#FA Success Ep 257: Deepening Client Relationships By Going Deeper For Clients In Transition, With Beth Jones

Resources Featured In This Episode:

• Beth Jones
• Third Eye Associates
• Kinder Institute
• Kinder Heart's Core Grid
• Dick Wagner
• Sudden Money Institute
• AssetMark
• eWealthManager
• eMoney Advisor
• MoneyTree Planning Software
• XY Planning Network
• #FA Success Ep 244: Taking A ‘Financial Gym’ Approach To Financial Coaching For Next-Generation Clients, With Shannon McLay

Full Transcript:

Michael: Welcome, Beth Jones, to the "Financial Advisor Success Podcast."

Beth: Hi, Michael. It's great to be here.

Michael: I'm really looking forward to today's discussion. And a number of years ago I had fallen in love with this quote from Mitch Anthony, that, "When life goes in transition, money goes in motion." And I think for some of our industry, including perhaps Mitch originally when he had put that forth, it was sort of like a calling sign for advisors about how to find business opportunities, i.e., if you're in the business of managing client portfolios you should try to find people who are in transition. Because when they're in transition their money tends to go in motion, which means there are opportunities, right? Someone dies, someone's married, someone's divorced, right, just those kinds of life transitions tend to mean money is moving, right? Divorce settlements, life insurance proceeds, dollars are in play that creates business opportunities.

But I know you’ve taken this to another level, which is building an advice business around the transitions, with a lengthy multi-meeting planning process to really help them manage the transitions that they may be in the midst of. And while, as Mitch Anthony said, when life goes in transition, money goes in motion, and there may well be investment management opportunities that come after the transition… I’m looking forward to talking about what this really looks like when you build an advice business that’s focused on the transitions themselves first and foremost. For which I know you actually charge standalone advice fees. And perhaps some investment management opportunities come later, because there is usually money in motion when clients have lives in transition.

Beth: Right, absolutely, and we have a lot of that going on. Most people that do come to us, not all, but most people that come to us do want us to help them with their assets. And we use a TAMP to handle the investment management part, but we design the investment plans based on all the life planning work or the transition work that we're doing with the client. So it is another revenue source, but it's always after the planning before we do that piece because we don't know what we're planning for. We don't know what they want to do.

Michael: So talk to us a little bit more about just the clientele that you work with and who you're doing this for.

Beth: Well, we have a few different targeted markets. I am married to Susan Simon. We started our company together in 2005, and so we, back in the day when I got in the business, in the late '90s, we needed to be really up to speed on, how do you help LGBTQ, the community, how do you help them plan for their life when marriage equality wasn't an option? So that was my entry into the business. And when I was in New York working for a small boutique firm, that was our client base. We didn't really work with anybody else, so I got really good at and understood, studied about that whole world, estate planning, and how do you help folks have a safe space to talk about their money in an authentic way, rather than pretending that they're not gay, and dealing with a broker in a brokerage house?

So that was a really important piece. I came into the business to help people, so that's a major part of our business. But we don't discriminate, and we do focus on people that tend to live a more holistic life, people that care about the environment, people that care about their dollars and their community. So we do a couple things, a couple small things that, sort of, bring those people to us. Since we've relocated to the Hudson Valley and created Third Eye Associates, we really have tried to find ways to reach the right kind of people.

We like to find people with a similar approach to life that want a place to go where they have that safety to bring all of them, and what they don't know about money. And then we help educate them into how to get your head around all your money. We give them great tools and then great infrastructure for moving forward in life. So we have those folks. We have, of course, anybody going through transition. We have a lot of women that come to us that are looking for a great place where they can feel safe.

We also have a lot of guys that bring... they bring their wife to us because they know they're either older, or they have health issues, or they know they're not going to live as long as their wife. So they come and they say, "Listen, I want my wife to have a safe place to go that somebody authentic is going to take care of them and not be just taking advantage of them." So that was an interesting thing that I noticed I was getting some of that. And a lot of professional people, so a lot of self-employed people, of course. And like I said, we don't discriminate, so we take care of lots of people but they tend to be people who are in need of these kind of services, where we can build a whole infrastructure for them around their money, and give them great tools, and educate them. We do a lot of education. So that's a little bit about the people we take care of.

How Beth Creates A Safe Space For Women & LGBTQ Clients To Receive Advice [07:28]

Michael: So I'm struck that I...I feel like I heard a few times in there this framing of, "We create a safe space for them. We create a safe place for them to go." Can you talk a little bit more about that? I don't hear a lot of advisors necessarily framing that as part of the value proposition, "We're a safe space."

Beth: Sure, yeah. So initially in the early years of my career...this is really my encore career because I used to be in design work and graphics. But I had a community of people that might have worked with Merrill Lynch, or Morgan Stanley, or one of these big brokerage houses. But they didn't even tell their broker who was just selling them product. They didn't tell them that they were gay. And so any advice they'd give them was like, "Well, when you get married or when you have a kid," or whatever, and it had no relationship to them. So it's like, they would come to us and they would say, "God, I just need a place where I can just be myself, and communicate all those aspects of my life, and get some planning done." So that was my initial entry into the business. And of course, when there was no marriage equality, you had to know how to structure things in a way that you could still support people to have things go the way they want it to go.

And then the other people that come to us and ask us, they want a safe space because they know that we really focus on education. We're not doing any revenue shares with other people. There's no investment houses that are giving us a little residual income. I like to call it kickbacks, but they like to call it residual income. But we don't have any of that built-in. We're a registered investment advisory firm so we're fee-only, and we only work for our clients and we tell them exactly what it costs to work with us, so they appreciate the transparency. And most of the people who come to us do not know anything about money. They're just a little bit freaked out, or they've been throwing money at accounts, hoping it turns out.

And in working with us, they know that we have this process that we go through. Typically will, even on the life-planning cycle, work with them for a good six months, like a very deep-dive discovery process, where we're really getting to understand what motivates them, what their fundamental values are, who are the cast of characters in their life that they need to keep an eye on, or look after, or support? And then what are their wildest dreams and ideas about how they'd like to live their life, and how do we get them from where they are to where they want to be, sooner rather than one day, someday? So we do get a lot of people that don't have a solid understanding of money.

Beth’s Financial Advice Begins With Creating A Life Vision [10:00]

Michael: So help me understand a little bit more just how this works in practice. Because when you talk about a deep-dive discovery process and an initial life-planning process that can span six months, just walk me through that a little bit more. If I've just said, "Beth, this stuff you're talking about sounds great. I don't know that much about money. I'm feeling unsettled. I really want someone to help. your firm seems great. Sign me up, I'm ready to become a client, and I'm coming on board now." How does this work? What happens?

Beth: Well, basically we do a series of meetings. We tend to do about seven meetings. Sometimes it's nine meetings, it really depends on the complexity of the client and what their immediate needs are. But in the financial life-planning process, we give them some exercises to do. We collect data. So we collect the same data probably any good financial planner should be collecting, but we want to get all that technical data in by about the third meeting. And we want to understand how people like to communicate. So we have a communication preference exercise. We have them look at their life today when they're starting with us, like a wellness check sheet, like a checklist, go through and give yourself a rating on a scale of 1 to 10 in each of these areas of life.

And we find that people come to talk about money, but what they often find out is that they improve their health, or they lose some weight, or they get a little more integrated in the way that they live their life, which is really fascinating. And then we have different exercises. We utilize The Kinder Institute exercises as well as some things that we've made. We have people go through some discovery questions about what's important to them, if they have any regrets, any concerns for their future, things like that. What really keeps them up at night, that kind of thing, although we don't really language it that way, but what are those things that are rolling around their head that they're not really dealing with?

And then ultimately we want to help them create a vision for their life, so we have an exercise for them to, after the other exercises you start to see some themes in people's lives. And then we ultimately work with them to create a brief, succinct vision statement for their life, and then we work on the obstacles that get in the way of having that life fulfilled. So we list it out. We don't do a lot with the obstacles, but what we find is that the end of the process, when people go back and review all this work we've done, all the life-planning work, they will look at the obstacles and they often say, "Wow, a third of that is gone." Because they've actually acknowledged the obstacles, and now when the obstacles pop up in their face in their life they can go, "Oh, yeah, that's just an obstacle," and just keep going based on the vision statement that they've created.

So for instance, I'll give you my vision statement for my life. It's to live a purposeful life, inspiring others with integrity and love. So when I was doing the Kinder work in the beginning, because we do it before we get certified to do the work with clients, the more I get underneath, like what's the why for me, why does that matter? And really, I like to make a difference in the world every day, and sometimes it's a small difference and sometimes it's a little bit bigger. But I enjoy impacting humanity every day of my life, so that's really a driving thing.

Prior to being a financial advisor, I owned other businesses and had varying levels of success. You talk about the iceberg, well, I'd get a lot of industry awards in my prior business but I didn't know how to manage money. So I learned all that through life experience. So when I came to this business, it was like, "Wow, how could I take that life experience and shorten that timeline for other people?" And so that's what makes me tick and gets me out of bed in the morning.

