#FASuccess Ep 056: The Opportunities In Providing Hourly As-Needed Financial Advice For The Middle Market with Sheryl Garrett

What You’ll Learn In This Podcast Episode

• What led Sheryl to end up in the financial planning industry. [6:57]
• Why it’s important to ask good questions and determine if a firm is a good fit for you. [24:02]
• Why you shouldn’t let the licenses and registration process stop you from trying a new business model. [27:14]
• What kept Sheryl coming back to financial planning each time she tried to leave the industry. [28:43]
• Why Sheryl had to figure out what type of business she wanted before she could build her firm. [47:26]
• How referrals from other financial advisors can actually be one of the best ways to build an hourly practice. [1:05:38]
• How the hourly model kept Sheryl focused on trying to be as efficient as possible with her clients. [1:05:38]
• Why identifying what clients’ need and want out of life is a financial planner’s most important role. [1:22:45]
• The importance of advisor support services and finding a community of peers. [1:24:37]

Resources Featured In This Episode:

• Sheryl Garrett – Garrett Planning Network
• @SherylGarrett
• Garrett's Guide to Financial Planning by Sheryl Garrett
• Garrett Investment Advisors
• Bob Veres Inside Information
• FAS Podcast Ep. 19 with Bob Veres
• Kitces.com Become A Member Sign-up Deal
• Nerd’s Eye View article on interview questions to ask
• E-Myth Revisited by Michael Gerber
• Seven Stages of Money Maturity by George Kinder

Full Transcript: The Opportunities In Providing Hourly As-Needed Financial Advice For The Middle Market with Sheryl Garrett

Michael: Welcome, everyone. Welcome to the 56th episode of the Financial Advisor Success podcast. My guest on today's podcast is Sheryl Garrett. Sheryl is the founder of the Garrett Planning Network, a financial advisor support network for fee-only RIAs with a focus on bringing financial planning to the middle market by making it available on an hourly, as-needed basis.

What's unique about Sheryl, though, is that what started out as a very unique business model in the late 1990s turned out to be so popular that it attracted other financial advisors to her, to emulate the model, and as a result, what started out as something that Sheryl wanted to do for her own clients turned into a network of several hundred advisors all delivering the same hourly model in their own local markets.

In this episode, Sheryl shares her own path through the financial planning industry. How she struggled early on in a broker-dealer that required her to cold-call and sell products. How she dropped her FINRA licenses and shifted to an early fee-only RIA, then picked her FINRA licenses back up for a second time for another broker-dealer firm, only to then drop them again by transitioning once more finally into the fee-only channel for good, albeit by becoming a partner in a new fee-only RIA, only to discover that that partnership wasn't going to work. Which is what ultimately led her to finally start her own firm a full 10-plus years into her career.

In addition, Sheryl shares what it took for her to finally launch the Garrett Planning Network, what she's learned about the success and the challenges of the hourly model for financial planning, why referrals from other advisors can actually be one of the best ways to build an hourly practice, and how just as with any other advisory model, many hourly planners build lifestyle practices while some endeavor to grow larger businesses. And how the appeals of the hourly model for Sheryl, in particular, is that it kept her focused on trying to be as efficient as possible with her clients to help them manage their own cost of advice.

And be certain to listen to the end, where Sheryl talks about the value of organizations like Garrett Planning Network, where it's great to have the advisor support services but in the end, the most powerful effect is simply finding a community of fellow financial advisors all pursuing a similar business model with similar clientele, from whom you can learn and with whom you can share best practices, whatever your target clientele and business model happen to be.

And so with that introduction, I hope you enjoy this episode of the Financial Advisor Success podcast with Sheryl Garrett.

Welcome, Sheryl Garrett, to the Financial Advisor Success podcast.

Sheryl: I'm delighted to be here, Michael.

Michael: I've been looking forward to this episode because we've had a number of people on the podcast lately who have followed this path of there's a thing that they did in their business, I mean, basically for themselves, to get their own business started, and then they found other advisors were interested and then they started doing it for other advisors. And then all of a sudden they were going down this other business path that didn't necessarily have a lot to do with the original business path.

I mean, we recently had Greg Friedman on, who started his advisory firm and then didn't like any of the CRMs so he made his own, and then other advisors wanted it, and lo and behold he made this company called Junxure that recently got bought. And, you know, you've gone down a similar road in starting out in an advisory practice and then did this unique model that no one else was doing, that others then came and asked you about doing. And suddenly, you were running a network of advisors that were all doing this model. So can you talk to us a little bit about maybe just as a brief starting point like, just tell us what Garrett Planning Network is as it exists today, and then I really want to understand, like, how does a network like this come about?

Sheryl: Okay. I'd be delighted to. The Garrett Planning Network has about 220 advisors around the country. And this is our 18th year. This summer will be our 18th anniversary. And the network was literally born out of my financial planning practice, which was Garrett Financial Planning. Very unique names, aren't they? But you can find somebody…

Michael: It works. I call my website Kitces.com. You know, it works.

Sheryl: Exactly. I didn't want to name anything after myself. My financial planning practice or the network or, you know, anything like that. And I remembered a colleague of mine in Kansas City where I was working from, and I knew his name but I couldn't remember the name of his firm. And he was not listed by his name. So I got thinking, you know, "There's a lot of reasons why using your name and your title of your company is a good idea." And then some marketing people said, "But, you know, think about it, Ford, Montgomery Wards, Sears, Dodge. These are all dudes' names or people names."

Michael: Deloitte, Touche, Merrill, Lynch, Schwab, right? Like, it's....

Sheryl: Yeah. Probably Kohl's and a few other things we might think about. And so, you know, I got over it and named the firm Garrett Financial Planning. And I basically, I had evolved in my career. I started in late 1986 with IDS, which is Ameriprise predecessor, as many of us did. A very good way to start and place to start.

Michael: They were a broker-dealer doing financial planning long before most broker-dealers did financial planning.

Sheryl: Absolutely, absolutely.

Michael: And now we kind of take it for granted that financial planning is all over the place and people do it from all these different channels. But back when IDS was doing it, you know, they were fairly unique in that space of actually doing it. There was IDS on the broker-dealer side, there were a couple of firms like Cigna Financial on the life insurance side, but they were very much the exceptions to the rule.

Sheryl: Precisely. And given that it was the mid-'80s, I was in my mid-20s at the time and didn't have any experience whatsoever. I mean, seriously none. If you look at my college transcript or my high school transcript for that matter, both of them were about as useful in the subject of financial planning.

How Sheryl Ended Up In The Financial Planning Industry [6:57]

Michael: So how did you come to the financial planning world? How did you land in this industry?

Sheryl: How in the world did I want to do that?

Michael: Yeah.

Sheryl: Oh, yeah. That I think I have to blame my father for a lot of this. He developed a little entrepreneur and didn't know it necessarily, but I think he was very delighted that that was the outcome. But my father ran his own business. I just knew he worked a lot and I really missed that he wasn't there until, like, dinnertime and he worked about six days a week and so forth until I was well into high school. But I very much admired him. I admired his work ethic. I actually wanted to, like, go into business with him but I couldn't get any mojo going toward heating and air-conditioning, which was his field. However, this entrepreneur had learned quite a bit about the work word concept through my parents, my father particularly. Negotiating skills like, "Oh, you want a new bicycle? What are you going to do for us to get that? To raise that money?"

Michael: Excellent.

Sheryl: So we were doing this quite young.

Michael: So you were learning how to raise capital from an early age.

Sheryl: Yes, yes. My father grew up very, very poor, with a large family, and my mother grew up in a more upper middle class kind of environment. And so, you know, their marriage was not designed to be blessed by my grandfather. However, it ended up being a great and continues to be a great, great relationship. So it doesn't have to be that two people have to be so much alike. That actually that difference was good. But what I did learn from my parents is that I was raised in a community and in a household that I was never given any reason to believe that a girl could not or had any restrictions on what they could do and accomplish.

Michael: Okay.

