#FA Success Ep 380: Expanding Capacity For $500M Of Organic AUM Growth In Just 4 Years By Increasing The Density Of Team Talent, With Andrew Leonard

 

Resources Featured In This Episode:

• Andrew Leonard
• Geometric Wealth Advisors
• #FASuccess Ep 173: Growing To $250M In 5 Years By Crafting A More Specialized Client Experience, with Andrew Leonard
• Geometric's Comprehensive Financial Planning For BCG MDPs – Download (PDF)
• Financial Planning For Partners Of Bain & Co – 7 Decisions to Make – Download (PDF)
• The Long Tail, The Big Head, and the Dangerous Middle Of Financial Advisory Firms
• Sora Finance
• Bain & Company
• Boston Consulting Group
• McKinsey & Company

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

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Full Transcript:

Michael: Welcome, Andrew Leonard, to the "Financial Advisor Success" podcast.

Andrew: Thanks, Michael. I am definitely honored to be back.

Michael: I'm really excited to have you back on the podcast. And I guess really to talk about what's changed since you joined us last time. You were originally out on the podcast with us, I think, almost 4 years ago from when this is going live. So, for folks who were listening, Andrew's prior episode was 173. So you can go to kitces.com/173 if you want to hear the prior episode. So, I'm trying to put my mental frame back to where we were then. It was early 2020. I think the pandemic was literally just breaking out. In fact, we might've recorded right before the pandemic went mainstream and then the episode went live just after the pandemic was rolling through the world. You were $250 million of assets under management at the time with kind of a focus specialization that we'll talk about more that was going really well for you.

And now, fast forward 3 and a half, almost 4 years later, the firm is basically 3Xd in size, which is a lot of growth, particularly when you're already at a few hundred million. It's one thing because we 3Xd from $10 million to $30 million. I don't want to belittle that. But just I can do that with me just taking on more clients. When you go from $250 million to $700 million plus, you're hiring people on pretty much a continuous basis to just get all the people, and you need to do all the work you need to do for all the clients that you're growing with at that pace.

I feel like in a lot of the advisor world, it's kind of fun to talk about faster growth. We can all do the spreadsheet math of how much our revenue and profits, or enterprise value, grows if you start growing at higher percentage rates. But few I find have really lived what that actually feels like when you're going through a fast growth environment and barely trying to keep up with the hiring and the demands of clients. And they're coming in as quickly as you can manage to hire people, so capacity is often a pinch. And there's all sorts of pressures on the business owner of other things that the business needs besides the client stuff that starts cropping up when you've got 5, 10, 15, 20 plus team members. So I'm really just looking forward to talking about fast growth, interesting changes you've made through that, like hiring a COO, what would be I think fairly early by traditional advisory firms, but probably very necessary at fast growth rates. And just digging into what fast growth feels like.

What Geometric Looks Like Today [05:53]

Michael: So I think to kick off, why don't you just bring us up to speed on the advisory firm as it exists today, maybe even for folks that haven't gone back to listen to the prior one yet. So, what do you do? Who do you serve and some metrics just to help us understand the size and scope of the firm as it exists today?

Andrew: Great. So, everything you said was correct. Geometric was founded in 2015, which means we are approaching 9 years old. We manage around $750 million for about 200 client families. In terms of clients, we are very focused on a pretty specific niche. We serve partners at Bain, BCG, and McKinsey, the top 3 strategy consulting firms if people are familiar with them. So, our average client is around 40 years old and you can assume from their profession, they are very bright and very analytical and very busy both professionally with hours worked and travel. And personally, many or most of them have young families. I would also just say they have high professional expectations, which we view as a good challenge. Oh, and I would say about 75% of our clients fit within that core niche. They are current or former Bain, BCG, and McKinsey consultants. So it is pretty focused.

In terms of our team, we're 23 people. We work fully remotely. We are spread across 18 different states in every time zone. I'm based in Washington, DC. So, our business address is here, but that's pretty meaningless. At this point, we don't have an office.

Michael: I was going to say, do you even have a physical office in the DC area?

Andrew: Nope, just a sort of virtual mail service with an address. And then our team is relatively young like our clients. I guess I am 43. I don't know if that still counts as young, but I'm the oldest person on the team. I guess another interesting element, a number of people on the team are former consultants ourselves, some of whom are from Bain, BCG, and McKinsey, several of our advisors and then our COO, are former consultants, maybe not coincidentally.

And happy to describe the full makeup of the team by department, but I guess one notable element is we do have 3 folks on our in-house tax team, and that's sort of not just tax planning but we're doing tax preparation and filing for essentially all of our clients. And then I guess in terms of sort of high-level metrics, run rate revenues are just over $6 million per year. There has been a ton of organic growth as you alluded to. I think sort of compound annual since the firm started was something like 45% per year, but that can be misleading when starting from essentially 0. Even over the past 3 years, it's right around 35% per year. And I think we're projecting 25% per year for the next 3, and that's essentially sort of the maximum growth rate we are comfortable with. And I'm sure we'll get more into what that means. And then as you suggested, I'd say we are firmly entrenched in, I guess, what you have coined, the dangerous middle of RIA firms or others call it the valley of doom. I generally just call it the painful middle and everything that comes with that. I'm happy to discuss any of it.

Michael: I do like dangerous middle a little more than valley of doom. We can acknowledge the danger without literally getting doom in there. It gets a little gloomy at that point.

Andrew: Yep.

Michael: All right. So you have lots of really cool stuff in there about what you're doing and building. So, let me start with understanding the whole team structure that's here. I'm thinking about relative to, I'll call it traditional industry metrics. 23 people on the team supporting 200 clients is a higher staff count relative to clients than I usually see, although I know you're much deeper touch into what you're doing, which is part of the point. From a revenue per employee perspective, $6 million of revenue, and 23 team members is about $260,000 of revenue per employee, which I find is actually pretty typical for advisory firms as they're kind of growing through this stage. I see a lot of firms somewhere between $250,000–$300,000 of revenue per employee. So, help us understand for your firm what these 23 people on the team are and do.

Andrew: Yeah. And I think you're right. It is a lot of people relative to number of clients, and there are 2 reasons for that. One, I think we are more comprehensive than many. Don't tell me you are comprehensive. Tell me how many clients per team member you have and that tells us how comprehensive you are. Two, I think you just have to decide if you are staffing for profitability or staffing for growth and we attempt to walk a fine line there. But it's hard and that's part of the dangerous middle, I suppose.

So, the makeup of the team is it's 6 wealth advisors, it's 3 people on our in-house tax team. Like I said, we have 5 people on our financial planning team, which includes both internal paraplanners doing sort of internal analyses and client-facing financial planners who manage the planning-specific work streams. We have 1 person on our portfolio management team. We have 5 people in client operations and then 3 people in business operations, including our COO. And I guess of those 23, I should mention, 4 of us are partners and owners of the firm.

Michael: And so are the 4 all amongst the 6 wealth advisors, or are there nonwealth advisor partners?

Andrew: It is 3 advisors and then our COO.

Michael: Okay. Do you count yourself in the 6 wealth advisors?

Andrew: Yes.

Michael: Okay. Okay. So, again, I'm just kind of thinking about this from, I call it traditional industry metrics. So 200 clients across 6 wealth advisors is, it sort of implies a pretty high level of touch, 30-something clients per advisor, but not uncommon for firms that have multi-multi-million dollar clients as you do. You had $750 million of assets across 200 clients. So the average client is 3 and a half million in assets and pays about $30,000, it sounds like in advisory fees on average.

