#FASuccess Ep 058: Custom Designing Your Office For A Better Data Gathering Experience with David Armstrong

What You’ll Learn In This Podcast Episode

• Why Monument’s clients are considered clients of the entire firm, not just any particular advisor. [8:17]
• Why people with more than $10 million value financial planning less. [9:37]
• How the firm structures their data-gathering process to help clients see and visualize their own financial situation. [23:01]
• Why Monument sees more work being done by technology rather than staff in the future. [37:30]
• The clever job description format Monument used to weed out non-ideal applicants and attract the right type of people. [52:07]
• Monument’s future now that brokerage side of their business is less than 10% of revenue. [1:12:47]
• How David defines success. [1:33:54]

Resources Featured In This Episode:

• David Armstrong - Monument Wealth Management
• Monument Blueprint Meeting Video
• eMoney Advisor
• Orion
• Morningstar
• FA Success Podcast #041 with Elaine Bedel
• Philip Palaveev's Leadership G2 Institute
• New Planner Recruiting

Full Transcript: Custom Designing Your Office For A Better Data Gathering Experience with David Armstrong

Michael: Welcome, everyone. Welcome to the 58th episode of the Financial Advisor Success podcast. My guest on today's podcast is David Armstrong. David is the co-founder of Monument Wealth Management, a hybrid RIA in the Washington, D.C. area that serves about 120 families and oversees nearly $300 million of assets under management, with a team of 11 people.

What's unique about David's business, though, is the way that he's evolved the business over time, having built his early career under a broker-dealer, then shifting to a hybrid arrangement with an outside SEC-registered RIA that's separate from his broker-dealer, and then steadily dialing down his amount of broker-dealer business over time as he shifts increasingly towards an AUM-based wealth management model to service clients.

In this episode, we talk in depth about the way that David has focused the firm over time towards clients who have created their wealth through a business or other liquidity event, their ensemble approach where every client is a client of the firm and not just any particular advisor, the way they've structured their team into client services, financial planning, and asset management, and how they've systematized everything in the firm from their financial planning deliverables to their path to partnership, to using an engagement letter before taking on a client, and even the data gathering process.

In fact, we talk in depth about the really unique way that David structures his data gathering process with clients, by creating an interactive experience using a series of whiteboards to collect information and help clients actually see and visualize their own financial situation, in a physical space in his office that was first billed as what he called a "thinking room," and then became the planning and discovery room specifically to support this process with clients, culminating in a physical deliverable to clients that David calls their Monument Blueprint and becomes the basis for subsequently building out the client's entire financial plan.

And be certain to listen to the end, where David shares his unique hiring process to find great staff in the first place, which includes a job description that explains not only the nature of the job and the tasks that it entails, but an in-depth discussion of the values of the firm that every candidate should be interested in before they work there, and a lengthy list of all the reasons that a potential candidate should not take the job, just to ensure they really screen out those who wouldn't be a good cultural fit anyways.

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

Welcome, David Armstrong, to the Financial Advisor Success podcast.

David: Thank you very much for having me on. I appreciate it. I'm a longtime listener and, you know, love all the podcast. You know, I listen to it a lot when I'm driving. It's unfortunate I can't take notes while I'm driving. I wish I could. I end up listening to it twice, so.

Michael: Well, you could just kind of, like, listen to it and then pause and switch over, like, a voice recording app and voice-record your note and then switch back over and keep listening.

David: Exactly, right. Yeah. There's an app there somewhere, right?

Michael: Yeah. The amount of times I said "switch" while you're driving just sounded worse as I said, and maybe just listening to it twice is a little bit safer energy in retrospect.

David: Right. Yes.

Michael: Well, I'm excited to have you on the podcast. So we talked to a few folks that are on the brokerage side of the industry on various episodes, we talked to a lot of people that are RIAs. You can straddle both sides very literally. You are a hybrid with LPL and an outside RIA, and so I'm really excited to talk about that model, I think, and just the evolution of that model. You know, there are so many advisors today that are in some stage of hybrid, some are building their businesses as hybrid, some are kind of migrating through hybrid on the way to something else. And so I think there's a lot of good discussion we can have around just the hybrid model and what that looks like, and what it feels like to be in the midst of it.

David: Yeah, happy to talk about it. It's pretty interesting, you know, the way you just described it. I mean, we're celebrating our decade anniversary this May, and so, you know, I rewind back to May of 2008, and what an interesting time to start a financial services company in 2008.

Michael: Yeah, that was well-timed there.

David: It was. I like to joke that I saw the whole thing coming but, you know, the reality of it was I was just super lucky, and how we chose Labor Day weekend to move instead of Memorial Day weekend to move, I'm not sure we would have ever been able to pull it off. You know, we left a large wirehouse firm that my business partner and I had worked at for about six or seven years each, and we have lily-padded through this process. So like a lot of people in our industry, I just started out working at a broker-dealer, at a couple. I started working at a big investment bank up in New York after my MBA program, Donaldson, Lufkin & Jenrette, which is not around anymore.

Michael: All right, so yeah, good old DLJ. All right.

David: It was such a great firm. And, you know, they went through their transition with Credit Suisse and then I eventually ended up here in the D.C. area. And they shut their office right after the whole Frank Quattrone thing happened, and I was forced to move to another more traditional, large wirehouse firm.

Michael: And so where did you do your wirehouse days? Were you at Morgan Stanley, were you at Merrill Lynch?

David: I was at Merrill Lynch. Yeah, I was right here in Washington, D.C. office. It was great a firm. Merrill Lynch had a, you know, story tradition, they had great management there. I actually ran the new hire training program there for two years. I really enjoyed my time there, but I was lily-padding through my career. I've always been an entrepreneur. And it goes back to my background with the Marines and some internships that I'd done while I was in my MBA program. And I just always knew I wanted to run my own thing. And I like to say I became psychologically unemployable. I had to do my own thing, you know.

Michael: I'm highly unemployable myself so…

David: Exactly.

Michael: …I understand that sentiment.

David: Most of the audience probably is too. So, like everybody else, I started the business with my clients working in a large wirehouse. And that was very conducive to starting my business. And I actually, because I'm a CFA, I was able to get onto their…they had a name for it. I don't remember it anymore, but where you were allowed to run your own money. And so as I started managing the portfolios and running my own money, the whole idea of starting my own firm and doing our own thing outside of a corporate structure just started to make more and more and more sense.

So we started out by joining LPL Financial and on their corporate RIA platform. And that was great because I was still able to manage the money and everything. But all of a sudden, you know, the business got to such a size that I was able to register as a federally-registered RIA with the SEC, and I started looking at it and I thought, "Where's the future here for Monument Wealth Management and my team, and my partner? Is the future always staying on the corporate RIA and still having that box be a little bit too small for comfort in terms of oversight or am I willing to take on the risk of being the CCO and running my own compliance and supervising as the chief compliance officer here at Monument? Am I willing to take on that risk in order to get a little bit more latitude with some marketing and a little bit more latitude with the way I ran the business?" And the answer became yes.

So we transitioned over to, you know, regular RIA registered with the SEC, and then, have stayed in that format up until now. And now we're actually starting to grow a little bit more and we're moving to be multi-custodian now. And really, you know, the side of the business I started out in, the broker-dealer business is becoming more and more insignificant in terms of my revenue every single day that we operate. That business is just getting smaller and smaller and smaller. So eventually, I'm just going to end up being completely 100% RIA. I'm hoping to actually achieve that by the end of this calendar year but it more realistically may be sometime in 2019.

Why Clients At Monument Are Clients Of The Firm Rather Than A Particular Advisor [8:17]

Michael: But can you paint a little bit of a picture for us of just Monument Wealth Management as exists today? Like, how big is the firm, what does that look like in terms of clients or AUM or however you measure the sizing for your firm.

David: Sure. So Monument is truly, you know, what most people call an ensemble practice. Every client is a client of the firm. So I do not have my own clients, my business partner Dean Catino does not have his own clients. The entire team works on behalf of all the clients of Monument. So we are 50/50 partners and, you know, we split all the revenue 50/50 and we split all the expenses 50/50. So that means we split all the profits 50/50. So the team is 11 people right now, and it is broken up into, you know, what are traditional sort of pods of roles and responsibilities. I've got a client services team, I've got a financial planning team, I've got an asset management team, and I've got a marketing and administrative team. And then Dean and I do the business development.

We're right about $300 million of AUM, service around 120 families. I don't like to say, you know, like, clients. They're really families. So there's more than 120 people but it's 120 relationships with families that I have.

Michael: One hundred and twenty households if you want to frame it that way.

David: Yeah, right.

Why People With More Than $10 Million Value Financial Planning Less [9:37]

Michael: So that's actually a fairly…I mean, you've got a fairly affluent client base as well, right? If I'm doing the math right, like, that's a $2 million-plus average client for you guys.

David: That's right about where it is. Yeah. You know, I've got a couple big clients, and then I like to joke I'm the smallest client of the firm, you know, probably because I top all my money back into the firm. So yeah, I've got a nice client base. You know, our niche here is really people who have between $1 million and $10 million, who, you know, are very planning-focused. And that's just kind of where the business came. I know there's this big push in the industry to define your niche and everything. And if you force me to define my niche, I'll tell you it's people who have created their wealth through a business transaction, and after the transaction is over receive less than $10 million.

Michael: So a lot of people that essentially just built small businesses and have liquidity events or I guess were maybe key employees in much larger businesses and their share was a few million dollars.

David: Right. And that has really become a business focus of ours out of some experiences that we've had recently with some big transactions that have happened in our client base. And we've really kind of looked back at the business and we said… You know, I think there's a very interesting thing going on in our industry as it relates to clients' expectations and what they actually want. And my experience has proved that the clients who have the big $10 million and up transactions, they're essentially self-insured against financial failure unless they do something really silly. So they don't value the financial planning, the real rigorous financial planning that we do here at Monument.

