow and scale for you, or do you look at a world of outsourcing or using TAMPs or say, "No, I don't really need to because we're so efficient with the software. We're just going to keep scaling it internally?"

John: I think we'll just scale it internally, but we will need to add people to that department, obviously, moving forward.

Michael: And so, just in this world where a lot of folks are talking more about portfolio customization, portfolio personalization, it sounds like you guys are not necessarily in that camp. Portfolios are pretty standardized around the Vanguard and DFA models that you're building because the whole point is the value-add is the planning and the tax and legal work. It's not the portfolio that just happens to be the anchor part to it because, have money, needs to land somewhere.

John: Yeah. I think that we've all seen the DALBAR studies. The primary value proposition is helping people be educated around what's important in their plan so that they have confidence and clarity and they're not losing sleep at night because they're worried about market volatility, or they're making emotional decisions. They can do everything right for 10 or 15 years. They make one bad move, and it blows up the plan. And so we think building a low-cost portfolio that we can well educate our clients on why things are where they are, what their level of risk is exactly, what they can expect. I tell people all the time, "If we work together 20 or 30 years, we're going to have 5, 10, 15 down years." It's going to be Christmas Eve, and you're going to be looking at your statements and say, "Well, I got less money than January, Why are we paying Keystone?" Now, fortunately, about twice as often, you'll look at your stuff at Christmas and say, "I got a lot more money than January. This is working out."

So we know that we have to set proper expectations because frustration is the gap between expectation and reality. So we spend significant time with our clients at the onset, during the onboarding process, as well as ongoing, of continuing to set healthy expectations for what we are going to do for them, where we're going to add value, what could derail it. And so, when the market does what it did March of 2020, our clients...nobody likes it, right, but our clients aren't going, "What are we going to do now?" They're just saying, "Are we going to execute all the things that you told me we were going to do when this happened?" And as we're telling them, it's not "if it happens," it's "when it happens." And so we think that that is the proper way to invest for most people. Now, do some people want more customization, and they want ESG investing, and they want individual stocks? Probably. They won't be clients of ours. And it doesn't mean they're wrong and we're right, it's just we're sort of happy to say, "Hey, that's great for you. That's not what we do here." And I'm totally comfortable having somebody leave that meeting and say, "Keystone is not the right fit." And I'm fine with that.

Michael: I was going to say, and you're fine with that. It doesn't make you want to build in a little more flexibility, try to capture some of these people that are coming in and leaving because you're insisting to use your models when they wanted more customization.

John: Absolutely. I look at it and say, every person we meet with, we want to share with them where we think we can help them. But I'm not trying to shoehorn someone in to convince them to become a client of ours. In fact, there's many meetings that I have with prospective clients where I go through some of the analysis, and I tell them, "Hey, here's how I think you could improve your situation." We're not going to be the right fit for you. So there is no opportunity for us to work together because we're too far apart on some pretty core philosophical things, but there are some other firms out there that I think would be a really good fit. And maybe it is, because they want to trade individual stocks, or they want to be very active, or they don't believe that a diversified approach is the way to go and they want to be all growth. "Okay, that's cool. We're not going to do that." So there's other firms that'll do it. And I think, when you get out of the scarcity mindset of saying, "How can I try to get every single person to become a client?" and start thinking more around, "We've got a lot of people interested in our firm," we're just looking for the people that actually are a good fit and probably going to stay for a long time, because it's a good fit.

Michael: So all of that is predicated on...I get not having a security mindset, but sometimes it's also just raw math of just, "Are we getting enough prospects in the door that we can say no and still capture enough growth opportunity to have healthy growth as a firm?" So I feel like the other side of this is just you seem to have a lot of confidence in the marketing side of the firm that, if you're saying no to these people, it's cool, there's going to be more prospects.

John: Well, yeah. I think...what's the saying? If you want to be something to everybody, you're nothing to no one, or something like that. I think I butchered it. But I think, too, if you're true and authentic to what your offering is, and you're confident in that offering, you're really just looking for people that receive that and say, "This is really what we're looking for." But, yeah. I bet you, all of us can think of different clients over the course of us being financial advisors that we sort of knew we're kind of mean. This person's kind of grumpy. They're mad that there's dark chocolate in the lobby instead of milk chocolate, or whatever. And you know what I'm talking about, Michael.

Michael: Oh, yeah.

John: But you're kind of, "Oh, man. I've got a family to feed. We've got employees." And the whole time, they're signing documents, and they're complaining that you gave them a pen that writes in blue instead of black. You're going, "This is going to be a disaster. But we'll be able to mark on our tracking sheet that we closed another client." You know what I mean? We've got a new client. You know, intuitively, that's not going to be somebody that everybody's happy having as a client 10 years from now. But we do it, and as a result, we start basically cropping up in our garden of all these pretty flowers and we're just, "They just choke everything out." I think we all know that a few bad clients or...and this applies to building a team with 30 people, a few bad team members can really disproportionately ruin an otherwise good culture. And we've all been on the golf trip with seven friends, and six of them are awesome, and one guy is there and you're just, "Why is this guy here?" It's like somebody's brother-in-law, right, from the movie The Hangover, or something. It's, "Why is this guy here?" And it can ruin the whole trip. Everybody else is really cool, but there's that guy. And the same thing happens with clients and with your teams. You want to be really careful, I think, of who is entering in the practice.

Leveraging A Multi-Prong Marketing Approach To Acquire Clients [34:19]

Michael: So help us understand the other side of this, which is just, where does the growth come from for you that you, at the end of the day, can still be confident of, "Yep, just going to move on from this prospect? Okay, there's more fish in the sea?"

John: I think, traditionally, in our profession, I think we have this weird stigma where it's, "I'm a fee-only CFP, so I shouldn't market. That's beneath me. People are going to just refer me and find me." I think there's a little bit of that. I could be wrong, but I think that that's a little bit of the mindset sometimes. Early on, I was spending 25%, 30% of revenue on marketing. We still spend 15% or 10% a year at a minimum on marketing. And it's all educated-based marketing. We basically give a bunch of information that we think is valuable for free, and some of the people go, "That's interesting. I don't want to do this myself. My current advisor doesn't talk about any of these things. It's resonating with me. What would it look like to work with you? I at least want to have a conversation."

