#FA Success Ep 243: Scaling $1B Of Organic Growth In Under 5 Years With Targeted Multi-Niche Online Education, With James Bogart

Resources Featured In This Episode:

• James Bogart
• Bogart Wealth
• Constant Contact
• eMoney Advisor
• Salesforce
• John Furey of Advisor Growth Strategies
• Traction by Gino Wickman
• PKS Investments

Full Transcript:

Michael: Welcome, James Bogart to the "Financial Advisor Success" podcast.

James: Thank you, Michael. It's great to be participating today.

Michael: I'm really excited about today's episode and getting to talk about what it's like to really grow an advisory firm fast. We talk about trying to grow our businesses and grow them more quickly. And some firms really try to invest more heavily into their marketing growth and get it going. But I know you have been on a truly, I think, kind of a growth journey, unlike very few others that I've seen.

You are closing in on $2 billion of AUM, but it was $200 million 5 years ago, and it was only just barely over a billion at the beginning of last year before the pandemic, and then kind of went hockey stick vertical in growth through the pandemic for what I know are a number of marketing shifts that you made that we'll get into. But just in a world where a lot of advisory firms at the end of the day talk about fast growth is like, "Whoa, I added several clients this month, but I'm kind of drained because of all the financial plans I've been doing for all these clients at the same time." And you're living in a world where you're adding many, many clients a week, sometimes multiple clients a day, pretty much every day on an ongoing basis. You were just living a whole other level of growth and what it's like to try to quickly grow and accelerate an advisory firm.

James: Yeah, that's a pretty good summary of what the last, call it 12 to 15 months have looked like for us. And I think it's a byproduct of having a really, really good team, and very aggressively making some shifts just in the environment that we were in, and being educators. Being educators is absolutely what caused a lot of this to start. And then, of course, adjusting some of the strategy based upon the pandemic, but we look at 2021 started just over a billion, and here we are breaking close to $1.9 billion, 6 months later. It's been a lot of work.

Where James’ Rapid Growth Came From [05:08]

Michael: So, talk to us about, I guess, first of all, where is a billion dollars of growth coming from so incredibly quickly?

James: Truthfully, it's a lot of these layoffs. It's a tough environment. And to me, I view what we do as just an essential need. A lot of the clients that we're working with, unfortunately, we're caught with redundancy programs or just infrastructure changes that eliminated their jobs. And next thing you know, some of them hadn't even looked at what life would look like after the company they were at, and they needed help very, very quickly. Last July, I'll never forget it. It was July 6, announcements were made at a company, and all of a sudden, we get 100 phone calls in a day, 60 phone calls the next day. And I'm on vacation in the meantime.

So it quickly turned into a very clear message of how valuable an advisor is and how valuable being knowledgeable and their benefit programs was. And I got to say, a lot of what we do is building a pipeline. We treat the business as a business. And one of the KPIs that I watch really closely is what's coming, just as much as what we have. And I actually look at that as one of the health and success matrixes that we use in terms of the future of the company. But everything changed last year where we had $150 to $200 million in the pipeline quickly became $1.3 billion. And a lot of it was induced because of the environment. But it became where we were doing a lot of the educational events live, pre-COVID pandemic, and we shifted to doing them all virtually and recording them, which I think was a big step too for me. But now, all of a sudden, the geographic footprints changed, and where we used to be doing events just in certain geographies, now, all of a sudden, we're talking to clients all over the globe. So I mean, that's a lot of it.

Michael: So, I want to understand more in a couple of areas here. So first, you had noted just where does all the growth come from at the end of the day. We had a giant pandemic, people are getting laid off, when they're getting laid off they're losing their jobs, retirement plans are in motion, money's in motion. And when money is in motion there's often business opportunities.

With the caveat and I think the distinction for what you're doing versus other advisory firms like, yes, a lot of people are getting laid off and having getting laid off through the past year, but for the average advisor, when layoffs occur in their area, they don't get 100 phone calls that day. And you do, apparently. So, what's making the phone ring? Like, why is it that layoffs are like massive influxes of inbound business for you and for the rest of us, it's not at that level? Like, maybe there's a client we know who suddenly has a 401(k) in play, but not 100 phone calls that start ringing off the hook.

James: You know it comes back to that pipeline. The billion dollars of growth, really, yes, it all occurred in a very short period of time, but there was legitimately 10 to 15 years of base building if you will. Call it brand enhancement, call it continuing to expand your service offering. But we've been doing what we've been doing for a very long time. And what we did really well was develop, essentially, subject matter expertise. So then, all of a sudden, when a specific change happens, we become the go-to name or one of the very few go-to names. And that's what caused, all of a sudden, in this vortex to have a lot of activity in a very short period of time.