Michael: So walk me through a little bit more of just how this meeting sequence actually goes. When I look at a lot of advisory firms, we've done some research around this just from the Kitces platform. Most advisors get through the planning process in anywhere from two to four meetings, data gathering and present, or data gathering, present, and implementation is probably the most common versions. So you're talking about this seven-to-nine meeting process with all these exercises, just very different process than what a lot of other advisors use, so I want to understand this more. Where does it start? If I'm coming on board, "Beth, sign me up. I want to do your thing. This sounds great." What's the first meeting? How does this get started?

Beth: So the first meeting is really just to, sort of, glean from the potential client, what is it that they're looking for? What has them contact us at this point in their life? What's the complexity? What are their assets? Where are they at? And usually they provide some basic information about themselves and their statements or something so we can get a sense of how complex the planning process will be for them. And then, meeting two and three is really working on some exercises, answering some discovery questions. And we poke and prod people a little bit to try to understand in a deeper manner what's important to them. And then we start to do some work in the background on the cash flow.

Our plans are all built around, how do people get money and how do they spend their money? It's really foundational. I tell them it's the secret sauce to having anything you want in life. That is foundational. So most people just try not to spend too much. They try to save money regularly. Some people don't even pay attention, they just spend whatever they want to spend and they have debt, and they don't know how they're doing or if it's going to be okay or not. So we check in on that cash flow document that we work on together over the course of about two or three meetings to get it finalized before we can actually do the formal written financial plan.

And so about meeting five we've done an analysis of the investments. We're still working on putting the plan together, but now we've got a pretty good idea from the first four meetings of what's really important. What does the client want to accomplish in their life, and what are the timelines for those goals? So then, by meeting five and six, we're working on that draft financial plan and we're doing an analysis of the investment. Sometimes people are ready to get those investments reorganized, and then we create investment plans working with a third-party asset management firm. We use AssetMark exclusively. We think that they do a great job and their company, really, their value system aligns with ours. So we feel very comfortable. They're a great partner and they've helped us build our business over many years.

And then by meeting seven, we're delivering the final financial plan and making sure that we're really focused on that implementation process. Have they finished the estate planning? Through the process we analyze their tax returns, and of course, I think most people do that but we actually find out, is that accountant that you're working with, if you're working with one, appropriate for your life situation? And do we need to recommend somebody else? So we look at their professionals, make sure they have the proper people in place to support them in the tax area and also in the estate planning area.

Michael: So as you're diving in with the first meeting, you had said a lot of this is, what are they looking for? Why did they contact us, or what's the complexity? What's going on here? So I'm presuming then that that means when someone says they want to come on board with the client, you may not yet even be at the stage of actually figuring out the scope of the engagement or setting a fee for them yet. Because you have to get through that first meeting just to figure out what complexities you're dealing with.

Beth: Exactly. Yes, that's true. So by the end of that first meeting, if they've provided me with the basic financial data and we have this dialogue, I can see, do they have 25 accounts spread all over the universe? Or do they have some sort of consolidation and some organization, and their investments aren't in terrible shape? So I get a sense of it, and then they talk about what are the things that they want to address so I can tell are we doing a lot of scenario testing for them around who they have to support in their family? So how much money do we need to set aside for that person? Plenty of times I get people who have a family member that doesn't have any resources, or very little, and they have to keep one eye on them. Because it's either a parent or a sibling that's got maybe some other issues going on and they need to just keep an eye on that person and make sure that they're okay, so like that.

Unveiling The Needs Of Clients Through Discovery Exercises [19:12]

Michael: So you said by the second and third meeting you're getting into what you had framed as discovery exercises. So can you talk a little bit more about what those are? Is this your own process? Is this the Kinder style process? Is this something else?

Beth: Yeah, it's a little bit of Kinder, and it's a little bit of what we've developed, and then it's a little bit of some of the exercises that we use from Sudden Money Institute. The communication preference is definitely from SMI. We're really looking at, how do people like to receive information? If they go quiet, should we give them space, or should we intervene at some point to...do they want a day to think about whatever we're talking about? Or do they want us to jump in and keep them moving? What is their particular way of taking in information?

Michael: Interesting. And so it's just literally like these are blanks or multiple-choice options on a questionnaire. And so I could say, "How do you like to receive information? Email me, call me, we gotta do it in a meeting," whatever it is.

Beth: Right. But it's also, I like to get to the bottom line and then we can drill down and give me the detail. For instance, that's one of the major things about communicating with me. It's like, now don't give me all the detail and take me to Paris and back. I want to know the bottom line of whatever we're working on, and then we'll drill down and get into the detail. So that's a particular style I have. And other people, they take in information but they're very quiet because they're, sort of, integrating that information. And sometimes they need a day or two to, sort of, think about the things that we're talking about and then come back and have another conversation about and have questions. They need to think a little more or sit with it.

And some people just get quiet when you're talking about money because they're just internally a little freaked out. And so they may not tell you they're being freaked out, but I can usually see it. But sometimes they're like, "Yeah, don't mistake my lack of response for inattention. I'm paying attention. I'm just not communicating back to you." So things like that.

Michael: And so that's literally like a questionnaire that Sudden Money Institute has and provides you to use because you're involved in...

Beth: Yeah, that particular piece does come from Sudden Money. And then the Wellness worksheet I kind of adapted from another...some holistic practitioners I know.

Michael: So what's the Wellness worksheet?

Beth: That's the one where we've broken life down into 10 areas, and rate yourself on a scale of 1 to 10 in these areas. So one might be well being. Do you have any health issues that we need to plan for? Those kinds of conversations might not come up if we don't ask. How's your relationship with your family? Do you have great relationships with them? Do you have some you have a great relationship with and some that are maybe estranged or whatever? So we want to understand what's it like to be in your world. It can be, what about your career? How do you feel about your career? Are you doing things that light you up and inspire you? Or are you doing something that pays you good money and you feel like you got those golden handcuffs and you can't break out?

So sometimes we start working with people and they leave that career and do something else because we work on what's really important to them and then they start to focus on that. And then they get very clear that they're not going to stay in that particular job. And then we can coach them through that process and help them with the financial piece of it. So we do a lot of that work. We use the Kinder Heart's Core Grid. We want to get to the source of what's really important with folks.

Michael: What's that one, The Kinder Heart's Core?

Beth: The Kinder Institute Heart's Core Grid. So it looks at life from across the top. It's three categories: heart's core, ought to, and fun to. So down the left side it's heart's core have, heart's core do, and heart's core be, right? So we focus on the heart's core column first and we look at, if you think about life as whole and complete, nothing missing, what's there? What's there in life? What do you have to have in your life? So for me, home is really important, a home that I designed. It's kind of like my little sanctuary, so when I leave my office and I go to my home, it's like, I want to close that door and feel like, "Ah, this is the best place to be," right? I can rejuvenate. I can give my all all day and then go home, and then next morning I'm like a new person. I walk out that door. So for me, my home is something that would be in my heart's core have.

But I like to drive a nice car, so I drive an Audi. So for me, having a really nice car that's very comfortable is...so having my Audi is very important to me. And I'm not really into so much the material things, but yet that's something that really means a lot to me, having a solid machine that responds well, that feels right when you're driving it, and I feel safe. So for instance, my relationship, my grandchildren, those kinds of things would be in my have category.

And then the do category is heart's core do. So what are the things you do? Sometimes there's an overlap. So if you're a gardener, so having a garden might be in your heart's core have, and then doing would be the gardening, creating my gardens, keeping them up, or whatever that would be for you. And then the being category is the being side of a human being. So for me, it's about being generous, being loving, and accepting. And there's probably a few others in there, but that kind of gives you a sense of what that's like.

And then you compare the heart's core to the fun to. So some people, traveling the globe is really important to them and it would show up under their heart's core do. For me, I love to travel, but I live in a beautiful place. And if I never traveled again I wouldn't feel like my life wasn't whole and complete. So for me, travel ends up in the fun-to-do category. So things like that.

And then people, usually the ought to category down the middle is...and then, of course, it's always have, do, and be down the left side. So the ought to category is usually people's to do lists. So sometimes they put on the ought to have a financial plan. It's like, okay, I hope that's for you and it's not for me. Because I'm just here to support whatever you're up to. But sometimes they're really focused on that. A guy called me yesterday, he's been shopping for a financial planner for 10 years, and a few months ago he found us listed somewhere on some site. And so he started looking into us and doing his own research. And then he called us last week and said, "I really want to work with you guys, so what do I have to do?" So we started a meeting process.

So sometimes those are things that are really strongly on people's minds, and sometimes it's, they're getting closer to leaving their corporate job and they want to make sure they're okay for the next stage of life. So we use that grid and we really glean a lot of information about people. And sometimes the fun to category is really interesting. The first time I did it, I was in a darker place in my life, and not terribly dark, but I was just, sort of, not really feeling self-expressed in my life and I was trying to figure out, "I don't really want to do that but I'd like to do this." And so for me, the first time I did the Kinder Heart's Core Grid, I didn't have much in the fun to category because I was just, sort of, re-examining my life. And so it didn't feel like there was a lot of fun going on at the moment. But I'm actually a very fun-loving person, and that's not the case today but that was the case the first time I looked at it.

