#FASuccess Ep 432: Crafting “Input Deliverables” That Show Financial Planning Value To Clients Without Creating Busy-Work, With Seth Scott

Resources Featured In This Episode:

• Seth Scott: LinkedIn | Website
• Housing Allowance Worksheet – Download (Excel)
• Kitces Report On How Financial Planners Actually Do Financial Planning
• Church Law & Tax

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Full Transcript:

Michael: Welcome, Seth Scott, to the "Financial Advisor Success" Podcast.

Seth: Thank you, Michael. I'm so excited. I appreciate being on the podcast.

Michael: I'm really excited to have you join us today and to get to talk a little bit about I guess what I'll broadly characterize as deliverables. I feel like there's been this growing movement lately in our advisor world to try to create more deliverables for clients. I think particularly in this world, financial planning is so intangible. Having a deliverable or a visual, a graphic, a PDF, sometimes literally like an actual piece of paper we still print sometimes, it just becomes really powerful as a more tangible way to start to show value.

And especially given by our own research data, less than half of us now even deliver a physical financial plan anymore. The majority of us are collaborative on a screen, either a screen share or a big screen or conference room. And so as the physical financial plans decline, more and more of us are now trying to create deliverables. So you've got various vendors that are solving for this. Holistiplan and FP Alpha create tax planning deliverables. Asset-Map has their mind maps. We built a version of this in fpPathfinder with flow charts and checklists you can use with clients.

And as nice as it is to have software tools that create deliverables, I find some of the most powerful and the really impactful ones are things you don't necessarily get off the shelf from any software provider because they're really specific to your clientele. And I know just this is a domain where you've spent time lately building more specialized deliverables for your ideal clientele. And so I'm just, I'm excited to talk about creating deliverables and maybe how we try to make the value of financial planning at least a little bit more tangible for clients.

Seth: I agree, Michael. And for me as a business owner, I feel like a deliverable is a great way, especially one that is maybe a tool that is self-serving, as a way to scale my value to a lot of people without necessarily having to scale my time.

I have a background in computer science. And so if I can build into deliverables or spreadsheets or something that maybe has some automation that can help people and bring value to them where they are, it doesn't take much from me. I have put my expertise into this tool that can help people. It adds value immediately, and it also acts as a draw for people that want to come back and work with me on a more granular level.

Creating An "Input Deliverable" That Meets A Key Planning Issue For Seth's Ideal Target Client [05:45]

Michael: So I'm curious. We're going to get more into this in a moment, but I was struck by how you framed it. For you, deliverables are both to show the value and to scale your time. So I'm curious to hear a little bit more about the scaling part. I think a lot of us get the idea of if it's a really meaningful thing I can put in front of clients, it's nice to be able to have a tangible show of value. But how do you think about deliverables from the scaling perspective? Because for a lot of firms, I hear wariness to create deliverables as just it's another piece of work. It's another thing we're doing. It's like, "Okay, I hope it's at least worth the time it takes to make the deliverable and it's not busy work." But most firms I hear talk about deliverables as, "Well, it's going to take more work, but it's going to show our value, so it's worth it." Not, "This is a time saver. This is a scaling time saver for me."

Seth: That's a great question. And I know what you're talking about. I think there's two types of deliverables. There are output deliverables, and then there are input deliverables. I don't know if those are official terms. I just made that up on the spot.

But I think when you're talking, it sounds like you're talking about output deliverables, where it takes a lot of time and effort and staff time to deliver something specific to a client and then give it back to them like, "Here is a one page that shows your balance sheet in a visual way. Or here's something that outputs the information that you've given to us. We have digested it, and we've put it into a format that is palatable and easy to look at and is useful." And that's great. I can see how that disconnect would happen, and just your question of, "How is that a time saver?"

The deliverable that I have in mind, and I have a very particular clientele that has a very particular problem that they need solved. And so the deliverable that I had in my mind when I was saying it's a time saver is actually an open-ended tool. So it's not something that we input any information on the client's behalf, and then we give them a report. We're giving them a fully functional standalone tool that they can take home. They can put in the information themselves, and then they get immediate feedback on what they're looking for.

And so the only staff time it takes for us is actually developing the tool, maintaining the tool, perhaps. But if I can go to talk to a bunch of prospective clients, which in my case are pastors and churches, if I can go and share with them something about, "Hey, here's how the housing allowance, for instance, is structured with the IRS. And by the way, here's a tool that you can take to analyze your own situation and to see if you're fully utilizing your housing allowance as a minister." That's the kind of tool that I'm talking about.

Michael: And so I see now your distinction of output deliverable versus input deliverable. That's a really interesting framing to me. So my output deliverable is you give me the information, and I produce a thing. Right. "So here's your balance sheet. Here's your tax report. Here's your one-page financial plan." And your framing is different because your version of a deliverable isn't...the value isn't the output. The value is literally the tool because they can put in information themselves and get an output or a report that they want for themselves. And so your value isn't creating the output. It's creating the tool.

Seth: Yeah, absolutely. And I think there's a place for both in a financial planning practice. But you're right that the output deliverables, as I call it, is more labor-intensive than, say, the input deliverables. But the input deliverable is an easy way that I found that I can add instant value to someone's life in addressing a problem that maybe they didn't even know that they had. And by the way, here's a solution to help you to add value to your life, but also to get my foot in the door as an expert in this space who can help you if you have further problems down the road.

Michael: So, no pun intended to the deliverables theme, but can you make this a little bit more tangible for us? I think you said you do stuff around housing allowance for pastors and churches. Is that an actual input deliverable? What's the thing? What's the tool that you actually made to do this?

Seth: Yes. So I've developed a spreadsheet. It's not...it's all open source. It's all out there. It's not proprietary or anything like that. And what it does is it prompts the user to input the financial variables from their life that would substantiate their housing allowance. It prompts them to put in some other data for perhaps the fair rental value of either their home or their apartment that they're living in. And we send them to places like Redfin and Zillow that have good rent estimates to kind of substantiate that.

We kind of walk them through this process of visualizing what are sort of the...there's a lot of confusion around the housing allowance. This is a very niche situation just for pastors, just for members of the clergy, but it's something that's very important to them because it's a tax benefit that they uniquely get. And so there's some confusion around exactly how it works.

Well, hopefully what we've done is we've, through this tool, developed a way that prompts them about the information that is relevant to that, puts it in a visual way so that they see what's going on. And then it gives them an answer at the end, "This is the housing allowance that you should take. Or if you already have a housing allowance, this is how much is underutilized." I hope that makes sense.

The Unique Needs Of Clients Who Are Members Of The Clergy [11:49]

Michael: It does. I feel like we have to take a pause for a moment here. And just can you walk us through what the clergy housing allowance is and what it works? If you'll nerd out with us for a moment? Because I think it'll be more helpful to understand what you're trying to do and accomplish if we just understand the rules. I think most of us, if we don't work with clergy, we just don't necessarily know this set of rules.

Seth: Michael, I would love nothing more than to nerd out about pastor finances with you and your audience.

Michael: Awesome.

Seth: This is such a privilege. And it really is a really particular niche in the financial planning world that has some surprisingly interesting implications for financial planning.

