#FA Success Ep 376: Accelerating Growth To 30 Clients/Month With Affordable Advice(-Only) Services Where Clients Can Keep Control, With Eric Simonson

Resources Featured In This Episode:

• Eric Simonson
• Abundo Wealth
• Plaid
• Vanguard
• Fidelity
• Robinhood
• RightCapital
• The FIRE Movement
• XYPN
• The Advice-Only Network
• WealthTender
• Gerber E-Myth

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Full Transcript:

Michael: Welcome, Eric Simonson, to the "Financial Advisor Success" Podcast.

Eric: Thank you, Michael. And thank you so much for inviting me to be on today.

Michael: I really appreciate your willingness to join us. And what I think is going to be a really cool conversation today around what it looks like with some of these, I guess what I would call relative to the industry level, kind of emerging models around advice-only firms, which I think we'll probably talk more in a moment about what that is and what that means. And what it looks like when you start to scale them up, because I feel like there's always been a phenomenon in the advisor industry that I've certainly witnessed for more than 20 years of people that come along and say, like, I've got the new business model, the new thing, like, it's a great way to work with clients and it's really working with mine and they're compensating me well. And it's really financially successful.

And I've seen a lot of them over the years. I'm like, I totally get why that's cool for you and the clients that you serve. Like you've got a model that seems to really fit the clients you're working with and it's compensating you well for your time and you're making good money. But I look at the model a bit and I'm like, but I'm really not sure this could ever go beyond you. Like I'm not sure it maps to the point that you could actually scale it. And there is to me just a bit of a difference between I made a business that serves my income and lifestyle well. And that's fine and great. Like more power to everybody that does that. But then folks that say, well, this is like a new emerging business model that can be mainstream, where I'm like, okay, but how far can we really grow this thing? How far can we scale this thing? Like can it grow big enough to actually really serve mainstream?

And I feel like you're doing some really interesting work in this space around advice-only models with multiple team members at fast growth rates with lots of hiring and solving real time what these challenges look like and how we actually scale these models. And so, I'm excited to talk about what it looks like when you take advice-only models and really try to start scaling them up to multiple advisors and of high volume of clients.

Eric: Yeah, Michael, I will say just to add to that, we have viewed that as our greatest challenge and mission as a business is to actually prove to the world that you can build a sustainable, scalable, advice-only business. And so I'm so thrilled that that's how you open it because that to us is, yeah, it's such a fun project that we're tackling. And so I'm happy to share all the details I can about it.

What Is "Advice-Only" And How Does Eric Help Households Implement Investments On Their Own? [06:17]

Michael: I think just to get started because I'm sure not everybody on the podcast, or listening to the podcast, has even really heard the term or familiar with the label. Can you just explain, as you framed it, like you're trying to build a sustainable and scalable advice-only business. So what does advice-only mean?

Eric: Yeah, you can think of it in a lot of different ways. I think the easiest is simply just we don't take custody. So we don't actually manage any investments directly. We don't have discretion, of course. It's truly just giving people advice on everything in their financial life, including investments. But in terms of the implementation of those investments, we actually help our clients do it on their end versus us doing it for them. So that's probably the biggest differentiator, I would say.

Michael: Okay. And so, just sort of, I think about it functionally. We give estate planning advice, but we send you to the attorney to implement. We might give you tax advice, but we don't prepare your return. The CPA goes and does that. And even a lot of the fee-only world, we may give you insurance advice, but we don't write the insurance policy because we're not licensed and don't take insurance commissions. And so, maybe my framing, you can validate if this is a good way to think about it. Like you're simply going another step down that road, which is, oh, and even on the investment end, no, we don't need to take it in-house and manage it discretionary. We're just going to help you get set up with the systems to implement it yourself the same way that someone might DIY their own tax return or legal zoom their own estate planning documents or fulfill any of the other parts where we can give advice and then they can go implement themselves.

Eric: Yeah, that's exactly right. The investment piece, I think, can sometimes throw other advisors off a bit because they think, how can you trust or how can you ask an individual or a family to manage that on their own? And we've really put a lot of thought and effort into trying to figure out, how do we make sure that people feel supported? Because they are the ones pushing the buttons. But how do we make sure that they feel supported and also ensure that they're not going to make any mistakes doing that?

And so that's, to us, getting back to the idea of how do we scale this thing and how do we make this a real, real business? We knew that that was a problem we were going to have to solve at scale. And so we've spent a lot of time not only building out just tutorials in terms of, here's the step-by-step on how you trade, here's the step-by-step on what you're going to invest in, but also building out tech, really custom tech that doesn't exist anywhere to provide another level of peace of mind for our clients that when they are placing those trades on their own, we're going to see it. We're going to know they did it right. And we're going to be there with them every step of the way.

Michael: So, all right, to lots of questions here as you framed that up. Let me just start with coming back to the question that you, I think, framed up so well. Like, tell us more about what you are doing to try to make sure they feel supported. And that they're not going to make mistakes on their own implementation or I guess even the mistake of implementing it wrong and the mistake of taking your advice recommendations and never getting around to doing it at all because I know some of us see that too.

Eric: Yeah. The first thing I would say is when we started, it was the standard, let's screen share and let's watch you actually execute these trades. And that was how we did it. And that was fine. And we still do that when we're asked to do that. But we realized that wasn't going to allow us to keep our prices as low as we wanted and it wasn't going to allow us to, you know, build a really, really healthy business. And so what we did is we actually really early built a tool, a custom tool that allowed clients to go in and enter in some information, take a risk assessment. And then it would essentially guide them through, Hey, here's our recommendations. Just like we would as humans. And then it would walk them through a kind of a step-by-step, okay, you know, load up your custodian, load up Vanguard, load up Fidelity. And then place trade one place, trade two, etc.

And it was really kind of a guide for them to do that without us on our end, holding their hand up in a screen share through it. And we beta-tested that with, a handful of clients and they loved it. And, you know, I think the really wonderful, frankly, surprising thing was that we had not only our very tech savvy DIY clients that were like, this is great. Easy-peasy, done. We also had, you know, older clients, who were like, that was super smooth, super easy that we're able to do it. And really we found pretty quickly that there was a lot of adoption with that way of doing it.

So that was great, but we knew that that didn't solve the other problem of they're still the ones doing it. And we don't, even though we gave them the recommendations, did they actually, they said they did it correctly, but did they actually do it correctly. So the next iteration of that is we actually built, as part of that tool, through Plaid, we built a connection that allowed us to essentially see the transactions they made. So, if we told them buy 80 shares of VTI, we got a report that says, this is what they did, you know, and it would give us, did they do it correctly or not? And that I think was a game changer for clients to know that we're seeing what they're doing. And that was kind of the next version of that and now we're continuing to enhance that. And again, without taking custody, try to get as much visibility into the account as we can. If that makes sense.

Michael: So, can you share a little bit more. I'm curious, even just for the first layer of this tech, you said, client-centered information, take a risk assessment. I get that. A lot of us have tools to that extent. Guides them through recommendations. Okay, I can kind of visualize that. We recommend you buy this and that, and here's a little bit more education around it. Then you said like and it starts to walk them through step by step of loading up their Vanguard or Fidelity or whatever their brokerage account is, and start to implement their own trades without needing to hold their hand through it.