You got clients that are going to have some pretty high expectations about service touch and accessibility and how deep you go with them when you're charging tens of thousands of dollars per client. I certainly get it on that end. Help us understand further though what 5 people on the financial planning team do beyond, or in addition to 6 wealth advisors that "only"... I'm putting only in air quotes as though anybody can see me, only 30-something clients for wealth advisor. What do 5 people on the financial planning team do?

Andrew: Yep. And I would just say I think our target client per advisor is more like 60 clients. I think that's sort of what our model supports. But one, many of the advisors on the team now wear multiple hats within the firm, including myself, and that limits the number of clients they can serve. And two, we do have sort of newer advisors in the process of building up their client load and that lowers the number. But I think if there were a fully staffed full-time advisor, I think our number would be 60. But even that I know is lower than industry norms and I think it comes down to comprehensiveness of services. And that also starts to answer what the financial planners do.

Geometric's High-Touch Debt Management Service Offering [15:17]

Andrew: So, broadly speaking, what do we do for our clients? Externally facing, we categorize it into 3 buckets. We do financial planning, portfolio management, and tax services. But internally, and everyone listening to this podcast knows, each of those involves a lot of subservices, if you'd say. And even with financial planning, internally, we categorize it into 7 services. They are financial projections, cash flow planning, education planning, insurance and employee benefit planning, charitable planning, estate planning, and then debt sourcing and management. And I'd say that list probably sounds like most firms, or at least most comprehensive financial planning firms. It's just that for each of them, we try to do them, I guess, most importantly, as tailored to the needs of our niche as possible, but also just as comprehensively as possible, as proactively as possible, and taking as much work off the plate of the client as possible. And all of that adds up to a lot of hours per year.

We recently calculated, we spend something like 80 total team hours per year on every client and significantly more than that on first- and second-year clients where a lot of the upfront planning needs to be done. But if it would be helpful, I'd be happy to sort of double-click on any of those services and sort of give an example of what I mean. Maybe a good place to start would be that last one, debt sourcing and management. Sure. So I'll sort of describe that process. And it starts with hopefully, whatever financial planner is doing is if a client has a need to borrow, most frequently a mortgage for a new primary or vacation home, we're obviously working with the client to figure out how much to put down, what type of loan to take, what product to get. But then beyond that, we consider it our responsibility to shop that loan on their behalf to a handful of lenders that we work closely with who are willing to lend to our clients at discounted rates or more flexible terms. And in some cases, it's because the lenders have direct relationships with Bain, BCG, and McKinsey that they're willing to sort of offer better terms. In some cases, it's because we have informal relationships with the lenders ourselves, but regardless, we shop it amongst all of them and have no skin in the game about who's going to win.

And we negotiate on the client's behalf, just trying to get to the best rate and terms, and often that ends up with a rate that is significantly better than they would have sourced on their own. And then, once a winner has been selected, we usher the client through the underwriting process of completing the personal financial statement and providing all the documents that the lender needs and generally managing the process as much as we can. And then once the loan closes and the client has the mortgage, we built an internal tool that every week scans every client's mortgage, compares it to the best rates we have sourced elsewhere over the prior week or weeks, and proactively flags refi opportunities. And when those pop up, we immediately raise them to the client. And if it makes sense to pursue it, we start at step one of this process again.

And so hopefully that sort of speaks to the comprehensiveness of the approach and how much we're trying to take off the plates of our busy clients. I think it also starts to answer the question of why do we have a specific role called financial planner in addition to wealth advisor? The wealth advisor is overseeing all 3 elements that we provide, the financial planning, the portfolio management, and the tax services. But each of those and each of these sub-services are pretty deep and time-intensive and require someone to sort of manage those work streams themselves.

Michael: If I'm visualizing this correctly, the wealth advisor might sit down with the client who said...and the client says, we've decided we really want to do the vacation home, but we're not sure how to proceed, right? Do we borrow, do we pay cash? How much do we borrow each, right? The client queues up some question like that, help me figure out vacation home purchasing decision terms. So the wealth advisor gets that in the client meeting. And then the wealth advisor would come back to the financial planner to say, run me the numbers and start calling the lenders to see what kind of terms we can get. And the financial planner runs with that stuff and then brings it back to the wealth advisor to deliver to the client?

Andrew: Well, it depends on the client and the situation and the financial planner. But in general, financial planners are in those meetings having the conversations with us, with the client. I would just say the wealth advisors are the ones typically leading those meetings. But yes, all of our financial planners are client-facing, and that's the distinction for us between financial planners and paraplanners. But then the financial planners would be the ones sort of doing all the steps under the guidance of the wealth advisors that follow.

Michael: Okay. So contact the lenders, get the rates, see if we can play A off of B to get the rate down. Okay. We've picked the lender, make sure the clients getting...make sure we're getting through the underwriting, make sure the clients get through the paperwork. The financial planner would be sort of process-managing that stage.

Andrew: Yeah, that's right. Maybe, with the exception of if there is negotiation to be had, that's probably going to be the wealth advisor. But yes, certainly reaching out to the lenders, sharing the situation, gathering quotes, helping with every step of underwriting, and then monitoring that tool that we use to monitor for refis.

Michael: And can you talk a little bit more about what the tool is? Is this an extension off your CRM or something entirely standalone?

Andrew: Yeah, it's standalone. It's even simpler than that. It is a Google Doc that sort of lists every client's mortgage, current balance outstanding, current rate, and then a centralized place for all the best rates we have sourced elsewhere. And then it does a little NPV calculation for each situation and flags refis. And by the way, I know there is good tech coming out about that for other advisors to leverage Sora Finance and others. And I think that's great because it is very valuable to clients.

A paraplanner runs that process every week and then sends the results to all the wealth advisors and financial planners to decide which require action and which do not.

Michael: So, who are the lenders? How do you find lenders that give you special rates for your clients? I get it in scenarios of, hey, there's a lender that's got a special arrangement with Bain. And so we'll show you how to take advantage of the deal that Bain cut for you. But how does this work for your firm?

Andrew: Yeah. And I'd also note even just in terms of the lenders that have relationships with the consulting firms, many or most clients aren't always aware of that. So even just making sure they know that the relationship exists and that we'll be reaching out on their behalf and benefiting from that relationship and what the specifics of sort of the discounts for a given firm are, that can be valuable. But we do separately have relationships with lenders who are willing to lend to any Geometric client at discounted rates or more favorable terms.

Andrew: It totally depends on the situation. And sometimes it is no different than what the client would get if they walked in off the street. I know there are instances when it's been upwards of a full percent.

Michael: Are these relationships with mortgage brokers that facilitate across many, or are these relationships with banks themselves that are literally doing the lending off the balance sheet and evaluating risk?

Andrew: It's some of both. Brokers obviously have more leeway on what they are quoting to clients, and there's more wiggle room there. Banks are all subject to fair lending laws. I'd say the big advantage we have with some banks is that many or all of the banks have private banking departments that require a certain banking relationship or loan size just to access. And in those instances, the banks have just agreed to waive those requirements for our clients in general. So even if it's a loan or client who wouldn't normally meet the private banking threshold, they're willing to include our clients as a result.

Michael: And so how do you get a relationship open like that with a bank? Do you just say, hey, will you give my clients private bank rates without actually using your private bank services?

Andrew: Yeah. It develops over time. And as with all sort of third-party experts that we refer to, it starts with if a client has a really good experience with a specific provider, we want to know about it. We keep it on a list internally and are more likely to refer to them down the road. And the more you do that, sort of the deeper the relationship gets. And hopefully, it goes without saying, these relationships are entirely one-way. We are not looking for or accepting sort of referrals or monetary compensation for this. This is all just done for the benefit of the client.

