#FA Success Ep 386: Turning Impostor Syndrome Anxiety Into A Strength That Drives Client Referrals, With Dann Ryan

Resources Featured In This Episode:

• Dann Ryan
• Sincerus Advisory
• Kitces Research on Advisor Wellbeing
• Advice Pay
• Internal Revenue Code
• Black Diamond
• CIMA Certification
• Roger Whitney

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Full Transcript:

Michael: Welcome, Dann Ryan, to the "Financial Advisor Success Podcast."

Dann: Hi, Michael. Thanks for having me. I'm excited to finally be doing this. I know it's been a long time coming. I told a lot of people that I was coming on to do this, and they were a little concerned that you weren't feeling all right. I joke with you only because I've made it a schtick to disagree with you at times, but that's really because I respect the tremendous amount of work you've done for the industry, and we actually agree on much more than we don't.

Michael: No, I appreciate it. To me, we learn a lot more in the ways that we disagree than in the ways that we just mutually, vigorously nod in agreement with each other. To me, indirectly, that's even part of the theme of what I'm hoping to delve into in the podcast, in the discussion today.

To me, there's this strange shared experience for almost anybody who's been in the business for more than about 20 years, which is if you go back to the late '90s, early 2000s, the RIA movement and just even doing assets under management and holistic advice and planning was a relatively early stage nascent thing. Almost everybody who was doing that had broken out of an insurance company or a brokerage firm back in the 1980s or 1990s and launched their own thing, and then were convincing more people in the 2000s to come out of insurance and brokerage and try this RIA thing.

To me, there's just this collective experience of almost everybody who had built a successful RIA firm did not start in an RIA. They started selling products of the insurance or investment variety and then, at some point, had transitioned to this world where they're giving advice and charging fees for it. But now that's been happening long enough that we have a new generation of advisors now well into their 30s and into their early 40s that can be 15, 20-plus years in their career and have actually been in a fee-only advice capacity their entire career.

To me, that's a really unique distinction of new career tracks, new paths into the industry, and results in people that have a very different experience of what the industry is like, which can create interesting disagreements and that's the times that we and others get to have fun conversations of disagreement because that's what happens when people have diversity of views and diversity of perspectives and different experiences.

And so I think I'm excited today to start the discussion around really, I guess, from your perspective, as someone that's spent a career in the fee-only world, how are career tracks emerging in different ways now than this path of old where you sold stuff and then figure out later how to charge fees for advice?

Dann's Start In Fee-Only Planning [5:57]

Dann: Yeah, thanks for that intro because that is still baffling to me that I've been in the fee-only space my entire career, and sometimes I take that for granted. I forget to tell clients that, of course, we're fiduciaries and, of course, we're fee-only, but I think it's a tremendous opportunity set now for advisors.

When I went to college, I did my undergrad degree in math, I went to grad school for economics, financial planning was not a major that you could take, and now there's financial planning programs all across the country. And I think that that just sets up a generation of advisors for opportunities. Frankly, they will be working with my generation of advisors and on teams with us. I think we get it a little bit more and we've been through the, you call it literal and figurative hazing, that was financial planning a long time ago, and I'm just tremendously excited about the future in that regard.

Michael: So help us understand what this journey has been for you. How did you come to financial planning world if you were starting in a math and econ background? What got you to the industry?

Dann: So the year was 2007, and this is back when an inverted yield curve actually meant a recession and jobs were hard to find and I would take any one. And I did a lot of applying, and one was to a fee-only financial planning firm that at the time had $10 billion in assets under management and worked with high net-worth individuals. And I had absolutely no qualifications to be going to.

And I was interviewed and hired by a gentleman in the New York area by the name of John Lafferty. And I do want to name names because I do believe in giving people their flowers. And there's a lot of tremendous advisors out there who deserve to be recognized, and I've been fortunate to work with many of them.

So I was hired in 2007. And the New York practice had a business of producing your old-school 100-page financial plans for a major university, and that's a name I won't name, but for a segment of their professors, we produced financial plans. I think we charged $6,000 for a financial plan at that time. It involved a few meetings. The university paid for it. Of course, it was imputed income to the professors but they still got a pretty good deal.

And I was brought in to just crank financial plans. At the time we were using a DOS-based software, you copy strings over, it was proprietary. Some of our best planning spreadsheets were still in Lotus Notes. I had to move them over to Excel. But that was my first experience. And I had a tremendous boss and John who, frankly, just let me fail, which is I think one of the best ways to learn. Go, do this plan, give it a shot, bring it to me and I'll tell you why it's wrong. And I did a lot of that in 2007.

And then, of course, 2008 hit, and our other clients started to be much more needy too, and wanted a lot more meetings. And those clients were what we called flat fee at the time. A lot of them paid $10,000, $20,000, $30,000 a year. I guess you would call that a retainer now but we just called it a fee. They paid six months upfront with a check and then six months we reached out to them for another check. That was the business at that time.

Michael: Well, I guess that was how you get around the infamous "you have custody if you take fees more than six months in advance". So bill them every six months and then you don't have a custody issue.

Dann: Yeah, and it's a little scary having half your annual revenue in checks that you have to take to the bank and deposit, but that's how things were done. There was no AdvicePay at that time. But that's just my way of saying that this model, this fee-only model, and holistic financial planning model certainly existed then. It was a little bit messier but we got by.

I think I've told you the story that at my first job I remember looking up some tax question, it was probably contribution limits or something and clicking Print on the page and it going to the printer and proceeding to use all the blue ink because somebody had not set a print style sheet on their website and taking that page to my boss and him saying, "What is this?" Of course, it was Nerd's Eye View.

Michael: Oh, nice. Yeah, we had a lot of blue background on that website then.

Dann: Yeah, and so that's when I learned the lesson to always go to the IRC [Internal Revenue Code], and I still do that with my team. I don't want any secondary sources. It's got to be from the code if you're trying to tell me something about taxes. So I thank you for that learning experience. It served me well.

Michael: Excellent. Help me understand this advisory firm. I think you said they were $10 billion in AUM, which is a very big... that's a very big firm now. That was a very, very big firm in the 2000s. How big was the firm? How many advisors were there? Who were they serving? Just help us understand what a $10 billion firm circa 2007 looked like.