So, I'm just trying to visualize more what this is, what you created. I mean, like, is this general instructions on how to trade? Have you gone through 10 of the most popular brokerage platforms and literally recorded your own DIY instructional screen share videos of how to actually enter the trade into the Vanguard interface, the Fidelity interface. What does this walk them through step by step guide thing actually look like that's working for you that they're actually doing it

Eric: Sure. Yeah. The tutorial is essentially what you just said, which is, we went through the top custodians, top platform, you know, Vanguard, Schwab, Fidelity, and we recorded, we made screenshots, we got all of the accompanying information we needed, and then plugged it into that tool. So, it shows clients on the trade ticket, here's what you're going to do. So, yes. It's really not more fancy than that.

Michael: So you literally like.... There's not more fans than that, but like literally screenshots and video captures of like, this is the Vanguard 401k trading screen. Like see this field here? That's where you put the ticker that we told you and like, see this field here? That's where you put the dollar amount we told you. It's that level of tutorial.

Eric: Yep. If you get this message, this is what that means. Right. And then throughout, we've got, you know, a notice that says, hey, if at any point you're unsure or you want support from your advisor, here's a link to set up a quick 15-minute meeting. So we make sure that that also exists as well.

Michael: So the follow-up, I'm just stuck, I need your help, it's still there as an option.

Eric: Of course.

Michael: But your goal is to make it not needed.

Eric: Our goal is to probably not make it not needed for not everybody. There's a lot of nots in there. We know that there'll be some percentage of people that will always probably want us to hold their hand. That's fine. But there are a lot of our clients and a lot of people out there that are absolutely savvy enough, who have already been doing it on their own, who could very easily trade. They just want the recommendations. How much of what to trade.

Michael: So I can't help but listen to this. You're going into major brokerage providers and making tutorial tools about how to actually use their platforms.

Eric: Yeah.

Michael: We saw the implications, like, because their platforms are either so not good, not clear, or their own tutorials are so not good that you have to teach clients how to use their software for them. I mean, just there is a part of it that's, like, shouldn't it be the platform's obligation to make their tools not suck and have educational content about how to use them? And maybe that's just me being overly idealistic. They're like, no, some of them do suck and you got to help clients. So you made your tutorials.

Eric: There are absolutely, there are worse platforms out there than you would ever guess. But I would say that for us, it's more about knowing exactly where clients typically, because we did it, we screen shared. For so many meetings that we could see, these are the points where people sometimes have questions. So, that's where we really highlight versus the platform's own tutorial. They're just going to... it's going to be a buckshot covering everything and it might overwhelm folks.

Michael: It's an interesting point that it sounds like you started with just let's do this the "old-fashioned way," which is turn on a screen share, go to the whatever it is, the Vanguard website, and let's just do this together and I'll help make sure that you get all your trades done. But you do that enough times with enough clients over and over again, and it starts to get pretty clear like, oh, this screen they get confused by because they don't realize that you're supposed to put the ticker over there. We need to make sure there's a bubble for that when we make our tutorial and just if you do it enough times with them, I mean, I think of this just from the technology end, like this is how great product design is often done. You literally sit along with the user through the journey that they're taking and see how they do the journey and where they get stuck on the journey. And to me, basically what you're describing is a version of that. It's just, you're doing that to make probably, like, overlay tutorial of how to use the platform because the platforms can't seem to figure out how to actually do this for themselves.

Eric: Exactly right. Yep. And I would say too, that, as you know, Michael, just the investment piece, and clients placing trades, and us providing recommendations, that's such a small part of the relationship. This isn't the entirety of what working with Abundo is like. But for at least the investment sleeve and the advice-only sleeve, you know, that's the path we've started to go down to try to make this scalable and sustainable. And we're just going to keep making that better. We're going to keep enhancing it. We're going to keep, to your point, figuring out what clients need to feel really good and supported with that. But so far, you know, with all the clients that we work with, that has not been anywhere close to a pain point in terms of the friction of working with us. Them doing their own trades.

Michael: And then tell us a little bit more about as you kind of framed it, the second part of the tool, which is, if I'm understanding right, like, you create account aggregation. flows using Plaid to link up to their outside accounts. Not just for balances as like some of us do for, like, balance sheet aggregation, you're doing it to see the transactions to verify whether they actually did the trade they were supposed to do and the shares and dollar amount they were supposed to do.

Eric: Yes. Yep, exactly. And have had that up and running for a couple of years.

Michael: Okay. And just from your end, I just want to like, how long do they get to do the trade? Like when do you hop in the check to make sure they did it.

Eric: Yeah, we get an email that day with, hey, this is what they did. This is what was recommended. This is what they did.

Michael: Okay.

Eric: Yeah.

Michael: And so does it try to verify whether they "did it right?" Or it's just, you get a screen of like, here's what you recommended, here's what they did, and you can glance pretty quickly to see whether they basically got it right.

Eric: We get a green checkmark, hey, true, trades were made correctly notification. And they did it right, which is the vast, vast, vast majority of the case.

Michael: Okay. I was going to say, so now that you have literally like tech that tracks how often advice-only DIYs actually implement themselves, like how many actually do implement themselves. I feel like we make the case in the advisor world, like, oh, they're all going to screw it up on their own. Like, that's why they have to have us. It seems like you now get some hard data of, okay, how often do they actually get it done themselves or not?

Eric: You know what's really interesting? We in the industry, myself included, we think clients are going to mess it up because when they start working with us, they've got some pretty messed up portfolios. They've got some AMC stock that they're still holding on to. They're completely out of balance. It doesn't look ideal. And so we make the assumption that left to their own devices, they're going to mess up. But once they hire us, once they hire you as an advisor, now they've got someone guiding them, and they trust that guidance. And so all they want is just to know what to do, and either you do it for them or they do it on their own. And so once they are working with an advisor, I feel like that bad behavior goes away.

And so we see very, very, very little, I mean, I'm trying to think of even an example of somebody who messes it up. I mean, once they have the instructions, they do it. And the few times over the 4 years that somebody has not followed our instructions to a T, it was something really small. Like they decided that they saw our recommendations and they're like, no, we actually wanted to be slightly more conservative. So they added a little bit more to the bond index than they did to the stock market index. And it was like, oh, okay, that's fine. It wasn't like they placed 10,000 shares instead of 10 shares, nothing, nothing like that.

Michael: Honestly, the biggest worry that comes to my mind on it is just like, whether they do it at all. Like, not that they're necessarily going to enter 10,000 shares instead of $10,000 and have a trade error event for themselves, as we do sometimes in the advisor world. I think about it more in the context of just, yep, you all gave them the list of recommendations. They're like, yeah, yeah, we're going to totally do that. And then they come in 3 months from now and they have not done any of it. Just the sheer follow through of, do they do it at all versus all the clients who say they're going to do the follow-through thing and then they don't and they come in for the next meeting and they still haven't done the thing and we're nudging them again.

Eric: Yeah. And that's where also we have tech to support us with that because we know if we met with a client and we made a recommendation to say, fund your Roth and invest your Roth, we'll know now if they did or didn't do that because we get that trade printout through our tool that says, hey, they invested it. And so if we don't see that come through, we know it's not done, we can nudge them. And I think that's also a really powerful thing.

