#FA Success Ep 378: Scaling Growth At 1/4th The Cost Of M&A By Wading Through The “No’s” Of SmartAsset Leads, With Michael Collins

Resources Featured In This Episode:

• Michael Collins
• WinCap Financial
• SmartAsset
• eMoney
• Ken Fisher
• Schwab
• Fidelity
• Substack
• ChatGPT
• Acadian Asset Management
• CFA Boot Camp
• Boston Advisors
• Northern Trust
• CAPTRUST
• State Street
• Black Diamond
• Morningstar
• Endicott College
• Bentley University
• Bunker Hill Community College

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

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Full Transcript:

Michael K.: Welcome, Michael Collins, to the "Financial Advisor Success" podcast.

Michael C.: Thanks, Mike. I really appreciate you having me on today.

Michael K.: I really am glad you're able to join us. And I'm looking forward to this discussion today around, as I see it, the evolution of...I don't know how to frame it, like lead generation services, how we get leads, how we get people to do business with. When I started, if you were coming in cold and you didn't have some natural market to go to, friends and family or former colleagues from a prior career or something, there were basically two options. Number 1 was phonebook and a phone, just start cold calling, or number 2 was you could "buy leads". And buy leads back then, I remember there was actually a service that a bunch of the other reps and our agents in our life insurance company worked with where consumers that were reading magazines, like parenting magazines, would get these inserts in the magazine that...I forget exactly what the wording was, but something in the effect of like, "Are you a new parent? Do you realize that you might be underinsured? If you want to learn more about how life insurance works as a new parent, fill out this postcard and send it in," because this is pre-internet era or just when the internet was coming forth and most people didn't look this up online.

And you could buy leads. And buying leads meant they literally sent you a stack of these postcards that people had filled out in a magazine that said they were interested in learning more about life insurance, and so you could give them a call and say like, "Hey, Mr. and Mrs. Smith, a few weeks ago, you filled out a postcard to learn more about life insurance. Well, today's the day. I'm calling you to explain more." And if you were a life insurance agent, that was a pretty good deal. And I forget exactly what the number was, but you paid something like $20 or $30 a lead or a couple hundred dollars to get a stack of these postcards that you could call upon.

And the industry, I think, has moved a lot since then, including that most of us don't really try to get information by filling up postcards from a magazine anymore. Now, we pull out our smartphones and go onto the internet. But there's still this kind of extension into the modern era now of lead generation services and what it looks like if you don't want a cold call and you don't necessarily have a natural market to go to, and you're trying to figure out how you can get leads. You'll get in front of opportunities of people that might do business with you where you can just "spend some dollars" to have someone send you some leads so that you've got people to call upon. And I know, Michael, you have been building in this direction in what I very much think of as the modern expansion of lead generation services, which is today companies like SmartAsset where you pay some dollars to get leads, and then you can call on the leads and follow up with them and try to do business with them. And so, I'm excited to talk about what it looks in the modern era of spending some dollars on leads as a way to try to grow and accelerate the growth of your business.

Michael C.: Yeah. So, I was really fortunate. I came across SmartAsset at an eMoney conference, I believe, in 2018. And when they pitched it to me, it just seemed super interesting. And I was like, "Wow, I can build a tremendous amount of lead flow, that if the numbers they're telling me work, with a tremendous ROI." And as a younger advisor at the time, it was difficult in my own personal network to really drum up leads. And going to events and kissing babies and shaking hands can be very time-consuming. So, it also seemed very efficient. So, that was a big inspiration for me. And I say yes to a lot of events and yes to a lot of projects. So, I think by saying yes often, I'm able to discover more and was able to come across SmartAsset, which has been a tremendous source of my growth. And to be honest with you, it gave me the confidence really to start my own firm.

Michael Explains SmartAsset And How It Has Worked For Him [08:27]

Michael K.: So, let's just dive right in there. For those who are not familiar, just can you explain SmartAsset, what this company is, and what they do?

Michael C.: Yeah, they basically put up banner ads where people with money hang out on the internet. They source and dissect those leads and then repackage them and sell them to advisors like you and I. I specifically buy the million-plus leads, which are people who self-disclose that they have a million or more in investable assets. You don't really get a choice other than geography on how to parse them. So, when people ask what my niche is, I'm like, "Anyone with more than a million dollars."

Michael K.: In your general geographic region, or you don't even bother to filter by geography because, hey, Internet?

Michael C.: Yeah, I'm in Mass, and I focus on New Hampshire and Rhode Island explicitly, just to make sure the lead flow is consistent. They usually don't have any issues filling leads, but I want to make sure my bucket is full so I can expand the geography. And I think I can be local to anyone in New Hampshire and Rhode Island. I have done some other experiments with them and ask them like, "Hey, where's an underserved market that you're just desperate for advisors?" And tried that as well.

Michael K: So, they put banner ads on the internet, whatever it is. "If you want a financial advisor, click here." Someone clicks there. SmartAsset asks them a few questions like, "How much do you have?" They say more than a million dollars. And then, you get to pay to get the inquiries of the people who have responded to this and said they had at least a million dollars.

Michael C.: Correct. Yeah. And right now, I'm buying about 20 of those a month. And that's because for every 20 I buy for the last 5 years, I get 1 client. And that really the number is for every 5 grand I spend, I'm getting about $10K in reoccurring revenue within 100 days.

Michael K.: So, I'm just mathing that. So, it's $250 a lead to get to million-plus prospect leads?

Michael C.: Yes.

Michael K.: Okay. And is that literally how they charge? You pay per lead, you pay a monthly subscription fee, you pay a percentage of the client revenue when you get the client, what's their model actually look like?

Michael C.: Yeah, you pay per lead. They used to let you get as little as you wanted in terms of lead, like, "Hey, let me try it out. Let me get three leads." But I think SmartAsset found that if you start really low, you get very few at-bats. And if your close rate is 1 out of 20 and you only get 3 leads a month, it could be like 9 months before you see your first win. So, you'll fail before you see the fruits of your success.

And I had experimented with the lower tiers. The tier-2 leads are $250 to a million, and they're less than half the cost. The problem I found when going with those tier-two leads is that they're self-disclosing their investable assets. And I don't know if half of that's locked up in a 401(k) and their current employer. So, when I went to million-plus, even if half of their money is locked up in a current 401(k), it's still a good client to onboard.

Michael K.: What I was going to ask, I guess this is just my own jaded skepticism of the internet, I understand they're sending you people that have million-plus-dollar opportunities because they clicked the button on the internet to say they're a million-plus-dollar leads. Do they really all end up being million-plus-dollar leads? Do consumers actually self-disclose that accurately and willingly on the internet about how much they've got that they're willing to work with?

Michael C.: Yeah, I find that they're pretty honest. I will say that when we dive into the metrics on this, I don't hear back from 40% of the leads. They show no sign of life. They don't engage, never hear a peep. But 60% I hear from, I've never had anyone be like, "Oh, I really only had 50 grand. I just wanted to see what would happen." And more often than not, the bad leads are people who just wanted to see what the process was, or at least once or twice a month, I get a financial advisor who's testing out the service. And SmartAsset has been great about refunding those leads that I get that are a little bit hairy.

And if someone gives a fake email or a fake phone number, those ones are refunded as well. And I would say I find that like 10% to 15% are refunded, which is fine. Again, it goes down to like somewhat of a numbers game when you're going through this process. And as I've refined it, I figured out that I'm not really paying for leads, I'm paying for meetings. Because out of the 20 leads I get, I'll get about 3 or 4 meetings. And for every three meetings I have, I bring in a client. So, the effort in my outreach is just finding ways to get people to engage and book that meeting. And then early on in my process with kind of trying to hone and optimize the SmartAsset process that I've built out is how do I get them to engage? How do I get them to meet with me?

