#FA Success Ep 342: Scaling To $1M Of Financial Planning Fee Revenue By Specializing In The Divorce Niche, With Nancy Hetrick

Resources Featured In This Episode:

• • Nancy Hetrick
  • Smarter Divorce Solutions
  • Divorce Financial Planner Training Center
  • Institute for Divorce Financial Analyst
  • Master Analyst in Financial Forensics
  • Certified Divorce Coach
  • Family Law Software
  • XY Planning Network
  • American Bar Association
  • Ameriprise
  • The National Association of Women Business Owners ((NAWBO)
  • Bill4Time
  • Wealthramp
  • FP Transitions
  • Markel Cambridge Insurance

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

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Full Transcript:

Michael: Welcome, Nancy Hetrick, to the "Financial Advisor Success" Podcast.

Nancy: Thank you so much, it's a pleasure to be here.

Michael: I'm really excited to have today's episode and to get to talk a little bit about... So, as I frame it, I've long said I think the future of the business for most advisors is that we have to have some kind o niche or specialization in the future. Just, frankly, some way to differentiate against the mega firms out there that are going to do probably relatively basic financial planning at scale. But they're going to say they do financial planning for everyone. And if you want to show up in some way that wins you business against something...someone that's got national scale and can run Super Bowl commercials in their spare time, you have to have some way that you show up differently.

And often, I kind of use the words "niche" and "specialization" sort of interchangeably, but I've actually always thought of them differently. That a niche is much more about a particular target clientele that you're going after that has a certain common need that you can solve. Whereas a specialization is much more about a personal expertise, people come and seek you out. Ed Slott's the IRA guy. You got an IRA problem, you send an e-mail to Ed, and he knows what the answer is. That's the thing, that's the deal. And some domains kind of share a version of both.

And I know you have grown very successful business over the years focusing into divorce, which I almost think of as a little bit of each. There's a very specialized body of knowledge of what you actually have to do to help people through a bunch of the technical and money-related issues of divorce, which is kind of fits a specialization. And there's also just a subset of people who have a very concrete specific need, like, "I'm going through a divorce. There's all these complexities, there's all these challenges. I need someone to help me through this." And so it's kind of a combination of the 2 and who it serves and the specialization that it brings. And I've seen a number of advisors that have been very successful with this, but only a limited number that seem to focus there.

And so, I know you have done this. And so, I'm looking forward to the conversation today, both just to understand this divorce niche specialization as you've built successfully in it and just what that business looks like. And I'm hoping maybe even a little bit of a conversation of why don't more advisors focus here, as well, because it seems like there's a real opportunity.

Nancy: Oh, there's a huge opportunity. And that's actually why, about 5 years ago, I started teaching and training financial advisors how to do this divorce niche practice. Because a lot of them are really interested in it, but most of us were never really taught how to grow a business from nothing. So, they'll get their credential, but they don't really know what to do with it once they have it.

What Divorce Financial Planning Means To Nancy [06:24]

Michael: Well, and what's even the credential? Most of us, we start with CFP certification. Which, there's a chapter or 2 in 1 of the books, but not necessarily enough I want to hang my shingle on that basis.

Nancy: Right, right. Well, and then once you get into the work, you find out that there's multiple. But the primary one is the Certified Divorce Financial Analyst. Which is a credential given through the Institute for Divorce Financial Analysts. And I know you've been a keynote speaker at 1 of our conferences. And so, that was the first credential I got. And then, as I started to get into the niche and do the work, one of the things I learned was that attorneys in my market, which is Phoenix, Arizona, don't really...aren't familiar with that credential. They don't really understand what a CDFA is.

And so, the attorneys here had been kind of hardwire programmed that if they needed financial support in a divorce, they would get the forensic accountant. So, about 2 years in, when I learned this, I said, "Well, okay, I'll go get a forensic credential." So, I also...

Michael: How interesting.

Nancy: Yeah. So, it's a Master Analyst in Financial Forensics with a Matrimonial Specialty. There's a mouthful for you.

Michael: Master...I'm remembering some of that, Master Analyst in Financial Forensics with a Matrimonial Specialization.

Nancy: Yeah, exactly.

Michael: Okay.

Nancy: And that is where I learned some of the higher-level skills that equipped me to be... do expert witness testimony, tracing work, fraud work, marital waste claims, really in-depth analysis of stock options, RSUs, and various kinds of executive compensation. And so, there's that credential.

And then a lot of the advisors that specialize in this area end up getting trained in mediation and collaborative divorce. And because we are a whole bunch of left-brain, number-crunching math people, you realize pretty quickly when you start doing this work that we are woefully unprepared for the myriad of emotions that are going to come and smack you right in the face. So, I went and did the certified divorce coach training so that I could come to the table with a more holistic, whole-human kind of approach.

Michael: Certified divorce coach.

Nancy: Yeah.

Michael: Okay.

Nancy: And that's actually recognized by the American Bar Association as a viable team member in an alternative dispute resolution, so an out-of-court process.

Michael: Okay.

Nancy: So, it's a pretty formal deal. And I, in my ignorance, thought, "Oh, it's one of these little life coaching classes. How tough...how difficult could it be?" Oh my goodness. It was 4 months virtual learning, and I had to dedicate about 15 hours a week. It was a lot.

Michael: Wow.

Nancy: And it really did help with just having some tools to bring to the table. And fast-forward 12 years into this business, I've had hundreds of hours of mediation training. I do actually work as a mediator and neutral financial expert at the same time for couples. And I really built a business around a different kind of a divorce process with no lawyers, no judges, and no courtrooms.

And when I put that kind of offer out into the marketplace, guess who showed up? Baby boomers in the target market for every financial planner. Right? I was getting 20, 30, 40-year marriages where they're working together. They don't want to waste a lot of money on attorneys for no reason. They really just want to make sure they're both going to be okay and have a lot of financial stuff going on.

So, it was really shocking to me when couples started showing up with no attorneys and saying, "Can you just help us figure this out?" And I got to tell you, it was the best work I'd ever done. And so, I just really dove deep on that side of the process.

Michael: So, help us understand what this looks like in practice. If we're talking about... Because I'm not even sure what you call it. I was going to characterize this as divorce financial planning. Is that even an inappropriate label, or do I need to think of this as something different?

Nancy: That's a very appropriate label, the most commonly used label, is "divorce financial planners". And that's the tip of the iceberg. Right? And then for those that really get serious about this, like I have, the forensic stuff comes. And then there's another layer where you could be a mediator, and another layer where you can bring in simple financial coaching, just budget work and financial empowerment for that non-CFO spouse.

So, it's an incredibly diverse niche. What I find is one of the most common misperceptions of a financial planner that says, "I'm going to build a niche in divorce," is they don't really have any idea up front that there's actually about 10 different ways, 10 different niches within the niche of divorce.

And so, in my basic training program, the first thing we do is get clear about, "Who do you want to be in this market? Do you want to be only working with people that you're advocating for? Do you want to be a neutral working with couples? Do you want to do expert witness testimony and deal with lawyers all day long? Or do you want to stay away from that and specialize in a different area?"

So, there's actually many, many different ways to show up in this niche. And it's kind of important up front that you decide where you want to fall. Because the marketing, the business plan, the growth model is completely different depending on which area you want to focus.

How Nancy Evolved Her Divorce Niched Practice [13:25]

Michael: So, start by painting the picture for us of what your practice was, or is, that you built to. What was your version of divorce financial planning?

Nancy: Well, it certainly has evolved over the 12 years. So, I got...I went independent from a large broker-dealer. Went independent in 2011. And I was blessed and fortunate that my core family of clients followed me. And so, I secured my base income very quickly as an independent advisor. And...

Michael: And out of curiosity, just what was the context of the switch to out of broker-dealer to the independent RIA channel? Was it literally around divorce, like you wanted to do it and couldn't do it there? Or were you leaving for other reasons, and then had this new journey?

Nancy: It was both. I had actually gone through my divorce in 2007.

Michael: Okay.

