#FA Success Ep 332: Transitioning From (A Father’s) Commissions-Based Practice To Fee-Based Planning As A G2 Advisor, With Liz Hand

Resources Featured In This Episode:

• Elizabeth K. Hand
• Pleasant Wealth
• Liz’s Recap Email Template (download)
• Liz’s Spring Review Self Check-in (download)
• #FA Success Ep 083: Switching To The Right Independent Broker-Dealer By Understanding Its Profit Centers With Jon Henschen
• XYPN LIVE Conference
• SHIFT Conference
• FP Transitions
• Jon Henschen & Associates
• Kestra
• Accomplishment Coaching
• Limitless Advisor
• Envestnet
• ONESCO (The O.N. Equity Sales Company)

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

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Full Transcript:

Michael: Welcome, Liz Hand, to the "Financial Advisor Success" podcast.

Liz: Thanks, Michael. It's great to be here.

Michael: I'm really looking forward to today's conversation. And a journey that I think is...happens a lot in our advisor world that we don't necessarily talk about as much, which is these transitions when you've got an advisory business that built over the years or even over the decades in the commission-based world, in the insurance-based world. And what happens when you want to transition it to say, "No, no, we're more financial planning-centric, and we're more advisory-focused," in the future? But we actually have to get from here to there, and navigate little messy things like, "But they didn't buy us for financial planning originally. They bought us for that insurance policy they needed 7 years ago, or 17 years ago, or 27 years ago." Oh, and by the way, in an insurance-based business, we tend to have a much higher volume of clients because we're not doing as much ongoing servicing. So, "By the way, we have to roll out our financial planning to 1,000 clients, and there's only 2 of us." Good luck with that.

And I know you've lived a version of this journey with some family dynamics as well, because you came into your father's practice that had this incredible book of insurance clients. But then you have to figure out, "What am I going to make this in the future as I come into the business?" And so, I'm excited to talk about sort of the messy realities of, on the one hand, I think there's a lot of advisors that would say, "I wish I didn't have to live the pure world of cold calling and cold knocking some of the rest. And that I could find an opportunity to buy into a practice, and take over a book of clients." But then you get to the reality of it and it's like, yeah, it's a little messier than you might think in practice. So, looking forward to just hearing about that journey as you have lived it firsthand.

Liz: Yeah, absolutely. I totally resonate with that idea of the grass is greener on the other side. I've had my moments of fantasizing about starting over from scratch, and how much easier that would be. But both sides have their pros and their cons.

How Liz’s Father Developed His Practice With The Amish & Mennonite Community [05:30]

Michael: All right. So I have to hear a little bit more of that out of the gate, because there are so many advisors I know over the years who have said, "Started from scratch, did the calling, and the knocking, and the networking, and all that stuff. It was rough. It was awful. I wish I just could have had a practice to buy into." And then here you are saying, "Yeah, I did that, and kept thinking about starting my own business from scratch, and not doing that." So, I guess help us with this journey a little bit. What was this buy-in pathway into the business, and what did that look that ultimately you were even wondering, "Why did I do this to myself?"

Liz: Yeah, I mean, depending on where you want to start with that. I think, as an eighth grader, I spent a summer in my dad's practice, and the purpose was to do filing, and create a spreadsheet for him, just some basic things. But he allowed me to sit in on a client meeting, and I was just so captivated by the way that the conversation occurred. So, I knew from a young age that this was the path I was on. My dad was always very encouraging and saying, "You would be really good in this business." And some other people, too, had that same type of statement for me. And so, I came right out of college into the practice. And my dad, Ellis... I talk about him…In person, I talk about him as Ellis. Here, I've said "my dad" quite a bit.

But Ellis, from the get-go, just having his estate planning mind, he has a degree, a law degree, and applies that to investments. So, he was always talking about what the buyout would look, from 2010 when I started in the practice. And so, I'd have these days of, "I don't know, I can't do this admin stuff any longer. I don't know if I'm doing it that well. Maybe I don't belong here." And then we'd go to the whiteboard, and he'd draw out how this arrangement would work, how it would be for me to purchase the practice, and how the practice would fund it. And this would all be great. And I'd walk away from that conversation like, "Wow." And then also like, "Yeah, but I'm still an admin."

And so, yeah, it's always been embedded in the conversation, and that's totally his way of approaching life, of always looking for the next possibilities.

Michael: Very cool. So, help us understand then, what did this practice look like in 2010 when you first showed up?

Liz: Yeah. So, even being in insurance and investments only, he...Ellis had such foresight with it. He came in in 1998, and tech wreck. And then 2008, 2009. So, right from there, he wanted to make sure that when we did any type of investment with a client, we had flexibility, and we weren't charging that upfront commission necessarily. And so, even in 2010, when I came in, we were mostly C shares and some managed accounts that were starting, new accounts that were being added. That's where we went. So, it was mostly A shares, insurance work, but the forward motion was heading towards C shares, and managed accounts.

Michael: Okay. And so, what was the, I guess, sizing of the practice of clients, or I guess I don't know if you would measure by revenue since AUM would have been a little wonky then because you were still in transition. But what was the size context of the practice, however you were measuring it then?

Liz: I would say that at that point, perhaps our revenue might have been around $300,000 or $400,000, and not much recurring revenue in that. And his vision was always to hit the million-dollar mark before he sold, which we were inevitably able to do in 2021 before he sold, which felt really good.

Michael: And then how many clients was it at the time?

Liz: In 2016 was probably our high watermark, and we had right around 1,500 clients, households.

Michael: 1,500 clients?

Liz: Yes.

Michael: So, is Ellis just kind of a machine here? I mean, just math-wise, 2016, you're about 18 years in at 1,500 clients. It's like 2 clients a week for 15 years before attrition. So, where do 1,500 people come from?

Liz: Yeah. So, our family's background is Amish and Mennonite. And so, if you think about niching down, that wouldn't necessarily have been a thing that we talked about in the office, but there was always the conversation of, "I speak Pennsylvania Dutch, therefore I connect with Amish folks really quickly." And the referrals in that community are really strong too. So, yes, I mean, he was a machine, and also right place, right time with the right skill set. You have a whole population of people that haven't really been treated well by financial services folks that want to come in and razzle dazzle, and then leave. So, he's very relational in nature.

Michael: Okay, interesting. And so, what company was your father with at the time? I mean, he started insurance business. So, with one of the insurance companies?

Liz: Yeah, we were with an insurance BD, the ON equity sales company. And that would have been Ohio National was the parent company.

Michael: Okay, okay. So, clients, I'm presuming, then much...at least relative to a lot of the industry today, high volume of small accounts, just that sort of environment.

Liz: Yes.

Michael: So, it reminds me. I also started in the insurance side of the business, and I still remember when I started, the most successful agent in that office who had been doing it, I think he was almost 30 years into the business at that point. He actually had 2 offices in our branch location. One was his office that he was in, very nice desks. He was top, top producer in the branch. And then the second office were his client files.

Liz: Oh, my goodness.

Michael: He had so...I mean, this is 20 plus years ago, so it's all paper. He had so many client files, there was an entire office room just to house the client files. And wading through 1,500 clients was just really brutal and time consuming in and of itself to figure out, "Well, which of these clients do you actually want to spend time with, who might have been a good client but has moved on to another place, who wasn't a good client but actually has become a good client because some changes in their life circumstance have happened, and now they'd actually be a better fit?" And that was still a really messy, challenging, time-consuming process.

So, was that showing up in the practice for you? Was there some point where it began to shift from, "We're just adding 2 clients a week, 100 clients a year on an ongoing basis," to saying, "Wait, maybe we don't need to be just adding adding, adding. Maybe we need to be shifting, or refining, or winnowing." Was there some transition where you had to go from adding to subtracting?