How Did Abundo Build Their "Peace Of Mind" Tech? [24:20]

Michael: And so all this tech that you're talking about, like you built this in house, like there's not off the shelf industry software that quite does the things you're talking about at least I know of there is on like gather information, take a risk assessment. But trading tutorials and even though a lot of the account aggregation tools I'm aware of, like I can pull in balances and such, but there's not a tool that automates let's track their trades against whatever we wrote in the financial plan as a recommended trade and validate that they did the right trade.

Eric: Yeah. Right. Yeah, because that it hasn't really made sense for that tool to ever exist before. And as we have ambitious goals around trying to become the first advice-only firm to really break out right and build something that's big and scalable. We knew we were going to have to come up with solutions like this. And so, this is 100% in house in terms of us building it.

Michael: So are you a programmer, techie-type on the side or are you like...

Eric: I am not...

Michael: ...hiring developer shops or do you have like a developer full-time on the team and that's a role in the advisory firm like just how do you actually do this most of us are not not techie oriented

Eric: Yeah, correct. I'm also not techie-oriented. No, and as it happens, our very first employee, so about 3 months into the business, a gentleman approached me and said, hey, I found Abundo. I love what you're doing. I want to join you. And he joined our team really with the intention of just helping out, doing social media, etc. But pretty quickly realized he had a lot of exceptional talents. His name is Ethan Jung. He's amazing. And we realized his talents would be kind of going to waste if he just did kind of traditional assisting work. And so he taught himself how to code because we realized we were going to need that on the team. And so he took a few months, taught us how to code. He taught himself how to code and then built that tool along with a number of other tools that we use that I'm happy to get into.

Michael: Wow. That's quite a turn. Like, gee, technology seems neat, I'm going to learn to code and make it DIY reviewing implementation trading tool for the firm to scale.

Eric: Yeah. You know, Michael, maybe you can speak to this too with your experience on teams. But I'm just a big believer in letting people find what they're really good at, even if it's not what I hired them for and letting them explore that and be great at that. And I feel like that's just such a great, a better thing for the team than plugging them into something that isn't perfect. So he's one example of a few on our team where we are able to do that.

Michael: So I've got to ask one more question in this investment direction. I do want to get to the rest of the model because I know there's a lot more that you do than just the investment side. But there's still a part of me that hears this like, we make tutorials of how to do the trades. We built our own software to monitor whether they did the trades. Isn't it still easier to just do it for them? Like, why are we trying so hard and investing so much time and energy and resources and like custom-tech building to go out of our way to not manage the money.

Eric: Yeah, such a good question. A few reasons. Biggest being that we're huge believers in teaching and empowering our clients how to do this. The tutorials are one piece, right? But in the meetings, we're doing a lot of advice around why they're investing, why it's important, how the accounts work because we want to teach them a skill that they're going to have for the rest of their lives. And that's been one of the most rewarding things is so many people have told us how appreciative they are that they now understand. They always said, it felt like there was a wall between me and my investments. My advisor was doing something, I didn't really understand it.

And now that wall is removed. They're doing it. They understand it. They feel good about that. And so once that was starting to present itself, we couldn't stop. We just wanted to keep teaching, keep empowering. So that was the first, I would say, reason. The second is it allows us to keep our costs down. We have a little bit less overhead if we don't have that custodian relationship. Our compliance is a little easier. So there's just some kind of ancillary benefits there.

Michael: Because if you don't have all the discretion layers you don't have as much in, you don't need to verify best execution because you don't execute. You don't need to deal with those layers. I guess those kinds of pieces of compliance get a little bit lighter when you really, really aren't in the discretionary investment management side of the business anymore. You're, "just doing the advice," recommending what they buy.

Eric: Yeah. And again, that wasn't the driver, but it was certainly a nice benefit of it. The last thing would be that really, like I've kind of been saying, just the challenge of it. So people like you could ask, like, why? Why are you doing that? Because we feel like it's something that we truly believe the industry is shifting and it's headed. You know, the younger generation who grew up on Robinhood, you know, again, they weren't trading correctly, but they certainly know how to trade. You know, they're going to be looking for an advisor and they don't want to give up control, but they want advice.

Michael: I think that's sort of the, like, very clear target clientele framing. Just this segment that they don't want to give up control, but they do want advice. And I feel like those have been so intertwined in our industry forever, like almost by definition, getting advice meant delegating your portfolio to me and sort of the control shift that goes along with it, that, we haven't really had models of, or even mental frames around, no, there really is a segment of people who don't want to give up control, but they do want advice. And those are not incongruous with each other. In a way, I think a lot of us have sort of presumed those have to be opposites.

Eric: Right. Yep. And there's a large group of people out there, you know, millions of people and all age groups that still want help, need help, would benefit from help, but are very leery of giving up control.

Michael: So then I have to ask from the flip side, and we'll get more into business model soon. But, you know, if we're training and empowering them this way to do all their stuff on their own, does that mean they just leave after 3 or 6 or 12 months because now they can do it on their own? And we're increasing our own client churn, as it were.

Eric: Yeah, that's a common question we get asked, and we've been tracking that obsessively since day one. I was curious about that myself. When I started the business, I didn't know how that was going to work, but I was shocked that we didn't have a single client in the first 2 years leave. 2 years from first client in the door. At that point, we had well over 100 clients, and I was kind of freaking out because I was like, this is weird. What is happening? Since then, of course, we've had clients leave, but we still are very much operating at around about a 99% month-over-month client retention rate. And that is in line with, I would say, an average fee-only RIA. It's not higher than that. And I think that just goes back to, yes, the investment piece is something that we're trying to teach and empower. But that's only one tiny little part of the relationship. There's still a lot of great advice that they rely on us for.

Michael: So do you have a sense as to what that is in an annual retention rate? Only because I feel like a lot of the industry we tend to look annually, not monthly. Because a lot of us don't bill monthly as I know you do. Do you know what that looks like on an annual basis?

Eric: Yeah, it's about a 90–91% annual retention rate.

Michael: Okay. Okay. Interesting. So there is some segment that moves on. It's still the overwhelming majority that stay, if I think about that relative to a lot of AUM firms, you tend to see numbers closer to 95 to 97. So it's maybe a few points lower. Although I know also you've got a different clientele. I do think there's a secondary effect that we don't talk about a lot in the industry that just retirees also tend to be stickier because they're at a point where they just want to do their comfortable thing and be retired and their lives aren't changing as much. Younger folks that are like moving in new jobs, in new careers, and new family and new stuff happening all the time. Also just have a higher pace of change that sometimes means they are slightly more likely to move on simply because of the client demographic, not because of the model necessarily.

Eric: Yeah. And I would just add to that, that part of, certainly part of those folks that are working with us for a limited duration are people who are very upfront saying, we're looking for a one-time plan. We're looking for an hourly advisor. We're looking for a one-time plan. And just because we are so cost-effective, they're still choosing us over somebody who maybe just does only that. And so we've had a number, not a huge number, but a number of folks that were upfront and saying, hey, I love this, but just, I want to work with you for only a couple of months and then I'll probably revisit it in a year. And that's maybe a couple percent of folks per year.