Michael: So, help me understand a little bit more of just what does this mean, in practice, when you say just, "We've done education, we have subject matter expertise. We've been building a pipeline for years and years at the firm." What are you doing that is ultimately making a bajillion client show up?

James: So, at the highest level, it's educating? Yeah, my Why is to educate. Period, the end. And whether it's doing the rubber chicken dinner seminars, or podcasts, white papers, blog posts. I do believe in educating the investor.

Now, specifically, what caused this growth is taking that education and being very specific with it. So we work a lot with the energy companies, ExxonMobil was the biggest one. But what we've done is become experts on their benefit plans. I would argue we know their benefit programs as well as their own HR employees.

And the real need for someone like us is we can take the knowledge we have and then apply it to a client situation. What is the best thing to do to optimize the programs that they have available to them? We did that extremely well within the ExxonMobil world. And we've turned and we've applied it to at least a dozen other companies at this point. And continuing to grow.

And what's interesting is I went into 2020 really working on taking our educational content and programs and applying it to other businesses. And then the pandemic hit. And as we all know, life kind of stopped temporarily, if you will, but then I look at March of 2020, it was all-hands-on-deck servicing clients. And then very quickly, all of a sudden, we saw the writing on the wall, that things are changing, and things will be changing.

And so we pivoted our content to take it all virtual, recorded. And the next thing you know, I used to get anywhere from let's just say 40 to 80 people at a live event. This is a restaurant where I'm serving dinner, and I'm talking about something specific to their benefits. Whether it's net unrealized appreciation, which is tax strategy, or retirement income planning, or some of the more generic ones like Social Security. And each of those high-level topics, I always try to make it very specific to them and their programs and then how to apply it. But then when we moved to virtual, I'll never forget, the first event I did, 371 attendees. And I got to say I was pretty nervous when I did that talk because never had I talked to that many people all at once but yet had a very captive audience. And people wanted to listen, they wanted to learn. And what else are they going to do but sit at home and listen to this stuff?

How James Developed Expertise In ExxonMobil’s Benefits Programs [11:28]

Michael: So, help me understand more like just how does the expertise come about? You said, "We became real experts in their benefit plans for places like ExxonMobil." And one of the questions I often get from advisors that are looking to become more specialized it's like, “What course do you sign up for to do that? What's the designation? Where do you go to learn the stuff?” I mean, where do you go to actually get the depth of expertise to go so deep into particular companies like ExxonMobil?

James: That's a really good question.

So first and foremost, because I would say being a CFP is extremely important. Certified Financial Planner. But then related to the depth of the specific companies, you can get most of these companies’ 401(k) programs, all of the supporting documents online, if they have a defined benefit program, you can get those as well. Now, what someone will quickly learn is every defined benefit plan has different nuances, and calculations are different. And then there's, of course, legacy programs associated with them.

And so when it comes to the depth itself, some of it is literally just analyzing what's in front of them now, but then also experiencing the modifications that happen along the way. Like, again, ExxonMobil is a huge corporation, they've done several acquisitions. And because of that, there's deviations that employees will have based upon legacy pension plans they had and things of that sort. And so it's being able to not only understand the content that you're looking at but then turn around and find the mechanisms that will allow you to apply that to enhance client value.

For example, interest rates have a direct impact on the lump sum calculation that someone would be able to have if they decide they want to take a lump sum. I'd say in this environment because interest rates are so low, a lot of clients believe the lump sum is the best option. But it's our job as educators to talk about the pros and cons of pension versus lump sum to go through the pros and cons, financial ramifications, tax implications, income ramifications.

And so, going back to kind of how do you get that knowledge, some of it’s living it, but some of it's also being able to understand and apply what you're learning.

Michael: So just the whole phenomenon. Like the more ExxonMobil clients you have, the better you get at planning for ExxonMobil clients.

James: I would say that's absolutely the case.

So what we've done to replicate Exxon is, so every one of our client's husband, wife, some work, some don't work, you then start to see kind of the correlations of where other people work. And so the next thing we did is we talked about growing was, all right, who works? Where do we have concentrations at other companies? So then it was Northrop Grumman, then it was Lockheed Martin, it was Verizon, it was Oracle, ConocoPhillips, Chevron. And then how can we build content to support going after other businesses as well?

And the same concepts applied. You go, you study what the plans are that are available to them. Now, admittedly, along the way, you will stumble upon some pitfalls, because I look at Shell's benefit programs. Shell is another big corporation that has done several acquisitions, and there's lots of deviations off of some of the pension calculations, even some of the 401(k) calculations. And that's just part of the process.

Michael: And I think you make an interesting point, that just we do live in the modern internet era, particularly for large companies. Like most of this stuff is actually online. You may have to dig a little on their website or get savvy in figuring out the right keywords in the Google search to shortcut your way to them. But I'm comparing this to, even when I started 20 years ago, and if you wanted to get in with a company, the first step was to figure out how to make a friend with someone in the HR department so that you could contact them and get them to send you material or answer your questions just to get the basic gist of what was going on because documents just weren't out there publicly accessible in a lot of cases. And now, they are. The internet is a wonderful thing. A lot of information is often out there if you just go hunting for it to say, "I really want to learn about this particular company."