Dann: Yeah, it was a bit of a dichotomy because there was a California office that was huge. There was a very big Chicago office, and then the New York office was the smallest. It was, frankly, a partner, myself, and a support administrator. So you were getting that big firm exposure because there was a committee for everything, and I true mean everything, financial planning topics, estate planning, and then every investment class under the sun. And so you got that big firm exposure but we were also very siloed.

And like I said, at that point, I'm doing 30, 40 financial plans a month plus serving high...there was this pipeline of professors who are often successful and they become clients and then other high-net-worth individuals. So it was still pretty sectored to the high-net-worth space. At that time, frankly, high-net-worth people were the only ones who knew to go out and ask for fee-only advice and could negotiate around that. So still a pretty complex client base.

Michael: So did you say 30 to 40 plans a month?

Dann: Yeah.

Michael: That's the flow of new clients or that's existing as well?

Dann: That's the professor. There's probably 10 client meetings a month and then follow-up. There's probably 10 new clients a month, 10 follow-up meetings, updates, and then other onboarding.

Michael: Interesting. You're cranking the plans in the planning software, in the DOS-plus spreadsheet-based software and then John is out presenting them, or are you out presenting plans and meetings at this point as well?

Dann: Yeah. So from a scale size, this comes to my next change is that I just had to be in the office all the time. Somebody had to take phone calls, deal with Schwab, I was still on Schwab at that time, and be there. So it was really restricting my ability to be client-facing and I really wanted to make a change there so ultimately that's why I changed firms and went to join another RIA in 2009. They were looking for somebody with RIA experience. It started to suddenly be known that there was an RIA way of doing things at that point.

Michael: So I'm trying to visualize this timeline. So you were with this firm basically two years and change, starting in 2007, leaving in 2009, and ground through a thousand-odd financial plans and updates over that time window.

Dann: Yeah. Probably maybe not a thousand... You're revisiting a lot of them, and also it's '08, '09, so clients are calling, clients are wanting meetings. I was sleeping, not physically sleeping in the office, but there till 10:00, 11:00 at night and stopping for Wendy's on the ride home and back at 7:00 in the morning the next day. There was plenty of work. And I think having a time period like that in your career is just so incredibly valuable where you're engrossing yourself in financial planning and just figuring it out. We're all young once and that's a great time to do it if you can.

Michael: Yeah, I had a similar stint for a couple of years also in my 20s in a role where I was just cranking through and building plans. That role I also got to deliver plans, so I did get the client-facing part as well but just a high volume of deep-dive plans on a continuous basis. And I think I got the proverbial 10,000 hours of experience to work towards mastery crammed in 2 or 3 years of working ridonkulous hours that I could do. I didn't have a lot of other... I didn't have a family yet. I didn't have a lot of other commitments, just put in the hours, got stuff done, got some decent raises, and got a mountain load of experience in a compressed time period because I got the opportunity, I got the privilege of being at a firm that was growing fast and had a lot of volume of activity for me to get to learn and practice on.

Dann: Yeah, I think your advisor wellness study mentions there's a correlation between experience and happiness for advisors. I would caveat that by saying that not all experience is created equal. It's not just purely in years, and for young advisors that get an opportunity to engross themselves in financial planning that way, I highly encourage it. I'm not trying to kill anybody's work-life balance here but when you have an opportunity set to just work on a lot of financial planning, I think you should wrap your arms around it.

Michael: Yeah, well, and we've been trying to drill into the data further. We're a little bit limited just because of the ways that we ask some of the questions in our surveys. We ask about overall industry experience and we ask about client-facing experience and we find that well-being along with income is significantly more correlated to client-facing experience than just general industry experience. So it's that pathway of getting in front of clients at some point. That doesn't necessarily mean you have to get there day one. I do think there's some value for spending some early time, I'll say, "just doing some of the back office operations and plan grinding work." But that means being there for 2 years, not being there for 10. At some point, that's slowing you down in progression.

Dann: For sure.

Gaining Additional Experience Serving High-Net-Worth Clients [18:29]

Michael: So what was the new role that you went to?

Dann: So I jumped over to a firm that was named RCL, it was the names of the partners, Roche, Cafaro, and Langham, and they were one of the firms, you probably remember when Sarbanes-Oxley hit, it launched a thousand RIAs out of accounting practices that no longer wanted what they called investment advisory but it was largely pretty deep holistic financial planning and they no longer wanted that to affect their audit business and so you had all these good sized RIAs that popped up from those practices.

And so this was a group out of Ernst & Young. E&Y said, "Take your clients and go." So they had a couple billion in assets to kick things off with and knew what they needed to build an RIA. And I was probably one of their first external, well, I was the first external person they brought in. And it's a lot of fun to build an RIA when you have assets and revenue, and you can dive in. And so I hitched on with them, and my first day in the office I was thrust into a client meeting and just "go, figure it out, and how can we improve this experience?"

Michael: So for those who aren't familiar, what were these planning practices in accounting firms? What were they...you saw RCL as they came out. What were they doing? Who were they serving? What did that business look like?

Dann: Yeah, so that business was... I'll tell you my first challenge day one was our assets were at Bear Stearns and you had to find a solution for those. So it was like actually doing due diligence on custodians and looking at the landscape and ultimately ending up at Schwab even then. But from a planning standpoint, it was heavily tax-focused, as close as you can get to giving tax advice without giving tax advice, heavily estate planning. Clients…our average portfolio probably was a mean of $13 million but a median of $8 million or $9 million. So pretty high net worth, I wouldn't call it ultra-high net worth. There was a couple of $100 million relationships in there, but there was a lot of $2 million and $3 million in there too.

Michael: And where did the clients come from? Where were they getting these decamillionaire clients, give or take a few?

Dann: Yeah, they were largely handoffs from the accounting practice and word of mouth, and I definitely am biased from that experience in that our strategy was always just to service clients to the utmost and that that will yield referrals and growth. Obviously, that's not the most unique or even fruitful new business development strategy but it always worked. And again because our minimums were high and the client base we were working with was complex, it was a way to stay in that environment.

And frankly, the work was incredibly rewarding, I joke, but in those early days, it was a lot of fun. You'll hear me say I'm a stereotypical New Yorker and we New Yorked very hard in those days, worked in the office till 10:00, 11:00, and then went to the bar and talked about estate planning for another two hours and got up and did it again the next day. But there was a lot there to learn and a lot of complex strategies. You remember 2012 and the estate tax collapse at the end of the year and doing all the estate planning you can at the end of the year. So just a lot of planning over the years. I joke and say I remember when the estate tax exemption was a couple of million bucks. But I think it will be again too someday probably and there will be a lot of planning to do there.