How Did Abundo Land On Their Fee Structure? [35:36]

Michael: So, as you framed it, all of this is built around we're trying to bring down the cost of advice. At the end of the day, like if I can make the good tutorials and the training tech to verify it, it takes me much less time than actually trading and doing it myself for them. And I don't have my custodial overhead layers and I don't have to do my additional compliance costs for best execution, all that stuff. So we're trying to bring costs down. So then can you talk a little bit about cost and pricing? Like what are you charging in the model that you're doing for advice only? And then I think we'll get a moment to like all the other things you're doing for the dollars that you charge, but help us just understand the pricing and the business model.

Eric: Sure. Yeah, I'd love to. So when I started the firm in 2019, end of 2019, we initially, just kind of a quick backstory, we initially tried to charge a fee loosely tied to income. So, if you made $150,000 a year, you'd pay $150 a month. But very quickly, I realized that wasn't going to work, and I didn't like that. And so July of 2020...

Michael: What wasn't working? Like where did it get stuck?

Eric: Yeah, I didn't think it was fair. I didn't think it was fair because part of the whole reason why I went into this model is because I don't think there's necessarily more work for somebody who makes $200,000 than somebody who makes $150,000. So why are they paying $600 more a year? And so I decided to instead of tying it to income to charge a couple rate and an individual rate. And the couple rate was $139 a month. And the individual rate was at $89. And that is where our fees lived for about 3 years until everybody, literally everybody in my life, lobbied me to raise our fees. I was very resistant to it, Michael. But yeah. It was the right thing to do.

And so we raised our fees this fall to $189 a month for everybody. So, completely level individuals, couples, everybody pays the same rate. And it's our intention to keep it there for a bit. We're not going to probably raise it again anytime soon. And my hope is that we can continue to find efficiencies and tech efficiencies especially that allow us to even either keep that price low or even offer a lower price point in the future in some capacity. And so I'm just always thinking about how do we serve people? How do we serve more people who maybe can't afford a traditional advisor? And I know that our prices need to be really affordable to do that.

Michael: So, why was literally everybody you know lobbying you to raise the fees? What was the issue with where you were?

Eric: Yeah, because we weren't going to be able to build the business that we all wanted to build at that price point. It felt great. We knew we were doing a really good thing for the consumers and for the country by being that cheap and offering that solution. But as we grew, we could pay the advisors. Certainly, we could pay the people doing the work, but it wasn't going to give us room with our profit margin to be able to hire another programmer, an HR team, the other roles in the business that we would eventually need. There just wasn't going to be the cushion to do that. And so ripped off the band-aid.

Michael: So you could pay the advisors, but in essence, like you could pay the advisors, but you couldn't scale. You couldn't grow the overhead that you have to have in a growing enterprise to actually run like a larger volume of advisors and clients and the rest. That was where it was starting to bottleneck. Or I guess you could see it was coming as a bottleneck?

Eric: Exactly. Yep. And we have a team full of spreadsheet gurus and, and so they all went to work really crunching all the numbers with the business in terms of all of our hard costs and figuring out what's that price we need to be at. And in order to have a really healthy, viable business. And $189 a month was where we landed. And the numbers look great. I mean, I'm happy we did it. I'm confident this is about as low as we can charge and still do this really well.

Michael: So is there anything else you can share about just how you got to the 189 number? Only because it sounds like you had a process of looking at costs and margins and room for scaling and such. So I'm just wondering if there's anything else you can share about how you got there. Was it like, you know, my overhead is X, so I need my fees to only be a percentage of that, which means if I back into it, I get to 189. How did you get to this particular number from spreadsheeting?

Eric: Yeah, everything you just said, yes, we did that. But the most granular thing that we did that I think you might find interesting is we're growing so fast that the biggest risk and threat to our business was we have to hire advisors before other advisors are at capacity. Because if we bring on 30 clients in a month, which has been kind of our average the last few months, one advisor can't do that on their own, of course. 2 advisors can't do that on their own. And so we need 3 to 4 advisors to be able to support just the new client flow. And so to have to hire that many people and pay them a full salary before they have any revenue attached to them, that could really be a threat to the business. And so what we did is we backed into like, okay, based on our growth rate. Based on our projected growth rate, when will we need to hire? What is that going to do to our cash reserves? What is the price point we need to be at to make sure that this all is still very, very doable?

Michael: Okay. Interesting. So it sounds like it was very driven by I need enough margin and free cash flow to be able to hire the next advisor for a salary before there's any revenue to pay them. Because we're growing so fast, we actually will cover the revenue to pay them relatively quickly. We don't have to eat this for years. But we do have to eat a whole salary for months because we have to hire ahead of the curve. Because we're bringing on so many clients in a fast growth environment that we'll just smoosh our current advisors. It's a technical term. We're going to smoosh our current advisors in new client flow if we're not adding to capacity ahead of the curve.

Eric: Yeah. And I'm very focused on not smooshing anybody. I am actually obsessed with making sure we have a really happy, great team, great culture. And so I want to find what's, yeah, the whole goal is finding that price that's going to allow us to just kind of keep the team happy, but still have profits. And $189 did it. And it's been great. You know, really, we haven't had any negative consequences from that. So anybody who is out there thinking about fees, I know you are a big proponent of this, but raising your fees, I was the most scared of that, of anybody you've ever met. And it ended up being just fine.

Michael: So did you do this to existing clients, not just new?

Eric: We, we did it for just new. And the reason for that in part was a client retention strategy knowing that we view those clients kind of as our kickstarters, right. They believed in this model. They believed in the business before it was a thing. And so we wanted to thank them for that. And then also they know if they leave and want to come back, then they're going to pay a higher rate. So it kind of keeps them going.

Michael: Oh, because you, do you actually have a segment of folks that like, leave and come back, they're using you a little bit more piecemeal than just staying ongoing?

Eric: Very, very, very small. Maybe we've had over the 4 years 3 folks. I mean, very, very small.

Michael: Okay. You don't necessarily have a high flow in and out, but there's still at least the implied you've got a special thing that no one else can get. You lose that if you leave.

Eric: Yep.

Michael: So like maybe you want to hang out because you're getting a deal here.

Eric: Yeah. And also we, of course, want to still provide great value and earn their business on top of that. But that was part of the reason why we did that.

What Do Abundo Clients Get For $189/Month [45:00]

Michael: So now help us understand the overall model of what you actually do. At least like what do clients get for $189 a month?

Eric: So they get full financial planning like we all kind of know and think about it. So we look at everything that they have going on, starting with cash flow, figuring out what does their budget look like? Are there any opportunities we can help them with to maybe tighten up spending? Where are they saving? Are they saving into the right buckets? Are they saving into the right tax buckets? We look at retirement planning, of course, how they're tracking their insurance planning. So looking at their auto home, life, disability, long term care coverage and providing recommendations there. College funding, college planning. The list goes on. Just all of the normal things you would think about with financial planning is really the core of our business.

Michael: And is this Financial planning software traditional, something that you've built, your own spreadsheets? What are you using to do all the planning work?

Eric: Yeah, we are using RightCapital and have been using RightCapital since day one. But that's something where we're probably not going to always use RightCapital. We do have goals of eventually having that in-house and have started to lay some groundwork for that. Not because we... Oh, go ahead.

Michael: Is that like a gap in RightCapital that they're just not quite building the things you want them to build or you just have other aspirations?