Once we get done with that then we start to work on the...we've now collected all the data. We're starting to do work on the cash flow. And the final life-planning meeting is really around visions and obstacles. So what is that fundamental why for you as a human being that gets you out of bed in the morning? What are you most passionate about? Why does that matter to you? And then listing out the obstacles that get in the way, the external obstacles or the internal obstacles. One is, sort of, a variation on what Kinder does, and the other is right out of Kinder. Kinder wants to discover the torch.

I go a little deeper, more 10,000-foot view, like, what is that fundamental thing for you about your life? Why? What's your why? What's underneath? So we do a life vision statement and Kinder does a torch, and sometimes the torch changes because you might have a torch this year but then next year you might have a different torch. So I kind of take it a little bit further and do a vision statement.

Michael: And so this is all happening through largely the second and third meeting that you're doing these discovery exercises?

Beth: Yeah. And then the fourth meeting is really the vision and obstacles. We've given them a money autobiography that...

Developing A Financial Strategy By Documenting A Money Story [27:28]

Michael: So what's a money autobiography?

Beth: So that's an exercise that was put together years ago, I've sort of adapted it, that Dick Wagner put together. And I've adapted it to a more abbreviated version, with his permission before he passed, of course. And it really walks people through like, "Okay, let's figure out what your money story is, right? What's your conversation around money that has never maybe been distinguished or articulated?" So think about childhood. What's your first memory of money? What was good about that or not so good about that? What was your family's life like around money? What was your culture?

Did you have people that lived through the Depression? Now it's getting harder to find people who have lived through the Depression, because those of us who have parents that did are older. So it's a little bit different than it used to be. Everybody had that, and now you say that to a Millennial and they're like, "What are you talking about?" Something they read in a book once but they don't know much about it, so it's sort of fun.

Michael: Financial crisis is pretty depressing for a lot of us.

Beth: Yes, exactly.

Michael: So is this another guided questionnaire thing? How are you actually delving into people's money story?

Beth: So what some people do is they'll read a section, the section on childhood and money, right? And they'll just write a paragraph or two about that. Other people just answer the question, so it's really designed to inspire thinking and get it out of the gray matter, and get it in black and white on a piece of paper so that you can start to interact with some of those innocent messages that you might've created as a young person with an under-developed brain, observing adults that maybe don't have great habits. I grew up in a large family with a lot of kids and not a lot of money, so for me, I didn't want to have a life like that. It was so stressful.

I wanted to have a life that had a little more freedom to it. So I matched my thinking to watching my grandmother, who was an entrepreneur. So I was like, "Okay, you gotta work for yourself so you have freedom in your schedule, freedom to do the kind of work you want to do and you can make whatever money you want to make." It's just a little bit less relying on another person to employ me. So we do a whole bunch of work on that, and then we go a whole section on your own personal line of credit, and on your personal adult life, and your habits.

And how a lot of times people will say, "Well, at this point in my life I was really good with my money but now I don't seem to be able to have a handle on it. So I carry a little credit card debt and I always seem to be a little bit behind the eight ball." But they make good money, so it's sort of like, well, that seems silly that you're making really good money and you feel behind the eight ball like you don't have any money. So then when we really drill down in that cash flow people can start to see, this is where they're spending their money. So the money autobiography is inspired to kind of get them to be awake to what's their fundamental conversation around money, and how'd they put that together?

Michael: And is this literally running from some, kind of, just a template? Is this seven questions for you to answer to formulate your money autobiography?

Beth: It's like, three...it's two and a half pages, single-space questions broken down into different categories. And then they look at the questions, and sometimes they read a question and nothing resonates with them. It asks about religion. It asks about your family culture, mother side, father. It just asks you all these things so that you can start to get your head around. Were you like me observing others and not wanting to have that life, or were you just, sort of, going along and everything was fine until you became an adult? And all of a sudden you realized, "Hey, somebody has to pay attention to this stuff."

So it sort of just depends on what your experience is, but the money autobiography, a lot of people think it's very cathartic because they've never really sat down and thought about it. So people tend to spend about 45 minutes putting that one together, and then they bring it to us. We go through the highlights of what they saw and set that aside. And now we're wrapping up the...that's helpful before the obstacles really, because it does point to some of the obstacles people accumulate throughout life.

And then we wrap up the vision and the obstacles, and then start to really delve into the technical side of the financial plan, all the analysis, and putting the plan together, and figuring out their time. Now we have a clue about the timelines, and the goals, and a deep understanding about their fundamental value system. So that, for us, is fundamental to any recommendations that we give them.

Michael: And so then you've said you start building towards cash-flow planning. So what does this look like for you in practice? Are you literally pulling out a budgeting sheet and having them fill out where all the dollars go?

Beth: Yeah, we do that. We also work with eMoney. So there's a spending feature on eMoney. We guide clients through that. Every client that comes to work for us gets an account on eMoney. We private label it, My Financial Vault. But if they don't have any system that they use then we recommend that they use that and link their accounts so we can start to really categorize their spending and look at it. So after we've spent three meetings just reviewing that and getting it what we feel is pretty buttoned-up, sometimes people have more of a hard time figuring out how they've been spending their money, but they're really focused on how they want to spend their money.

So they'll create what they would consider their best budget or spending plan, and then we start to build the financial plan around that because then we can see. We've got an Excel tool that we've built, and then we can see what's left over if this is really what you're spending. A lot of times people come in and they'll say, "Well, I'm earning 150,000. I put away my 401(k) but I really don't have much else, other than that." And so when they give me their expenses and we look at it, and if the Excel sheet says you should have $30,000 or $40,000 left over and you don't, okay, where's that money going? It's like, I call it mystery money.

So we get into that and we go back and forth. And we want to have a baseline for whatever their budget or spending plan is so that when we're doing the projections forward, then we gotta think about, "Okay, well, if you stop working at some point in the future, how are those expenses, and income, and expenses going to change, so that there's a cash flow now in life," depending on their age. But if they're 50 and they're going to work for another 15 or 20 years then they're probably going to adjust that cash flow over time. However, if they're 60 and they want to retire in the next 5, or 6, or 7 years, they're going to be really paying close attention to that and try and squirrel away as much money as possible to hustle so that they're prepared.

Michael: So I'm curious, just from the pure eMoney, and just how does this work in practice? You link them up and then you have to wait for spending to come in for a while before you can actually have something to look at to say, "Here's where you money is going?" Are you trying to use it to pull in prior data to figure out where money has been going?

Beth: Well, actually we're using it for money going forward, where that's going so that we can verify what they're telling us about where they spend their money. Because usually I just have them start, like I say, "Don't worry about the income. Don't worry about the taxes. I'll get that from your pay stub and your tax return. Let's just focus on what you know are your fixed expenses and we'll start there." Because that's the easy part. It's when you get to that discretionary spending that people don't really necessarily have a clue how they're doing it. They like to eat out, and they don't really know how much they're spending in restaurants. So getting all their accounts linked on eMoney helps us to understand. We start to see how they're spending their money, and so we can challenge whatever they've thought they're spending their money on versus what's really happening.

Michael: So you said then by the time you're getting into the fifth and sixth meetings you're now starting to draft a financial plan. So I'm presuming this starts coming forth from eMoney, if that's your planning software of choice.

Beth: Yeah. Well, we have two different ones, but when we deliver a financial plan we like to deliver a document, even though we know that tomorrow it's obsolete. But at least it gives people a baseline. But we do a summary in the beginning of the plan of all the life planning work we've done, so their vision, and their obstacles, and their Heart's Core Grid, and all those things are like that deep-dive work that we did in the beginning. And then we look at the cash flow that they've settled on. Is there cash flow?

And then we get into the software projections of the financial plan, and we try to limit the number of pages that we give them. It's too technical. And we run Monte Carlo and all that stuff that you run when you're putting a plan together. But we try to keep it very focused on, "Here's all the things you want to be focusing your life on. Here's your money and here's how you're putting it away, and then here's how that's going to make a difference in the future in these dates and times of the things you want to do, like sell this house, buy another house, or buy a second home, or travel to Europe."

I had a client last week that's been planning for five years to go to Greece and then the pandemic hits. So when she finished her planning we do a wrap-up, and we go back and look at the beginning, what they came in the door with, what their concerns were, and then we compare it to where they're at at the end of the process. And she said it's the first time, this woman is 72 years old, first time in her life she went on a vacation and she didn't worry about money. Because she got that she has plenty of money and she can afford to go to Greece for two weeks, and it's not going to disrupt her money for the future, but she actually can afford to do that.

So it's very fulfilling when people come to you and say things like that. It's like, wow, that's really great. She's a person that came in the door very worried about her money, and now she's like, "I have enough money. I'm okay. I thought I needed $5 million dollars. I don't, I've got $3.5 million. I'm good there. I don't need to worry, or keep working, or whatever."