Nancy: And did not want to waste money on attorneys. We actually ended up doing a do-it-yourself divorce. And I fancied myself a brilliant financial advisor, so, "How difficult can this be? I understand it all." Right? And I... Keep in mind, again, it was 2007. And I had 1 primary home and 2 rental properties. And they had both...all those properties... We were just at that very front edge of the Great Recession and the real estate collapse in Phoenix, Arizona, where we were absolutely hit... 1 of the 2 places in the country that was hit the hardest. And I made so many mistakes in the do-it-yourself paperwork by failing to protect myself that 30 days after that divorce was final, when my ex-husband shifted from guilt over the affair that he'd been having to anger and was angry with me for the next 10 years and started making up his own rules, I had absolutely nothing that was enforceable.

So, the 2 properties that he kept, the agreement was we would both refinance by the end of the year. I did, he did not. And then he was not able to refinance and let both properties go into foreclosure with my name on them. And there was nothing I could do about it because I was not properly protected.

So, through that period, I went, "Man." I learned about the CDFA credential and I thought, "I really want to help people not make these kinds of mistakes." And I went to my firm at the time and I said, "Hey, I'd like to do this credential." And they said, "Oh, no, no, no. That's a whole weird, risky legal area that we are just not really interested in. How about you pick something else?"

Michael: Oh, right. Because I guess, from the BD realm, if you're going to do this and charge fees in this, they have to oversee it. Which gets challenging when you literally know more about divorce than they do. Just if you're an expert who still manages to make a mistake, they don't even know how to oversee you to make sure that you're not making a mistake.

Nancy: Correct. Correct. And the reality is the work that you do as a divorce financial planner is non-regulated activities. The most successful divorce financial planners do it as an outside business activity and not part of either their RIA or the broker-dealer.

Michael: Interesting. Because you're not literally getting paid for investment advice, which would trigger your RIA registration.

Nancy: Correct.

Michael: And it's not pursuant to a sale of a product, so you don't need a FINRA license. So, it just shows up as an OBA. Still...I guess still charging fees, but you're charging fees in your outside divorce business. You're not charging fees in your RIA.

Nancy: Correct. Now, there are, though, a boatload of RIAs and some broker-dealer hybrids that will not allow the outside business activity, but they will allow you to do it within the firm, but it's subject to all of the marketing rules and regulations of the firm. That's a really difficult space to do this work. A lot of people are trying. And I have to give kudos to Ameriprise. Ameriprise has come a long way and endorses the CDFA credential, lets the advisors use the specialized software that exists for our field, and even will let them do expert witness testimony, and, as of this time, will not allow an outside business activity.

Michael: Interesting. I guess it's obviously, from the company's end, nothing nefarious, but if it runs through your business, that also means they get their grid piece of it. "You're doing advice fees. We get our piece for our oversight." Then they have to oversee it and support it. But just I'm envisioning they do get to participate, as well, at that point, but they're allowing it.

Nancy: Correct. Correct. And so, I've worked with a lot of advisors that frankly end up leaving a broker-dealer situation to specialize in this work.

Michael: Because it's working, but their platform just isn't cooperating with them to let them do it, and they're not at Ameriprise that's been more hospitable to it.

Nancy: Yep, exactly. Exactly. So, I always started, from day 1, with an outside business activity. So, I have my financial firm, and I started my divorce business, Smarter Divorce Solutions. And I was determined to do a couple of things starting this business. I was determined that I would not use debt, that I would only invest money when I was making it. And so, I joke with my coaching clients that you have to have 1 of 2 things when you're going to start this divorce niche practice, money or time. And I had time. Because I had just this little core family of clients that followed me and took me about an hour and a half a day.

So, I learned how to build my own website, and I learned about SEO, and I learned about social media. And this was all back in 2011. And I did it all myself. I built everything myself. And rather than pay for any marketing, I was a networking maniac. I was out and about in this valley 3 days a week, 4 days a week. And then I would pick 2 people at each event to go have lunch or coffee or happy hour with. And I did that in a rabid way for 6 months. And there is actual science on networking effectiveness, that someone has to see you or have an interaction with you 6 times before they actually will take you seriously and actually refer you business. And it was no coincidence at all that I started that all January of 2012. No clients, no clients, no clients. And in August of that year, I got 5 cases in 1 month.

Michael: So, monthly meetings? 6 meetings, 6 interactions, 6 months?

Nancy: Yeah. Yeah. All these different networking groups. And so, my first 5 clients, it was 2 individuals that had attorneys and were doing the litigation process. It was 2 individuals that were trying to do a do-it-yourself divorce. And they were the non-CFO spouses saying, "Help me, I don't know what he's proposing." And a couple. A couple that showed up together all by themselves. And the first 2 clients that had attorneys, my very first 2 cases went all the way to trial and I had to do expert witness testimony on my very first case. It was horrifying. It was absolutely horrifying.

Michael: I was going to ask, you go through the, "I'm your expert witness. You do realize I started this 9 months ago?"

Nancy: Right? Well, but here's the great thing. And this is what I have to remind people of. Yeah, you're new at the divorce niche, but I'd been a financial advisor for 22 years. And what any advisor has to understand that considers pivoting into a niche like this is it's your lifetime of experience that matters, not the specialized knowledge of your little niche. Your little niche becomes an on-the-job-learning situation where every single client that shows up is going to have a different situation and different craziness. And Google is your friend, and you're going to learn something new every single case. And your knowledge grows, and it expands, and it changes. And then within about 1 year later, 18 months, so a total of 18 months from the time I started, I was averaging 3 to 5 cases every month, generating $100,000 a year in divorce revenue, and getting 30 qualified prospects in front of me that I could convert over to the wealth side of the practice.

Now, I will confess, I did a really, really stupid thing when I started my business because I didn't have the confidence. And there weren't any coaches around then, there wasn't anybody doing advanced training for the CDFA for this niche. I deliberately marketed down, not to my target client. I marketed and took clients that didn't really have any assets to manage, didn't really have that much complicated stuff going on, because I just felt like I needed to learn.

So, the first couple years, I did a lot of divorce work, but I didn't really convert much of it over to the wealth side. But I grew my confidence. I grew my confidence. So, about by 2014–15, I started really dialing in on the niche, the target market that was going to build the success.

How Nancy Leveraged Networking With Women’s Groups To Build Her Reputation [24:11]

Michael: So, all right. So, I have more questions about how it evolved, but take me back for a moment to the beginning as you're doing this onslaught of networking to try to get activity going initially. Just, literally, where did you go? What organization or organizations were you networking at? Who were you targeting?

Nancy: So, the interesting thing about divorce as a niche is every one of us knows somebody. Right? It's so pervasive.

Michael: Yeah.

Nancy: So, instead of thinking about trying to get in front of people getting divorces, I thought about trying to get in front of their friends. And as a female advisor in this market – I'm sorry, if you're a female in this market, you better be niche-marketing to women. Because there's not very many of us and the women are looking for you. So, I knew I wanted to really market to those non-CFO spouse females who had delegated the finances to their spouse, found themselves faced with divorce now, and were horrified that they didn't even know what they had.

So, with that as my target demographic, my target market, I thought, "Well, of course, I'm going to go to the women's business organizations." So, I went to NAWBO, the National Association of Women Business Owners. I joined the chamber group. I went to eWomen. So, every professional women's group I could find, I would get in front of.

Michael: So, not necessarily going to a recent divorcee's networking group or a marital trouble support group, "Hey, if you decide to get divorced, give me a call." You were just in circles that had women, I guess conceivably, who may go through a divorce themselves at some point. But failing that, building a reputation in organizations with a lot of women because that means they're likely to have...they're likely to be able to refer their friends. Someone in their friends and family circle is going through a divorce and will be the non-financial spouse, "non-CFO spouse," as you put it, of the couple. And so, they're going to say something to their friend, and their friend is going to say, "Oh my gosh, I met this woman named Nancy at a networking meeting. She does what you need. You should give her a call."