James: Unquestionably. And even, honestly, the small and mid companies... So, with an Exxon, like ExxonMobil has a program where they hire an outside consultant to educate their employees, and they've got different stages of their career where they can talk about, very generally, what their programs are. And then you look at small and midsize companies, they don't have those resources. But at the end of the day, the employees want to know how to enhance their value, the value of those programs, what's available to them. And ultimately, how does that translate over into how can they retire off of these programs? And it's enhancements, the optimizations, and it's looking at the sequencing and timing and what would be the most important timing of executing the different programs.

Michael: So, you noted this starts with CFP certification. And I feel like at the end of the day, a lot of what you're talking about, they have 401(k) plans, they have defined benefit pension plans. Pension plans have lump sum calculations that are impacted by the discount rate that you use. Companies have NUA.

I'm sure there's a lot of advice to those that are listening and it's like, "Yeah, I learned this stuff in CFP class too." Like, why are you getting a billion dollars of growth? Like, what's different about what you're doing it and the fact that we all learn about these things as well and have at least a lot of shared knowledge? Yes, I'm sure more nuances about the particular twists and turns of all the ways that Exxon has acquired various companies over time, but I feel like I know, at least a lot of this stuff. I know the core rules and kind of how these mechanics work. I can read a plan document as well. So why is your business growing bonkers compared to everybody else's who also has at least a lot of this similar knowledge?

James: Valid question. And truthfully, it comes down to application. Like, for example, I'll use NUA. We have a tool that we've built that talks about not only how to calculate it, but it talks about what the value to the employee would be for having it, and then specifically, helps them with what is the most optimal way of executing it? And that's just one example. We actually have the same thing for pretty much any pension program we run into. And these are tools that we've built along the way with kind of the planning process itself. But what makes it...

Michael: And when you say tool, just we're talking like Excel spreadsheet that does the number crunching that serves up some output that you can use to have a good conversation when meeting with clients? Is that the sort of tool we're talking about?

James: Yeah. So, I've been blessed with some really, really great employees. Like really great employees. People that make me look a lot smarter than I really am. And a couple of them have different backgrounds. One's an engineer, a couple of accountants. And the thing is they can take the data, and then turn around and find a way to analyze the data, and then we turn around and find a way to demonstrate the value of the data.

But yes, back to the original question. There are macro documents that were built out of Excel that turn around and spit out PDFs. So “This is what you should really be considering.”

And part of it too is we're not just coming back to a client saying, "This is the only option you have." We're modeling different scenarios for them. And we're talking about the pros and cons of if you were to consider declaring, and I'll go back to NUA, but if you consider declaring, and you weigh on your $15 shares and below versus your $53 shares and below. And then ultimately, what you should be doing with any type of employer stock that is beyond those price points.

The other thing that we've talked about a lot recently is tax-paid credit balances, after-tax balances. And should you use it to apply it against NUA cost basis or should you have it go to a Roth IRA? And then for those that are actively employed, if you have too much tax pay credit balance, you really might want to consider mega backdoor Roth strategies.

These are all ways of enhancing the client experience, but also at the same time, really also positioning yourself as highly knowledgeable within their programs. And candidly, the one that probably carries the most weight is going in and analyzing the pensions. I look at a lot of these companies that have these defined benefit plans and it's like these are real numbers. You get admins who on average have a million-dollar pension benefit. Some of them have less, of course, but on average, it's about a million bucks. And then, of course, you go up to the executives and it's a lot more than that. And so when you talk about the impact of interest rates on lump sum calculations, like the number one conversation we were having in the fourth quarter was, “You need to delay taking your lump sum. If you're going to take the lump sum, you want to wait until the first quarter, and here's why.”

And of course, as advisors, that means you're not getting paid. I get it. It's doing what's in the best interest of the client, but it's absolutely in the best interest of the client. It's a significant amount of money.

Michael: And the reason for the delay, in that case, was, well, rates were declining before you could tell that the calculation was going to reset its number in a month or two at a more favorable number so you really should wait on this thing because we can tell that the calculation is going to reset more favorably since interest rates have been moving.

James: Precisely. Yeah.

So, another tool that we've built is tracking discount rates. And then, of course, how it applies to different companies' benefit programs. But again, we saw a very clear trajectory between the fourth quarter and the first quarter was a significant decline in those discount rates. And so, from an optimization perspective, even if somebody was over the age of 60, and again, every pension program is a little different, but with like Exxon's, Exxon's discounts if they're under the age of 60, but if they're over 60, it still made sense because on average, a 1% movement in discount rates equates to a 10% increase to the lump sums. And so when we saw, for example, between fourth and first quarter, it was a 47 basis point decline is 4.7%, just for waiting a month, in a lot of cases.