One of the benefits, to answer your question, that pastors get is something called a rental allowance or a housing allowance. It's from Internal Revenue Code Section 107. And it says very simply that ministers can exclude a portion of their ministry income as a housing allowance from their gross taxable income. So that's a really nice benefit.

However, as you can imagine, there are some rules and caveats, and guidelines that are in place to make sure that that doesn't get blown out of control. Pastors have to follow certain rules and guidelines for what counts towards your housing allowance, how big of an allowance exclusion can you take, etc., etc. And so every pastor, when they get ordained, the first thing they're told is you need to find a good tax person who understands clergy taxes, because it really is a whole monster in and of itself.

You have the housing allowance. Ministers also have the opportunity to opt out of Social Security taxes, if that's something that they would like to do. They have a limited window to do that, but that's an irrevocable decision. That means that they're also not getting Medicare, which is a whole other can of worms. They're all considered self-employed by the IRS. So they're kind of navigating this dual status of being an employee of the church but also being self-employed and having to pay their own SECA [Self-Employment Contributions Act] taxes.

So it's a very surprisingly complicated situation when you're dealing with someone who just wants to serve the people of God, who just wants to shepherd God's people, and the IRS has essentially put them in this place where, "We're actually going to make it so that you're managing two businesses. You're keeping track of your ministry expenses like you're owning a business, but you're also keeping track of your housing expenses as if that's a separate business. And you better not violate any of the rules, or you're going to get audited."

Michael: So when you go through this with pastors then, I'm sort of inferring, so you have to go through a process with them to figure out what would be an appropriate amount to actually, say, I don't know, of my $90,000 that you pay me, $27,000 of it would be allocable to my housing expenses. Therefore, $27,000 of my $90,000 of income will be excluded, but I have to actually put numbers to paper to document and validate that $27,000 is the right number and that it shouldn't be $37,000 or 10. And that I'm not claiming $200,000 of housing expenses and trying to zero my income. Is that the right context to think about this?

Seth: That's exactly right, Michael. Really, I try my best to demystify it for ministers because there's a lot of misinformation and half-information that's out there. And there's not really an established source necessarily that's widely known for "This is where you can go to kind of demystify all of these really complicated things."

But it really comes down to three values when we're talking about the rental allowance in particular. And the minister is allowed to exclude the lesser of these three in any given year. The first is the easiest. That's the housing allowance that's designated to you by your governing church body. So your church board, for instance, they have to designate a portion of your pay as a housing allowance as part of a board resolution every year to specify this is how much of your pay is going towards that allowance. So that's one of the lower limits of what you can do.

And so part of the power of the tool that I was talking about that we've developed at Heartwood is to be able to help the pastor request the right amount of housing allowance from their church, because that's one of the lower watermarks that allows them to take their benefit. If they ask for too little, then there's benefits that they're leaving on the table. So that's number one.

Number two is the fair rental value of their place of residence plus utilities and furnishings. So that's another low watermark. And that essentially keeps pastors from, like you said, claiming $200,000 a year for housing expenses. Let's say they put a down payment on a house that year or something, and so their expenses are through the roof. They can't just zero out all of their income for that year. It has to be substantiated by an actual fair rental value of the property that they're staying in or that they own.

And then the third thing is their actual housing expenses. So if they don't have substantiated, documented housing expenses that follow these specific rules as far as what counts and what doesn't count, that becomes another limiting factor to what they can take.

So you have those three things every year, and you can take the lesser of those three.

Michael: So presuming just that we're on the up and up and our expenses are bona fide in the first place, then I'm presuming most of the time this is some combination of I can claim the fair rental value of my residence plus utilities and furnishings as my housing allowance, as long as my church board is setting a board resolution for an allowance that is higher or at least substantively similar, just so they don't like floor me at a lower number than what I otherwise would have been able to claim in the first place.

Seth: Exactly. And some of the value that we provide to our pastor clients is helping to foster the way that they communicate with their church board about these issues, because our experience is that church boards aren't necessarily even completely savvy on these particulars about pastor taxes or pastor finances. Church boards are a lot of times made up of individuals who…they love God, they want to serve people, they got a good head on their shoulders. They're not necessarily well versed in these particulars.

And so we like to empower our pastors to equip their church boards to do what I know that they want to do, which is to help their pastors and to equip them and to put them in a position where they're set up for financial success. And there're so many low-hanging fruit type of things that church boards can do to make it so much easier for their pastors to take all the benefits that are afforded to them. And so we just love facilitating that line of communication, which isn't always as open as we would like to see.

The Capabilities Of Seth's Housing Allowance Tool And How He Built It [19:34]

Michael: And so now with that as further context, can you take us back through, I guess, the tool, the input deliverable now as we're framing it, step by step? What does it do, or what are the sections or capabilities of the tool?

Seth: Right. So the tool is doing roughly two things. First of all, it is equipping the pastor with a reasonable housing allowance request that they can present to their church board every year and say, "This is the housing allowance that I would like, and here's the justification for doing so."

We even have a page in the spreadsheet that reads like a request letter from the pastor to the church, "I'm requesting this much for fiscal year X for a housing allowance." There's another page that actually outputs in the form of a board resolution with the name of the church in there that you could give to the board and say, "Here's a resolution already written that you can pass this year that substantiates and designates my housing allowance according to this documentation that I've provided."

So that's one of the deliverables is helping give the pastor or the minister an actual deliverable that they can present to their church board and say, "Here's the housing allowance I'd like for this year."

The other part of the tool is helping them track and really prompting them to continually document their housing expenses so that they can substantiate the taking of their housing allowance. There's a very particular list that from IRS publications and whatnot specify exactly what counts as a qualified housing expense for pastors. For instance, pest control services would be counted, but house cleaning services are specifically not counted. So there are lots of kind of nickel-and-diming issues like that.

Michael: So you make a budget-style template of how much do you spend in each of these areas, but it's not our traditional budget worksheet. It's just the elements of the budget that you would be able to count towards housing allowance so you can write down what all of those are.

Seth: Exactly. So we've line-itemed what from our research and our expertise in this area that we feel is the definitive list of these are the housing expenses that fall under the umbrella of what the IRS has designated as counting towards your housing allowance.

And so we prompt them to put in their rent or their mortgage. We break out their utilities, electricity, water, gas, trash, any furnishings they bought that year, repairs and maintenance, property insurance, real estate taxes, all of these sorts of things. We just prompt them probably more than they need, but hopefully just having it on there to say, "Oh yeah, I forgot to include my property taxes or I forgot to include my rental insurance as part of my allowance." So that's part of what it does there. So you get a view of over the last year what were your actual housing expenses. And it again, hopefully, prompts the pastor to continue to track those moving forward.

The other part of the tool is helping them determine that third value that we haven't talked about, which was the fair rental value plus furnishings and utilities. And because this is one of the low watermarks, we want to make sure that it's generous enough to allow them to take their full benefit, but it's not blown out of proportion because we don't...that's a problem in and of itself.

So our tool prompts them to go look up their property on Redfin and Zillow because they both have rental estimates just built right in there. So they can just put those right into the tool. We put a spot so that people can freeform, put in their own value, whether they have a rental appraisal or some other source that they have, and they can write in what the source is to substantiate that value.