Liz: Yeah, I think the place where we started to get bottlenecked the most were simple IRAs. So, when Ellis would go out and he would get a new client, it was usually a business owner, and small business, highly productive Amish or Mennonite folks with some sort of manufacturing shop. And so, when that household number, that 1,500, that includes...because of simple IRAs, that includes simple IRA participants. And so, with our firm, just with the relational nature that we were, I've heard other advisors say, "Oh, well then simple IRA, don't even count them as a personal household." But in that land, suitability still has to be maintained, you have beneficiaries…the service on there.

Michael: Oh, yeah, you absolutely have to maintain a full client file for every single one of those simple IRA participants.

Liz: Yeah. And let's just say, if we had 1 David Miller, we have 10 David Millers because that's the way the Amish folks...there's very similar names, and very similar last names. And so, our files, yes, there was a little trickiness going into that.

Michael: It's an interesting point. What CRM do you use? Do you actually have a CRM field for David Miller 1, David Miller 2, David Miller 3?

Liz: No, you learn to know people by their street. It's no different than me going to a sandwich shop, and them being like, "Oh, Liz, she always gets this sandwich." You get to know people differently. And I'll say that with those files, they were paperwork files. Ellis is an incredible relator. And historically, we've had team members that are incredible relators. And so, maintaining a file with a bunch of notes isn't necessarily as important because some of that stays top of mind. Now, as we want to scale over time, not wanting to rely on that just relator side, it'll be important for us to find ways to put that relational knowledge into a CRM.

How Liz Handled Evolving The Firm’s Business Model While Succeeding Her Father [15:16]

Michael: So, what shifted? Because as I know, we'll get to it more soon, but the business did not keep adding clients. You're fewer than 1,500 now. So, what changed in this? Ellis is a growth machine in the Mennonite community, and having great relationships, and driving all this activity, and bringing in all these clients and opportunities, and growing the revenue kind of, but dot, dot, dot, something shifted.

Liz: Yeah. We had purchased another practice of another advisor that had been affiliated with ONESCO. And I had started working with those clients succeeding that advisor and was really gaining my ground as an advisor with a voice, and feeling more confident. I'll just say that with Ellis' clients, it was more difficult for me to gain that footing, simply because of the nature of the community where they might get the...I'm a CFP, I'll answer their questions super detailed, and then they'll say, "Okay, well, have Ellis call me afterwards, and I'll run it by him yet." So, that dynamic for me was very dissonant. Once I got into my own book where I had succeeded an advisor and had more freedom to understand who I am as an advisor, I started gaining a voice.

And it was 2018, I think. You'll like this, but I attended two conferences. One was FA Women's conference. I think that was in the spring in the other was the XYPN conference. And it was the first time I've realized, "Oh, I belong in this business. And that's a big deal, which means that I can take this financial footing that I have, this advisor footing that I have, this advice footing that I have, and build something that I want because look at all these other people that are doing it." And it was very heartening. And I saw from that moment forward, my desires, my drive, and what I wanted to shift in the practice started coming more to the surface. And I started having more of those conversations with Ellis about how can we shift this practice more? How can we make this not so service heavy, etc.?

Michael: So, I'm struck in that flow that notwithstanding kind of coming into the business and having an opportunity to sort of succession into your father's business, into Ellis' business. That sounds like he was totally on board with from day one, because he was whiteboarding it during the admin stage. That your growth momentum came when you bought a second advisor's clients and worked with those instead.

Liz: Yes.

Michael: And that's just...I was going to say just, I don't mean that in a diminishing way. That's just the dynamic...is that the parent-child dynamic? Is that because everybody in the community knows you're Ellis' little girl, because they saw you when, and they can't get past that?

Liz: Right. Yes. And some of those conversations would even come into client conversations, and it was always from a place of jovial laughter. But ultimately, I was the daughter, he was the parent. And I could not see myself as the assertive woman that I am. And so, when I had my own space... And I've seen this in other areas of my life, so it's not unique here. But there is an independence within me that seeks to be. I love the creative process. And so, being able to have my own space to create in tandem with team is really fun for me. And so, it was my first time of having what felt like a fresh palette of clients, of ways of being, and introducing financial planning, introducing different types of conversations without having to get approval first. And it's not even that he wouldn't say, "Yeah, go for it." He probably would have said, "Yeah, that sounds great, let's go for it." But there's still that hesitation as the child, and like, "Is this really okay? How is this going to be?"

Michael: So, what changed when you acquired another advisor's clients? It's just they didn't have that history, they weren't being transitioned from Ellis to Ellis' daughter because you get stuck in this referential identity. You can't be Liz. You have to be Ellis' daughter. When you acquire any practice besides a family member's, that part at least goes away. You start to establish yourself as the new advisor coming in and taking over the clients. But you don't have that dynamic which, it sounds like, was when easier went better for you.

Liz: Yes. Also, I think, as I've looked at... My brother is also in the business. I don't know if I had mentioned that to you. Clinton, he and I now own the practice 50-50. And conversations we've had have been about do you need to match the personality in the way of being with clients as the advisor that you're succeeding? I say no. And with that book of business that we purchased and that succeeding advisor, he was great. He had a completely different style than I did. My dad, Ellis, and I have very similar approaches, very relational, a little bit gregarious, willing to be emotive, etc. And so, I'm not sure that it would have worked because people's expectations may have been benchmarked to the way that he did it. With this other advisor, who is very data driven, very analytical, pretty quiet, my style was a nice contrast to it. And so, people, they would know instantly if they wanted to stick with me. And I see that with my brother also as he's taking over Ellis' practice, Ellis' side of the practice, he's got a different approach. And clients appreciate that. It's like a different facet of the diamond.

Michael: So, I feel like the fear a lot of the times is, "I have to show up the way the other...the old prior advisor did, because that's what the clients know and that's what the clients expect. And if I don't show up the same way, they might not like me, they might not want me, they might not stick around, which is particularly problematic if it's an acquisition, because I paid to acquire the revenue associated with that relationship. So, having the revenue walk out the door is kind of economically problematic as well." So, was that not a concern for you, was just the way the deal was priced and structured made that manageable? I'm wondering where that fear was or wasn't for you of, "If I show up as me and I'm different than the prior advisor, does that mean I'm going to lose some of the clients here?"

Liz: It's interesting that you ask that. I don't think it was a conscious thought at that point. What I do know for myself is authenticity drives everything for me. If something is inauthentic, if I am posing or fronting in a certain way, it shows. You can tell, you can read it on me. And so, for me to morph myself and pretend to be like this advisor who was way more data driven than I am, it would have been silly. Yeah. You would have been able to read it. And there are situations where I was incongruent. And some of those clients are not with us anymore. And good, because if I can't be my authentic self, then they're better served by someone else because they're not going to get the heart of Liz, which is where all my power is.

Michael: And I guess from your end, that was where...it's almost like that's where some of the confidence building came for just getting momentum with clients yourself, because you could...you actually got to be you and not Ellis' daughter.

Liz: Yeah. And actually, now that I'm thinking about it, for better or for worse, profit is not the first thing that comes to mind. And so, even...I recall one engagement with one of those clients that we purchased from that advisor that I started working with, and I tried to bring in different strategies, Roth conversions, or monitoring their cost basis, or all these iterations. And they were already doing it. They were doing it on their own. Super bright people. And I realized, "Oh, the only want me to help them pick stocks. Well, that's not Liz Hand. That's not going to be...that's not going to work." So, I had that conversation with them, and I said, "Hey, I don't think I'm the best fit for you, but let me find you another advisor."

And I recall a peer that was like, "What?" That’s 2,000 recurring dollars walking out the door. And we made an arrangement that that client parted, we were compensated as we recoupled them with another advisor. But for me, it's really important that I have a voice and that it matters to people. And if I'm not adding that value, I want to find someone who will.

Michael: And then how were you compensated, though? I mean, is this broker-dealer environment, you got to refer them to someone else at ONESCO, and there was a split rep code arrangement, some structure like that?

Liz: We just did a straight 2 times revenue, did not do a split code. And I will say...