And early on, I decided to explicitly offer complimentary financial plan as a client experience and say, "Hey, you know what? I'll treat you like a client. I'll come to your home, take you out to eat. Or over Zoom, we'll do a full financial plan on eMoney, and I'll show you what it's like to work with me, no explicit sales pitch, even though in some way, everything's a sales pitch." And then, we go from there. I build them a proposal and tell them where I think they could make improvements, whether it's through planning or on the investment side. And then, see where the conversation goes from there.

Michael K.: Interesting. So, it feels like from a sales end, this is not unlike what a lot of us do. We get in front of some prospects who are interested in being with us, we say... And I do some initial financial planning with you to show you the value that I can bring to the table. I come to you with some planning recommendations and propose ideas and say, "If you would like to work with me as an ongoing client, I'm happy to help you implement these."

Michael C.: Yeah, exactly.

Michael K.: And you're closing about a third of those. which I know is not dissimilar to a lot of just broad-based marketing strategies. In the seminar marketing world forever, the standard formula was 10-3-1. Of every 10 people who come to your seminar, a third of those will take a meeting, and of the ones who take a meeting, a third will become a client.

Michael C.: Yeah, I've heard that before, too, and I feel like SmartAsset's 20-3-1, which isn't bad. I'd love for it to be 10-3-1, though.

Michael K.: Yep. Well, and I guess it makes sense that just there is a little bit of a...called a looser affiliation on the internet of who fills out forms online. So, to me, from what you're describing as it's flowing, there are good leads there. There's just a little bit more stuff you got to sort through to get to them.

Michael C.: Yeah, exactly. You do need to work and nurture the leads. I mentioned the 100 days is the average close time. But since the start of WinCap, my longest close was like almost a year because this guy had to wait to liquidate some real estate before he was a client. And then, once I launched my firm, a SmartAsset lead from three years ago from my prior firm reached out to me, and he's like, "I'm finally ready." So, I think that nurturing these leads is a huge part of it. If you just call them once or twice and then be like, "Well, they didn't answer," and then never talk to them again, your hit rate is probably going to be meaningfully lower.

Michael Explains His Process [16:39]

Michael K.: So, can you talk to us then around...just with more detail, how does your process actually work to get to the 20-3-1, every $5K of spend is $10,000 of new revenue in 100 days? When you get a SmartAsset lead, what do you do? What's the process?

Michael C.: Yeah, the first thing is super important, and that's speed to lead. So, to the detriment of people in my personal life, if I get a lead, I'll probably pause what I'm doing and be like, "Let me call these people really quick to at least leave a voicemail or hopefully have a quick intro conversation."

Michael K.: So, how does that lead come in that you're then doing that, speed to lead response?

Michael C.: Yeah, I get an email just right to my work email account. It goes there. It gives me some pretty generic information, like are they retired? Are they working with advisors? Do they care about ESG? How much money they have? What is their income level? And that's really the gist of it. But for my initial call, that doesn't matter a whole lot, all those other details. What matters the most is that they're at least showing some interest in working with an advisor. That's really the biggest part of it.

And then, they also tell me how far away they are from retirement, which could change the tenor of my initial interaction. But usually with these million-plus leads, oftentimes, they're one to four years away from retirement. I feel like a lot of people fill out these internet surveys on a Thursday night after 2 glasses of wine, and they're like, "Hey, let me see what happens when I fill this out." But the engagement's been great. And I've gotten some of my best and favorite clients from this service. And it's just been a game-changer for me.

Michael K.: So, the lead comes in, and you said your first thing is a phone call. So, not an email response, you want to call them.

Michael C.: Yeah, and that's kind of through some of my research. My highest chance of having a meeting is getting them on the phone first and then trying to book a meeting and then going from there. If I don't get them on the initial call, I have a pretty well-scripted voicemail where I say, "Hey, this is Mike. SmartAsset connected us. I'm a wealth manager and fiduciary. We give two hours of complimentary advice to all potential clients. And I'm an approved manager at Fidelity and Schwab. So, if you have an account at either one, it's usually pretty seamless to work with us." And then, I just get my contact information. After that, I kind of immediately send the email, which gives a lot of the same information. I'll include a hyperlink to my LinkedIn profile, the firm, my Calendly, but the turnover into meetings via the emails are just much lower. After I send an email, SmartAsset will tell you to call them three times in the first week. But then, I feel like people get annoyed because SmartAsset gives the lead to two other advisors.

I find myself often competing with like Ken Fisher. I'm convinced they buy every SmartAsset lead in existence. But sometimes that works in my favor because I don't think everyone wants to be like a number at a really big institution. They might want some more personalized service. So then after about a week or so, I will then follow up with another call. And if they don't answer, this time I'll follow up with a text message, which is very similar to my initial outreach and my email, like, "Hey, this is Mike, SmartAsset connected us. We do give two hours of complimentary advice if this is something you're interested in. We'd love to book an intro call or schedule the meeting." And I find that the text message gets a lot of responses. Either like, "Hey, not interested, stop bothering me," or, "Yeah, sure, call me in 20 minutes." The prioritization of what people answer, like emails, text messages are pretty high on that list in terms of a response rate.

Michael K.: So, I actually want to take one step back to the first call and then come forward to this follow-up call after a week. So, you talked about if...you try to do the call quickly when the lead comes in. What's that conversation and what are you trying to get to in that conversation if you actually get them?

Michael C.: Yeah, I always kind of make a joke about it because I don't want to seem like I'm some guy at a call center. So, I'll do the initial pitch of like, "Hey, SmartAsset connected us. I'm a wealth manager and fiduciary. Does that ring a bell?" Because I don't want to come off as spammy. And sometimes I'll explicitly say that to kind of bring their guard down because we get so many spam calls. I'm sure you do, and I do, and everyone listening does. And they're like, "Yeah, that does ring a bell." And I'm like, "Do you have two minutes to just talk about why you filled out the silly Internet survey that connected us?" And they're like, "Yeah, sure." And then, I quickly find out what their pain points and hot buttons are as to why they clicked on this Internet survey that connected us, which is getting to the heart of like what are their hot buttons? Why are they interested in potentially working with someone? Whether that's like, "Oh, I'm not happy with my current advisor, or I'm about to retire and I need help going down the mountain," things of that nature. And it can be different every time. But I think the key is to find out why they engaged initially.

Michael K.: So, maybe this is just my own bad assumption. I was envisioning in the modern, electronic world where everything's connected to everything, if you just got a lead from this person, it means they just put their name into this form on someplace on the internet in the past hour, and they filled out their stuff and submitted their thing, and then it went to SmartAsset, and then SmartAsset parsed it out to you, and now you're following up with them. But it sounds like that's not a valid assumption. There is some time delay occurring between when they're filling it out and when you're getting the lead to follow up such that you can kind of have fun with like, "Hey, does it ring a bell that you filled out a thing on the internet with SmartAsset to talk to an advisor?"

Michael C.: Yeah, I don't think there's a huge time delay. That's just kind of like a verbal tactic, I think, to bring their guard down that, "Hey, I'm not a spam bot," because I'm calling them, and I'm pretty much going right into talking about how much money they have, which can be a difficult conversation. But one of the things that's helpful is that they've already disclosed it. They fill out the form. Ninety percent of the people who fill out the form, know what they're signing up for. So, it's really just humanize myself to a digital audience. I think that's a big part of it.

Michael K.: Well, because I am envisioning this like someone enters this stuff on their, whatever, on their phone on some website, and then it's like 20 minutes later, they get a phone call. It's like, "Geez, that was fast."

Michael C.: Or 20 minutes later, they get three phone calls. Oftentimes, especially if I'm the first, I'll hear someone else beeping into the call I'm on because I'm like, "Oh, there's the other advisor." So, I'll also try to be like, "Hey, you might get calls from two other advisors, just so you know, try not to get annoyed," just to make the client experience a little bit better for them.

Michael K.: So, when you talk about speed to lead, this is no joke. Like, if you see this email come through, you drop everything to make this phone call. Sounds like a relatively quick phone call usually, but you drop everything to make this phone call on the spot.