So for example, last year, we had 800 first appointments. We had, out of those 800, about a little less than 500 qualified...it was just a good fit after the first visit. They weren't talking about how the world was going to end, and they're burying everything in the backyard. So we went through what we call our retirement map review, which is, basically, the Kitces & Carl one-page financial plan. And so we do that. It's a very high-level analysis. And from that, we had 204 new clients, 170 million of new monies all from organic growth last year alone.

Michael: All right. So I've got lots of questions about where 800 first appointments comes from, right? That's roughly 250 working days in a year, that's 3 prospect appointments every single day of the entire year, including holidays. So just where does that come from? Where does that flow come from?

John: Let me start by saying, I really believe that any advisor can create this level of lead flow. And no, by the way, I'm not selling an advisor marketing program. I'm just saying, I really actually think that what we're doing, I think we do it really well, and we have experience doing it now, but I don't think it's something that just no one else can do. Because I think sometimes people hear that number, and they're, "Whoa, 800 first appointments. That's pretty crazy." But it's coming from a multi-pronged approach. So about 40% comes from radio. So we have a radio show that's on the weekends. A lot of people are, "Radio doesn't work." That's what's funny, by the way, about our marketing, Michael, is that so many people around our channels, the sort of sentiment is, "None of this stuff works anymore." And I'm, "I don't know. We added 170 million of new monies doing these things." So they do work. So 40% came from a radio show, 20% client referrals. So we're getting significant 30, 40 million a year just in one client telling another, and I think that's due to the depth of offering and us actually delivering on what we tell them what we're going to do for them. 20% from webinars and 20% from in-person events.

Radio Storytelling As A ‘Slow-Burn’ Marketing Scheme To Recruit Prospects [37:20]

Michael: Okay. So talk to us a little bit more about each of these and just how these work in practice. So let's kind of start on the radio end, because I think you said, well, there's a lot of pessimism out there I find right now around radio, everything from just, "That's an old channel, this is the new modern world," down to sort of, I guess, the slightly more practical, "Radio was the thing of the past, but podcasting is the future now." So talk to us about radio. What are you doing that's working with radio?

John: Well, I think, people point to a mutual fund store or Edelman, and they're, "Oh, well, that just works before," right? I think those firms would...I think Ric Edelman would say, "Oh, radio has been okay."

Michael: Twenty billion later.

John: Right, exactly. So it does work. And I don't want to overweight what I do personally on it in terms of my skill because I think there's people that are way better than me on radio. I'm not some unique radio talent, by any means. But I've also heard shows where it's literally a CFP reading from a script in a monotone voice. No one's interested in getting a first appointment from that person. So I do think that it has to be a little bit entertaining. Now, I'm 38 years old, so people my age are going, "John, who listens to radio?" And I'm looking at them going, "Your parents, which is who my clients are." I don't want you 35-year-old as a client. You're not our ideal client for our practice. We want your dad who's retiring and your mom. And they are listening to radio.

And so the whole radio show is basically me giving information out that I think that's relevant that we've experienced. When you're doing 800 first appointments, you hear a lot of stuff. When you're doing 475 retirement maps, you see a lot of things. I incorporate a ton of those experiences, obviously, redacting the names and specific circumstances that will be identifiable, of things that I'm seeing, and things that we told them to do, and things that they've been able to do to improve their situation. And so people like this sort of voyeuristic...think about this podcast. It's basically me opening up what I do with my firm and other people listening and saying, "Oh, that's kind of interesting. Maybe I can grab one or two things that are helpful from this podcast." And so we enjoy that. And so the radio show is really been built around storytelling of just practical things and then saying, "If that applies to you, here's some things you could be looking for. If you've got questions or you don't think your CPA, you don't really do this, you just kind of take your organizer and march to your CPA with your documents, and they just file it, but they never talk to you about these things, we will. So schedule a visit. It's free." And that's basically, in short, the premise of the radio show.

Michael: So it's a one-hour show. How often does it run?

John: Well, I'm on about...right now, it's about 12 to 15 stations. And it's once a week on the weekends.

Michael: And so you have to...is it live? Do you have to go in once every weekend to do it, or is this, "I get to record it from my office," and send them an audio file, and they just do their thing when it's time?

John: Recorded. I record them on Thursdays.

Michael: Okay. Okay. So I guess, functionally, it's...you record it like a podcast that just gets distributed on the air.

John: Exactly. And I know, even Edelman, that's how he did it. He'll take live calls, but if you listen at the start, it's, "The broadcast is prerecorded." There aren't a lot of... By the way, I think if certain advisors are going, "Well, I wouldn't want to do a radio show," because that's kind of a fear of saying, "Wait, a live show? What if I say something crazy?" You know what I mean? So you don't have to have that concern because it's all done ahead of time. So you really don't need to worry about that part of it. You can take things out if you say, "Oh, well, I shouldn't have said that." You know?

Michael: Does that make it easier, I would imagine, just from a compliance perspective as well, any compliance officer that wants to review can review stuff before it actually goes out as opposed to being live on the air and who knows what questions are going to come in?

John: Exactly. It'd be tough to do that and not, over a five-year period, say something of doing a weekly radio show where you're, "Oops, I probably shouldn't have said that." So you don't have to worry about that.

Michael: And so, what are the typical themes that you're covering? Tell us more what you're talking about.

John: It can be everything from something more technical or in the weeds on just, "Hey, what's a donor-advised fund? How does it work?" And then we'll get people, they'll call, and, "Oh, that's really interesting. I hadn't really ever heard of that before." So it might be something like that. It might be bracket maximization around taxes. And then, obviously, the radio show is to be educational, but I know the average person listens to a radio show for seven minutes at a time. So every seven minutes, I'm positioning a transition of why they should call and get a retirement map review. And so it would be, "Hey, here's an idea. When's the last time your CPA reviewed your tax return?" And people are listening, going, "Gosh, they don't. They just file my taxes." And then I say, "If you don't really like the answer to that question, give us a call. We will." And that's basically the approach that we take.