Michael: Okay. Just someone else in the BD where it's easier to do those transitions?

Liz: Yeah. Yeah, exactly. And they were someone I felt really confident about too, and it was neat to see that relationship take off. I felt really good about it. But to your point about split codes, by 2018, which I would say is the year where I really stepped in and saw, "Oh, no, I want to shift to this." Split codes were the bane of my existence because it didn't make sense to me. What is a split client? You hope they call the other advisor, and the other advisor does all the work, but you get compensated for it?

Michael: Yeah.

Liz: Or they're really your client and...

Michael: No, no, no. The first one.

Liz: ...you maintain the relationship.

Michael: The first one.

Liz: Of course. Right. And in the environment we were in before we moved to Kestra, it was left and right splits. And it made sense at the point of the beginning of the relationship. But the longer you got into that relationship, the more dissonance it created. And our practice was so hard to figure out. What are we? What is our profitability? Because you get the split code over here, and that split code over there. And they don't match, and there's no real rhyme or reason to it. So yes, I don't like split codes.

Michael: And so, I'm fascinated by that. Lots of advisory firms that sell the whole practice, or books of client, a segment of the practice, I want to make sure I understand, this was just an individual, 1 client you're sending out, but you know where you're sending it. So, you call the advisor on the other end and say, "I have this client. It's really not a great fit for us. I think it would be a better fit for you. Would you like to acquire this 1 client? It's $2,000 revenue. It's a $4,000 payment. And you'll have the ongoing client relationship from now on. Would you like it?"

Liz: Yep. Yeah. And I wouldn't say that's exactly what we've done every single time. It's been very...being highly relational. We're always looking, from the client perspective, what is the next step? There are clients that I have simply referred elsewhere, and not requested compensation for that. There are clients that we simply let go.

Michael: But some, at least, you know where it's going. I mean, just presuming, it's hard to do much legal paperwork for that as a sale acquisition event because the lawyers are going to make all the dollars go away in legal fees. Was this essentially just a verbal agreement? "Here's the client's revenue. We'll refer it to you as an acquisition deal if you'll acquire it from us for this going rate. And we agree." And then the referral happens, and the money moves, and that's that?

Liz: Yeah. In this part of the world, Ohio, fly-over state, there is high trust. And so, a lot of the transitions we've made, whether it was changing broker dealers, or even statement of intent, it was a little bit more than a handshake deal. But built on high trust and not as many attorneys in the process.

Michael: Okay. So, just some relatively basic agreement just to document, "I'm referring the client and you... It generates this revenue and you'll loan me these dollars."

Liz: Yeah. Exactly.

Michael: Well, I'm fascinated by it because I really...again, I mean, there's certainly, of advisors that sell practices, there are some that do partial book sales, "I'm going to sell a segment of my client base that isn't a good fit for me anymore to another advisor." But just, I hear so rarely someone just transitioning a client that's not a good fit. But just to do it for remuneration. I'm fascinated by that. And even including this down to, "Yeah, and we just basically deal with the phone call and a handshake, because the legal cost won't make it worth more than that. But we're in a high trust space where I'm confident that everybody is going to do what they're supposed to do." And so, you can get compensated for generating an opportunity for someone else at that point, because that's how the client revenue flowed.

So, I feel like there's sort of 2 phases of the journey for you that you're describing. There's this first...I guess almost 3. There's this first phase where you've come into the practice, you start in the admin end, and trying to work up to doing some planning work with clients. But they're Ellis' clients, and the clients are having trouble to see you as anything besides Ellis' daughter.

Liz: Secretary is actually the word that was given.

Michael: Secretary. Okay, excellent. So, there's like a family age thing, and a career title status thing.

Liz: Yeah.

Michael: Let's just get all of it on there at once. So, then option two, or stage two is acquiring another advisor's practice into yours, which gives a client base that doesn't have that history of Ellis and you, relative to Ellis in the business. You get a fresh start with them.

Liz: Yes.

Michael: And get to start building just career confidence, advisor confidence and comfort. And then there's a third stage that came in 2018 after you started going to some conferences. So, FA Women in the spring, XYPN Live that fall. And seeing like, "Oh, there are a lot of other advisors that do this the way I do it. I'm really on a good track here. I really do belong in this business." That then becomes the stage of, "Okay, now I feel like I actually want to shape this a little bit more." Is that a fair characterization of kind of this progression of how it evolved for you?

Liz: Yeah, I would say that's a fair progression. I'll also say that I feel like I'm in a fourth stage presently or maybe more, who knows? But as of a couple of years ago, really, as Clinton and I purchased the practice, that has unlocked an even different stage in going through my own mindset work and really understanding how I tick has made me aware of a new offering that I want to incorporate into the practice of coaching, and wondering how that will look. And so, well, the same conferences that I would go to in the past that I was like, "Oh, I fit in," those conferences now I'm like, "Well, if I bring in coaching, who am I as an advisor? Am I doing the financial planning thing? Well, yes." And so, I actually went to a conference recently, a Shift, that occurred in San Antonio. I think it was the first one this year. And met some of those folks. And so, I feel like I'm entering a new stage or phase.

How Liz And Her Family Structured Their Succession Plan [32:15]

Michael: Interesting. So, I want to come back to that. But first is I want to get, I guess, through...I guess I'll call it, through stage three before we get into stage four. So, you've come back from the conferences like, "I'm feeling more confidence of getting to really start assert my desires, and drive, and vision of what I think this can look like." I guess where did the actual succession planning, transition planning with your father start to kick in? Does that crop up here? Was that already underway, or did that start showing up in this stage, like, "Okay, Dad, I think Clinton and I are ready to actually do this transition."?

Liz: "Go ahead and step aside, we're in." No.

Michael: Yeah, "We're ready now. You can... Just be clear, you can now move out of the way. We're ready."

Liz: So, one great thing about Ellis is he sets an intention about time frames for himself. And he kind of always had in mind, at age 67 he was going to retire, or he was going to sell his practice at age 67. So, at age 62, he sent a letter to all 4 of us siblings, his children, my siblings, and it said, "I will be selling my practice in 5 years. If you want any portion of this, or you want to be considered in the process, you need to give me word before I turn 67. Otherwise, door's closed." Ultimately, my parents had the vision of all 4 of us children being in the practice, using our different skill sets, and really letting the practice be the legacy of the family.

So, we're nearing age 67, and he turned 67 in 2022. So, it was 2021, and I was engaged with a life coach at that point. And she said something to the effect of, "Well, this process, you need to get clear on what you want as early as possible to work out the kinks of it." And so, we started at the beginning of 2021 really getting into the details of it. And it was a difficult time to really pin down what do I want, what does Clinton want, what does Ellis want, what's best for the clients, what's best for the family, etc., and the team. Those are a lot of weighty conversations that can happen. I was very present to places where I felt like I was being duped, or worried that I was being too overpowering, or taking advantage of. And I think because it was a family dynamic, I could be more present to that and stay in relationship with my family versus if it's a 3rd party, I might not necessarily think to that depth to keep...to make sure that Thanksgiving dinners, we're all sitting down together still.

Michael: So, I mean, just you're talking to what...as you're pinning down, what does Liz want? What does Clinton want? What does Ellis want? So, the other 2 siblings were not interested, I'm presuming.

Liz: Correct.

Michael: That's 2 out of 4. So, I guess just talk to us more about just how that deal flow, how did it get structured for the 2 of you that wanted to come into the business? How did it work?

Liz: So, Ellis, with his legal background, he drafted a whole document that was very well thought through, that matched what he needed for his cash-flow plan, what he wanted for the legal structure of the buyout. And so, we started with that. And then Clinton and I looked at that to see where are the places that don't feel right. And an example that came into it, there was an element that I wasn't sure what was happening. He had in the document that he wanted us to pay for part of the insurance premiums that he had maintained on himself for the rest of his life. And to me, I'm like, "That's a long time. We don't know how long you're going to live." And I work with retirees. They're experiencing some of their friends passing away. And there's this very...they're being confronted with their own mortality. And so, he was like, "Oh, I'm not going to be around much longer anyway." And I was like, "Well, you could live to age 100, and that's a pretty long time of me paying premiums."