Nancy: Exactly. And if you know anything about networking and referral marketing, women talk. Right? Women, there's a thing about women that we want to connect people. We are natural-born connectors. And so, my biggest victory, and this was my goal, and in 2014, it happened. Every woman that would come to me for their initial consultation, I would always ask, "Well, how did you find out about me?" And this woman said, "I went to a jewelry party," one of those home parties that we women like to do. "Went to a jewelry party last week, and I was sitting on the sofa. We were all just visiting, and I was sitting on the sofa. And I was telling the woman next to me that I thought I was going to be facing divorce. The host of the party, another woman across the room, and the woman I sat next to, none of which had met each other before that night, in unison all said, 'You need to call Nancy.'" And I just went, "Yes, I have arrived."

Michael: So, how did you just introduce yourself, position yourself out there as you're going to these networking parties to try to do this? I'm going to presume, "Hi, I'm Nancy. Do you know anyone who's getting divorced?," is probably a little too out there. But how were you setting yourself up this way? It's like what were you saying to introduce and explain yourself?

Nancy: Right, right. Well, I never, again, introduce myself as a financial advisor.

Michael: Well, that's good. Then people don't take 2 steps back.

Nancy: Right, exactly. So, I did, in kind of a casual networking environment, I would say, "Well, I am a financial advisor, but I specialize in divorce." And they would go, "What? Really?" So, that's kind of the casual thing, and then we could start the conversation. But I had a beautiful little elevator pitch that I would use. If you go to a BNI group and everybody goes around and has their 30 seconds to introduce themselves.

Michael: Well, do you remember what it is?

Nancy: Of course I did. Of course I do.

Michael: You've probably said it a few times over the years.

Nancy: I would say...I would stand up and I would say, "My name is Nancy Hetrick. And I provide individuals and couples with a kinder, gentler, much more affordable divorce." And everybody would crack up laughing and the heads would pop up and they'd be like, "What?"

Michael: Because everybody's heard the story of divorces that are entirely not kind, not gentle, and not affordable.

Nancy: Right.

Michael: So, you have distinguished on that out of the gate.

Nancy: Yes. Exactly, exactly. And then I would tell my horror story about my divorce, and what happened with the properties, and that I am now on a mission to make sure that these things don't happen to our other friends.

And I was always really careful. I never excluded men in my marketing. I always had languaging and things that will appeal to women, but I never have come out overtly and said, "I only work with women." Now, there are some divorce financial planners out there that do that. I didn't want to do that. And so, I wanted men...if they wanted to come in as a couple, I wanted to make sure the men felt really comfortable with that, as well. So, I had a lot of men that were the non-CFO spouse show up. One guy was a railroad engineer and his wife was a CPA. And he was horrified, and he hadn't paid a bill in 30 years. And one of our favorites was, we called him, Dr. Brad, the veterinarian. Oh my gosh, he just was wonderful. But non-CFO spouse and was terrified.

So, it is...women do tend to be the majority that will go out and look for information first, but certainly not always.

Michael: So...and so I'm struck by this. Just do you just go out and introduce, "I provide individuals and couples with a kinder, gentler, much more affordable divorce," just let it...there it is? "If you know someone who's going through a divorce and maybe nervous that it's going to be a train wreck, 'Now I know who to call.'"

Nancy: Yeah. And I would actually say to them, I would say, "Please do me a favor. And if you know anyone thinking about divorce, please have them talk to me before they talk to anyone else. Because"... And then I would tell a little...I'd put a little bit of fear out there. I'd be like, "Have them talk to me before they tell their spouse. Because once they tell their spouse, stuff can start disappearing. So, have them come talk to me and I will help them get ready, I'll help them get prepared." And that was really compelling.

How Nancy Structures Her Engagements With Clients Going Through Divorce [31:33]

Michael: So, you said as things got going, it's 6 months of doing the elevator speech at the meetings and showing up 6 times. Then all of a sudden people are like, "All right, she's legit. She's sticking around." You get through that proverbial know, like, and trust barrier. And then all of a sudden, I think you said, 5 cases come in the 7th month, after you got through the first 6. So, just for those of us who are not familiar with this space at all, it's like you got 5 cases, or you get a case. What does that mean? What do you do?

Nancy: Yeah.

Michael: What do you do, Nancy?

Nancy: Well and let me tell you. That month was horrifying. Because I had put every ounce of my energy and effort into marketing and networking. I had no idea. I had no retainer agreements, I had no paperwork. I was totally not ready.

Michael: I started marketing, and then people wanted to engage me. I'm like, "Oh, I don't have an engagement letter yet."

Nancy: Exactly. I was like, "Oh my god, now what am I going to do?" So, I begged, borrowed, and stole.

Michael: Great moment just for anybody who's gotten started or remembering back to their early years. This is normal, this is how it goes.

Nancy: Yeah.

Michael: Like, "Oh, I should probably figure out how to do that now that someone actually wants it."

Nancy: Exactly. Exactly. So, I think what is so typical with entrepreneurs is you jump off that cliff and you build the parachute on the way down, and it just works. You figure it out.

So, the engagement looks typically, you have an initial consultation where you identify risks. And I have a beautiful recipe for the initial consultation where it's, "What is...if you could look back on this 5 years from now, what would you like to be able to say about how you went through this process? And what are the risks and barriers that might make that not possible?" And you're really just doing that active listening, and then paraphrasing it back to them, "Here's what I hear you saying. Here's what I hear you saying."

And there is a point in there at which I'm kind of getting that basic financial planning information, "Tell me about your house. Tell me about your kids. Tell me about your jobs." And so, I get kind of a picture of what the financial situation looks like so that then I can say, "Well, here's the concerns I have for you. You mentioned that your spouse works at Intel. Well, I can tell you right now that Intel has restricted stock units and they also have a pension. So, that's going to need to be valued. And let me talk to you about the rules around those things. And if you don't have someone like me involved, chances are they're going to miss this and they're going to miss this and they're going to miss this. So, here's how I can bring value to what's going on. And then let's talk about how we could work together."

Now, in the beginning... Because I wasn't trained as a mediator. And I wasn't comfortable calling myself a mediator, for heaven's sake. But then the silly couples kept showing up. And they were wonderful, wonderful to work with. And so, I called myself a settlement facilitator. I was totally doing mediation, I just didn't want to call it that.

So, but once we have that initial consult, they say, "Yes, help us figure this out." Then I...

Michael: Wait, let me pause you there for a moment though.

Nancy: Sure.

Michael: So, I'm just trying to process. Because you said this initial consultation, it's about identifying risks. And just I hear that from my financial advisor lens, I'm like, "Well, risk of death, we need life insurance. Risk you could get sick, health insurance, long-term care." You're in a different realm of risks though. Your risks here, these are places where you get a really bad divorce outcome because of things that can go wrong that you can lose out on if you don't know what to negotiate or defend. So, like, "There's a pension. Are we going to know how to split that properly or how to value that properly? There's...I guess there's rental real estate with mortgages. Let's make sure we know how the refis are going to work. Been there, done that." So, it's those kinds of things when you talk about this? Because you're essentially trying to get to, "Here are the places where your divorce may go haywire if you don't have an expert like me to help you go through it."

Nancy: Yeah, exactly. Those kinds of risks. And education for the client that, "By the way, your attorney doesn't know squat about finance." And that, Michael, I got to tell you, that was the rudest awakening for me getting into this field, is having an attorney ask me how they should argue their case. And I couldn't believe I was sitting in front of 15-year marriage and family law attorneys who didn't know the difference between a Roth IRA and a regular IRA. I'm not joking.

And so, making sure the client understands if you're going to use lawyers, they're there to get you through the legal process. They're not there to give you financial guidance. They're going to come to you and say, "Well, what do you want? What do you want to ask for?" And these poor non-CFO spouses are like, "What do you mean? I don't know what I want. I don't know what I need. You're supposed to tell me what I need."

And so, it's just a very... The family law system is really... Kind of one of my little soapboxes I get on is in the late '70s, early '80s, when no-fault divorce became ubiquitous in the United States. In my opinion, we made a critical error. We decided to use a criminal system to deal with a family issue. And it's ridiculous. I've never known someone to go all the way through a litigated divorce without coming out the other end feeling punished and bruised and battered. And it just makes no sense to me at all, except for the 10% of human beings that are high-conflict personalities that just simply will not participate in any other option.

Michael: Right.