Michael: So what was the role when you went there initially? Was it meant to be similar to the prior firm where you're grinding financial plans for the partners, for the senior advisors to then go out and present and deliver, or did it look different at this stage?

Dann: It was very much "you've got to produce plans and you've got to be the owner of the materials for the deliverables for client meetings." But also it was a full RIA firm. And so I do think that the E&Y experience really helps there in that they knew what they needed. We knew we needed a performance reporting solution. I think we were client 14 or something on Black Diamond.

I remember sitting in meetings and saying "I just really need a risk-return scatter plot." Not that I invented that but I need to see that in my performance reports and drawing it on a piece of paper and scanning it over to Black Diamond and you get a performance report from them. That's their off-the-shelf report these days. That's table stakes. But at that time, it was a lot of knowing what we needed and going and getting it, which was exciting. It was knowing we needed an investment committee but how do we do that? I was able to learn a lot about doing due diligence and having an investment committee and keeping an investment solutions list for a very large asset base.

Michael: How big was the asset base, and how many clients were there in this firm, if you remember? I know this is a couple of years ago now.

Dann: You test my memory here but I think probably when I started, it was about a little over $1.5 billion and it was probably 150 to 180 clients.

Michael: Okay. How many people were there?

Dann: That is the incredible part. It was very lean. I think we were eight people the entire time I was there, for most of the time I was there. Started to grow at the end. It's just an incredible, incredible team. I miss them deeply. It was one of the hardest things I've ever had to do. I had such an incredible team. And frankly, that's what I've carried throughout my career is a real team approach because when you work as a team, you can be leaner and still serve clients incredibly well.

Michael: What did fee schedule look like at the time when you were working with clients this big?

Dann: Yeah, it was similar to what it is today. 1%  on the first couple million and then tiered down 75 bps [basis points], 50 bps, finished probably 20 bps over $50 million or something like that. Those are good problems to have too.

Michael: Yes, yes, very much so. Interesting. This is a firm that might have had like $10 million of revenue and they're supporting it with 8 people.

Dann: Yeah, revenue was probably half that because you make a lot of deals over time on fees.

Michael: Okay. There's the fee schedule and then there's the negotiated amount from certain large clients that cut some deals.

Dann: For sure. And we're all guilty of it but, yes, that was the printed fee schedule.

Michael: Okay. What were the roles on the team? What were the seats on the proverbial bus here?

Dann: I will say that we had an incredible... We were very fortunate to have a dedicated operations team that kept us running and kept us looking good. My director of operations there, Mary, just saved me countless times and I joke but I developed this. She would always say, "Dann, if I have to ask you to get a new signature from your client, you act as if I just kicked your cat because I just came from the world of do not hassle clients. Let's find a new solution. Our clients are incredibly busy. They're executives and they don't have time to be resigning paperwork."

So they kept us going and got everything perfect on the first pass, which was very valuable to our clients. And like I said, there was three partners splitting up the client base. Again, big relationships get multiple advisors, and then there was always a junior person like myself also on that relationship.

Michael: And so were there three of you, one for each partner in a one-on-one groupings, or were you more of a shared resource, a shared support that went out with all the different partners?

Dann: I was a shared resource, and at the best of times, maybe there was three of me, and at the worst of times, there was one of me. And I joke, but having actually experienced it in my career, I've had as many as 130 clients I was serving and as few as 40. And I would like to be somewhere in the middle, but 130 sustainable and very complicated clients. But I had no outside life either at that point.

Why A Lack Of Partnership Opportunity Led Dann To Start His Own Firm [28:49]

Michael: So did the role shift and evolve as you were at RCL? How long were you there, and did the role shift and evolve as you went?

Dann: So I was there a decade.

Michael: Okay. So you were there quite a while.

Dann: And it's a tale as old as time I can say. I know I experienced it, my business partner David has experienced it, a thousand other advisors experienced it. The promise of equity was always there. Ten years was the target. And I was always singularly focused on that. And that was my goal. And I obviously became a better advisor. I developed there. I thought I was working down that road. It's a hard space to be a revenue producer in when you're working with clients of that size, but again, I always just focused on the client experience and improving that.

You can tell because we're sitting here having this conversation, that the partnership promise never materialized. There was, oh, you can be promoted to being a principal. And how much equity does that have? Still none. So that was largely the impetus for me going and starting my own firm. Also just being in a very, very high-stress environment. What had once been fun can also start to take its toll on you when it doesn't have the same future laid out in front of it. So I ultimately left. They were very shortly thereafter sold. They are now part of Wealth Enhancement Group, I believe. So that roll-up happens everywhere. So that was 2019.

Michael: So what was important about equity to you that this was a hot-button issue?

Dann: I'll say, honestly, looking back on myself, I don't know what was important about it. I was told it was important. Everything was presented to me in the framework of when you're a partner, you will get this, or when you're a partner, you will understand how this works. I think a lot of people are out searching for autonomy for the sake of it. Like I said, I had a tremendous team around me. I was very fortunate. I had great experience and some more challenging experiences, of course.

And so it just hit a point where you can only be coming home at 10:00 at night and have to sit in the dark for 20 minutes and sob to yourself because of the stress of the day. I was fortunate to have an incredibly supportive spouse who is much, much smarter than me. That's irrespective of her decision to marry me. She was the first one to recognize, hey, this is unsustainable and you're putting a lot of yourself into this. That was a turning point for me.

Michael: And you were putting a lot in because that was the perceived path to partnership?

Dann: Yes. It was just what more can I do because that's what I thought I had to do. Let me just give a bigger and bigger piece of myself because I have to have equity. And I will say, to that point, for advisors out there that maybe are in the same boat, being a support advisor or an advisor at a larger company is not a bad role to be in. There's great work to be done out there. And partnership is not for everybody because with partnership comes finding clients and other challenges.

Michael: I was going to ask, was the firm giving you a roadmap, like you need to do these things to become a partner, or was it not that clear? They were just saying, "We'll consider partnership at some point," and so you're trying to find whatever you can do to prove yourself and make them notice.