And then they add in the utilities from the top part where we ask about their expenses. And this is a part that I think even some tax professionals who work in this space sometimes miss. It very clearly says that the fair rental value includes utilities and furnishings. The furnishings part can be hard to substantiate, especially if you don't buy furniture that year. However, the way that we've captured this in our tool is we have a link to an article on the tool that says that across the United States, if you rent a furnished apartment, you can charge between a 15% and a 20% premium to the rent. I don't know about you, but most of the pastors like to live in furnished houses and apartments. They're not just staying in a...

Michael: Unless you are particularly into the minimalism of poverty. Yep.

Seth: That is a good point. That is a good point. But if you do have furnishings in your house, and if you were to rent that house as a furnished residence, then you would be justified in charging 15% to 20% on top of whatever that Zillow or Redfin estimate is that they give you.

So we allow you to put in... We default it to 20%, but we allow you to put in whatever you feel like that premium should be for your residence. And then we calculate kind of that low watermark for the fair rental value as well. And that ends up being what gets populated into the board resolution language where they're actually requesting that from the board.

Michael: Interesting. So you're literally giving them a templated letter for requesting their housing allowance and a fill-in and sign board resolution kind of thing.

Seth: Exactly. Yeah. That's one of the deliverables that it has. And it's something that they can use year on year. There's nothing in particular that's specific to the tax rules that tend to change year on year. It's just until Section 107 changes or any of these other publications. Unless there's a material change to any of these, it's something that a pastor could use every year in perpetuity and just continue to keep an eye on those expenses and continue to ask for reasonable housing allowances from their church board.

Michael: So I guess as I'm going to ask, you're comfortable writing board resolutions for sort of stranger organizations. I'm going to presume these don't necessarily have to have the heaviest of legal language. This is we're not writing board bylaws. This is a resolution of, "We agree that this will be your housing allowance for the year."

Seth: No, it's a good question. And I do have lots of disclaimers throughout the tool saying, "This is not legal advice. We're not licensed to give legal advice. This is an example."

And actually, it's interesting you mentioned that. One of the resources that I go to often, Richard Hammer, is a CPA, and he puts out a church law and tax annual guide, which for me is just the gold standard for church and clergy tax topics. He also has a website and other pages that he puts out. One of the things that he put out was a sample resolution for a church board adopting a housing allowance. And so the language that I put in was very heavily influenced by what he put in there.

Michael: Very cool. Very cool. And just for folks who are trying to visualize this, are you comfortable to share out to the other advisors who are listening, if they want to literally see what this looks like?

Seth: Absolutely. And I feel like if I could accomplish one thing being on this podcast, it would be to just get the word out there to other advisors who, like me, have a heart for ministry, have a heart for ministers. Maybe are close to ministry in your own local church and are maybe looking for a way to give to that community. It's a very underserved community. The need is great.

I think the perception is that pastors aren't necessarily the best financial planning clients because a lot of them don't have a lot of money. And that tends to be true. But if this is something that you have a heart for and a passion for, something like this that you could share or become educated on, even just these talking points of talking about the housing allowance and just really breaking it down in plain language, that is just worlds above the help that a lot of these pastors are getting, which is really none, little to none.

And so, here at Heartwood, we're looking to fill a very real gap. There's almost no competition in this space. It's really hard to find firms that are really going after this niche, going after this population of pastors and ministers who really do have very unique and particular needs with financial planning and taxes. And really, if we can just spread the word and get more advisors excited about even becoming more educated for their existing clients or adding value to pastors and their life, I count that as a win.

Michael: Well, we appreciate the willingness to share. Hopefully, a few folks get either inspired to literally do this with their place of worship and whoever leads it, or just to see, I guess, now as we framed it, what an input deliverable looks like.

So for folks who are listening, this is Episode 432. So if you go to kitces.com/432 and scroll down a little bit to the Show Notes area, we'll have a link out to this in the show notes if you want to kind of see the actual deliverables. So I guess this is, Seth, from your end, this is like a spreadsheet. We're just talking like good old Excel spreadsheet or something to that effect.

Seth: Good old Excel spreadsheet. I actually have a Google Sheets version of this that I provide to my clients so that we both have access to it and we can both input and collaborate on it. But when I give it out at talks or as deliverables just kind of ad hoc, then I provide it as a standalone Excel document.

Michael: But I guess in that context, because I know you'd mentioned earlier that you have a computer science background. We're not talking like, "I made a custom app with software developers to do a thing." Just we're literally talking, it's an Excel spreadsheet with formulas that pull numbers to other cells in a displayed format. That's the depth of programmer complexity we're talking here.

Seth: Yeah, absolutely. I probably shouldn't tout my computer science background because it really is just what you described. It's really nothing fancy. I feel like honestly I have to...

Michael: Sometimes you have to make it more complex than it needs to be.

Seth: No, I agree with that. I think the most complex I ever get is just concatenating a string with a value and just like... So that you're reading the thing, and it says, "We at this church," and it says the name of the church, and it's not in its own box, and it's like part of the actual text. That's as fancy as we get.

Michael: Okay. Very cool. Very cool. And so then I guess in that context, like you said, there are multiple pages, I'm presuming multiple tabs of the spreadsheet. When they need the allowance request, they're literally just printing that tab of the spreadsheet when they want to give the board their sample resolution. They're just printing that tab of the spreadsheet and saying, "Y'all can sign this and put it in your records, and now you've documented my housing allowance."

Seth: Yeah. Absolutely. And again, reiterating that we are not in the business of writing board resolutions. We're just providing a sample. If the pastor wishes to use it and if the board wishes to adopt it, then that's great.

What Heartwood Financial Planning Looks Like Today [32:06]

Michael: Okay. So now zoom us out a little bit to just the advisory firm overall. What do you do? Who do you do it for? You've given us some understanding around pastors that you serve, but help us understand now the advisory business that's wrapped around this input deliverable.

Seth: Sure. That's great. And so just to be clear before I talk about that, this particular direction that we're going with pastors, this is we're about a year and a half into pivoting towards this niche. And so we're still very much in the process of turning the ship in that direction.

And so the existing book that we have is more kind of garden-variety standard stuff. I have acquired books of business from three other retired advisors at our broker-dealer. So I'm managing their books as well as my own book. One of the advisors also had a tax practice that I bought him out of that. And so I'm continuing to do taxes for those clients.

And having a tax background actually helps me serve clients better or serve pastors better in particular because pastors a lot of time, again, first question they get asked or they get told is, "You need to find a good tax guy." I think the second question ought to be, "You need to find a good financial planner." A lot of them stop with the taxes, and they don't really go that next step. But anyway, that's all on the side.

Michael: Do you have a CPA or enrolled agent background? Is that the world you come from?

Seth: No. Actually, so I became a certified tax preparer in order to serve one of my predecessor's tax books. But seeing that this is an area that is going to serve my clients well, I do have plans to pursue my EA designation in the next year or two.

Michael: So for those who aren't familiar, what's the difference between a certified tax preparer and going to get your EA?