The Division Of Labor At Geometric [26:22]

Michael: So with this structure, so I'm understanding kind of financial planners versus paraplanners a little more. The paraplanners are purely internal doing, I'm presuming kind of your classic build financial plans, crunch numbers, work. Your financial planners from the internal team live a little bit more of a split role. They're doing some internal work, but they're also sitting in client meetings with wealth advisors and are client-facing. So, for the financial planners, as I'm just trying to visualize, does every meeting have 2 Geometric people in the room, a wealth advisor or a financial planner? Is it more optional about when financial planners come in at the discretion of the wealth advisor? How do you set who's in which meetings?

Andrew: Yeah, it's probably even more complicated than that. Most of our clients work with 2 of the wealth advisors on our team. One serves as the primary or lead advisor to the client, and the other is sort of a backup and/or sort of additional strategic guidance for the relationship. So, often, there are 2 wealth advisors in every meeting. Typically, there is a financial planner, and depending on the topic, there may also be a tax advisor in the meeting.

Michael: Okay. So client meetings often will have 2,3, 4 people in the room.

Andrew: Right.

Michael: Okay. So, how do these get...? It's assigned. If I'm a financial planner in this, is there a certain wealth advisor where I help them with all of their clients? Is there an assigned client base, I support these 50 clients across multiple wealth advisors? How do you figure out who's in which meeting when you've got multiple financial planners and multiple wealth advisors?

Andrew: Yep. Every client has an assigned financial planner. Financial planners are not dedicated to any one or more wealth advisors. Every client is mix and match between wealth advisors, financial planners, and tax advisors. Although the wealth advisors ourselves are starting to teamatize a little bit into sort of 2 teams of 3 instead of one giant group of 6, which would have started to get unwieldy.

Integrating Private Equity Opportunities Into Portfolio Management [28:52]

Michael: So now talk to us a little...so I think we've got a sense of the depth of financial planning, and then you're doing this across multiple domains, because you've got, I think you said, cash flow education, charitable estate, employee benefits, because I'm sure that's complex by the time you're a partner at a major consulting firm. So I think we got a sense of the financial planning side. Talk to us a little bit about the portfolio management side, because I was a little struck as you were going down this list that I think I heard one person on portfolio management, you were doing all this work for clients, but there is one person literally managering $750 million.

Andrew: Yep, soon to be two. We're in the process of hiring a 2nd portfolio analyst. But.

Michael: It's nice to have a backup if someone calls in sick.

Andrew: Yeah, definitely. But your point is well taken, and I would say philosophically, we are big believers in evidence-based investing. I am a lifelong Boglehead, and our clients' portfolios are invested primarily in ETFs and index funds from Dimensional and, to a lesser extent, Vanguard and Avantis. And so that element of it is very straightforward and standardized. But the complexity comes in, I guess, specifically for our clients. One, we're sort of managing across all of a family's accounts like many firms are. Two, obviously, all of our clients are coming to us with some degree of legacy positions that sort of fit or don't fit in the model portfolio and need to be managed around. But I'd say three, and the more unique element to our niche is all 3 consulting firms have internal platforms that allow them to do private equity investing through their firms.

So for those who aren't aware, Bain, BCG, and McKinsey, a big part of their business is supporting private equity funds in the due diligencing of companies they are considering acquiring. And all 3 firms' platforms are slightly different. So, I don't want to paint too broad a brush, but the internal platforms essentially allow the partners of the consulting firms to co-invest at low or no fees alongside their private equity clients. Even the Boglehead in me, who has some deep-seated inherent biases against private equity investing, understands that that's a pretty unique opportunity. And whether or not...regardless, pretty much everybody at those firms is going to participate. And so we knew right from the start, we needed to integrate that into our investment process. I guess we do that a few ways.

One, the written investment plan, the investment policy statement written at the start of every client engagement helps a client set an allocation for that private investing because most are just guessing prior to that. And then once a client has a targeted allocation, that means each time an opportunity comes around, we can help...we do the modeling to help them figure out how much to commit to that opportunity in order to stick to that allocation. And that can be tricky business in that you have to understand how all the existing funds are going to be called and distributed and grow and how the overall portfolio, I guess the denominator of the equation is going to change over time.

But we have that model built for every client. And so we're helping clients figure out how much to commit to the funds. And then we essentially have real-time data on all of these funds because so many of our clients are invested in them that we're able to manage the diversified portfolio in contemplation of the private investing. Essentially, we're able to rebalance around the private investing so that the client's overall balance sheet risk remains appropriate.

Michael: Meaning if the client has...if the client has 10% allocated to their private investing, your model and the rest of the diversified portfolio might be dialed back by 10% plus in equities to offset the fact that they've got this wing of high-risk PE investments over outside.

Andrew: That's right. So, yeah. And if there is a big capital call for a client or for many clients, that might mean rebalancing slightly their diversified portfolio so that their dollars are appropriately allocated overall.

Michael: And what kinds of allocations do you target for PE in this scenario?

Andrew: Our typical recommendation is 10% of a client's growth allocation. So, if you broadly categorize assets into growth assets and conservative assets, not growth in the sense of high or low PE ratios, but things that grow versus things that are there for stability. We help the client set an overall allocation to growth assets. And then, typically, 10% of that is dedicated to these private investments.

Michael: So if I'm a high-income 40-something-year-old with a good time horizon, maybe I'm willing to do a 70-30 stock bond-style portfolio in the first place, 70% is kind of my growth allocation. And so you might do 10% of the 70, which means 7% we put towards the PE side, and the other 63% of your growth equities are things we're going to do in the managed portfolio.

Andrew: That's right.

Michael: Okay. I am struck by this, that, yeah, I appreciate the irony. I've lived a version of this as well, that our advisory firm at Buckingham were also very tilted towards DFA and Avantis and Vanguard and beyond factor investing, not big fans of trying to actively trade or pick companies. And I am also a business owner who understands the wealth creation that does happen when you own and build a business, a privately held business that grows successfully. So, I appreciate the tension as well of investing publicly traded companies more passively and strategically, and then saying, but maybe there are some interesting opportunities in the PE realm. And I guess, practically speaking, if they get to co-invest into the funds without the fee structures attached, there are actually a lot of segments of active management that do have alpha before fees. They just don't have alpha after fees. So, if you get to do it without the fees, that probably does math okay if you're otherwise, A, working with strong PE firms overall, and B, they know exactly how good the deals are that they're investing in because they literally did the due diligence.

Andrew: Yeah, although even with all of that said, and maybe this is the Boglehead in me coming out, but even with all of that said, the private equity markets are pretty efficient at this point as well. And even if you're co-investing at the price that the private equity fund is buying the company for, it's a competitive process, and a bunch of other private equity funds bid the price up. So, we actually... When we're talking to clients, we say we're not encouraging you to participate in this because of any expectation of outperformance. If there is any outperformance, it's the result of the illiquidity and added risks that you're taking in this investment. We're doing it for diversification purposes. We're saying private equity is beneficial because it is not public equity. It diversifies the overall portfolio. Normally, the fees ruin that diversification benefit, but if you can do it without fees, then it's worth it for diversification.

Why Geometric Charges Tiered AUM Fees [37:40]

Michael: So, now I feel like I've take one brief step back though. So you'd said earlier 750 million of assets under management, about 6 million of revenue. What's the actual business model fee structure? Are you charging percentages of assets under management, or are you a flat-fee style firm into your niche?