So those clients are driving asset management prices down because really what they want is the lowest cost best asset management for the cheapest amount of money that they can pay, and they can really compress those prices because they're going to the big firms out of New York, who, you know, are looking at immersing AUM and they can drive prices down. But it's the clients who end up receiving less than $10 million who still look at us and say, "I'm so fortunate that I have made this much money. And this transaction has really changed my life, but I'm still really concerned that it hasn't changed my life enough to where I'm not going to lose the race between dying and becoming destitute, and I need financial planning to make sure I keep myself out of trouble."

Michael: That's an interesting way to frame it. You know, that you get to a certain size where a lot of the traditional financial planning we do, I mean, basically most of the stuff around, I was going to say, like, prudence and risk management starts to fall by the wayside once you get materially north of $10 million because there's just enough assets there to absorb a relatively large number of mistakes. Obviously, you can still have very wealthy people go bankrupt. Like, it takes a little more, and you're not going to do it off of the usual mistakes. Whereas when you're under $10 million, like, all that stuff we traditionally do in financial planning, it's squarely in their wheelhouse, it's relevant, they are really at risk if they don't do it, they can really be helped if they do get good financial planning. And so they just literally value it more when it's actually balancing growth and risk, whereas really affluent clients it's pretty much just a growth story and whoever gives me growth at the best price.

David: That's right, and servicing, obviously, at that level. And then you get into all kinds of crazy stuff like, you know, people have sweets for entertainment, things like that. I'm just not all about that. I mean, you know, part of my currency is I get paid in thank-yous, and so people who you truly help, that feel like they are fortunate to have made the amount of money that they've made but they still know that they need, you know, really good solid financial planning work, the rigor put into it, they're the ones that at the end of the day say thank you. And, you know, I cash those thank-yous into my soul, you know, just like I cash my paycheck into the bank.

Michael: So $300 million, 120 families, so is this… You know, you said you are still a hybrid, you've got an LPL relationship, you've got your outside RIA, so, like, how does this $30 million breakdown between brokerage business and RIA business? Like, what do you actually still do on each side of that line at this point?

David: So on the broker-dealer side of the business, I'm basically maintaining some annuities, 529 plans, and some other trail-based investments that are still very appropriate for my clients to own and maintain and have. It's just I can't put those things over onto my advisory side of the business. However, I'm not doing business in the brokerage side anymore.

Michael: So you're not writing new 529 plans, you're not writing new annuities at this point?

David: Well, one of the things that we're doing this year, I mentioned before, is we're going multi-custodian because what that allows me to do is there are some, for example, TD will allow you to put their advisory class, the 529 advisory class shares on their platform. And that's exciting for me because that's new, and I've never had the opportunity to do that before. So I will still do 529 plans. I'm just going to make sure that I'm doing it in the advisory side, which is so much cleaner and easier to do with clients, and truly paying you a fee for your advice there rather than getting all mixed up on the brokerage side of it.

Michael: And on the annuities side, like, are you just not getting the clients where you're writing those anymore or you're not as into the products as you were before or are you trying to find, like, fee-based annuity solutions as well as finding advisory 529 solutions?

David: So we've just started researching, I'm probably setting myself up for 5,000 phone calls the day after this airs, but we're in the process right now learning about the annuities that you can put into the fee-based account. Because I know annuities have a bad…they're a bad word sometimes in our industry, and I get why and you do too, and most people listening do, but there are instances where they are completely appropriate and really useful for people. And I always like to use the example of my parents, who have an annuity and they basically said, "We want to set up our own pension plan, what a perfect way to do it." Completely appropriate for my parents. Guaranteed income, they like it. I know it's a little bit expensive but they look at it and they say, "Okay it's an insurance policy. We get that. Okay, great."

So there will always be clients who I feel like those things could become appropriate for, but the advisory side of our business is really starting to create solutions for the RIAs that allow you to do that business on the advisory platforms. And it's exciting to be learning about those. So I think I'll continue to use them when appropriate and we need it for a client, but I certainly won't be doing them in the broker-dealer side.

Michael: So at this point how much of, like, the business or the revenue is on the RIA side versus the BD side? Like, I'm just trying to get a handle around where $300 million sits as you've been going through this shift over time.

David: Right. So, less than 10% of my annual revenue is coming from the brokerage trails.

Michael: Okay. So it's a fairly small part at this point and I guess is winding down since new business goes to advisory contracts and over time the old stuff goes away, right? Like the kids go to college and they spend the 529 plan and then the money is not there anymore or…

David: That's right.

Michael: …they spend the annuity and then they pass away and that contract is not there anymore.

David: Exactly. And, you know, the common question I get is, you know, "If it's such an insignificant part your business, why don't you just, you know, hang it up and walk away from your licenses? You don't have to deal with the broker-dealer side at all anymore anyway." And I look at that and I say, "Yeah, but there's no corresponding offset to expenses if I just get rid of that business that is there, so I still have to service it. Who would take it? Who would end up being the advisor on that side? I don't like that. I don't want my clients dealing with somebody else. They like and trust me and so I feel an obligation to be able to keep that business going."

And then because there's no corresponding offset in expenses, I would be taking a pay cut from whatever I walk away from. So right now it's still in the client's best interest from me being the advisor perspective and a Monument's best interest to keep those right now. But we are slowly…every single day we're getting closer and closer to that being, you know, a number like zero.

Michael: So talk to us a little bit more about just the team structure. Like, I'm struck, so most firms I find the primary thing that drives the hires is just the number of clients, right? At some point, like, there's just too many clients to set the meetings and do the financial plans and do the trading and all the rest, and so you start hiring up and adding staff. But, you know, you, I mean, like, just by round numbers, 120 families, 11 staff, like, it's 11 clients per person, per staff member. Obviously, not everyone touches every client the same way but, like, yeah, that's a fairly low number of clients per staff member, at least relative to some firms. So can you talk to us a little bit more about just what do all these different folks do that, like, they're getting 11 touches from 11 different people across 120 families?

David: Yeah, because, you know, they'll tell you that they're really busy, all 11 of them.

Michael: Sorry, I didn't mean to get anybody…I didn't mean to throw anybody at Monument under the bus for not working hard because there are not so many people.

David: No, they're all working hard. No, it's a great question and probably one that, you know, your audience would have asked anyway. So, you know, we have a process here at Monument that all the clients go through, and I have a financial planning team. So we are not taking on new clients who are not interested in going through the financial planning process. So everybody that comes in the door as a new client is going to have to work with the two people on my financial planning team. So they're busy. We have a really unique process where it's a five-step process. As a matter of fact, I know we're going to probably talk a little bit about marketing later too, but we just launched this video that explains our whole five-step process today.

And what the second step of the process is, is clients come in and do what we call a Monument Blueprint meeting. And a Monument Blueprint meeting is designed to be a discovery meeting where we're capturing data from our clients, like everyone in our industry does, but we're doing it in this really interactive graphic format on a wall, where we have a dedicated planning room to our Monument blueprinting process and clients come in and there's seven white glass boards that are completely blank when they walk in. And we just start asking them questions and going through, you know "Tell us about yourself. How did you guys meet? What are some experiences that you've had with people in our industry? What are some early memories that you have about your parents dealing with money?" And things like that. And people just start talking.

And as they're talking, one of the planners is…both the planners are trained to stand there and basically not participate in the meeting in any other way than just writing on the boards. Anything the client says gets categorized into one of seven buckets on those boards. And just over the course of this meeting, these panels get filled out with all of this information that people have. And it's really impactful when the husband and wife are there because the husband may be talking but the wife is still looking at the board and thinking and then she'll come up to me and say, "I want to go back and talk about this thing." So it's no different than taking notes on a pad, like old school, on a notepad, but everybody sees what's getting written down and it really creates this interactive thing.

But that creates work for the planning team because now when the blueprinting process is done, we still haven't engaged the client to do financial planning. All we've really done is taken their data and organized it into an interesting format that facilitates discussion. But they have to take that data and put it into what we actually create as Monument Blueprint. We send it to the client with an engagement letter saying you know, "If you would like us to actually take this data and do the planning, here's how much it's going to cost." So they work on that.

And then we're fortunate enough for the client to say yes, now that work is all going to come back to those two planners and they're actually going to have to… We use eMoney, they're going to have to go in there and build the financial plans for everybody. And then once the planning is done then we say, "Now if you're interested in having us manage some money too, we'd really like to talk to you about that." And then that brings in myself and the two other people in the asset management team, the three of us are all CFAs, and we actually manage the money here at Monument. So then there will be an asset management meeting where we talk to them about portfolio construction and how we manage money and what's going on there. So then everybody gets busy on the asset management team.

And then, you know, as the client goes on with their relationship with Monument then it's coming back to the client services team. I've got two people on the client services team. And they're in charge of running what we call the ACR process or the Annual Client Review process. So once a year they're getting all the teams together and they're actually doing a complete audit of their financial plan, their asset management plan, their reporting, and everything so we can deliver an ACR or an Annual Client Review to each client. So there's 11 people, but if we're bringing new prospective clients in and putting them through that process and then we're doing the Annual Client Review process too, things can get pretty busy here pretty quickly.

How Monument Structures Their Data Gathering Process [23:01]

Michael: Okay. I get how that gets busy by the time you get through that. All right, but I've got a whole bunch of questions as you just went through that. So let me dial back first to just the Monument Blueprint meeting. So seven whiteboards, people are scribbling notes, you said into seven different buckets. Like, is this literally seven whiteboards, one board for each bucket of things? And what are the buckets? Like, what are the boards?

David: So you've got, we have a board where we talk about relationships that they have with people. So we want to find out who they're using for CPAs and trust and estate attorneys. We have a goals and objectives board where people talk about what their goals and objectives for life are. We have a panel for financial planning, obviously. Sorry, for financials, so kind of accounts and amounts. And then in there, we're talking about spending and any insurance policies that they have, what their liabilities are, things like that. And then we have a board for legacy where we talk about what are their legacy goals? We have a board for family where we write down all the information about any one of their families, you know, names and where they live, how old they are, things like that.