And the other thing about doing a radio show or I think any of this marketing is you do need to be true to yourself. It doesn't work if it's just you trying to be something that you think they want you to be. So I think the more authentic that you can approach any of these sort of cold marketing approaches is helpful because you will attract the right people too. You don't sort of want to attract a lead on a false premise, and then they come in, and it's not really who you are or what the firm is about. And so I think that that's pretty key as well. The challenge with radio, I think, for most people too is that you don't start a radio show, and then next week, you're, "Oh, I got 15 leads. This is great." So what happens with the radio show is we have people now that come in, and they go, "I've been listening to John for four years, and now I'm retiring." And I always laugh, and I go, "Oh, you're one of six people. Jeez. Are you trying to go to sleep when you're listening to the show? I know it's not that good. I appreciate it." But they're laughing, and they're, "No, we love the show. It's great." And it kind of gives me a renewed sort of excitement, "Oh, some people actually feel like they're getting some value out of this."

So it's a slow burn process, and I think, for a lot of marketing, advisors start, they go, "Yeah, I should market." They start, and then it doesn't work quite as well as they would have liked at the beginning, mostly because, as you've talked about with your blog, you're not as good at it because you haven't done it very much yet, right? And so there's not enough staying power to just get over the hump and actually get some critical mass and just improve upon what you're doing regarding that marketing.

Michael: And so if you're kind of thinking about this in seven-minute segments, is that, literally, over the span of an hour, you're going to have seven, eight, nine different instances of prompting this, "And just remember, folks, when was the last time your CPA reviewed your tax return? Well, if they haven't, we'd be happy to do it. Give us a call at 12345678910," Just that kind of call-to-action over and over and over again every seven minutes or so?

John: Yeah, sometimes. Oftentimes, in the middle of the segment, call-to-action is a much shorter one, sort of just be, "Hey, if you want to chat with us, go to keystonewealthpartners.com." But I'm making it available, and then I may go into a longer sort of call-to-action at the end of the first 30 minutes and the end of the show. I am positioning it, but I'm not kind...I'm trying to stay away from...people don't want to listen to a show that's just an infomercial. So you do kind of want to stay away from that, but also, I've had other people that they do the show and it's just not clear at all what someone would want to do to work with them. And so you're, "Well, I hope you enjoy the radio show and it's fun for you." But no clients are ever going to come because you're not actually telling them what the next step is, what would they do to actually engage you. And so I think that is a balancing act though in a very fine line that you walk when you're doing a radio show.

Michael: And your primary action points, at the end of the day, it just sounds like either it's "Give us a call" insert phone number here or "Check out our website, www.keystonewealthpartners.com."

John: We have one call-to-action. It's "Get a retirement map review." It's a one-page roadmap that overviews your entire financial plan. By the way, everything that I'm sharing with you today, I reserve the right to be completely wrong. This is just my experience in how it's worked for me on a very tiny sample size. Because there are advisors that say, one of their calls-to-action will be, "Hey, if you want my newest book, call in, and we'll send you a copy." And then they try to nurture that relationship where they'll say, "Hey, we've got a live event on how to reduce your taxes in retirement over at the library in your town. Check our website for dates and sign up for this seminar," or whatever. I have found that if I can make the call-to-action as clean and clear as possible, that's going to be most effective. Because think about it, you have them go to a seminar, what's the goal at the end of the seminar? What is the outcome you're hoping to achieve at the end of the seminar?

Michael: Usually, get an appointment.

John: Bingo. Why do I want to send them to a different marketing funnel that's going to have the exact same call-to-action? So we've always just said one thing, and it's worked really well for us to do it that way.

Michael: So all roads lead back to the retirement map review, which is your kind of one-page plan, gather some information, show them some opportunities, "If you would like our help to implement these, we would be happy to work with you."

John: Exactly. And we do...that's a two-appointment process, and at the end of the map, I just say, basically, "Are you ACATing your money to us, or do you want to just stay doing what you're doing?" And I'd always tell them, "There's no pressure at all," but we're very clear in the process, how we onboard clients and when they're going to...when we're going to ask them if they'd like to move forward. We don't require them to. It's not, "Hey, you have to decide today, or you're never talking to us again." But we make it very clear, "Here's how we make it simple to keep the process going out of this visit."

Michael: Because at the end of the day, when you've got channels that are driving through 800 first appointments, 500 qualified, 200 new clients, about 40% of the qualified folks who meet and go through the process become clients. If you're confident, you can make more appointments appear, and you're consistently closing about 40% of them. If you're not a fit, it's cool. We're just going to part ways and going to do the next phone call, which may be a better fit, and we'll work with that person instead.

John: Yeah. And our goal is to give them a lot of value even if they don't become a client. I tell them that at the beginning, "There's zero pressure to become a client. I want this to be super helpful for you. And if at the end, you think you want to work with us, and it's a good fit, we think it makes sense, We'll make it really easy to get started, and you can cancel whenever you want. You're not signing your life away with a 20-year contract." We think we're going to work together for a long time, but the first step is just saying, "All right, I'll pay you guys every quarter as long as I'm happy. And I'll fire you if you're not adding value." And so that's kind of how I present it. And we have a lot of people that leave because that is too quick of a process for them. And six months later, they call us back and they're, "I did the map six months ago. I'm ready to go." And they just needed more time, and we never require that they aren't allowed that time.

But it's kind of that whole thing too, what I was saying about trying to shoehorn these people that aren't good for the firm. If you're still dating someone seven or eight years later, and you're in therapy, maybe you just shouldn't get married. This might just not be a good fit. Why are we trying to make...? There's hundreds of thousands of financial advisors and 330 million people in America. We're probably not right for everyone. And that's okay. And so I think it's easy to say that when you have a lot of first appointments, but it's kind of, "What comes first, the chicken or the egg?" I was taking that approach when I was starving and didn't have any AUM. And so I can say that that's probably part of what led us to this growth, is that people sense when you're desperate. People sense, "Oh, this person really, really wants my business." That's not attractive. And so I think there's a level of confidence in just saying, "Let's check each other out and see how it goes," that make people want to work with you. And I think you see that in the bigger firms just continuing to get bigger.