Seth: That's a good question. I guess if I were to make an analogy, I suppose it would be the difference between becoming securities licensed and getting your CFP. One gives you the license to be able to do business in the space. And the other is a designation that provides more training, more specialized training, allows you to take on perhaps more particular clients or those sorts of things. And so I think the EA and the CPA designations are to the tax profession as the other CFPs or other designations are on the financial planning side.

So becoming a certified tax preparer, at least in California where I am, involves taking a course. You take a certain number of hours of federal taxation, state-specific taxation if you live in a state that charges income tax, ethics. And then you take a test through the CTEC [California Tax Education Council] Board, and you can become a certified tax preparer. And that's really what it takes.

Michael: And so I was curious if you recall, how long did it take you to study and go through this? Just is this, I guess, sort of analogous to Series exams? Is this study for a few weeks and get it done? Is this study for a few months, and get it done? Is this study for a weekend, and get it done? What did it take for you to get to the certified tax preparer level?

Seth: I think it's 80 hours of coursework that you have to go through to get certified for the first time. And then every year or two, you have continuing education very similar to the securities side, where you have to take maybe another ten hours, I think. I would say that it's comparable to maybe getting your Series 65. Maybe slightly less rigorous than that. But I think the parallels of the process are there.

Michael: Okay. So then help us understand just the advisory firm overall. So you've largely acquired books of business from three other retiring advisors. So how many clients are you responsible for, or assets under management, or however you measure or quantify it?

Seth: Yes. So down to the numbers, my AUM is just over $100 million. About 50% of that is annuity business, about 30% of that is in managed accounts. And then 20% of it is in employer-sponsored retirement plans.

One of the three advisors was very heavy on the employer-sponsored plan side, especially for the small municipal government 457 plans. I have a background in government work myself. My 457 plan actually allowed me to venture into this business because 457s have the special provision to where whenever you leave your employment, you don't have to take a penalty to take it out. And so I essentially had a slush fund that I could draw from to keep the lights on and feed my family while I was building up the advisory business over here. So I'm a big believer in those for those that are government employees.

The gross revenue from the book is about $763,000 a year. We're just, this last year, started introducing full comprehensive financial planning into our offerings. So of that $763,000, about $26,000 a year is in planning fees, but that's continuing to grow. As far as clients, I have about 850 clients right now. And that's a lot. I've come...

Michael: That's a lot of people. So again, I guess as you're buying some books of business, just you are kind of you buy everything lock, stock, and barrel, as it were. So you take over an advisor's retiring business like, "Here's every client I literally ever served that was still under my rep code," kind of thing.

Seth: Yeah, that's kind of how it ended up being. And so I'm coming out of my first full year of managing all this myself. And if you don't mind me saying so, I'm proud of what I've accomplished and keeping it going. I've recognized that it's not sustainable. And so I actually went back recently to talk to the advisors to see if we can renegotiate a more competitive payout, just so that I could scale my team a little bit more, invest in the business a bit more to be able to service those clients, and also have time to go in the direction that I feel like God called me to go with serving ministers and all of that.

And so we're actually in the middle...this is an interesting timing for this recording of this podcast, but we're kind of in the middle of those negotiations. It's seeming like it's maybe not going to go the way that I want to go. So I may be in a situation where I pivot away from these legacy books, and I'm kind of back to square one and starting over. But I'm very excited about that prospect, to be honest, because I've learned a lot in the five years of being in this business. I feel I know exactly what I want to do with the business. I know exactly how I want to build it. And the prospect of starting it and building it right from the beginning the way that I want to is quite exciting.

Michael: So just to make sure I understand. So the $763 [hundred thousand] of revenue, is that gross, and then you have to start paying splits and stuff back to them, or is that where you net after they get their shares, then you have to run the business off of that with 850 clients?

Seth: The former. So that's the revenue that the books present or the books generate. And then a portion of that, a big portion of that in this case, go to the retired advisors.

Seth's Journey To Financial Planning [40:38]

Michael: Okay. So, then help me understand a little bit more of the journey in. So I guess, so you obviously like career changed in to get to this. So can you talk a little bit more of, I guess, just where you came from, where you transitioned in, and how it works that you ended out with this, "I found three books of business with a good chunk of revenue, but also a whole lot of clients that I'm navigating"? Explain to us this entry path.

Seth: Gladly. So my back-of-the-napkin life story is when I was in grade school, I was really into theater and music and dance. And so naturally when I went to college, I got my degree in computer science. After I got my degree in computer science...

Michael: Well, you got to have something you can fall back on, Seth.

Seth: Close?

Michael: You need a marketable career. I'm like trying to channel some parents here. Okay. So, computer science in college and not the theater major.

Seth: That's correct. I did keep theater as a very active hobby. And I'm actually getting back into that this year with a local theater. So I'm excited about that.

But anyway, so immediately after that, I get a job working for local government doing urban planning of all things. I did that for about 16 years. And then I got the itch to do this. About five years before that, actually, my eldest son was born. He's currently 9 years old. And after he was born, I distinctly remember a meeting that I had with my pastor at the time. My son was about 6 months old. And my pastor told me, "Seth, you're too busy to be a dad. You need to scale it back and make room for your family." And I said, "Yes, you're absolutely right."

As you can tell from my little story, I have a lot of disparate interests. Very involved in church, very involved in music and performing arts, and had a lot of mentorship opportunities with young men in the church in particular. And it was with leading worship and music at my church. I did that for 13 years.

And so I'm going through, and I'm pruning. I'm making room for my family. I'm a naturally industrious person. I'm an ambitious person. I'm doing things that I feel like are very meaningful and that give me a lot of fulfillment. And really, to be honest, it's breaking my heart, giving up on these side things that are very meaningful to me. Didn't regret it for a moment. Family is everything. If you're not taking care of your family, then what are you doing? So didn't regret it at all.

But at the same time, I'm looking at my government job, and I'm thinking, "This is the one thing I would give up if I could, but I need to feed my family. So how do people build businesses? How do people build wealth? How do people retire early?" And all those sorts of things. That's not something that was ever modeled in my family. I don't come from having much exposure at all to entrepreneurship or building businesses or anything like that. So I did a lot of reading.

And from the reading, I came out with I should go into real estate, real estate investing. That's where people make money. That's where people build wealth. Flipping houses and buying rentals, and doing all that. And I said, "I could learn to do that. That's fine." So I jumped into that while I was working my government job and failed miserably. And I think the reason why is because, for me, I didn't feel like I was helping people.

There are people that do that, and they do it well, and they do help people, and God bless them. But for me, my heart wasn't in it because I didn't... I felt like I was adding value for myself, and I wasn't adding value for other people. And so that was a learning experience that I pivoted away from, and found myself back at square one and being like, "Okay, I want to help people. I like analyzing situations. I'm an analyst. I'm a thinker. What can I do?"

And my mom's tax person and investment advisor, his name was John. He was more of a family friend than anything. I think my mom was maybe his first client when he started this business like 30-plus years ago. And so I knew him since I was 10 years old. And I thought John seems to do okay for himself. And he seems to...I enjoy managing our family's investments and our finances. I was the guy that was encouraging my friends to open up Roth IRAs and showing them what to invest in. And I'm like, "Maybe I could make a career out of this."