Michael: So I get it from that end of just how you're doing the in-depth analysis itself. And it strikes me that any time you're in a practice where you get focused in a particular thing, it starts to pay to reinvest into actually building tools and solutions. You're probably not going to build a bunch of highly refined calculating and presentation spreadsheets for a client who has NUA, or for two or three clients who have NUA. But when you're doing that as a full-time focus, and you have 100 clients who have NUA and pension lump sums, all of a sudden it's like, Hey, we should probably put a little extra time in making this like a really nice client-facing spreadsheet with all the additional bells and whistles that we want to attach to it. Just it's literally in your interest now because the value and the expertise of building that tool become repeatable expertise that you can use, not just for the next client or the next one or two, but the next 10, 20, 50, 100 clients.

How The Employees Of Large Companies That James Has Expertise In Knew Where To Find Him [22:22]

So I hear you on that end, like the more you focused in this area, the more you started making tools and solutions and analytical material that both make the process faster for analyzing the client's plan and just sort of do a deeper job and show better for the client because you really made a thing that's specific for it. But to me, that explains the value you're creating for the ExxonMobil client, the Shell client, the Chevron client, etc. But how did they know to call you and show up in your office in the first place? Like, where's the new business activity coming from that you get to whip out your really cool ExxonMobil-specific lump sum pension calculations spreadsheet?

James: So, honestly, it's referrals. And I go back to that pipeline base building. And because we're known as the subject matter expert for them... It's very interesting. I do think that probably the strongest and one of the best things that Bogart Wealth has is our organic growth initiatives. Because we've created a platform where we're just giving away the educational content. I mean, anybody who's listening to this can go to my website and see some of the content we have. But we give it away. I'm not charging for any of it. But it's been incredible in that it gives our prospects the ability to refer their friends.

And that's even more valuable than just having your clients refer their friends. Because what we've done is now, of course, over the years, accumulated a massive database of names. We've probably got 20,000 names in our database of people who are subscribed to the different content that we're producing. Whether it's the blog posts, the emails, the white papers, the videos. And it's all because we're constantly getting new referrals from our existing clients, but also our existing prospects, because if you think about it our prospect database is probably 20X our client base. But it comes back to because we know this stuff, and we are fiduciaries, we're putting their interests above our own. And at the end of the day, it's made it a very, very powerful organic growth platform. Right now...

Michael: Because even that person who is considering retirement who maybe isn't there yet, but has checked out your video on ExxonMobil lump sums, when their friend is thinking about retiring and is all saying, "Hey, are you retiring? Are you going to take the lump sum off your pension?" Then that person who is even working with you yet still says, "Oh, well, I've been checking out these videos on Bogart Wealth, like it's all about ExxonMobil lump sums, you should go check it out as well. It's really helpful stuff."

James: Exactly. Exactly.

Michael: And they're not even a client, but they've been following the educational material.

James: Yeah. And it's interesting because I actually have prospects who have given us more referrals... I have prospects that will do it themselves. And you kind of know quickly when you're talking to somebody if they're going to be employing an advisor or not. But we're still engaging with them and helping them with understanding their benefits because, at the end of the day, they're sending their friends over. You know, I have one gentleman, I knew he was never going to be a client, ever. And he came to every one of the live events I did, and he did pretty much every podcast or video we've ever done. And he's given us over 35 referrals that have all become clients. So, some of it is a little bit of that pay-it-forward mentality. You have to invest in the value of the relationship to be able to get future returns off the relationship.

Michael: I love that point, though. "We have a DIY investor who keeps coming to all of our events and is never going to work with us because they're a DIY investor, dot, dot, dot, but they referred 35 friends."

James: Yeah. And it's funny because obviously, we track a lot of this stuff, but one of them is what does it cost us to onboard a relationship? How many events have they attended? And what's the cost of acquisition of the client? And this gentleman, by far, is my highest. But then when I look at the return of that investment, it's like, all right, I'll pay that all day long.

Michael: And out of curiosity, just because I love tracking these numbers as well, what is your client acquisition costs? How are you tracking? And what is that boiling down for you?

James: Yeah, so obviously, it's changed since the pandemic. Pre-pandemic, I was doing all this stuff live. And so you're doing the dinners at an expensive restaurant, which is usually $100 a plate. And normally, I don't have people that come to just one event before they onboard and become a customer. We're very process-oriented with client acquisition. So I knew the math on these events. Every event that I would do, 35% were brand new names that had never been to one of my events. Typically, they come to 2.7 events before they come in for a meeting. And then at that point, once they come in for a meeting... And by the way, 65% of new attendees came in for a meeting, but those that came in for a meeting 87% became clients. So it was very process-driven. And so the typical cost of acquisition on the client because of the meals was somewhere in the realm of $350.