And then we have a board for interests. And that's very closely correlated with goals and objectives. Sometimes those two boards bleed over. But a lot of times people talk about their interest, and we'll get around to, "So what are some goals objectives?" And they kind of look at you and say "We're not really sure what they are." So we go back to the interests and we say, "Well, you're interested in these things." And then we'll use that to kind of shepherd them through the, you know, "Tell us what your goals are." It always seems to be the hardest thing for people who want to articulate is what's really their goal for the money.

And then the final panel is a communications panel where we ask people how they like to be communicated with, because some people like email, some people like hard mail. Do they want, you know, PDFs of reporting, do they want, you know, hard copies of things, do they like to use their cell phone, do they like to use their home phone, personal email, work email, things like that. So we kind of flesh all that out there. And that's the boards.

Michael: So, I mean, it's pretty much all the stuff that we tend to cover in data gathering meetings but just, I mean, I almost feel like it's sort of a mind mapping process but you're not doing the big, like, mind mapping with the connected circles, you just have seven boards that are kind of like…I'm just trying to visualize, like, is it just one giant wall with, like, seven panels on it?

David: Yeah, that's exactly what it is. And, you know, the beginning of that started with this really interesting client. We went to his office one day and we were having this discussion and he says, "You know what? Let's stop talking real quick and let's go into my thinking room and talk about this." And all of a sudden I'm like, "A thinking room? This guy's got my attention."

Michael: Like, "You have a thinking room? I want a thinking room."

David: "You have a thinking room?" Right. Jeez, my thinking room tends to be the shower so I want to see what this guy's thinking room is, right? So we go into this room, and he's got this really…it's cool. It's a square room, there's no windows in it, there's the door and that's it, and it has four chairs that face each other. And you would imagine there should be a coffee table there but there's none. So there's no distractions. And he's got whiteboards screwed into the walls all around them, all around the place. And he just starts talking and he's like, he's got a pen in each hand and he's going crazy, you know, talking about stuff. And I'm like, "What?"

Michael: It's like a weird padded chamber cell except they're not normal walls, it's whiteboard in walls, it's a thinking room.

David: Right, right. And there was a Keurig machine, I mean, that was, like, the one weird thing, you know.

Michael: Because clearly, the one thing he needs on top of all of this is more caffeine for more energy, I guess.

David: Exactly. Yeah. And so at the time that we sat down and met with him, this was eight years ago, we were in the process of moving our office, and we were moving into a new building that was new construction and we actually had the ability to sort of plan out how we wanted it to look. And we just said, like, "I want to have a thinking room. I don't want it to be in my office, I just wanted it to be in this room." And so the architect that we were working with…

Michael: So you actually have a thinking room?

David: It started out as a thinking room. And I said, "I want this thinking room." And then I said, "We want to put these panels on the wall," and he goes, "What you ought to do is get these glass panels, take literally like a piece of 1/4-inch thick glass, powder coat, paint the back of it, and we'll mount it on the wall so it stays nice and clean. You can wipe glass off with Windex, and let's make them all different sizes and shapes so it almost looks like this cool mosaic piece of art on the wall. And when it's not filled out it's just these white panels that look really cool." And I'm like, "That sounds really neat. I want to do that." So it started out as the thinking room.

And then I went to a conference down in Texas where I heard, God, I guess it was Simon Sinek speak, and then right after that somebody did a mind mapping class, and all of a sudden it just hit me like a ton of bricks. I'm like, "The thinking room is not the thinking room. The thinking room is the planning room. That is where we're going to take these seven boards," it just so happened that it ended up being seven boards that fit there, I'm like, "We're going to use this for planning now and discovery meetings." And that's how the whole thing started. So we never ended up with my thinking room, I ended up with the Monument blueprinting room, which is sort of like the center of our…it's like our nerve center now.

Michael: Like, I'm just thinking through the sort of traditional data gathering process, like, do clients still bring in paperwork and financials and that kind of stuff? Like, do you still do that part? Do you give them anything to fill out before the meeting or, like, they just come in and you start asking questions? I've got to imagine you've kind of got a sequence of how you ask questions as you go through the board since each one's got a name, and you just start filling out the boards on the spot and then you follow up afterwards with…

David: Yeah. So it's a common question for people to say, "What should I bring?" And I just tell them, I say, "Just come with a general idea of what you've got. I don't want you going through a big research project. I don't want you bringing in a bunch of paperwork." I tell them, I say, "Accuracy is way more important than precision right now. When we actually start doing financial planning for you, we will get down to the decimal point on this stuff, but let's just talk rough numbers of what you have." And I really feel like that puts a lot of people at ease because I think one of the barriers to getting people in and excited about doing financial planning is just the anxiety around getting all of your stuff together. If I had to do it, I think I would just vapor lock. And I think that that probably keeps a lot of people from engaging with planners is just the anxiety over collecting all that documentation. I just think it's crazy. So I just ask them questions.

It's funny because the team here will say every time we do, we call it an MBP meeting, Monument Blueprint meeting, every time we do an MBP meeting, we just ask clients, we just talk like you and I are talking right now and you're extracting data from me, just like I would in this meeting. And what will end up happening is I'll say something or approach a question in one way or say something differently, and then Jessica will look over at me and she'll go, "Did you come up with that question because of Kitces' podcast from last week? Like, with Gail?" I'm like, "Yeah. As a matter of fact, I did. You know, it was great." So the questions are always changing, the dialogue is always changing. I'm always learning new ways to try to talk to people about it. But it's about getting them to talk about themselves.

Michael: And so you're asking the questions and then one of your associates…you said two are just writing and taking notes on the boards?

David: Exactly. So you have one person, generally one of the partners, who is the master of ceremonies, asking the questions. I'm not taking any notes. I don't have a pen in my hand. All I'm doing is talking with the client and guiding the discussion to have them tell us the information. And then I'll have one of the planners is sitting on the couch with them also and taking notes on a notepad, taking, like, basically what they're saying, taking it down to details. And then the third person is standing there in front of the boards with a dry erase marker and writing down the high-level things that they're saying.

Michael: Okay. And then clients are just, they're answering the questions, they're seeing it go live on the whiteboards, they're asking and seeing responses. So what happens at the end of the meeting after they leave? Like, do you take photos of all the whiteboards? Like, how does this get sort of inscribed into, like, CRM or a planning software or something?

David: Yeah, great question. So now what we do, so then we have a download.

Michael: Because you'll need a really big file cabinet if you… "Can we just keep the whiteboards and stack them in the file room?"

David: So the output from the MBP meeting is a literal object, we call it the Monument Blueprint. And it's kind of cool. We have this thing designed. It actually looks like this folding blueprint thing. It's neat. And in there is, you know, really stapled in there, assembled into this package a… Well, I think they use PowerPoint to graphically put it but they basically take all seven of those boards and then type the information into what looks like the boards, same boards on this piece of paper. And then next page is sort of like next steps, and then, "Here's your priority of work that we think you should do." And, you know, that's always different coming out of each meeting.

But then the final page is actually a digital photograph of the board. So it's memorialized, right? And then we take that information and it goes into both eMoney and Salesforce, and then we have the digital copy of the picture. Now, here's where I really think the magic comes in. So now, you know, Michael, you come in and you're a client and I do the whole whiteboarding session for you, and you walk out, and you become a client and you say, "Great."

And then it's a year later and it's time to talk about your plan, or something changes in your life and we need you to come in. You'll come back into a meeting and we will take that picture of the whiteboard, and we will hand-write all the things that were on there the last time we met, in black ink, in black magic, you know, the black dry erase marker. And then as you come in and say, "Okay, this has changed, this is new, I've got this," we're taking a blue pen or a red pen and we're writing in a different color. So at the end of it, you see here is the old information and here is the new information. Boom, picture goes back to the client, they keep it all.

Michael: Very cool.

David: Yeah, it's neat. It's really worked out well.

Michael: No, wait, I'm also going back to what you do originally, like, this Blueprint meeting, this is your pre-engagement process? Like, have they hired you to do a plan yet?

David: No they haven't.

Michael: So you're just doing all the, like, this is data gathering experience on spec.

David: Yes.

Michael: And if they like this then they proceed to a planning engagement where you produce all of this into a eMoney Advisor plan that goes to them.

David: Exactly.

Michael: Well, I guess you don't charge for this data gathering process upfront because it's part of the engagement up front. Like, do you charge separately for the planning work when they get to the end of this process and they get a plan out of eMoney? Like, are you charging a planning fee or ultimately are you in the camp of, "No, no. Ultimately we get paid when they implement with us?"

David: So we definitely charge a planning fee. It's project-based. So after the Monument Blueprint process, we're pretty good at being able to look at a project and say, "This is pretty complicated, it's going to take a lot of work." Somebody will estimate the hours and we'll just use, you know, whatever we say our internal rate is and say, "Okay, it's going to take 10 hours. Jessica, I think you're going to have to spend four hours on it, Emily is going to spend hours on it, and then, you know, Dave is going to spend four hours on it or two hours on it," something like that. And you just said?

Michael: And do you actually, like, price each staff member's time at some certain and different amount of time and then add it up?

David: Internally we do. So I don't send somebody a bill like a lawyer where they say, "Jessica worked this many hours." We use it as a back-of-the-envelope guide to price it. And we'll send them an engagement letter that says, "You know, based on the fact that we think this will…" We don't actually put the hours on it, we just say, "We think this project will cost, you know, $5,000…" We don't think. "This project will cost $5,000." Internally, we're having a discussion where we say like, "Well, we think we're going to spend, you know, 10 hours on this thing or 15 hours on this thing." So sometimes you come out a little bit ahead, you know, if you're allocating hours or something, sometimes you come out a little bit behind.

Michael: But that's the nature of doing project work with an engagement letter.

David: Exactly. And, you know, I feel like, at the end of the day, we're at least pretty much breaking even if somebody doesn't become an asset management client on the time. I'm getting paid for the time.

Michael: Okay, so it's not necessarily the most profitable time since, you know, straight pay for hours is not necessarily the easiest business to scale. Like, you get covered for the time, and then obviously if you're doing a bunch of these and you're doing them well, some subset of them is going to decide to become a client.

David: Right, exactly. And, you know, as my own RIA, I've got a lot of flexibility in how I can price and charge and get paid for those things. So it comes back to another benefit of the RIA is I can actually charge for planning work and he writes me a check and I cash it.