Nancy: Because those are out there.

Michael: But I think that's a powerful framing though, that just the lawyers are there to get you through the legal process. Which is amplified by the fact that we put it through the criminal legal system. So, they'll fight for whatever you want them to fight for because that's what they do. Which is not terribly helpful if you don't even know what you want or what you need or what to ask for or what's appropriate, beyond it's pretty easy to get into a frame of, "Well, get me as much as you can." And now we're in a contentious divorce.

Nancy: Exactly. Exactly. And it's really interesting to me, too. Because the...I learned, after working in this field for a while and starting to get quite friendly with attorneys, their code of ethics requires not that they get you a fair settlement, but that they get you the best possible settlement they can get you. Which means if they're going to get you more than the law would award you, then they have to take it from the other person. So, it just inherently puts the attorneys in a position where they have to be adversarial or they're not abiding by their code of ethics.

Michael: Interesting.

Nancy: It's a crazy world. It's a crazy world.

Michael: Yeah. So, initial meeting is an initial consultation. You're identifying risks here. I guess you're fact-finding just to understand their circumstance, but you're identifying risks. Because this is just a "I need to show how your divorce may go off the rails if you just use the lawyer or you DIY it because there are financial and other nuances that just takes a person with my expertise and specialization to be able to help you through to make sure it goes well."

Nancy: But it's never that way. Right? We can't be... We have to stop...as financial advisors, we have to stop being data dumpers. Right? People don't care what you do and how you do it. They only care that "you're going to relieve my pain."

Michael: Right.

Nancy: So, the whole point of that consult for me is to shine the light on what they didn't know they didn't know. They had no idea that these things were going to have to be discussed. So, now they know, "I can't do this alone. Because you just talked about 4 things that I never would have even known to ask the question." And I can do that pretty much on every single initial consultation, talk about separate property rules and spousal maintenance and doing some reality checking and things like that. So, they realize in that first meeting, "Ooh. There's a lot more to this than I thought." And that becomes the compelling argument.

So, I never am...I never sell myself. I don't want to ever sell someone on getting a divorce. What I do at the end of the consultation is I say, "How would you like to proceed from here?" And this can be an incredibly long sales cycle. Because it's typically about 2 years from the time that someone first thinks they might be headed for a divorce to the time they pull the trigger on it. I laugh because I just finalized a case in February that had come to talk to me for the very first time in 2013.

Michael: So, 2 years because you're not just having them come when they're filing for divorce. The whole point is you're encouraging, "No, no, no. Talk to me before you tell your spouse, talk to me before you really initiate this so that you can help protect yourself." So, you're talking to people that are still in the, "I'm thinking about getting divorced, but I'm trying to make sure I understand my issues and options." You're getting them at that stage.

Nancy: Exactly.

Michael: And it may take 2 years until they actually go through.

Nancy: Yeah, exactly. And I don't stop following up. We have... part of our culture, part of our values of who we are as a company is the minute somebody walks through our door or we pick up that phone, we just became your new best friend. We're your shoulder to lean on. We're the person you can call when every other professional is going to charge you by the minute. And we're not going to do that. And I'm going to hold your hand and I'm going to help you get through this. Now, imagine. Once I've done that with somebody through one of the most traumatic times of their lives, who else do you think they're going to want to be with as their financial advisor?

And so, it's funny because I get CFPs asking me all the time, "Well, okay. So, what's the trick to making sure that they convert over and stay with you for the financial planning?" I was like, "There is not one." Halfway through your divorce engagement, they're going to start saying, "You're going to stay with me, right? You're not going to kick me to the curb, right?" So, it's just such a natural transition that they can't imagine doing anything else.

Michael: So, you go through this initial consultation. So, then, what comes next, as you're getting a case, getting an engagement?

Nancy: Yeah. Document-gathering. I want to see every document.

And one of the other things I was horrified by, we in Arizona, and in most states, frankly, there's a lot of attorney mediators. I kind of think of them as your reformed family law attorneys where they're like, "I'm tired of the courtroom. I want to give people better outcomes." And they start offering what we call transformative mediation, which is mediation where everybody's in the same room together and we're just...we're working it out. Right? Which is different than evaluative mediation. Which, if you're in the state of Texas, is the only kind of mediation that happens. Where you have a lawyer and a client in one room, the other client and their lawyer in another room. And the "mediator," air quotes, goes back and forth, who's usually just another lawyer or a retired judge. And it's not really, "Let's work it out," it's an orchestrated negotiation.

Michael: Yeah, "I'm going to haggle you down to the point that you find a midpoint that everybody isn't happy with, which means we all made compromises. Now, let's sign it and move on."

Nancy: Exactly. Exactly. And in my opinion, that's not mediation. But what I was going to say is that the horror that I found, there's all these attorney mediators out there. They do not gather documents. They give their client an Excel spreadsheet and say, "Here. Fill in what you have. Bank accounts, retirement accounts." Now, every one of you financial planners out there, how many clients do you have that have no idea that they have a Roth component to their 401(k)? Clients don't know what they have.

So, I'm looking at tax returns. I'm looking at brokerage statements. I'm looking at bank account statements. I'm looking at mortgage stuff, loan documents, everything for the last few years, and picking out what's missing. And there's always stuff missing. They think they've given me everything. I make them pull credit reports so I can go through and say, "Okay. There's this credit card that has a balance. Nobody told me about this one." "Oh, I forgot about that. That card is in the safe." And it's not usually...nobody's hiding anything. They don't know what they have.

And what's really shocking to me is the more money they have, the worse they are at knowing what they have. The worst couple I ever had had an $18-million-dollar net worth. They had a million-dollar account they had forgotten about. I want to be in that problem.

Michael: Nice problem to have.

Nancy: Yeah. Right? But so, the idea that these attorneys were doing this mediation and just never looking at documents was just shocking to me.

So, anyway, gather documents, do all my analysis. There's actually a very customized divorce financial planning software, that is called Family Law Software, and it's kind of the standard for this business. There are some competitors starting to come, but they're not nearly as robust. The gentleman that created that software created the original tax software that was sold to H&R Block. So, he's an MIT crazy genius. Shout-out, Dan Caine.

And the software is amazing. It's really amazing. It takes all the intricacies of financial planning and combines them with all of the intricacies of divorce. So that I can do 20-year cash-flow, net-worth projections for each party individually. We can sit together and we can say, "Well, what would it look like if we did this? What would it look like if we did that?" And so, really is...takes that same financial planning skill that we already have and just applies it to somebody looking at a new next chapter, new reality, and how we can optimize for it, determine how much support they need, or not need, what does the ramp-up look like if someone's going to go back to work, all of those great things.

Michael: Yeah, was just going to ask. When you say "I do my analysis," just what does that mean? What are you analyzing?

Nancy: Yeah. So, I'm going through every document and entering the data into the family...into the financial planning software. And I'm looking at... Well, if I'm a neutral, if I'm working with both parties, and actually it's true even if I'm an advocate, I'm spending time with that person up front to, "What are their goals?" "If you could have your ideal and perfect future, what do you want it to look like? Do you want the house? Or is it too big and you'd rather do something else? And what does that look like?" And, okay, maybe you're only working part-time now and I'm going to have to have a hard conversation with you about the realities of spousal maintenance of Arizona, because it's really ugly.

And so, if we think about opportunities that you might have to be able to make more money, I love asking questions like, "When you were in high school, what did you dream about wanting to do? And what if we got back to that?" And I kind of coach these people that divorce can be a time of amazing transformation if you just let it be. It doesn't always have to be a horrible, vicious end. It can be a real transformative period where you get to be a whole new version of yourself and recreate a future that lines up more with what brings you joy.

Michael: So, similar to how we may do financial planning projections in a, I'll call it, traditional context, just you're getting some understanding of goals and how they want their financial life to look like, with perhaps a little more near to intermediate-term changes. Right? A lot of us are like, "Tell me what you want retirement to be like in 30 years." But you're dealing with a lot more of, "Are we going to wind down the house in 12 months? Are you going to change your work situation in 6 to 18 months?" Because there's a lot of change and flux coming off of this. So, you're doing the divorce equivalent of a financial plan of just literally, "What were your goals?," and then it's like, "Can we make the math work?" Or "How do we carve up the assets to try to make the math work?"