Michael: So, I guess I'm still just trying to process. It's an hour every week. So it sounds like this is not a two-person interview-style thing or a live call-in show. This is mostly just you monologuing, I guess monologuing in an education context, but this is primarily you talking for an hour every week?

John: That's exactly right. My parents chuckle about it all the time. They're, "This is perfect for you."

Michael: Okay. So this may be just a little bit of personality. You're one of those people where turn on the microphone and talk for an hour every week is just, "I got this. I talked to a bunch of prospects this week. My mind is brimming with recent conversations I've had with people that I think would be instructive to some other people. So I'm just going to start sharing what's been going on in planning conversations this week in appropriate anonymized context," and lo and behold, "Oh, it's been an hour. We're done, folks."

John: Yeah, kind of. I think I really enjoy it, and I think, whatever you're doing, you want to be excited to do it, whatever the marketing is or whatever you're doing to build your practice or the type of clients you want to work with. I think, at the end of the day, it needs to be something you're passionate about and excited about and feel like you're helping people doing it. And so, yeah. I think the radio show is probably a lot like you do this podcast where I have a rough outline and then it kind of just fills in for the show, but I try to have a level of cadence where I'm not just all over the place and there's no consistency to it. So there's a little structure, and then, outside of that, it's just me talking.

Michael: And can you just walk us through a little bit just what is the rough structure? How do you think about the structure of filling the hour in a radio show?

John: I have the exact outline of exactly what I talk about from the...and I'll pull it up. I talk about a random story topic in the news around finance. I provide a quote. I do a short call-to-action. Then I do my rules for money. I share something that I think is a rule for money. And then I do a long call-to-action.

Segment two. So I'm a Christian, faith is a big part of my life. I share a Bible verse, tie in how that matters in our life. And by the way, we have clients of all different faiths. It's not only people that are Christians. But I share. That's meaningful to me. That's important to me. "Hey, here's something that I think we can take away for the week." I give a personal story around stewardship, kind of a story around why we can make a difference with our money. I told you, we have a chief of investor behavior that's a CFP and also a doctor of psychology, so we focus a lot on, "If we do a lot of things really well and reduce your taxes, then you die with more money in your IRA. Is that actually winning? Is that better?" Cool, I died with $3 million instead of $2.2 million. But we never even considered why any of it mattered. That's not really winning.

So we spend a lot of focus in my radio show as well as with clients on, "Hey, none of this matters actually if we don't figure out what truly is important to you and how you're going to align the money in a meaningful way." I think United Capital did a great job kind of building that whole financial life management, kind of that concept around really truly understanding why any of this matters from a life standpoint. And we think that's important too. So I focus on...I do focus the radio show some on that. And then I basically kind of go through a similar type of structure in segments three and four.

How John Measures Success In Radio Show Marketing [52:32]

Michael: Okay. And what do you spend to do this? What does it cost to run one-hour weekly radio on an ongoing basis that's producing hundreds of leads?

John: We spend about $20,000 a month.

Michael: Okay. And how do you measure or think about the ROI of $20 grand a month, $240,000 a year? How do you decide, this was a good spend, we should spend more, or we should spend less?

John: Well, the first thing is, to do this type of marketing, it has to all be tracked and measured. So we have a company called Track That Advisor. So if people are listening, it is unbelievable the depth of our tracking and measurements of every single dollar we spend for marketing. So I know which stations are producing leads, which aren't, how much that station's costing. I know all of the specific numbers on...if every client that we acquired left us in 12 months, what's our ROI? If they left us in three years, what's the ROI? We know this is an industry with really high retention rates, right? And in our case, it's even higher than industry norms. Because it's really hard to fire your advisor. It's particularly hard to fire your advisor, your CPA, and your attorney all at once. And so I know that we're going to have 98%, 99% retention year to year. But even if we didn't, what's the ROI? Because the other thing is you can't say, "Well, in 19 years, we'll make money as long as these people stay with us," but you’ll go broke in the process trying to fund your market. So the ROI has to be reasonable.

To put it more broadly, we brought in $170 million of new monies, spending about $700,000 on marketing. So we're very, very profitable in 12 months, and most, 98%, 99% of those clients will stay a long time. So it's really just, how can you continue to provide a great deliverable in the midst of growth. The only constraints on growth is just people, getting the right quality of people, which I really believe in. You can't just interchange advisors and say, "Well, they're all advisors. They'll be fine." So those really are our sort of kinks in the hose is office space, the right people, all of those sorts of things, not monetary, not, "Do we have enough money to market?"

Michael: And so help me understand, what does Track That Advisor do, in particular? What is that company or service?

John: So our director of marketing interfaces with that company. And basically, every lead that calls in from our radio show, that goes into...it's all in Excel, and it goes in there. And I can toggle between all sorts of different pages within Excel that show me different measurements of ROI from campaigns from specific channels, whatever it might be. And then we can make better, more informed decisions. There's a lot of times where I say, "Why are we doing this? This doesn't work." And our director of marketing is, "The last two of them, bad. The 4 before that, we brought in $7 million. What are you talking about, John?" "Oh, okay. I'm glad that we track that, because it feels like it's not going well." And so it's really tough to know where to deploy money most efficiently if you're not on top of that.

Michael: So I'm sure I'm going to oversimplify this and not do it justice, but my interpretation is Track That Advisor, essentially, they build a super awesome, very deep Excel tracking system to be able to take all of your marketing information, dissect the heck out of it, and surface it back to you in useful ways. And so, at the end of the day, you pay them to gather all the data, plug it into their super cool tracking tool, and get the report output that they're giving you to tell you how to effectively deploy your $700,000 or at least tell you which deployments of your $700,000 are working well such that you should put more dollars there.

John: Exactly. And it's all customizable. So we've had them add specific things. I, at one point, was going, "Do we close the same percentage if someone's currently a do-it-yourselfer versus someone who's already working with another advisor?" and things like that. And so we said, "Well, that would be helpful for us to know." And so we started adding a lot of different things such as that to be more informed and to just create a better process, hopefully, adding more value along the way, and in turn, if you add more value, you'll hopefully have a better business and have more clients.

Michael: And out of curiosity, what does it cost for the Track That Advisor service?

John: I think it's 250 bucks a month or something like that.