Michael: Yeah, it's like 33 years, a long time to make this commitment. I'm not quite sure what health insurance in 2050s here.

Liz: Yeah. Right. So, when we drilled into what's behind this, his expectation was that he was wanting to gift part of the practice to us. And then in turn, the life insurance would cover to make it equal with the siblings. And I, being fairly independent, stated, "I don't want you to gift me any part of this practice. I don't want any point in time for my siblings or even my mom to come back and say, 'Hey, this was not a fair deal.'" So, I was very sensitive to any place that there was discounting, or gifting, or...because I wanted it to be fair from everyone's perspective. So, that was just one place where it was written on the paper that we're going to do it one way, and we worked through that, and then removed that from the deal.

Michael: So, the insurance premiums here, this wasn't health really. This was life insurance.

Liz: This is life insurance. Yeah.

Michael: This was life insurance related. This was, "I'm going to partially gift to you the practice, but then you've got to pay some life insurance premium so that I can make your siblings whole." And your preference instead was like, "No, just charge us full fair value for the practice and get full dollars. And then you can divide whatever you don't use evenly among siblings, because no one got any distorted transfers, gifts along the way. Just you're made whole, and what's left is left."

Liz: Yeah. And another area where there was some conversation around it. So, this book of business that we purchased, that I managed, I was being paid on a commission basis for reasons that I don't want to get into. But it was important for me only to eat what I kill, except I didn't have a commission mindset. I had a fee-based mindset. And so, there was a way, when I was looking at the deal, I was like, "Oh, my goodness, I didn't get compensated when I placed the business, or all of these...the years along the way, I didn't get that upfront sales pop because I didn't want it. And then now I'm going to pay a premium for that just to purchase it to be my own." And so, it felt like I was...I set myself back on both sides, being the good daughter, relational-focused type person.

So, we talked about that and rightsize that. But in the process, it created conversation with Clinton and I of just, "Well, how come you get that discount? I helped you when you were on your maternity leave. And took care of those clients for you, made sure all those things were placed, and I wasn't given that same opportunity to have a book of business." So, what does that mean? And we ended up just splitting that discount 50-50. So, it was a part of both of our deals versus just mine, which felt really good and aligned for me.

Michael: Interesting. So, let me just try and make sure I process this. So, for the clients from the outside practice, you were on a commission basis within the practice. So, I guess your comp was a percentage of the first-year revenue that was generated from those clients. So, if you're placing them into more A shares and such, whatever it is, 5% commission comes through, you get a piece of that, and were made whole. But instead of putting it into A share business where you get a percent of the whole 4% or 5% upfront, you're putting them into advisory accounts where you'd get a payout on a whole one quarter of 1% in the first quarterly billing. So, there's no upfront pop. But now it's part of the recurring revenue of the business. So, when you get down to the valuation stage later to buy it, you're buying the recurring revenue, right? You're paying for the buy out of 1% annual fees. But you didn't get the original pop of the upfront on the commission-based business, and you didn't get a rev share on the advisory business. You just got a really low upfront payout because you put it into advisory, and then have to buy the advisory recurring revenue.

Liz: I did get a rev share on it throughout. So, it wasn't quite as stark, bad decision made by salesperson Liz. But no. Yeah. But the nature of it was lower pay out early, ultimately to pay for a larger amount later. So, we rightsized that.

Michael: And so, the way that you rightsized it was just you figure out, "This portion of the revenue is attributable to the fee-based clients that I got from the other advisor that I didn't necessarily get as much of a payout upfront and ongoing. So, the valuation on this portion of the clients needs to be discounted down just to make the rest of that or the rest of those economics whole."

Liz: Yeah.

Michael: Okay. Which you then split the discount on that portion of the book with Clinton, since you were both contributing to make this work.

Liz: Yes.

Michael: All right. So, I guess sort of 2 follow-on questions I have for this. So, number one, what's it like negotiating with dad?

Liz: What's it like negotiating with dad? Being from the Amish-Mennonite background, we are not confrontational folks. The nature of community is that you don't rock the boat. So, the process of negotiating what I want was very intimidating for me, even though my dad's stance was like, "I'm open. I'm open to this conversation." I felt, personally, and it's my own introspective journey that I've seen of like, "What does it mean for Liz to have a voice? What does it mean for Liz to assert what she wants in a place where..." Especially women do not have that voice historically in the community. And so, yeah, it was very intimidating. There were periods of time where I probably wasn't the most pleasant person to be around. And there was a time where I just had requested from my parents, "Hey, there's so much going on for us right now in this conversation. I don't know that I'll be able to show up as the best daughter, or as the best mom of your grandkids right now, as we sort out this business thing. And just know that I'm approaching this business thing with all the heart, and it's ultimately for everyone. There's so many parts of me that are being pulled here."

Michael: So, that sounds just pretty challenging in practice, if it was turning and tearing you that much. What was pulling on it? What was turning and tearing that much?

Liz: For me, it was just the worry that if I asserted what I want, it would tear the family apart. And that is a heavy, heavy thing to carry.

Michael: And what was it that you wanted that felt so different from where they were that it was at risk of being this family-rending desire?

Liz: It's not even that what I wanted was so different. It's just the practice of speaking what I want. I mean, you have to... Being a mindset coach, none of this is logical, right? I mean, it all stems from childhood and community background, etc., etc. And so, Amish-Mennonite communities, women are in the background. They are supportive to the family. They stay at home, they cook the meals, they clean the homes. They are of service. They eat last in community dinners. So, to assert myself was to put myself at the front of it. And it felt unsettling. It felt not right for me. So, I get that it's not logical by any means. But it definitely was the mindset hurdle that I had to overcome in that stage of my work.

Michael: And I mean, what was the path to overcoming it, and not relenting and taking a back seat, and just going along for whatever journey Ellis originally wrote in the documents?

Liz: Yeah. Our personal clarity is so important, and so I had this image of what I wanted the practice to be, and the decision making that I wanted to make with it, taking it more financial planning focus, raising fees. A lot of different ways of scaling the practice a bit more. And I knew that getting the deal complete was me unlocking the door to what I wanted. And so, you can get to that door of what you want a lot of different ways. For me, it was really important to stay in relationship with my family. And so, the way that I did it is through conversation, and being willing to own my side of the street. So, knowing when I'm getting angry, and knowing what's going on inside of me is not related necessarily to today, but I'm interpreting it that way, and imposing a lot of my own judgments and fears, etc., etc., on my family. So, just being hyper aware of what was going on for me internally.

Michael: And then how do you ultimately value a business like this? I mean, because at some point you've got to set a dollar number. Did Ellis have a number? Was there a benchmark you were looking at? Did you get a valuation?

Liz: We did, yes. So, in 2019, we moved broker-dealer IRAs. And at that point we got a valuation for that piece. And then we got another valuation from FP transitions. Both times we used FP Transitions to get the growth there. And we'd had some pretty rapid growth once we changed who are you affiliated with. And then we relied on their documents, their valuation, and as long as it matched my dad's cash-flow plan that he had for himself, then we were good with the valuation.

Michael: So, you used FP Transitions to do the valuation. The math worked for Ellis, so that was that.

Liz: Yes.

Michael: Okay. And can I ask, just what did valuation or valuation multiples come in at? Just because I'm cognizant you've got some insurance business, you've got big accounts, you've got small accounts, you've got recurring revenue, you got old trails. I'm envisioning the composition of the revenue of the practice is complex. So, how did that end up getting valued? Did each little piece get valued on its own, and then it adds up to what it adds up to? How did you get to a number?