Dann: I'll say there was a path but goalposts were often moving. And again, we're in New York, so you can say, "Well, what revenue have you generated because your office is this size and your team's office space is this size and we got to pay for real estate." So there's a lot of moving pieces there. And frankly, again, I don't think that the whole time the plan was never to give me partnership. I don't discredit that. I just think that things change over time.

Michael: They had never introduced a partner so in all likelihood they were trying to figure it out as they were going as well.

Dann: For sure. And again, there's a generation of advisors that have experienced this now and I think our industry is better off for it.

Michael: Better off for which part?

Dann: The advisors that have experienced it are committed to doing something different in the future. I know personally I am. And I think a lot of young advisors are focused on the equity piece instead of having a bit of faith that things are improving.

Michael: So did the role continue to be one in supporting the partners and their relationships all the way through, or was there some point where you had your own clients or had to go do business development for your own clients? What shifted?

Dann: It took a long time, and I will say because it was such a high service level. So clients themselves were getting multiple partners on them. And it was very team-based but probably at the end of my tenure is when I started to have my own client relationships, sitting in meetings being the only one there, and that will never not be scary. That is terrifying to this day. My stomach flips the morning of a client meeting, and I think that's an important message. It's okay to be nervous.

Michael: As you're 15 to 20 years in.

Dann: Yeah. Exactly. I think that's what makes this business rewarding and exciting to do after all these years is that it's still scary. There's still something to learn and there's challenges and it's never going to be entirely comfortable.

Michael: So did you want to have your own clients if it was scary and felt awful? Were you happy to continue working alongside the partners and their clients? I'm just wondering what drove the shift. You wanted more clients. They pushed you towards clients.

Dann: Yeah. I think, again, they tell you you should be becoming an advisor who is self-sustaining. They can do it all on their own. They can go into meetings with a $50 million client and have all the answers. I'm still trying to be there to this day but it's a fun journey. Again, I think that that journey is the reward and this industry can continue to challenge you. I'm glad that I pushed myself out of my comfort zone into being the lead advisor. I'm thankful that I have had a team and still have a team that can help me along the way. But again, these things, they happen naturally over time and there are certain expectations. You'll constantly have to be growing, and at some point, that's the only way to grow is to become the lead.

Michael: What came next? Was there some moment of truth transition moment like, okay, I'm here for my partnership, and when they say no, you say then I'm done here, I'm out the door? Did it come to some crystallizing moment like that?

Dann: There was a crystallizing moment. There was a conversation that, frankly... I worked for a woman for many years, Barbara Roche, who's a tremendous, tremendous advisor. You've never seen her on any top advisor list but had been doing it for 30-plus years and was incredible. When I frankly announced my plans, she said, "That makes sense. I would do the same in your shoes." And that was frankly very validating.

Michael: Meaning your plan to say you were leaving?

Dann: Plan to go.

Michael: To go.

Dann: To be my own, start my own firm, which is... I don't have an entrepreneurial bone in my body, Michael. It was never in the cards for me, but at some point, I started to see it as an option. I have a business partner now, David Wilson, who helped me see that. He's much more entrepreneurial than me. But when I did it, it was just me. I left and I opened up shop one day with Sincerus. Again, a part of my anxiety and troubles with the whole thing, I left the entire client base behind. I had no head start. I started at square zero again, zero AUM, and opened the doors and said, "Please, somebody come work with me. I have a bunch of experience."

Michael: So help me understand more just getting to this point where you're convinced enough that partnership isn't coming, that you're willing to take a leap to go out on your own, that you feel so compelled to do it even though you don't have an entrepreneurial bone in your body, yet here you are launching a firm. Help me understand what was going on in your experiences or what was changing in your head that such major shifts happened for you in I guess what seems like relatively quick succession, maybe it was a very long time building up.

Dann: There was a point where an advisor had left the firm and, frankly, in doing so had dropped the ball on some client stuff. I stepped up and said, "How can I help? I know this is important to the firm. What can I do?" I was told he had this one client, maybe it was $25 million, $30 million. "It's important. We need you to take ownership of it."

So I rolled up my sleeves. I did everything I could to figure out what was wrong, what needed to be done. They needed some serious estate planning work done. I prepared and I flew out to the West Coast for a two-day intensive meeting with this client where we just revisited everything top to bottom. I thought it was some of the best work I've done. It was really hard to spend 48 hours with these clients and then fly back. But I was proud of the work I did. When I got back, the client called the office and said, "Can you have the partner call me back?" So the partner called them back and rang me up and said, "Could you just listen in on this call? They're your client now."

So I listened in on the call and the call proceeded to be the client basically saying, "Hey, all these mistakes that the previous advisor made, I think they're Dann's fault. And while Dann seems great, he's too much of a New Yorker. He talks too fast. And look at all these balls he dropped." And that was an opportunity for somebody, frankly, to stick up for me and say, "No, Dann's doing great work." And instead, they let the blame fall on me for that. And afterward said, of course…

Michael: Even though in reality, you were the deliverer of bad news of the prior advisor's mistakes that you were trying to not throw that person under the bus for.

Dann: Exactly. And that was an eye-opening moment because afterwards they said, "Of course, it's not you, Dann. You're great. You didn't…"

Michael: But they didn't actually stand up for you in front of the client after ironically inviting you onto the phone call to hear them not stand up for you.

Dann: Horrible practice of having somebody listening on phone calls. I don't recommend it. You never know what they're going to hear. But that was a moment where I realized I was an advisor as a commodity and if I wasn't going to stand up for myself, nobody was. And frankly, that opened my eyes. And when you do that, you start to notice that the Focus Financials are coming into the conference room and these meetings are being had, and you say, "Well, this place is for sale and I'm an asset that's being sold along with it. I'm not actually participating here." So that's the moment I remember as a turning point, but it was one in a long, long list.

Michael: Interesting. And so it sounds like that was much of the impetus for why leaving. So why not go to another firm?

Dann: I had thought about it. I had interviewed all around New York. I knew all the major players. And I felt that at that time and at my age, I felt I had one shot to rebuild my client base if I was going to give it my all. And I just took stock of myself and said, "If you're going to go back to working all these hours and giving every piece of yourself to something, at least retain it at the end. Don't give yourself a chance to make the same mistake." And again, I have the world's most supportive spouse who also supported that vision and encouraged me to do something for myself.