Nancy: Yeah. And one of the things I always say is...

Michael: Or "Your expectations are unrealistic. Let's talk about what you can do."

Nancy: Yes. All of the above. And my specialty, and what I love to teach and train, is creative settlement options. So, we're doing...I can recommend things to people that would never fly in a courtroom. Right now, I have a lot of couples that are going to continue to own a home together. Because for 1 of them to refinance would be idiotic. "We have a 2.4% mortgage, and we got to go get a 7.5% mortgage?"

Michael: Right.

Nancy: Well, that doesn't help anybody. Right? And there's an IRS rule that says, after divorce, if you continue to own the home jointly, and as long as a transaction happens within 6 years, the out spouse gets credit for having lived there even though they haven't. So, they can sell a home and split the proceeds later, for up to 6 years, and they can each take their $250,000-dollar primary home exemption so we can avoid the capital gains tax.

So, that's the kind of creative stuff we're trying to do. I get a lot of that. If we've got kids that are in the second year of high school, "Well, let's leave them where they're at until they graduate, then we'll sell the house." And the beauty of that, too, is for the out-spouse, if the in-spouse is responsible for making the mortgage payment, it doesn't impact their ability to go get a new mortgage on their own house.

So, that's the kind of creative stuff I'm looking at, is how can we maximize what you both get. So, tax creativity. If I've got a really, really high wage earner and the other spouse maybe is a wage earner but never going to be in the income bracket that the other spouse is, well, let's give that spouse all the retirement assets and give all the home equity to the other spouse. Now, we got money you both get to keep because we're not going to give it to Uncle Sam. That kind of stuff.

What Nancy Charges For Divorce Planning Engagements [51:27]

Michael: So, help me understand what this is, I guess, building up to. And maybe it varies a little bit by the nature of the engagement. So, you do this analysis. I guess just what comes next after you do the analysis? Where are we in the divorce process? What's the outcome?

Nancy: It depends on the kind of engagement. But... So, if it's a case that the couple is working with me, then we schedule a 2-hour property division meeting where I, in essence, print out the plan and we walk through it step by step. And I give them all my rationale and reasoning. And I let them know that, "Hey, this is just a place we can start. And everything is up for negotiation." And we just walk through the settlement. And then we start having a conversation about support.

And I'm kind of lucky because here in Arizona, we have certified legal document preparers. So, you do not need an attorney to get a divorce in Arizona. And so, from day one, I partnered with another certified legal document preparer. So that when I...we reached all the agreements with my clients, I could write it all up in just a summary of meetings or memorandum of understanding with the final property division, hand it over to the legal document preparer to do all the legal docs. And I evolved to this, but I've become a one-stop shop where everything happens in-house. We courier the documents to the courthouse, the clients never have to go have a hearing. So, it genuinely is a seamless out-of-court process. And I just built the team to be able to walk through every step of the process.

Now, if I'm advocating with a client and they're working with an attorney, then we're really having that same meeting, but it's with me, the client, and the attorney. And then the attorney is probably going to say, "Okay. Could you run it with this much support? Run it with this much support. And switch that asset around." So, then they'll have me create a bunch of multiple scenarios. And that will be used in their evaluative-style mediation, or in just putting settlement proposals back and forth between the couple.

Michael: So, at what point did you sign an engagement here? I'm assuming that's just after the initial consultation. If they say they want to move forward, "Yes, the divorce is happening. And, Nancy, I want you to help me." That's when some kind of engagement letter gets signed, and then document gathering and data gathering began after you signed an engagement?

Nancy: Exactly. Correct. And there is the...as a CDFA holder, the code of ethics does provide that I cannot be someone's financial advisor and divorce planner at the same time. So, there has to be a clear delineation. The divorce, my role as their divorce financial planner has to be formally ended before I can consider them a prospect on the wealth side.

Michael: Okay.

Nancy: So, if they ask me questions, and they will, during the first engagement, they'll say, "Well, but if I get that, then how are we going to invest that?" And the simple answer always is, "We will get to that part later. Not... That's not what we're doing now. We'll get to that later."

Michael: So, how do you charge for an engagement like this, this thing that you're describing?

Nancy: Yeah.

Michael: With the data gathering, and then the analysis work and Family Law Software, and then the property division meeting. How do you charge for this?

Nancy: The vast majority of practitioners will bill hourly. And I learned the hard way to only take...to take retainers. There's an interesting thing that happens. When somebody gets through their divorce, they are mentally moving on. They're moving, they're shifting, they're doing a lot of different things. And it's not that they don't want to pay you, it's that their life is in shambles. And I do not want to waste my time doing collections.

So, if in an hourly engagement, which would be where I'm working with 1 client, then I always take like a 10-hour retainer up front. And the hourly rates for CDFAs range anywhere from $200 an hour to as much as $600 an hour, depending on your...the time that you've been doing it and the market that you're in, what the going rate is. And on average, we try to price ourselves a little higher than the associate attorneys and a little bit low lower than any partner attorneys, but about the same rate, too, as whatever a CPA in your market would charge per hour. So, that's kind of what I advise people.

When I'm working with a couple though, I have gone to flat fees. So, I do flat-fee work because, frankly, I've been doing it so long that I'm really good at it and I can do things really fast. And so, it got to the point where just I couldn't raise my hourly rate high enough to make it make sense. And so, I just went to a flat fee and clients love it, they love knowing up front, "This is what it's going to cost."

Michael: And what's a typical flat fee?

Nancy: I do a value-based flat fee. So, the reality is the more money they have, the more money I'm going to save them and the more value I'm going to bring to the table. So, if their net worth is up to a million dollars, then it's a flat fee of $5,000. $1 to $2 million is $7,500. And $2 to $4 million is $10,000. And over that is negotiable.

Michael: Okay.

Nancy: And that's our full mediation engagement. But then I do have add-on fees. Like if you have a rental property, that's an extra $1,500 bucks because that's a whole extra set of analysis. If I have to do a separate property tracing, there's an extra charge for that. If you have a business that you want me to analyze, there's an extra charge for that. So, that's kind of how we build it.

Michael: And so, when you do this on an hourly basis, so I guess some of these numbers may be small. If you're a couple hundred dollars an hour and you're billing a 10-hour retainer up front, those may be more in the $2,000 to $4,000-dollar engagement level?

Nancy: No. Because when you're billing hourly, if the client is working with an attorney, that thing can stretch on and on and on. And so, a 10-hour engagement can just as easily become a 50-hour engagement. And the initial retainer is just the beginning.

Michael: And from the...just the pure business end, do you have this full, I think of it like, lawyer-style retainer? Like there's an escrow account and you apply bills against an escrow account and you have to manage to that. Do you have to deal with all those layers or is this just a little bit more informal, like, "I'm going to bill you for $2,000... I charge $300 an hour. I'm going to bill you $3,000 for 10 hours up front, and I will refund you whatever we end up not using"?

Nancy: Thank goodness the latter. Yeah. It's only the Bar Association that requires all of that stuff for attorneys. So, what I tell clients is, "Look, I know I'm telling you that it's an hourly rate, but I'm going to tell you right now I don't bill like an attorney. I'm not going to bill you for every e-mail, I'm not going to bill you for every phone call. I'm going to bill you when I'm putting meaningful work in on your case. So, rest assured that it's not going to be like your attorney."

And then we have...there's another piece of wonderful software for time billing, that's actually created for attorneys, but where I can...we log our time, and then they get statements and they could see exactly what we were doing when.

Michael: And what tool do you use for that?

Nancy: It's a software called Bill4Time. "Bill" and the number "4". Bill4time.com. And it's designed for attorneys to track their time expenses, the client accounting records, and produce invoices, and all of that. So, it's pretty effective.

Michael: So, you build up around this model. And so, just am I thinking about it right? That when you talk about getting cases, a case per month, multiple cases per month, these are kind of $4,000 or $5,000 per engagement on average?

Nancy: Yes.