Michael: You know, it's such an interesting just divider in the regulatory lines that I still get inquiries a lot from folks that are just purely at standalone broker-dealers who say like, "Well, I want to do planning and get paid for it, how do I do that? My broker-dealer won't let me." It's like, "Well, yeah, technically you do need some RIA relationship. You know, maybe there's a hybrid option where you are, a dual registration option to their corporate RIA. Maybe you have to be a hybrid and have your own outside." But, you know, I find just we get so used to some of the silos that we're in sometimes that you sort of forget like, "Well no, one of the virtues of having a hybrid structure is you can actually do fee-for-service financial planning as part of your business and get paid for your time."

David: That's right. And, you know, I see, you know, occasionally some clients coming in who are leaving a wirehouse and they'll come in and they'll say like, "Well, they did a financial plan for me." I'm like, "Okay, hang on a second. What do you mean they did a financial plan for you? Did they do an asset allocation for you? Because that's not really a financial plan." So a lot of people don't even know what a financial plan is, the general public, you know, so it's educating them on what really a financial plan is. What does cash flow-based financial planning mean? What does goal-based financial planning mean? What's actually happening there? And asset allocation is a financial plan. You know all these things. But it's amazing to see how people look at work that others do and it gets passed off as planning. And all that coming from a guy who's a CFA and not a CFP by the way, so, you know, I'm really…I mean, I'm sold on it, right?

Michael: Yeah. Well, someone got you to drink the Kool-Aid. It's fantastic. We welcome all CFAs here in the world of financial planning.

David: Thank you very much. Thank you.

Why Monument Sees More Work Being Done By Technology Rather Than Staff In The Future [37:30]

Michael: So how does this grow and scale for you from here? Like, you know, I know you're an entrepreneurial really, like, business-minded guy. You're sitting at 11 staff for 120 families, you know, $300 million under management, it's like clearly, the revenue is there to pay the people. So, like, I get it, the business is working fine. But, you know, you're at 11 staff for 120, like, how many more clients do you think you can add before you have to start adding more staff, and, you know, do you have, like, a plan or a vision about how it scales further? Like, how you hire up the people to go to the next level with this?

David: Right, because you end up at a point… I was saying to the team today, I was like, "Look, I know we're all busy right now, but the solution to that problem is not hiring somebody else. Like, we need to be more efficient with how we're working." And so as you dream he's like, "Let's do an MBP and let's have this in our annual client reviews," and all the stuff. All of a sudden you're like, "Okay, where did all the time go?" To your point, like, "What are 11 people doing?" And so it's about getting smarter with how you work and really leveraging the technology. So I really feel like Monument is at a place right now where a lot of the future work that we need to have done should be getting done by some technology and not necessarily another human. And so there's a lot of technology out there that we're starting to embrace. Like we're currently data onboarding with Orion, and in going through their training and working with their reporting, I'm already looking at it and saying, "This is going to save me so much time?"

Michael: Well, I guess two questions. One, what were you using previously, and two, kind of related, like, what were you doing that was taking time? Like, producing performance reports or trying to do billing or kind of all of the above?

David: Yeah, it's doing the performance reports was taking a lot of time, and then trying to… We use Morningstar, and somehow Morningstar just wasn't really good at reporting a couple of different things.

Michael: So, like, just using the Morningstar Office product or, like, the full Advisor Workstation?

David: Yes. It's the Office product.

Michael: Okay. So what wasn't working for the…like, what couldn't you report on? I kind of feel like Morningstar seems to have their tentacles into almost everything. Like, what does Morningstar not report on well in the broker-dealer world?

David: So yes. So it's not that Morningstar is...it's not that it's bad, it's just that we're going multi-custodian and really wanted to have a trading tool embedded, because, you know, Orion's got their Eclipse coming out. So a lot of that was driven by this. Here's an example that we were having trouble getting out of Morningstar the other day was, some client just wanted a simple cash flow map. Like, "What are my dividends going to look like? What's my income going to look like over the next 12 months?" And we found ourselves in spreadsheet land on that. And any time you get into spreadsheet land, right, now you're really not working efficiently.

Michael: Well, particularly when you've got three CFAs. I mean, that's just a black hole.

David: Well yeah, because all of a sudden one person is like, "Look at this new formula." And the next thing you know it's like we're all hovered around one screen looking at some init [SP] thing, you know. So your original question I think was, you know, how do you scale? When do you kind of know? And really, God, I hate to say that it's this unsophisticated, but up until this point, it's really just been my gut. It's just looking at people working here and saying like, "All right, that team seems like they are really overloaded," you know. "I saw that they were in here over the weekend, why is the financial planning team working on a Saturday?" you know. And you just start to figure out like, "Okay, something is not working right, somebody is overloaded, I need to spread some work around."

And I also feel like if I have one or two people hired in advance of really needing them to be at full capacity, I'm always going to stay ahead of the hiring curve. In other words, I don't want to hire people in an extreme situation. Like, an in extremis hire. I don't want to have that happening. We just onboarded a planner three months ago, and, you know, I think it's going to take her a year to get up to speed on all who the clients are and all the situations and everything. And what I don't want to do is hire somebody when I need them. I want to hire them before I need them and get them spun up. And that's part of the G2 thing for us too is, you know, if you really want to start developing the future leadership of your firm, you can't just hire somebody and say, "You're going to be the G2 leadership of my firm, go read this book." I mean, it takes a long time to get somebody up and running. And so we've got a little bit of a bullpen there too.

Michael: So what does that look like? Like, ultimately your plan is to have other ownership involved, not necessarily just to continue as you and your partner?

David: Yeah, really Dean Catino is my other partner, and he and I really feel like Monument is a firm that we would like to see endure beyond he and I owning it. We really don't have any appetite to sell into an aggregator or a roll-up or anything like that. And there was 1 million good reasons to do it, we're just not interested in it. It just doesn't fit, you know, my psychologically unemployable personality, you know. What our goal is, and I really hope we achieve this, so our goal is, we want Monument to be owned by the employees someday. We want to sell Monument to the next generation of ownership and leadership here and have them continue the firm, right? I mean, somebody started Goldman Sachs, you know, somebody started Merrill Lynch. So, you know, I would love to have Monument kind of be this enduring thing that is a legacy down the road. And, you know, that's maybe not the right word but you know what I mean. Like, something that I'd love for it to be around.

Michael: So are you setting, like, a specific plan and timeline about how new equity owners get introduced to the business and when you guys are going to either completely dial out or start dialing out? Like, what does this G2 process look like for you guys?

David: So for me personally, I kind of feel like my career and ownership at Monument is going to be categorized by saying, you know, I don't know if I'll ever retire. I think maybe my vacations just keep getting longer and longer every single year. Like, try to do that. I don't know if that will work out, but if I could wave my magic wand and make it be the way I want to, that's what I would do, but at some point, right? So Dean is 8 years older than I am, I'm 50, Dean is 58, and I think it takes 7 years to get somebody at the point where they're ready to become an equity owner. Maybe it's five but in my mind, I'm just like, "Okay." And maybe a little preshaped by the way lawyers become partners at law firms. It's usually at the seven-year mark. So I may be a little bit polluted by the way they do it, but somewhere five, seven, eight years. I think it takes them that long to be ready to say, "Okay, now I'm ready to be an equity partner."

Michael: There's just a lot that you've got to get through. Like, first you've just got to learn your technical chops then you've got to learn to actually be able to manage clients. Then at some point, at least for most firms, if you want to be an equity owner that participates in the growth of the business, you have to actually contribute to the growth of the business. You've got to learn business development at some point. And then if it's going to grow you've got to start to learn to manage people as well. And just you get all that stuff in. Like, look, you can be really fast and learn how to do all those things in a year or two each, it still takes five to seven years or more to…

David: Yeah, I think it does.

Michael: …learn all the skill sets that you need to take on that mantle.

David: Right. So if I'm 50 now, I mean, we're looking at being 58, 59 years old, and then tack 8 years on that for Dean. So we've got to get cracking. It is a big project right now. So we have spent a lot of time over the past three months putting pen to paper and developing what we internally call our path to partnership or our P2P. And, you know, just looking at how other people do it and trying to figure out what works. And we went to the G2 conference with the AICPA, which I thought was a great foundation for us to really figure out putting pen to paper. And there were some great people there, Mark Tibergien and Philip Palaveev and Cheryl Holland. I mean, they were all really great at helping me create this mental foundation of what my P2P is going to look like.

And this year it's going to be putting pen to paper and then saying to the people that we identify as being on their path to partnership like, "This is your first level that you need to clear in order to make it to the next level or the next step," or whatever we call it. But eventually, it's got to end up with equity ownership.

Michael: So I know you're still fleshing it out but I'm just curious even where your thinking is going for this. Like, what are you visioning is this path to partnership? Like, are they going to earn their equity, are they going to buy their equity? What kind of standards are you going to set for them to become partners? Like, how are you fleshing this out, at least so far?

David: So the nice part about a seven-year path to partnership is I have seven years to figure out how they're going to get their equity, right?

Michael: Right.

David: But there's got to be… I think one of the most important things I have to do is sit down with them and show them and say, "Here is our path that you need to...this is the journey you need to embark upon on this path in order to become an equity owner here at Monument." Now, this I'm guessing here, but I think ultimately there's going to have to be a combination of some gifting of equity, like effort equity for, you know, just working hard, but at some point they've also got to buy some, right? Because I need to get bought out of my business if I'm going to not be in the business anymore. So I just don't know what financing looks like seven years from now. I know what it looks like today, right? I know everybody is a cash flow lender, and the next sentence out of their mouth is, "Show me your assets." So, you know, funding can be kind of hard. So with Dean, I may have to fund it ourselves. That part, we are still working on, how they're actually going to buy it.

But to get back to your question, what does the path look like? I think it has to include things like taking on more responsibility, leading other members of the team, slowly getting introduced to, you know, "How does the business get run?" You've got to start understanding accounting. I love some of these programs that are out there right now. You know, Philip Palaveev's Leadership Institute. I think that's what he calls it. You know, that's going to be part of our path to partnership.