Now, since COVID, and we've pivoted everything over into a virtual world, I'm not paying for dinners anymore. And of course, the amount of attendees has skyrocketed. So the cost of acquisition on a client has dropped down into the $20 range. It's more my time than actual costs for marketing dollars.

Michael: Because there's just almost no expense to the event itself. And just what about the marketing for the events? Like, well, in the in-person world, the so-called getting butts in seats, virtual world, I guess, and virtual registration seats. I mean, I know for a lot of firms, even in traditional educational world, 68% of their costs wasn't the dinner plate. It was the mailer to get the people into the room to do it. So where are the people coming from?

James: I'm glad you said that. So, I don't do any mailers. Yeah. One of the things that we moved to very aggressively, oh gosh, 15 years ago, was email marketing. And it used to be, we'll send out the paper invitation and see who comes. Yeah, they RSVP and whatnot. But when we moved the email and provided a platform for someone to very quickly forward our link over to somebody else. So every one of our emails that we send out for introducing one of these topics or the events, of course, it's got the links in it to the other videos, the podcast, the blog posts, specific pages on our website that are talking in more depth about the different topics that people want.

And that's another thing we track is website activity. And obviously, looking at where people are going on our website. We made the biggest investment in enhancements on the website, which was building the platform out for the content stuff, but I don't pay for anything with regards to mailing out paper invitations. I have a constant contact relationship, which is it's a couple of hundred bucks a year. But we're not buying names either. Now, I've heard a lot of advisors, buy email lists, and then they just blast out different email lists. We haven't needed to do that because of the amount of leads that are coming in off of what we're already doing. And now this stuff is all searchable that we're getting anywhere from 25 to 70 leads a day coming in off of all the content.

Michael: Meaning in essence that because you've got all this educational content and blog content you put on your website that 25 to 70 people sign up for the mailing list every day and move into your marketing funnel that you're going to then get to communicate with and target on an ongoing basis?

James: Precisely.

Michael: And so that all drives from just putting out and publishing lots of content on your website. I'm presuming this is like you run a blog, you've put out articles on the website.

How James Figures Out What Content To Make And How’s He’s Integrated An Advisory Board In His Practice [30:06]

James: Nothing at your caliber, by the way. It's more specific to what people want to see. And so, one of the things we do very well is surveying, what are the topics you want to hear? What are the topics you want to see? And of course, producing the content associated with that.

Michael: One, I love the point of that, that so often, the blocking point I hear for a lot of advisors around producing content on their website is like, "I don't know what to write about. I don't know what to cover. I don't I don't know what we should be doing content on." And to me, you sort of said right there you just survey your clients and your mailing list and ask them.

James: Ask them. And every event you do have a survey. Again, old school, but I used to have a paper survey that every attendee, I'd ask them to fill and I'd reiterate it a couple of times during the event. Now, with the virtual ones, we have a digital survey at the end that all of that populates right in our CRM.

Michael: And one of the questions is what other questions do you have or what other content do you want to see information on?

James: Exactly. And the other thing I would say, not directly related to this, but it's you got to have an advisory board. Absolute must, must have. Because your biggest advocates are your top clients. But within that advisory board, interestingly enough, I always, always, always made it an initiative to have prospects. And including prospects that I know I had no chance of winning because I wanted to direct and candid feedback.

Michael: So how did you bring the advisory board together?

James: That was probably, gosh, 10 years ago, maybe longer. But originally, again, fledgling young guy, I wanted ways to ask people questions, ways to enhance the business, ways to enhance the client experience. And candidly, at the end of the day, it was all about how do I grow the business? How do I get more clients? How do I get more of you?

And then the next thing you know, ask a group of, I think the original one, I had 12 people that attended from an advisory board. And I've held true to 12 to 15 people at every one of these. But it was really, I wanted that platform to be able to ask questions about my business and get candid feedback. And by the way, a lot of times, you'll get stuff you don't want to hear, but they'll also give you some really great stuff too.

And then I think the key to the success with the advisory boards is showing them what you're implementing from their feedback. And obviously, when you bring back the advisory board, you want some consistency associated with those people. But when they come back, you start the meeting of "Since our last advisory board, these were the recommendations. This is what we've implemented. And this is the value why I'm asking this group to come together."

Michael: And how often are you meeting with the advisory board?

James: So I try to do them every six months. Now, I will admit because of COVID, I have not done one in now 15 months. But pre-pandemic, the last one I did was November of 2019. I'm going to bring it back. And it's funny because people who would sit on the advisory board are asking when the next one's going to be.

Michael: And so, how do you run them itself? Like it sounds like it's sort of like a meeting that they come together for and that's the deal.