Liz: We used their benchmark valuation, which is about 2 times revenue, but then backed out certain areas where we...either Clinton and I were building, Ellis wanted to compensate us for sweat equity, or that area, that one little piece that I told you about with the compensation.

The other piece, now that I'm thinking about it, we took the snapshot date from the first valuation to the second valuation. And one thing as Clinton and I...as we changed broker dealer IRAs, we noticed with Ellis that he was much less interested in driving the decisions of the business. And so, he had given us fairly full reins to make the decisions that we wanted to with the firm at that point. And so, with the rapid growth that we had experienced, we talked about, "How do we want to split that up?" And so, he did give a sweat equity type of discount for a portion of that growth. I want to say it was a third of the growth that we had from 2018 to 2021 when we got those 2 snapshots.

Michael: Okay. The idea being, you are sweat equity contributors to a big portion of this last stage of the growth in particular. So, we're going to use a blended valuation number of the two, which pulls the valuation number a little bit more in the direction of the 2019 valuation. So, you don't feel penalized as it were for having done so much to grow the business since the broker dealer transition, and then having it just be more expensive for you.

Liz: Yes.

Michael: Okay. Just curious, was that at your bequest, or was that his desire?

Liz: That was his desire. And in that time period, he and my mom did more snowbirding, and so they were out of the practice more. So, it made sense to us too, the amount that he gave to us. Again, thinking about it from all sides, I was like, "Don't just give away sweat equity for sweat equity sake. Make sure it makes sense. That it's not... This is ultimately your business and you're taking the risk." So, yeah.

Why Liz Changed Her Firm’s Broker-Dealer Relationship [49:46]

Michael: So, I'm struck, though, it sounds like it was very challenging in going through some of the negotiating with family because family, and community, and upbringing, and all those challenges. But the challenge wasn't necessarily about the valuation per se, because that was third party, and sounds like everybody was reasonably comfortable with the number that came in from the third party. I mean, correct me if I'm wrong, doesn't sound like...the negotiating back and forth wasn't necessarily valuation dynamics. It was other parts of the transaction, the deal, the life insurance, and adjustments like that?

Liz: Yes.

Michael: So, what else…were there other things that were blocking points that were tough to get through in a family transaction like this?

Liz: I think the other piece was what was Ellis' role in the firm after selling the practice? And on one hand, Clinton and I want to be taking over the clients, the client work, and Ellis wants that, too. But then what is the role that he has? I think that took a little bit of conversation, and his compensation during that time too. He wanted it to be fair. And there's the element of how much do you want to be holding your parent accountable to the work that they're doing? That gets a little dicey, right?

Michael: Uh-huh.

Liz: So, that was a conversation that took some time to sort through. So, his main role now just… I imagine that will be your next…

Michael: Yeah, what did you arrive at? Yeah. Yeah. What did you arrive at?

Liz: Yes. So, he manages our portfolios. He does a lot of the research part of what we present to clients and writing with that. So, especially with the extended market turbulence over the last year, he wrote some just really sound articles that helped people feel really...I almost used the word safe. Watch out, compliance. No, just felt more secure and willing to hang in there. And that's really valuable for us. And then the handoff process was another place where we wanted him to be actively involved in. And I'll say, not everything has panned out the way we thought it would. And also, we're fine. So, you go through those conversations, and you negotiate how you think it's going to be, and then it might be easier to transition a client than having some 5-step process.

Michael: So, I'm cognizant that through this transition in the past few years, you said that you changed broker dealers as well. You went, I guess, from Ohio National, ONESCO world to Kestra. So, what led to that change? Why the broker dealer shift?

Liz: Yes, a lot of reasons. The main ones were, one, we couldn't get a good handle of what our business looked like. The reporting, the partnering, the business management piece was just difficult with the way that they gave us data. And then you partner that with all of the splits and rep code differences. It was just really hard to get our arms wrapped around what is our part of the business. So, that was one piece.

Another was we felt like that at ONESCO, we were very much more managed account, financial planning focused, and they hadn't built out that part as well. Their pricing was pretty high on that. So, we got a nice discount when we shifted to...for our clients, when we shifted to Kestra within the managed account platform Envestnet, just by economies of scale. And being in that world, everybody...when you're in your own context of doing business, that's your context, that's what you understand. And so, the conferences, you would be having conversations with people about sales, and insurance, and features of policies. And it wasn't invigorating for the direction we were going as a firm. We just had a different vision.

And so, when we were looking at the different options available, landed with Kestra. It's been a great fit. And the advisors are much more aligned in their practice with the way we are. We didn't feel like a big fish in a small pond from the way of just doing managed account business. Many advisors use managed accounts. In fact, that's what the predominant number of people there, that's their main focus of business. And they have legacy life insurance or mutual fund business. So, it was just like our people.

Michael: So, on the ONESCO side, I guess, if I'm hearing sort of 2 big themes, one just cost of platform, you're doing more manage account business. But because ONESCO's roots were Ohio National Insurance, just their manage account platform wasn't as big which means that tends to be more expensive. So, when you go to Kestra, and they've got more size and scale on the Envestnet platform, just platform fees, manage account platform fees went down. So, is that literally the managers you were using charge less through Kestra than your old firm because of the size and scale there are, or is it like there's a managed account platform fee that you have to pay?

Liz: Managed account platform fee? Yes.

Michael: So, can I ask, what were the platform fees?

Liz: I want to say they were maybe 40 bips or so. And then they dropped to 17. But those could not...I mean, they could be loosely in the area of each.

Michael: Okay, fair enough. But something in that neighborhood. So, not trivial when you may shave 20 bips off the platform fee. I mean, if you're predominantly manage accounts, that's essentially a 20% of revenue scrape on top of the BD platform that just vanishes when you change platforms.

Liz: Yeah. Yeah.

Michael: Which is not a trivial amount of money as the dollars add up. So, I guess just why Kestra, and how did you find them? I mean, there's so many independent broker dealers out there these days. Why Kestra, and how did you find them?

Liz: Okay. You'll have to help me out with the name of the person that was on your podcast that essentially helped match-make people to their BD RIAs that they moved to. Do you recall?

Michael: Jon Henschen?

Liz: Yes. Yes. So, I heard that podcast and I was like, "Oh, I want to have a conversation with Jon Henschen." You'll note that I get things done through relationship, which is not all that dissimilar from my clients. So, anyhow, had a conversation with him. He looked at our business. We didn't really know what the scope was. Again, our context is one very specific area of financial services. So, he looked at the make up of our investment accounts for clients, the types of products that were in there, and ultimately where we wanted to go, and then narrowed it down to 3 BD RIAs. And Kestra just felt like a really good cultural fit for us.

I really appreciated the vision that James Poer has with the firm, and how the emphasis is on the independent advisor and their support of the independent advisor. I liked that their platform that they were looking into tech improvements, which was not available at our previous firm. And when they discussed us partnering with them, they also discussed us decoupling with them, which felt really freeing to me of this...it's not a black box, I'm going to be here forever necessarily. And maybe I will, I don't know. But just the idea of, "We've got our own platform, but you'll want to retain your red tail so that you have your own records to plug in." And that felt really healthy to me.

Michael: Okay, interesting. So, that whole fascinating mental dynamic of, "If we show you how easy it is to leave us, it actually makes you want to join us. And then you may never leave because you're actually happy with what we're doing, which you only came because we made it so easy to not stay, and then we earn your business anyways."

Liz: Yes.

Michael: Very cool. Do you recall, who else was in the running that wasn't checking the box for you?

Liz: I had conversations with Commonwealth and Cambridge. And then there were 2 smaller ones that I don't recall the name. But I remember one was...it's just the model I didn't really like. And that was where the advisors were part equity owners. All the advisors owned the BD RIA, which is cool. I kind of like it. But what I noticed is when I went on to all of their tech stuff, it was not to the caliber that I wanted. And I thought, "Oh, these advisors all have to agree to use their profitability to improve their tech." So, am I wanting to be the person that's like, "Hey, reduce your profits, let's invest here." No, I don't want to expend that effort. I want someone that's already got that mindset going and is investing that way.