Michael: Simple ones are smaller, some crazy one is 10X that because the lawyers go at it, and you get dragged into a 50-hour engagement. But it sounds like the typical work is it's a $5,000-dollar engagement.

Nancy: Yeah.

Michael: A little smaller for simple ones, a little bigger for when there's more dollars at stake.

Nancy: Yeah. That's an absolutely fair estimate.

Michael: And so, has that just become the ongoing work and business model for folks that do this? I think you'd said after 18 months, you were getting like 3 to 5 cases a month ongoing because you built your reputation, you built your network. And so, at that point it's like, "Okay. So, I'm now doing $15–25,000 a month in divorce fees."

Nancy: Yeah. Except that at that point, you're insane. Right? Now. Because now, every single person that has used me is now telling all their friends and family about me when they know anyone getting a divorce. So, literally...

Michael: It's like, "So, unfortunately, it starts to work."

How Nancy Managed Growing Pains While Scaling Her Practice [1:01:29]

Nancy: Oh my gosh. And it's... So, I got to the point where it was like, "All right, I have to hire." Because you will...as you grow anything, if it gets successful, you will hit the wall.

Michael: Right, right, right.

Nancy: You'll be working 12, 13, 14 hours a day trying to keep up. And then, of course, if you're doing all the client work, you stop doing the marketing that got you the clients in the first place. And so, then you get on this roller coaster of giant revenue, and then nothing, and then giant revenue, and then nothing. And so, it's a very delicate balance.

And hiring is probably one of the most challenging decisions that I find people don't want to make. The advisors that I work with, it's horrifying to them to commit to paying someone a salary. Because it feels like that's going to come right out of your own pocket. And it's a really difficult mindset to get around because you're holding yourself back. You will never be able to grow beyond your own capabilities until you get all the stuff off of your plate that you shouldn't be doing. And I had a business coach that said, "If you want to make $250,000 a year, then take that divided by 2,000 hours. And what's the hourly rate? And whatever that hourly rate is that you want to make, anything you can pay someone else to do for less than that, you should be paying someone else to do. As long as you then use that time to do the one thing that you are really good at."

So, I made the leap, I hired a full-time admin, and that really helped to get some capacity. And... But I had to...I stopped marketing for 4 years. Because the refer...it had become a 100% referral business very, very quickly. And I struggled to keep up. So, I ended up growing from my first, just having 1 admin. Fast-forward, we grew and grew and grew. And at the peak, I had 8 full-time employees. I had a paralegal on staff. I had another CDFA on staff. I had a mediator on staff. And a full-time admin. And then I had a program manager for my training department. And we were approaching a million dollars a year in revenue. And I was miserable. I hated it. I had gotten to the point where I just felt like I was swimming all the time. And it happened so quickly.

And that was my goal when I started, is I said, "I want to run a business that's going to run without me if I want it to." And at that point, I was not really doing very many divorce cases at all. My staff was doing most of the divorce work. And I had a full-time operations person on the financial advising side to keep that ship running right. And I was just swimming. And it took a while for me to notice it. But when I quit doing the divorce cases myself, over a 3-year period, the revenue dropped in half. And by the end of 2021, the revenue on the divorce side was less than half of the salary that I was paying the 2 people to do it.

And I was on my 4th succession advisor, because I was trying to hire associate advisors that I could start grooming to be the succession plan on my wealth practice. And it was a revolving door of the wrong people, the wrong people, the wrong people. And I just stopped and I was just like, "I am beating my head against a brick wall. The universe is telling me I got to do something different. Because the divorce business is dying. I can't get anybody to help me on the wealth side. And now what started as a $20-million-dollar book is a $65-million-dollar book that I can barely keep my hands around. And I spend every night feeling guilty because I know I'm not giving those wealth clients the service that they deserve."

And I had a major ‘come-to-Jesus’ moment. I fired 6 of my employees. And I contacted 2 female financial advisors in town that I had known for about 10 years that were business partners. And I said, "Guys, I'm having some growing pains and I wonder if you'd like to go to lunch." 3 months later, they were buying out my practice.

And we actually positioned it as a merger. And I'm their senior divorce specialist. Did a 1-year transition with the wealth clients and only 1 client did not stay. So, probably one of the most successful transitions of a wealth practice that's ever happened. And my divorce revenue, in 1 year, went from $75 grand to $250,000 last year. And I am back in the trenches doing the divorce work. And I forgot how much I love it, and I forgot how good I am at it.

Michael: So, Nancy, I'm fascinated by this journey, this rollercoaster journey of it. So, just I want to make sure I understand. So, you get going in the divorce niche, and it's going well, and then it's going better. So, you hire an admin. And then you hire a paralegal and a mediator and another CDFA to help. And keep adding people, because all these clients are coming in because we're serving them well. And it's growing and getting bigger, and it's ramping up, except you need a lot of people. And so, you get to this point of it's a million dollars of revenue, the staff mostly does it, but you're miserable.

Nancy: Yeah.

Michael: I guess where was your time going at that point? What were you doing that's not happy and fun anymore in the midst of all this?

Nancy: Managing humans. Which I have a very high personal bar of excellence for myself. And I learned that when you try to impose that on other people, they kind of don't like that that much. And so, that was a big part of it. But then just the CEO duties of keeping a business that size running, all the different regulatory items and paperwork, and we had started doing the legal documents. And so, there was just a lot of just yuck. And at the same time, I had also started my training business. I had started teaching and training other CDFA holders, which is really where my heart is. I did not go to school to become a financial person, I went to school to be a teacher. And that's my happiest place on the planet, is up in front of a classroom, up in front of a group of people.

And so, as we grew, what occurred to me, too, is when you do this work, there's only so much one person is capable of doing. And if you're going to have a financial firm at the same time, you're going to really max out at about 3 cases a month. And if you're going to do more than that, then you have to start to build this infrastructure, which I was attempting to do. And was just... had to double-check and manage everything.

And I realized, also, I made a critical error in the beginning. When you first start to hire people when you're having rapid growth, you will make the mistake of hiring people to complete a task. So, they'll be task people. "Okay. I need somebody who can make appointments for me. So, I'm going to get this low-end receptionist. And then I need somebody who could do all the paperwork for me on the new accounts. So, that can be a low-level person."

And so, then what happens is you get through phase 1 of your growth and you're surrounded by a bunch of task people. And now I need leaders. I need leaders that can lead this thing so that I'm not having to do the supervision of every single task. And it's not the same people. And so that's where I had to just realize that the same people that had helped me grow were not the same ones that were going to help me lead this company forward. And I fired 5 people at low salaries and got 2 people at high salaries who can be self-driven, and lead their own world, and I don't have to double-check everything they do.

Michael: And so, that was part of this change when you hit the wall, to let a whole bunch of people go, was to say, "I'm going to let go a lot of my admin folks, and then hire fewer people at a much higher level. Who can still do some of that work, but are much better at self-managing, and getting it done, and taking initiative in other areas." And 2 good ones ended up being more effective than 5 at a lower level?

Nancy: Yes. Once I removed all the noise. I removed all the noise. I got back on the client front lines. And so, then it just started to soar and everything feels... I'm so much happier. Oh my gosh, I'm so much happier. And interestingly, I didn't know if it was going to be possible, but I've replaced the revenue that I was getting from my financial firm... Let me put it this way. The profit I was getting from my financial firm has been 100% replaced by my divorce practice now. So, it was absolutely the right thing to do. I'm a much happier person, my employees are much happier people.

Michael: You have more profits with 1 or 2 people than you did with a million-dollar practice with 8.

Nancy: Yeah. Yeah. And actually, I have 3 full-time employees right now. One of the things I do do is I... Some CFPs that get into this business realize they don't really want to grow...they don't want to have to market, they don't want to have to grow a business, they don't want to have to do a website. So, I have a licensing agreement. So, there's actually a Smarter Divorce Solutions in Indianapolis, and there's a Smarter Divorce Solutions in Milwaukee, and there's one in Charlotte, North Carolina. And nothing that ever is going to make me rich, but it helps those people really be successful.

Michael: And how does it work? Just because you're getting so much divorce business, you refer it to them. And since this can be done virtually in a Zoom world now, they get to service the clients from wherever they are?