How Dann Built His Firm From The Ground Up [44:53]

Michael: So it sounds like it was a version of, "I've still got gas in the tank. I'm ready to keep working really hard, but I can't do this forever at this pace. So if I've got one more 'work really hard while I'm young and have energy' stint, I'd rather do it for a thing that I'm going to own at the end."

Dann: Exactly. And again, I had no desire ever to be an entrepreneur, but at the time, the writing was on the wall having had that experience that so many advisors have had.

Michael: How old were you at this point?

Dann: I must have been 34 at that point. I still felt that I could give it another go.

Michael: And so were you building savings, reserves to do this transition? Was your spouse in a role or you could live off a spouse's salary for a while while you were building? How were you just preparing financially for this much of a change?

Dann: Yeah. I joke and say that I started my firm and got married in the same month, but the reality is I got health insurance and started my firm in the same month. That was obviously a big piece to solve, but I had saved. The one thing about my prior life is the compensation was very, very good. And there are roles out there doing that where the compensation is incredible. You almost get "golden handcuffed" to them because you're doing pretty all right for financial planning. And I saved, and that became the first year of Sincerus. That was the first year of just spending down my entire life savings to start this firm and to get going. But yes, it was something that I'd provided myself an opportunity for, for sure.

Michael: So can I ask, what did compensation look like in these roles where you're working with these high dollar firms, high dollar clients?

Dann: Yeah. My last year probably, this is 5 years ago, $300,000 to $400,000 a year. It's good for being a W-2 employee.

Michael: So you were effectively W-2 employee at that point, W-2 employee servicing clients, very, very big high dollar clients. So this is high stakes, high complexity, a whole bunch of revenue you're responsible for.

Dann: Yeah. But again, it's a commodity and something they can hire out. These 50, 100 billion dollar RIAs can always hire that role.

Michael: So what was the actual plan for getting clients and launching the firm when you made the decision commitment, like, "I'm not going to try to take any of the clients with me?"

Dann: It was a clean break. I had a non-solicit. I honored it to the letter, again, because I needed a stress reset. I was at an incredibly stressed point. And it was a lot of projecting self-confidence that was not there, I assure you. It was riddled with anxiety and listening to people around me who told me I had the skill set as an advisor.

David Wilson is my business partner now. He was not when I started the firm. We can talk about that too. But he was an advisor that I met. I met David at the gym doing Brazilian jiu-jitsu before it was cool, before Zuckerberg made it cool, or whatever. But we met doing jiu-jitsu. He choked me out. I woke up, we were business partners. It's not really. We were friends for seven or eight years. We traveled together. He worked at a different RIA where he was also being promised equity.

For many years, we had lunches and just, "What are you doing for clients here? How do you approach this?" I got to know him as a friend and know that he was doing incredible work for clients. That really inspired me. He was telling me, "Hey, you can do this. You can go start your own firm. You're a good advisor. If I were you I would do this." He definitely gave me a nudge probably because he knew we were going to be business partners someday. I just took a leap.

Michael: What was the tactic to go get clients from day one? What did you do? You've hung your shingle. Congratulations. Now what?

Dann: The same thing everybody does. I went on the internet. I did all the social media I could. I tapped my natural networks, family, friends, my spouse's family friends. I think the first week of, okay, I'm registered in New York, let's go, a lead came in off of NAPFA and it was a really good one. I said, "This is going to be so easy." Then it wasn't. The first year was tough. It was very hard. I spent a lot of it working on my processes and getting ready for when I knew I was going to get at-bats.

Michael: Where did the at-bats eventually start to come from?

Dann: I started doing a really, really good job for clients. I'll say this. Our biggest source of clients is still referrals. I credit my partner David with this. Fast forward to 2020. We all know what happens in 2020. David calls me and says, "Hey, I want to come join you. I'm in a similar situation. Let me pluck out some of my clients and come join you." He had an okay book of business [$30 million of AUM] and he came over and injected some life into the firm and we just started working it really hard.

I credit David with teaching me that, frankly, it's about community. That's really our approach with clients is that our clients are people that we care about deeply, that we're very excited to be associated with. In that environment, all boats will rise. New York City is incredibly small when you actually make it that way and when you get to know it. It's a lot of our natural network and just doing a good job for people. It's no magic faucet of...we have a blog. I go on podcasts, we do things, we make ourselves seen, but there is no one lever that we're flipping for finding clients.

What Dann's Firm Looks Like Today [52:41]

Michael: Is there a particular clientele that you're working with and going after? Is this still similar to working with the high net worth, $10 million, $20 million-plus clients from the RCL days, or does it look different now?

Dann: Yes. The first thing I'll say is when I left RCL, my average client age was 76 years old. A year later, it was 36 years old. So very different. But I saw in my clients the same thing that I ultimately saw in my high-net-worth clients. And I'll say there's three parts to our client demographic. The first is that our clients are incredibly smart. And frankly, they could be DIYers. And that's scary to say as an advisor, but they are all very capable of being DIYers. The second part is that they're also incredibly busy and don't have time for that. And the third part is that they are people that are generally receptive to advice. And that's where we come in.

I think that my clients know based on my 17 years of experience, David, who's much like you, has a million letters after his name, that when they come to us with a problem, we are going to work it thoroughly and find a solution for them that is also respectful of their time. And so I don't love niches. I'm pretty vocally against them. But you could say we have an affinity niche and that our clients are people that share values with us and that we care about deeply. And I think they know that, and they know that we are just a member of their team. And when you have a team working for you, you want to share that with the people you care about too.

Michael: So what is the fee model and service model look like? What do you ultimately do for these clients? And how do you charge them now?

Dann: Sure. So right now, the team is myself, David, Valerie, and Samantha, who just joined us. We are all CFPs and we are all doing holistic financial planning. And I think that an important part of our service model is that you are always getting access to all of us if needed. And while I might be the person you are talking to most frequently, it comes back to my relationship with David that we would just sit around and talk about financial planning. And that is what we do as a firm. And we meet regularly and are always helping each other.

The fees are largely AUM. And we do have retainer clients. We do have a retainer fee, but that is just a tool for us. Maybe that is 10% of our client base. That is a tool for people that are probably going to be AUM fees someday. And I believe strongly that I can well recognize the problems with the AUM model, but it is good enough. And I think no industry talks about fees as much as ours does. And I think that is a real detriment to us as advisors, the sitting around and tweaking with fees and constantly revisiting them. It is a point of friction that we are creating that does not need to be there.