Michael: Interesting. So, that dynamic of, "It's neat to own a thing, but I don't want to have to get every single advisor in the firm on board with my desire to see the platform reinvest in itself. I'd rather have a platform that is just owned by its shareholders that has to win our business. And it does so because we're going to pressure them to make tech investments, and reinvest their own margins and they can decide to do that. And if they don't, I'll just vote with my feet."

Liz: Yes.

Michael: Out of curiosity, Commonwealth and Cambridge are also fine, reputable, independent broker dealers as well. What tilted you towards Kestra or away from them? Were there distinguishing factors about what clicked or didn't click just for you and your context?

Liz: It was more of the pull to Kestra. I really like the culture there. I like the...there's a work hard, play hard type of mentality, and a pursuit of excellence, but also the reminder that we're all human. And so, the connection... This is the other piece that was really important to me was instantly when I went and visited their office, I had connections to all the department heads, and I could relate to them. And I didn't feel like that... I'm super sensitive to this phantom image I have of financial services, which is the dude with the power suit, with power tie, and sticks to the numbers, which is so polar opposite of me. I didn't get that vibe there. And I felt like I could really relate with the department heads, and actually reach out to them. And so, I've had such...it's been really helpful for me, as we've been getting established with them over the last 5 years, to be able to reach out to some of those, even if it's the COO, Kris Chester, or Julie Peoples, or whomever, just to be able to be like, "Hey, this is not going well for us. I need someone to help me with this."

Pleasant Wealth’s Current State And Liz’s Plans For Its Future [1:01:09]

Michael: So, what does the practice look like today? Where is the business now?

Liz: Yeah. So, today we have about [$]146 million of assets under management, and a client household count of 522.

Michael: Okay. So, where did other 1,000-ish clients go? You're at a little over 500 today. I think you said you were peaking close to 1,500 in 2016. So, 6 or 7 years, and about 1,000 clients aren't here anymore. So, where did they go?

Liz: So, one piece that was important for Clinton and I that I did not mention earlier in our succession was that we did not see a future of doing retirement business, retirement plan business. So, 401(k)s, simple IRAs, we were not interested in continuing that business on. And so, we sold that business, we packaged it up, and sold it to the firm that we left when we were at ONESCO, our branch office. Which we retained really good relationship with them as we were leaving, great relationships, kept up strategizing, being with them occasionally.

And so, we knew that if we were wanting to be out of that business, we wanted to partner our businesses that we had been managing their retirement plans with someone that would handle it just as well as we did. And so, we sold that part of the business. Again, simple IRAs were at the bulk of that client household count, all of the participants therein. So, that really helped with the household count.

Michael: Oh, interesting. So, I assume, because that was the world of, "We opened simple IRA for a small business with 11 employees. So, now we've got 11 simple IRA accounts, and 11 client households because each one needs their suitability, because it's a simple IRA. So, each one has their own brokerage account. So, we've got to do deal with it for all of them." So, that whole side of the business just got packaged and sold. So, what was the clients and an asset base of that, do you recall at least approximately how much of the business that was?

Liz: I don't recall how many households that was, but it was about $60 million of assets under management that we packaged and sold.

Michael: Okay. I mean, that's a sizable chunk. I mean, that was a quarter, a third-ish of the business or more was the retirement side of this high volume of clients. So, I guess I'm just trying to summarize. So, this got sold before you left ONESCO, before you started doing the succession plan with Ellis?

Liz: No, not quite. So, we left ONESCO in 2019, and joined Kestra. And we sold the retirement plan business at the beginning of 2022. And we timed it to occur 5 business days before Clinton and I purchased the practice from Ellis. So the proceeds from that sale also reduced our buyout cost from Ellis.

Michael: So, you sold the retirement business back to your old friends at ONESCO, but we’re 2 to 3 years after you've left, just you kept good relationships, and could call them back to say, "Does someone want to buy this small business retirement plan back from us?" And they were ready to do it because you saw they had a good relationship, and they were familiar with the space.

Liz: Yeah, they had a 401(k) specialist. They still have a 401(k) specialist on staff. And we also patterned the way that we did our retirement plans to the way that they did, because we were affiliated at the time that they were set up. And so it's an easy transition. It's not like there's going to be a big upset amongst the businesses. They get to retain their same structure.

Michael: And so, I want to understand the flow of this. So, the retirement plan business sale closes 5 days before the rest of the transaction. So, if I'm flowing that right, that essentially means Ellis monetizes that portion of the business, and then only sells you what's left at that point. You and Clinton don't participate in that sale beyond...you don't then have to go buy it and service it, or buy it and go repackage it and sell it yourself. Ellis essentially did 2 partial transactions of the business, a $60 million retirement plan business sale to the old ONESCO branch, and the other 60% or 70% of the business of whatever it was that got sold to you and Clinton. So, from his end, he cut 2 deals to do 2 pieces of the transaction.

Liz: Yeah. And it was really nice for him, just as I think about, from a financial planning perspective, he got an upfront pop because he got the buyout from the retirement plan business. And then for us, he structured a longer buyout. So, it's a nine-year buyout.

Michael: Oh, interesting. So, it was a pop of dollars for the retirement sale because, I guess, just he negotiated a faster payment, or they could make a more lump sum. And then that let him negotiate your portion longer.

Liz: Yep. Yes. Worked really well.

Michael: Yeah. I'm struck by that as well, because I do see a lot of advisors acquire practices that candidly have a portion of the clients, a portion of the business that they are kind of excited about, and a portion that they're not so excited about. You acquire it just like, "Well, I guess after I acquire this thing, I'll have to figure out what to do with it. Maybe I'll keep it, maybe I'll hire an advisor to support it, maybe I'll sell a portion of it off." You have to buy the whole thing, and then start repackaging it into what you want it to be. And so, I'm fascinated that you did it the other way around, which is like, "No offense, Dad, but can we just buy the part that we actually want to buy, and you can find something else to sell the rest of it to?" Obviously, good news, you had some good existing relationships to find a buyer for the retirement plan portion. So, it's not like you had to shop it on the open market and go through the entire process.

Liz: Right.

Michael: But just I think it's an interesting contrast to say, "No, we didn't buy the portion we didn't want. We had the seller sell it to someone else, and we just bought the part that we wanted to focus on." It seems relatively straightforward, but it is really rare that I ever hear anyone actually structure the transaction that way.

So, help me understand what the business looks like now in terms of just what are you...what do you do, and who are you trying to serve at this point? You're down this more focused 500-ish clients, 150 million of AUM, give or take whatever the market's doing in any particular day. Is this where you want to be? Are you growing from here? Are you still trying to winnow it down further because you actually still don't even want that many clients, and there's more transition? Where does it stand relative to where you're going or what comes next?

Liz: So, our next step is to really build out our service model for the tiers of clients. That's something that we'll be focusing on in Q2, Q3, Q4, however long it takes this year. The vision that I have is integrating coaching into the process of financial planning, specifically for women retiring, often alone. It's that independent woman that's making the decision but doesn't have a financial-thinking partner. And so, as I think about that, it's not necessarily that we're wanting to winnow down further the number of clients, but I don't know that yet. I got to get a grasp of who's fitting in what tier of clients, and how much we're servicing them.

But ultimately, every decision paves the way for the next level of clarity that I have. So, where I want to go, I'm not fully sure yet. I know who I want to serve, who we want to serve. Both Clinton and I are on board with this. As far as the group that we're growing, but getting clear on what the makeup of the 522 clients are currently, what they expect from us, what we expect from them, the pricing structure, etc. That's going to be the next iteration to provide the next level of clarity.

Michael: I really like the way you frame that every decision paves the way for the next level of clarity. I feel like that's oddly redeeming to say, "It's okay if you're not completely, totally clear on what the exact end state is. Just get clear on what the next step is and do the next step. And then decide what the next, next step is from there."