Michael: Okay. So not inexpensive relative to tools and outsourcing and "a spreadsheet," again, I'm sorry if I'm oversimplifying their thing. But...

John: They're going to be so offended. They're going to be so offended when they hear this. They're going to be, "It's not a spreadsheet, Michael. You should see this thing."

Michael: Look, I'm a data nerd, so believe me, I have such an appreciation for beautiful data tracking. But I mean this the positive way. If you're not doing a lot of marketing, $3,000 for marketing tracking is expensive. If you're deploying $700,000 for marketing and this helps you get a 2-to-1 or 3-to-1 ROI instead of 1-to-1, $3,000 to deploy the $700,000 better is a ginormous return.

John: Yeah, it's valuable. And whether you use Track That Advisor or do this in-house, I'm just saying, it's very hard to build. No large company in other industries has a marketing plan. And then you go, "How did that work the last quarter?" And they go, "I don't really know. We brought in some business."

Michael: It grew. More clients for you.

John: Other companies have entire departments tracking meticulously where every dollar goes and what the ROI is, right? And so I think, historically, too, when we go to do marketing as financial advisors, we're not trained in marketing, I'm not trained in marketing, so it's...I don't know, I like to help clients, and I like my job and add value and give them good guidance. And then you go, "Well, it would be kind of nice to grow more." And so we're sort of accidental marketers, and I think, sometimes...and I know I've been guilty of this before where you're kind of just throwing stuff against the wall, saying, "I think this might work," and you don't really even know if it works. You do it for six months, and you go, "Seems like it's worked." So I think that the ability to really look at the data closely is really important if you want to make a sizable investment in marketing.

Michael: And how long did it take for radio to work?

John: We started seeing some positive ROI within 12 months, but it's exponentially grown the longer we've been doing it.

Michael: Well, I'm struck even from that. I get the exponential growth in the long run. But, yeah, it's $240,000 a year, and you're, "We started seeing some positive ROI in 12 months," that's...

John: Well, keep in mind though, I started on one station at 4:00 in the morning in Phoenix. It was the number 22 station. You know what I mean? No, I started spending less than $1,000 a month when I did it.

Michael: Okay.

John: So we're kind of seeing, at this point of the journey right now in our conversation, this all happened over seven years, and, yeah, that's fast, but the journey was arduous. There was a lot of times when I'm, "I'm an idiot. Nobody wants to hear me on the radio." We've gotten no calls for three weeks. Who's up at 4:00 in the morning? Maybe somebody taking their grandma to the airport. You know what I mean? "This isn't working. Why did somebody else tell me radio would work?" "Cool, it might work for them because they're good on the radio. It's not working for me." So, hear all of this through years of refining it and scaling it up. Everything we're doing now we're doing at a lot higher volume because we have 30 people, and we've got a bunch of CFPs and stuff. We didn't have that. First, it was me. It was me and an assistant in 2014, and that was Keystone. So it's changed a lot over the years.

How John Structures, Delivers, and Scales Webinars [1:00:08]

Michael: So, now, talk to us a little bit about some of the other channels. You said about 40% of flow came from radio, but you also were doing webinars and in-person events. So, what's going on on the webinar front?

John: All different types of topics. They're marketed on Facebook, and people just sign up for them. The nice thing about those is that I do not need to record those live. So any in-person events, I was showing up or one of our advisors has to show up. And so those are a little bit limited, just from a scale standpoint, where webinars, you can record it, and you can have people join your webinars every single day. And I know you do webinars for industry, right? So you understand this. It's really nice for me to do a really good job doing one 60-minute webinar, and then we'll use it for 6 months. And we're just seeing leads coming in. That's what I love about that as a parent to seven kids and running this company. That gives me some of my life back, yet we can still be marketing.

Michael: And so, what would a typical webinar be about? What are you covering on a webinar?

John: Estate planning, driving income in retirement, taxes, how taxes change as you lead toward retirement, really focusing on that person that's nearing or entering retirement. It's not that we don't have any younger clients, but that is the focus, is that person. And so it's a lot of things that are subjects around that, and we just do a webinar. Then we say, "Click on this Calendly link if you want to schedule a visit with us."

Michael: And what's the marketing campaign to do it in the first place? Just how are you making this appear on Facebook?

John: We use outside companies. So we use...I'm trying to think of who the companies are. White Glove. I think some people might be familiar with them.

Michael: Okay.

John: We use them. They do in-person and webinars. So what happened really was, during the pandemic, all of these companies that supported live events were, "Oh, cool. We're out of business if we don't figure something else out," right? So you had...

Michael: Reinvent. Reinvent quickly.

John: You had Steep and White Glove. They were doing what all of us, advisors, were doing. "Well, we used to meet with people kneecap to kneecap. That's not happening. So I guess we need to figure out how to use Zoom." And so they were all doing the same thing. So a lot of these companies have predominantly been in-person companies who now are doing both, basically, and they got in the webinar game. And webinars were even more effective during COVID, just like a lot of things. People were sitting at home.

Michael: Right, trapped at home. Nothing to do, may as well...

John: Yeah. It's a 60-year-old sitting at the house, scrolling through Facebook, looking at their grandkids' pictures, and they're, "Oh, I may as well see about taxes and retirement. What else am I going to do today?" So there was that component that we saw with the Robinhood craze and online gambling, and all these things that just went crazy because everybody's cooped up at home. So webinars came out of the gate just extremely hot. And before that, we were doing in-person events on a weekly or biweekly basis. So we were doing eight in-person events a month, and those just shut down. They were gone, right, during COVID. And so we hadn't done webinars until that. And so they're marketed through...there's a company called Steep that does it as well. But we basically pay them for an area, a geographic area, and then they charge us, and we don't know sort of how the sausage is made. They're arbitraging what they charge us and what it's costing them within Facebook's algorithm to fill the room basically. And so they just say, "Here's the cost to you." I don't really know where their margins are on it, but it's helpful for us because they just fill the room. And then we're able to do what we're good at.

Michael: So basically the deal, you'll tell them, I guess, it comes from them, "You want 50 people in the room for your event. We know our marketing process. It's going to cost $5,000 to put 50 people in the room," and you write the check for $5,000, and then you do your event, and there'll be about 50 people in the room.