Sheryl: I never was given any indication that there was a difference between girls and boys or men and women, you know. And so my parents raised me to be a feminist. I don't know they knew it at the time, but they raised me just to recognize that as a human being I can do whatever I have a lot of passion for and I set my mind to. I mean, it's America. You know kind of the American dream. If you have the skills and the passion, you too can accomplish what it is that you want to accomplish. Sometimes it takes a lot longer or it may not quite work out the way you think. In fact, if I look at my resume and look at all the number of jobs and positions that I've held, there were quite a handful, from starting at IDS/Ameriprise until finally truly falling in love with financial planning. And that was about 11 years into the business.

Just to summarize that, I spent a couple of years at IDS. The first year, they had just started with an annual salary. Oh my goodness, that was perfect because I was making $24,000 a year as a 24-year old. And in those days, that was great. Although the funny thing is, is all the expenses we had to pay. My actual adjusted gross income was three figures but regardless. And then the next year, I had to actually…you know, I was on commission, I had to generate the business. I started looking for a job within a couple of months after getting to IDS and started the training. After the training program, I started looking for another position.

But as I had mentioned earlier, I didn't have any background. You know, a lot of companies were saying, "We're willing to hire you, pay you nothing, and you come and learn and be all you can be, and we'll give you that opportunity." I had four job offers and IDS was the one that I felt had the strongest training program for someone like myself, as well as they had that initial salary. So I would have a year to get my sea legs.

At that same time, I also had this, I don't know if I should call it an illusion but it kind of worked out that way that I needed to know everything about the subject matter of personal finance before I talked to anybody. And as a person who has more credentials after their name than most anybody I can think of, Michael…

Michael: Well, I have a full set of…

Sheryl: …I think you might have a little bit of this situation of wanting to know everything maybe before you actually needed it. What I started learning, the more I was in this industry, and I do still call it an industry. We're a nascent profession. One of our colleagues used that term the other, well, okay, two years, three years ago. And I actually, I can embrace that. We're an evolving profession. It's really exciting to be part of it, but we're still an industry. We've got long ways to go to be a profession. And hopefully, we can come back and talk more about that. But my second year at IDS, this was in the day when cold-calling was not only legal, it was very much encouraged, you know. And 9 a.m. to 9 p.m. and 9:00 to noon on Saturdays was requirement if you did not have your "production numbers."

Michael: I think that's an interesting point, right? Just there's so much discussion today of sort of the hours that it takes to get going in an advisory firm and how much work is too much. And like, I feel like you're just sort of quietly throughout there like, "Oh yeah, 9 a.m. to 9 p.m. specifically so that you could be around to cold-call people when they were home for dinner. Plus Saturday hours." Like, that was normal for years…

Sheryl: Minimum requirement.

Michael: …while you were getting started.

Sheryl: Exactly. And, I mean, I didn't appreciate the cold-calling part. I definitely do not appreciate being interrupted during dinner. I don't think the subject matter of personal finance is something you cold-call people about. If somebody was cold-calling about, you know, Tupperware or something I might be open to it, but something of this nature, the subject matter just didn't fit. But lo and behold, you know, I started getting my word out there. I did need a paycheck. You know, I was single and had to pay the bills. And I mentioned getting audited. And I think I mentioned getting audited, maybe I didn't. That adjusted gross income number.

Michael: Yeah.

Sheryl: My second year in the business, I had slightly lower income and slightly higher expenses, and my income for my second year in financial planning was $883. And I know that number.

Michael: Eight hundred and eighty-three dollars.

Sheryl: Eight hundred and eighty-three for the year of 1988. And I know that number. That was the original number. I know that number because I was audited by the IRS. I basically said, you know, "Why am I being audited?" You know, "I have no money."

Michael: Because they didn't believe you?

Sheryl: Yeah. The woman auditor that I was working with… And it was a very pleasant experience. I know people are going, "Yeah, right." No, seriously. At least at that time, it was definitely a pleasant experience because I had all kinds of daydreams of how awful it would be. And, you know, I walked in and she said, "Oh, your stuff is so organized." And I'm like, "Oh, great. This is good so far."

Michael: Like, "That makes this better," right?

Sheryl: Yeah, yeah. That helped just by easing the tensions. Kind of like what we need to do with our clients sometimes, walk them back off the ledge, "Your stuff is so organized." And then while we go through this auditing process, there is an extra receipt that I had failed to claim, and I ended up with a refund.

Michael: A refund.

Sheryl: So the CPA that was working with the wealth management firm that I had joined by this time, he said, "Well, don't be expecting us follow up on…" So yeah, the first two years were miserable as far as income, but at the same time, I was still learning. I had against my supervisors and the firm's, the company's instruction and wishes, we were not to, new recruits were not to get involved with predecessor organizations of the Financial Planning Association which we had.

Michael: So it's the IAFP and the ICFP.

Sheryl: The IAFP was active, very active at that time in Kansas City, and shortly thereafter the ICFP came in. But our managers didn't want us to participate in that. It was prohibited. We couldn't study for the CFP program. But, of course, folks like myself and you would say you know, "I need to know this stuff." So I secretly enrolled in the program and secretly studied, you know, aside from… Now that 9:00 to 9:00 cold-calling thing, no one get the illusion of, "I actually dialed people the whole time." I may have made 100…we were supposed to make 100 cold calls in a day. I may have made 100 cold calls the whole time I was affiliated with IDS.

Michael: Well, no wonder you were failing. You weren't smiling and dialing enough.

Sheryl: That was at least one of the reasons. My manager said, you know, "Sure, but once you get right in front of somebody, you do so great with them." And I said, "Yeah, except I hate the part before that." I hated it to the point where I actually wanted to climb into the back room, put me in the back office and leave me be. Seriously. And eight and a half years later, I emerged from the back room because I almost had enough comfort to come out of that proverbial closet.

And I don't mean people that are working in the back office or the back room, as I'm speaking of are less than those that are client-facing. But I have to tell folks in all honesty that for eight and a half years, starting with my first connection with a prospective client or a client at IDS, and no, I didn't really have any clients, but there were a few leftover people I inherited when I got there who were really irritated that I was the 18th rep who had called them in the last four years. So, you know, things just weren't really stacked to be a pleasurable experience. But they were IDS. American Express Financial Advisors was a great place for me to get started, to get my training and also learn what I didn't want to do. I started putting out the feelers for other opportunities, staying in financial planning, though. Part of me is saying, "I hate this and I love this at the same time."

Michael: I was going to say, like, what made you…

Sheryl: Yeah, your question that you asked at the beginning. I think I had a notion. I was going to say an illusion, and at the time it probably was an illusion. And now I look back on it more of a notion of what financial planning could be, of, you know, at the time that I was interviewing the four different companies, two of which were primarily insurance companies, the other one was an employee benefits company that wanted to start a financial planning division and they were willing to take a newbie to do it. And yes. And so IDS definitely felt much more financial planning-oriented and would provide the training that I thought I needed.

I started looking for another position but because I had zero experience on my resume, from my educational endeavors, you know, college, high school, post-college activities, and, of course, I was still in process with my CFP designation, but lo and behold, I actually got headhunted by a fee-only financial advisor and went to work as his girl Friday. And I was delighted. I was on salary again.

Michael: I was going to say like…

Sheryl: This was in 1989, for a couple of years, we worked together. This was at Personal Financial Designs with Wayne Henry. The first of the wonderful Waynes of my life that gave me a great education and a good start in my career. At Wayne Henry's practice, Personal Financial Designs, it was a one-man shop. And when I joined him, because my skill set and experience was so limited, it took me a full eight hours to do all the work that I needed to do, but by the time several months had passed, I had completed my CFP. I had served as an executor on a friend's estate or helped her with her husband's estate technically and then a few years later served as her executor, and completed my CFP designation, and worked as this gentleman's right hand.

So I did everything from balancing clients' checkbooks. This was a wealth management, a little family office. We had about 24 households that we worked with, and that's it. And so by the end of our tenure together, it took about two hours a day to do the work that I was providing for him that was of value and the rest of it I was reading and studying. And so he was extremely generous and came to me in August of that year and said, "You know, Sheryl, I think that given how things have evolved, I think we should part company at the end of the year." And so he gave me a good warning and heads-up and plenty of opportunity to look for the next position that I had until the end of the year to find. So basically four months' notice, which I was very grateful for.