Liz: Yeah. And honestly, it's how I approach financial planning, too.

Michael: That same kind of iterative approach. Like, "Let's just figure out what your next step is." So, I guess, playing devil's advocate, I mean, I'm just wondering is there a challenge, though, if you're not clear on where you're going in the long, long run? I'm sort of reminded of the Stephen Covey aphorism that if you're...

Liz: Yeah, start with the end goal.

Michael: Yeah. And if you don't put the ladder against the right wall in the first place, you just climb up the wrong ladder faster. That whole sort of phenomenon. So, I guess how do you balance that if every decision paves the way for the next level of clarity, but you don't necessarily want to go really far down the road, then find out, "Wow, we've spent a long time iterating in completely the wrong direction." Or do you just accept that that's a risk, and then we'll iterate from there to get back to where we wanted to be?

Liz: Well, I can accept that it's a risk. The short side of that is that profitability targets don't occur at a fast speed. And am I okay with that? Yes. Because it's a lot of pressure to put on yourself, that I have the exact thing that I'm going to when there's so much detail in the midst. And especially as being in the people business. People are messy. It can be about 4 steps down the road at this point. And so, then I know the next several iterations, and it doesn't feel like the ladder on the wrong wall unless the current step I'm doing, I'm not taking the best first step for that, which is usually a mindset issue. I run into this with Limitless.

Actually, just building our website, which we're in the middle of right now, changing it. And we know we want to serve women retiring alone. So, what does that mean for our website? And so, I get in, and I'm pretty creative. That's an understatement. I'm very creative. And so, I hammer out the whole website. The ladder was on the wrong wall when I didn't start with my clear message. And in Limitless, we have this messaging wheel process. I knew I needed to start there, but I had so much resistance to that.

Michael: The piece I'm wondering, as you raise that is just, as you said, your roots are in this Amish-Mennonite community, and you're talking about empowering often alone, financially successful women who don't have a financial-thinking partner. That whole nature feels not necessarily traditional messaging to basically your entire existing client base.

Liz: Right.

Michael: Is that a worry unto itself that your clients are going to come to the website, and see that you seem to be doing something that's very different than what they got to know you through what your dad originally was doing, because that's still the journey for a lot of them?

Liz: That has been a fear that I have overcome from being in community with other advisors who have gone into a new niche. I often hear that it is a fear that is not substantiated, that clients are often fine with the direction that you're going, so long as you don't forget them in the process. And I think the way that we go about our work is so much in service of clients that it's not a fear for me.

Michael: Yeah. I'm always struck by knowing a lot of advisors who've made that change. I mean, as you said, "everyone" has the fear, "If I start focusing the business in a new direction, my existing clients are going to get pissed and upset, and leave, and storm out the door because I've said I'm going in this new direction that's not them." And then when you actually do that, and have the conversation with them, they don't get upset and angry you're going in a different direction. They get fearful because usually the first question is, "Well, Liz, if that's what you're doing now, do we still get to be your clients? Because we liked working with you."

So, as you said, as long as you take care of them, and don't forget them in the process, they don't really care what you're doing. They care about themselves.

Liz: Yeah.

Michael: Is there some vision or clarity of just where this is going in the long run of what you want the business to be now that you and Clinton have the business? I guess Ellis' still around a little, but you own it, you get to set it now. So, where is it going?

Liz: The direction that I see at this point in time is integrating more financial planning where compensation makes sense. And so, I've kind of split up our clients into 3 ideas. I haven't put people in categories yet, but 3 ideas. One is foundations, one is flow, and one is flourish. And foundations are the folks that are still mutual funds and life insurance. They're not really engaged with us in any holistic conversation. They're not engaged with us on a year-over-year basis. It's kind of just whenever they need attention.

Michael: Okay, so they sort of are our legacy transactional kind of clients. They need the thing, we did the thing. We still service the thing. They're not really into ongoing holistic financial planning, but we did thing, we serviced the thing. And they want another thing, we can help them with the other thing. But otherwise, they're kind of hanging out on their own.

Liz: Yeah. And they still consider us their financial advisor. And when something comes up that they need help with, then we will transition them to a different portion, a new client tier. Or if we're not the right fit, then we'll find them a new advisor. But oftentimes, where our client base is sitting is more in the age 45 to 80 range. And so, in that foundations... As part of the decoupling with clients, that 1,000 clients that are no longer with us. Some of that was retirement plan business, and some of those were under the age 45, hadn't really engaged with us fully, and compensation wasn't at a place that was sustainable.

And so, they got kind of a "Dear John" letter. But then also, if they desired to be recoupled with another advisor, we provided that referral for them, and even made a connection if they wanted that. So, as I think of that foundations layer, it's those people who are older than 45, haven't fully engaged with us. They're going to hit a life event soon enough that they want to re-engage, and we'll be open to that if it's the right fit. And then the flow is more financial planning focused. They appreciate some financial strategy, but are not interested in coaching or any type of deeper transformative work. And so, building out the model there to have ongoing good conversations with them over time that get their financial planning and investment needs met.

And then the flourish category is one...that's where I'm not sure exactly how it's going to look, but it's right where I'm at today, looking at potentially building out a group coaching program within it, topical based that are the places that are common where clients get stuck in not implementing a financial plan. So, why aren't you going to the estate planning attorney to draft those documents? Okay, let's look what's underneath there and tease that out. This is part of my... I'm in process of getting certified as a life coach. And so, just integrating that in to the practice. And then the possibility of one-to-one coaching for those clients in a pass type form. You have 2 or 3 passes a year for one-to-one coaching.

Michael: So, I guess just help me understand how that flows up. Is this like a higher priced, more expensive tier? Are these premium kinds of services, or it's just different in a more coaching-y, less financial planning-y context in the first place, because they're just in a different place and need different services?

Liz: So, we have a minimum fee that has to be hit before they would have access. I'm recognizing I'm still building this. So...

Michael: Understood. Understood.

Liz: It might change.

Michael: We're just paving the way to the next level of clarity. I understand.

Liz: Right. So yeah, there's a certain asset level that's met. And just as we have engaged with clients over the years here in the Midwest, I found that those high savers are very hesitant to spend their money in retirement. And oftentimes I feel like the financial services industry does a disservice to them because of retaining the assets, and getting them not to keep spending and, "Oh, be worried about all the things that will come down the road."

But what happens is their life satisfaction goes down, and they have all this money that they've spent so many years thriftily saving, and they won't allow themselves to retire at the timeframe that their body or they desire to retire. And once they're in retirement, they might skimp on just the joy of full-time freedom and financial freedom.

And so, there is a conversation I've been developing over the years of this Midwestern money mindset that's based in farming that always is looking to have seed money for the next year of cropping. And that breaks down when you're in the retirement phase because you need to start spending money as to enjoy the life that you have. And so, helping clients work through those mindset blocks really, those are the conversations that I love. You can probably hear it in my voice. My energy level just skyrocketed. I love those conversations.

And especially with women that are in retirement, especially if they haven't engaged with the financial component before. This is a place where they can enter in the conversation, and really shape out what their financial goals are because we're having a different level of conversation. And then I can kick that to Clinton, if he's doing the financial planning, to really map out what the plan looks like.

The Surprises And Low Points Liz Encountered On Her Journey [1:21:06]

Michael: So, as you've done this transition and went from working in the practice to acquiring in your own set of clients, to getting confidence to start building the practice, to actually acquiring it with your brother, and owning it, and sort of being in the owner's chair now. So, I'm curious just what's surprised you the most about building and running an advisory business now that you're in the owner's seat?