So I ended up taking John out to lunch and just kind of asking him the ins and outs of the business and how do I get into it? And that ended up in a mentorship situation where he trained me up in the business. Two other advisors that were in his orbit were all looking to retire at about the same time. And the timeframe was about three years or four years. And so for those three or four years, I quit my government job. I took my [Series] 65 and my 63 and my 7. Got my tax license and trained myself up to take over these three individuals and their clients.

Michael: So the three individuals being John and his two friends?

Seth: Yeah, correct.

Michael: Okay.

Seth: Yeah, they all retired at the exact same time.

Michael: Good timing. So you came in with the full-on, I guess I would say, expectation, but already a track to be able to take over the books of three different advisors who were planning to exit? You knew you were going after them before you took the leap, if I'm understanding right.

Seth: Yes, that's right. So I did have a very clear runway, had a good idea of what the revenue would be. One thing that I wasn't so clear on was the work that it would take. I'm new to entrepreneurship, or I was at the time. And all of these gentlemen were all running solo practices, not necessarily what I would call running a business, which is totally fine. They made good livings for themselves.

But taking over these practices, I realized very quickly that I couldn't just draw from their experience and their example in order to run now essentially five businesses: those three, the tax practice, and then my own practice that I've built up over those three years of training. I didn't have the luxury of building a solo practice. I had to think like a businessman.

And so that led me, after this year of doing it, like I mentioned before, to go back and try to renegotiate the contract and say, "This is what it needs to be in order for me to do right by the clients and to invest in the business and make it scalable and to carve out time so that I can build my business as well, which I haven't really had too much time to do over this past year of servicing these books."

Michael: So help me understand a little bit more how this runway progressed. So this started four years ago of making the transition in?

Seth: Something like that. I'm going into my fifth year. It was in 2021. And we're in early '25 when we're recording this. So yeah, about four and a half years ago or so.

Building His Own Business While Servicing Clients Of Retiring Advisors [48:12]

Michael: So walk me through how this progressed. Day one, I guess, in 2021, when this starts, who are you working for? What are you doing? And who's paying you what at this point? How did it work? Because you're still pre-transition.

Seth: That's right. So I'm not getting any revenue from the books at that point. I'm building my own business slowly alongside training and meeting all of John's clients and the other clients and all of that. And I'm keeping the lights on with savings from my 457 account for my government job. And knowing that in two years, three years, whatever the timeframe was, I would have a more sustainable cash flow situation, and it was just a temporary thing.

The broker-dealer that we were working with had what they call a vesting arrangement where I didn't actually buy out the books. So the books reverted back to the broker-dealer, and the broker-dealer manages the agreement, the payout split between the servicing advisor and the vesting advisor. And so they're facilitating that agreement. The book technically lives at the broker-dealer, and they own it. And so I'm servicing this contract and servicing these clients as an advisor there, but there was a provision that allowed us, me and the vesting advisors, to work together to renegotiate at least once throughout the process if the payout split needed to change.

So it was nice to be in a situation where I knew I did not have to raise any capital to buy out a book. So it was nice to just have a clear runway of, on day one, you start getting X amount of cash flow. And I knew exactly what that was going to be. And that was a good thing. The challenge now being in a position where, after servicing the books and realizing that it's not necessarily a sustainable cash flow situation is that when I walk away, I truly walk away. I can't take the clients with me because they still belong to the broker-dealer. So I'm essentially taking my clients that I've built up over the time and trying to make it work over here.

Michael: So I'm fascinated by this. So there was no buy-in. There wasn't a "acquisition" like we're paying a check up front. I guess functionally, it's kind of like buying a business entirely on an earn-out, where as long as revenue stays and it's getting serviced, the sellers get a percentage of the revenue to compensate them, but you don't have to come to the table with a, whatever, six-figure check or seven-figure check to "buy the business." You just start getting a split of the revenue once they flip the retirement switch.

Seth: Yep. That's exactly right, Michael.

Michael: So, in the ramp-up period before that, was there like a salary or other dollars available, or are you just like, eat what you kill for anything you can actually bring in, live off your savings for the rest, and you're just waiting for the point where they actually transition out and suddenly you can get added to the accounts for a percentage of the revenue?

Seth: Yeah, the latter. So yeah, eat what I kill and tighten the belt and hold out, and make it work. I've got to a shout-out my wife, who has always believed in me for everything that I've done. The failed real estate business, going into this new direction. Even now when we're potentially pivoting away from this vesting agreement and into something else that's a lot more unsure and unknown, she's been immensely supportive through all of it, and I could not do it without her, without her support, without her raising our boys.

And I'm proud of the fact that my family has not suffered. Even though I've been extremely busy, I've always made sure to carve out time for my family. The echoes of my pastor telling me, "You're too busy to be a dad," have stuck with me. And that's one of the exciting things that I found about building a business is that I really can carve out the time that I need, and I can make it what it needs to be for my family so that my family doesn't get the short end of the stick. I can devote X amount of time to my business, and it's a discipline for me not to let it consume me because I am very industrious, and I do want to succeed. But I know what I'm in this for. I'm in this for the next generation in my family. I'm here to set an example for them. I'm here to pour into them. I'm not willing to let them suffer so that I can build a great thing over here.

And even though it's been a challenge in those first years of wrapping up, and even though I've been very busy this last year and even though we're going off into the unknown right now, having my wife's confidence beside me and the assurance that I'm doing my best and I'm doing exactly what I feel like God's called me to do. I know you're going to ask me what success means to me because that's what you ask all your guests, but...

Michael: We'll get there eventually, yeah.

Seth: ...I think it has something to do with all of that for me. All of that has something to do with success. Just knowing that you have a clear view of what your values are, you have a clear view of what you've been called to do, and you're courageously going after it no matter what. I feel like that means success to me.

Michael: So to the extent it's okay to share, I'd love to understand more about how this, I would say, buy-in worked. I guess again it wasn't a buy-in because you weren't writing a check, but how did this revenue get carved up when you get to come in and be the servicing advisor and they're the vesting advisor? Does this split indefinitely, or did they just get payments for some number of years and then eventually all the dollars flow to you?

Seth: Yeah, it was the latter. So the vesting contract... And I'll be light on the details just to protect all the parties involved, but essentially this book, while John, for instance... I had separate agreements with each of the advisors because they were all solo practices, and I still have a solo practice. We don't have a big office or institutional support per se.

So my agreement with John, for instance, it says, "John, as the vesting representative, will get X amount of the revenue. Seth, as the servicing representative, will get Y amount of the revenue for X number of years." And then at the end of that runway, ostensibly I can buy the clients for like $1 apiece or something, and then they become my clients if they're still around at that point.

Michael: Not a 1X revenue. Just literally, this is a nominal $1 to formalize some transaction, and then they're really yours.

Seth: Right, exactly. Because again, they revert back to the broker-dealer. So they become, on paper, house accounts that I'm servicing, but I have the option to buy for a nominal amount if I've serviced them for the full term of the contract.

Michael: Okay. And then likewise, the payment to the vesting advisor eventually drops off after that same number of years when you can do the new...sort of strike the new deal?