And I put the feelers out. Now I had some experience, I had my CFP, had, you know, officially maybe four years of experience, but I still was not interested in becoming the rainmaker. I didn't want to have to bring in clients. I wanted to be a support person. I wanted to be a staff planner or whatever you want to call that person. And I took a position. Well, actually before I did that, another colleague in Kansas City, another fee-only planner had recommended me to a firm who was a pension consulting firm who wanted to start a financial planning division. I'm just finally in my 50s learning how to say no.

Michael: I'm still learning.

Sheryl: Okay, maybe I started in my late 40s, but in my 50s, I'm starting to learn to say no. At first, in the early stages of my career, I think the fact that I said yes to darn near everything was, for the most part, a really good idea. This stint was only a six-month ordeal and within two weeks I was trying to leave. The salary was more than I'd ever been paid, and that made it a little bit harder to leave. But I started hearing things, they had acquired some companies, third-party administrators, and I was to work with the book of business, the business owners that were part of this acquisition. These people also weren't interested in talking to the new rep on the block. And I got screamed at so many times in a six-month period of time. It's shocking. And I literally, you know, through various parts of my career literally was sick on Monday mornings at the notion of going to work. And at the time I got that offer that was a referral from a fellow fee-only advisor, I didn't do my due diligence on that company. I don't know that I would have discovered.

Why It Is Important To Figure Out If A Firm Is A Good Fit For You [24:02]

Michael: I was going to say do you know what you would have asked or sought out to figure that out in advance, right? I think that's still a challenge for a lot of us today, figuring out like, "How do you know if it's a good firm?"

Sheryl: I think probably spending a lot more time asking questions and actually interviewing instead of being the interviewee. You know, think of it as a dual due diligence process. And I think so often we look at a job opportunity as, "Oh, man, I need that, you know, to pay the bills," or, "I need that experience," or, "I really like the person I'll be working with and that came from a good referral." That's what I based my decision on. And it sounded good. The man I'd be working with, you know, he said all the right things. Actually, I think he was as stunned as I was when the proverbial stuff hit the fan just a few weeks later. And he didn't stay long, but unfortunately, that was a health issue.

And concurrently, the day after I accepted that position, this is where sometimes your principles don't get in your way, I accepted the position with the pension consulting firm to set up a financial planning division, the next day, I get an offer for the job I really wanted. And because I had accepted thinking the other one wasn't going to come through, I said you know, "I'm sorry but I've already accepted." Two weeks later I called them back and I said, "Is that position still open?" And he said, "I'm sorry, it's not."

Michael: Oh no.

Sheryl: And I'm like, "Oh…”

Michael: So you applied for your dream job, didn't get it, took another job at the 401(k) plan administrator, found out 2 weeks in that it was going to be horrible, called your dream job back and by then they'd gone another direction.

Sheryl: Yes. And this connection with this dream job and the person that they hired actually comes back to me again 10 years later. The person they hired in my stead, I ended up joining that firm six months later. They were on a growth spurt and they acquired somebody equivalent basically to me at the time, and then six months later I joined. And it was great. She and I worked together along with another staff planner at this firm for three and a half years. Got to the point where I had really…I started feeling quite comfortable, not to the point where I was 100% certain that I wanted to be on my own, but I was so much more confident of what I knew and needed to know. This was the second time I had to obtain my securities licenses. You know, when I was at IDS I obtained them, went away from IDS with a fee-only planner, they evaporated, went back and the pension consulting firm, and then when I went to this next position in '91 with a holistic financial planning firm, I had to reobtain my securities license. It was a fee-offset firm.

Why Advisors Shouldn't Let Licenses Stop You From Trying A New Business Model [27:14]

Michael: I think it makes an interesting point, though, that… You know, I know a lot of advisors that get, particularly earlier in their careers like really nervous about being in the broker-dealer channel and then maybe trying something out in the RIA channel and they're afraid because if they leave and you're out for two years your FINRA licenses lapse and you have to go back and take them again. But it's not the end of the world if you have to go back and take them again. And I'm going to bet by the time you got back to it the second time with, you know, 8, 10-plus years of experience, it probably was not nearly as hard as it felt like it was the first time.

Sheryl: Correct. Absolutely. Yeah. It was not intimidated and, you know, not to say it was a breeze but relatively it was. So, you know, don't let the licenses and the registration process and those kind of… We must do these to participate in this industry. Rules stop us from trying things that we think might be a good fit.

So I spent three and a half years with this financial planning firm, Neill & Associates in Kansas City, where I worked with one of my colleagues Rosie, who'd taken the job six months before me. And we were a big independent firm at the time. I think there were, like, 12 employees.

Michael: Wow.

Sheryl: And at that time, literally, that was a big firm.

Michael: Yeah, so when was this? This was, like, early to mid-1990s?

Sheryl: Yeah, early '90s.

What Kept Sheryl Coming Back To Financial Planning [28:43]

Michael: So I've got to ask, like, you know, you had a lot of kind of bouncing around in the first few years, right? You were at IDS for 2 years and then Personal Financial Designs and then briefly with the 401(k) plan administrator and then onto this planning firm. So, you know, like, four firms in four or five years.

Sheryl: It actually was about eight years, but yeah, five firms in eight years is a lot.

Michael: Yeah. I mean, just that was kind of the reality for the path for you? I mean, was there a point at which you were thinking like, "Maybe the sixth firm just needs to be in a different industry," and, "This isn't working out for me?" Like, did it ever get to the point where you were thinking about just not continuing onto another firm?

Sheryl: I tried to leave financial planning three times, Michael and I failed. Seriously.

Michael: What kept you going?

Sheryl: What kept me going? I ended up with being number two out of a job selection. My bachelor's degree is in human resources management, and so I thought, "Oh, human resources and benefits department." In the '80s and early '90s, we were still thinking big companies was, and, you know, in Kansas City we had several very prestigious large companies that I would have been proud to work for. I tried unsuccessfully to get a position in an employee benefits/human resources role. I had a couple of the large corporations and I got to candidate number two on two of them. And, you know, basically, I think it's the universe's answer of, "You weren't supposed to leave."

Michael: Right. "So we just didn't give you a different job."

Sheryl: But I did try. Now, when I was at Neill & Associates in the early '90s, my family and I, you know, maybe an entrepreneur and my parents wanting to… I've always wanted to, you know, have some kind of business working relationship with my dad as I mentioned. And, you know, my mom kind of comes with the package. So we actually looked at buying a resort. And coincidentally, I live at one now so it wasn't a crazy notion, but in the early '90s, my parents and I did initial due diligence on a resort in Lake Taneycomo, just outside of Branson, Missouri. And bottom line was it was a very cash-oriented business and the sellers wouldn't allow us to look at the financials. And the financials wouldn't stack, you know, wouldn't justify the purchase price. So as businesspeople, my father and I just went, "This is luxurious but the price doesn't add up to what they're showing as revenues. We can't afford to pay for it." This is purchasing a lifestyle and only, you know, it's not a business. Whereas the resort environment I'm in now is a nice business actually.

Okay, on with that. So that was the third time I tried to leave, and that was to completely get out of the industry and nothing to do with personal finance and become a resort manager and owner-proprietor.

Michael: Was there a point it went the other direction and was there a moment where you said, "This is working, I'm going to stay in financial planning?"

Sheryl: It was not all at once. That's for sure. When I tried to evaluate that resort opportunity, and of course, we looked at others and they all, you know, they basically were few and far between. I was still employed at Neill & Associates at the time, and I stayed there for three and a half years and continued my learning and growing. You know, developing my confidence and comfort level in dealing with challenges that we run into and, you know, people and systems and all the kinds of things that you have to learn. And I was also quite involved with the IAFP about that time in the early '90s, well, about mid-'90s. I was the Kansas City chapter president of the IAFP. So I had gotten very involved with the industry, and I met my next business partner, Kathleen Stepp at an IAFP function.

And she and I are on paper so similar yet so different. I mean, it's like yin and yang. Both females, almost identical age, almost identical upbringing, very similar backgrounds and years of experience, and so forth. She also is a CPA and she enjoyed estate and tax and insurance, and at the time I most enjoyed the investments, and that was the least favorite thing of hers, and the thing she loved I least favored. And so on the surface, it sounded really ideal. And she and I had worked with the IAFP in public relations and did some programming and ran some money-wise fairs with the newspaper there in town. So she and I had developed a really good relationship.