Michael: And I think you said that you have two different planning tools that you use, so what are you using besides eMoney?

Beth: Yeah, so we do use Moneytree Software as well. We used that for years, and then about four years ago we bought the eMoney system. And we've been using the eMoney almost exclusively since, but we have certain clients that have pretty straightforward situations that have their original plans done in Moneytree. So we'll just call up the software and update their plan for them. But if life's gotten more complicated or they're using eMoney regularly, we're just going to do the plan on eMoney. Because my planner is just a whiz at it and it makes me happy because it drives me crazy.

Michael: So what led you to eMoney and to make a switch away from Moneytree?

Beth: It had nothing to do with the planning software and it had everything to do with being able to aggregate people's accounts, having a safe portal where we can exchange sensitive information safely. I'm always focused on technology and cybersecurity. It's a big thing. We're a small firm, and I hear stories of small firms that don't really have that buttoned up. And it's always just been very important to me so I make sure that that's covered for my clients. Overall, I love eMoney and I think it does a great job, and it's a little complicated but it's okay. Because there are people that have more complex situations, and they actually require a more complicated software.

Michael: So that's interesting that the portal, and I guess, not just the portal for account aggregation, and data flows, all that helps, but the portal, to specifically use it as your secure document sharing location and confidence that would rather let eMoney figure out all the fancy cybersecurity stuff as an enterprise than doing it as a solo firm. That's a lot easier to let their technologists do it.

Beth: Yes, exactly. My method has always been spend your money on technology because it's going to make you more efficient. It's going to make your clients safe. And work with the very best of the best in any outside vendors that you work with. And when I hired a cybersecurity consultant he said, "Oh my God, I've never seen a small firm your size that actually had all their technology buttoned up like that." But I'm like, "Well, I want my stuff safe, so why wouldn't I make sure that I got the best people?" And he said, "You did exactly the right thing. You go with the very best in the business, and knock on wood, you should be covered." But it's something we monitor on a regular basis, so yeah, so that's why we chose eMoney, for all the services that they provide.

The Drafting And Implementation Of The Final Financial Plan [38:50]

Michael: And so, I'm wondering, it sounded like you said there's a meeting around five or six for the draft or the plan, and then there's a meeting number seven for the final version of the plan.

Beth: A final version of the plan and then the execution. We want to make sure we're executing whatever plan we've worked out. We tend to spend the last two months of the six-month process, sometimes it's four weeks, sometimes it's seven or eight weeks, but we try to spend that last period of time really focusing on that the client is implementing everything that we're recommending for them. So it might be re-allocating their 401(k)s, or they've asked us to consolidate their accounts and have it all make more sense. So that's where we work with AssetMark. We design the investment plans and then AssetMark does the implementation.

So they've done all the due diligence on the money managers, and the certain managers that resonate with us. And we typically will do a few different managers for each client depending on their area of expertise. So we'll do some broad-based, global allocation, and then have some tactical overlays, or some of the managers that are focusing on limiting loss. Some are focusing on a little more alpha on the upside, and so we get a nice, good cocktail there, and we can go forward and monitor that for them. And then we would be meeting with the client after that probably, two to four times a year, depending on their level of assets.

So that last couple of months is really to make sure they're implementing and find out where their pain points are. Are they focusing on the budget, or do they just throw their hands up and walk away? Then it's probably not going to work out if they're not having some ability to keep an eye on that. So we want to make sure that it's working for them in their life, so that's why we try to get the bulk of that work done in the first four to five months. And we're meeting with people. In the beginning, the first 4 meetings are 90 minutes every 3 weeks.

So we want to kickstart this and get them going, and keep the momentum going. And then from there, sometimes at the end the meetings are more like an hour, just checking in to make sure things are moving, make sure they're setting up their estate planning. If they need something new in the insurance world, re-analyze their coverage, and then they can make a recommendation where they can get that work taken care of if they don't have somebody already, that kind of thing, just to make sure everything is buttoned up and moving forward.

Michael: So I guess I'm just wondering, process-wise, from draft plan to final plan, because I think you had said you like to actually create the deliverable, right? I like to call it The Plan, capital "T," capital "P." So do you make The Plan, but walk them through it and say, "This is a draft, if you don't like stuff we're going to go back and change it?" And then you come back in the meeting with a final The Plan?

Beth: Yeah, we do the first draft, and sometimes they have a couple scenarios they want us to run. So we'll do a little scenario testing and we'll sit with them with the draft. We think it's pretty buttoned up, but then we go through it and sometimes they're like, "Yeah, I know I said I was going to buy that house in Vermont next year. I'm probably not going to do that for five years." So then we would go back and we'd tweak and adjust those changes that they might really have. Or they'll say, "Well, I was going to sell my house but now I think I want to keep my main house and just have a little weekend place later on." Whatever the thing is that they're focused on, we look at the timelines for those.

And then when we review things with them, sometimes they'll be like, "Yeah, I realize my cash flow, that was kind of BS. I'm not really doing a good job with that so I'm seeing that I need to update that for you before you run the final. Because that's going to impact how everything looks." So in going through that draft we can really fine-tune things with them and see. I had people that were going to retire in five years in California, now they're retiring in March because Covid just made them crazy. So it's like all of a sudden we're changing the whole plan because they've moved their deadline up by several years. So once we get that, sort of, the first one down, it's much easier to go back and then just adjust the scenarios, and figure out how that's going to impact their bottom line later.

Michael: So how long are these meetings? Is each meeting an hour-plus meeting to go through all of this? Or are some of these shorter and more focused? Do some of them actually go a lot longer just because of the depth of some of the conversations in the exercises that are involved?

Beth: Well, we try to keep it to 90 minutes. Sometimes the first meeting is a little difficult when you have a couple to keep it to 90 minutes. So I tell them, "Be prepared to go two hours." And then after about the fifth meeting, when we've gone over the draft plan or whatever, then they tend to be about an hour long. The last few meetings tend to be an hour, sometimes they're 45 minutes, sometimes they're an hour and a quarter. But for the most part, they're right around an hour as we get further along in the process, because we've done a lot of work behind the scenes so that that deliverable is pretty organized around what they're wanting to see.

Michael: And so how are the meetings spaced out from each other? If you're going through, what, maybe seven odd meetings, how long does it take just to get through the process?

Beth: It takes roughly four to five months. We try to meet with them every three or four weeks to keep them on track. And of course, then life interrupts that. I got a guy, we just started working with him on his planning process, and his mother took ill. She's out in the Midwest. He supports her around-the-clock care, so he's like, "Look, let's just cancel any meetings we have on the books for now. I gotta go out there, sort this out. I will be available to start this process properly with you in January when my sabbatical starts." So he's a busy executive-type guy and he's getting a sabbatical in January, so he's just decided. We've been trying to get him going, but he keeps having these delays. So now we're like, "Okay, let's just wait and start this in January."

But the meetings are pretty...we find that you don't want to do one and then not have another meeting for two months. Because people lose track of where they're at, what they're doing, why, what does it matter? They sort of get lost in the process, so we try to keep them on track once we get going.

Michael: And so do clients get, I don't know, impatient with going through all this? Do you worry about just client fatigue when it's as many meetings as it is over as many months as it is? Or just when clients come to you, they know that this is the process and what they're getting into, and so if they sign up they've already got buy-in for going through just the meetings and the process?

Beth: Yeah. Well, we lay it all out for them. They get a lot of information from us with a layout of what we're going to cover at most of the meetings. We've got our process, and then they've got life changes and they've gotta stop and do something else for a meeting. And then we'll go back to the process. But for the most part they know what's going to be involved. We're very clear about it because it's like you're climbing a mountain and you're tied to somebody and you don't want anybody jumping off. You don't want to jump off and you don't want them jumping off, because that's going to be one more thing they didn't finish in their life. So we want them to feel successful and to really get an infrastructure around their finances that serves them and keeps them feeling like they know what's happening. So that's a process.

Michael: So how do you think about this from the firm end of just the sheer amount of time that this takes? As we had said earlier, there were a lot of advisors that, for better or worse, tend to do their planning process in usually two or three meetings, which most of us will get through in anywhere from about three to six weeks depending on how quickly you schedule those follow-ups. You've got this seven-meeting process that can run four-plus months, and just time and labor-intensive for the firm. So just how do you think about that relative to other advisors out there and the time it takes?

Beth: Well, I'd probably make a lot more money if I didn't do this in-depth process, but this is the process that I have discovered really works to give people what they need to go through life and be empowered around their money. Like I said, it's a big commitment for us as well as the client. So we are a little selective about who we say yes to. At this point I have about 15 people that want to start working with us, and we have to spread them out a bit so that we have the brain space and the staff support to get them through the process. It's a very big commitment on our part. We do get paid. We have these retainer packages that, basically, as long as things go along pretty much the way we expect they will from the beginning, give or take an hour or two, we'll stick to whatever we contract with them for.