Eric: Yeah, I would say it's twofold. I would say we like RightCapital, and I think RightCapital is a pretty good tool. But the one thing where it lacks is RightCapital is very retirement-focused. The whole platform is built around kind of a retirement goal. And for most people, a lot of our clients where the average age is mid to late 30s, that's not the number one thing on their mind. The number one thing on their mind is how much house can they afford? And are they saving the right amount? And what are the different savings tools or savings vehicles they should be using? And RightCapital doesn't really help with any of that.

And so we are looking at building that. The other thing is just being dependent on any third-party tool has always worried me because our prices are so low. And if RightCapital decided one day to say, hey, we're now going to charge instead of per advisor, we're going to charge $10 per client or something like that, that would be bad news bears for us.

Michael: Yeah. Okay. So because hard costs of something like planning software or potentially a higher fixed cost in your budget in serving clients, you're, particularly, I mean, none of us like fee increases on our tech, but your economics are particularly sensitive to it because you have less margin for adjustment when you're trying to run a leaner cost model in the first place.

Eric: Yeah. Exactly.

Michael: Interesting. Interesting. So, what does planning process look like for you in terms of number of meetings, how much you go through to get through a RightCapital financial plan and deliver? Because again, it's substantive like a lot of firms do this and charge more just for the plan than you charge in a year. So I'm just trying to visualize like where the time goes, how time or labor intensive this is in your firm with your process in how you're delivering financial plans?

Eric: Yeah. So, a new client, they would start working with us. Of course, we're going to do just the initial kind of prospect get to know you meeting. If they sign up and they want to work with us, then we do a quick data gathering meeting, which is usually about a 30-minute meeting to get them connected to RightCapital and start sharing documents and linking stuff up. Then we'll do an hour-and-a-half long kind of plan delivery, plan presentation meeting. After that, usually about 60 days to 90 days, we'll do a quick check-in, usually 30 minutes to review progress towards their goal or progress towards their tasks.

And then you will usually meet again about 3 to 4 months after that for another 30-minute meeting to review progress. And so in the first year, we're finding that on average, we're meeting with clients about 4 times. Some, maybe one extra meeting. But then for ongoing clients, we find that we're meeting with them on average about 3 times. And those numbers are pretty firm. I mean, we've been tracking this for 4 years and they haven't really changed.

Michael: So, instruct just your meeting lengths feel a little bit shorter than what a lot of us do. Just a lot of advisors are kind of anchored around one-hour meetings for a lot of planning and check in, data gatherings, sometimes even our 90 minutes plan deliveries can be 90 minutes or 2 hours. I'm presuming part of that is just you're trying to make a leaner process because you're not trying to bulk up your planning process to justify a high planning fee. You're trying to keep your planning process lean to support being able to charge a leaner, more accessible planning fee. Is that a fair way to think about it?

Eric: Yes, I would say that's a fair way to think about it, but that wasn't our driving force.

Michael: Okay.

Eric: We found, and your listeners might find this interesting, but we found that when we shifted our meeting length down just a smidge, we still got the same amount done. It made sure we all stayed focused in the meeting. There wasn't that much room to go off topic. And so we tested that, and we found that it had no meaningful difference in outcomes for our clients, for us, and so we're like oh let's just stick with that.

Michael: It's like a nice way of saying we all pad our meetings with more chit chat than perhaps we realize. And that if you just want to get the planning stuff done, turns out it gets done fine in a shorter meeting.

Eric: That was what we found, but everybody's experience will be a little bit different there. But I will say too, just to really clarify, we pride ourselves as being very accessible. And so, there's no limit. If we schedule a 30-minute meeting, but we didn't get everything covered, we'll just set up another meeting like the next day or next week. We're not trying to limit our advice in any way. That's just the frequency that I was just speaking to kind of what's been the averages. Those have really been the averages. But our clients at, at all times have access to our calendar. We give them the availability to schedule a 15-minute meeting, a 30-minute meeting, a 45-minute meeting, and they can choose what they want. And even with that full freedom and availability to schedule, we still have found again that it's those are our annual averages for ongoing clients.

Michael: So, I understand the first-year process, this like initial data gathering meeting, get stuff in the RightCapital, go through a plan, present out in a 90-minute delivery meeting, and then like Check-in meeting 2 months later, another check-in meeting 4 months after that just like how are we doing on our planning tasks? Are we implementing them? And then you shift into the ongoing client process thereafter. So tell us a little bit more about what the ongoing process looks like. Like, is there a structure to these 3 meetings a year? Are you a like client service calendar firm? We do this stuff in Q1 and this stuff in Q2. And like you rotate through that way. What is that ongoing service model look like to hold on to clients paying a monthly fee?

Eric: Yeah, we try to really tailor it to that client. So we don't follow a service calendar. But what we'll do is we'll set up meetings with clients based on what they have going on in their life. So if we know that they're going to get their benefits, let's say, you know, I've got some clients that have benefits renewal right now in the spring. So we're meeting now to cover that and to talk about other things. But other clients we might want to meet in the summer because we know they're going to get their bonus then. Other clients want to meet around tax time or around end of the year. It's really up to that client. And we confirm with them at the end of the previous meeting when we think it makes sense to meet. And then they agree or disagree. And then we set up that meeting at that particular time. So we try to make it very custom.

Michael: I think of this as like my beloved dentist model like I don't leave my dentist's office until I've scheduled my next cleaning. So, you guys are doing something similar that at the end of the meeting, so when does it make sense for us to meet next? And they can say like, is this 3 months out or 6 months out or whatever it is? And then you'll say, great, let's actually put a time on the calendar or is that just a, we'll check in then and schedule something then?

Eric: Nope. It's great. Let's actually put a time on a calendar and then it's followed up with a, but as a reminder, if anything comes up between now and then we can always meet sooner, you know, and you have access to our calendar links. We want to make sure they 100% know that we're accessible and feel supported.

Michael: And so, I've got to ask, like, the infamous question I feel like comes up any time we talk about monthly subscription models. So just do you feel pressure or concern or deal with questions from clients of, I'm paying you monthly and you didn't do anything for me this month. We didn't meet this month. Like, do you feel a pressure of monthly fees means I have to be doing something every month for them?

Eric: No, I don't feel that, but I understand the feeling. I understand why you're asking that question. Our clients, I think we do a really good job of setting expectations and educating them on what the relationship will look like. And so they are not expecting to meet every month by any means. With that being said, we do do some monthly engagements. We do, of course, a client-wide newsletter on a monthly basis, which we get good feedback on. We also do a client-wide webinar on a monthly basis, which we've gotten really good feedback on.

Michael: A monthly webinar for clients.

Eric: A monthly webinar. Yeah. And that's been one of the great benefits of having a bigger team is we can kind of spread that out. And so like, for example, next week I'm presenting our February webinar, but I won't have to do it again, probably till like next January, because we'll have other advisors stepping in and educating our clients on a different topic.

Michael: So what kinds of topics do you do?

Eric: Yeah. Yeah. So last month, so, January, one of our advisors, Chris Mamula, he was actually the author of the "Choose FI" book. And so he presented on FI, the FIRE movement and what is financial independence. And that was great. So he talked for about an hour just about his experience with that and tactics to consider for clients. This upcoming month, I'm actually going to be talking about travel hacking. So, ways to use credit card points, how to find cheap flights, all that fun stuff, which we're expecting that to be really well attended.