But that doesn't necessarily mean that you'll make good business partners. What I did learn and I wouldn't do any of this differently. You know, based on what I knew at the time, if I had to do this all over again, I would do it all the same. I mean, I could have skipped the pension company issue, but it happened and I learned more in six months on pension and all the reading because I hated people screaming at me. That, you know, it was a severe education to try to get to a point where I could be comfortable. And that just never happened.

But I joined Kathy Stepp, and she had just made the first Worth 100 list when Worth magazine was coming out with the top advisors in the country. And she and I were commiserating over the phone, you know, IAFP business and personal stuff like, "Well, you know, you sound frustrated there, Sheryl, why don't you come to work with me?" And I'm like, "Are you serious?" And she's like, "Yeah."

Michael: I was going to say, I mean, what led you away from Neill & Associates if you had this job and you were getting paid a salary and things seemed well?

Sheryl: Yeah. After three and a half years, I had recognized, and as did at least one of the other persons with the exact same position, we had realized that we had gone as far as we could. I don't want to talk ill of the individuals involved. You know, the owners and the people we worked for were really good people, except they really liked the positions we were in. I mean, we were doing like 90% to 95% of their job and they were making three times what we made. So it was a perfect fit for them, you know. So that's kind of the moral of the story, is we had grown to the point we should have been made a junior partner.

So when they brought in a newbie and she and I had had five or six years of experience or more under our belts by this time. And they brought in a brand new rookie out of IDS, coincidentally, and he was to be a rainmaker, but yet the hours that we kept as staff planners on salary were longer than this new whippersnapper greenhorn that just… I mean, you know, he was in his mid-20s and didn't recognize that if you waited until after rush hour, you can still get home at the same time, and same thing coming in if you come in early. So the work ethic and the fact that this had happened with a couple of salesmen-type that the firm had brought in, and they basically let these two salesmen-type individuals do whatever, however they wanted to. And we didn't respect what was going on.

And so when it became known that we knew that the youngster that we were training was only making 10% less than we were and he had an upside opportunity that we didn't, there were closed-door sessions the next day. She had with her boss, I had with my boss. Then the two bosses got together and said, "All right, how about we offer these two women a partnership?" And she had a much better relationship. She was working for the big boss, I was working for his junior, and she had a much better relationship with the big boss. And we both decided that she was going to accept the buy-in offer. I didn't feel that comfortable with them so I declined the opportunity to buy into their practice. Years later it proved to be a very, very, very good idea for her and lo and behold it did for me as well but for completely separate reasons. So, you know, sometimes people take different courses and it still is the right thing.

Because I was talking to Kathy Stepp at the same time that this stuff hit the fan, I'm going, "Kathy, I am just…I'm fit to be tied. That, you know, we've got this newbie here that doesn't know anything and we're trying to educate him and keep him out of trouble, and I'm really…I just don't have any faith in my organization and where they see my future." And she said, "Well, why don't you leave?" And I'm like, "Because I don't want to go out and hang up my own shingle." And she's like, "I need help."

Michael: I was going to say it's like, "I've got a shingle."

Sheryl: "The phone's ringing off." Exactly, "I've got a shingle." And so I ended up buying into Kathy Stepp's practice, 50% owner. In theory that could work really well. Kathy had the backbone I didn't. And I shouldn't say that as a past tense thing because I'm sure she still has a backbone. But at the time I didn't. And she could very confidently talk to a prospective client and present the fee estimate because we were a comprehensive financial planning shop. Portfolio management, comprehensive planning, one service, take it or leave it.

Michael: For like a standalone planning fee? Like for a retainer fee?

Sheryl: An annual retainer but it was a really challenging multi-part formula. Combined earned income and assets under management, tier down, tier three. And we had some high wage earners that…you know, a couple that ended up coming to my firm when I did go out on my own totally. They had come to see she and I both twice to try to talk us into doing it their way, you know, more on their terms. And their quoted fee, if I'm remembering correctly, was like 22,000 and something dollars. And they were like, "Yeah, we're more validators. We just want a second opinion, not a few thousand, not tens of thousands."

So we, you know, I think the services that we provided, there was a staff of 5 and we served about 100 households. So it was significant detail that we went into. And for the majority of Middle Americans, I mean, I was answering the phone and talking to prospective clients by this time in my life. And this is the first time that I actually, you know, not that I was comfortable with it but I started growing okay with it. I still don't know care for it, you know, but I started becoming okay with it.

One thing I learned through that experience is that I found that, I'll use a caller example. A woman called up and she said that, "Here's what I've got going on?" And at the time I was with the firm our minimum annual fee was $4,000 a year, and we did require folks to turn over asset management for our control. We didn't take discretion but that still is enough of a turn-off for some people to turn over asset management. And that was for, you know, several years of my career what I primarily did. And that's what I did at that firm was portfolio management. I actually went so far as to enroll in the CFA program only to find out that that's really not what I wanted to do, that I am so much more holistic and a big picture, broad picture. But I thought having that knowledge would be really cool to have. And I would still appreciate having the knowledge but…

Michael: So how hard was it transitioning from a world of having been an employee for a whole bunch of years just to suddenly going in with Kathy as a partner and buying in? Like was that a difficult scary thing unto itself or not such a big deal by that point?

Sheryl: It was actually really exciting. It was a very positive time. I was feeling quite enthused with the opportunity. I liked, you know, what she had going on and her reputation and her energy, and the fact that her firm was doing well and getting a lot of attention and she needed help. And so I entered basically at the ground floor, or, you know, a little bit past that. But it was just a few years old. I mean, I was 33 years old and so was she. So we were, you know, pretty young in the firm. But she had had it for I don't know maybe five or six years by that time. I don't recall.

Michael: So did you have to write a check when you were coming in and trying to buy in for half the firm or was it small enough at that point that that was pretty manageable?

Sheryl: It was small enough at that point, I would say. Because the existing business had grown, you know, over time but the new business was coming in fast and furious. And so the buy-in for 50% was actually a pretty low number. Now when I left, it was different. We didn't do that. I just left, pretty much. But yes, I purchased half of the firm and recognized very quickly that my partner is… And it's only to be expected. Someone who's the founder of a firm and who's been the boss and who is a type A personality very likely might retain that position.

Michael: Might retain that inclination even after the merger.

Sheryl: Exactly. And, you know, it was not a merger per se. You know, I was bringing my work skills and labor to the equation. But, you know, like I said I would still do it the same way and have that experience with her even though it was very challenging. You know, there were moments she was going through some personal life stuff and I was finding that there was periods of time that, you know, I was kind of holding things together for the whole firm because I was, you know, flexible and I didn't have kids. I had more flexibility in my life and I poured it into work. And she had a lot of, well, at least for a period of time she had a lot of personal stuff going on. But she also had a family when this all started, and her work-life balance is what she declared. And I just felt that, you know, I needed to pull out more time and energy into it. But it was really things like I ordered the wrong paper clips once and got chewed out for that, you know, but…

Michael: She was at a stressful point in her life.

Sheryl: Well, I think it really boils down to she knew that she needed professional-level skills to be added to the firm and she couldn't afford to pay a salary. And maybe she also…I mean, I'm sure I told her that I was scared to death of prospective clients, you know.

Michael: So from her end it was like, you know, "I can do this for equity to get someone that I can't afford to hire for salary."

Sheryl: Exactly, exactly. And so I think that, you know, from both of our perspectives, it worked out actually very, very nice. And in the long run, she has continued on. And part of what was happening toward the end of our partnership was she was getting ready to get remarried and her new spouse, he was a financial planner, is a financial planner, and they merged their practices. So they lived happily ever after. And I learned so much from her as far as, you know, being able to present your, "Here's what we're going to do for you and here's what it's going to cost." And not… You know, she had the absolute confidence that we could deliver and would deliver, and we'd have thriving raving fans for clients. I, on the other hand, could be sitting next to her in the conference room going, "Oh my God, if they sign that we could make payroll," you know. So my poker face, you know, didn't do me any favors.

Michael: Not always a good?

Sheryl: Exactly.

Why Sheryl Had To Figure Out What Type Of Business She Wanted [47:26]

Michael: So at what point did you decide or realized, "This just wasn't going to work?"