Michael C.: Yeah, I mean, within reason. If I'm out at dinner, I'm not going to walk away from the dinner table. But if I'm talking to one of my analysts or assistants or a co-worker, I'll be like, "Hey, I just got a SmartAsset lead. Let me call you right back."

Michael K.: Okay. And it sounds like these are not long calls. Either you're going to leave the voicemail and it takes, whatever it was, 30 seconds to leave the voicemail. If you get them on the phone, I guess, how long is that conversation and what are you trying to get to at the end of that conversation?

Michael C.: Yeah, if I get them on the phone, I think the max conversation is about 10 or 15 minutes. I mean, I've definitely had initial calls that turned into 45 minutes or longer. But generally, it's about like, "Hey, here's what I do for people like you. And what are your hot buttons? Why did you click on this internet survey?" And then, that conversation is an easy 15 minutes. And then, it tries to morph into, "So, should we schedule some time? I'm willing to come out to your house or take you out to eat or do it over Zoom." And they either say their availability, or they're like, "Hey, follow up with that with email, and then we'll circle back via email." And then, the kind of conversation goes from there.

Michael K.: Okay. It's nice you said like, "I can come to you, or we can grab a meal together, or we can do it with Zoom." So, you're still leading on the in-person end of it because you're trying to get leads in the general geographic region.

Michael C.: Yeah. And just based on the data I have, the in-person financial planning meeting just has more buy-in and efficacy for the end client than over Zoom. And that's just been my experience. I don't have the exact number in front of me, but I would say my close rate on prospects that we do in person are probably 25% higher.

Michael K.: Okay, okay. So, that's why, particularly if you're at the point of like, "My 20 leads this month cost me 5 grand." Yeah, if making it in person boosts my final close rate by 25%, that's pretty material amount of dollars given how much these leads costs. So, yeah, I'm going to buy me some more local leads, and I'm going to try to get some of these to be in person.

Michael C.: Yeah. And then, my timesink into this isn't tremendous. So, for 20 leads, assuming I do 3 meetings at 2 hours each and there's some driving time involved, I'm probably spending less than 8 to 10 hours a month on my SmartAsset process to do this. Because a lot of people you don't hear from, out of the 12 people I see a sign of life from, I'm only booking 3 or 4 meetings. And assuming the meeting is two hours each, it ends up not being like a giant time suck. It's a pretty efficient use of your time.

Michael K.: That's interesting, just that you frame it that way because I... One of the things that we do in our advisor marketing studies that we put out every other year is that we look at how advisors rate various marketing services overall, but including some of the lead gen services. And we've seen a pretty strong trend that for most advisors, the biggest weighting that we give to satisfaction with lead services is the quality of leads, which is essentially like the percentage of leads that turn out to be good, decent leads that book meetings with you and that you had a real shot at it. Or viewed another way, most advisors seem to be pretty negative on lead services that are the kind of, I think as you'd even framed it, like the numbers game. I got to go through 20 leads that aren't a fit to get to 3 meetings, to get to 1 client, that they don't want to take the time to do all the follow-up with all the non-qualified, not good fit leads just to get to 1 client at the end. And you're making an interesting case that like, "No, it's really actually not that much time." The ones who don't fit and don't respond, it takes you a minute to leave them a voicemail and have them never respond to you. It's not that time-consuming, most of the time is just the people you see that are live prospects that you probably would have gone to see as live prospects in any scenario.

Michael C.: Yeah, exactly. And you hit on a really interesting point. I think that our field, there's a lot of big egos in this field. And I think people don't like hearing no. So, if you've been reasonably successful and have a reasonable ego, you might not like the idea of 40% of the people not wanting to engage. And out of the 12 that engage, you only book 3 meetings. But if you flip that on its head and look at the ROI, it's actually like, "I don't care about the people who say no. I only care about the people who say yes and want to meet with me." The rest of them is like, "Yeah, it took me one minute to leave a voicemail to eight people who I'm never hearing from. And the rest that engage, that's where I spend most of my time." We also do other things. I have a weekly blog that's 50% written by artificial intelligence to make it efficient, that we put everyone in this weekly marketing drip, we can see who reads it, and how often they read it. And that's another way to kind of like, "Hey, I've never engaged with this prospect. I put them on the list for our blog two years ago, and they open the email multiple times a week. They're obviously a fan and know who I am. Let's reach out again."

Michael K.: So, tell us a little bit more about this weekly marketing thing. What is the content you're sending out? And how exactly is AI playing into this?

Michael C.: Yeah. So, I was really fortunate. I do some adjunct teaching at a couple colleges. So, I got access to AI and ChatGPT about a year before the general public. And I felt like I got early access to Napster back in 2000. I was the first guy in the street with a CD burner. I was like, "This is like adult Napster." And I was like, "How could I use this to enhance my practice?" And the weekly blog, I think, was the biggest benefit for me. A lot of people are doing research, and AI can help you with investing decisions. I think the jury's out on that. But I think creating great marketing content is really the best use case for people in our field. A big part of the blog is what happened last week and what's happening next week in the markets, whether that's economic data or earnings. And there's just so many sources on the internet that are just like fact-based. It's not copied. I'm not stealing other people's content. It's just like, "Hey, let's take this economic calendar and have AI rewrite it in a really nice fashion." The AI kind of spits that part out for us. And then, I fill in the blanks around that.

And then, generally, once a month or every other week, I'll include a financial planning tip, my thoughts on a certain subject, like government shutdown, what does that mean for your portfolio? And then, talk about that. And all my clients are on the blog, too. So, I found that it's been a really helpful way in communicating my thoughts and ideas to my current clients because they know I'm thinking about stuff. Because if I get a call from three people about I'm worried about the government shutdown, that probably means I have 15 clients worried about it, but they're not confident enough to call me and bother me about it. So, the blog lets them know like, "Hey, this is what Mike thinks. He doesn't think it's a big issue because in the past, it hasn't been a big issue." So, it keeps them in line with my thoughts. So, I think it serves two purposes. And then, I get to see who's actively reading it as well. And we do that through Substack.

Michael K.: Oh, and you distribute through Substack. So, not a blog on your own website, it goes live on the Substack service, and then you're using all the Substack metrics to track the engagement.

Michael C.: But one of my interns who became an analyst actually embedded the Substacks blog into our website. So, it feeds there pretty naturally.

Michael K.: Okay. So, clients can still find it on your website. Prospects can discover it through the Substack ecosystem, and Substack still managing all the data and the email list distribution and such because that's what Substack does as a newsletter service.

Michael C.: Correct.

How Is Michael Creating Articles With ChatGPT? [33:19]

Michael K.: So, I want to understand a little bit more just like how exactly you're creating articles and where ChatGPT flows in. So, I guess what I'm trying to say is what kinds of prompts are you giving ChatGPT to do this? Please summarize all of the major economic milestones of the coming week. Enter button and then it just does its thing or...?

Michael C.: It's even simpler than that. Oftentimes, I'll take the Barron's economic calendar, copy it into ChatGPT, and said, "Please rewrite this in a better writing style for my blog." And then, I might have it rerun that like five or six times, take the multiple drafts it's created, and then kind of Frankenstein that together, and then marry my own words around that.

And now, I've trained it in my own words. I've done so many of these blogs, so it knows my writing style. And I'm actually not using the standard ChatGPT. There's another model they have. It's like GPT-3. It's not that standard chat model that everyone gets because that tends to kick out the same answers. So, the version of the ChatGPT I'm using lets you fiddle with the intellectual freedom it gives you in the responses. So, I've kind of like tuned that in pretty well into my own writing style, so that way, it doesn't sound like someone else is writing it because it's been trained on my own words and my own blogs.

Michael K.: Yeah, I was going to ask just for folks that are not familiar and have not been down this road, what does it mean to train GPT in your style? How does that actually work? What do you do to train it in your style?