Andrew: Yeah, we are a traditional AUM-tiered model. And I would say I've spent many hours of my life fretting over the fact that AUM fees are not intellectually consistent in that they imply that the value of what we're providing comes from the portfolio management. When I and probably most people listening to this would agree, the value and certainly most of the time comes from the financial planning, and in our case, the tax services. But I guess I have come to appreciate that there's really only to me 3 things that matter when it comes to fees. One, what is the total dollar amount that the client is paying relative to the total value they are receiving? Two, is it transparent to the client and sort of simple for them to calculate? And three, is it relatively easy for us as a firm to administer operationally? And I think if all of those boxes are checked, then the actual sort of structure matters less.

And for us, the AUM fee still checks all of those boxes. And I guess we're not willing to uncheck any of those boxes for the sake of intellectual consistency. That said, I think there are many other models that can check all of those boxes and may do a better job of it for some firms. So, if other firms do it via flat fees or percentage of net worth or hourly or anything else, I think it's great as long as those dimensions are being met.

Michael: I'm struck. Obviously, you are literally handling their assets and a steward for their money. So, obviously, that matters and a lot is a major piece. But then I just look overall, one-person portfolio management, 5 on the planning support, 3 on the tax support. Your staff structure or your staff support structure is 90% tax and financial planning, 10% portfolio management. And I'm going to assume the wealth advisors probably have more planning and tax conversations than portfolio conversations as well. So, I just find it fascinating of whether that gives you concerns around, do we have challenges being an AUM model when we've so decentralized...so de-emphasized the portfolio management component of the value prop. Not that it's nothing, but that you seem to very clearly have put your resources towards the non-financial planning things, and judging by the growth, your clients are really appreciating the amount of resources you put towards the financial planning and tax. I guess just my follow-up question would be, as an industry, we debate this a lot. Does it come up from your clients? You have really sharp savvy clients, given the work that they do. So, does this crop up from clients?

Andrew: It doesn't, and I think it's because of those first 2 notes. I think they all know exactly what they're paying, and they all believe they are receiving value in excess of that. And two, it's sort of simple and transparent to them, which they appreciate. I don't know. I guess I can't see far enough out to know if the industry will entirely move away from an AUM fee or not. And if so, I don't think that concerns us because I think there are other fee models that would still meet the criteria and still meet our business needs. It would just be a different way of charging.

Michael: At the purest level, you said you're just over $6 million of revenue. It's about 200 clients. So you're roughly $30,000 per client in revenue. You're spending as much as 80 hours of team time on each client each year. So $30,000 of fees and spending 80 hours with them. If I'm mathing it right, it's $375 an hour, which is not unreasonable at all for a specialized firm into a specialized high-income clientele. And I'm going to guess is, ironically, actually is well below the hourly rates that your clients are probably used to because I'm going to bet a lot of them bill higher than that for the strategy work that they do. So I bill $800, you guys are only $375, cool, good deal.

Andrew: Yep. And like every firm, the averages are misleading. Probably the mean is higher than the median. But the math you are describing is right. There are just certain laws of physics here given how many hours we are spending per client and that we are hiring sort of talented people and compensating them accordingly. Our cost to provide services is high and sort of requires a high average fee per client in order for the business to exist.

Michael: So, out of curiosity then, you had talked earlier that you think your capacity probably gets up to about 60 clients per wealth advisor as people come up to capacity as you expand the team. So some wealth advisors that wear multiple hats can just focus on their clients. It seems you come to a lot of this with a great deal of intentionality. So I'm just curious, where did 60 clients come from as a prospective target?

Andrew: Yeah. I think that has been found via, I don't know, trial and error of the 1 or 2 advisors who are full-time advisors as they have approached those numbers, that's when they started to reach their own capacity. I think it's worth noting several of the advisors, including myself, spend a good chunk of our time on the portfolio management process. Also, I think so if we have one person fully dedicated to portfolio management, he is running the trading and the actual execution, but if we were adding up part-time equivalents in the portfolio management process, my guess is that it would be more 3 or 4 people. It is a bit oversimplified, but we think...

Michael: You have an investment committee that does research due diligence on what's going in the models, that kind of structure.

Andrew: Yep. And sort of every trade is discussed with the client's wealth advisor before it is made in case there are any client-specific reasons why something should hold off or not be done. So, yeah, the way it runs now, the advisors are still very much involved in the investment process, although over time, we know that may not be entirely scalable.

Why Geometric Chose To Offer In-House Tax Services [45:42]

Michael: So you've talked about the financial planning side and portfolio management. And talk to us about the tax offering.

Andrew: Yeah. Right from the start in launching Geometric, I knew I wanted to somehow integrate tax services. I just knew it was a consistent pain point for the people we wanted to serve to find someone good and manage that relationship separately and deal with all of their tax complexity. And so right from the start, we set up a relationship with a third-party CPA and she did all of the tax services for our clients. And we integrated it as best we could and even paid her fees on behalf of our clients and that was fine. But I think we eventually outgrew that relationship and just any time you are outsourcing any part of the client experience, you lose control over it. And the bigger we got, the more problematic that felt.

So, a couple years in, we started to explore the possibility of bringing tax services fully in-house and spoke to a bunch of firms that had either done it or evaluated it and decided not to do it. And the overwhelming advice I received was, don't do it. The phrase I kept hearing was, oh, it's 90% of the headaches for 10% of the revenues, or some variation of that. And I guess, to some degree, I know what they were saying. It is a hard business for a variety of reasons. One, it's just expensive to deliver. It requires talented, credentialed, in-demand people, and in our case, people who are capable of working with the clients we serve. It requires added technology that sort of doesn't have anything to do with the rest of the technology in the firm often. And the most expensive element, which I didn't sort of fully appreciate right away, was it does reduce the total number of clients each advisor can serve if the wealth advisor is involved in the tax processes, which we think they should be because they are the ones who know the clients the best. So if they're involved in those work streams, this is a bit oversimplified, but I would say it reduces the number of clients each advisor can serve from 70 to 60, let's say. And that is really expensive.

Michael: When your client revenue average is tens of thousands of dollars peeling off. 10 clients you can serve is like that's a few hundred thousand dollars of revenue per advisor that comes down.

Andrew: That's right. And there are other reasons it's challenging business to run. One, there is a serious war for talent among CPAs. If people think there's a war for talent among...for CFPs, it is almost not comparable to what's going on in CPA world. There's just sort of a pretty well-documented global shortage of CPAs and the public accounting firms, especially the "Big 4", are willing to do pretty much anything to keep their stars because their whole business model depends on it. There's also, I would just say, clients feel differently about tax services than they do about the rest of the financial planning process. Maybe clients don't lovingly engage with the tax process the way they may with the financial planning process done well. And bringing it in-house to some degree sort of knowingly absorbs those vibes in a way that doesn't happen even with a sort of integrated third-party provider. And so those are all the reasons not to do it. They are real.

Michael: So why again did you do it?

Andrew: Right. I think for us, ultimately, there was just one reason to do it, but it was the only one that matters, which is if done well, if sort of delivered with excellence, it is undeniably better for the clients to have it under one roof than not. And it's definitely true for our clients, who have a lot of tax complexity that overlaps with their financial planning complexity. I think it's probably true for every client, but it's especially true for those with tax complexity.

Michael: You got high-income partner distributions. They're doing PE investing, so all those K-1s. They probably have a nexus to multiple states. You have multiple state returns to file. There's a lot of stuff.

Andrew: Yeah. And so there's the integration benefit of, I think, we are better wealth advisors and financial planners and portfolio managers because we have full and real-time visibility into the client's tax situation. And I think our tax advisors are better because they have real-time visibility into the client's life and anytime something tax-relevant happens in their life. And obviously, that integration benefit also, it's not just sort of better outcomes, it's also better experience for the client. They are starting tax season with a tax advisor who already knows everything that happened in their life...everything tax-relevant that happened in their life over the prior year and has most of the documents.