Sheryl: One of your other podcast guests mentioned the book "The E‑Myth Revisited."

Michael: Yes.

Sheryl: That was also instrumental in my evolution at this point. I had become completely immersed in financial planning. I didn't want to be a portfolio manager, I wanted to be a financial planner. I no longer wanted to be the exclusive or more exclusive firm in town or on the block, I wanted to be accessible to regular people like those that I grew up with and my neighbors and myself. With Kathy and I's practice, we received a lot of phone calls. You know, we had good press and we received a lot of phone calls from people in the general Kansas City market but also, you know, within say four-hour drive of the Kansas City market because, you know, there were just so few and far between fee-only advisors at that point.

But because we required portfolio management and because we had a minimum of a $4,000 a year fee, many of the people that contacted us, it wasn't a good fit for them. And that bothered me severely. And I didn't realize it until I grew more confident in my skills and my discomfort in what I had seen happen in other companies and partners or owners or bosses or whatever. And I started to get enough confidence to say, "I want to become the outsource provider or the outlet that we had been referring people to before that person got filled up." And now we had nobody to send anyone to. And so I approached Kathy, and I wanted to give her a long notice, you know, like my first Wayne had done, the second Wayne was at Neill & Associates, Wayne Starr. So I proposed to Kathy that I leave in three months, and she asked for six and we ended up making it four, which was perfect because that means I opened my new firm on April Fool's Day.

Michael: Excellent.

Sheryl: Which absolutely is the perfect day to go self-employed. And even though I was a 50% owner in Stepp & Garrett, the only time I was an owner of a firm, prior to that I didn't feel like an owner so much, I felt more like… In fact, I threatened a few times, you know, at home, "If I were an employee, I'd quit."

Michael: But you can't when you own it.

Sheryl: I think it's a real darn good thing that I was an owner. So I couldn't quit, so I had to stick it out and learn what I had to learn through this experience. And it was very, very positive, although it felt that many times awful. And I'm sure she'd say the same things, you know. So, you know, I have the utmost respect for her. But just when you have really, really different personalities, it's kind of like, you know, dating or any partnership or something where, you know, eventually you're going to grind on each other's nerves or you're going to irritate each other or you're going to want to break up.

And with our situation, I chose to leave to become this outsourced provider because what was happening, you know, internally, and I kept this, you know, really quiet. I'm being more open about it for the first time, you know, because it's been so long, but I didn't want and still don't want any bad energy toward her or the great firm that she built and the staff. I mean, she still has some of the staff that were there when I was there, you know. So, you know, it's a great entity.

But one of the things that I recognized is what I needed. And that happened, it was a combination of several things coming together, you know, the perfect trifecta. An estate planning colleague, estate planning attorney, elder care specialist who was a member of the National Network of Elder Care Attorneys. I was visiting with him in his office one day and he said, "Sheryl, what you're describing to me sounds a lot like… Well, have you ever read "The E-Myth?" And I said, "No, I haven't but I've heard of it." He said, "What I'd like you to do is get a copy. It's now "The E-Myth Revisited" by Michael Gerber, and go out, use it as a workbook, and go out into a quiet natural space, you know, a meadow or whatever, in the woods. Someplace very, very peaceful and tranquil and by yourself for a couple of days literally and holed up and go through this book, this workbook."

And out of that exercise, I had my pens and pencils and notepad and book just as he had instructed, and I had my big blanket laying out in the meadow for… You know, of course, I went in at the end of the day and camped and then went back out the next day and did this again. But I went through the process and I came up with my primary aim. And that quote was, "To help make competent objective financial advice accessible to all people." And an ever so slight deviation of that mission statement is still my mission statement to this day. So getting crystal clear on what it is that I wanted to do and to whom I wanted to provide those services, that accessibility mantra was so critical to it.

And then I had to back up and say, "So how am I going to do it?" And I asked myself, this is still while I'm employed by Stepp & Garrett, owner in that firm, I'm thinking about, "How would I design a financial service offering if I were the client?" You know kind of the "Field of Dreams" movie, "Build it and they will come." I wanted to figure out, "What kind of a financial service model could I build and people would just be attracted to?" Because I didn't want to cold-call anybody or, you know, spend a fortune on marketing or any of that. I wanted to build something that was needed and that lo and behold people would refer to.

Michael: I like that. Just rather than needing to cold-call, the goal was just to build something that people would want enough that they would call you. It seems so simple.

Sheryl: Exactly. That's why, you know, simplicity and naivety are actually my good, good friends. We work well together and it does make up things a lot easier.

Michael: Well, though…I mean, there is an interesting point that goes with it. That when you create something that's so different from what everyone else is doing, right? Because, you know, you literally were basically talking about creating a business to take the "cast-offs" that the firm was turning away. When you go create a business that no one else actually does, when it's, like, truly differentiated in that manner, it is kind of amazing sometimes how the business can find its way to you.

Sheryl: That's true. But I can't say that I was the first to do hourly advice. I knew of at least two other people who were very visual and vocal at that time. One of them was a former chair of NAPFA and one of them was a member of NAPFA. And she had always done hourly advice. And so they didn't, you know, make the big ruckus of that or get the attention. But I think that by building something where… You know, I asked myself, "How would I want financial advice if I were the consumer?" And I am pretty much of a do-it-yourselfer. I mean, you know, I hang wallpaper, I do tile, I paint. You know, I'm not afraid to call an 800 number and push buttons. And, you know, I'll try some simple technology things on my own, and, you know, those kinds of things. But a lot of things that many people won't try, I might be more open to. And sometimes that's a really silly idea.

But I remember, I was at the very last ICFP meeting, shortly after starting my practice, my hourly practice, and there was a, oh, I would say he was in his early 70s or so gentleman. So, you know, I was in my late 30s and he was probably in his early 70s. And I had my hair up in a ponytail and it was like a spring jumper dress on, so I probably looked even younger than I was. And we're at the hospitality room of the CFP Board at the end of one of the nights at the conference, and this gentleman walks over and he said, "So are you a financial planner?" And I said, "Well yes, I am." And he said, "Well, tell me about your business." And I said, "Well, I just started my own practice and I'm working by the hour and I'm really enjoying myself," or something like that. I don't remember exactly what I said. But he put his arm around me and he said, "Oh, honey, let me tell you what you're doing wrong." And he definitely…he seriously meant well.

Michael: Oh, so like, you've just launched your firm and he begins to try to tell you why it won't work.

Sheryl: Yes, yes. He definitely had the best of intentions. And I think…

Michael: He's trying to save you from yourself. Absolutely, right?

Sheryl: Exactly, which oftentimes we need that. But he's like, you know, "You walked away from a wealth management practice to do this? You don't get commissions when your clients are paying commissions to buy municipal bonds anyway. You could just be having that money instead of sending it to somebody else. It's stupid," you know. But, you know, he said it in a kind and loving grandfatherly...

Michael: "Why would you not take the commissions they're going to pay anyways?"

Sheryl: Exactly, exactly what he said. And I said, "Well, you know, this feels good. I've tried some of those other things, they didn't fit me so well. You may be right." And I knew I wasn't going to change his mind, you know, and I didn't need to.

Michael: Right, you weren't soliciting him to join your business. You didn't actually have to win this debate with him.

Sheryl: Exactly. Plus it was, you know, I was only a year, 15 months or so into it. I think I was 15 months into my practice at that time so it was still embryonic as well. But it was also at that very meeting was the culmination of when I spent the first day of that conference on a panel with 4 other CFP professionals talking to newly minted CFPs and CFP students, about 135 people in attendance, about what we did with our designation for a living. And one representative worked for a very large wealth management fee-only firm, one worked for a county extension agency, one worked for a large financial services corporation in the corporate headquarters. One worked for a regional broker-dealer, and then myself.

So if you just think about the entire morning of that event we spent with Jerry Mason, one of the CFP professors of years gone by moderated the panel, and in the morning we talked about, "What does our typical day look like?" And I could see that my story of my typical day working with middle Americans and people just starting out and more wealthy do-it-yourselfers but mainly the middle Americans and people just starting out, when you're talking to an audience of newbies, and I don't mean that in a derogatory sense…

Michael: Yeah, just literally new people to the profession.