Michael: Like, they'll have to go through that then.

David: They're going to have to go through that.

Michael: I forget, like, Leadership Institute, G2 Institute. Yeah.

David: Right, right. I mean, that's going to be part of it. You know, I'm really excited to see what Ray Sclafani of ClientWise ends up doing with this new partnership with Northwestern. Does he create something that's similar to that, where G2 people are coming in? Anecdotally it looks like that could be happening on his platform. So I think there's going to be a lot of opportunities out there to teach people how to become business owners. I suppose you could even say, "Hey, go back and get your MBA at night or something like that," is another way to do. I don't think that's the most efficient way to do it, but it could be any one of those things. But there's got to be this program of self-studying and becoming a business owner that you're going to have to show us that you're putting in the kind of effort. Do you really want to become an owner or are you just kind of trudging down the path hoping that one day you get given something?

Michael: Yeah. Well, I mean, to me that's one of the blocking points for a lot of firms is this idea of, "We'll just let them develop, and if they get to that point then five years or seven years from now or whatever it is, we'll make the offer to them and we'll give them a chance to buy and then become partners." And I think, like, what a lot of firms end out forgetting is from the next generation planner's end it's like, "I don't really want to work my backside off in the hopes that you will deign to recognize me with a partnership opportunity five to seven years from now and hope that works out." Like, "You know, define the rules of the game and I'll decide if I'm going to step up and try to become a partner. But don't ask me to do all the things of partnership and then hope you decide to follow through on your end, not even knowing what the rules of the game are and whether that's realistic in the first place." Or you just get people that don't want to step up until they know what happens and then succession plans never happen because the next generation person doesn't want to do the work until they know there's a path to partnership and the other person doesn't want to give a path to partnership until they know if it's working out, and then nothing happens.

David: Right. I think it's like, you know, there's two ways to get to New-…well, there's a couple of different ways, but I'm going to use two different ways to get to New York City, right? You can fly. You can get on a plane, and you get on that plane and you have no idea where you are, right? I don't know where I am in that plane. The pilot is flying it. But I'm going to land in New York and I'm going to get there and one day I'm going to be like, "Okay, I made it to New York," right? Surprise. Or I'm driving and I'm like, "Okay, I just went through Baltimore, I just went through Wilmington, I just went through, you know, Philly area, okay? And now coming up the Turnpike." You know, I know where I am on this journey to New York City.

I think the latter of those two analogies are what I'm aiming for with the path. Like, I want people to have benchmarks and know that they are heading in the right direction, they're at the right speed, they're on time to get to New York City when they want to, rather than the experience of, "Okay, I landed, and am I where I thought I was going to be seven years down the road?" You've got to provide that sort… And I think this got ingrained in me in the Marines. You've got to be giving people constant feedback all the time about where they stand with you and where they stand on their journey towards partnership, otherwise, as a leader you are doing a massive disservice to the people that work for you.

Michael: And it's a challenge because we're all busy.

David: It is a challenge. Yeah. But you've got to make it happen. It's part of the responsibilities of being an owner and a mentor and all those other things. And if you want to be a good owner and you want to be a good mentor and you want to have a firm that's going to endure and have people that really want to work here, you've got to put the time into developing those people and your culture.

Michael: Yeah. And so that's the focus for what you guys are doing at this point is trying to build all of that out.

David: We are. And the nice thing about it is I don't think I have to build all seven years at one sitting. I have to build next year, right? What does the first year look like for Jessica or anybody else that works here? What does it look like for them? And just focus on that. You know, the journey of 1,000 miles begins with 1 step. I'm going to work on the first, whether I call it a level or a year or a step or whatever it is, let's flesh that out and get her embarking on that journey, and then I'll do the next year and the next year, learn along the way. And hopefully, you know, it'll be something that I can take and keep repurposing it for the next person.

How Monument Weeds Out Non-Ideal Applicants With A Unique Job Description [52:07]

Michael: So how did you find your people that are on partnership tracks in the first place? Because I feel like that's the other challenge for a lot of firms is just finding the people who can actually step up to all of these demands and expectations in the first place.

David: Yeah. So, you know, having been around for a decade now, we have matured in our hiring process from our very first hire, which was, "Oh, I really like that person, let's hire them," right? Because that was pretty much the job interview, right?

Michael: Yeah, been there and done that. Yeah.

David: Right, you know. And here's the thing. Like, I'm a connector, I'm a people person, I want to love everybody, so I'm a terrible interviewer. I'm horrible at it. Because somebody will walk in, I'll be like, "I like them. Hire them." And it's a disaster. So I think it's got to start with a great hiring plan. And here at Monument what we've done is we've said, "Okay, look, we have to have an interview process that puts people through a consistent process where everybody gets to interview them and we all sit down and have a conversation about it. What does that process look like?" And so over the course of 10 years, we've developed what I think is a really solid hiring process. And it depends on what the role is that we're using. So we had a really, really successful engagement with Caleb over at New Planner Recruiting when we were hiring a CFP. That was fantastic because that took a lot of the initial research and finding someone legwork out of the equation. So that was very helpful to us. But then we had to hire a CFA, and Caleb doesn't do that, right?

Michael: They're just focused on new CFPs. Yep.

David: Right, new CFPs, which is great. So, you know, if I wasn't already busy I'd probably try to figure out a way to do it for CFAs too, but that segment…

Michael: I hear there's a lot of CFAs looking for work opportunities these days.

David: If the way people applied for my job is any indication I'd say that it's either…I don't think they're out of work so much as they just don't like their work. That was my experience when I was meeting people. Everybody I met when we were hiring a CFP was employed, they just didn't like their jobs that much. So I think it's got to start with, you know, your job description. And I have this thing, like, you know, if we want to capture…how do you capture the attention of people you really want to hire when every single job description looks the same? I mean, you look on these job boards and you're like, "How do you even begin to decide if you want to do that job?" That's how you end up getting these interview dumps, right?

So the very first thing we did was we said, "We need to have…" First of all, we have to have a place that people actually want to work. Okay, hold that constant for a second. Now we have to create a really unique job description. So this is where I kind of went a little, like, Dave Armstrong fun zone on this whole thing, and I was like, "You know what? I mean, all of these job descriptions are selling the job, why don't we let the culture sell the job rather than the job description sell the job, and let's just start talking about Monument in the job description rather than the job?"

So when we did our financial planning hiring, I think the first page and a half of our job description was just about Monument. You know, why we were founded, what is our company overview, what's our vision, what are our, you know, what we call our Monument, what are our six pillars, like, our mission and our values. We have six pillars: missions, values, our practice, our people, our story, our place. Put that in there and let people read that and start selling Monument in the job description. And then halfway through you get to the job description.

But I think the thing that really resonated with most people as they were coming in and either sending their cover letters in or interviewing on the spot was, we had a section in the job description that literally said who should apply, which is kind of standard, and then there was a section that said, "Who should not apply." And I spelled it out for them. And I'll just read you the very first sentence from the "who should not apply" paragraph. It says, "People looking first and foremost for a very structured experience and/or a big company name on their resume should simply move on. If you are not a good fit for working on an interdependent team that takes pride in the culture and the clients above all else, this opportunity is not a good fit for you. If you have no personality and no sense of humor or you need to be told what to do every second of the day, Monument is not the place for you." And there's three more paragraphs of that kind of that stuff.

Michael: Three more paragraphs?

David: Oh my God, it was half of the page. Here's another one. Like, "If you're just firing off your resume, cutting and pasting the cover letter to every available opportunity without fully understanding the brand, the culture and the team you want to work with, please move on. If you don't take the time to learn as much as you can about us, we're not interested in taking our time to learn about you. We're a small business, we can't get our hiring wrong. If you can't be patient with our decision-making process, you won't make it through the interview." Here's my favorite part. "Finally, Monument has several dogs that come to the office during the week. If you don't like dogs, please factor this into your decision to apply."

Michael: All right.

David: I mean, I went off the reservation with it. And man, I'm telling you, the response to that was so unbelievable because the cover letters that I was getting from people were obviously, like, thoughtfully…I got cover letters, people attached a picture of their dog. People said like, "Here's my dog."

Michael: "I'm a dog person, please hire me."

David: Exactly. And then there were some people who did this massively professional cover letter, right? And then at the end said like, "I didn't want to lead with this because I didn't want to be unprofessional, but I love the fact that you guys have dogs in your office. And I have a chocolate Lab and his name is, you know, Worry [SP]," and all this kind of stuff. And it was amazing to see how all these personalities came through. And what I really realized from that, so I know it sounds kind of funny that "who should not apply" thing, but it was key to weeding people out. And I was shocked at how well it worked.

Michael: It's been a funny thing to me that… or maybe funny is not the right word, but just experience of growing as a business owner that, like, every year that goes by of working with them, building a team and appreciating the value of good people and appreciating how toxic, like, one bad person on the team is to drag down the whole team, that I get more and more appreciative every year that goes by of the old saying, "You have to be slow to hire and fast to fire." You know, I mean, I certainly look back, like, I haven't had to fire a lot of people over the years, but in retrospect, every single one I've ever had to fire, I didn't do it soon enough.

David: I know. It's true.

Michael: It was terrifying at the time. It's always terrifying at the time, but, like, every time, you know, looking back I'm like, "I should have done that sooner." And then everyone else in the team would say, "Yeah, you really should have done that sooner," right?

David: I know. And it can become so toxic. So 10 people sounds like a lot for the amount of clients that we have, right? But if one person doesn't work out, I just lost 10% of my team. And that hurts a lot because you could put a year or two into training somebody and they walk out the door. And we've had people at Monument get fired, and we've had people quit, and then we've had people just, you know, life circumstance, they had to move or something like that. So we've seen it all, right? And it's amazing that...you're right, like, the quick to fire thing…but what I'd really rather do, and maybe this is a unicorn but I'd really rather be slow to hire and never fire.

Michael: Well, that's what I ended out getting to is frankly I just like helping people. I really don't like firing people. So the easiest way to not fire people is just to be so stringent in the hiring process that you never have to fire someone that you hire.