But it's not just the integration benefit, I'd also say there's a real expertise benefit in that I would have to assume our tax advisors are the world's experts in the tax nuances of Bain, BCG, and McKinsey partners. Our clients have a lot of tax complexity, but it's all the same tax complexity for all of them. For all the reasons that specialization is helpful in financial planning, it is also helpful with tax planning for complexity. Once we understood sort of all of that calculus, it stopped being a question of, should we bring it in-house? And more a question of can we find the right people to deliver it with excellence because, if we can, then we should. And so that was a process that took a couple of years, but once we did, we did bring it fully in-house 3 or 4 years ago. And I would say right from the start, clients loved it.

Internally, we knew it would take a couple of years to learn how to do this in a manner that was as well-oiled as the other services we were providing. But once we reached that point, it has become a beautiful thing, and I kind of can't imagine not doing it for our clients at this point. I would say even with all of that said, when others approach me about the topic, I do say it's a lot easier for us because all of our clients fit within this niche. If we were trying to do this for a generalist firm where everybody's tax needs and complexity was different, I think that would be really hard to do at a high level. So I understand why others don't. But I think for us, it just comes down to…it is a hairy business, but if we're willing to do the hairy problems in order to solve a real pain point for our client, that makes us better and we're willing to do it.

Michael: So you said there was kind of a mental shift from, will we do it in-house, where we feel like we just need to because it will be meaningful for clients if we can do it well and deliver with excellence. And so you shifted from will we do it to how do we find the people who can do it with excellence at the quality level that we expect. So, how did you find the people?

Andrew: Yeah. That was a long process of recruiting. We tried tax-specific recruiters, but ultimately, many of the best hires of every firm, it came about through sort of personal relationships that were built over time. And so now the person who leads our tax team is Jen Knight. She is a former PWC CPA and was working with a lot of their clients who were partners of professional services firms or private equity investors and sort of already came in with a lot of the expertise we needed and has done a great job of building and recruiting a team around herself.

Michael: And so you said there are 3 people on that team now.

Andrew: That's right.

Michael: Do you do tax returns for every client?

Andrew: Yeah, probably 99% of them, they're a couple who we don't for one reason or another, but we are probably doing them for 195+ of our 200 clients.

Michael: And do you charge for it?

Andrew: No, it's sort of wrapped into the AUM fee. And again, it all sort of comes down to total dollars paid relative to total value provided and the equation still works for us.

Michael: So how do you think about capacity of the tax team? Advisor world, we kind of have our standard numbers of this many clients per advisor to manage ongoing relationships. We've got to presume the tax world's got some of its own of how many preparers you need to handle a certain number of tax returns. So I guess I'm curious about, sort of twofold, capacity, and what do they do in the 8 months of the year that isn't tax season?

Andrew: Yeah, yeah. And I should say that so the 3 people on our tax team, 2 of them are client-facing tax advisors. One of them is a tax associate helping with all of the behind-the-scenes work. And so it is not sort of 200 divided by 3 in terms of capacity. I think that structure could serve maybe another 50 clients or so at which point we need a 3rd client-facing tax advisor and maybe another tax associate. So, roughly speaking, I think...

Michael: These people aren't just hanging out behind the scenes to grind on returns during tax season. They're in client meetings because you said earlier a client meeting could be 2 wealth advisors and a financial planner and a tax advisor.

Andrew: That's right. And it's not just sort of the sprint to April 15th for us. There definitely is that. And we're in the middle of it right now. But almost all of our clients file on extension because of K-1s. And so there's a sprint to complete the return to see if a payment will be owed at extension. Then there's another sprint in September and October once K-1s have been produced and returns need to be finalized. And then many, or maybe even most of our clients end up needing to make quarterly estimated tax payments. And we are doing all of those calculations each quarter for them. And so I remember originally worrying that if we bring on a tax team, they're going to be twiddling their thumbs for some portion of the year. That has definitely not been the case. It is sort of they're working hard pretty much year-round.

How Andrew Is Handling The "Dangerous Middle" As His Firm Grows [58:10]

Michael: So, I'm cognizant these are not inexpensive people. You're staffed up to have 2, 3, 4 people in a meeting, all of whom are relatively expensive folks. So on the one hand, that math's a little bit better at just your average client size and your average revenue per advisor. But I'm curious how you think about these profitability margins? Is there a target of where you try to be on margins as you go through this growth phase?

Andrew: Yeah, and this gets into the dangerous middle that you have written and spoken about so much so that we knew it was coming. And I guess I can report from the front lines that the phenomenon definitely exists. And I guess to summarize, what the dangerous middle or painful middle is, it's that as advisory firms grow from, let's call it, $250 million in assets under management to maybe $1 or $2 or $5 billion, depending on who you ask, I tend to believe it's probably the higher numbers.

Michael: I think you start coming out of it north of...you find your way through it somewhere between $2 and $3 billion is what I see these days.

Andrew: All right. Well, I'll let you know. But as you sort of have to bridge that chasm, it requires a lot of investment into, especially people, but also just technology and platforms that allow you to make that leap. And for many years, there are increased work and decreased profit margin. There are years of diseconomies of scale before you realize any economies of scale. And we have definitely sort of knowingly felt that there have been years where our margins were in the mid to high teens at the low level. And I'd say now they're slightly more normalized to industry norms. Somewhere in the mid-20s is probably what it will be. This year, I don't know that we set a specific target, period. I do suspect that longer term, it will normalize around 30% the way many larger RIAs do and maybe a little higher in the sense that one of the benefits of specialization should be higher profitability in the long run. But we're still very much in the thick of the dangerous middle.

Michael: Well, I think that's a powerful thing to reflect, right? Well, your revenue has been going through this cycle, but when you're talking about millions of dollars of revenue and 5%, 10%, 15% swings in margins from the low point that you were in the mid-teens to...I guess not the high point but the long-term normalized target of 30% or low 30s, it's hundreds of thousands of dollars of profitability that's curtailed in that growth phase for you. It's a lot of dollars of reinvestment for growing through this.

Andrew: Yep. And maybe that gets into sort of a more philosophical discussion on growth and why a firm should grow or not. I would probably start that by saying, I don't think every advisor or firm should feel the pressure to grow. I believe that some of the best advisors with some of the happiest clients are those that choose not to grow and instead obsess over their 50 or 100 great clients. That's especially true if they choose to specialize. You sort of have to ask yourself why grow in the first place.

For us to build the firm that we want to build, we need to grow for a few reasons. One, and most importantly, we need firm-level growth to provide career growth to the people on our team. And I can say from experience, sort of the more talented the people, the faster the career growth they need and the more firm-level growth required to meet it. Two, I think size done correctly can benefit existing clients. So we are definitely providing clients more now than I was as a solo advisor in 2015, and even significantly more than we were 4 or 5 years ago. I think we have a roadmap of services and tools we would still like to be able to provide to clients entirely in-house that we don't yet have the size to do.

Michael: What else is on your list that you still can't do?

Andrew: I'd say the one that comes up the most frequently is in-house estate attorneys. We are still relying on outsourced providers. It's obviously harder for estate law because our clients are spread in many different states, but we do think there's a model where we have in-house estate attorneys and it benefits our clients. And there are other tools and proprietary technology that we think would benefit our niche that we don't have the size to even sort of attempt at this point. So, I think done well, it will benefit our existing clients. It's just much easier said than done.

And I think many firms in all professional service industries, this is where they go awry, which is the pressures to grow result in sort of diluted experience to existing clients. And I think we are only willing to grow at a rate where that's not the case. And we'll talk more about, I guess, how we limit the growth. So that's the second reason to grow.