How Third Eye Associates Incorporates Clients’ Financial Priorities In Their Fee Model [46:54]

Michael: And so what are those retainer packages? How do you actually price all of this?

Beth: So we have figured out, backed into how much time it takes, how much staff time, how much of the advisor time it takes to put these together. Some of the planning meetings as we get into the technical end, they'll probably have more of my staff talking to them to make sure they've collected all the updated information that's going into the plan. They're working directly with the planner who's putting the plan together, and then they come to me to review things right before it's going to go to the client. Or if they bump up against something in building the plan, then they would get me involved.

But my staff, we do this as a team, and so my clients understand that, while I'm the lead planner on this, they are going to be interacting with everybody on our staff. Everybody's got their area of expertise and the things they focus on. So they really want those experts helping them in those different areas. So people understand. That's why we do the initial one-hour consultation. We want them to understand that this is a ride. And so we start out, I think our basic plans for an individual for the six-month process starts out at $4,000, for couples it's like, $4,500, and they go up from there based on the complexity.

So if somebody comes to me with a million dollars, they're probably going to be paying between $5,000 and $6,000 depending. I've had people that come to me and they've got 10 businesses, so that process is a little different because they're much more complicated. And they'll pay $10,000 for the planning process, and it takes longer. So it just depends on the situation, but that's the basic range of things. And then on the financial transition process, it's really at least a year and sometimes a second year, and they start at 6,000 and go up per year, depending on, again, the complexity of the situation. And usually those situations are people have a lot more parts and they have a lot of emotion around whatever it is they're working on.

So we have to allow the space for the emotion but we don't do a lot with it. We just allow it to be. It's the whole human being. It's not just the technical business side, we got a whole human being. And if they're having emotion we want to understand, what's going on with that? Is it because they lost a spouse? Then you're just going to be...always have tissues on the table, right? There's always going to be some sadness there until they get to the other side of that. It's not ever going to go away but they learn to live with it, right, and to include it in their world.

But I've worked with entrepreneurs who are working on creating six different businesses all at one time. And while I think for me that would make me crazy, it's perfect for them. They're a quick start. They're out there with great ideas and they got people working for them and pulling things together. And those people need some place to, sort of, have somebody bring them, have them take a deep breath. Let's focus, what's our priority list? What are we working on today? And then we re-organize. We meet about once a month. And then they're really looking at, "Okay, these were our priorities last month. Are these still our priorities, or are we moving something around?"

We break it out with now, soon, or later. That's a Sudden Money tool that's very effective in helping people prioritize when they have multiple, multiple things that they have to really get to. So we go through that process with them. We've got a lot of different tools, more than 100. So it really depends on what comes up in the meetings, what tools we're pulling out in that transition process.

Michael: So when you think about this core planning process, just the span of seven meetings and the stuff that goes with it, do you know, how long does that take you? How much time is involved with this at the end of the day?

Beth: We charge $250 an hour, so for me, as the planner, my time costs more than my staff, of course. And that's why we try to have staff work on certain parts of it so that we're more efficient. And it takes a while, so it's probably, in the basic planning process, it's probably somewhere around 10 hours. More complicated things tend to be more like 12 or 15 hours. Some of them are more complicated, it's 20 hours to get it all done. Some of it's advisor time which is, like I said, a little bit more expensive than staff time. But yeah, there's a lot of parts. There's a lot of pieces.

Michael: Well, just the sheer 7 meetings that are an hour and sometimes an hour and a half, just that alone will rack up almost 10 hours of meeting time.

Beth: Exactly. And then there's the behind-the-scenes stuff, so yeah.

Michael: I'm presuming just from the pricing that you don't necessarily have a huge amount of behind-the-scenes stuff priced in. The biggest driver of this is just literally all the meeting time.

Beth: The biggest driver is the meeting time, but there's plenty of...I don't have the chart in front of me so I'm just trying to remember, but the different packages have different amounts of time. And we have some that we're spending nearly 30 hours on. So it just really depends on the package, but yes, there's a good amount of staff time that goes into the collection. The bulk of the expense really is my time in meetings, and then the planner's time to put that plan together, although mine's pretty zippy. But that can take three or four hours to actually put the plan together, and proof it, and make sure it's all buttoned up. And then I'm ready to present it to the client. So anything I can hand off does help the process be a little more efficient and cost-effective for the client.

So I work mostly in the middle market with people that are, what they say, the mass affluent, or people that are professionals that are working and making good money, and saving money. So the bulk of my clients are between $500,000 and about $3.5 million. I have some over, and I have a few younger people that are building their wealth. And I'm not really the servicing advisor on those, but they get set up in their planning process and then somebody else takes over and manages those folks to keep them moving forward.

Michael: But I guess, from a pricing end, just you set a price upfront in the cost based on your estimate of the complexity, and that's what you move forward at. You're not literally billing them hourly and then invoicing after the fact based on how long it took?

Beth: Right, we are tracking. We track everything we do, tasks, we track client time. We don't track for things like sending them an invoice, or my schedule, or calling them to get them scheduled. Administrative stuff we don't charge them for because that's really included in my hourly rate, but the other things, anything anybody's working on, building the plan or doing some work with them on their budgeting, that is billable time. We track it, and I have to say, we're pretty on the money as far as what it takes. Every once in a while we get into it with somebody.

And I tell them in the beginning, "Look, it looks like this is what you're asking for. This is what we can do. This is the amount of hours we have." But every once in a while we get in there and we find out, "Okay, there's really transition planning." So we have to do, stop, change, start. So we'll say, "Okay, you can see that this is much bigger than we were initially thinking it would be, so we're not going to be able to do it for this price that we agreed to." Or we'll be three and a half months in and we've already spent all their money. It's like, okay, "We gotta have a conversation because this is definitely bigger than you and I thought it might be."

They've been great. I've had some people where they spent $2,000 more than they expected to, but I tell them, "If something comes up I'm going to let you know right away and we'll make an adjustment." And we'll work it out with you. But if we're within an hour or two, I don't charge them extra. I just get it done, get it out the door.

The Delicate Balance Of Providing Services For Those Clients In Transitional Phases [53:59]

Michael: And so then talk just about how the financial transition process is different. You had just said, it has different pricing. It can take a year or two, just because when we're going through big transitions it takes a while to process. But what does that process look like? Or how is that different in terms of the meetings you have, and when you have them, and what you're doing?

Beth: So with those folks we tend to meet with them monthly. Sometimes we have people, like I have a wonderful, favorite client that's been with us for over 10 years, and she came to us on a recommendation from her estate planning attorney in DC. Her husband committed suicide and they had just retired, or he had just retired. She was about to be retired, and so it was really disruptive, of course, and she was heartbroken. He had been struggling apparently with mental illness for his whole life, and she came home and found him in his study. It was really sad. So she was just devastated.

And so for her, while we ultimately want to do the financial planning process, we have to really take it in small bites. And mostly what we do for a long period of time with the transition clients is we're looking at, what are those priorities? What do you feel like? Tell me all the things you're worried about you gotta get done. Because a lot of times people are like, "Oh, there's so much to do," but at the same time, they're sad, and their brain is...their cognitive ability is a little bit depressed at the moment because they're so emotional, and they're dealing with this big shift in life.

So we want to slow down that process, get from them everything they're thinking about so we can capture it for them, and then help them to prioritize, "What do you really need to do right now?" Some of them are like, "Oh, I have to sell this big house. I can't live here." Okay, but you don't need to do it now. So am I okay? There's another tool called Am I Okay? So we look at, okay, what are these things that you're concerned about? And let's quickly look at the financial piece to make sure that you're financially okay for a period of time so you can make that decision when you feel like all of you is on the case, rather than doing it under duress because you just lost your spouse, right?

So in that instance, we had to do shorter meetings. Sometimes we had to do 30-minute meetings every 2 weeks because they just couldn't handle more at any one time. Other times we have to do an hour, and we can do it every three to four weeks. That's fine, it just depends on how every person handles transition. Some people are used to pivoting and they can do that fairly well. Other people, something like the situation I described with my client whose husband passed away, that's a whole different animal. So we just have to, sort of, tread lightly and help them feel safe that they don't have to make a lot of decisions. Let's figure out what needs to be made right now, figure out how much money you need to cover the basics for your situation so you can stay put, and go forth from there. So we do a lot of prioritizing and re-prioritizing over the months that we're working with them.

Michael: And so I guess less planning even as we traditionally think about it, and more just...the words that coming to mind to me is just counseling of just... Counseling through, let's just do monthly check-ins, and just, "How's it going? How's life going? How's the transition going? Is the money lined up to be where it needs to be to do these things that are going on right now? But we don't need to deal with all the rest of the changed stuff."

Beth: Yeah, so that's a little bit different in that regard. So we sort of have to dance in the circumstances with whatever is coming up for them. But we want them, first, to feel like they're okay, they don't have to make a lot of decisions they don't need. That's the Decision-Free Zone through the Sudden Money Institute. It's a funny name but we only make decisions we have to make. We don't make any decisions we don't need to make, and then we're able to coach them how to talk to family. A lot of times when you lose a spouse people will say silly things to you like, "Well, what's the big deal? You don't have to worry. You have life insurance now. You have plenty of money."