March, we're going to be talking about tax strategies. Yeah. And the list goes on. So just again, we didn't set these webinars up with the intention of like, let's do them monthly. So clients feel monthly value, but we still wanted to provide value, right? We're very obsessed with making sure that clients feel... I think to your retention point, we want to make sure that clients love working with us and know that they're getting a lot for what they're paying.

Michael: So you mentioned earlier, you sort of mentioned a few times around fast growth and managing the volume of clients coming in. I'm really curious how you're thinking about things like client capacity, like how many clients can an advisor support in this model given where the price point is? Or like how many meetings do you expect from them given the volume of meetings times the number of clients? Where's capacity for you guys and how do you think about it?

Eric: Yeah. We think about capacity all the time. And I, again, getting back to my goal of really making sure we've got a very happy team. I don't want to overwhelm them. And so we've been really trying to find what that right level of capacity is. For everyone on the team so far, they all are wearing multiple hats. So, you know, of course I'm an advisor, but I also am the CEO and manage the team. Another one of our advisors does all of our finances and bookkeeping. Another one of our advisors does a lot of our compliance work and so on. And so the people we have on the team so far aren't going to have what I would call, you know, the full, full capacity, but they're going to work with somewhere around 70 to 90 clients, depending on their comfort level.

For a traditional, you know, plug an advisor in and that's their main job, we're thinking probably around 110, 120 clients. But that's a moving target. It could be a little bit more, it could be a little bit less. And we're really, really building a lot of tech to support the advisor and to make the advisor's job as easy as possible. So all they have to do is just sit with clients and provide great advice. And so we're hoping that just that tech can save a little bit of time as well.

Michael: Because at some point, just the amount of client correspondence and the number of meetings in the year just starts to fill them up as capacity. Like where, I guess I'm just trying to visualize like what's the capacity constrainer for you?

Eric: Yeah, the capacity constrainer would be the combination of meetings and emails and, of course, client follow-up, client prep. But even if you run the numbers, even at 110, 120 clients, for a full-time advisor, there's still plenty of room based off of a 48-week year, a 40-hour-a-week job. There's still plenty of room, but we want to make sure there's that slush because things are going to come up with team meetings and unexpected stuff. So we want to build that in.

Michael: Yeah, I mean, if I just think like, 120 clients at 3-client meetings per year is 360 meetings across roughly 48 to 50 working weeks between, you know, vacations and holidays and such. Like you're up in the neighborhood of 7 to 8 client meetings per week, which when you tack on the prep and the follow-up, like, you know, that can easily chew up half your week or more, but like, you're not packed. There's no human way to get this done in 40 hours a week. Like there's definitely some breathing room to still, you know, do your professional development, and participate in team meetings, and take your vacations, and all that good stuff.

Eric: Yep. Yep, exactly. You know, there's no sense in trying to, in my opinion, build a big, wonderful business if we don't have really happy staff and happy team. And so, if we find out, and I'm very confident these numbers we're talking about are accurate, but if we find out that the capacity just has to be just a touch less, then we might have to adjust prices a touch. But I'm not expecting that because I think we've built in plenty of room at our current pricing to make it work.

Where Does Abundo Stand At This Point? [01:02:33]

Michael: So, now help us understand, I guess, the size of the firm overall at this point, you know, AUM doesn't work because that's not your model. So I don't know if you if you measure like client households or just revenue run rates, like where does the firm stand at this point?

Eric: Yeah, so we measure AUA, of course, and we've got about $600 million or so of AUA. We have 7 advisors. We're looking to add probably 3 to 4 at a minimum new advisors this year. Our revenue goal for 2024 is we're hoping to hit a million. Again, that's all based off of that monthly flat reoccurring revenue model. And then in terms of number of clients, so I always think of clients just in terms of the number of people we help, which is about 650 or so, spread across about 420 subscriptions.

Michael: Okay. And I guess subscriptions for you now are still a blend of older clients at the $89 or $139 a month tiers, plus all the new clients who are coming on board at the 189 level.

Eric: Yeah, exactly. Exactly. And so I would say looking back, Michael, it's been tough sledding, of course, because we've had to hire because of our growth rate. Our prices were so low that we didn't have a ton of cushion. But moving forward, things look great. I mean, moving forward at our new price, based on the number of clients we're bringing on, we expect to bring on, we're seeing that our profit margin, even paying our full-time advisors, paying benefits, doing a 401k match, we should still settle in at around a 28%, 29% profit margin as we start to get more and more advisors at full capacity.

Michael: Okay. So, 650 clients spread across 420 subscriptions is where you are now or where you project to be through the end of the year?

Eric: That's where we are now. So we're projecting to be probably around, well, 750 or so subscriptions with over 1,000 clients by the end of the year.

Michael: Okay, so then I have to ask, where on earth are all the clients coming from? If you're going from 420 to 750. I mean, you're up at a like adding 30 plus a month +/- a little bit of churned attrition. So where are all these clients coming from?

Eric: Yeah. Yeah. Last year we averaged about 20 new clients per month for the whole year. And so, I'm just expecting, right. And hoping that based on the growth we've seen, we will hopefully continue to see that's where we'll be at. The clients where they're coming from is a lot of places. First and foremost, referrals. We try to do an outstanding job for our clients and they reward us for that and love to refer. And so, definitely a good percentage of our new clients come from that. And then a great thing about that is it's renewable. It's, as we continue to add new clients, we'll continue to add referrals off of that. And so that's a really good source of our growth.

The second biggest source of our growth is we get a lot of advisor referrals. So, we're very lucky that there's a number of advisors across the country that sometimes we'll have a prospect that just doesn't meet their minimums. And so they send them to Abundo. Or maybe they've got a client that no longer kind of fits in their practice. They send them to Abundo. And so we get a lot of new clients that way as well, which we're very, very appreciative of. And I think our price point, just being what it is, naturally allows that.

And then the next biggest categories would be finding an advisor searches. So, we've got XYPN, The Advice-Only Network, WealthTender, just various sources there. We get a handful of new clients per year...

Michael: Are there some that work better than others across the various finding advisor platforms?

Eric: I think there's not a clear leader. I would say...

Michael: It's like they all said, they each send a handful and it just, it adds up nicely, but it's not one in particular.

Eric: Exactly. The one thing that's not on that list is social media. We haven't been good traditionally at getting our name out there. And that's something that we're working on improving. And so we actually now have a social media manager on our team who's handling that. But that's an area where we see a lot of opportunity to get growth and to keep our growth rate high because it's very untapped up to this point.

Michael: So it's not just primary channels for you. Client referrals, advisor referrals for all those advisors who have higher minimums or work with more retiree-oriented crew that aren't a good fit. Your ideal client is not a good fit for them. And then some flow from the finding advisor portals like XYPN, Advice-Only Network, and WealthTender.

Eric: That is correct. Yep.

Michael: Okay, so I hear you, but most advisors I know try to get referrals and are on some portals, they don't add 30 clients a month. Most of them don't add 30 clients a year. Where is all the business coming from?

Eric: I will say that sometimes we ask ourselves that too, but we're just, Michael, we're just trying to do a good job for our clients. I think that one thing I would say is, we do a good job of telling our clients how different we are because we are, right? This is fairly unique in our industry. And so we like them to know that. Like, hey, you guys are working with a radically different startup financial planning company. And if you believe in us, right, help us grow. And they do. And they refer people.