Michael C.: Yeah. So, there's these models inside ChatGPT that you can save. So, I have like a Save Template inside ChatGPT, and I call it The Investing Blog. And every time I do some more writing or it gives me a response, I can give it a thumbs up or thumbs down in the lower left-hand corner that says, "Hey, this is pretty good," or, "Hey, this is bad." And then, I can tell them like, "Look at my past blogs," if I want to go... I usually don't go that deep because the results I get are pretty decent. And again, it's just reciting facts. So, usually, that doesn't go too far off the rails. And I also can dictate how long I want the response to be. Sometimes I'll say like, "Hey, summarize this in two sentences for an unsophisticated audience." If I sit there and ramble on about CPI, someone might not know what that is. So, I try to have little explainers and stuff in there as well, and then calls to action as well. But I don't want to seem spammy. The blog is really meant to be educational.

Michael K.: So, the idea here is it's not writing the whole thing entirely, you're using it as a baseline that you can then edit, add your own words. I think you verbed, Frankenstein it, like just grab pieces, "Oh, I like how it said this part, and I like how it said that part. I'm going to copy-paste those sequentially into my final version." But it's faster to just grab the snippets that you liked and then add some of your own commentary than to write the whole thing from scratch.

Michael C.: Yeah, 100%. That's where it really drives efficiency, and how can a solo advisor use technology to kind of like appear big, right? And I think that's been pretty powerful as a tool. And that's really it. It's not all that complicated. The hard part is still filling in my own words. Like, "Hey, what color do I want to add around the automated content to appear authentic, genuine, give good thoughts, advice, and things of that nature."

Michael K.: And all of this is free on ChatGPT? Are you on one of the paid plans or services?

Michael C.: Yeah, it's like a pay-per-use. I have me and a few of my analysts on it, and I think we pay less than $10 a month because we're not doing a ton of writing. But it's really time...

Michael K.: You're not actually doing large number, high volume number crunching here. It's like, "Give me three versions of this economic calendar written for an unsophisticated audience."

Michael C.: Yeah. And the other thing we've done, too, is I can have my interns and analysts just crank out content as me and then send it to me for review and finishing. So, it really just drives efficiency. So, something that might have taken me two or three hours on a Sunday, I can now bang out in 30 minutes because of the efficiencies that technology is driving.

Michael K.: So, I guess the key point that like it's not automating where it takes your time down to zero, it's expediting. It's taking you from two hours with a blank page to 30 minutes of copy-paste, insert your own commentary edits.

Michael C.: Yeah, correct. And I think that's the big story with AI. You know, a lot of people are like, "Hey, how are we going to make money on AI?" And I'm like, "No, you're looking at it wrong. How are we going to save money by using AI."

Michael K.: So now, take me back through...I want to come back to the process, again, of leads. So, initial lead comes in from SmartAsset. First goal is to call right away. It sounds like ideally within minutes because there's a decent chance that one of the other people is going to call within a few minutes as well, especially because at least one of the other people seems to be a very, very large firm with the call center that literally does this for a living. So, first goal is to call right away. If I can get them on the phone, my goal is to get a meeting. If I don't get them, I leave a voicemail and then do a follow-up email just trying to introduce myself.

Michael C.: Correct.

Michael K.: My next touchpoint is a week later with a follow-up call, and if they don't answer the call, I send the text message.

Michael C.: Yes. And getting a no on a text message is just as important as getting a yes because now I know who not to waste time with anymore. If someone says, "No, please stop bothering me," I'm like, "Fantastic. I know now not to cross this person off and move on."

Michael K.: And I've got to ask from the like regulatory, compliancy, and how are you handling text messaging?

Michael C.: Well, as a solo shop and as the current head of compliance, so that's probably soon going to change, I make sure everything's tracked and stored. I'm not deleting any messages. When you have like five employees to watch over, you have to start worrying about, are they tracking and storing all their communications with clients? But with just me, it's easy to make sure like, "Yeah, I'm not deleting client messages." I have that all stored if someone wants to look at it, and all that information is tagged and tracked.

Michael K.: So, do you use a separate tool or service to do it, or are you just literally exporting your text messages out and into a compliance archive because it's pretty straightforward when you're a solo to make sure you do that yourself because you oversee yourself and do it?

Michael C.: Correct, the latter. Any client communication. And then, I quickly try to...some of that has worked against me sometimes because then clients become really comfortable with text messaging. And once they become clients, for sure, I try to move all those conversations to email. I have one lady in Utah who always requests money via text. And I'm always like, "Yeah, hey, would you mind sending this over via email, or I confirm the text message via an email per your text. Here you go, I'm going to send you X amount of dollars.

Michael K.: Is there just like a particular reason that you like texting in the prospect context, but not a fan of it in the client context? What's the dividing line for you?

Michael C.: I think it's compliance. I don't want to get in the habit of communicating important client details over text because just the way I run my organization, it's easier if everything is in my inbox. And everything stays in my inbox until the task is done. Whereas a text, once you read it, if you get five more texts, you can be like, "Oh, oops, I got that text two days ago. I didn't respond or follow up on the task."

Michael K.: Okay. So, just sort of the concept like, "Hey, I'm Mike. We got introduced through SmartAsset. Would you like to talk?" This is a relatively low-stakes text message. Getting clients in the habit of, "Please sell X dollars of Y and distribute it out to this account number. Please don't send that to me."

Michael C.: "Please don't send that." Yeah, exactly. And a lot of times, in that text message, I'll ask for a no. If you aren't interested, I will stop communicating with you. "Please let me know." Because some of these people have probably already gotten like 10 points of communication from Fisher, the other competing advisor, and me. So, if they don't say no, then that means it's a yes until it is a no.

Michael K.: So then, what comes next? We're a week out, we do the follow-up call and text message. What's next? Are we still going or do we just kind of throw in the hat.

Michael C.: Yeah. Hopefully, at some point, they book a meeting. But after I've made like three points of contact, I'll kind of let the lead marinate for a bit. They're already on my blog. I've had a lot of great success. If the market's having a terrible day, a terrible week, or a terrible month, I'll be like, "Hey, this is the day I go back and call leads from six, three months, even a year back." Because at this point, they might not have the confidence that they did in the upmarket or dislike their financial advisor at the moment. So, I do tactically like on days of weakness or periods of weakness, kind of really aggressively harvest back on that list. Because when the market's up, everyone feels smart. And when it's down, they're like, "I don't know if I know what I'm doing."

Michael K.: So, then I just got to ask what's the wording of that outreach? I'm just like there's a sensitive way to do like, "Hey, this is a tough day in the markets. Do you need help?" And there's probably an accidentally less sensitive way of like, "Hey, is the market kicking your butt because you really didn't know what you're doing in the first place? You're ready to talk to me now?" What kind of language do you use on that outreach just to try to engage them and not...no, I'm visually, not accidentally offend them of like, "Hey, have you realized now that you're really not good at managing your own portfolio?"

Michael C.: Yeah, I'll just try to say, sometimes I don't even mention it. I know already the market's weak. They already know the market's weak. And I'm like, "Hey, just calling to check in. I know a lot of people might have a lot of questions about the current economy and market. Even if it's helpful just to share a few of our thoughts with you, I'd be happy to do that. And the offer for the complimentary financial plan is obviously still on the table, so if that's something you're interested in." And they might be more interested in that, like a roadmap when they're a little bit more nervous.

Michael K.: So, when do you add them to your drip marketing list, this weekly email? Is that right up front when they come in as well, they're also getting tagged on, or is that at some point after you've made a certain number of outreaches that landed or didn't land that you put them into the weekly blog drip?

Michael C.: Yeah, before I write my blog every week, I go through the people who I've gotten contact information from and add them to the blog. I don't go like as soon as I get the email information from them, I put them on. I do it on Saturday or Sunday evening. I'll go through a few leads I got that week, or anyone who's emailed me about something, I put them on the blog at that point, just to be efficient.