John: Yeah. And the thing that I like about the webinars that I think other advisors will appreciate if they choose to go this route is they charge you for who actually shows up on the webinar. So that's kind of nice because you're not paying this huge amount upfront and then going, "What if you only get me five people? This is my whole quarterly marketing spend. And if this doesn't work, then what am I going to do in the next three months?" And so if they get a ton of people...it's actually kind of funny because we had a few where the attendees were just...it was massive. It was just enormous. And so our director of marketing is, "Oh, John, this webinar this week, it's crazy how many people are going." My first thought is, "Oh, man, that's going to be a crazy expensive webinar. I hope we get people off that," because they're charging you literally per person that shows up in the webinar. But it's a good thing.

Michael: From their end, they run an ad and get a surprisingly large turnout. They just charge you more, to be fair, because they're charging you per registered attendee. So if you can convert them, everybody's winning here.

John: Exactly. It works both ways, and I'm just sort of trusting that they're not having their third cousins signing up for my webinar so they can make more money, but I probably wouldn't actually ever know. So there's a little mutual trust there. But I think it works out well because if the event is not successful, theoretically, you shouldn't have to pay as much.

Michael: And so, from your end, do you pick what the webinar topic is going to be that you want to offer, or do they even tell you and package that for you, you just literally have to show up and do the webinar off a script, and then they market it?

John: So, to get started, if you want to keep it simple, they have slides, presentations, all of that that they've even developed as part of their value proposition. I don't use those. I like to build up my own. But if you're somebody sitting there going, "Well, that'd be a barrier to entry. I don't really want to have to build out a whole..." you can start by just saying, "Hey, I want to do one of these a quarter. I can only do 25 people max for the kind of spend, so I want it capped at 25 people." And assuming that it's not a super-hot, in-demand location where they're going, "Well, we don't really want to give you this and only do 25 because somebody else is going to pay us for 50," but I think, in general, you would be able to start there and then just use one of their presentations. So I think that that's very much a doable sort of walking before you run approach if you haven't done webinars before to dip your toe in the water.

Michael: But at the end of the day, you set the topic. It sounds like, at this point, you're setting your own, but historically, you could use one of theirs. You record the webinar, you give them the webinar and tell them who you're going after, and then their job at the end of the day is to create a Facebook campaign, run the campaign, have people go from the Facebook campaign to the webinar, do the webinar thing, at the end of the webinar, has some kind of call-to-action to schedule an appointment. At the end of the day, you just get appointments that start appearing on your calendar based on the webinar you recorded and the campaign they ran.

John: Exactly. And I think it's important to sort of bring this full circle. All of these things work in tandem with our offering being compelling and our deliverable. So none of this marketing worked as well for me when I was a solo advisor that didn't have CPAs and attorneys. And I couldn't talk about that on the webinar. I couldn't say, "We can do your taxes." So the other part of this is, again, the actual work you end up doing and the offering still, at the end of the day, has to be compelling and adding massive value, or none of this... You can't just market your way in a recurring revenue business. So at the end of the day, that still has to be the focus. The marketing is great because it gets people in the door, but my main focus every day is how do we continue to add more value, because that's the only way any of this works.

People have been asking me, "How do you get these referrals, John? How did you get these referrals?" And it's, "What program do you use?" No, I'm not saying I get paid two ways. One is from you, and one is from your referrals. Because think about it in your life, Michael. If somebody says, "Hey, my kid needs braces," and you have an awesome orthodontist across the street, you're, "Oh, yeah, the orthodontist across the street is great. Our kids love it." Fantastic, right? And you refer them because they're referable, because your experience was great. There's all these programs about how to get more referrals. And it's, no, you're not going to refer that orthodontist to your friend and risk reputational damage, because that orthodontist said they'll send you a $10 Starbucks gift card and give you a free rubber band on your next braces. That's not compelling you to refer that person. It's your friend. You care about them.

And so getting more referrals, I think, is a direct...for me, I see, the more referrals we get every year as a sort of validation, this is resonating with people. Our clients believe that what we're doing is way more valuable than what they were getting before, because they're telling all of their friends about it. And so, to me, that, to me, is the best barometer, not how many first appointments we have from marketing, it's just, "How many referrals did we get last year? And what's our retention rate?" Because those two things tell me that people...retention just says, "Hey, people aren't really upset. They're happy enough to not leave." And referrals are, "Hey, we have advocates. We've created people that actually believe so heavily in what we're doing that they're telling other people." And that fuels our marketing too, because some of our marketing events are just filled from a client telling a friend, "Hey, go to this event." So in most of our marketing, we have a few non-cold leads too that have come through other things.

Michael: And so, when you bring all of this together, one other thing I'm wondering is just, who fields 800 lead inquiries? What do you do with that volume? Who's fielding all that, and what do you do with them?

John: Well, fortunately, they don't come all at once. That's over a year, obviously. But we have...

Michael: Still a couple a day all year long. That's a lot of flow.

John: We have three what we call client coordinators that do a lot more than just sit at the front desk. They are following up on other radio leads. They're sending out first appointment packets. They're rescheduling appointments. We did 3,200 current client visits last year on top of the 800 first appointments. Our office has a lot of activity, and as a former airline pilot, I can relate to this because, before I was in finance, I was an airline pilot, and one of the things that I think translates really well is, as an airline pilot, you do everything based on systems. So my mind thinks systematically. Everything is a process. So every single aspect of our business is systematized. It's exactly the same for every single person. All of our client coordinators do it the exact same way. There is a flow to every single thing that we do, the appointment process and all of that, and that comes from my days being a pilot, because you get in the airplane, and you're not just deciding to not do your checklist when you push out of the gate at LAX. You're doing it, right?

And the other thing is sometimes people go with this lead flow. How are you able to...your question with all of these calls, how are you able to...I think one of the first thoughts, with that level of volume, can you do a good job? Because I've had other advisors that I just talk with, they're, "Well, how do you actually do good planning? How is that retirement map even going to be valuable when you have to do that many of them?" And again, going back to my pilot days, I think we're way better at things that we do a lot. When I was a starving advisor, and I didn't have any lead flow, and I'd get one first appointment every month, I wasn't very good at the first appointment. I was kind of trying to make it up as I went, figure it out. But I hadn't done a lot of first appointments.