I guess the third reason to grow is there are still many people within our niche who need or want our services that we don't have the capacity to serve and to the extent that. I'm a believer in the power of financial planning. I really do think it can enhance people's lives, done well. And there are many people in the niche who want what we do and we don't have the capacity to serve it, to say nothing of all of the partners at the 3 firms that are going to be promoted over the next 10 or 20 years. And so for all of those reasons, we need to grow and want to grow, but we're only willing to do it at the rate that 1, maintains or enhances our experience for existing clients and 2, does not overwhelm our team. And we throttle that by at the start of each year figuring out how many new clients we're willing to onboard in a given year.

And last year, that number was right around 35. I think we did a good job of maintaining standards for existing clients, but many people on the team felt overwhelmed last year. And it probably just speaks to the comprehensiveness of the planning that we do upfront. And so this year we've set that number at 25, and we'll see how that goes and how that feels, and maybe we'll ramp it back up next year or maybe we won't.

Why Geometric Assesses Its "Talent Density" First Before Deciding How Many Clients To Onboard [1:06:04]

Andrew: But I think all of this maybe speaks to a slightly nuanced but fundamentally different approach to growth, which is we're only willing to grow at the rate at which we feel like we can hire and train people who increase the density of talent on our team. And that's harder to do and needs to be done slowly.

And so we use that number to determine our capacity for new clients rather than the other way around, which is figure out how many new clients we can squeeze through the door in a given year and hire to meet that capacity. I guess we feel that is a recipe for the pressures of growth, lowering the bar on hiring standards. And once that starts, it sort of is very difficult to ever turn back around. Go ahead.

Michael: So let me try to understand this. You don't just try to grow based on literally the capacity of the business in how many people can you squeeze through the proverbial funnel without breaking. I think you said you're growing at the pace that you can increase the density of talent on the team. So can you explain more what that means?

Andrew: Yeah. I think if you look at any professional service industry, the firms that are the best of the best in those industries, it's a pretty straightforward formula. They are the ones that are the best at recruiting, developing, and retaining the most talented people in that industry. And I think that is much easier to say than to do. And by the way, I think potentially, the 3 best companies in the world at those capabilities are Bain, BCG, and McKinsey.

But to the extent that we sort of aspire to do the same, albeit at a much smaller scale, a microscale compared to that, we kind of know our limiting factor is our ability to recruit and train people to do the work that we do the way that we do it. And density of talent, I guess, is an expression that's common in other industries and maybe not of ours, but hopefully, it's relatively self-explanatory in that how talented to the extent that that can be measured, which of course you can't. The team as a whole, is that increasing or decreasing at any given time for a company, and our fear is having that decrease over time, and we're only willing to grow at the rate that it increases over time.

Michael: So what is that rate? What are the parameters around that rate? I'm assuming there's a too-low number and a too-high number, maybe a Goldilocks-ish thing in between that's viable.

Andrew: Yeah. This year, I think we're going to hire 4 people. Next year, I think it's another 4 or 5. And then we use that total team size and each individual person's capacity on that team to determine how many clients to onboard in a given year. And to put this in perspective, this year we are going to onboard 25 clients. Where it gets tricky is that we are likely to receive somewhere around 75 or 80 referrals from our core niche clients to other potential clients in the core niche. And that's where things get very hard.

Michael: Because it's one thing to say we only want to grow so fast, it's another to actually turn down ideal clients that were referred by your ideal clients.

Andrew: That's right.

Michael: So how do you handle?

Andrew: We will receive 80 total client referrals this year. I shouldn't have said they'll all be in our core niche. A good chunk of them, no matter how clear you make your core niche to your clients, you will receive referrals to clients who are not...potential clients who are not in your core niche. When that happens, we consider it our responsibility to help them find an advisor who specializes in their situation, ideally, and we help them through that process of finding that advisor, even if it takes multiple meetings to do so. And we just consider that our obligation to our clients for having made the referral.

Michael: You're pushing the upper limits of your growth capacity. It's a lot easier to say, nice opportunity, but I'm going to refer it out because you don't want to take too many at once. Because then you have to hire staff faster than you can train them. And then service quality goes down.

Andrew: Yeah. And it also just wouldn't feel right. I don't think we are the best firm for pretty much anyone outside of those in our core niche. We have sort of optimized every square inch of the firm and the processes and the people and everything else around our niche. And we know we do that really well. And that has to come at the expense of pretty much everything else. And so if we don't think we're the best for our clients, it wouldn't be right for us to take them on. So I guess the number dwindles from 80 to something like 50 that way. And then it does get really hard. And we do have a bit of a queue and a waiting list that we're trying to manage and trying to build capacity to meet. But that is hard. And I think our clients and potential clients understand that ultimately, it's probably a good thing that this is the case. But yeah, that is what I personally spend a lot of my time thinking about and fretting over.

Michael: How do you do this core, recruiting, developing, retaining cycle that you're focused on? I don't know if that's your natural gift that you're good at this or if you're building team around it.

Andrew: Yep. On the advisor side, up to this point, most of our advisors have been career changers directly from consulting, from Bain, BCG, and McKinsey often. And that there is no sort of formal way to go about that. That is a lot of networking and meeting people in that world who express an interest in doing something like this. And to a large degree, that has been the limiting factor, right? We have really only been able to do that at a rate of about one person per year or even less. It's not just recruiting. It's also then, they are total career changers into financial planning, and it's all of the training necessary to get someone capable of serving our clients. That's been the real limiting factor.

I would say we just take recruiting seriously in general for all roles and are in recruiting mode at all times. And for every role, we do a lot on LinkedIn for that sort of proactively reaching out to people. And, yeah, I guess that's the... I wouldn't say we have a formal process around it, but that is something that our COO has largely taken over and is under her domain.

Why Geometric Hired A COO Relatively Early On [1:14:25]

Michael: So can you talk more then about the COO role? When you look historically to advisory firms, that...well, for most of our history, that role basically didn't exist. Founders or multiple founders and partners would split executive-level duties on top of their client duties and the rest, and that was just kind of how it was done. I feel like maybe 5 to 10 years ago, you started seeing some COOs showing up at advisory firms, typically somewhere in the $1 to $2 billion AUM range, somewhere in the $10 to $20 million revenue range. Firms are like, this is getting a little crazy. I think we need someone just to manage this. You've hired a COO role much earlier than that. I think, as you said, you're crossing $6 million of run-rate revenue right now, and you already hired the person. So you hired them in an earlier stage in that. So help us understand I guess what triggered the COO hire, and what does that role actually do in your firm?

Andrew: Yeah. The last part is a good question because I know the COO role is different at every RIA, and sometimes it's a technology-focused role or a client service-focused role. For us, it is definitely a people management-focused role. And it goes back to what I was saying about the belief that for professional services firms that do the best are the ones that are the best at recruiting, developing, and retaining the most talented people. Bain, BCG, and McKinsey being the best at this capability.

So, I think people in our industry would be shocked if they knew how much resources all 3 of those firms pour into those categories and especially the training side of things. I think there is a reason why every alumni of McKinsey puts in their LinkedIn tagline that they were ex-McKinsey. It's because it means something to have worked there and gone through that training. It's not just that it was difficult to get a job there in the first place. Although that's part of it. It's that they receive a pretty incredible level of training while there such that they quickly level themselves up professionally at a rate that just doesn't happen elsewhere. And I think that's one of the main reasons those 3 firms are at or near the top of every best places to work list that comes out nationally. And especially given that we had people career changing from consulting, realized our people were sort of craving more of that and especially the development part of it.