Nancy: I do a little bit of that with a gal in Charlotte. She's actually going to relocate to Arizona and ease more into a business partner role with me. But with the others, what has happened is, because I'm now 12 years in in a very successful business, now I pay for really good online marketing. And we are... our SEO and our footprint on the internet is powerful. So, for these other locations, they just become part of our digital marketing. So, we're doing their online marketing on their behalf. And they pay me an intellectual property cost every month, very low and affordable. And I get 5% of their revenue. So, it works for them because then they can focus on what they're really good at and not have to worry about online marketing.

Michael: Because at the end of the day, just there are people that are googling for "collaborative divorce," "low-cost divorce," "gentle divorce," whatever the keywords are, that you've found you've been able to build traction with?

Nancy: Yeah. And divorce financial planning. People are looking for financial experts in divorce. And you pretty much can't google that in any of my target zip codes without my ads coming up right at the top. And we do retargeting. I love... one of my favorite ads is when somebody googles "Phoenix divorce attorney," my ad comes up at the top that says, "Did you know you don't need attorneys to get a divorce?" Which nothing against the attorneys, but we need to educate the public.

Michael: I like that. They search "Phoenix divorce attorney" and you have an ad that says you don't need an attorney to get a divorce.

Nancy: Yeah. And then the ads follow them all over the internet and we start showing up on Facebook.

Why Nancy Chose A Merger As Her Succession Plan [1:14:08]

Michael: So, help me understand. As you're building and scaling this divorce practice, what was happening on the wealth side of the business?

Nancy: So, I've just told you about all the different irons I had in the fire, right? Okay, wait until you hear this. I also managed my own money. I had my own ETF custom portfolios that I was trading. This is how insane I am, right? "Oh, I can just do everything." But you know what? It was working and I'm good at it.

Michael: So, who did you build custom ETF portfolios with on the side?

Nancy: Oh, no, me. I had my own models, my own model portfolios and individual stocks. Because I grew up in Schwab's private client model where I was the portfolio manager. So, I'm a money manager by background, not a salesperson. And so, yeah, I just had been running my own money. My wealth clients love me. They loved me right up until the moment I said, "I'm changing things." And they referred clients to me. And I'm feeding people over to the wealth side. And I was an XYPN advisor for 2 years. Because I had to start hiring other advisors, and so I had to be fully independent. And so, yeah, I was just doing it all. Because, "Why not? I could just do it all." Lasted for 10 years. But it was just way too much.

Michael: And so, where did the growth of the wealth practice come from? Was it all divorce?

Nancy: Yes.

Michael: The segment of divorce clients that got to the end and were like, "Nancy, I get to stay, right?" I'm going to presume a lot of them, you don't even have to sell it at that point. You've been so deeply involved with their finances ongoing, it's just a brief, "So, just to let you know, if we're going to keep working now, I have to move you over to my advisory firm. Here's how it works. We good?"

Nancy: Oh, not even that. It's the last step of the divorce process is the new normal session. And I sit down with them with a checklist of what are the next steps. And one of the steps is, "Okay. You're going to get part of this 401(k) via QDRO. So, we need to open an IRA. Would you like me to help you with that?" "Yes. As a matter of fact, I would." "Okay, great. Now, we're just going to open accounts and get everything set up on the wealth side." So, it's a pretty smooth transition, it goes pretty easily.

Michael: So, I'm struck by the discussion, though. And I think you said you went through 4 prospective successors trying to transition the business?

Nancy: Yeah.

Michael: So, tell us more about this succession planning journey.

Nancy: Oh my God. So, I had to stop and realize that the one common denominator here is me. So, "What the heck am I doing wrong?" Well, I was fishing in the wrong pond. I came from a big box, Charles Schwab. So, I thought, "You know what? I'm going to rescue someone out of the big boxes," just like I felt like I was rescued by going independent. And so, I was hiring people from Vanguard, from Fidelity, from Schwab.

And what I came to understand is most people that work at those big boxes and have been there for some time, they thrive on structure. The structure and the systems and processes that are in place for them. And when I would drop them into my entrepreneurial, fast-paced world where we all have to clean toilets, they were fish out of water. They just couldn't cope with that kind of an environment. In fact, the last one I had, she said, "Nancy, I didn't even know this about myself. I need the box. I like the box. I want to stay in the box." So, I realized that.

So, then I realized that the advisor that was the right fit was already an independent advisor. They didn't want to come work for me, they were out there doing it themselves. That's when I started thinking about, "What if maybe I look at a merger possibility?" And that's where the conversation started with the 2 women that I know. And it was absolutely the right way to do it. Because I needed someone who already had the skills of being a successful independent advisor.

Michael: I'm struck just by this dynamic of you spent, what I'm going to assume is, years trying to work with various successors. And then ultimately decided, "Oh, maybe we should do it as a merger instead." And then 3 months later, it's all done.

Nancy: I know. Right? That's kind of the way I work in the world. There's personality tests and things, and I'm very much a quick-start kind of person. But I'm also very high in fact-finder and research. So, I do the research. But when the research is done, I rip it off and move.

Michael: So, how did this merger... I guess just I'm trying to understand the mechanics of how it got done. Are you still serving your, I think you said it was a, $65-million-dollar client base? Are you completely out of that, that's theirs, and you're solely doing divorce work now and you just...you're getting, or got, a payment for the sale of the business? What was the actual merger?

Nancy: Yeah. As of March 31st, my duties to my prior clients are done. They have fully assumed my original practice. And I spoke with... We had 1-year transition where I helped the transition along. But I am still an IAR, an investment advisor rep, for their firm. So, that’s when I hand them a divorce client who now needs an advisor, I can get trailers, I can get referral fees.

Michael: So, essentially, you get paid as a solicitor. But rather than going through all the solicitor disclosures per se, you're just literally an IAR of their firm. So, you're soliciting, by definition, that you're an advisor with their firm.

Nancy: Yeah. Yeah. And what I've done for this business model, this transition, also, not every advisor is right for every client. So, I actually have solicitor agreements with 3 other advisors that each have their very unique qualities. So, if I get somebody who's a high risk, wants somebody picking stocks, I've got the perfect advisor for them. If I've got the younger professional female, I've got the perfect advisor for her.

And so, I've kind of very carefully chosen my advisor partners so that I... Because I kind of have to. If I don't help these people land in the right place, I lose sleep at night, once the divorce is over. And that's actually really hard for me because I get really close to these clients.

How Nancy Structured Her Solicitor Advisor Agreements [1:21:15]

Michael: So, out of curiosity, just what do you charge, or how did you structure your solicitor revenue-sharing payment? Is it a 1-time fee, is it a percentage? What do you find a fair percentage for these types of clients you lob up there, as it were?

Nancy: Yeah, I struggled with that a little bit. The only model that I had to go by was the models like NerdWallet and Wealthramp. And I was on the Wealthramp platform. And if they gave me a client, they were charging me 25% of the fee year 1, 15% year 2, and 10% in perpetuity. And I thought, "Well, that's an okay place to just start throwing it out there." And I thought about, "Do you want that or do you just want a bigger percentage for like 2 years?"

And ultimately what I landed on... Because I...my heart, I just want these people to all be taken care of. And so, my select advisors, we all just agreed on 10%, 10% in perpetuity. That's it. That's all I want, that's all I need.

Michael: So, and then whatever was left on the wealth business and just that was sold, you had whatever financial terms were set to that and that's a separate bucket of money, as it were?

Nancy: Yes. And I self-financed that. And so, I financed that for them. So, it's a 6-year payout deal, typical. We hired FP Transitions to do the book appraisal and a formal sale.

Michael: Interesting. And so, just you follow their process, basically? FP Transitions did the valuation, you come up with a number based on that, "Here's the number." Seller-finance for 6 years.

Nancy: Yeah, exactly. And it was nice because I could customize the deal, as well. Normally, there would have been a much larger down payment. But because I'm handpicking my successors, I was able to structure the deal in a way that felt really comfortable for them. And I was happy to do that.