Sheryl: Yeah, it's a much more comfortable thing to think about is working with people and situations that you can relate to. I mean, you probably bought a car, you might have rent or a mortgage payment, you might have bought insurance. You know, you might have had some of these life experiences that we deal with regularly, credit card debt, you know, that kind of stuff. And so the morning was full of, "What do you do," and the afternoon, the attendees in this pre-conference to the 1999 last ICFP conference before the merger to the FPA, they broke for lunch and then rejoined and the attendees were told to go to whichever segment of the ballroom where they wanted to spend the balance of the afternoon talking to that practitioner.

Embarrassingly, in a way, at the time it was embarrassing but when I look back on it just…I mean, the cards were definitely stacked that more people would come to listen to what I had to say because they wanted to be financial planners. They wanted to work with clients and they wanted to see that happening sometime in the near future. And they could see that with what I was doing versus, you know, that large wealth management firm that, you know, at least at that time those openings…you know, that was almost 20 years ago, those openings were few and far between. The institutional, the corporate positions may be few and far between, the county extension agent, few and far between. So the only other option was the regional broker-dealer. And so there were a few people there and the balance were at my area.

And we spent the rest of the afternoon and they were just peppering questions. You know, "Do you use a contract for this, and how do you do that, and what software do you use. Would you send me a copy of this?" And I was having a ball. It was also my 36th birthday, by the way, or 37th. I've got to do my math right, 37th. And so I was having the time of my life because it was fun.

Michael: Yeah.

Sheryl: I like really truly making a difference in people's lives and working for folks who wouldn't necessarily have access to the same level of competent objective advice without those minimums. And that's what I wanted to be able to provide for folks. So I got to share that story in massive detail during that conference.

And later in that same conference, I ran into Bob Veres, who I had already known pretty well. And he said, you know, "Sheryl, I've been watching you for the last two or three days and, you know, you've got a flock of people following you even into the ladies room. Come on now or the guys will stand right outside the ladies room and wait for you to come out." And then it's like, "Sheryl, just one more question," you know. "So obviously you have the desire and willingness to share, and these people obviously have the interest in obtaining what you are willing to share. And I know you're a capitalist so bottle it and sell it. I give you six months." And I said, "Give me 12." And 12 months later we had our first training class, and that would be 18 years ago in July of this year. So yeah, Bob is to be blamed…

Michael: Bob is to be blamed.

Sheryl: …as one of the many.

Michael: Yep, Bob has been responsible for many similar things over the years. You know, the original launch of the Nerd's Eye View blog and the kitces.com newsletter and all of that was a similar swift kick to the backside from Bob in my direction in 2007, I think it was. He said, you know, "You're writing stuff. Yeah, you know, you're writing stuff. You should do that systematically and get paid for it." I'm like, "Oh, yeah, I guess that would be a good thing to do."

Sheryl: Yeah.

Michael: Yeah, Bob's shaped a whole lot of people over the years.

Sheryl: He definitely has. And for those people who aren't aware, if you're not a subscriber to his newsletter, I believe if you're a subscriber to The Kitces newsletter you get a discount on Bob's newsletter, and both worthwhile.

Michael: Yeah, we'll put a link out to that in the show notes as well. So this is episode 56. So folks who are listening, if you go to Kitces.com/56, for episode 56, we'll have links out for Bob Veres' newsletter and how you can sign up for. You know, our firm's…well, our firm has literally been signed up as long as I've been with the firm, which is more than 15 years now. And I know Bob goes further back than that as well.

Sheryl: It's just wonderful, you know, the Inside Information. And I look at him… You know, initially, folks might have defined him as a journalist, but I've always kind of looked at him and more of a futurist. You know, he's an industry observer who has observed this industry for well over 30 years and has for the most part been spot-on, I think, with a lot of his observations and expectations of how he thinks things are going to play out. And regardless, if we agree on everything, which, you know, I don't think people have to agree to admire each other, I think Bob's thoughts are just, they're so thought-provoking, you know, as yours are as well. But it's really cool to get that kind of feedback from somebody.

How Sheryl Built Her Practice With Referrals From Other Advisors [1:05:38]

Michael: So you start this firm doing hourly planning for anybody who wants to pay for it, right? For all people, and within just a year or two, everybody is starting to knock on your door and ask you how you do it because they want to do it as well?

Sheryl: Kind of. I just got to the point with working with Kathy Stepp in that firm that I knew that they would be fine without me and that I needed to make a change for my own personal development and the need to satisfy some kind of a hankering to make a difference. And I can't say that she doesn't or our firm didn't make a difference, but the difference that I wanted to make were for the people who couldn't afford or couldn't justify paying for the services of our former firm. So I wanted to basically, and it was quite easy to do is find out what everybody's minimums are and their thresholds.

Like when I first started my hourly shop, I got three-quarters of my new business in the first year from three people, Kathy Stepp, my former business partner, you know, so all of the people who called her firm. And she very confidently and proudly shared what the firm did and provided their fees and the people said, "Oh, not for me." But Kathy was really good about sticking to her knitting. And I think that that's one thing that we all can learn from, is even though her knitting was not my knitting, sticking to our knitting would be a good idea because we can be quite efficient and expert if we don't try to be everything to everybody.

Michael: Yeah, it's okay to just be really good at the people you serve and refer the others out, because you know what? You may get inbound referrals as well for the people who aren't a good fit for someone else but would be a good fit for you. You know, that's…I mean, that's why medicine works so well, right? There's a network of specialists. So specialists aren't in competition with other specialists, specialists refer to other specialists. That's how highly evolved professions operate. And, you know, I think we're slowly and steadily making our way in that direction as advisors more, like, refine their models and refine their niches and refine their specializations. Because when we're all generalists we actually are in competition with each other. When we all get good at the particular thing we do, then we can all effectively cross-refer with each other. We don't just have to go out to attorneys and accountants or others. Like, we can literally cross-refer to each other.

Sheryl: Right. And my referrals were coming from my former business partner, her former business partner. And his deal was that he had a lower annual minimum but he did require comprehensive planning. He didn't do portfolio management. He did give investment advice but he didn't do ongoing portfolio management. But his annual minimum fee was $2,500, and if he didn't feel that this was going to be a perpetual relationship, perpetual fee generation, that he didn't want to take on that engagement. And this is a fellow that I…I mean I admire these folks very much. And I'm not saying that there's anything wrong with what they're doing. They had clarity, I had clarity of what they did, and so I tried to, you know, fly under the radar. And so I actually prohibited minimum.

The third person that I got the referrals from was that one person we used to outsource to until she got full. And now people were still calling her and going, "Oh, Chris, you're no longer able….you can't work with me?" And she's like, "No, but I have someone I can send you to." And so those three people, just three humans, all fee-only…well, two fee-only financial planners and one fee-only investment advisor, two with minimums. One was an…she was an hourly investment advisor. Did not manage money on a continuing ongoing basis and did work by the hour but she didn't do the financial planning detail. She did kind of a light version of that. Those three people basically did a huge number on filling up my pipeline. You know, three-quarters of my new business in the first 12 months came from them.

Now, the second year, when I look back on that, I could not come up with anywhere close to that number of referrals, but the weird thing that happened, Michael first time in my life is I got referrals from people I had never heard of. Like this woman that was in my office, and I still chuckle at myself for this because I can see her plain as day. And she came in and she's just as bubbly and vivacious as possible and she's just beaming to be there. And I'm like, "This is great. I'm glad she's happy to be here." And we were having our get-acquainted meeting, learning what she had going on and how I might be able to help. And she said, "Oh…" I'm making up names, "Bob and Sally told me to call you. And they just couldn't say enough good things about you."

Michael: You're like, "Who?"

Sheryl: And I'm just going, "Who?" I was, literally. I'm thinking, "Who are these clients? I cannot picture a Bob and Sally." And so this lady and I finished our meeting and everything and I go out to my staff planner, Jo Ellen, and I said, "Okay." And Jo Ellen is exquisite when it comes to dotting i's and crossing t's and memorizing, you know, things that actually matter instead of trivial like me. And so I said, "Do we have Bob and Sally?" And she said, "Nope." And I said, "Are you positive?" And she said, "Yep." I'm like, "Okay, good to know because I was wracking my brain and I could not think of them but I didn't want to, like, interrupt her."