David: Right, right.

Michael: I mean, that's really is basically where I ended out in the process for businesses for me as well is just the clearer we can be upfront about who we want to hire and who is a good fit and what the expectations are and not be bashful about any of that stuff of what it takes to succeed here, whatever that is for your firm, like, just be clear about it, don't be bashful, you know, the people you'll end out weeding out are the ones that probably weren't going to be a fit anyways. And not only does that mean you're probably only going to talk to people who actually are a good fit, but there's this effect that I found out.

You know, we see the same thing, particularly for our hires for XY Planning Network because, you know, we write kind of similar style to our descriptions, although our "why not to work here," "why you're a bad fit" is not as long in ours as it is in yours, but, you know, we've gone down a similar road and just let the hires happen more slowly with all this detail and pace of this context about our culture and what we're like, and the people who like that stuff love it and end out loving the firm and loving the culture. And it works because the people who like that literally like the culture that we just pretty much set forth in the job description and the cover letter.

David: That's right.

Michael: So everybody knows what they're getting, and just the hiring goes so much better.

David: It does. And so, you know, the first part of our process, it's a Skype interview, so we're not dealing with a whole lot of time crunch of people coming in and stuff like that because you can knock out a 15-minute interview. But, you know, one of the first thing that's going to happen in that Skype interview is our marketing manager, Brittany, she's going to sit down and she's going to start grilling you on our brand. And if you haven't looked at our website and you can't talk about our videos or any of the blogs I've written or anything like that, you're done. Like, if you didn't take the time to research, she starts asking. She's like, you know, "I like them but they did no homework on this job opportunity." And we clearly state out in the job description like, "You better have a passion for our culture." And so, you know, if people can't get excited about working here in the first interview, boy, that's a bad hire.

And then, you know, some people come in and they knock the cover off the ball and then they come through some more screening and some more, you know, in-person interviews. And then finally it ends up, you know, they've got to meet Dean and I. But that's really the easiest part of the interview. I mean, you're sitting down with the partners.

Michael: If made it through the rest of the gauntlet, this is actually probably the shoo-in meeting even though the person getting hired is probably most terrified of this meeting.

David: Right, exactly. Because I'm the pushover, right? So I've got to have this whole crew out there. And, you know, they're tough. You know, you can't spend a day on social media without seeing somebody maligning the millennial generation. And I think that's unfortunate because I do not share a lot of that, the feelings about the generation because all of the millennials and younger Gen Xers that work here, they are tough, hungry people who want to work and love what they do for their living, and they're really protective of letting somebody else come in here. And I'm just shocked at how tough some of these people are in their interviews. Like we'll do a debrief on somebody and I'm like, "Wow, really? You would ask them that?" Like, "You were on them about that? Wow, wow."

Michael: That's a powerful thing, right?

David: It is.

Michael: Like, if you don't like asking the hard questions, get the other team in there and let them do it.

David: Yeah. And then the last thing we do too, this is something else that has really worked out well for us is we mandate that everybody that gets through pretty much where you interview with Dean and Dave, we have a happy hour with them, where we go out, and the whole team goes out. We'll get a big table, you know, at the restaurant or bar down the street, and we'll see what people are like in a social setting. You know, get a couple drinks at them, see what they're like. And boy, we've had some people destroy themselves in that social setting, just they were done.

Michael: Yeah, like, looked good on paper, seemed good in the formal interview because their game face was on, but get them into a social situation and then find out what they're like and realized this ain't going to work.

David: Exactly. You know, I think we did, like, 10 of those social outings. And there was one day where we came back and everybody was like, "Okay, I'm a no on that person," just based on, you know, the hour and a half social thing. It was interesting to see how some people came apart. And some people really shine in the social thing too because at the end of day, with 10 people, you better like who you're working with.

Michael: Yeah, no kidding. No kidding.

So what was your, like, pathway into getting into financial services and doing all of this in the first place? You know, I think you said at one point you were military before you came into working at DLJ and then Merrill. So, like, what was your background path to actually coming into the industry in the first place?

Michael: So I have to actually go back to my Marine Corps days to tell you why I ended up in this industry. You know, it started back with when I was at high school and that movie "Top Gun" came out. I mean, it was the most fantastic recruiting thing that they ever put out. And I just remember watching that movie and looking at my dad and saying, "That's what I want to do." And my dad said, "Okay well, you better graduate from high school and you're going to have to go to college and become an officer and do all that stuff." So I got really passionate about joining the military. And what I discovered was that the Navy had a great flight program, and the Marine Corps was the only service when I was in, and it may still be the case, that would guarantee you a flight contract in writing. In other words, if you passed all their basic training, everything, they would guarantee to send you to flight school. So I said, "Okay, that's it. Great. I'm going to do that."

Michael: Oh, because it was "Top Gun," you wanted to fly. Okay.

David: Right, I wanted to fly. I wanted to fly. So make it all the way through to my senior year, and then decided because I had a friend that had a tragic accident in training, and then all of a sudden changed my mind, "I don't want to be a pilot," and that was it. My senior year I gave up my flight contract. But I still had to serve four years in the Marines as an officer. So I went in the Marines. And this is the early 1990s, so I'd just missed Desert Storm but I ended up, you know, going through Somalia and Mogadishu when that whole thing went down. And that really just started to change my attitude about being in the military. And all of a sudden I thought, you know, "I may not want to do this for 30 years like I thought I wanted to do 30 years 2 years ago."

And I end up on a ship somewhere, and when you're out on a ship, the only thing you can spend your money on is, you know, razor blades and toothpaste. There's just nothing to spend your money on. So I started saving money. And I remember my dad saying, "Do you know what a mutual fund is?" And my dad started turning me on to, you know, invest in my IRAs and everything. And at this point it's 1996 and '97, right?

Michael: Oh, and then your IRA started going up.

David: Oh, listen, I was a genius. I couldn't pick a stock that would go down. It was impossible. I was a genius. I was made for this industry. This is what I'm thinking, right? I'm like, "I've got to go do this. I'm amazing at this." Like, The Motley Fool was coming out, all the chat boards, people were talking about, you know, Iomega Zip drives and all these crazy things and stocks. You just couldn't make a mistake back then. So I said, "That's it. I'm getting out of the Marine Corps, and because I didn't get a business undergrad, I'm going to go back and get my MBA and just use that as an opportunity to career-change." So I went back to graduate school, specifically to get a business degree because I didn't know what I was doing. Ended up getting this job with DL J, and it was great but it was it was private banking. It was working with, you know, the firm's big banking clients that were coming out of M&A transactions and things like that.

My career took me here to D.C., and my wife ended up getting a job in…we met in graduate school and she ended up getting a job in politics, so there was no way I was leaving D.C. at that point. So I ended up having to leave the private banking industry because I shut my office down and kind of started working with smaller clients and figured out like, "I really like this a lot more than dealing with the banking clients," because I was really just a relationship manager there, I wasn't really doing a lot of heavy lifting with planning and investing and stuff. So that's how I ended up in the business.

I subsequently went on to do a full 28-year career mostly in the reserves, in the Marines, so I stayed in and participated, which was great. I loved it. And I'm retired now, but throughout the course of that, I met my business partner Dean. And the original guy that I came in through the business with, a guy named Rob Bartenstein who runs Kestra Wealth Management now, the RIA arm of Kestra, he and I came into the business together and started building our clients. And he went off into the management training program and I was kind of stuck without a right-hand man. And I got to know Dean and I said…there was one day when I was just frustrated with something and I walked into his office and said, "Have you ever thought about, you know, going out and doing your own thing?" And he goes, "Shut the door." So he had been thinking about going independent too, and he had been doing a lot of research on his own too. So when that happened, we just decided that it was time. And that was, like, January of 2008. And like I said, by May of 2008, we had opened the doors to Monument and embarked upon this great journey.

Michael: But how was that transition like? When you left Merrill, did you try to transition clients with you? Were you, like, going through that protocol breakaway process?

David: So we did. You know, it was 10 years ago, so I'm trying to remember all the details, but I don't remember it being all that hard to get our clients to come with us. I don't remember TROs, I don't remember anything like that. I mean, we just called clients and told them, you know, what we were doing, and, you know, that we weren't at Merrill anymore, and if they were interested in learning more about Monument to give us a buzz back. I kind of remember that's how we got around that. And so it was 10 years ago. But, you know, you had this list of your clients that you want to have come with you and you kind of also go through the list of the clients that you don't want to have come with you.

And so, you know, our thing was, you know, that old 80/20 rule, ours was more like, you know, 80/50, 80% of our revenue was coming from 50%. So we were like, "Okay, we have to make a really compelling reason if we're going to take number 51 and we're going to have to make a really compelling reason if we're not going to ask number 26 to come." So we figured that out. And we did that and we started calling it. And I had a couple of surprises. I'll be honest with you. You know, one of my really great clients who just said, "Hey, I'm so psyched for you because that's how I built my wealth, by starting my own business, but I'm retiring and I've been going…"

Michael: But I'm not moving my wealth to help you create yours."

David: Well, it wasn't that much of a slap in the face, thank God, it was a palatable reason. The client had said, "I've been going through the CFA program myself, and because I'm now retired I've decided that, you know, as my retirement hobby, I'm just going to run my own money." And I was like, "Oh, okay.” Like, how do you argue with that, right? I was like, "Okay, I get it," but, you know.

And then we had 90% of our clients over by the time, you know, Lehman went under. And I just remember, I think it was, like, a Sunday night where, you know, the next one, the next shoe was about to drop and I just think to myself, "Wow, how lucky was I that the timing worked out the way it did?" But, you know, I look back on that and I think, you know, for people who are looking to do that now, I think there's a whole different set of legal challenges that I didn't have to deal with. And so my experience may not be relevant to those people getting out. But the one experience I'll tell you that I hear people share all the time is that saying, you know, "I wish I had done it sooner."

Michael: Why? Like, I mean, what was it that was so different from being at Merrill versus being at LPL?