Liz: How much my own money story crops up so frequently or my...really, it's not my money story. It plays into it. But from a childhood situation that I had, an illness that I had, I missed out on some of those foundational years of math, and English, and, and and. And so, there's a level of lack of trust of my own ability in some of the basics of math even. I'm a financial planner. I've done calculus, obviously I'm skilled at math. But in my mind, I don't associate with being skilled with math. And so, in every layer of my work, I have been confronted by this fear of not being smart enough to do the thing. Whether that was my initial first meetings with clients, studying for the CFP, the Series 7, etc., etc. All along the way, I'm confronted with this fear of not being smart enough.

And becoming the business owner, it's a new layer of that, of knowing the numbers of the business. Even preparing for this conversation that we had today, I had a lot of fear around it. I had to work through it with a coach just to be able to dig into my numbers, pull them out, and not worry that it showed something negative about me. So, there's this continual surprise that I experienced with myself of being able to work through to be confronted by this story, this old story of I'm not smart enough. And then to overcome it, and really lean into what's next.

Michael: And just what's brought you to the point where you are overcoming it, or feeling like you're making some progress in overcoming it? Because, I mean, just I know there are people like that that will have a version of that struggle and it wins. And it overcomes them, and they get stuck there. As you've noted, it's still a continual struggle. So obviously, it hasn't vanished into the background or anything. But you seem to be winning more often than losing against it. What's bringing about the success and being able to overcome it?

Liz: Any hardship that we have in life, we have resilience around. And so, I can get hung up in, "Woe is Liz. Woe is Liz that she didn't have those foundational math courses. And so, sometimes she gets tripped up when she's adding, or multiplying, or, or, or." I can stay there, I can hang out there. Or I can reframe that and say, "Wow, because I didn't lean on the numbers part of math, I have come into this practice from the fully relational side, and I get my clients. And I don't need to build out systems or processes that prove something when I fully understand who my clients are and what they need."

And so, in any of those moments, we have the opportunity to look and see what's going on for us when we're feeling...when we come into a hardship, or a hard conversation, or being called out, or whatever to look and see what's there for us and shift the story. And that's why I love mindset work. I've been engaged with a mindset coach consistently since middle of 2020, and it has made all the difference for me.

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

Liz: Yeah, I'm feeling the emotion on this one. The lowest point for me was 2014. We had just purchased this practice, and it's like my moment to shine. Right? Because I got these clients that I'm going to work with. My dad has taken a huge financial risk for me to be able to do this. This advisor is counting on me to take care of his clients. Simultaneously, I'm becoming a mom. And...

Michael: Congratulations.

Liz: Yeah. So, I recall, it was a couple of months into this engagement. And I was at lunch with some advisors. And someone said something to me that I don't know if what they said was pure truth, or if I just misinterpreted it. Either way, I felt very condescended to, and I was ticked off. I carried that the rest of the day. And I got home, and I was in the shower, and I just screamed. I was so ticked off at how difficult it is to be a young female in this area of the industry. And later that week, I am...it might have been 2 days later, I went to this 401(k) review. So, I was at this big company. And I am trying to prove myself. I've got my little suit coat on, and I'm trying to be relational but also super professional because this is a corporate space.

And I come away from those conversations...I get to the end of that date, and I'm drained because it's not the type of conversation I want. And I go to hand back something to the HR person, and I noticed they were looking at me kind of oddly. And I didn't know what it was, but I covered over it, and I kept going. And I got to the bathroom and realized that...sorry to be a little graphic, but I was bleeding, and it was showing on my khakis. And I was so embarrassed. And when I got home, I realized I was having a miscarriage.

Michael: Oh, my God.

Liz: And so, at that moment, I felt like the 2 pieces that were super important for me at that stage, motherhood and career were at their all time low because I was failing at both. And I think that's one place that women uniquely experience in this practice, in this industry, is having to sort through what it means...if they decide to become a mother, what it means to become a mother, which is its own thing in society, and own thing internally. And then also stepping out into their own as an advisor. And to me, horrifying experience, so embarrassing. That HR person had no idea what was going on for me. They just noticed something very awkward. But it also was a turning point for me too, of just continuing on and looking for what resonates for me, what is most authentic for me. Yeah.

Michael: So, help us understand more how it was a turning point. What changed for you in that moment or in the aftermath?

Liz: I wouldn't say it's immediate, but in both places, I saw this way of interpreting how I was supposed to be. I will say just not to sugarcoat this, that it took several years to sort it out. But I see that was the market low of sorts. And from that point, I was very resolute that I'm going to make this my own. I'm going to figure out motherhood, and I'm going to take a day off, which I did for, I think, five years, take a day off a week and be with my kids, because that's important to me. And then in the work, I'm going to do this the way that I want. It was very much an ownership piece for me of just what is it that I want. Stop looking externally for what the next step is. Start looking internally for what I need, what I want, what makes me happy.

Michael: Interesting. And so, through much of that growth stent, then you were splitting four days on at work as you're building career and clients, and one day off per week to be with family.

Liz: Yeah.

The Advice That Liz Would Give Her Former Self And Younger, Newer Advisors [1:29:44]

Michael: So, what else do you know now that you wish you could go back and tell you from 10 years ago, as you're in the early stage of this?

Liz: I wouldn't change how much I did networking. I love that part of me. I definitely spent a lot of time talking to other advisors to see what they were up to, to understand kind of my place. But the piece that I would state is don't put so much emphasis on what they are doing. It's helpful. And also, we can be our own guide in the process. There's a way that I was defaulting to everybody else has the answers and I'm missing them. And if I could have paused there and said, "Okay, that is just a story that I have that they have all these answers." Not all that dissimilar from why you have this podcast, thinking about what's underneath the success of others. Just recognizing that my process is an okay process. It doesn't have to match the external journey.

Michael: I guess that's part of, as you said earlier, why you've been focusing to mindset and having a mindset coach is trying to bring about those shifts for yourself.

Liz: Definitely.

Michael: And so, can I ask, where have you gone for mindset work and help and coaching? Where does that come for you?

Liz: I first engaged with Elise McConnell. She was the mindset coach with Limitless. She unfortunately passed away about a year into our engagement. And through that process, I was like, "Wow, these are fascinating conversations. I would love to have more of these with my clients." And I had asked her where it was that she was trained. She was trained through Accomplishment Coaching. And so, I went through their year program, and simultaneously was in Limitless, which has the mindset component. I finished the certification process through Accomplishment Coaching and offered to Limitless that...not that I would ever replace Elise because she was so special to so many people, but if I could be of service to the advisors, I would love to be the mindset coach there. So, I am now mindset coach with Limitless. I have my own individual one-to-one mindset coach. And I offer mindset coaching to others.

Michael: Very cool. So, any other advice that you would give to younger, newer advisors looking to become planners and get started today?

Liz: Well, I'm just struck by how much came about for me in the moments where I found my people. And so, getting involved in some of those organizations like FPA, or NAPFA, or XYPN, or your BD RIA, really getting engaged. Find the people that you resonate with most because there's so many ways to do the work of a financial advisor. And you'll find the way that works for you. And that's where you bring the most value to the people that you serve.

What Success Means To Liz [1:32:58]

Michael: So, as we wrap up, this is a podcast about success. And just one of the themes that always comes up is the word success means very different things to different people. And so you've had this wonderful path of building the business successfully, and transitioning it to what it gets to become next. And already as noted, much larger than it was just a few years ago. And so the business is on a great journey of success in its own right. How do you define success for yourself at this point?

Liz: Yes, that wonderful question. So, how I have viewed success in the past was opposite of joy. I felt like those were two contrasting ideas. And so, as of late, I have been integrating the two as synonymous. So, when I think of success, there is deep personal trust of myself, trust of others, trust of the process, the maker of it all, and then just extreme joy in the moment to moment wins and celebrating therein.

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

Liz: It's been a real pleasure, Michael. Thank you for calling out to women specifically to apply to be on. It was when I saw that, that I gave myself permission to be on here. So, thank you.

Michael: Well, thank you. I appreciate your willingness to share the journey. Thank you.

Liz: Absolutely.

Michael: Thank you.