James: It is. Yeah. And I don't ask for anything other than the three hours of that meeting itself.

Now, running them, I use a conference room in my office building. They've got a little conference suite. So it costs me absolutely nothing for the conference space. I bring in a professional moderator. I've used the same gentleman for the last decade. He's absolutely incredible. But I let him run the meeting. Obviously, he and I talk about what I want the agenda to be ahead of the meeting and we prepare a slide deck for it. But the key to success I found with the advisory boards is just sit there and be a sponge and take as many notes as you possibly can and listen to the side conversations that the advisory board members are having. Because ultimately, it's the little nuggets you get from those meetings, and then turn it around and implement it.

And I'll also say, again, you have to have a thick skin. Be prepared for them to tell you about things that you're not doing well, and things that you need to improve upon or enhance.

Now, after I do the three-hour meeting, I always take them to dinner, restaurant afterwards. And then, of course, candid feedback at the end. And afterwards, I always, that night I send out an email of "This is the key takeaways that I had from the meeting. Thank you so much for your time, look forward to visiting with you in the future."

Michael: And do you otherwise pay them, compensate them, or just invite them, and they want to do it to be a part of it because they're already clients and they just kind of have a self-interest, so you get better at it because it's serving them anyways?

James: Exactly. Yeah, it is the latter. I don't pay them. We'll give them branded tchotchkes, wine glasses, or a folio, or pens, notepads, stuff like that. But it's nothing that's creating substantial cost. The cost of the event is the moderator and then the dinner. But I'd say, at the end of the day, you're well under $3,000 of total cost on this event, and the value from it is just so directly impactful. It's great stuff.

And again, a lot of them are doing it because they want to see us get better. And I think part of it too is a little bit is that they want to be able to know some of the inner workings of the company. Because when I introduce the company, I always ask them, "Please keep what we talked about at this meeting," the moderator always frames it as the Vegas rules. What happens in this meeting stays in this meeting. But I talk about the inner workings. I talk about financial condition, I talk about asset growth, I talk about some of my big pain points, my struggles. How can you help?

How James’ Content Market Funnel Works [35:41]

Michael: So James, so I'm still just trying to step back and just think once more at the high level of the sheer volume of growth that's coming. So just walk me through once more at a high level how this is working, or I guess, confirm my understanding that just, at the end of the day, you're doing a bunch of content on your website, educational content about retirement stuff, NUA, pension lump sums, etc. People find their way to that content, and I guess primarily through Google searches. If they think it's interesting, they sign up for your mailing list. Your mailing list invites them to come to a webinar, since we're in a virtual world now. You do one or several webinars for them. And then eventually they say, "Hey, I'm interested in talking to you about becoming a client. And just if you do that, with enough volume, a whole bunch of clients start showing up.

James: Yeah, exactly. And I would say the key to the success from what I've found is consistency. You have to make the investment in doing it several times. Again, what we've experienced recently is the manifestation of, call it 15 years worth of doing these, where we've consistently been building these databases in this pipeline and making that investment. Now, along the way, we're getting return on our investment, but of course, we just had to call it the big payday, if you will, due to the consistency of what we had.

Michael: And so, again, I feel like there are a lot of advisors that write some blog content, try to do some webinars, just their numbers are not even on the same plane of what you guys are doing. What's different about how you're doing it, and I'm sure you've seen what other advisors out there do in the marketplace that are not getting the same kind of results? So what's different for your approach?

James: Being specific and being relevant. That is the most important part.

Michael: So, what do you mean by that?

James: Well, so we're very rifle-shot at what we're producing. Obviously, I have some generic stuff too, just like everybody else does. But the stuff that has the most impact that leads to business is very, very detailed and very specific to what the customer wants to hear.

Like, for example, cover call writing. Again, it's an example, but cover call writing, we've got a five-page white paper that we wrote, and it's on my website, everybody can see it. But it's a very specific piece that gives examples of how to apply this stuff. Now, at the end of the day, and we all talk about it, you can educate somebody as much as possible. But it really comes down to how you execute it and how to optimize and then being able to make those very specific and detailed recommendations associated with it.

Michael: So, can you give me some other examples of just like what kinds of things just drive this sort of activity or even drive the prospect lead flow? Are you...

James: Sure. Yes. So, probably the number one that I get right now that's been driving lead flow for us is how discount rates impact your lump sum. We do webinars on it, I do a weekly piece that I send out where we're showing the projections that we're doing on those discount rates, and again, translating it to direct impact for them. That's probably unquestionably been, call it the fastball, if you will. But then getting into some of the more specific topics like mega backdoor Roth conversions. That's a very timely one right now, and especially with several companies discontinuing or reducing 401(k) matches, provides a lot more latitude to be able to put some after-tax contributions in.