I feel strongly on a "Success Podcast" that the recipe for success is very simple. If you are doing honest work, which we are all very fortunate to be doing in this industry, you are very persistent about it and you surround yourself with good people, success will follow. And that is basically just our model. And the fees are the end product.

And so yes, we are largely AUM. Our fees, they start at 1% and they tier down just as the old ones in my world used to. And I think that is probably average. You can tell me if I am wrong, but I think 1% and tiering down is probably average in our industry. And I do not think I am the average advisor in our industry. I think I am above average. And so I feel good about that.

Michael: Do you ever think about raising the fee? I've got to ask. Above average advisor charging an above average fee?

Dann: It is interesting. So I do genuinely believe that I am a better advisor than I was last year, and I plan to be a better one next year. And for that reason, I do not think my fee should go down. I am not arguing for it to go up, but I do not think it should go down. In the RIA space, it is hard. There are these hurdles. Our technology costs are rising every year. Even if you are a great advisor, you have a 1% or 2% attrition rate, right, like your clients pass away or something happens. And you have to take care of your team. So there is basically an inherent 5% hurdle of growth every year you just have to achieve. And maybe the AUM model softens that in some years and makes it a little easier on you. Some years it does not. Some years it contributes to that hurdle. But why fight it if it is allowing us to spend more time on planning?

Michael: So where does the retainer fee kick in in practice then? What do you charge, and where does it apply?

Dann: Yeah, I think our minimums now are $7,000 a year when you have a client who is making $700,000 a year but is still in their accumulation phase. I think you have said that 1% fee should be a no-brainer. So starting them on a retainer and building up their investable portfolio. 

Dann's Hands-On Approach To Investment Planning [59:20]

Dann: I do think too that there is this theme of advisors saying, "Oh, investments are where I add the least amount of value and I just want to put in a model or never discuss it." I am never going to be some great beat-the-market active investor, but investments are such a key determinant of a lot of other behavioral components to financial planning. I think it is a big disservice to ignore them or to just try and sweep them under the rug. And so we meet them head-on. We are not afraid to have investment discussions with clients. And again, that is just one of the many services we offer.

Michael: So how does the investment management process work for you? Are you different portfolios for every client, specific to the client? Do you build and run centralized models? Are you outsourcing? How are you actually handling the investment side of practice?

Dann: Yeah. So I call back probably too much to my prior experience, but we do have model portfolio targets, if you will, because I am a big believer in modern portfolio theory. And we have our own forward-looking capital market assumptions, put a lot of work into it, build our own model portfolios. And that is the key determinant, right, of the variance and returns. It is just getting the asset allocation right. I sound like a CIMA professor now, but basic modern portfolio theory, still believe in get the asset classes right.

The implementation, that can be very client-driven. A lot of our clients reflect their values or beliefs in their portfolio. They have legacy positions. So in some ways, it is bespoke and we're trading around the clients' desires, but at the core, we are just worried about getting the risk allocation right. And I always say that take the risk tolerance and any model portfolio can work for you. You just have to stick with it and you just have to be comfortable with it. And I think that is our job is to explain the investing experience and make clients comfortable so when you do get the inevitable pullback, they are not shocked.

Michael: So help me understand this a little further of just what standardized the model level and what is different at the client level. So yeah, just help me understand a little bit more what client-driven implementation differences become in practice. What do you do? What will you still not do?

Dann: Yeah, you can imagine that a lot of my clients have ESG preferences or values-based preferences or even say…I encourage my clients to say, "I have got an investing idea." Okay, well, it is my job as the advisor to not let you blow out your risk profile by your investing idea. You get to allocate 1% or something to that and we are going to put it in your portfolio and we are going to track it and you are going to have an investment thesis and a strategy to get out, and, frankly, make it not very fun for them.

But if the client being able to make an investment decision and experience that is going to make them make smarter decisions on the rest of their investing world, then yes, let's do it. Is it more heavy lifting for us? Sure. But send me the prospectus on the crazy LP your friend pitched you and if you really want to go forward with it, I just got to protect you on the downside.

Michael: Interesting. So you do not necessarily try to talk clients out of all these. You just try to talk them down to a small enough allocation that it won't hurt if this blows up on them and then basically let them learn their lesson.

Dann: Yeah. And again, I have been doing this a long time. In my experience, they almost always change their tune, or they do not, and that is fine too, or we just keep taking 1% little bets.

Michael: So you make them hold the thing, explain, and write out what the strategy or thesis is. I am assuming you just basically want to document what they said so you can put it in front of them later. And then they have to have some exit plan. Is that just like so...

Dann: If you are being a real investor, right, you have a thesis and you have a...if I am buying an individual holding, there is a price at which I will sell, right? Or I change my thesis. So just principles of investing and bringing them back to them. So it is a lot of education, and this goes back to my clients are incredibly intelligent. My job is just communicating with them in a way that they will understand and will resonate with them.

Michael: And mechanically, does this actually go in their portfolio or...

Dann: Oh, absolutely. It is changing the risk profile of their world.

Michael: Okay. So it is not like you put it in some side portfolio, held away, not held away, but self-managed account that this wraps directly into the portfolio itself.

Dann: And if I need to exclude it from billing, so be it.

Michael: Do you get issues where it messes with the... I'm just envisioning trying to run performance reports if you do that and having their stuff mixed in with "your stuff" and at the risk of they have bad investment results because they had bad investment results, but they say, "Dann, your portfolio is not doing well," and then we have to get into, no, my portfolio…

Dann: I would love to have…

Michael: To find your addition screwed it up.

Dann: Yeah. I'd love to have that... I spent a lot of years talking about investment performance first and foremost. We don't do that anymore. It's later in the presentation, but I never shy away from it. If a client's mad about performance and that's what they want to talk about, well, then we have to sit down and talk about that because that is an emotion that they're feeling that is affecting their financial picture. And I think just saying, "Oh, you should buy VOO [Vanguard S&P 500 ETF] and shut up" discredits a lot of what the client experience is.

Dann's Agile Financial Planning Approach [1:06:20]

Michael: So then what does this look like on the planning side of the process? If I say, "Dann, all this sounds great, I'd like to come on board and become a client," what's the actual planning process you take folks through?