And it's like, it's not about the money, it's about the human being and what they're experiencing. So we tell them, "Call us any time. We're here for you." And we schedule according to what they can tolerate. Sometimes we start out at hour-long meetings and then we switch it up because they're just in an upset space and they really can only deal with a small amount of time. So we make the meetings shorter and a little closer together. It's just, you have to dance with it with them.

Leveraging The Right TAMP (Turnkey Asset Management Program) To Create A Complete Financial Plan [58:07]

Michael: And so now talk to us a little bit about AssetMark, I guess just more generally, the investment implementation side of things. So I'm gathering you don't do any of the investment management and trading in-house, that you said earlier no custody, no discretion even. So it's all ultimately outsourced for AssetMark to implement, as TAMPs doing what TAMPs do.

Beth: Right. So we're trained by AssetMark to understand all the different investment managers that are on their platform. It's absolutely wonderful, wonderful, very comprehensive. They do a lot of practice management with us to help us build our business over time. They've done a great job, and at this point, we're one of their top 100 clients. We've worked with them since 2005 when we started the company. We were with a different TAMP who basically dropped us like a hot potato and just blew us off for meetings. And we were like, "Oh my God, what are we going to do? We have to have somebody who manages the money for us."

So we were introduced to AssetMark and they turned out to be the perfect partner for us. Of course we have access to their eWealthManager website, and so we're able to go in and build the investment plans in their software, drag and drop, so to speak, the different managers we want to work with and why, and then, of course, dial up and down the risk level based on the goal of the money. So somebody could have three different risk levels in their overall accounts based on what that pool of money needs to do.

Michael: Why AssetMark, and what led you to AssetMark in the first place? Because it seems like there's a bajillion TAMPs out there these days.

Beth: Yeah, of course, there are, but they've been doing it since the mid-'90s. They just really know what they're doing. I was originally attracted to them by the staff I met. They were really very comprehensive and very attentive. The company was started by three advisors, so I liked that about it. So they understood our world and what we're dealing with day to day in taking care of people. Certainly our side of the business is not the easy side of the business, but it is really valuable and I find it extremely fulfilling.

So I used to manage portfolios in the prior company, and at some point I was like, "I'm really good at this but I don't really want to do this. I want to do the planning work, and there's gotta be smarter people that can do this, not at a retail level, but at an institutional level at a very good price point, and very high level of asset management. And I need to go find those people because I think that's a better mousetrap than what I was doing at the other company." It was all retail, mutual funds, and it just was like, "Oh, God, you gotta be kidding me." It wasn't what I thought was the best way for people to manage their money.

Michael: So how does this work from a pricing perspective?

Beth: There's our fee for monitoring the managers, meeting with the managers. We meet with them throughout the year. We go to a couple conferences a year. We're in constant contact with AssetMark. They, of course, have a whole back office that does all the processing of the business. We can direct it from here. When a client says, "Yes, I love this portfolio," we can prepare the paperwork and have them sign off on it, and then push a button. It lands at AssetMark, and they take it and open the accounts, and start the transfer process happening.

And sometimes we have to do the transfers because they're rollovers, but I have an operations guy, that's all he does is handle all the transactions and make sure that everything is buttoned up the way it's supposed to be, and monitors to make sure the transfers are happening. He's in touch with AssetMark, but it's all mostly electronically done on their website that we have access to, their eWealthManager website so we can see all the clients. We can go in and submit documents on their behalf, and things like that. So they handle all of that piece and we just monitor what's going on with it.

So we charge a fee. It's usually starts at 1% and goes down based on the volume of money. And if it's a very small account we might charge more like 1.2% because it's a small amount of money. So getting that set up is going to cost a little more.

Michael: What's very small in your practice?

Beth: Well, if we got a client that's got $1.5 million with us but they've got a kid that's got a Roth IRA account, we would help them set that up. We're not really going to so much interact too much with that person with the...say they got $10,000 in a Roth IRA. We're going to set them up so they're doing systematic investing. We're going to make sure they've got good managers doing it, and AssetMark provides a couple of programs that they manage where they've got the multiple managers under the hood.

And our side is very automated in the way we send reports to them, and we send them a letter at least once a year letting them know that we're here if they want to talk about anything. And then every couple of years we have a live phone call with them or a Zoom meeting just to look them in the eye, make sure the risk tolerance hasn't changed, and check in on what's going on. But for the most of our clients have larger amounts of money and we're meeting with them quarterly.

Michael: Okay. And then how do you handle, I'm presuming AssetMark's got its own platform fee. If you're using third-party managers on there they've got a fee. So do these add up? Do you pay some of yours out of yours? Do you apply and pay separately for each? How does that work?

Beth: No, the client gets one flat fee. So when we create the investment plan they get one flat fee. They do break out what goes to the advisor and what goes to the asset managers, and out of the asset managers cost is any cost that AssetMark has, plus the money managers. We've got a lot of separately managed accounts. Those tend to cost around 1% on the manager side and go down from there. Our fee is around 1% and goes down from there. Most of our clients that are in the $2 million range, they're paying about 1.3% or 1.5% a year all in, everything, all their reporting, the tax work, all of it, right?

So it's a very good price point, I think. We have a couple of clients that only have the separately managed accounts, and they tend to be about 1.6 or 1.7, but they have them because they've got custom bond programs, or custom stock programs, or ESG programs, where they're really focused on the environmental, social, and governance, screening, and advocating. So it really depends on who the manager is what their different fees are. But when we put it all together, we try to keep them somewhere in the ballpark of around 1.5% or less if we can. If they've got volume we can get it below 1.5, so we try to keep it very reasonable for them.

Michael: So just in this world where I feel like so many advisors talk about the proverbial 1% fee, and then by the time you actually get all the different people at the table who need to get a piece we end up higher at that. So as you said, you end up more like 1.3 to 1.5 all in. Does that worry you? Is that a challenge?

Beth: No, I don't get challenges at all. Clients want to know and we tell them, and whenever we show results of the programs we put together we're showing them after expenses and that's what they care about. What do they get to keep? Our 1% ends up getting whittled down to 0.67% or 0.7% on many cases, so we're not really getting the full 1% because they're getting price point breaks as the volume of money goes up. So we're starting at 1% and going down from there.

So clients know exactly what it costs and we show them the results after the expenses, so they're very pleased when they see that. And it's institutional pricing, so while they could pay somebody a flat 1% in a brokerage house, they're not talking to them about, what does the asset management actually cost? Are they doing it internally in their company? Is the broker doing the asset management? That's not a really smart thing to do. That's not the brightest minds at the table managing your money, not from my perspective anyway.

And I've been in this business for, I don't know, 22 or 23 years, so it just seems to me that I tell people, "I'm a fiduciary. I'm going to show you what I feel is the best thing. You don't like that, we can show you something else." Sometimes I've had high net-worth people that don't want the separately managed accounts. They want us to build a program. It's typically made up of exchange-traded funds, got the core holdings, and then tactical pieces overlaying. One is avoiding loss, one is trying to give us a little more alpha, and then a bond strategy to sort of balance it all out. And they prefer that, and those folks can usually come in right around 1.3 to 1.5. So they don't want to spend the money on a separately managed account, but it depends on the client.

How Beth Deals With Serving A Large Number Of Clients [1:06:19]

Michael: So what does this add up to just in terms of total clients with the firm now? How many are you serving in the aggregate through all of this?

Beth: Well, we've got about 200 families we take care of. That includes a couple of small, I think, four small 401(k) plans with up to $1 million or $2 million in them. We got a few of those but we don't really tend to focus on that business. They tend to be clients we take care of who are small business owners and they can't really find a platform for doing a small plan like that. So we'll do it for them because they're our client and we're looking after them. But we got about 200 families, and we have things, our processes in place to every single process. Somebody calls up and wants to change a beneficiary, how do you do that? What are all the steps? What are the backup checks and balances to make sure everything goes off the way that they asked?

Or they're asking for money, or they're adding money, or taking, all these different things that people need to service their accounts, we have a process in place for everything. So our production manual really for how to run this business, it's over 100 pages because every single process is documented. And I hired some new people this summer and they were able to come in and go to work, and literally, within about 10 weeks they were very self-sufficient, on their own, doing what needs to get done, and verifying that everything is happening the way it's supposed to happen, and then following up with the client to confirm that it's done. So we're very much focused on that process. It keeps us efficient and it makes sure we do right by the client.

Michael: And so how does this break down on an asset basis if you're, well, I guess, not assets under management, but advisory, what's the asset base that ties to 200 families now?