And then I'll devote one day a month to go back a few months. So, I think I'm scheduled to do that on Monday, I have it blocked on my calendar, where Monday, I'm going to go back to all the leads from October and November and give them one more ring because they might have totally been turned off by how many people called them in the first week, and then like say, "Hey, you know what? I'm not interested. I didn't think I was signing up to be called 15 times." And then, three months later, they might be a little bit more open to a conversation. And they might have received some of my content already. So, there's some more familiarity with the brand.

Michael K.: So, I see what you mean, though, that like for every 20 leads that come in, you're spending like 5 minutes when it comes in, granted you have to be a little bit reactive. Like it's 5 minutes when it comes in for the 20 leads to do the outreach and leave the voicemail and send the follow-up email if you don't get them. If you do get them, maybe it's 10 or 15 minutes on the call. So, you're maybe 2 or 3 hours in the first round of those. Then you've got a shorter subset that you're doing a follow-up because some of them are already giving you nos or saying, "I changed my mind. Please don't contact me, whatever it is." So, you got like maybe another hour or 2 of the follow-ups. Then that gets you down to 3 or 4 meetings that are an hour or two each, and someone closes, and you're $5,000 and 10 hours later, you've got a million-dollar client.

Michael C.: Yeah. And wash, rinse, repeat. And I've been doing that since 2018 with a good deal of success. And there's other little things that we'll do. I'll highlight the 9 people who engaged, but didn't book a meeting. I'll proactively follow up with them more than people who have never engaged at all. So, on my little spreadsheet that I have that keeps track of all my marketing data, I'll go back and say, "Hey, John Smith here said he was interested, said to send a follow-up email and that we'd book a meeting, but that meeting never happened. So, let's give him a ring and then follow up with him on that day."

The way my ADD works, I probably will devote a day to the people who have engaged with me. And then, I'll devote another separate day to the people I've never engaged with, just so I set my expectations for a lot of nos on those days.

Michael K.: It's just good for like mentally steeling yourself, like this is going to be a day of rejection, but if I get one, that's awesome. Yay.

Michael C.: And I talk a lot about that with my team. It's like, "Hey, I'm going to call people until I get a call, or I'm going to call people until I get a meeting." Because since I've been doing this for so long, I have like 1,000 millionaires on a list and 1,000 people who read the blog where I can now go back and continue to harvest that because someone who said no five years ago might have changed their opinion today. And now, I haven't gone back five years for any leads or prospects, but the oldest one I said was, I think, three years it took to bring him in the door, and he's going to be a fantastic client.

The History Of Michael's Firm [49:10]

Michael K.: So, you said you've been doing this since 2018. So, I don't know how much you have to track this, but what is this added up to? What have you gotten cumulatively over the past four or five years of doing this?

Michael C.: Yeah. So, I only have the data since I started my own firm. I wasn't able to take the data when I launched my new firm. But since late 2021 we've spent $70,000 on SmartAsset and have generated $86,840 of revenue to date. And that's going to continue to increase because all that's reoccurring revenue. So, that's...

Michael K.: So, like $70,000 of one-time spends, $86,000 of annually recurring revenue. That's...

Michael C.: Revenue already generated.

Michael K.: Okay. Just mean you've billed and collected.

Michael C.: Billed and collected, yeah.

Michael C.: So, the longer we go on, the longer the clients stay on, the larger that total revenue collected will be.

Michael K.: So, do you have a sense as to what that is just in terms of asset flows?

Michael C.: Yeah. I think we've generated about $140,000 of reoccurring revenue.

And the way I like to count my numbers is what's real, not hypothetical projected, like what have we actually spent? And what have we actually brought in? But we brought in I'd say about $17 to $18 million of assets since we launched and...

Michael K.: And you launched late 2021, so like about two years plus a little bit of a fractional year. So, this is doing just south of $10 million of average assets for you in a year by just going through your monthly process.

Michael C.: Yeah, yeah, correct. And really happy with the numbers. Even when I launched, one of the biggest risks I took was I ended up taking out a $50,000 bank loan to really just dump into SmartAsset because I had the confidence that it worked.

Michael K.: Wow, that's a lot of confidence.

Michael C.: But it's like I could grow slow, or I could try to fit capacity, where like, "Hey, if I buy 20 leads a month, I can book out..." That means I'll have three meetings a month. So, which won't completely overwhelm my time. And I probably wouldn't want to buy too many more leads a month because then I'd feel like I'd be driving myself a little crazy in terms of constraining my own time and stuff like that.

Michael K.: Okay. Interesting. And so, where does the firm sit overall then? So, I don't know if you have other marketing channels or other clients and assets that came with you when you transitioned to launch from where you were previously.

Michael C.: Yeah. When I launched in 2021, I launched with about $40 million of assets. I was really fortunate where that many of the people I had worked with previously actively reached out to me to want to continue working with me. But I would say out of the $40 million that I left with, more than half, probably 60%, were originated from SmartAsset.

Michael K.: Oh, interesting, because again, since you've been doing this prior, going back to 2018. So, a significant segment of the $40 million was SmartAsset previously. So, what is your total client base add up to today? Think of households or assets or however you measure it.

Michael C.: Yeah, about 70 households and $80 million in assets.

Michael K.: Okay. And so, it sounds like between the recent activity since you left and the activity from SmartAsset previously, upwards of half of all of these assets are SmartAsset originated over the span of about five years?

Michael C.: Yeah, I'd probably say close to two-thirds.

Michael K.: Okay. Wow. So, you're $50-plus million that came in from SmartAsset. Well, again, I got... Oh, over the span of about five years since 2018. So, just it really has been a like... it's about 10 million of assets for you, give or take a little every year if you just keep going through the process.

Michael C.: Yeah. I'd say it's been top-heavy recently. In 2018, when I started this, I think I was spending like 5 or 10 grand, and the 5 or 10 grand, 2X in reoccurring revenue. And I'm like, "Well, this makes sense. Let's increase the budget." And I kept on doing that. And then at some point, I think I hit a wall with what my old firm was willing to let me spend versus what I think I should be spending to maximize growth. And that was when I started thinking about, "Maybe I should go off on my own."

When you're part of a larger organization and you're growing fast, and you need marketing dollars to do that, I think some of the financial incentives were out of line is probably the best way to phrase it. They paid me a decent base, and they gave me a small percentage of revenue upside. So, I only got at that firm, I was only getting 20% on the upside, but they were responsible and approved of all my expenses. And at some point, if I wanted to spend more, it would have to come out of my pocket. But I'm like, "With only 20% of marginal revenue, it doesn't make sense for me to spend out of my pocket." So then, there was some dispute about like, "Hey, how do we square-peg this round hole?"

Michael K.: Right. Like, "Hey, I've got a marketing formula that's working great where I spend $5K and I get $10K, but this doesn't work if I spend $5K and I get 20% of $10K." That math doesn't work anymore.

Michael C.: Yeah. And this seemed to be the biggest roadmap for my own growth. So, I started to try to see like, "Hey, how can I make this work inside an organization?" And an extra complication was that I was part of an organization that was acquired. So then, it became a question of like, "Who pays for Mike's marketing expenses? Does the corporation pay for it, or does the local office pay for it?"

Michael K.: Well, you highlighted an interesting dynamic that...I mean, look, advisory, most advisory firms, I find particularly most large advisory firms have an expectation that all of their advisors are doing some business development. And so, you can sort of implicitly earmark like, "I expect all my lead advisors to spend 20% of their time doing business development, which essentially means 20% of their comp is a business development expense of the firm." But it's so baked into the firm that nobody tends to look at the line item of marketing expenses embedded in lead advisor salary, but it gets really noticeable when someone shows up with a tactic like yours where, "No, no, I'm actually making my time really efficient, and I'm generating the leads by spending dollars, but the dollars show up as a line item in a way that a percentage allocation of staff salary, nobody really looks at the same way."

Michael C.: Yeah, I think you hit the nail on the head there, is that sometimes when you're part of a large organization, you can get lost in the metrics. But when I look at it, I'm like, "Listen, we're spending $1, and we're getting $2 reoccurring. We should just figure this out."