David: Well, you know, running your own business is great because you can make the decisions on what you want to buy and don't buy. You know, everything that you would want to do with your own business at a larger firm, you've got a manager you need to ask. And I always felt like, you know, if Dean and I…I always felt like four quarters didn't equal $1 sometimes. And so if Dean had this much, you know, production and I had this much production, shouldn't we be allowed to at least sit next to each other? And it was like, "No, because this guy, he does this in his office and this assistant," and all the stuff. And you're like, "Oh my gosh, the red tape of a big organization." It wasn't specific to anyone, I think it's specific to all of them.

Michael: Well yeah, it's hard running a giant business with that many different brokers under the umbrella, and just you have to run it as a business. So yeah, like, I get it, but it doesn't mean it feels good when you're the one that's trying to get something done and can't get something done.

David: Right, right. And, you know, I enjoyed the friends I made at Merrill. You know, I was in the big office in Washington, D.C. I used to say all the time like, "I ride the elevator with 150 of my biggest competitors because they're such great guys and gals." And, you know, I mean, that firm was chock-full of really good people doing really good work for their clients. The managers were all, you know, really, really great, but at the end of the day, I was like, you know, "I just want to run my own thing. I want to do my own thing." And that was a really powerful draw.

Michael: Just to have the freedom.

David: Just to have the freedom. You know, I bring my dog to work. That's just, you know, because I can.

Michael: Yeah. And everybody else that are like that too.

David: Yeah, right. And, you know, I just don't think…you just can't really create a culture when you're part of a bigger culture. You can't be an advisor at a firm and create, you know, what you want to be. I can't write a job description like I just read you. I couldn't do any of that. And I love that stuff. That's the stuff that makes me want to get up every single day and unlock that door every morning.

Monument's Future Now That The Brokerage Business Is Less Than 10% Of Revenue [1:12:47]

Michael: So now you're at an independent broker-dealer, having done this for 10 years under LPL with an inside RIA then an outside RIA then a growing outside RIA. So what do you see is the future from here for the firm? Like, where do you see the broker-dealer fitting in or not fitting into the future if it's, I think you said less than 10% of your revenue now?

David: Yeah, I see it eventually going away. We haven't been doing business on the brokerage side for some time. It's not really a part of my strategic vision going forward, you know, from a compliance perspective. As a hybrid, one of the difficult things is, you know, not only am I the chief compliance officer on the RIA side, but I have broker-dealer compliance responsibilities too. And sometimes you see things differently. They see something red and you see something green and vice versa. And I just think that it would be a lot easier to run my business under one set of regulatory rules that are very clear and concise and…well, they're not concise but they're clear in terms of, you know, being able to, you know, act in the best interest of your client. And I look at the broker-dealers… I'll sum it up like this, it's becoming where the juice isn't worth the squeeze on the broker-dealer side. I'm just not selling products anymore.

Michael: Now, I know at the same time, like, LPL is technically one of the larger RIA custodians as well. You know, they actually are self-clearing, they do the clearing and custody themselves. You know, a lot of the folks on the independent RIA side tend to use the Schwab, Fidelity, TD Ametritrades of the world that are focused on the standalone independent RIAs. But LPL has a large RIA business, Raymond James has a large RIA business, so are you looking at this to say, "Hey, I might wipe down the broker-dealer side, but, like, being an RIA using LPL's custody platform still works going forward," or do you ultimately envision, like, just is the whole broker-dealer world just not that relevant to you at some point in the future?

David: Well, you know, LPL has been a fantastic partner in my, you know, decade-long journey, and I'll always have a relationship with LPL, but I'm forced to go multi custodian at this point because of just client demands on things. So, you know, everybody makes their own strategic decisions and moves their technology in one way or the other, and I've got a certain subset of clients that are demanding a different technology experience than I'm able to give them when I'm captive on one platform.

Michael: So is that in terms of like the website, like they want a TD Ameritrade retail-style website and not LPL's capabilities? Like, that kind of stuff or more specific technology issues?

David: Yeah. Well, you know, there's two sides of technology in our industry, right? There's the client-facing technology and then the advisor-facing technology. And the advisor-facing technology is bad. It's just frustrating and sometimes it causes some client services problems. But eventually you look at it and you're saying, "Okay, it's also impacting my ability to efficiently run a practice and grow it." And then there's the client-facing side of technology, which is, you know, what are clients seeing and doing on the website? And LPL has been working very hard to bring out their ClientWorks and upgrade their account for you and everything, but at the end of the day, they kind of own their technology. I mean, in a way LPL is kind of a software firm, right?

Michael: Yeah. Well, it's sort of the…I mean, I find the more that broker-dealers are…like, the more that the advisory industry evolves away from doing traditional brokerage products and into a world of AUM or fee-for-service business, like, if you take a broker-dealer and you get rid of all the products, what you're left with is basically a technology platform that gives you practice management support. Yeah. And somewhere there's got to be custody of money, but there's also independent custodians. Like, just this sort of world of, you know, like, the future of BDs is the technology and the practice management support you can bring to the table, because when I don't have to have my license with you to sell a product because I'm not selling the product anymore, like, that's what's left.

David: Right, that is what's left. And, you know, in my case, I've got, you know, LPL, you know, that's a tough job, right? You've got 15,000-plus people and you've got to have technology that fits, you know, a big box of people. And then all of a sudden you're like, "What about Dave Armstrong, what I want?" And it's kind of like, "Well, you know, you can't really either. You got what you got." And so when you have clients that never get shown anything different, maybe it's not a competitive situation or, you know, people aren't prospecting them from other firms, they're fine with it. But the minute somebody gets shown something and they like it more and you can't offer it, now all of a sudden you've got a problem on your hands.

So the whole thing about going multi-custodian for me is that if somebody wants something, I don't want to have to be like LPL is with me, which is like, "Hey, here's what we've got and you either like it or you don't." And for the most part I like it, but for the couple clients who don't like it I also want to be able to say, "If you don't like it then I've got this other solution for you too."

And so I have to do it from just a practice survivability perspective because people are getting shown a lot of really cool stuff out there, you know, I mean, YouTube videos that show…people can see an experience that they would have on another…you know, it's always the grass is always greener, right? But they're convinced that there is something better out there. And if you don't do something to give it to them, at some point they're going to say either, you know, "I'm going to stay with what I've got," or, "I'm out of here because XYZ firm over here just showed me something really cool and you don't have it. And I'm sorry Dave, I love you, but this is important to me and I want it." So I just don't ever want to be in that position.

Michael: I mean, I guess, not all broker-dealers that have some kind of dual-registered option for BD and RIA will even let you have an outside RIA, an outside multi-custodial relationships. I guess, like, this is an option at LPL, at least for you?

David: It is. And I think that's one of the best things about their offering, and I think that's probably the thing that's attracting new advisors to come to LPL, to be on the hybrid platform is that, you know, they will allow you to, as long as you're not doing anything wrong with compliance and you're willing to pay for and it works, they're very supportive of me and my business, which is why they'll always be a partner of mine. Go ahead.

Michael: But I guess it's an important point that you may have your outside RIA and outside custody business, but they're still doing RIA oversight of you even though you're your own RIA and not their RIA?

David: So no, they don't do RIA…this gets a little confusing but they don't do RIA oversight, but because they hold my licenses, they've got a responsibility to FINRA to supervise what I'm doing in the RIA space. So no matter where I'm custodied [SP], I could be custodied to TD, Schwab, Fidelity, and LPL, and LPL is going to say, "We need to be supervising everything that you're doing at TD, Fidelity, wherever you are because we hold your FINRA licenses and FINRA mandates that we supervise you, even if it's on the RIA side."

Michael: So what does that mean in practice? Like, you've got paperwork you've got to submit to them, they're going to take a scrape of your outside business because they're going to come and say, "We have to oversee it and then we have to get paid to oversee it?" Like, what does that look like?

David: That's exactly how they do it. So they say, "Listen, if you feel like you need to be multi-custodian and have relationships away from us and we need to supervise those, there's a cost of carry there and you're going to have to pay it." And it's a reasonable compromise because I understand they do have to do the work. So you're going to pay for it. So it's a business decision like everything. They will come in and supervise things like my policies and procedures manual. So the policies and procedures manual for Monument Capital Management is my actual RIA and we DBA as Monument Wealth Management. So they'll come in and they'll say, "We need to see all of the policies and procedures manuals for Monument Capital Management." And they'll go through it and they'll say, "Hey, we think you need to change this, you need to do this." And they'll make suggestions based on best practices and things that they've seen with other LPL advisors. It's actually a really great, you know, additive help for me.

But at the end of the day, it's my RIA and I'm on the hook for it. So, you know, I have a law firm that does a lot of the heavy lifting for me on the RIA side, which has been really helpful for me because they're my go-to people on any questions that I have with RIAs and they're the ones that keep me out of trouble and update everything and tell me what I need to be doing. And they come in and do mock audits. And it's just more expensive.

Michael: So is there some point where there's so little BD business that it's just not useful? Like, how do you think about that? Like, just, "Hey, my clients are happy at LPL, I don't want to mess with the applecart and move them, so we're there as long as clients are there," or do you do some calculus like, "Once the BD revenue winds down enough, if what they charge me to oversee my RIA is more than what I get from the BD revenue then I'll just walk away from the BD revenue because then I don't have to pay them the oversight anymore?" Like, do you look at those kinds of breakevens or just, "Hey, as long as clients are happy, I'm sticking?"

David: So it's a both. So so far clients are happy and they're sticking.

Michael: Yay. Yeah.

David: So there's that. Right. Okay. So let's hope that doesn't change. But the other side of it that you mentioned, which is, you know, like, at what point do you do the analysis on the money? And I think you just have to look at it and say like, "Okay, it's a couple things are all going to happen at the same time. It's if I'm not doing any more broker-dealer business then my trails are going to end up just going down. You know, the revenue that I'm getting from 529 plans and things that clients have right now, their kids go to college so the money won't be in the 529 plans anymore and then the client has to be…

Michael: Right, eventually all that legacy business just winds down.