And so I think that for your listeners, you don't have to be and advice-only startup to have that mentality. You could just go all in on your niche. And if your niche is working with firefighters, you can tell your clients that you are the best firm in the world for firefighters to work with. And any firefighter, they know, right? They should be working with you because if they're not, they're not getting the experience they could.

And so I think that's been a big part of our growth, too, is just really getting that buy-in from our clients. And then, again, the advisor referrals, I don't want to understate that. Last year, I think we got about 60 or 70 new clients from financial advisor, financial coach referrals.

Michael: So is there anything that you've done in particular to support that, like driving that many advisor referrals? And just if I break it out like that's, you know, 4 or 5 a month, that's like a client every week from an advisor somewhere across the country. Are there things you did to drive that?

Eric: Yeah, we did a campaign about a year and a half ago of reaching out to folks to let them know, like, hey, we're here. You know, we can be a resource if you don't have a place right now to send folks you don't want to work with. We're here and we're happily going to work with them. So we did a campaign and developed some relationships that way. And then networking at conferences, meeting folks that way has been something. But we are actually hiring a new advisor who, starting in March, she's going to really take that over. And she's a master networker. Everybody on the team so far is actually kind of introverted, but she's very much an extrovert. And so she is going to spread the word of Abundo and we're very excited about that.

Michael: So, do you have a sense like how much of this comes from, I mean, sort of the discussion, the beginning of being advice only and trying to be at a compellingly low price point as it were. As you said, like you're trying to keep the cost low to expand the accessibility. Is that a driver for this? Is that just how you happen to show up and the folks that you're meeting and working with? Like I'm just trying to visualize, I guess, you know, is the growth higher because it turns out there really is a lot of hunger for more affordable advice-only advisors.

And when there are very, very few of them so far, you're off to the races because there's the supply greatly, or the demand for the advice-only advisor greatly exceeds the supply. So hundreds of new clients show up. I guess I'm just trying to visualize like how much you think that's a factor versus I'll call it just the more traditional you serve your clients really well and you drive referrals from them.

Eric: Yeah. Kind of the chicken or the egg. Yeah. I would say that the reason I started this business at the end of 2019 is because I knew there was demand, you know, based on the conversations I had with colleagues, with, you know, friends, family. I knew that they didn't want to pay an AUM fee. They didn't necessarily want to give up control of their assets. And they didn't want to pay a lot, but they still wanted advice. And everybody that I kind of told about, hey, I'm thinking about this type of model for my new business, they were all like, yes, sign me up.

And so I knew that there was demand. So my gut is telling me that it's more the latter, right? It's more the former, whichever one it was, that there's a lot of people out there. There's a big blue ocean of folks that want advice but can't afford an $8,000 fee or don't want to pay a 1% or even a 0.75% AUM fee. And so I think we're showing up for those folks.

Michael: So you'd said earlier that you estimated you may be as high as $600 million of AUA, not AUM because you're not managing directly, but 600 of AUA across 420 subscriptions. So if I just start mathing that, like, your typical client might actually have a million dollars of assets out there somewhere.

Eric: Yeah, you're mathing it right. We work with a wide, wide, wide, wide mix of folks. You know, we've got a bunch of people that are in their early twenties. We've got a client who's 19. It's amazing. They're like just out of high school and they want to get started. You know, we've got clients in their late 70s. The market, as you know, right, the market's at an all time high. People have accumulated money, which is great. So, a lot of our clients here have wealth dispersed through 401k, you know, workplace plan, Roth, HSA, etc. And yeah, we're looking at that all in number. And, you know, it's a little bit skewed because certainly we've got clients with 2, 3, $4 million, right?

Michael: Sure. Yeah. Most, most advisory firms, we've got a subset that are bigger numbers. Like the median client is usually lower than the average client.

Eric: Yep. Yep. And when I say there's a big demand for folks who don't want to pay $8,000 or don't want to pay 1%, that demand is real, but it's also for people maybe with money. There are some frugal people out there that still want help. And we're a solution for them and that's fine. Right. We also want to be a solution for the folks that just can't afford a higher fee as well.

How Eric Considers Advisor Compensation And Scaling In The Abundo Model [01:16:03]

Michael: So I kind of wonder as you think about this from a business scaling up perspective, how does it work compensating advisors? I mean, for a lot of AUM firms, advisors are either compensated in basis points or they're compensated as a percentage of revenue, which you can equate back to basis points if you want to pull out a fee schedule. You just don't live that world at all because that's not the revenue model that you're attached to. So how do you think about advisor compensation and scaling advisor compensation in your model?

Eric: Yeah, I think about it like a non-financial planning business. I think about just a pure salary, and that's what we pay our advisors. Everyone gets a fixed salary, and then they get benefits, a 401k with a match. There's no requirement for them to source their own clients. We never ask them to go do lead generation. We've got enough clients coming to us. I think that there's a lot of people out there that want that. They want to have that level of security, but also still do financial planning and do good work for folks. That's how we set it up.

Michael: So is there any business financial incentives to them to bring in clients, to get referrals, to ask more for referrals if you're growing so much from that direction?

Eric: No, there's no incentives to them other than they just really, really believe, right? They believe in the mission. They believe in what they're doing and they want to help more people. And so they're still doing it. And there's still a benefit there that it helps the business, which allows us to pay them and allows us to hopefully pay them more next year. But we don't have any sales games around number of referrals you have to get or anything like that.

Michael: I'm just struck by that relative to so many advisory firms that are trying to grow more by referrals. and have advisors maybe who are also who are salaried and don't get percentages of revenue, don't have the "financial incentives" to generate referrals and therefore seem to be not generating referrals. And I hear a lot more industry chatter these days around how do we need to incentivize salaried advisors to still generate referrals. So, I'm struck that you live in a world of like, no, not a not a problem. Like we got a cool thing and they're excited to work here. And they're generating plenty of referrals all by themselves.

Eric: Yeah, it's that. It's 100% that. And I think if you can create a culture that people love and want to work at and they believe in the mission, what you're doing, I think that the rest falls into place.

What Surprised Eric The Most In His Journey Of Building And Scaling Abundo? [01:19:15]

Michael: So, what has surprised you the most in this journey of building and scaling up the business?

Eric: Without a doubt, without a doubt, the thing that surprised me the most was I thought I was a genius, Michael, when I came up with the idea of Abundo because I thought, gosh, if somebody has half a million dollars and they work with a normal advisor, they're going to pay $5,000 a year in AUM fees. And look, they can work with us and pay, at that point, $89 a month and look how much they're going to save. And they're going to immediately understand that and see how much they saved.

And day one, nobody understood the savings. It was like, no, we're paying you $89 a month. That's all we care about. We don't care about what we would have paid somewhere else. And so now it's on you, Eric, to deliver value and to keep us going. I thought it was going to be just like a slam dunk. People would pay us forever just because of the savings, but nobody gets that. And that's been good. That's been a good thing because it's forced us to get better. It's forced us to, like I said, come up with the best service model we can, come up with the best client experience we can. But that one, if anybody out there is thinking about like, you know, charging a monthly subscription or charging a flat fee and kind of banking on clients to like equate the difference between that and whatever AUM fee they would have otherwise paid, not going to happen. Like literally not going to happen.