Michael K.: Well, I chuckle hearing that. So, you said you were in a firm that got acquired, and so if they were acquired for more or less, what rates are going for these days where a lot of advisory firms get bought for two to two and a half times revenue or occasionally more sometimes? I'm like, "They bought your firm under the condition that they get $1 of revenue for every $2 spent. Your strategy gets $2 of revenue for every $1 spent. So, it's 4X better than the money they paid to acquire you. But they couldn't figure out how to handle it."

Michael C.: Yeah, that was it. I have to be careful here a little bit. I think the local office had some incentives on growth for another layer of their compensation. And that kind of muddied the waters a little bit in terms of like, "Well, we don't want to spend too much because we have our own metrics to hit to make sure we get what we're looking for." And then, I'm like, "Well, that works against my own goals." And then...

Michael K.: It's the challenge in large firms. How do you figure out how to create these incentive structures if you have lots of different advisors that grow lots of different ways with lots of different offices that have their own relative preferences, and you can try to tell everybody they have to do what the home office does, but a lot of us in the independent world don't like to do what the home office says because we're independent for a reason? And nothing against any of the firms like this, but it's the messiness that comes with at least some big firms that are trying to figure out when you aggregate a lot of different independents, how do you create the systems that keep everybody aligned when independents tend to be a little independent-minded about how they do things?

Michael C.: Yeah, it's like herding cats, you know?

How Does Michael Justify Paying For A Service With A 95% Failure Rate? [59:15]

Michael K.: Yeah. So, I've got to ask, though, coming back to the comments earlier, how do you think about...and I'm sure you don't frame it this way, this is my words, but you're paying for a lead generation service with a 95% failure rate. You seem very not bothered by that. So, I'm just curious to understand more like how you think about this dynamic of you're paying for these leads and the overwhelming majority of them don't work and you have to write a check for them.

Michael C.: Well, at the end of the day, the numbers work. And I think part of my career history, I started working almost full-time while I was in college. And I worked for, you might remember this, Gateway Computers.

Michael K.: Oh, yeah, absolutely.

Michael C.: I sold the cow boxes. That was 100% commission-based. I was doing it during the boom time. I think it was there from 2000 to 2004. I was selling computers...

Michael K.: This was like the big like build your computer competitor to Dell.

Michael C.: Yeah, exactly. And broadband was just rolling out and it's competitive market. So, I think I got used to the Nos while I was doing sales for Gateway Computers in college. And one of the things I really liked about that job was the salesmanship and offering people solutions to their problems that they were having and building them something that they could find useful. And it was something I was good at. So, 15 years later, I'm in wealth management, and I'm like, "Oh, yeah, I'm used to people saying no. That's no big deal. I can deal with that." And I think a lot of people, like you said, the framing of it, they don't like the idea of the 95% failure rate, even if the numbers at the end of the day make complete sense.

Michael K.: Well, and that was part of what we found in our research as well that it's our advisor version of so-called behavioral finance biases. Our data was quite clear that the marketing tactics that had the highest satisfaction rate for advisors were not the ones with the best economic outcomes. They were the ones that had the highest quality leads. We tend to take inferior marketing results. Might still be good. I'm not totally knocking the strategies, but we tend to show a preference for marketing strategies that might not even be as good economically if we just don't have to talk as many bad-fit leads.

Michael C.: I have a great example of that. I won't mention the lead service, but I experiment with other lead services as well. And this lead service got you to meeting, meaning like, "Hey, we're going to book you meetings. So, you don't have to worry about the hassles of this and that." But they take 30% of revenue forever. So, it was like, "It doesn't cost me anything upfront, besides like they charge an initial small platform fee." But as I went through these leads, they were more willing to talk. But the long term, like two, three, four financial metrics, they just weren't adding up. And I'm like, "Geez, this 30% cut they take forever. If they refer me someone with a half million dollars and I'm giving up 30% off the go, and for the next decade, it starts to look pretty poor in terms of my ROI, even though it costs me nothing up front." And it feels better because I'm doing these meetings. But like the end of the day, the margins, the revenue, it made me feel better, but the results weren't the same.

Michael K.: Yeah. Well, if you're doing a 30% rev share like that million-dollar client at the proverbial 1%, you're going to pay $30,000. Like 30% of 10 grand is 3 grand times 10 years. You may pay $30,000 over the next 10 years for the pre-arranged high-quality meetings, your scenario is a $5,000 one-time payment for the same client instead of $30,000 for that client with the caveat like you get more bad-fit meetings, you get more rejection, you get more people that you have to chase only to have them say, "Please stop contacting me," and you're like, "I paid for the privilege to contact you. You submitted a form, and I paid for that, and now you're telling me to stop talking to you." But you math through it all and it's like, "Yeah," and you're all in cost is still a lot lower, like a lot lower.

Michael C.: A lot lower. You hit on an interesting point that I was sharing with a new advisor we recently brought on board is people buy books for 2X or 3X times revenue, if not more. And we're able to build a book for 0.5X. And so, you spend $5K on SmartAsset, I get $10K reoccurring and the net worth of my business is now increased by 30 grand.

Michael K.: Yeah, that's true. If you look at from an enterprise value end, every $5,000 you spend on marketing is $20,000, $25,000, $30,000 of enterprise value in 100 days. Your spend-to-enterprise value is like a 5X to 6X multiplier in months.

Michael C.: And I talked to plenty of advisors who were like, "What about buying a book?" And I'm like, "Yeah, but you're going to pay 3X." And you should do it if you need the economic runway and you have the financial resources to do it. But you can build it if you give yourself a year to 18 months. You can build it at a significantly lower cost.

Michael K.: Yeah, again, if you look from that math, you spend $5K to get a $10,000 client. And an acquirer spends $20,000 to $25,000 to get the same client. That's the revenue multiple on a million dollars of AUM. So, yeah, I think that's another interesting way to look at it. You're relative to the cost of acquisition by acquiring. Your growth cost is like 20% of what an acquirer spends to scale through M&A.

Michael C.: Exactly. And...

Michael K.: With the caveat of all the nos.

Michael C.: With the caveats of all the nos, which is all like behavioral, like just people don't like... you're at the high school dance or whatever. You don't want anyone to say no to you, so you don't ask anyone to dance, and now you're not dancing. But if you can get over that, you'll end up with more dances.

Michael's Journey From Selling Computers To Running His Own Firm [01:06:16]

Michael K.: So, help us understand a little bit more than this journey from selling Gateway computers to running your own advisory firm 20 years later.

Michael C.: I was like, "Geez, my first job out of college, unless I want to stay selling computers, is probably going to be meaningfully lower than what I'm making now." I was fortunate where I didn't have to make that decision as they went belly up in 2004 before I graduated college in 2005. And from there, I went to State Street where a lot of people from Boston, they start their careers in an operations role there. I spent about a year or two in operations. I was fortunate where State Street at the time paid my master's degree full out. So, I took advantage of that right away because their compensation for entry-level wasn't the best, so I might as well take advantage of this really juicy benefit.

I got my master's degree in 2007. That led to a promotion for me at State Street where I took a job out in California on the institutional relationship manager side, is like a junior RM in their San Francisco office. I was really jazzed about that opportunity. The job was great, but I would say the support system and the lifestyle wasn't the best in terms of like you're in a big organization, and you're away from the home office. So, training isn't as good, and things of that nature. And then, I also moved out there to take that job in 2007. So, I walked right into the financial crisis. And a year or so into my stint there, just networking with people, and I ended up...because of my master's degree in finance, I got a job teaching college, one night a week, an intro to business class that when I got laid off in 2008 or 2009, that became like a temporary full-time role. And teaching is super countercyclical in terms of like, "Hey, economy is doing bad, college enrollments go up." I ended up moving back to Boston in 2009, making a parallel move, going to a quant firm called Acadian Asset Management, and was there from about 2009 to 2012. During that period, I had started my very long journey to getting my CFA. I definitely failed each exam once. So, it was definitely like that.