Dann: So we have our standardized planning topics where we...first quarter, right now, all we're talking about is taxes, right? In the fourth quarter, we'll be talking about open enrollment and loss harvesting and a catch-all. The second quarter is when we talk investments, which is rebalancing. Are you maxing your 401(k)s? What are your 401(k) investment options? And the third quarter is a wild card. That's when we can do estate planning or insurance reviews. It's a pretty simple model. Clients' lives don't even fit that simple calendar. They come at you when something rises to their attention.

And that's a lot of our business is just being very responsive to clients. And in those times, very high touch. Let's just hop on a call and solve it. I tell clients, "If you wake up in the middle of the night and there's a dollar sign keeping you up, send me an email and go back to sleep and we'll get a time on the calendar to solve it."

And so the investments and financial planning, there's no way to separate them. They're all your world at all the time. And so that's our day-in and day-out model. Personally, I lean into being very agile on my financial planning, coming from the days of delivering a 100-page plan, which everybody loves to say. Now we don't do the 100-page plan. But at the same time, a very rigid schedule that they have to go through that ultimately is equal to a 100-page plan. And so we are very agile. Let's identify what the pain points are in your world, and let's do some sprints.

And I'm stealing from Roger Whitney here, I'm sure, but let's do some sprints and, frankly, then you are going to be burned out and we'll just fall into a regular cadence where we will continually iterate on this. And that will be your living, breathing financial plan over time. And it will address your needs as they come up. And ultimately it will be robust.

But it drives me crazy to have a 35-year-old client and go out and run a Monte Carlo projection for them. Nothing could be more inaccurate, right? And I present it to them and I have to say, "The only thing I'm certain about is that your life will not play out the way this projection goes." But we're using it as a decision tool.

So that's the push and pull in my world every day, is that I don't want to be very rigid in the process, but I also want to be incredibly responsive to clients. That might be very, very long emails sometimes but it's whatever they need. And I'll say this, something I've learned about myself is that the way I learn, and you probably have some experience with this, is I learn through reading and talking. Talking is my best way to learn. But that's not true for every client. Some people are video people. If you sent me a video, you'd be getting fired. I'm not watching a video. But some people, that's how they learn. And so it's trying to identify that and come to people in the way that communicates best for them.

Michael: So it feels like you've got this default client service calendar with some structure to it. Q1 taxes, Q2 investments, Q3 wild card, open clients' choice, and then Q4 into open enrollments and loss harvesting because you've got folks in working years so there's a lot of open enrollment discussions. So is the default a quarterly meeting cadence where you're getting into these, or are these check-ins with the clients about the topics? Or is this mostly behind-the-scenes work you do and then you just reach out to them and let them know, we were analyzing and thinking about you, here are some stuff that we figured out and recommend. How do you operationalize this?

Dann: It's still evolving because I came from the world where it was always quarterly. Frankly, you mailed a client a performance report of their portfolio and asked them for a meeting at the same time on calendar quarters. And that just doesn't work for everybody's life, especially when they're in their working years. It's great for retirees. But I tell my clients, "I would love to be meeting with you quarterly. I am going to reach out. And if you say, 'No, I don't want to see you,' my feelings aren't hurt." Twice a year I'm going to say we really got to meet, but in the interim, I'm unlimited available, and that is more often than not the way we're communicating is like, "Something came up, let's do this. Let's get together."

I have also been a very big vocal opponent of "surge meetings". It was from the start. Having been an advisor for a long time, if I have two client meetings a day, that's great. The third client meeting of the day, there might start to be some diminishing returns. And if I'm having four, that fourth client is not getting the best version of me. And so I always try to manage that because all my clients deserve the full best attention of me.

Michael: And so what is the overall size and scope of the firm then? How many clients are you serving?

Dann: So the total firm, I think we're at about $165 million of AUM now. It's about 150 households. You can infer the average size there. Like I said, a core base in New York, a lot of clients in California and all over the country.

Michael: And how does this split or manage amongst your team? Are some of these your clients and some of them David's? Are they split across the four of you that are on payroll? Is it like you have them and then other people support you? Who actually leads what?

Dann: I think there's the typical David and myself are recognized as the person probably who brought them in, and we are never handing clients off. So I think there's an expectation that we're there, we're the lead. But like I said, everything's a team solution. And our biggest clients are getting both David and me. And if they don't know they are, they are because we're constantly talking through situations. And so there's a mix of just who has the experience, who can research this. And like I said, we're very fortunate to have the team we have. Again, I continue to be in a place in my life where other people make me look good.

How Sincerus Grows Through Client Referrals [1:14:32]

Michael: And do you feel like you guys have capacity at this point? Are you approaching capacity limitations?

Dann: As every firm does, we've got some rub where not every client is the perfect fit client. I still think we do have capacity. We're still taking new clients. We don't do it at the rate that some firms do, where we just say, "Let's turn the faucet on and catch everything." There might be a waitlist at times because we have a commitment to our existing clients, and that is always first and foremost. And so that service has to come first. And we're not a catch-all for new business.

Michael: How do you decide when to put a waitlist in? When does that actually kick in?

Dann: I wish we had a good systematic way for doing it. It's looking at the calendar and asking people how they feel and what their workload feels like, and a lot of trying people management here.

Michael: And how do you explain it to prospects?

Dann: Largely, again, because most of our referral network or most of our growth is coming from referrals, they understand. They're being brought in and being told, "Hey, this group has done a great job for me. They understand why that would be in high demand." It's not a strike while the iron's hot situation where they're interviewing three or four advisors. You've got that higher introduction.

Michael: You make an interesting point because I feel like for a lot of advisors, there's this feeling of, if this came to me from a referral, I have to drop everything and serve the person because it came from a referral. I don't want to piss off the referral source that they sent me someone and then I couldn't take them and do the work right away. So I'm struck that you frame it from almost the exact opposite manner for the same reason. Yeah, it's a referral, so who better to understand? We do focused, good work for people, and you might have to wait your turn because we do focused, good work for people. They'll trust that more than anyone because they were referred in, and that is consistent with being referred to a high-quality practitioner is sometimes you can't get in right away.

Dann: Yeah. I think that most of my clients, no offense, would have preferred that I was working on their issues than onboarding their friends. They wouldn't want to get it the other way. "Oh, I'm sorry, I can't get to your needs right now because I'm working on new business."