Michael: Well, I guess to me, that also comes back to, particularly advice-only, and you've got this distinction of we'll give you the advice without requiring you to give up the control. So I feel like there's a segment, if people wanted to and were willing to give up control, they'd already be with an AUM advisor.

Eric: Exactly.

Michael: The folks that come to you have probably already rejected that model. Which then means like, yeah, they won't see any cost savings because they were never going to buy it in the first place. All they care about is currently their DIYers paying nothing and you charge $89 a month. So what do I get for my $89 a month standard?

Eric: Yeah. Nope. That was a big learning. You know, the other thing was it's been everybody sacrifices something when they start a business, as you know. And I would say it's been especially more for us just because we didn't charge a lot. And so, I went a long time without paying myself anything from the business, much longer than you would expect, given our success and our growth. And that, of course, is hard. That can create a lot of self-doubt, like, is what you're doing the right thing? You know, my savings account sure says it's not, right? But having that kind of self-belief to keep going, that was hard.

And then, also, I think all of our team. Just like, you know, Michael, like I could go get a job at an AUM firm and I could make 200, 300,000 a year next year. With my skills, with how I can talk to clients, that would be fine. But I'm not, I'm instead choosing to take less pay and to build this model. And I think our team also as a whole, the same could be said about them. And so it's been both hard and a sacrifice, but also kind of that like rewarding one, knowing that, Hey, look, we're kind of coming out now the other end, especially with our price increase, where now we see the profitability. Now we see kind of those cash cushions growing, which is going to allow us to do some really cool things in the future.

Michael: Yeah, it's an interesting phenomenon, I find that. It's hard to visualize for folks that have not gone through really fast growth cycles. I think you said you launched in 2019, end of 2019 so I guess like coming into 2020. You're now 4 years in. You're staring down a more than a million dollar revenue journey this year. And for a lot of firms like cool, you know, zero to a million dollars in 4 years sounds like an amazing growth cycle. And it is. But the business math to it, as you kind of highlighted earlier, when there's that many clients coming on board and you have to hire far enough ahead to manage the capacity so that you don't smoosh your advisors. With the growth, you really, really have to be hiring staff on fixed salary before the revenue is there to pay for them.

And you can do that from profitable cash flow if the business is otherwise running healthy margins. But it means it eats all the margins. And like, there ain't no money left for the owner. Like it's the classic and we talk about making reinvestments into our businesses for growth, but that's what reinvesting the business for growth really looks like. I get no money this year. Because all of it went to the next staff that I need to handle the next stage of growth that's coming in.

Eric: Yep. And that's the reality, but, you know, we know we're building an asset, though. And that's something that at the end of the day, for those people in that situation, there's still that. And that's the good thing, that at least hopefully at the end of the day, there's some equity that you and your team has built.

What Was The Low Point For Eric On His Journey? [01:25:06]

Michael: So tell us more about the low point on this journey.

Eric: I would say for me, the hardest thing, not compensation related, but the hardest thing is just, I think, there's something wrong with me that I am obsessed with like doing as much as I can for clients. And I think the low point for me with trying to lead the team and trying to do everything that the business requires, I think that I probably have been way too hard on myself for not doing as good enough job as I could for my clients. And I know that's not true as I say that to you. I know that I've got like my clients tell me all the time how happy they are and how much they love me. But I still am like, gosh, if I could just spend all my time working with them, which I can't do and I don't want to do because I want to grow a bundle. But that's been really hard for me. And I know that's for your listeners and you, that's probably like that's a weird, silly thing. But that's the kind of thing that weighs on me is just trying to always do the best job I can for everybody.

Michael: Well, I find for a number of us in the advisor role, like when you started out with a mission to serve. I mean, most advisors these days, like you come into the advice business because you want to help and serve people. That's pretty much the driving motivator. And then it starts growing into a business and the business starts pulling more of your time for business things, right? The old, like, Gerber E-Myth, more time working on the business than in the business, right?

From the pure business entrepreneurial, and sure, I get it, it's becoming a bigger business, I got to spend more time working on the business than in the business. But for a lot of us, there's this really challenging pull around that. It's like but I started this because I like what I do in the business. Like I like helping clients. That's why I became a financial advisor. And so this pull of oh, wait, now I'm supposed to not work with the client so much and do all the stuff that I was doing for them because I have to do all these other things for the business? I find it tears at a lot of us when we got into this to serve and the business starts getting bigger.

Eric: Yeah. You're exactly right. It's the E-Myth example to a T. And I still would prefer to be the entrepreneur and prefer to lead the team and build the business. But yeah, I can't put the advisory piece to bed quite yet. And that's been the challenge.

What Does Eric Wish He Could Tell Himself When He Was Getting Started? [01:27:55]

Michael: So what else do you know now you wish you could go back and tell you when you were starting down this path?

Eric: To start social media right away. I know it's silly and there's probably something better I could choose, but I look at other companies that are having success and they're just kicking our butts when it comes to social media. And I just think about, we've got such a cool idea and we've got such a great team and we're not sharing that with anybody other than just ourselves and our clients. And I would love to have, you know, documented that journey better and added some value through social media. Earlier, I just wasn't good at it. And so if I could tell myself something, it would be spend more time on that.

Michael: Is there a particular tool channel platform. It's like social media is so wide reaching of what it is and the different ways that you can show up? Are there like particular social media things or tactics or stuff that you wish you'd been doing?

Eric: I think YouTube is something that I would have leaned into more. Because it's not that hard to make a video and you can create such a great personal connection through video. And the growth of YouTube that we've seen over the last 4 or 5 years has been great. And so, yeah, YouTube would be probably where I would really, if I were a new advisor, that's where I would start creating value over a different platform right now.

Eric's Advice For Younger, Newer Advisors [01:29:37]

Michael: So any other advice then that you would give maybe younger, newer advisors coming into the business today and trying to figure out first steps navigating the path?

Eric: Be, yeah, I mentioned this earlier, but just be your authentic self. I think that a lot of advisors try to just model themselves after someone they like or another firm or what they think a financial planner should be like. But from day one I've told the team, like, let's innovate. Let's come up with solutions that don't exist. Like we built our own CRM. We built this other tool that we were talking about earlier. And that's created just a lot of energy within the business. And that, I think, has then flowed into referrals. It's flowed into advisor referrals. And for a new advisor just starting out, even that firefighter example, right? If that's your niche and you want to work with firefighters, like be the best damn firefighting advisor out there you can. And tell everybody you know that that's what you do. And that will open doors up that I think would surprise you. But don't beat around the bush. Don't be shy about it. Just be you.

What Does Success Mean To Eric? [01:31:00]

Michael: So as we wrap up, this is a podcast around success and even just the word success means very different things to different people. And so you're on this wonderful success path with the business and fast growth to a million dollars of revenue. And it sounds like that's just like first inning for you of where you want to be in the long run. How do you define success for yourself at this point?

Eric: I define success not around revenue goals, not around client goals. I 100% define success around team happiness and client happiness. Do we have happy clients? Do we have a happy team? At the end of the day, I did well. If one or the other is not happy, then something is wrong and I didn't succeed. And I really, truly believe that. Those are the most important things to me.

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

Eric: Well, thank you for having me, Michael.

Michael: Absolutely.