Seth: Exactly. Yeah. So then they become my clients, and then I can service them as I wish, take 100% of the revenue. A lot more flexibility at that point. Yeah.

Michael: So what's the term? Is that set in stone or negotiated? I'm just trying to visualize that. Is that a year, or three years, five years, ten years? How long does it have to go before parties split ways and you can more formally buy the book?

Seth: They have a max number of years and a max percent payout that is sort of templated, but the actual number of years and the percent split out over those years, those are both the points of negotiation between the vesting representative and the servicing representative. Again, I'll be light on the details, but when I came back with my counteroffer after doing it for a year, I said, "I would like X amount, which is higher. And I'd like the number of years to be less." And we're still talking that through.

Michael: Interesting. So what's the block? Just you're excited to take it over and sort of shape it. I think prune was the word you used. Prune it to where you want it to be, or is it that there's just too many hands in the proverbial cookie jar and you just, there's not enough coming to the bottom line for you to do what you need to do to serve that many clients? Because nominally 800 clients, we've got some hiring to do.

Seth: Exactly. I do have a part-time admin who has been amazing. Couldn't have done it this past year without her. But I do need to...I need to scale beyond that if I'm going to take care of 850 clients. And again, there's a lot of opportunity in this book to find new money, to grow the assets there. And I just haven't necessarily had the time to work the books the way that I feel like would be a way to do it and be a good steward of it.

For me, it's very much a stewardship mindset of okay, I have this opportunity, I'm in this role, I'm servicing these clients. I want to be a good steward of the clients. Of course I'm a good steward of their assets as a fiduciary, but I also want to be a steward of the human capital that has come before me. I want to provide a level of service that is respective of all the years that they've been loyal to these other advisors. I want to be able to pick up where they left off and continue to build their trust and do so in a way that makes me feel like I've done a good job. And in order to do that, I need to be able to scale myself because I can't be in 850 places all at one time.

And so for me, it was simply a business decision born on the back of having done it for a year and realizing what it will take. And so, coming back and saying, "If I'm going to continue doing this, this is what it needs to be. This isn't a money grab, it's not a power grab, it's just the reality on the ground because I want to take care of your clients. I want to carry on your legacy that you've built over 30 years or however long the timeframe has been. And I think the clients deserve it, and I want to do well. I want to do well by them."

Michael: So, then help me square this with what you're also doing with pastors. Did a chunk of these 800-something clients happen to be pastors, and you get to double down there, or are these independent paths running in parallel for one another?

Seth: Very much independent paths running in parallel. As I've been telling people about my situation, the way that I tend to frame it is I have been immensely blessed with this opportunity to step into a role of managing these established books with these established clients and to have an instant runway where a lot of advisors are having to build from scratch. So it's nice to have that.

I am also blessed with this very strong vision of what I feel like God wants me to dedicate my practice to doing, which is serving pastors and ministers and covering those financially who cover us spiritually. I feel very strongly that that's what God has called me to do.

And in trying to be a steward of both of these blessings, I realized that they don't seem very compatible. And so this past year has been me trying to manage, like you said, these two parallel things, realizing that in order for me to do so, I would need to scale my business and grow, and I would need more cash flow to do that.

Michael: So I'm just fascinated by this. So, it sounds to me like just you were on a path to successor into these businesses, but now that you're here, it's not as appealing. Or now that you're here, you unwittingly discovered another calling along the way that is more compelling than what you were originally looking to successor into. Is that a fair characterization or way to look at this?

Seth: Michael, that is such an incisive question. And honestly, it's a struggle to answer that question with clarity, because I'm going to go back to what I said earlier about stewardship. I don't see it as I had this good thing going, but here's this other shiny object over here. So I'm going to blow this up over here so I can go do that. I think that that's too far.

But at the same time, I did feel like all of my time, literally all of my time, it seemed, was spent servicing this existing book and trying to do right by them. And I feel at the same time this impetus and this drive and this impatience in me, almost like the Lord tapping me on the shoulder and saying, "Hey, I've called you to go in this direction. When is it going to be time for you to obey and to go in this direction?"

And so I'm at your service, Lord. That's where I am. I'll do anything. If the Lord had called me to continue to service these legacy books and to slowly build my practice at the same time, I would have done that. I had it pretty much handled. I don't know for my own mental health how sustainable that would be in the long run, but I survived the year, and I'm proud of it.

Michael: Well, and I'll just say it got to the succession. There are a lot of advisors who come in and take over an advisor's book of business, and then the advisor doesn't actually exit out of the way on the original two or three or five or seven-year time horizon.

So I guess as I'm even wondering in that context, did you have to worry that one or two or three of the three weren't going to actually retire and exit when the time came, or was this fairly certain and confident for you? They were going to go. This was going to happen. It was just a matter of was it going to work and could we get the numbers to where they need to be?

Seth: Yeah. There was a little bit of anxiety, ramping up to the actual day where we signed on the dotted line, and everything that I had worked for for the past two or three years before that had come to fruition. I was wondering how much longer it would be, because it's not over until the fat lady sings, so to speak. And so I'm working towards this, but there's nothing written down. There's nothing contractual until the actual agreement is signed. So yeah, there was certainly an element of hoping and faith, and it did end up working out. I think I proved myself as a competent servicing advisor and someone who cared for the clients and who could be trusted to steward those relationships well. And I think that gave the advisors peace of mind to take that plunge and to truly walk away.

Michael: Except now that you're a year in, the dollars aren't enough to reinvest into what it takes to serve all of the clients at once, and you don't seem that stressed at the possibility that it might not work out to renegotiate terms.

Seth: I'm not too stressed about it. I feel like I am impatient, I guess is the word. I tend to be a pretty impatient person. My wife can attest to that. But I want to have a plan in place in case this goes to the point where I'm going to have to walk away. There's a lot of little details that I'm going to have to figure out. It's like, do I continue on a...for instance, do I continue on a BD chassis, or do I hang up my seven and go full RIA and try to do what I want to do over there? It's exciting.

Crafting A Business Model Suitable For Pastors And Churches [1:05:20]

Michael: What's the model you envision for working with pastors, if that's the direction that you're feeling called? What would be the business model? Because, as you noted, not necessarily the clientele that has multi-million dollar rollovers for traditional AUM models. So how are you envisioning the model, the business to serve them?

Seth: I'm so glad you asked that question. And this is going to be a work in progress, but I've run this by a few advisors who have worked in this space throughout the United States. And I think this is a sustainable path, at least to start. I'm going to focus primarily in the beginning on signing churches to 403(b)(9) church retirement plans.

Churches are specifically exempt from ERISA. And so timely, just this morning, front page of the Wall Street Journal, there was an article about the non-ERISA church pensions and how, because of the lack of oversight, some of them are running out of money and the pastors are left with nothing. Really sad story. But just kind of shows the depth of the need in this space. There's lots of opportunity in being specifically exempt from ERISA. You don't have to file a [Form] 5500. You can fly under the radar. You can make your retirement plan essentially anything you want. But the flip side of that coin is that you can make your retirement plan essentially anything you want. And so it requires even more scrutiny and even more guidance.