Michael: Well, and it's kind of embarrassing if you ask the follow-up like, "Wait, wait, just remind me, like, Bob and Sally who?"

Sheryl: Yeah, "Are they clients?"

Michael: Like, "Where did you meet them?" It's like, "You've been working with them for 18 months." "Oh, it's right them." Right?

Sheryl: Exactly.

Michael: Yeah, at some point it's too embarrassing to admit you don't know who they are in case you're actually really supposed to know who they are and you've forgotten.

Sheryl: Precisely. And the way it came out it sounded like I would know them. You know, she's just beaming about how, you know, they think the world of me, you know. So she comes back in for our, you know, first client advisor meeting and I said, "You know, when you came in the…when we first met, you mentioned a couple of people and I was thinking perhaps I was just not clicking with who you were talking about. I was presuming it was a client." And she goes, "Oh no, they're not clients. I don't think. They've just been reading and following you and they know people that work with you and stuff. And they just rave." And so she went right back.

Michael: How much they love you again.

Sheryl: "They're just raving about you." And so I'm like, "Okay, I just wanted to make sure that you didn't have the illusion that I knew what you were talking about or that they were clients or something, or that I was completely messing up." And she's like, "Oh no, they just…" And so that kind of, not directly, but I did get calls. One woman called and she…I talked to her two or three times over the years, but in my first couple of years in business, she called on two different occasions. First, to buy a two-hour gift certificate for her daughter when her daughter became engaged. I'm sure her daughter thought, "Wow, mom that was an amazing engagement present." But lo and behold, it really was a great two hours that we had together with the young couple.

But the other one was she called on behalf of her boss and set me up to meet with him. So here is this person who doesn't know me at all. We haven't met. She hasn't worked with me. She doesn't know much or anything about my skills or personality or anything, and she's sending all these people. So I started, you know, having people come in and they'd… Like I remember one… I hate to keep bringing up women but… And I heard from a colleague that the same thing happened to him but they were much elderly women, and they came in with clippings, newspaper clippings that had turned yellow. They had been collecting them in a file folder for so long.

Michael: Wow.

Sheryl: And when they opened it up, and here's this yellow file folder it's like, "We've been following your columns in the newspaper." I've never had a column in the newspaper. I was very active with the ICFP and also the IAFP when they were both independent. And the ICFP had a Q&A section for all CFPs that are part of the association in our local paper. But the UPS delivery driver, who of course comes to my door when I'm dressed in my absolute worst, he comes through the door and he goes, "Hey, aren't you that person who has the personal finance column in the newspaper?"

Michael: Wow.

Sheryl: I'm like, "No, that's my ugly twin. And actually, it's not a column. I mean, she just does it every once in a while. You know, just volunteerism." So I've also done litigation consulting, came out of kind of a byproduct of my individual advisory work. You know, when I had my financial planning practice, Garrett Financial Planning, I was working with, you know, people from all walks of life, and a few of them would come in and I might meet them once. You know, it's kind of like going to the…

And actually, Bob Veres summarized this so beautifully. And I continue to reflect on the article, the first article that he wrote in his news…well, I think it might have been the only one in his newsletter about my practice, and it was called "Walk-in Planning." Not my term, however, I started to embrace it. Because as I described to Bob what my office environment looked like and how I engaged with people, and how they paid on the way out the door and scheduled their next meeting before they left, he's like, "It sounds like a dentist's office." And, you know, the more you, you know, kind of think about that, the more it was true. And I actually ended up using that line with clients in my hourly shop at first before I learned to advise them on when we should see each other again. Another lesson learned is, I had a client say, "Okay, so when should we get back together?" And I said, "Great question. Think about me every six months like your dentist and call me if you're in pain."

And so I kind of pilfered the notion of the dentist's office and I said, you know, "Hopefully the work that we do together is a lot more enjoyable and a lot less painful than going to the dentist." But it is something that is not a one-time and you're taking care of forever and ever. Financial planning is a process, not a product. And that's also been part of my philosophy of…

One person I admire immensely, who's passed, Dick Wagner, every conversation I had with Dick was one that I learned something from. I might not have necessarily agreed, and we definitely had some pretty passionate discussions, but I always learned something from him. And when I told him what my plans were on doing this hourly thing, his initial reaction back in '95 or '98 rather, when I started my hourly shop or just before that was it was a disservice to the financial advisory community. That attorneys and doctors and consultants are…well he specifically said, you know, the legal and medical field are moving away from the service model. Well, that is true to a certain degree, but when I opened it up and, you know, so my conversation with Dick was much more robust than that. And I said, you know, "Maybe you're right, and I really appreciate your thoughts. And I'll never forget them."

And a few years later I ran into him, like three years later and he said, "Sheryl, you remember that conversation we had in that exhibit hall, blah, blah, blah." I'm like, "Yeah, I do." He's like, "I've been thinking on it a lot since and I've changed my opinion." I'm like, "Hmm." He's like, "Yeah. That there's room for all of it," you know, more or less. I mean, it was a lot longer of a conversation. But I think that's a decent paraphrase. That there is a need for… And actually, instead of just looking at law and medicine, why don't we look at the consulting industry? You pay a consultant regardless of the subject matter. You know, imagine a consultant, you pay them for their time or for the project that they're doing for you, typically, or some combination of the two. And it might be, you know, time. One of my favorite quotes is, "If it can be measured, it can be managed." Not that I measure everything and manage everything well, but I like the quote. It's a good reminder of what it's really telling us. And I think it's important to know. But I discovered personally.

You know, one of the many things that I said that I had to leave Stepp & Garrett for was part of it was Kathy and I were very different in our management style, our leadership style, our work ethic, work style, whatever you want to call it. Then the element of I wanted to be able to provide services or access to people of more modest means or people who didn't want to turn over their portfolio for us to manage. For instance that self-made client couple that had the $22,000-plus quote per year for us to work with them and they're like, "No, thank you." And just as soon as I went hourly, they were one of my first inquiries. I don't even know how they heard, but, you know, somehow through the grapevine or maybe Kathy might have called them, I don't know, they found their way and then it just snowballed. So starting with those handful of advisors who had minimums. And I did also receive a few referrals, not substantially as many, from investment people only. You know brokers and portfolio managers.

Michael: Didn't want to do all that financial planning stuff because they do their thing.

Sheryl: Yeah, they didn't want to or they didn't need to. You know, they had their specialty and they needed to outsource the investment or the portfolio management part so that the… You brought up outsourcing earlier, and I am really delighted to see how our nascent profession is evolving because I think we're seeing some really healthy outsourcing going on now. And for a long time I remember, and I've done a presentation on this topic of how I worked with clients in my hourly shop, and one of the things that I heard frequently is clients will not implement.

Michael: Yeah.

Sheryl: And I have a couple of retorts to that. And one is, first of all, how many of us financial planners could do all of the implementation for our clients anyway? Probably not any of us. You know, if we're talking about, you know, tax returns, estate planning documents, go into the HR office and make some changes.

Why Identifying A Client's Needs And Wants Are A Financial Planner's Most Important Role [1:22:45]

Michael: You know, we don't do all this stuff anyways really. We just do the stuff that we happen to compete…

Sheryl: Yeah, we handle the money, and we might sell the insurance. So those are the two areas that yes, we have historically provided implementation.

But when it comes to the traditional financial planning subject matter of buying a home, having a good solid foundation, communicating with our spouse about our objectives and our needs and how we're going to go about things, it really boils down to financial planners are catalysts, and I see our most important role is to help clients identify what they need and want out of life, their financial life and how to get there most efficiently. You know, the majority of my clients, like 97%, 98% of the households we worked with in my firm before I turned it over and focused on the network exclusively, we had about 600 households we worked with, only a handful, a fraction of a percent technically but, you know, maybe I'm missing a few so I'll round it up, maybe 2% or 3%, but a very small handful of these people had ever…they said that they did not have a relationship with a financial advisor or a financial planner.

Michael: So, I mean, you were truly serving people who couldn't get served anywhere else.

Sheryl: Exactly. Or they chose not to go to someplace else because they were turned off by, I'll use my former firm, our minimums or our requirement that they turn over management or the sales process.