Beth: Well, we do have probably 30 or so of those families that don't have assets with us. So on the assets under advisement, right now we're in the neighborhood of about 125 to 130 million, and they're beating the door down to get in. And everybody coming in these days is walking in the door with $1 million or more, and I have to pinch myself. Because there were a lot of years where we just sort of struggled along to build, and you'd get somebody with $100,000 or $200,000 and it'd be like, oh my God, this is such a slog. It's just going to take forever to build this thing. But now it's really taken on a life of its own. We've gotten more known around the country and it makes a difference. We've got people that call us and they say they heard this podcast or that, they heard us on the radio or something.

Michael: I was just going to ask, where are clients coming from? I think you said earlier you've got, effectively, a waiting list at this point because you can only get so many people through the process at once. So where's the business coming from? Or where have you built it over time just to get to the point of 200 families and $100 plus million?

Beth: Yeah. I would say the bulk of our new clients are coming from referrals, at least 2/3, and then we've got 1/3 that comes from very limited marketing. Like I said, we've done some radio, a little bit of radio where people have interviewed us, and we've done a couple of podcasts. We did a podcast with the one in New York, the public radio station in New York. I forget their letters, but we did one with them two and a half years ago and we get people from all over the country that call us. And they heard me on that podcast talking about how to start getting your head around your money.

And they're just like, "We heard your podcast. We want to hire you." And I'm like, "Okay, well, let's have a meeting and talk about what you want and need and what it costs to work with us." And they're like, "Yeah, fine. Where do I sign up? Here's my money." I'm like, "Okay, okay." It's interesting that that podcast, I did a 40-minute podcast with WNYC, that's who it is, and two and a half years ago. And the thing just keeps paying off and it was just 45 minutes of my time. It's pretty wild. So we get some of that.

We do a very limited advertising in a local lifestyle magazine that is more for folks in the Hudson Valley region that are really focused on a more holistic lifestyle. And then, we do some underwriting of WAMC out of Albany, the NPR station. And we focus because we have a lot of...well, now they're all moving to the Hudson Valley, but it used to be that we had a lot of weekenders that had a house here but lived in Manhattan during the week. And so we focus our underwriting on Friday through Monday so that when people were here for the weekend they would hear us and they know we have an office in New York. So we can meet with them in New York or the Hudson Valley. We've got a good flexibility there.

And the other thing we do is we sometimes underwrite fundraisers for local organizations that get us in front of the right kind of people that we want to work with. So of course, there's the local LGBTQ center. We underwrite some of the center in DC, the center in Kingston, which is just across the river from us, and the center in New York. We dedicate some fundraising dollars for those organizations and that gets us in front of people on a consistent basis building the brand out in the world. And that seems to work. So for those people that find us out of the blue, it's always fascinating to me how they discovered us.

What Surprised Beth The Most While Building Her Career As A Financial Advisor [1:11:26]

Michael: So overall, what surprised you the most about building an advisory business?

Beth: Well, how friggin' hard it would be. I was an entrepreneur since I was in my late 20s, so I knew that that's not easy and that you have to deal with a lot of stuff. But I didn't realize how difficult it would be to find very great people to work for you. So I've had some struggles over time in finding great staff. I seem to be onto something now. I seem to be much more masterful at it. But the staffing is a difficult piece.

And my investment guy left last week. It's like, "Okay, I'm back in the investment business now. Okay, that's fine." So we're leaning a little more on AssetMark because we're a platinum advisor with them. We have a meeting with my contact there once a week and we walk through the clients we're going to meet with. Do we have any re-allocations? The new clients that are coming in and the moneys that are moving. And what are we thinking about that?

And so we can send them back an email with a list of the proposals we need to put together, and they will put them together, and then we proof everything and meet with the client, and either they can do the paperwork or we can do the paperwork. So right now we're leaning on them to support us through that process until we eventually find the right person to fill that seat.

Michael: Well, I guess indirectly that's one of the appeals of having a TAMP-platform, partner platform like that. It's just there's someone to call if your person leaves.

Beth: Right, someone that can support you on certain things, and you just do everything else. It's fine. You work it out.

Michael: So you had said you feel like you've gotten more dialed in over time in trying to figure out how to find and hire the good people, the right people. So what's changed for you in that regard? What have you found now that actually works to get the right people?

Beth: Well, my interviewing process is a little bit deeper, a little bit deeper conversation about what it's like to be here. Also, my staff makes the final interview with them. So we typically will, if we're pretty sure, if Jennifer and I are working with somebody and we're pretty sure we want to hire them, then we'll organize a staff lunch. And we bring them in to meet everybody, and we buy everybody lunch and they get to hang out for about an hour and a half or two. And then they give me the final word, and then we hire them. And that's been helpful to bring other people into the process than just myself trying to squeeze it in between people.

And I've also hired a fair amount of women that have never been in the business before but trained them to be in the business. And those folks, they had the right heart and soul, so it was like I can't train them how to have a heart and soul but I can train them how to do the work we have to do. So that is something, that you can't teach them how to have a heart. So if they come with that I can teach them the rest of the stuff.

Beth’s Low Point In Her Journey [1:14:00]

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

Beth: Well, probably one of the lowest points for me was when my wife decided she wanted to retire, and she started talking about it for a little over three years. And she's 5 years older, I'm 66. I'm not thinking about retiring. My people die in their boots, so I'm just like, as long as my brain is functioning well and I'm doing a good job, I love what I do. It's my life's work. Why would I not do this? I might do it less, but I can't imagine not doing this.

And so for me, the low point was because we built the business together. She just wanted to go and play with grandchildren, and she's very busy. She does a lot of things. She does a lot of activities, and she just wanted to be doing those things instead of the drudgery of coming to an office like this every day. And it wasn't her passion to be in this business. It was really my passion to help people. And while she enjoyed it, there was a point where she's like, "Yeah, I'm done with that. I'm ready to move on." So that, for me, was difficult to, sort of, get my head around. Because my initial thought was, "Oh my God, she's abandoning the ship. How can we do this? We've always done it together."

So it took a bit. She didn't retire right away. She did retire this year in the spring, so that was, definitely, I had to rethink over these last several years, "Okay, if she's going to retire, how am I going to fill the gaps for all the great things that she handles in the business?" So she still does our books, which is wonderful. She does our books and our payroll, but she's not quite ready to give that up, but I think there will come a time that she will.

Michael: Just a small, small, last financial safety net.

Beth: Eh, I'm going to watch the money.

Michael: Yeah, just going to keep an eye on the money, yeah.

Beth: Yeah, so she just recently gave up her IAR status, and she had several designations and she, sort of, turned them all in. And she's very happy being retired. And she's adapting to that because it just happened in the spring. And I've adapted very well.

She's always been a huge contribution, so I was very concerned about it, but because we had that three-year lead time I was able to really start to get my head around life without Susan in this business, and start to put the structures in place, and the people in place, and get them trained and up to speed to take over some of the workload. And then we continued to expand. So this last three years feels like I'm drinking from a firehose a bit, but we're now just, sort of, slowing down all the new...we've never had this many prospects all at one time. I used to be happy if I got 5 new clients a year, and now it's like I got 15 that want to start in the next 2 months. And I'm like, "No, no, no, this is not going to happen. There's just not space for that."

So it really is about trying to rethink, how do we want to deal with this growth going forward? Because if we don't manage it we're going to start to drop the ball with our regular clients, and we want to be sure that we're taking care of them. We're just trying to be very careful, and of course, I'm always thinking about the future like, what's our succession plan here? Who's going to take over the company? Very focused on bringing younger people in, which I think really makes sense.

I don't want to be the only advisor here. This is not my plan. I had three advisors over the last couple of years and now I find myself being the only advisor on staff, and trying to hurry up and get one of my guys to be an advisor. He wants to be an advisor but he's gotta finish his 65, and that kind of thing. So we just find ourselves in a spot right now that it's like, wow, that's interesting. I had three, I lost one. One retired, I got a new one, and now I'm down to me again. Okay, not the plan, but there we are.

The Advice Beth Would Give Her Past Self [1:17:22]

Michael: So as you look back over the past 15-plus years of building the firm, what do you know now you wish you could go back and tell you from 15 years ago as you were getting started?

Beth: Probably would've focused on being better at staffing originally. Because the first several years we'd get somebody and they wouldn't work out, and we'd get another somebody and then they wouldn't work out. And then we'd get another somebody, and then at one point we had Susan's daughter working here. She stuck with us for many, many years, but she was a part-time person. So it's really having that solid staffing, it would've been good to have that handled earlier on. But we've been solid on that world for the last four-plus years, so I feel like we've turned a corner in that realm, although it does come up from time to time, just where is the next great person we want to hire?

Michael: And so what was the turning point for you in getting to the point where that was solid?

Beth: Well, it was working with our business consultant that we have through AssetMark that works very closely with us in helping us think about the business. And we did a lot of work where we segmented clients. We released about 85 clients that followed us from the prior firm that we couldn't make a living out of, were actually costing us money. So at some point many years ago we had to, sort of, call the client base and figure out, okay, who's the ideal client? Who do we want to work with, and how are we going to build this business around that? And that's what's currently happening now, the people coming in the door are those people, which is great. But working with them and getting job descriptions was important. And then figuring out, how do you put comp together? And then adding a 401(k) profit-sharing plan several years ago, and then trying to add a little bit of benefits every year to try to build it out so that you can be competitive with larger companies.