And so coming into churches and saying, Look, this is a way that I can bless a lot of pastors with minimal time for myself. If I can manage their church plans, maybe once a year go visit and give ad hoc housing allowance reviews, or just financial planning and maybe some tax work with some of these pastors.

And then every once in a while, there is a pastor who really fits with the traditional financial planning client model for comprehensive planning. Like, I'm working with a client right now who I feel is my ideal client. He is a pastor of a local church here, but he doesn't take a salary because he has a business that he's run for 20 years over on the side that pays the bills. And so he's donating his time to his church as a pastor. But he needs help on the business side. He needs help with his personal finances, with taking his housing allowance and optimizing that. His church needs financial planning, which I do financial planning for churches as well.

And so when I first started working with him, I kind of just on the back of the napkin showed him, "Look, if we just change some things around, you will take a salary from your church, but you're going to donate it right back to the church. So the church is made whole. This is what it would do." And I ended up writing it out, and it had two things.

First of all, it saved him about $6,000 a year in taxes. And it also made the greater share of his taxes pay into SECA taxes, which increases his Social Security benefits in retirement. So it kind of just with that one little change. And there are so many little optimizations that you can do with pastors that are just so fun. And I know that you and I share the nerding-out gene, Michael. We just love talking about these details, and I just get so excited talking about these kinds of opportunities.

But all that to say, there are pastors like that who do make good traditional financial planning clients. And so that's going to be my business model. I have a pretty aggressive AUM fee for new 403(b)(9) plans, but it drops off steeply to encourage people to contribute to the account. 403(b)(9)s in particular for churches are really sticky business because there's...we talked about the housing allowance exclusion for pastors. They're permitted to take that exclusion in retirement when they take disbursements from their retirement plan, but it has to be from the church-sponsored plan in order to get that benefit.

And so I found a partner with PenServ who does the TPA [Third Party Administrator] and the custodial work. They're able to do it without charging a monthly fee to the church, which a lot of churches don't have a lot of budget. And so giving them a solution where they can have the right kind of plan that takes advantage of the ERISA exempt status. So the administrative costs are low. It provides faith-based and value-based investment options on the platform. For people, that's important to them. But it also allows their pastors, when they retire, to even continue taking their housing allowance in retirement, which kind of creates a super Roth, I guess. They could put into the 403(b) tax-deferred and then take it out tax-free as a housing allowance, which is a really, really cool benefit, but it has to be in the church plan.

And so it's such an easy sell for churches, and that allows me to be present and to kind of provide ad hoc financial planning to the pastors that I interact with. And every once in a while, there's going to be a pastor that's going to be able to afford a financial planning fee. And so that's the model.

Michael: Interesting. Which reminds me of a lot of advisors that are in the 401(k) space. And you work with the 401(k) space, and then every now and then you get a business owner, executive, senior person at one of the companies that also needs financial planning, and you end up with an employer retirement plan business with a financial planning, wealth management, individual client business as well. It feels like you've got a similar pathway. It's just yours is all built around churches and pastors, not corporations and executives.

Seth: Exactly. And I think with the added benefit that, first of all, I'm establishing myself as a specialist in this space. So I'm able to, with little investment of my time, add, I think, tremendous value to the pastors that I work with, kind of looping it back to our first conversation about deliverables. Developing tools like that, that outsource my knowledge and my expertise in this area and can instantly provide value to the folks that I work with, makes it very sticky business.

It's a very high referral business as well. Almost every town you go to will have some sort of pastor cluster or a minister cluster where ministers all talk together, or they'll have some kind of church conference. And it's just I found that the word of mouth is very, very high in this particular clientele, which is such a blessing.

A lot of pastors don't even know that they can take housing allowance in retirement. And so they're excited at that prospect. The churches are excited that we can offer the plan at no ongoing administrative cost. They're all borne by the participants, but the participants are happy to pay it because they're getting such amazing tax benefits, both in tax deferral and in tax-free income in retirement. So show me where the problem is.

Michael: So then take this kind of one step further for me. How do you, or how are you going about trying to establish yourself as a specialist in this space when there are also hundreds of legacy clients who don't necessarily fit the mold? And I know for a lot of firms is there's a struggle of, "Well, what do all my existing clients do who aren't pastors if I tell them now that I'm focusing on pastors?" How are you navigating that?

Seth: It's a good question. And a lot of it depends on how these negotiations go. But the way I see it is there's two...

Michael: Fair enough.

Seth: Yeah. Well, there's two main paths forward. If it works out and we're able to get a sustainable amount of cash flow, then I would be able to build my business in such a way so that I can grow and steward that side of the business, but can also kind of have a parallel thing going with pastors. And the way that I put it is that pastors are so complicated with their financial situation. If I can do financial planning for pastors, I can do it for anybody.

What Surprised Seth The Most Building An Advisory Business [1:14:05]

Michael: So, as you've gone down this path, just what's surprised you the most about building an advisory business, someone who didn't necessarily have an entrepreneur background by family and took the plunge into the space?

Seth: Really, I think I'm most surprised by how much I enjoy it, to be honest. I tend to be an introvert. I'm a natural analyst. Don't let my theater background fool you. I am an introvert. My degree is in computer science. This is very much a people business. And so, I think I was most pleased coming into it with how natural it was for me to be face-to-face with clients and to interact with people. That was something that I didn't necessarily take as a given, as something that would really fulfill me in a career. And it wasn't necessarily something I was looking for in the beginning, just kind of knowing myself.

But I believe it stems from my imperative to add value to people's lives. As advisors, we're called not only to be stewards of clients' assets but of the clients themselves, of the human capital that comes through our door. They're placing a high level of trust in us. And for me, that's always been both sobering and fulfilling. And so, I found a lot of... I'm pleasantly surprised with how natural of a transition it's been for me. And I know I've found my forever career. I'm going to do this for the rest of my life.

Michael: So, I'm still just trying to process one step further, like, "I'm an introvert who took over 800 clients I had to meet. Eight hundred strangers." So, how does that get comfortable as an introvert?

Seth: Only with God, Michael. That's the only way I can describe it. God doesn't call the equipped. He equips the called. And I believe that this is just something that God wants me to do and has asked me to do. And he has made it work, despite my own nature, despite my temperament. I never thought that I would find such fulfillment in helping people. But really, kind of looking back at it and analyzing the situation, I think I can see how it's a good fit for me.

I love analyzing things. I love analyzing systems. I love optimizing things. And so, the whole idea of financial planning just really appeals to me just from that side of it. But also, with my background in ministry, leading worship in my church for so long and being involved in mentoring, and really, I think, as a discipline in the beginning, but then growing into a calling, really seeing the value of people and stretching myself beyond my proclivities to stay in my cubicle and just be introverted and do my thing.

And looking at the example that I have in Christ and seeing this. I am in a people-centric religion. God, Christ has called me to love people and to serve people. And so, part of my faith journey has been stretching myself into that world. And so, the background of all of that, plus the analytical part of me, it just seems like fitting hand in glove. I think this is... It wouldn't necessarily look like on paper if you were to ask me 20 years ago what I would end up doing, but it's exactly what I was meant to do.