And so I think when you do something over and over, you would probably say, "Hey, I'm better at the blog now that I've done it all these different times," or "I'm better at the podcast." And that's exactly how I feel. We are better at what we do and deliver because we have all of this collective wisdom from hundreds of appointments and figuring out what people want, and what they like, and what doesn't work in an appointment, and what does work. The bigger the sample size, the better that you'll be at that. And so I actually think our volume is useful in us building more value for the client.

The Surprises and Low Point John Encountered On His Journey [1:11:32]

Michael: So what surprised you the most about trying to build an advisory business?

John: Oh, so many things. Probably more than anything, the moment that you have too many clients to take care of yourself, I think that's an inflection point for a lot of advisors. It's when you have to make that decision, "Am I just going to kind of do more of what we dub the lifestyle practice?" which is awesome. I think people have some amazing lives, doing, just saying, "Hey, I'm going to be a solo advisor and manage a couple of hundred million," or whatever they're at and say, "I make some really good margins and money, and I have good relationships with my clients." But the moment that you say, "No, I think I want to grow bigger than me," that is a huge...because once you decide that, really the success or failure of the business isn't marketing. It's all about the quality of the people that you're hiring.

That's what it ends up coming down to, because you're going to go to that first group of people that you go to, and you say, "Hey, now, some of you are going to work with this other person." That's the hardest transition, right? Because all of those people are, "Wait a second, Mike, we've only ever talked to you. We've literally never talked to anyone else at your entire company." And so what surprised me was I've made a lot of, I think, really good hires, and we have good employee retention, and we've got a really good culture, I think. But I've also made my share of mistakes in hiring. And just like I alluded to earlier on the podcast, the impact of making bad hiring mistakes is pretty significant. And so that's probably surprising more than anything. It stops becoming more about you and way more about the team collectively.

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

John: I was an independent advisor, registered rep. My wife and I, we have a couple of boys that we adopted from Ethiopia. So we're over in Africa, and I'm looking at all this extreme poverty. And I was going, "You know what, what am I doing with my life?" I'm selling a bunch of commissionable products. I'm making a decent living, but I don't really...it just was like something was missing. And so I go to this nonprofit organization that was just doing some amazing stuff over there in Ethiopia, and I'm going, "Hey, would you guys be able to use my wife and I?" I was literally thinking, hang this up. What if I just did something that "mattered?" This doesn't feel like it's mattering. And I'll never forget, a guy goes, "John, we have more than enough people on the ground here. We need money. We need resources." He's, "Can you go back and continue to build your business and then support us?" And it was, "Wait, that's the least sexy answer of all time. That's not exciting for me. You want me to go be a financial advisor?"

Michael: I was ready to quit my job and go and retire, change in life's mission. And they're saying, "Why don't you just go home and scale your business and cut us a really sweet check? That would be awesome."

John: Yeah. But it was just a reminder that, really, if we can align meaningful parts of our lives with our money, it does make a difference. And everyone has a role to play. And so that was sort of this renewed fervor to say, "You know what," and shortly thereafter, I left the broker-dealer, I started the RIA, I went... So I made a lot of changes not just because of that but in part because of that. And then the other one would just be, for those that are listening to marketing and thinking about marketing, a ton of marketing doesn't work, and you're dejected. I did so many workshops where I would show up and there'd be two people there. And neither of them had any money, and they were, you know what I mean, they were disinterested. I'm driving home at 9:00 at night, I've got all these kids. My wife's been taking care of the household, so I can go do this marketing, and I'm driving home on the freeway just going, "This is my life. What is wrong with me?" You know what I mean? This isn't working. And so I think that there had been so many of those moments where you don't see exactly how it's going to work at the end. There's a belief, but you don't know how exactly it'll work. And so I would just want to encourage people that have had ups and downs with marketing. Join the club. I've had just as many downs, if you like, as ups, and that's kind of just normal.

Advice John Would Give His Former Self [1:15:27]

Michael: So, what do you know now about the building and scaling process you wish you could back and tell you from 10 years ago as you were still in the early days?

John: Ten years ago, I think just focusing, first and foremost, on the client and on hiring the right people. I think that most owner advisors, if you suggested to them, "Hey, you're kind of interchangeable with any other owner," "Hey, Michael, anybody else could do the podcast," you'd be, "What?" personally offended. You'd be, "No, I'm good at this podcast. I've built this." And I think you're right, by the way, but I think sometimes we think with our support staff or with our advisors, "Hey, I just need to fill this role because we're short in this department." And compromising there has such a detrimental impact, so I'd rather run with us all working a little bit more to take more time to find the right person. And I think, at times, along the way, I was so focused on "We are short-staffed for our growth. We are short-staffed," and I would get someone in kind of knowing, this probably might not be the right fit. And so that's what I would tell myself is just you cannot compromise on the quality of the advisors and the team that you have in place.

Michael: Because I was going to ask. I don't feel like anyone says, "Oh, well, John, thanks for letting me know to focus on clients first and hiring good people, because I wasn't thinking about that." I feel like it's natural for us. I don't mean to be blithe about that because we do sometimes have some slip-ups or we do things that maybe we thought were better decisions at the time than they turn out to be after the fact. So I was wondering, given I'm sure you've had some mindset about this throughout, where were the actual gaps or cracks occurring where, at least in retrospect, you weren't making those "client first" or "hire right" decisions? It sounds like one of them was just the business got growing fast and you started compromising on hiring standards because you just need to get a person in because of the volume of stuff. Is that where things started slipping or breaking?

John: Well, I think, in general, you're balancing as you're scaling the business between being an owner and any hire that you make, and certainly, the more quality the hire, the more expensive they are. And so I think it wasn't that I was, in a lot of cases, hiring someone who was just, "Oh, this person is terrible." It was just, "You know what, the optimal person is probably going to cost a little bit more money," and being willing to say, and I think I have in many cases, but being...that's one thing I've really learned is that a great team member is worth a lot more than even a pretty good one. So if they're a little bit more expensive, the exponential value that you get from that person is so great that you're always better off reaching for that. And as the owner saying, "I'm going to make less money," that's the biggest problem is that, along the way, there's all these points where you're like, "You know what, if I just kind of slow down or we change a little bit, I'll make more money," as the owner of the firm. And I always tried to focus on, "Yeah, but if we can help more people, and I can get that really good person over to our firm, we're going to collectively be so much better." But I think that's a difficult process while you're scaling.