Really, four years ago when I found Jennifer, she came in to be our office manager, and in five minutes I realized, "This woman's going to help me run the company. She's extraordinary." She was not quite 50, and good experience, had worked in the music business, had worked on Wall Street for some hedge funds, so she had a good, broad experience. And that's when it was like, okay, we're going to get busy. We're going to put together systems and processes so that we capture everything we do. We're going to have manuals. We're going to figure out the right comp for people. We're going to get people for life, not people who are going to be here for three to six months. And that's made a huge difference.

And then the money just is flowing our way. So it's like, you get that infrastructure in place and now the money can flow. It's an energetic thing. And I really appreciate all the places that we've come, and having those experts around me has made a huge difference, to just really listen to my experts.

Michael: And out of curiosity, just what did you do to release 85 clients who'd been with you? It's so hard for us, been with us that long, especially if they actually made the transition with you from where you were, which is... "They came with me. They were my loyalists, and now I can't keep them."

Beth: Yeah. Well, it did take me a few years to, sort of, get my head around that fact, and I just couldn't believe it. I'm like, "You can't. They're humans, you can't just fire people." But then when the recession hit, I got a phone call one day. And I knew that I had this part of the book that I didn't really want to deal with. But when we left the other firm we got sued, and the lawsuit lasted seven years. It was brutal. It was really brutal, and we weren't managing that much money. We were only managing something like 20 million. It wasn't even that big a deal. But they just, the person that owned the firm did that. That was a matter of course of how she did business, somebody left, she immediately sued them to see if she could squeeze some money out of them.

And we tried to negotiate in advance because she knew we wanted to have our own company. And so the lawsuit went on forever, but it was absolutely awful and it cost stupid money. And I just had kept focusing on building the business and knowing that that was going on in the background. But we, when the recession hit, I got a phone call one day from a woman I never met that Susan used to service at the other company who had followed us. And we didn't even know why because she didn't even have a relationship with us, but she was like, "Where are you going? You have to take care of me." We're like, "Okay, fine."

So the attorney had told us that you can't cherry-pick. Anybody who calls you, you have to take them. And I'm like, "What?" He goes, "Yeah, when you get in front of FINRA and you have an arbitration, you gotta show that you are really doing the right thing by the client." So we're like, "Oh, you gotta be kidding me. We did not want to start out with those clients, not that we didn't love them as humans, but we knew that they weren't going to be profitable." So over time, we had put them in a...basically it was, at that point, it was retail mutual funds, and fund of funds, where their account was being rebalanced for them. So this woman calls up, she's got a $3,000 account with me. And she gets on the phone, and I won't say the word she used, but she cursed me out. I just happened to pick up the phone, and, "What the hell are you people doing with my money?"

Michael: Well, that'll teach you to pick up the phone.

Beth: Yeah, I know, right? I didn't. It was crazy. And I said, "Hold on a minute, please," and I put her on hold and I walked into Susan's office and I said, "You better get that woman off this phone. Because the world is crashing all around us. I got a woman with a $3,000 little IRA account with us. I don't even know this woman. We're sending her communication. She doesn't respond to emails, or letters, or whatever. And then she has the nerve to call up and say, 'What are you doing to my money? I'm down $300.' She's down 10% and the world's down 50%," and I'm like, "Get rid of her, okay?"

That was the only experience I needed to have when I said, "Okay, that's it, I'm done. We're going to have to just get this done and do it lovingly." So we had people in high-quality products but it was a fund of fund so it was getting rebalanced. And their risk tolerance was proper, and so we sent them these amazing love letters and told them that, "In our new business we've had to figure out what we're going to focus on, and we're here for you should you inherit some money. If you want to pay us for an hourly consultation, we're here for you, but we can't any longer manage your portfolio because it's costing us money and we can't do it."

Michael: And so did you try to send them somewhere else?

Beth: I didn't really.

Michael: I know some advisors sometimes do partial sales of their books. Or you just said, "It's just not working, we're going to part ways?"

Beth: Yeah, it wasn't working. We didn't really have anybody to send them to, and I didn't feel like it was a book you could sell. So we did make them house accounts. We assured them that their portfolios were in great shape and on automatic, and that the quality of their investments was very good. So we had a lot of people with MFS, and these great allocation fund of funds so that we know they're going to be fine. If they can build it, great. "If you ever inherit some money or you have some questions, you can access us all the time. We have an hourly rate. We're happy to work with you, but this is how we're going to be working going forward."

I gotta tell you, we got gifts, cards, we got people crying on the phone. We had people that came back to us because they inherited some money, or they left a job and now they had some money to work with. It was really amazing, and we did it in a very loving way. And we had a couple of people that were pissed at us, but not that many. It was very few that were pissed, but that woman, she got the first letter.

Beth’s Advice For Newer Advisors [1:24:01]

Michael: So what advice would you give younger, newer advisors coming into the industry today, and trying to figure out how to get their careers going?

Beth: Yeah. I would say that you want to affiliate yourself with a firm that's focused on the client, not focused on the money. Because one of the things I was always frustrated by was what I consider the financial service industry's inability to focus on the client. So I was with that boutique firm for seven years before I did my own thing, and they'd make it like, "Oh, they're here for the community and they do all this great work for the community." But then at the end of the day, I'd be excited about all the people I helped. And they'd say, "Okay, that's nice, but how much money did you make us today?"

So it was always the bottom line was, "How much money did you make us today?" So it wasn't different from any of the big firms, and it made me crazy and it made me sad, because I'm really focused on helping people, and guiding people, and coaching people. And I have always been of the belief that if you do that and you do it well, the money will take care of itself. And that's really where we're at today, is that the money is just flowing.

And one of my new guys is from JPMorgan Chase, and he came in here four months ago and he's like, "I used to scrape and scratch to get $100 out of somebody." He said, "People are calling you every day of the week and they're throwing $500,000, $1.5 million, $2 million at you. You don't even get on the phone and call?" I don't call anybody, it just shows up because they know they're getting good quality work, and we're not focused on the money. We're focused on the people, and that's the difference that it really makes from my perspective to do good quality fiduciary financial planning.

Michael: And so just for the newer advisor who's coming in and doesn't know as much of the history of the industry, how do you figure out the right one? How do you figure out which firms are client-focused and not money-focused? Because as you said, everybody puts on the website that they're all about the client.

Beth: Yeah, of course, but I think you have to interview firms. I know I've had some young people that came to me but they were more focused on making six figures than they were learning the industry. They didn't even want to do a year. They were like, "Oh yeah, well, I could take this job but I'm really out of here." It was sort of like, "Why am I going to knock myself out," right? But they did go around and interview firms and they chose us. Even though we weren't looking for a brand new planner, we had one for a while. But it didn't work out because they were very, very...they were just unrealistic in their expectations about when they were going to start making a ton of money.

We're always talking to, whenever I go to conferences or meetings I'm always talking to young people and seeing if they're in a place where they're maybe not very fulfilled but they love to do this work. I go to the Sudden Money conferences and meetings. You're already in the mix with people that are like-minded in the way they approach the work with the client. And so sometimes I've run into some younger clients that they're maybe looking for a new home. And so I just keep my ears open and see who I meet, and try to recommend that they do things like that. But there's a few places it could go, and we'd love to have a younger advisor in here. That would make us happy.

Michael: Well, this is Episode 257, so if you go to kitces.com/257, we'll have a link out for Third Eye Associates. So if anyone is in the Greater Hudson Valley area or would love to relocate there, we'll make sure you can find your way to reach out to Beth and the firm.

Beth: Yeah, it's great. It's a beautiful part of the world to live in, I'll tell you that.

What Success Means To Beth [1:27:20]

Michael: As we wrap up, this is a podcast about success. And just one of the themes that always comes up is the word "success" means different things to different people. And so you've had this wonderful, successful growth of the firm, and ironically, getting even more momentum now. But I'm wondering, how do you define success for yourself at this point?

Beth: Well, I've mentioned it before, but I'm really passionate about guiding people to really get their head around their money and how it relates to different parts of their life. Because most people, sort of, have money as a separate thing. And we're all about integrating your life and your money. So for me, what's going on right now where we've become a known entity around the country, which is always shocking to me. Because I'm in the Northeast primarily, and so for me, that I get these calls from around the country and they say, "I want to work with you," I'm like, "Okay." But I'm sorta like, "Really? Where are you?" "Well, I'm in California," or, "I'm in Maryland," or, "I'm in Virginia," or whatever. It's like, sort of fascinating to me.

So I do think that over the last three years, sort of, being able to absorb this new growth that we are experiencing. But I feel very successful in the way that our moneys are growing, the number of clients that we're impacting every year is growing. And that's really, for me, what gets me out of bed in the morning. So I feel great.

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

Beth: You're welcome. And I appreciate the opportunity to spend some time with you.

Michael: Thank you.