Michael: So then I still have to ask and come back to this question. I feel like most advisors try to go through referrals. And I don't really know anyone that says, "Oh, I provide below-average service, but it's managed to work for me." Everybody says they provide above-average service. Clearly, not literally everyone can, we can't all be above-average drivers, but we all seem to put ourselves in a position where we're providing above-average service for a reasonable fee. And not everybody drives the level of referral activity that you seem to be driving. So you've lived the industry a long time now. Do you have any sense as to what's going on in your world, that more referrals seem to shake out than what happens with other advisory firms?

Dann: So if I was to give myself one superpower claiming that I have a superpower, which is pretty audacious, but my superpower is that I'm just incredibly interested by people. I love interacting with them. And so any other advice I give, if you don't love people, then it's probably useless to you. But I am so enamored with my clients and I love to sit and hear them talk about their interests.

And I have a client who loves building canoes. I assure you, I, Dann Ryan in New York City is never building a canoe, but I could listen to him talk about it for two hours. And that is probably just the depth of the relationships we have. And like I said, this sense of community where all boats rise. I say that it's just referrals and we don't have a real marketing strategy, but we do things, we do events. We host roundtables with business owners or with other people in the wealth community. We're having a client happy hour next week, which is terrifying to me. I could never imagine doing that in my own world. Putting clients in a room together with alcohol, no way that ends well, but it does for us because we've cultivated this space that, frankly, we were very fortunate to have found our way into.

What Surprised Dann The Most On His Journey [1:20:06]

Michael: So as you reflect on this journey overall, what surprised you the most about building your own advisory business after 10-plus years in the employee world before you made a transition and actually launched on your own?

Dann: I think that it continues to be challenging. And I mean this in the best way. I think a lot of young advisors can get caught in the new shiny thing because, as you say, they've achieved some degree of mastery or some proficiency, and again, no offense here, Michael, that they want to launch a tech product or a coaching service or some other advisory-adjacent thing, instead of honing in on, how can I become a better advisor? Which is scary. I'm still challenged by it.

I just recently put over the door in my office the quote from AFC Richmond and Ted Lasso. Their motto is "Gradarius Firmus Victoria," which, despite being pretty shaky Latin is a good message of just slow, steady victory. Keep showing up, keep doing the work, and you'll continue to be rewarded. And I find that very surprising.

The Low Point For Dann On His Journey [1:21:34]

Michael: So what was the low point for you on this journey?

Dann: Frankly, I would like to believe that it may not even be behind me. That excites me, that there will be more peaks and valleys and that I'll have to dig myself out from for my career. And I'm somebody, it's probably come through in this that struggles with tremendous anxiety, and my clients have to put up with it. I'm just a stereotypical millennial. Anxiety rules everything around me. And so you see my nervous energy, but that's three or four hours into the anxiety where I am done all my prep, and maybe it projects this confidence at some point, but I assure you, it's just me working through this and it drives the good work I do. And so some of that was self-inflicted, sure, going out on my own and questioning, did I even know what I'm doing? And you've really pushed me harder than I've ever thought on those questions because there wasn't a lot of why behind it.

Michael: It was just a leap.

Dann: It was a leap. And sometimes those are the best leaps.

Michael: And as I'm still struck and the anxiety that you talk about wasn't a blocking point on that for you.

Dann: No, I think that anxiety is an incredible tool if you can harness it and point it in the right direction. And this goes to your wellness study. Just as we age we become more mindful ourselves and able to harvest these parts of our personality. And when you have a very rewarding career, that gives you a great outlet to point them towards.

What Dann Would Tell His Younger Self [1:23:41]

Michael: So what else do you know now you wish you could go back and tell you from 10-plus years ago, early in your career?

Dann: I think for young advisors, and this is just my constant message, is this industry rewards persistence. And the most successful advisors I've known just picked something and stuck with it. And I give niching a hard time, but that's one method of picking something and sticking with it. I will tell you personally, I learned early about myself that I like having different clients. Having all similar clients would maybe have made me lose my interest years ago. Sure, it's great when you have five clients who work at Google and you have some leverage there and you know their benefits. But I also like working with lawyers and doctors, not too many doctors, but a handful. And so I like the challenge of that.

And so it's a lot about knowing yourself and just picking something and sticking with it. And I know that's not sexy and that doesn't make a great weekly podcast, but that really is an underlying current in this industry. And there's a lot of advisors out there who you're not going to hear on podcasts or see on lists that are just doing that and are serving billions of dollars of clients' assets incredibly well.

Dann's Advice For Newer Advisors [1:25:23]

Michael: So what advice would you give to younger, newer advisors coming into the industry today, right, and starting their path as you did 15, 20 years ago?

Dann: I'm actually adapting this from our conversation here in that firm ownership does not have to be the end result. And I know we're here talking about being an owner of a firm, but it is one path, and you don't have to set your sights solely on that end goal. And if you are focused on the end goal, please know that there are advisors like myself, like David, like others who have been through that equity struggle, and we are committed to doing better.

What Success Means To Dann [1:26:22]

Michael: So as we wrap up, this is a podcast about success. And one of the themes that comes up is just the word success means very different things to different people. And so you're on this wonderful path for success now as you're out with David and $165 million of AUM and growing. So the business is on a wonderfully successful path. How do you define success for yourself at this point?

Dann: It's funny because I don't think success is a word that's even in my lexicon. I don't remember the last time I used it. I certainly don't view myself as successful, but I think I can point to what gives me the most fulfillment. And that would be being back at a place where my average client relationship is more than 10 years old. That is what I'm in it for. I'm in it for the long-term relationships that is incredibly fulfilling, not just my clients. And when I say that this sounds salesy, but we always say our biggest client is our team, is our people, and we truly do mean that. And so the relationships with them is incredibly important to me.

I still miss my old team. I have a wonderful new one that we're building and just having those very long-term relationships. Anecdotally, I just spoke with a client. I remember when his daughter was born, I worked with his parents and they said, "Oh, our first grandchild is born, we have to open a 529." He just went on college visits with that same daughter and will be withdrawing from that 529 next year. Experiences like that are what make me get up every day.

Michael: Very cool. Very cool. Well, thank you, Dann, for joining us on the "Financial Advisor Success" Podcast.

Dann: Thank you so much, Michael. I really appreciate it.