The Advice John Would Give To Younger, Newer Advisors [1:18:36]

Michael: So, what advice would you give to younger, newer advisors still getting started?

John: I think you really have two options, and this is what I talked about at the top of the podcast. I think, at this point, as an advisor, you have two choices. You either get extremely nichey and differentiate by saying, "Yes, I'm only...I'm a young advisor. I don't have his level of experience. I don't have as much AUM. But I am super-specialized in this one area." And I know you've talked and written a lot about this. And then...but so the second thing is, if you're not going to do that, you have to figure out a way to have more services for similar costs to other firms. You've got to be better at a lot of different things or way better at one thing to really compete. And so that would be my advice is you kind of got to go all-in on one of those two ventures, and that's why I meet with some younger advisors in our area that want to catch up and meet and grab coffee.

And the second one, the latter of those two is really expensive and takes a long time. The former saying, "I'm just going to get really, really nichey," is much more doable for a 27-year-old advisor that doesn't have a lot of AUM yet, right, which is why I think that's probably still the right approach for most newer advisors, or you try to join a firm that's already doing all those things and really learn and have some opportunities at a firm that's growing that is doing those. I think it's hard right now as a young advisor to come in and compete against the biggest firms that are doing those things, so I think getting very nichey is probably the way to go if you're not going to join one of the other firms.

John’s Plans For The Future [1:20:01]

Michael: So, what comes next for you at this point?

John: Well, quite a lot, actually. We have entered an agreement to be a division of Creative Planning. And so...

Michael: Oh, Peter Mallouk's Creative Planning.

John: Yes.

Michael: Okay.

John: Yeah. So I know you're familiar with Peter and Creative Planning, but they are basically a much larger version of us. And I have, in a lot of ways, tried to emulate their service offering as we've grown.

Michael: Because they have that similar one-stop-shop philosophy. I know Creative Planning has tried to bring the attorneys, the accountants, all under one umbrella in a very similar structure.

John: Yep. And that's why...this wasn't about me. This is definitely not an exit for me. I'm in my 30s. To me, this is the beginning. And I just kind of looked at it and said, "What's gotten us from 0 to 650 million isn't what's going to get us from 650 million to 6.5 billion." So if we're looking at how do we 10x, what would that take? What sort of infrastructure will we need? Rather than trying to do it on our own, if there's this similar firm that's much larger, that has the infrastructure, that has a great offering, a great culture, all the national respect, they went 50 billion organically, right, it's unbelievable, their story, with no acquisitions or anything at the time. I just looked at it, and this wasn't about me wanting to go to a larger firm.

This was all about Creative Planning. This was specifically about this is a larger version of us that will help us even deepen. Instead of 3 people in the tax department, we'll have 50. Instead of being licensed attorneys in 2 states, we're licensed in 50 states, or whatever, most all 50 states. So that was my thinking, was we're going to be able to actually do things even better and hopefully avoid some of the growing pains of being this sort of middle-sized firm, which is challenging, because we're competing against Creative Planning in our size, but they're a lot bigger than us and have a lot more resources. And so I'm really excited about this next sort of chapter in the journey of learning a lot of new things from a firm that's done a lot of things really well.

Michael: And so, how do you, I guess, just think about or get comfortable with the shift of going from owning your entire enterprise or just for all of that kind of mindset that some of us get around being founder, being owner, being able to control the decisions, to being a part of a much larger firm. The upshot is a lot of additional infrastructure and resources. Instead of 3 people in tax, you get 50, instead of a couple of states, you can serve almost all states for the legal practice. But there's, I'm presuming, a pretty significant shift and just control of what you can do because you're now plugging into a much larger system. So, how do you think about that as an owner, as a founder, in making that transition? Since you're a young guy, this isn't exit liquidity event, drop mic, stage left.

John: Well, yeah, I think it all comes down to the trust in the firm, and that's why I wasn't really just looking to sell or join some other firm, but specifically, in the vision moving forward that Creative Planning has, I believe 100% in it. And so I think it was one of those where you have to have a little bit of humility and self-awareness to say, "I may have done a decent job getting it to where it's at right now, and I believe in how we're doing things." But am I the best person for the next 5 or 10 years to unilaterally make the decisions for this company? Or do I think there are other people that are really smart that can come alongside us and support what we're doing? And we can do it together. And that was really the thinking behind Creative Planning. They're probably better at getting us from 30 employees to 100. They've already done it, by multiples. And so, why would I want to try to do that on my own when there's a like-minded firm out there that I totally believe in and respect who want to make us a part of what they're doing?

What Success Means To John [1:23:49]

Michael: So, as we wrap up, this is a podcast about success, and one of the themes that always comes up is just the word success means very different things to different people. And so you've had this wonderful path, building an incredibly successful advisory firm, growing to 650 million over the past 7 years, and now the next stage of the journey coming up. So the business is going so well. How do you define success for yourself at this point?

John: I think that I know what success is not, and it's not having more money. That's what our culture says, right? If somebody says, "Oh, he's successful." What do they mean? That person has money. She's successful. I think success is certainly not that, and it's more about using the talents and the resources that God has given us. We all had this unique...we're all unique people in this unique phase of life and on our own journeys. And how do we use those gifts and those skills not just to make our lives better but to try to lift other people up? And so I think if, at the end of your life, you look back and you say, "You know what, with what I was given, I think I made a positive impact. I think I filled people's buckets more than took away from it," then that, to me, is success. And this business, a long time ago, became a lot less about me trying to make more money or me trying to be successful and a lot more about, "How do I provide an amazing place for all of these people that work for me and these clients that are entrusting us for their lives to be better?"

Michael: Very cool. Very cool. Thank you so much, John, for joining us on the "Financial Advisor Success" podcast.

John: Yeah, thanks for having me.

Michael: Absolutely. Thank you.