David: Right. And at some point, you say to yourself, "Okay I'm spending…" I'm just making some numbers up, "I'm spending $100,000 on oversight in order to capture $50,000 of revenue." And you just say, "That's just dumb." So at some point in the future, that equation will invert, and when it does I think that will be the tipping point for when I decide, "Okay, I'm going to just go fee-only in the practice." And we're getting pretty close to that. I mean, only 5% of the revenues coming from the broker-dealer side so, you know, it's not going to be many, many years.

Michael: Yeah. To me it's an interesting challenge for the entire broker-dealer space about, what are they doing or what are they going to do to try to stay relevant as more and more firms make that shift over time, right? You know, the good news of going to fee-based frankly is, it's recurring revenue. It actually improved profitability for a lot of broker-dealers, but the bad news, like, the longer you do it and the more you don't use traditional FINRA products, at some point it's like, "I just don't do much FINRA products?" Like, "Why am I hanging out here?" And they've kind of got to figure out this reinvention for themselves.

David: Well, it's not just the BDs, I mean FINRA is a big organization, too. I mean, how about the big wirehouse firms? I wonder at what point you start to see the business change where, you know, there are channels available to people who are in the wirehouse to be able to do this. Kind of like, I don't know much about the program, but like the way Wells Fargo has some sort of ability to run your own practice but still be affiliated with them. And I don't know how or if I know that channel is there, I just wonder how much of the, you know, not only our businesses, like you and I as advisors how our business change, and not only, like, LPL, but how about the whole industry? I mean, if everyone is walking away from their FINRA licenses because they feel like it's easier to do business on, you know, best interest of your clients, I mean, everybody likes that, right? I don't know any advisors who really, you know, but there is that whole specter of, you know, the confusion between suitability and best interests.

And so at some point, people will say like, "I don't want deal with this anymore. It's so easy to go RIA and just follow the rules and do that." What happens to the member firms who are then paying fees up to FINRA? Like what happens to that whole thing? I don't know. I mean, but there could be a bigger…if a wave really does continue to happen, you know, what does the whole industry look like in 25 years, 30 years? I don't think it's going to change in 3 years, but…

Michael: Yeah, I mean, these things take a while, which, you know, frankly is good news. It means some of the BD folks have time to reinvent themselves or reinvent their business models or figure out what it looks like in the future. But it is an interesting transition time that just the fundamental reason, like, legally, the fundamental reason a broker-dealer exists is it's an intermediary to product sales. So when advisors aren't in the business of selling products anymore, like, you kind of have a none clear reason for existing, that you have to reinvent.

David: Right. Yeah, I can't attribute this article to whoever wrote it because I don't remember who wrote it but somebody wrote something really great recently that talked about, "What would our industry look like if we wore those NASCAR driving suits?" Did you see that article where it was like the patches that were all over? And the point that was being made was that, like, you know, when you're a NASCAR driver, you know who's paying your bills because your patches are all over your uniform. What would our industry look like if we wore racing suits as advisors? You know, what would everybody's suit look like? You know, because you'd have one that just says, "You know, I'd have Monument Wealth Management over the pocket." That's all it would say, right? And then you'd have, you know, commission salesmen would have, you know, all kinds of mutual funds and annuity patches all over their...and I was like, "That's…

Michael: Yeah, it is.

David: …pretty much, because it was actually pretty good.

Michael: So, you know, what comes next for the firm overall? Like, just you guys are building towards G2, you're trying to scale up and hire more. Like, is it just keep on chugging on and your hope is to grow to $400 million or $500 million and just keep moving forward from there?

David: By default yeah, because we're not really excited about the idea of going out and buying practices. I'm not really excited about the idea of going out there and buying, you know, I'm using my air quotes here but, like, "books of business." So I'd like just to keep growing organically. So what does that mean? Well, that means if you've got a partner who's 50 and a partner who's 58 that are doing most of the business development, that's really the problem that I need to start solving in addition to the G2. Well, solving the G2 problem solves the business development problem too, but, you know, I'd really like to start looking at, "How can I get some people in that can help do some business development too?"

Michael: So is that hiring, like, a business development person or is that you're going to try to figure out how to train your next generation of advisors to do business development?

David: So right now I'm looking at training my next generation to do business development because I don't have a candidate to hire for…being a business development, but, you know, I could wake up tomorrow morning and meet somebody and say, "Wow, what a great advisor they could be if they studied underneath us for five or seven years and learned how to actually give people advice and do planning for them versus, you know, going to a big training program and trying to make it through that." You know, the way I started out in the business was almost like that. You know, scene out of "Wall Street" where, "Hey, kid," you know, "There's a phone book, there's a lot of good leads in there." You know, I just don't think that people that are interested in coming into the business really want to be financial planners and advisors. They just can't do the business like that anymore. It doesn't work.

So in order for somebody to be successful in this business, I think they actually have to come in and do an apprenticeship. And if you have a practice like Monument, we have a process. So a process is, it's like a franchise, right? I mean, the process is easy for anyone that wants to come here and work and franchise it. And that's where I think our business development people are going to come from is we take our process in and go out and meet people that want to become advisors and say, "You can buy into my franchise and my process if you come in and, you know, work in the store for a while."

Michael: Yeah, to me it's an interesting evolution for the whole profession, that, you know, the last generation of advisors to come in, and I mean, even I was, I was on the tail end of it I guess but I started this way, you know, like, you came in to do business development selling to clients, and if you were good at that, then at some point 5 or 7 or 10 years in, you were allowed to start doing financial planning.

David: Right, or asset management or running portfolios. Right

Michael: Asset management, and getting a CFA or a CFP and going down that path. But, like, it only came after you did sales and business development to either survive or not. And now we live in this world where next generation of advisors are coming into financial planning jobs, and, you know, they're doing paraplanner roles or they're working in operations and client services and getting their CFPs and then starting to work with clients. And then at some point, like five years out or more, they start learning business development for the first time. And it's an interesting transition to me that we went from, you sell first and then after five years you can do financial planning, to you do financial planning first, and then after five years, you can learn to sell. And I feel like the industry still has not fully assimilated that, like, 180-degree turnaround in how we actually hire, train, and develop people.

David: Because we still put a premium on the rainmaker.

Michael: Yeah.

David: And, you know, I would argue after, you know, having run a training program at a large firm for a while, that I think there's a higher probability of success of people making it if you can somehow figure out how to pay them for five years in order to become a great advisor rather than making them make it in the first nine months, you know, hitting whatever the benchmarks are that they need to hit. It doesn't teach people anything and it doesn't set the right standard, and it introduces a lot of, you know, problem for the industry.

Michael: Well, and particularly in an advisor context, right? Like, even for when I started, you know, I started out in the life insurance side of the industry. And, I mean, my training when I came in, like, I learned one product. That was it. Like, you learned one product, and then they taught me how to sell that product, and then they sent me out there to sell it. It's a little easier at least to become competent at what you do when all you need to do is know one product and how one product works. But the moment you start going down the road of actually giving people personal financial advice, like actually advice about their stuff in their world, in their lives, like, you need to know more. And you need to be compelling that you know enough that someone will actually pay you.

And that quickly gets really difficult when you haven't had any actual training in financial advice and you don't know anything about giving people advice as all you've been trained in is sales and whatever the Series 7 and 66 taught you, which is not anything about how to help people actually with their financial lives. And, you know, we get stuck in this, I think transition now of, "Oh, yeah, if you want to actually have someone sell advice out of the gates, like, that doesn't work. They can't have enough experience and knowledge to be competent at that."

David: Right. It's like if someone came out of a trade school and learned how to be a plumber and went to the big plumbing company in town and said, "Hey, I want to be a plumber," and they say, "Great. Go out and get us 10 new jobs," you know, "Go out and sell 10 new jobs or go be the plumber on 10 jobs." You know, "Go develop 10 clients and go do the plumbing in their house, and then we'll see about coming over here and really learning the trade." And you're like, "Okay, so what happens to those 10 people that just had plumbing put in by somebody who's never had an apprenticeship or anything like that," right? I mean, those people are not happy with their plumbing. Or, I mean, you can say for instance what if electricians did that, you know, or anything?

So I think it's backwards. And I think, you know, it's incumbent upon us, you know, and I say you and us, I'm not just saying you and I, us, everyone listening, I mean, we have a responsibility to make sure that our industry is set up to help people become new advisors in our industry, whether it's through internship programs or just hiring people out of college. But, you know, if we want our industry to be as good as it can be over the next 25 or 30 years, we have a responsibility that's inherent in having this job of making sure that we're helping people get the experience they need to be good advice-givers.

How David Defines Success [1:33:54]

Michael: So as we wrap up, this is a show about success, and one of the things we always observe is that just even the word "success" means different things to different people. So, you know, you built a multimillion-dollar advisory business, a very successful business by any classic definition of business success, but I'm curious just for you personally, how do you define success?

David: So personally, I mean, okay, having this firm is a huge benchmark of personal success. I mean, I am so proud to come in here and open up the door every day and look at, you know, nine other people and say, "Wow, you know, what I built helps these people pay mortgages and do everything that they personally aspire to, and I get to help people." So that's one aspect of success I feel like I've already achieved. I feel like my next aspect of success is about making sure that it's set up to be an enduring firm. In my mind that will be success. I've never been somebody who's solely motivated by financial success. I think I mentioned to you earlier, like, you know, I cash thank-yous like I cash paychecks. So, you know, to me, having a firm that is, you know, really unique and creative and smart and innovative and respected around the D.C. area, those things are really important to me and they define a lot of my success.

I would say that, you know, obviously, you know, client success is important to me, but just the fact that I've got nine other people that really like coming to work every single day really defines a lot of my personal success too.

Michael: Well, very cool. Well, thank you for joining us here on Financial Advisor Success podcast and just sharing the story of how you built and developed the firm. It's pretty cool to hear.

David: Thank you. You should be equally as proud of yours. You've had quite an accomplishment as well.

Michael: It's been an interesting run so far. We'll see where it goes next.

David: Here's to 30 more years of it.

Michael: Amen. I hope so.

David: Okay. Thanks for having me on.

Michael: Thank you.