I think we were doing pretty well at recruiting and well at retaining, but the development part was lacking. And I knew I wasn't the person to build that. I have no experience in doing so. I have only worked for small companies and mostly for an RIA. So, we wanted to hire someone who could and who did have that experience. And so 2 years ago, we brought Julie Higgins onto the team as our COO. And Julie is a former Bain consultant who then transitioned into a practice management and people management role at a different consulting firm. And so she had done this at the highest level. She also happened to be a client of Geometric's and someone I had known personally for many years before that. So there was a lot of sort of trust and knowledge on both sides going in.

And Julie joined us essentially to level up our people management along with a bunch of other functions that she immediately took over, especially those that didn't require industry knowledge coming in, like finance. And her primary mandate is to build out all of the processes that would make us great at those things. And so that includes things like defined career paths for every role and every person at the firm with detailed skills, progressions of what's needed along the way, and formal training for each new role that someone comes into. It is sort of feedback mechanisms, both frequent informal feedback mechanisms and more formal mid-year and year-end 360-degree review processes. It's also annual goal setting for every employee and sort of accountability systems throughout the year to ensure that they're meeting those.

And to be clear, we don't have all of that built yet. Some of those we're a long way from building, but the goal is to get there. And I think we're moving in the right direction. I will say one lesson from bringing in a COO or really bringing in a person focused on people management that I wouldn't have known in advance or appreciated, but it helps a lot that Julie is a naturally good-hearted person. I think this role in the wrong hands could go very badly. All of those things I mentioned could be viewed as some sort of top-down, undesirable management technique instead of what we want them to be, which is systems that support each person's career development the way they want to develop. And I think the fact that Julie is naturally kind and caring and supportive goes a long way such that I think people on our team are willing to trust her with their career development, and that has been really important to us.

What Surprised Andrew During Geometric's Fast Growth Phase [1:21:04]

Michael: So as you reflect back on this journey over the past couple of years, what surprised you the most about this fast growth phase of the business? You've basically added about a half a billion dollars in 3 or 4 years all organically from client growth. So what surprised you the most about navigating through that kind of fast growth phase?

Andrew: Yeah. I guess it's just that problems never actually get solved, they just change along the way. I think I'm sort of naturally inclined to want to have things simplified and solved forever, and that's just not going to happen when you are growing fast. And so it requires sort of constant iterative changes to everything, sort of the org chart, advisory team structure, the offering, and everything else. And it requires getting comfortable with that.

And I sometimes have to remind myself, because I don't think I am naturally comfortable with that. I kind of have to remind myself why I wanted to grow a business in the first place. And I guess the real decision there was, when I reached the point where it could have just been a healthy lifestyle firm, and I already said how much I admire and respect those, I had to decide whether I was going to stop there or build a team and grow a business. And I think for me personally, at that point, I had already been an advisor for a number of years. And not that I had perfected it or anything, but it didn't feel...the role of the advisor didn't necessarily feel challenging on a day-to-day basis.

And I had never attempted to build a business, and I knew that would be very challenging for me. And for the desire to grow myself professionally in the 20-plus years I was hoping to continue to work is what led me to want to build a business in the first place. And I guess I'm saying this out loud as some form of self-therapy, because I have to remind myself that when those challenges come in, those are the things that I... Those are not a bug. Those are a feature. Those are what will grow us now as a team professionally. And that's why we did it in the first place.

The Low Point For Andrew During Geometric's Growth Phase [1:23:54]

Michael: So what was the low point over the past few years in this growth phase?

Andrew: Yeah. I think for me, it was the spring and summer of 2020, the first few months of the pandemic. Like you said, you and I recorded our first interview in February 2020, and it aired in April 2020, and between those 2 things, the whole world changed. And that was stressful for everybody, certainly financial advisors, certainly working parents. And at the time, our daughters were 5 and 2. Like everybody else, their school and childcare closed, they were at home. My job got very busy. My wife's job got very busy. She does tax policy here in DC. And we had the kids at home. I know I'm not alone in that situation. In fact, many people on our team were in the same situation.

And as everyone remembers, markets were in freefall. And not only that, our clients were very stressed about their own careers. There was question at the time whether the consulting business model would ever exist the same way again. And I remember listening to our first podcast. It was just 2 months later, and I remember thinking the things I was talking about felt so suddenly trivial, and it felt like all of it was kind of on the verge of slipping away. And, of course, that only lasted a few months, right? And thankfully, the world didn't end and schools reopened and markets recovered and consulting continues to exist and everything else, but that was a stressful stretch.

What Andrew Would Tell Himself From 4 Years Earlier [1:25:54]

Michael: So what do you know now you wish you could go back and tell you 4 years ago about this journey? I guess either pertaining to pandemic or even just more broadly over...as you've noted this constant pace of change over the past several years.

Andrew: I think one big learning for me has been how many of the best lessons come from other industries, especially other professional service industries. I have been an RIA industry nerd for essentially my whole career. And even before that, my dad started an RIA when I was in high school. And so I have been heads-down in RIA world for most of my adult life, and I think that does provide a good grounding. But I have learned from especially others on the team who have come from other great professional services firms that ultimately, all professional service firms in every industry are more alike than they are different.

I think one benefit we have on all of this is the fact that we are fully remote, and we haven't sort of fully talked about that, but I would be happy to spend a few minutes on that if that would be helpful.

How Geometric Operates On A Fully Remote Model [1:27:21]

Michael: Sure, I'm very curious to hear how that's played out for you, particularly with all of the fast-paced changes. It's one thing to manage a team virtually, because we work together in the office for years, and now we're mostly doing it from home. It's another when 50% or more of your team has joined in the past 2 years and may or may not have actually met anybody else that they work with in person ever. But there's supposed to be this high-functioning team working with high-power clients.

Andrew: Yep. And this is probably the thing I get asked the most about by other people in the industry. It's interesting. Internally, we can go months at a time without it even coming up. We are, I guess, the fish swimming in water that don't realize they're in water. It doesn't seem like a thing to us. And maybe there's insight into that fact alone.

And I also just acknowledge sort of every firm is different, and we are fully remote and always have been. And that's a very different situation than a firm trying a hybrid model or a firm trying to convert from in-person to remote. I know those are challenging, and I haven't been through them and don't have great advice there. For us, the benefits of being fully remote have just dramatically outweighed the drawbacks, and I'm happy to discuss both the pros and the cons. But the benefits...

Michael: What do you see as pros and cons?

Andrew: Yeah. For us, the main benefit is the ability to cast a wider net when hiring. And to put that in perspective, when we post a job, we typically don't take down the listing until we have received 300 applications and 20 to 25 people we'd be excited to invite for a first-round interview. And I know that's a different experience than in-person firms have. And it's not just sort of a wider geographic net, it's also just different, it's opening up a different group of people, right?

There are people out there who need to move every few years. We have several people on our team who are military spouses, including leaders at Geometric who are military spouses who couldn't have continuity of their careers elsewhere. And there are just people who live in regions where working for an RIA isn't...an in-person RIA isn't even possible.

So the main benefit has always been the ability to cast a wider net when hiring. There are other benefits, right? We wouldn't get to work with the niche that we work with if we weren't providing these services fully virtually. It's already a pretty specific group of people. If we were limiting that to trying to start it in one city, we just wouldn't have a business.

Michael: Okay. So the viability of the niche is tied to the fact that you can get anyone anywhere in the country who fits your big 3 consulting firm niche, not big 3 consulting firm people in the greater DC metropolitan area.

Andrew: Right. And it also just matches their desired way of working. They are mostly in their 30s and early 40s. They're on the road. They have young kids. They would rather be served virtually, and they're happy to find a firm that is so specialized to their needs. I can't even remember the last time a client asked anything about an in-person meeting or anything like that.

Michael: Probably just happy they don't have to get on a plane again.