The Importance Of Advisor Support Services And Finding A Community Of Peers [1:24:37]

Michael: So if someone's interested in doing this, like, how do they join Garrett Planning Network? You know, just what does it look like? What do they get from being involved?

Sheryl: Yeah. Well, kind of what Eric and Bob and I came to when the idea was born is, "Sheryl, document and share orally recorded training, live training, e-learning courses, webinars, what you did and how you did it." And then since you've now over the years, we've had 17-plus years of experience with others, and what their challenges and successes have been, it is so much more rich and vibrant than what I had to offer when I started because it was just me and my experiences. Now it's me and hundreds of people's experiences.

And so it is a very close-knit community of peers, like-minded individuals sharing and supporting each other in our quest to maintain and have a flourishing and thriving business practice, whether that's to have a lifestyle practice, which the majority of our membership have chosen. Although that's not the role that I set for them. I had the small law firm model, only a minority of our members have chosen to go that way. And I think it really does come to a balance of, "What do you want out of life and how much money do you need out of your vocation?" And I think a lot of us recognize balance is so critical.

When this group of people, starting with Eric and company saying, "We need to do this," I didn't know whether we'd be a group of a dozen study buddies around the country or whether we would look like a small, you know, independent broker-dealer, you know, with thousands of representatives or advisors affiliated. But I was okay with either one. You know, I never had a concrete drive for either. But I absolutely wanted to deliver on at least that study group because I knew that there was at least a dozen or more, probably hundreds or thousands of people who wanted to get together and share very openly and help each other.

Because gosh, there's so much business out there. Getting business is absolutely not our problem, it's once your plate is full, and to quote one of our members, she said, "Sheryl, we have a serious problem in my market." And I said, "Okay, what's the problem?" "There's not nearly enough of us because we had…" And she's in a pretty big city or marketplace and, you know, there's only a handful of people, of Garrett advisors. And she said, "My entire succession plan and contingency plan are pretty much out the window because all of us are… You know, when that person came on three years after I did I thought, "Oh, you know, if something happens to me or I want to…you know, it's my turn to go then this will be my successor or this will be my contingency person." But then they filled up.

And, you know, this person's been with us for like 15 years and she's like, "Okay, so I need new people in my market to refer people to." So, lo and behold, our own members are referring to other fellow members and we don't… You know, it's kind of like when we went to our FPA, and I love the FPA and the IAFP and the ICFP organizations, but when you went to a local meeting, there was that feeling of competitiveness. You know, you didn't tell somebody what you were thinking about doing or, "Oh, I'm just getting ready to do this new thing with my firm," or something like that. It was a lot more keep things to the chest tightly and quietly. Be friendly, cordial, businesslike, but don't share. Definitely, just don't open up and share with people.

And then in this environment, it was just the opposite. And people have literally been blown away. I continually am blown away. So now what I get to do as my day job and I've actually been blessed with this since 2000, my primary activity has been working with financial advisors. And I regret not recalling who was the brilliant individual who said this, but he said, "Sheryl, if your personal objective is to help make competent and objective financial advice accessible to all people, working with the end users is not the way to get there."

Michael: You have to build something that's broader than just you.

Sheryl: And it was like, "Damn, it finally sunk in," you know. I didn't say I was the brightest bulb. I did admit I'm willing to try things. So when he said that, although, you know, I had a 5-year transition plan out of my firm and I accelerated that to a 3-year transition plan, going from about, you know, 400-plus clients to about 4 dozen and then, you know, continued on with those for about 3 years, it was very difficult. I expected it because the subject matter is identical, well, I thought or it felt like it, but when it came time to switch hats and coach an advisor about certain issues, whether it's hiring or looking at systems or dealing with a challenging client, or, what software would I buy, you know, I definitely have feedback and opinions.

But one of the things that we've created with the network, and it's evolved quite a bit over time, we have had more numbers in the past and we've revamped the entire program to basically keep it up more up to date. And also because there's more choices and more options out there for folks, we recognize that we have a very important relevancy of wonderful press and wonderful traffic as far as inquiries to our site. You know, the public wants what we have to offer. And actually, our biggest problem is we need more advisors to meet the needs of the clients. But that's what I get to do all day, is work with the advisors and truly get to my vocational aspiration of making a dent and helping to make quality advice accessible. Because I was once asked by a journalist, "How many lives have we affected or how many…" That's not the words he used but basically, "How many people do you guys serve?" And I just did a rough estimate without statistically quantifying it and it's in the neighborhood of like 25,000 engagements a year.

Michael: Wow.

Sheryl: That's a lot of…

Michael: That's a lot of people.

Sheryl: A lot of people, you know, depending on the moment and time and so forth. But we're talking of thousands not hundreds or dozens, you know. So being able to do this and to be an inspiration to others that…

Michael: So what does your time look like now? I mean, what's your focus going forward from here?

Sheryl: Great question. My focus is to… We went through the last about six months updating and making some additional changes to our new member offering, lowering the initial hurdle, price tag hurdle that had dissuaded some people who had checked us out. They were interested but that initial price tag, as some of our members have shared as well. I got a three-page letter from someone upon her first renewal and I thought, "Oh no," you know. And then I opened it, read it and I went, "Oh my God." And I was just tearful with the joy and the wonderful things that she had to say. But one of the things that she brought to light is, she was like, you know, I don't remember the exact words but it was something like, you know, "Writing a check for 10,000 bucks without knowing what I was getting into it was really hard to do. But then now that I did it and I'm into it, I am so grateful."

Michael: Now I'm happy. Yeah. It's like financial planning itself, right? People are afraid to write the check and then they're happy after the fact. But it's hard to convince them upfront.

Sheryl: Yeah.

Michael: Yeah. So what is the pricing structure now if people are interested?

Sheryl: Yeah. So we had a high front-end and a lower annual renewal. And the annual renewal also covers our annual conference as well as all the continuing ed and the webinars and the coaching that we provide. Basically, everything that we provide other than getting initial training and getting to our annual conference and paying for the hotel and for transportation. But everything else is covered. So now, we have lowered our front-end fee, which was as high as $10,500 at one point, for the first year. It's now $2,000 initially, and then $500 a month from thereafter. But, big but, that ongoing fee, which is substantially higher than it had been for the annual includes three things that most people need. One is E&O insurance, the second one is a website, and the third one is their initial and subsequent annual updates for their RIA registration. So these are costs that they would be paying for out of pocket upfront. We're basically amortizing them for them.

Michael: Right.

Sheryl: And so those things would continue. The E&O continues, and there's a few other things in there. But those are the huge new additions to what we've…for the most part what we've done the majority or all of our existence.

Michael: So, you know, this is a show about success, and one of the things we always observe is that success means different things to different people, sometimes different things to, you know, different stages of our own lives. So, you know, you've had an interesting trajectory of a successful career then building your own firm, then having so many other people want to build a firm like yours. You've made a network for it and grew that to several hundred advisors. And so, you know, as someone who I think has built what most people would objectively call a successful business, how do you define success?

Sheryl: Definitely not by my network or business. I actually had a client ask me this question and I thought, "What an insightful question, you know, for a client to ask." And I anticipated that he might be looking for, you know, well, some stereotypical answers like rate of return above objective or whatever. And what my response was something to the effect of, "How many lives I've positively impacted is how I measure success." Apparently, it was the right answer for what he was looking for because he was pleased. But yes, in essence, it was how many lives, kind of getting back to the perhaps because I couldn't achieve my personal objective without discontinuing working with individual clients and working with advisors.

So my first book, "Garrett's Guide to Financial Planning" came out in 2002, and the publisher, National Underwriter contacted me and said, "What will you put in a book that you'd sell for $7,500 in the first year?" And I said, "Well, I can put quite a bit in there. You know, it's not deep but it's thorough." And they said, "Sounds perfect." And it's undergoing its third revision as we speak. And that should come out later this spring.

Michael: Well, thank you. Thank you so much for joining us here on the podcast. It's an incredible story and path, so I'm really glad we had the opportunity to share it with everyone.

Sheryl: Oh, I'm delighted to be here. I love the series and you have great guests. So thanks.

Michael: Absolutely. Thank you.

Sheryl: My pleasure.