Michael: Which means less of an upfront down payment. You're confident the revenue is going to transition. They get more room then to pay you over time from the revenue that they're generating off of servicing it.

Nancy: Correct.

Michael: And you don't have to do that work anymore, you can get back to your happy place.

Nancy: And I will tell you, now that it's done, that year was the most stressful year of my entire life. I've never been under that much stress in my life, even during my divorce.

Michael: Of doing the sale transition?

Nancy: Yeah. Yeah. It was a lot.

Michael: What made that so stressful?

Nancy: Because it was going on at the same time as the employee transition. So, I got new employees. Oh. And I had owned my office condo. And I sold that, too. So, we're moving. New employees. And I'm going to travel to Texas and travel around and see all the clients with the new advisors. And when you're negotiating selling a practice, they started doing their own due diligence and it became not easy. Because it was...then was discovered is the data that I was putting out, that my underpaid employees were producing, was inaccurate. And I had to go back and redo everything. And, yeah, it was a nightmare. It was a nightmare. And I'm a person with autoimmune conditions.

And so, I just...I hit the wall. From a health standpoint, I just...it was not good. It was not good. Now, a year later, I realize it was the best darn thing I ever did. And it was smart and it was hard and I would do it all over again in a heartbeat, only I probably would have done it sooner.

The Surprises And Low Points Nancy Encountered On Her Journey [1:25:10]

So, Nancy, as you look back on this journey, what's surprised you the most about building your own advisory business?

Nancy: I think what has surprised me most is how much stinking fun I've had. It's really...I've really enjoyed it. I am ruined forever, I will never be able to be anyone's employee ever again.

Michael: I believe the term is "unemployable."

Nancy: I am unemployable, absolutely. And I didn't...I wasn't prepared for how creative it would feel. It's an incredibly creative thing. I can remember being 5 years in and having 3 employees, full-time employees, standing in front of me. And I looked around, and I looked at all my content and my book that I had published. And I thought, "I built this. I built this from nothing." And it was just like, "Wow, this is awesome." Just having a ball.

Michael: So, tell me more about the low point then on the journey.

Nancy: There were several low points. I'm a very... People matter to me. My employees matter to me. My clients really matter to me. In fact, I had a business partner when I worked at Charles Schwab who said, "No, Nancy, your best quality is also your worst quality. You actually care about these people." And he was right. But so the low points came when I had employees that were dishonest. When I had an employee accuse me of being dishonest, because that's my integrity is one of the highest values that I hold. So, those interpersonal dynamics of conflict. I hate conflict. So, "Oh, let's be a divorce mediator. Great."

Michael: I was going to say. For someone who says they really don't like being in conflict situations, you picked an interesting niche.

Nancy: Yeah. That's the universe's little sense of humor that, "Oh? Oh, yeah? Okay. Well, we're going to help you deal with that." So, those things have been difficult. Feeling like I might have missed something in the early days that disadvantaged a client. Twice I had to fall on my sword. I had a couple come back after the fact that said, "Hey, this thing." And I said, "You are absolutely right. Since I worked with you, I have learned about that thing and we can fix it. And you come in here, and we're going to fix it, and I'm not going to charge you a penny." And I will do that.

Michael: Were they at least fixable?

Nancy: Yeah.

Michael: In theory, some of those are like, "Ooh, I don't know if we can fix this."

Nancy: Yeah. I didn't know at first. And I had to get a lawyer involved. And we had to basically do an amendment and a different kind of a legal document. But yes, it was fixable. And had it not been, I would have refunded their entire fee, of course, that they had paid me originally. And I would have worked with them to determine an appropriate remedy. I don't know what that would have looked like, but it was horrifying. It was horrifying to me.

Michael: And I guess the follow-on question in that domain, how does E&O insurance work for you, particularly if this is done as an OBA? So, your advisory firm E&O coverage presumably doesn't cover it. Is there separate coverage that you get? Can you get it?

Nancy: Yeah, there is. There is, actually. And Markel Cambridge is the only provider in the country that does divorce financial planning E&O specific. And they're amazing. And nobody should do this work without having a policy through them. And it's not that expensive, it's $1,200 bucks a year, or $1,500, depending on how much work you do.

Michael: Interesting. So, Markel Cambridge is the one that's writing that particular version of a policy?

Nancy: Yeah, exactly. And it's tough because some of the people that are not doing an OBA, their firm will tell them, "Oh, no, don't worry about it. You're covered." Yeah. If you have Markel Cambridge review their E&O policies, they'll poke the holes in it and show you where you're not covered.

The Advice Nancy Would Give Her Former Self And Younger, Newer Advisors [1:29:39]

Michael: So, what do you know now that you wish you could go back and tell you 10, 12 years ago as you were getting started down this path?

Nancy: I would have said, "Don't be afraid. You already know what you need to know. You'll learn the rest as you go. And be willing to be uncomfortable. Be willing to be uncomfortable in your shoes for a few years. And you'll reap all the benefits."

Michael: Because at the time, you weren't comfortable to be uncomfortable?

Nancy: I deliberately did not market to attorneys because I found them so threatening. And that was just a completely false fear. Once I met attorneys, I was like, "Oh. They're just people. And they don't know squat about finance. Oh, this will be fun." And it was just we have so many...our amygdalas are just...they're just driven to hijack our behavior. And we don't have any sabretooth tigers chasing us anymore, so we make up things to be afraid of all day long. And it's almost never anything worth being afraid of.

Michael: So, other advice you would give younger, newer advisors that maybe want to explore the divorce niche?

Nancy: Recognize your area of the market. For young advisors... I have some young advisors that are actually XY advisors that specialize in young families with children, or 1 area of divorce that they specifically know about or have personal experience with. Because it can be difficult.

Michael: So, don't go all things divorce.

Nancy: Right.

Michael: Just as you said earlier, divorce is actually 10 different subdomains within divorce. So, get clear on which one in particular you're going after.

Nancy: Right. And the prerequisite for getting a CDFA credential, you have to be an advisor for at least 3 years. So, it's not something that you take on straight out of the gate, unless you're going to partner with somebody like me that can...you can bring in as an expert and you're going to be the relationship person, or that kind of thing. But this is important work. It's really important. And the consequences to the clients are so much bigger than just traditional financial planning. And so, you have to really understand the gravity and make sure that you make up your mind that you are going to be the best in your market and you're going to know what needs to be known to help these clients.

Michael: So, what comes next for you on this journey?

Nancy: Oh, well, I am... As I mentioned, I have a new business partner in Charlotte, South Carolina...North Carolina, who I actually trained in 2017. She's going to relocate here in 2 years. I love the teaching and training. But I have a concept. The biggest challenge that we face as divorce financial planners is education, public education, and making sure that people getting divorces in this country understand that we are a critical person that has to be part of their team for success.

So, I would like to create a national directory site of qualified divorce financial planners who are really doing the work, and doing it well, and create a national voice and national PR and really get this country to wake up. Because my mission kind of changed. My mission now is I literally want to change the way that we do divorce in this country. And I'm going to need to build an army to do it. And so, I've been building the army for about 6 years now, and it's time that we give that army a voice.

What Success Means To Nancy [1:33:39]

Michael: Very cool. Very cool. So, as we wrap up, this is a podcast about success. And just one of the themes that comes up is the word "success" means very different things to different people. So, I feel like you've had several of these journeys, building the divorce business, and then retooling, and then building the wealth business, and selling and exiting. And so you've had a lot of different business successes through this journey. How do you define success for yourself at this point?

Nancy: Yeah. Well, it's interesting. Because I don't have to do anything anymore. And so, I did put a lot of thought into that, of what do I want. And so for me, success has become impact, purpose, and legacy. And that's what I'm striving for. I want to have an impact, I want to matter. I want to be able to make life better for people that are in pain. And that feels really good. It gets me upery morning.

Michael: Very cool. Because the sale of the business means you don't necessarily need this for work anymore. Now, we're in the mission stage.

Nancy: Yeah, exactly. Exactly.

Michael: Very cool. Well, thank you so much, Nancy, for joining us on the Financial Advisor Success Podcast.

Nancy: Thank you so much for having me. I enjoyed it very much.

Michael: Thank you.