Michael K.: You had the great pleasure of doing the CFA on the six-year cycle.

Michael C.: Yes, I was on the six-year cycle. But at the end of the day, it's like the guy who graduates at the last of his class with a doctorate degree, he's still a doctor. And I probably learned more from having to take it a few times. And it's not something I'm ashamed of either. I think it's more of a...

Michael K.: It's brutal. Yeah.

Michael C.: ...perseverance than anything else.

Michael K.: Was there a study service exam prep, like thing that you ultimately use that got you over the hump for these?

Michael C.: Yeah, the CFA boot camp, and I'm going to blank on the guy's name at the moment, but the CFA boot camp, I think if you Google that, was instrumental to my success because my stubborn nature, I'm like, "I'll just do this on my own. I'll study, I'll work hard." And the self-study aspect, I know can be challenging for a lot of people. And then, when I started taking these classes on strategy on how to pass the test, that was kind of like got me over the hurdle every time.

Michael K.: Okay, very cool. So, you're working for Acadian, and we're still in institutional money management world at this point, right?

Michael C.: Yeah, correct. And I never thought I'd do portfolio management or wealth management work. At the time, I thought I'd roll into an institutional sales role. But we were still coming out of the financial crisis at this point. And for people on specifically the institutional side, there was a long list of people waiting for promotions after the financial crisis that had to be in their seat way longer than they originally anticipated because of the slow job growth. So, I started looking elsewhere, and I was fortunate where the Northern Trust satellite office in Boston gave me a call, and we had a successful interview. And that was a big pivot for me in my career because they did ultra-high-net-worth wealth. And I didn't realize it at the time how high-end in the market they operated because...

Michael K.: If you've been in the institutional world, Northern Trust working with decamillionaires is really down market. Look at all these little $25 million account balances when you're used to an institutional world. It's just from a wealth world, those are really big clients. It depends on your perspective.

Michael C.: Yeah. They were really sophisticated. They were almost like institutional light. When I rolled into Northern Trust in 2012, they were one of the first large organizations to roll out software to do goals-based planning. And I raised my hand at the time to effectively beta test that with them. And I didn't know how revolutionary it was at the time. I think you go back pre-2012, eMoney was just a Monte Carlo simulation, didn't really take into account goals and future cash flow.

Michael K.: Yeah, it was a big Monte Carlo spreadsheet simulation with a really nice client portal.

Michael C.: Yeah. And not as savvy and sophisticated as it was or as it is today. So, I got to work with these pretty high-end clients, and that kind of gave me a taste for the business. I stayed there for about four years. I realized my track to be a senior person on their team, and my own relationships was a little bit longer than what I wanted mostly because they needed growth in that client range to be able to fill my bucket if I didn't want to be the secondary person instead of the primary person anymore. So, I started, again, looking around for other opportunities, and I joined Boston Advisors. They focus more on the $1 to $5 million range. They were looking to begin investing.

Michael K.: Is this like more traditional RIA world now?

Michael C.: Yes, very more traditional RIA world. They were looking to implement a goals-based planning solution. At the time, eMoney ended up being that solution. So, I helped them pick a vendor, I helped them with some manager due diligence as a smaller RIA at the time. They owned like way too many mutual funds and way too many different books of business. So, I tried to use my skill set and resources to help simplify all the funds that they held and what should be held and what shouldn't be held. And I learned from a lot of great people. If I didn't work under a guy named Larry Manning, I wouldn't have the skill set we do in asset allocation and stock selection. I will mention that's probably one thing that's a little bit unique. We do build individual stock portfolios for our clients. I wouldn't call us active managers. We build more of an enhanced index, really designed to track the index and give greater tax loss harvesting opportunities.

Michael K.: So, similar to a direct indexing framework, but not direct indexing?

Michael C.: Yeah, yeah, correct. We'll own like 50 to 70 names. We'll go sector-neutral, dividend-neutral. I'll hug the benchmark in a bunch of positions and don't make too many active bets. And I find that the end client understands their portfolio a lot better. Because if I have them in a momentum fund and an equity premium fund, the end client doesn't understand that. But if they own J.P. Morgan and Google, they get it.

Michael K.: So then, what comes after Boston Advisors? Did your firm launch from there, or is there another step along the way?

Michael C.: Yeah, Boston Advisors was acquired by CAPTRUST late in 2019, I believe. And I think the founders of Boston Advisors were getting a little bit older and looking for an exit strategy themselves. And CAPTRUST was a really great fit, great organization. But the challenging part for me was the economics and where I came in at. So, that was the tough part. And then, during the pandemic...

Michael K.: Because you weren't a partner at Boston Advisors, you were an employee advisor. So, when CAPTRUST came in, you're not part of the partners, owners, equity deal. You're the employee that's moving along in the transaction.

Michael C.: Correct. And, yeah, I felt like I was traded to a different sports team. It was kind of that. That was the feeling.

Michael K.: Pretty good analogy, I think, of what that's like sometimes.

Michael C.: Yeah.

Michael K.: So, this is now the level where you got to the, "We do some marketing costs, but if you want to do more, you've got to pay it out of pocket." And you're saying, "I can't pay it out of pocket if I only get 20% of the revenue back." That math doesn't work anymore.

Michael C.: Yeah, correct.

Michael K.: Okay. So then, what else was revelation for you in the pandemic?

Michael C.: Well, we were all working from home. I had the digital lead process at that time. There were a lot of people who boots on the ground network, but that was open window. And I was like, "Wow, aside from all the turmoil, just relating to this one aspect in particular, what a great opportunity there is," because now, there's a lot of people in need of advice. That whipsaw at the start of 2020, the market tripped down 30%, 40%, and then quickly recovered 30%, 40%, and higher, made a lot of people's head spin. And I'm there with digital leads with my hat out just catching them. And I was like, "Wow, this is great." And then, during the pandemic, I realized that like, "Hey, I'm bringing in the money. I'm managing the portfolio and the relationship. What is my current firm offering me to justify an 80% take of revenue?" And I was like, "Office space and software that I can go out and buy on my own." And I started just the thought process of what would it look like if I left.

Michael K.: It's a strange fascination point to me that a lot of the large firms have increasingly leaned in this direction of how do we get all the advisors at the firm to do business development and bring in more clients. And it's like, "Well, if they were really good at doing business development and bringing in their own clients and servicing their own clients, then they might not need you anymore." Or then, you're basically serving an independent broker-dealer platform, we give you the compliance and the tech, and you run your own businesses, and like, "Well, that's fine, but independent broker-dealers have like 90-something percent payouts, not salary plus a moderate percentage of revenue."

If you push your advisors to do business development and learn to do that, then it seems like a lot of them get to the place that you ultimately came to. It's like, "I'm actually pretty good at getting my own clients and servicing my own clients now. Why again do I work here?"

Michael C.: Yeah, and that was the question I really asked myself. And then, I was serving two masters, one, my clients, and then, two, the local office and the corporate office. And I'm like, "My real boss is my clients at the end of the day." So, it also helped me simplify things a lot, too, where some of the oversight and management and processes and procedures, I just felt like where I was at was holding me back a little bit.

How Hard Was It For Michael To Adjust To Running His Own Firm? [01:18:45]

Michael K.: So, how hard was it to adjust to actually hanging your shingle and being out in your own when it sounds like your whole career was in larger firms with support platforms, mostly very large firms? I mean, you were at some institutional folks like State Street, Northern Trust. So, what was it like to go from large firm-supported environment to you are actually running your own independent solo practice?

Michael C.: It wasn't as hard as I originally thought. I already had a good idea of what platforms I wanted to use, and they were really similar to the platforms I was already using. So, I was like, "All right, well, I'm going to use Black Diamond for performance, eMoney for financial planning, which I had a deep experience in." And then, it's like we connect the data, and then here we go. And I have someone who's going to offer me support to do the grunt work and the administrative side in terms of like, "Hey, when someone's onboarded, what's the process of the data integration stuff?" Which sounds complicated initially, but then it's just a process.