Andrew: Yeah. And so there is a benefit for both recruiting and clients. And I think a lot of what we have built has been thanks to that. There are sort of true drawbacks. They're often not what people ask about, but I'm happy to sort of tick through the list and say how we think about them. So, I sometimes get asked, how do you monitor people on the team to ensure they're working hard or working well or not slacking off? I'll just say that one has always struck me as a little bit silly. It has literally never come up in conversation in our 9-year history. I think it just comes down to hiring the right people. And if you do, you don't have to worry about that. And if you don't, you have to worry about that whether you're in person or not. So, that one's never felt like a true drawback.

I think there is what you were alluding to, which is, well, it's okay for experienced employees, but how do you train new people? I think the answer there is you just have to be far more planful and intentional about it. We have now onboarded 20-plus people to the team, all remotely, most of whom were career changers. So I know it's possible. It just requires being really prescriptive, starting in the weeks leading up to people's start date, to ensure they have everything they need for their home office to be productive and comfortable. And then, more importantly, really scripting out their first few weeks and who they will be spending every hour with and who will be training them on what. And then once you're through that sprint, I think training just becomes the same as at every other firm where you are looking over the shoulder or sitting side by side with the person training you. It's just that that happens over Zoom and screen share and not literally in person. So, that one is doable, it just requires more planfulness.

And I will say our last several employees have all made or some comment similar to this has been the most sort of structured and well-thought-out onboarding process. And, I guess one, that's just a testament to our business operations team. And two, it's because it has to be, we have to do it that way, or else we really would have people with nothing to do in their living rooms.

Another one is remote work might be good for individual workers, individual contributors, but it restricts teamwork or collaboration. I don't know, it's possible I don't know what I don't know here, and I just don't... I'm missing out on how everybody else does it, but I don't think so. We essentially work in teams on everything all the time. It's just that is all happening via Slack and Zoom instead of in a conference room. And it has worked well for us, although admittedly, maybe there is some leakage there that I'm not aware of, but it doesn't feel that way.

But then the last one, I'd say, is the big one, and you alluded to it right from the start. So how do you build culture when everybody is fully remote? And I guess to us, culture is a big all-encompassing word that factors in a lot of things, but broadly speaking, it is, one, all of the values and norms and behaviors that define how your team works together. And two, it's everything else that goes into the employee experience. On the first part, I think if your firm has very clearly stated and core values, and they are honest and not aspirational, and everyone on the team sort of inherently shares those values because they are the primary filter you are using when hiring, and that you use sort of those same filters for evaluations and promotions and compensation and everything else, then I think you can have a very sort of strong and clear and positive way of working, whether you're in person or not. People sometimes say the Geometric way of working, I don't think we've ever fully defined that term, but people know what it means because we're all sort of working the same way. So I think that part of it doesn't require in-person work.

I think the hardest part, and where the real dangers lie, is in the employee experience element of it. I think remote work risks people feeling lonely or isolated, or I think it's more likely that people burn out or just get sort of daily Zoom fatigue, right? I just think people need human interaction for their own well-being. I know that I do. And that is the hardest part to support in a remote environment. I guess we go about it a few different ways.

First, and I don't think this is the true solution, but we do foster in-person get-togethers as much as possible. The big one is we do an annual offsite each year where we fly everyone from where they are to just have a few days together hanging out with no work on the agenda. Last year, we did it at a lodge in the mountains of Colorado. And that helps, and we do smaller informal versions of that regionally and locally and by department. But that can't be the total answer. At best, that is still less than 10 days a year, and I think people need more connection than that.

And so for us, the real answer has been you need to offer people maximum flexibility to live their lives in a way that they can get that connection and well-being and flexibility in their own life and from the people they live in physical proximity with who are the most important to them. And that can be done a lot of different ways, both sort of formally and informally. And we spend a lot of time on that. That starts with unlimited time off for any reason, sort of not only with no questions asked, but met with a lot of supportiveness from everyone on the team. And those are sort of everything from big multi-week vacations that people take to unplanned, it's a snow day, my kids are home from school, and I want to go sledding with them. I'm going to miss the next 2 meetings. All of those are met with a high degree of supportiveness.

We also have something called Wellness Wednesday, where there's a two-hour block on everyone's calendar every Wednesday afternoon where there are no meetings and, ideally, no work allowed, and people are expected to spend that time pursuing whatever they need for their own well-being. It might be a workout, it might be gardening, it might be an app. There's sort of no judgments on Wellness Wednesday. And then there are sort of more typical policies. There's a generous parental leave policy that applies to both moms and dads equally. We are considering a sabbatical policy. During COVID, we instituted something where for those whose kids were home for school closures, we paid for their at-home child care, which only seemed fair because we were asking them to continue working. And I guess all of this... You can do all of that and it still doesn't mean you don't have people on the team who aren't sort of burnt out and overwhelmed at any given time. You almost by definition do. It's just... I guess we say that's not an acceptable permanent state of the world, and when that happens, we redeploy as necessary and change things so that it doesn't last. And I guess if you do all of that, you can create a great employee experience, especially for a group of people who have self-selected into that way of working in the first place, and that's how we approach it.

Andrew's Advice For Advisors Entering A Faster Growth Phase [1:40:11]

Michael: So any other advice you'd have to advisors that are gearing up for a faster growth phase, I guess, like remote or otherwise? Doesn't have to be specific to the remote world, but just these lessons learned over adding a half a billion dollars in 3 or 4 years.

Andrew: Yeah. I think my advice for advisors at any stage, new or growing or about to embark on a growth stage, would be work your way towards a specialization and, ideally, find the group of people for whom you want to be the expert and ideally, the world's foremost expert. And if that feels daunting or intimidating, it just means the niche is...you have defined the niche too broadly because anybody can do it as long as they define the niche narrowly enough. And then once you have found that, you are positioned for whatever you want. It could be a highly profitable lifestyle practice. It could be a fast-growing sort of business turning to an enterprise, but either way, the fact that you have very narrowly defined your target audience makes all of it easier and in my opinion, better.

Michael: I like how you framed that, find a group of people you want to be the expert...ideally the foremost expert. And if that seems intimidating, then just narrow the niche more. Because anyone can do it if the niche is narrow enough. True enough people, you will literally get to a point where no one else does what you do for those people and you are immediately the leading experts.

Andrew: And that doesn't mean that every narrow niche is going to work. And, of course, take some experimentation. And it's okay if you start too broad and narrow or want to pivot entirely. But once you find, let's call it product market fit with a given niche, you can feel it and they can feel it. And that's when, if you want to grow, you can sort of go all in on that niche and build everything around them. And I think it sort of sets up better for growth and scalability for sure.

What Success Means To Andrew [1:42:31]

Michael: So as we come to the end of the podcast, one of our themes always is just this word success means different things to different people. Sometimes it changes for us as we go through evolution of our careers, growth stages of our own businesses. And so the business is now on this amazing fast growth trajectory. How do you define success for yourself at this point?

Andrew: I think for me it's just feeling proud about what we are building. It's feeling pride in the team we are assembling and the work we're doing for clients and how we are going about it. And I think, I guess allowing success to be determined by pride could be coming from different places. I hope it's coming from a healthy place inside and not sort of a place of ego or comparison. I think it's coming from wanting to build something that is great for our team and our clients. And when I get to the core of it, I guess I just feel that we all just get one life and one career, and it is precious. And if I'm going to make helping to build this for my life's work, then I just want to feel proud of what I do with it. And I think that's what is driving it for me.

Michael: I love that. I love that. Well, thank you so much, Andrew, for rejoining us with this update on the "Financial Advisor Success" podcast.

Andrew: Thank you, Michael.