That's a very specific strategy, that again, typically, you're giving them enough data to be able to get them to understand it, but not necessarily understand to a point where they're ready to execute. And that's when they come and engage. And I'm intentionally not providing enough data, it's just simply they will still ask that question. And just having the opportunity to have a conversation is ultimately what opens up the door to give us the platform to be able to convert over into becoming a customer.

Michael: And so I hear now on the content and the content drive signups the email list. So now talk to us a little bit more of just the sort of jump from like 20,000 people on the email list that you've built up over years and years to people who actually say "I am now ready to hire your firm and give you my life savings." It sounds like the bridging of the gap between the two is webinars, but how does this work? I mean, what do you do? What does the webinar offer? How are you delivering them? Like just what's the actual flow from I'm reading your emails, and eventually, I've seen some webinars become a client?

How James Converts Webinar Attendees Into Clients [40:18]

James: Come in for a complimentary plan. I don't charge for planning. I go back and forth if I should ever charge for it or not. But I look at the planning initiatives as an investment that my firm is willing to make into the longevity of a relationship. So the call to action off of every one of our webinars is to come in for a plan. If you haven't run your numbers, take advantage of the opportunity. It doesn't cost you anything, and there's absolutely no obligation. That no-cost, no-obligation kind of tagline, if you will, is I think, ultimately what makes people feel comfortable. And it goes back to why our prospects are willing to tell their friends. But it's a tough pill to swallow when you look at what you could charge for plans relative to the amount of volume we do. But it's also one where I have a very high level of confidence in the product of what we produce and we have a very high conversion ratio to be able to support that.

And then I probably know, when we do these plans, it is not just an eMoney or MoneyGuidePro cookie-cutter type of product. We are actually going in giving very specific, very detailed analysis. We're modeling different scenarios for the customer, whether it's 2021 retirement, '22, '23, '24, pay cash for a house, use a mortgage, it's lump sum versus annuity. We're running different scenarios and then Monte Carlo is off of it. We give them the detailed pension analysis, we give them the NUA analysis.

So again, it's all of these tools that we've built that ultimately really create this detailed customized product that then when the customer sees it's like, “Wow, these guys really do know our benefit programs, and specifically, how to implement.” And then I'd even add one of the service offerings that we've enhanced is bringing tax and integrating tax in over the last couple of years. And that ultimate integration of planning, investment, and tax has been the secret sauce if you will. If you're just giving it away. But being able to make and translate over to a customer with their situation, what decisions they're making today, and what impact that's going to have on them in the future is, ultimately, to me, the recipe for success. Having just investments and just planning, that was great, we were growing. But truthfully, when I look at what we've done on the tax side, Roth conversion analysis, and then some of the mega backdoor strategies and backdoor strategies, that's all the stuff that's really just hit the home run for us.

Michael: And what planning software or tools are you using for just doing all the work that you're doing?

James: So we use eMoney. Honestly, we've used pretty much all of them at this point. eMoney to me has been the one that allows us to get as detailed as we desire to be. And really specifically, getting back to some of the tax implications of what we're doing. There's some great planning software out there. We've just found that eMoney integrates the best with our technology stack, and then also allows us to get into the specific data that our customers are looking for.

Michael: So the depth of tax modeling and eMoney is a particular driver for you then?

James: It is. And I won't say the firm we were using before, just because I don't want to speak ill, but for example, we were using another planning software that first off was using bad tax rates. For example, we all know that the 2018 tax reform the sun sets in 2025. They were just assuming the current tax rates were staying the same way. That's just inaccurate in the base case. Or they had restricted stock grants that weren't posting as taxable income. Okay, well, that's also inaccurate as well. Or when a supplemental pension was paying out it wasn't showing as taxable. And my team would spend hours with their platform trying to get these things fixed. And finally, I just said, "No, we need to make a change."

Michael: Interesting. And the planning output for you in practice, though, it sounds like it's a combination of eMoney output, your own Excel spreadsheets. I'm presuming your own Word document write-up of this as well.

James: Yeah. Yeah. Yeah. So we call our planning sequencing TFP1, 2, and 3. TFP1 is when we collect the data from a client, which is typically the first meeting after they've attended one of our events. We also will introduce the firm in that meeting, in more depth than what we've done at the webinars or live events. Then TFP2 is when we're actually presenting what our outputs are. And it's a Word document that gets converted over into a PDF, and then we're integrating over the eMoney documents into that document. We'll also throw in some of those Excel macro tools that we use, like the NUA analysis, the Roth conversion analysis. And then we also will talk about our investment suite and what we do on the investment side.

Michael: And then what's TFP3?

James: Typically, it's a revised iteration of whatever we had or a follow-up meeting off of the TFP2. So a lot of times, like for example, some will come in and say, "All right, what does it look like if I decided to retire a year later or a year earlier?" And asking for different iterations. That's typically the meeting where we'll do that. And if I haven't been able to win on the TFP2, I go for the win on the TFP3 or ask for the business.