Michael K.: Because when you transitioned, you did have some clients and a few tens of millions of dollars coming with you. So, there was some revenue to get at least a little bit of team support out of the gate.

Michael C.: Yeah, for sure. And through the college teaching, I think the students are really happy if I bring them on board because they're getting above-market payouts. But for me, I'm getting a discount on, effectively, my revenue. So, everyone's happy in that situation. The financial dynamics are in line.

Michael K.: And why Black Diamond and eMoney? Because there's a lot of choices in each. When you're going on your own, you have to make all the choices.

Michael C.: There's a lot of choices in each. One, I was familiar with it. Two, my clients were familiar with it, and it would have been a bigger lift to be like, "Oh, and I'm using Morningstar performance instead." And then, I'd have to re-coach them on what that is and how to operate the website. But if I used a really similar tech stack, it made it pretty seamless.

Michael K.: Because, I guess, Boston Advisor/CAPTRUST were Black Diamond, eMoney firms already. So, this was familiar to everyone?

Michael C.: Yeah. And if it's not broke, don't fix it. I think Black Diamond is a little bit more on the expensive side, so I could have saved a few bucks by potentially using Morningstar or another service. But I was happy with it, and I was familiar with using it. I didn't want to jump to a new organization, even if I created it, and have to re-educate myself on a bunch of new software. I wanted to be able to just plug in and go.

What Surprised Michael The Most About Starting His Own Advisory Business? [01:21:21]

Michael K.: So, from the flip side, then what surprised you the most about building your own advisory business?

Michael C.: The amount of people that were willing to follow me once I started. I didn't know in advance like who would follow and why they would follow. But I was just surprised by the amount of support I had with the people I worked with, especially coming from a large organization with a fair amount of street credibility, I'd be like, "Well, if I just leave and 30% to 40% follow me, then I'll be in decent shape." But if I leave, I didn't think the number would be double that, which it ended up being more than double that that followed me within a year. And I was just like forever grateful and surprised by that. So, that's been something I'll be forever grateful to those clients who decided to follow me when I left. But it goes back to like betting on yourself and taking out that bank loan. And I'm like, "Hey, regardless of who follows, I think I can grow this thing." And I think the fact that I had custody at Fidelity and Schwab and I got approved on their platforms was a big part of the success because I think that makes it easier. Most of my clients were at Fidelity and Schwab. And my sales guy at Fidelity, the one who brought me on board, was like, "You're the last guy we're letting in with $25 million. We're upping our..." And I thought he was just selling me. But apparently, they moved it right after to like $50 million for new advisors. So, I was also, again, another part of my career where I got really lucky.

Michael K.: So, I guess from the solo end, it's the story that I hear a lot of advisors tell when they're getting started. Like, "It's not just like me out here on my own. Your money is at Schwab and Fidelity. They have 497 branch offices across the country. If you're ever not happy with me, you can walk into any branch office and just disconnect and work with them directly. So, you're safe, you're secure, it's okay." And there is, I think, some comfort level to some consumers on that end that we kind of get some borrowed credibility, like halo credibility from the custodians that have big retail presences when we go out on our own.

Michael C.: Yeah, I 100% agree with that sentiment. I mean, if I wasn't custody at both of those shops, then I don't think I would be as successful as I am today. And that's just been a huge part of it because I could make the case that Fidelity and Schwab, with their support and integrations, is just as big or even bigger than any of the firms I work for in terms of street recognition. And I was also surprised by the amount of support that Fidelity and Schwab both offer. There's a lot of tasks that I just hadn't done before. And really, like with Fidelity or Schwab, if I have a question on anything, I just call the 800 number, and they answer it, and they walk me through it, or they walk one of my analysts through it, and it becomes super easy, which is great because I get to learn more, too, about the ins and outs of the business and the mechanics where before I had other people doing kind of like the onboarding for me. I closed my eyes during that process. And now, I have a much better understanding of what needs to be done and how it should be done and etc.

What Was The Low Point In Michael's Journey? [01:25:00]

Michael K.: So, as you reflect back on this cumulative 20-year journey from the good old Gateway days, what was the low point along the way?

Michael C.: Yeah, I think this echoes back to when I launched. And I think that was really difficult. It was a stressor on my family and friends because it took a lot of time out of me. It was certainly a big stress leaving. Knowing that the old firm I was with wasn't pleased that I was leaving also created additional stress. And then, just the uncertainty. I launched my firm at the top of the market. So, we were fortunate that we had this growth in the sales channel that allowed us to build. But from 20...call it the start of '22 to the end of '22, we brought in $10 million of assets. But our AUM was right back where it started, that $40 million by the end of the year. And that was concerning because I'm like, "I can do this with $30 to $40 million of assets and be fine." But if I didn't have the growth, then that would have been a big challenge. So, that was probably the low point. And then, just the stresses on the life dealing with that just were...tremendous would be an understatement.

Michael K.: So, what's your style approach of working through or managing that business stress?

Michael C.: Yeah, I like to stay positive. Staying positive is a huge part of this. And the work I do alongside the financial advising was obviously super helpful. I'm an adjunct, and I teach young people about financial planning at Endicott, Bentley, and Bunker Hill Community College. And I think acts of service and education are a big part of my ethos. And it makes me feel good. So, no matter what, if I'm having a tough day, if I can go and teach a classroom of young people about how the world works or how a subject works, I find that super rewarding. I like to go to the gym regularly and that keeps my mental status in a good place. And just try to enjoy yourself. Most of my clients are in New England, but I have 30% scattered throughout the country. So, I like the travel aspects of work, even though that can be tough on your friends and family. But that's also nice if I have a client in Florida or Napa Valley where I can go out and make a long weekend out of that and go see a client and take them out to a nice dinner. That's always really rewarding.

What Does Michael Now Know That He Wishes He Could Tell Himself 5 or 10 Years Ago? [01:27:48]

Michael K.: So, what else do you know now you wish you could go back and tell you from 5, 10 years ago?

Michael C.: Geez, I wish I did it sooner. That was one of the things that like the fear of the unknown, especially when you've kind of worked at a bunch of big corporations, you have that security blanket of working inside a big company. Doing it sooner, I would have been even better served in my career. And I think however we define success, I think it would have been better had I even started earlier on this journey.

What Advice Would Michael Give Younger Advisors? [01:28:27]

Michael K.: So, any other advice you give younger, newer advisors looking to come in the industry today and get started?

Michael C.: Yeah, I think you have to be confident, confident in your ability to engage with potential clients. Perseverance is a huge part of this, going back to like 95% of people say no, but they don't matter. Only the people that say yes matter. And I think that's a big part of it. And coaching yourself up. When I meet someone who wants to be an advisor, I'm like, "You know what? You should get your CFP." Because if you had your CFP and your background, people will be jazzed to talk to you. So, making sure that you're coached up in the right areas and that you're willing to take the risk because it is a big risk, especially going off on your own.

What Does Success Mean To Michael? [01:29:17]

Michael K.: So, as we wrap up, this is a podcast about success. And just one of the themes that comes up is literally that word success means very different things to different people. And so, you're on this wonderful journey now, you're three years in with your own firm and crossing up $80 million of assets. The business is in a wonderfully successful place. How do you define success for yourself at this point?

Michael C.: Yeah, I spent a lot of time thinking about this. I think that success for me is about having goals and then moving towards them. A lot of people think success is about money or having a certain amount of assets or a certain number of clients. But if you have a goal and you're working towards it, you're successful. And the money is usually a byproduct of that success. It's not the other way around where money is success. So, I think that's been a big part of the journey and how I think about it because I've always been a goal-setter, especially if someone says I can't do something. And that was a big part of actually when I left my old firm was someone said to me like, "You won't be able to do it." And I'm like, "Watch me." And so far so good.

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

Michael C.: And thanks so much for having me, Mike.

Michael K.: Absolutely