The Low Point On Seth's Journey [1:17:44]

Michael: So what's the low point been for you on this journey over the past five years into the career changing, into the advisor world?

Seth: I think failing at the real estate business was, I think, my low point there because...but at the same time, it forced me to do sort of a post-mortem of that. And I think it was a great learning opportunity, learning a lot about myself, namely finding that imperative that I have to add value to other people's lives. And so, realizing that I didn't fail at real estate necessarily because I couldn't hack it or because of all of this. It's just because it wasn't right for me.

And so, I went from a place of just open-ended, "I feel like I need to build wealth. I need to build a legacy. How do people do it? Real estate? Great, let's do it." Just kind of a practical decision into being more introspective after that failing and realizing I really need to find something that really appeals to me. What's sustainable for me? What do I want to do? Why do I want to do it?

And so, that was a really difficult kind of pill to swallow, just sinking money into that and having it fail and kind of being back to square one and feeling like I wish I had never gone this direction, but at the same time, taking a step back and taking the opportunity to look within and to figure out why did that fail and in the process learning about myself and bringing me to this place. I'm very grateful.

Michael: So, just curiously, what got it to the point that it was feeling like it was failing for you?

Seth: The real estate part?

Michael: Yeah. A certain number of years that it's not profitable, a particular transaction that went south. Just because I find that when we have strong perseverance, we can often try for a very, very long time trying to make something work. So, what was the point that you realized, "It's not working. I have to go another direction"?

Seth: I can tell you the exact moment. I had found a lead for a house. On paper, it was perfect. It was a widow who had lost her husband, had gotten behind on the payments, was facing foreclosure, really did need a cash offer right then. So, ideal client for a flip-and-fix kind of a situation. And I did everything right. I came in, I was building rapport, I was getting her laughing, got her to trust me. We're sitting at her kitchen table. She's signing on the dotted line. And then I get to where I would sign, and I pause. And I said, "I know my competition. If you went with these people, they'd be able to give you $15,000 more for your house. You should go with them." And that was when I kind of realized...

Michael: Because you realized she just really needed the extra 15 grand.

Seth: It didn't feel good, man. It didn't feel good. Again, I hate to use the word indoctrinated. I have every respect for people that make it happen in real estate and make it work and find their way. There is a place where that is helpful. But for me, in doing it, I didn't feel like I was helping people. I felt like I was taking advantage of people. And again, that's maybe on me.

Michael: Because your win is their loss, kind of by definition. If I get it cheaper from you, you got less from me.

Seth: Yeah. And I just didn't... I feel like I kind of quickly, when I actually started getting elbows deep into this and started trying to convert sales and do those sorts of things, I think I very quickly realized this is not for me. I don't feel good in a win-lose. I think it's very insightful that you put it that way. There are so many opportunities in life that are just win-wins. And so why don't I find something that does that?

Seth's Advice For His Younger Self And For Newer Advisors [1:21:53]

Michael: So with respect to the advisory business now, as you look back, what do you know now you wish you could tell you from 2021 as you were first entering this path, or maybe even from 2020 as you were making decisions? What do you know now you wish you could go back and tell you from five years ago?

Seth: Man, Michael I've thought about this question, and honestly, I don't have a good answer. And the reason why is because I feel like in every endeavor in my life, the learning journey is part of the process. I think we aren't as successful as individuals just based off of what we accomplish or what we do or the money that we make. I think we're successful based off of the person that we become. It's a character thing. And I know from my experience, my character is shaped by these moments of indecision and these moments of feeling like I'm in over my head and not knowing what I don't know, but then having to undergo the process to find out.

And so I know that it's a roundabout answer. It maybe is frustrating to people that just want an answer. And there are some specific minutiae things like how do I justify my fee? For instance, what value do I bring that substantiates what I charge for my services? That was something I really had to wrestle with. So there are things like that that I'm like, "It'd be cool if I could have had a handle on that earlier on." But honestly, wrestling with that question as an example and then continuing to wrestle with it is part of the process. And I think...

Michael: I was going to say, how do you answer that question now of how you justify your fee in bringing value for your services?

Seth: That's a continual wrestling, honestly, Michael. And I think I'm not alone in this. I think there's a lot of advisors that go back to this question. I'm reminded of in Genesis when God wrestled with Jacob and changed his name to Israel, and the name Israel means wrestles with God. And God's people were named after this concept that God invites you to wrestle with Him. And that wrestling with yourself and with God and with the incongruencies in the world and with your own character and with your own nature, it's all part of a journey that makes us human. It makes us who we are.

And so to be presented with a question where it's like, if I could go back in my past and inject the end result of the struggle that got me to that point, I wouldn't be the person that I am now. I'd be less of a person. So I don't think I can answer that question, Michael. I think I've done exactly what I'm supposed to do and I've become the person that I'm supposed to be. And I wouldn't have it any other way.

Michael: So, any other advice you would give other advisors thinking about career changing in the industry and trying to figure out what their path should be?

Seth: Yeah. I think take time to sharpen the axe. I think it was Lincoln that was attributed to have been saying, "If I have eight hours to chop down a tree, I'm spending six sharpening my axe." And for me, sharpening the axe is kind of asking those why questions. Why do you want to do this business?

We kind of addressed this earlier, but there's no shortage of ways to make financial services a profitable enterprise. Just listen to a few episodes of this podcast, and you'll see that there's no one right way to structure your business and to make it successful and to make it profitable. So I feel like the differentiating question for us is really in the why question. Ask it early, ask it often. Why am I doing this? What is my imperative? This is a service business. Whom do I want to serve? What value do I want to bring? What kind of work turns me on?

These kind of questions I feel like are just foundational. And I think a lot of people in any career, but maybe in this one in particular, they see an opportunity to make some money, have some free time, have some autonomy. But I feel like it takes discipline to really sit down and think, "Why do I want to do this?" And I think all of the other minutiae questions about fees and about business structure that has to naturally flow from that kind of core question that you ask yourself.

What Success Means To Seth [1:26:35]

Michael: So as we wrap up, this is a podcast about success, and one of the themes throughout is that just literally that word success means very different things to different people. And so you're on this wonderful path. Now I feel like a turning point as you find the calling of where the business goes next. And so the business is on this wonderfully successful path. How do you define success for yourself at this point?

Seth: I think success means knowing exactly what you should be doing and knowing that you're doing that in the moment. It means doing the work, kind of like what I said before of determining your values and your imperatives, to catch and to craft a vision for putting them into practice and courageously pursuing it. Because really, what else can be expected of you? I believe you're in the right place at the right time, doing the right things, listening to the right people. Success will inevitably follow.

And the wisdom to discern what all those rights are that's got to come from within, from your character, from your temperament, and your calling. And so when you know you're calling and you know you're doing your best to walk it out, that to me is the essence of success, being able to go to bed with a clear conscience, to run your race at the end and say, I ran my race well, regardless of the numbers, regardless of any of those other trappings. I believe all those things will come if you are aligned in integrity, I guess is how I would put it.

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

Seth: Michael, this has been so great. Thank you so much. Thank you to the listeners. God bless you all.

Michael: Thank you.