Michael: And out of curiosity, TFP stands for?

James: Total Financial Plan.

Michael: All right. It's all good. We got to get something in there.

James: I know.

Michael: All right. And so, on the tax end of things, are you solely doing the tax planning? Are you actually going so far as tax preparation in that?

James: The latter. Yeah. So, originally, I go back to the advisory board. I've asked this question for probably a gazillion years it feels like. Do clients care about tax preparation? And the answer I used to get from the advisory board was, "We want the tax advice, but we don't care about putting the numbers into the system."

interestingly enough, I had a competitor of mine that was doing tax prep as well. And the next thing you know, we had already had the relationship in place to be able to do tax returns, but we were just solely using them for tax modeling. And the next thing you know is I found, I love competition, I think healthy competition is a really good thing, but when I'm seeing him win in scenarios where I feel like I should have won, it naturally just makes me say, "All right, what do I need to fix to not have that be a differentiator for him?" And sure enough, boom, I integrated tax prep. And the next thing you know, you see the growth that we've had.

Michael: And how do you structure it in practice? Do you charge clients separately for the tax preparation? Do you bundle it into the AUM fee? So, how does this work?

James: So what we do is we pay for client tax preparation if they have $2 million in managed assets and above. We've got clients that sometimes don't have everything managed by us. But 2 million of managed AUM, we prepare the returns, if they're underneath that, they can still use the CPAs, they just pay for the cost of return.

Michael: Okay. And just add basically whatever the raw cost is. Like a few hundred dollars kind of thing.

James: Yeah, it's anywhere from $400-600 bucks. On average, I should say that because the client...

Michael: Sure. Sure. And the client has the messy one. That's works for us.

James: Yeah.

What James’ Webinars Look Like [47:23]

Michael: And so, talk to us a little bit more about just the webinar itself. It sounds like this is still the key linchpin transition point from lots of people who are getting the emails and reading the content to the people who actually take the meeting and start going through the planning process. How do they work? How do you produce them? How long are they? Tell us more about the webinars themselves.

James: So, we now have 11 different ones that we do. And different topics, of course, it's the durations will change on them. But again, it comes back to what have people asked us to talk about. The first one I ever did, we call it the retirement timeline, where we actually will break down some of the decisions. First off, we educate on what the options they have, and then we break down some of the decisions that they're going to need to be making and then how to execute.

And then what I found was that webinar, as I kept adding things, it kept getting longer and longer and longer. And even after I've now "shortened it", it's still a 70-Minute Webinar. And that's if I'm rushing through it, I feel like. But what we did then was we got into really detailed specifics of each of the specific topics that people really wanted to talk about. So like we do one on Roth. Roth versus traditional IRAs and 401(k)s, how to save where to save. Discount rates. Typically, it's a sole one on its own. Discount rates, one of the shorter ones, but it's, call it, 30 minutes. Retirement Income planning, that's another one that we've gotten into detail on. It's about 45 minutes-ish. Long-term care insurance. That's a more generic one, I will admit, but it's been nice because that's actually opened up the door to other opportunities as well. But that one's about 45 minutes. We do one on Social Security, that one goes about an hour.

And then of course, recently, we've had a lot of people asking more specific questions. So like one on after-tax rollovers and mega backdoor, and how to execute that strategy. That one goes, call it, 45 minutes to an hour.

And then as events happen, we're very good about producing content as those events happen. So it might be, for example, the CARES Act. When the CARES Act came out, we did an event. Roth conversions.

And so, I look at any market environment, and what are the opportunities or strategy things that we should be doing within those environments? Like, to me, March of 2020, yeah, it's an unfortunate environment very quickly, did we see returns diminish, but those that are in the situation where we know we're going to be doing Roth conversions in that calendar year, because their taxable income is low, we hit that hard, really, really hard. It's all right, we really should be looking at Roth conversions now, well, assets are down. And let whatever recovery happens, whenever it happens, be tax-free as opposed to [not] in the Roths.

And so some of its being timely as you're producing this content. Right now, I'm looking at one where I want to talk about the different tax proposals that are coming out. But yeah, as you know, they change every single day. So it's being timely with the content, but also being very, very, very specific.

So the biggest challenge with all of it is how to produce this stuff, and how to create those slide decks when you're trying to be very timely in that environment.

And again, I'll never forget that the first webinar I did was “Can I Still Afford to Retire”? Three hundred and seventy-one attendees. You can imagine March 24th, of 2020. Call me an opportunist, but again, it was a lot of people were asking that fundamental question, Can I still afford to retire? And having to build that slide deck, Sunday night at 11, coming in, and it takes you 5 hours to build it. But a lot of what I do is I take different pieces, things that I see, different resources. Honestly, some of the stuff that you send us on the weekly list you do. I love some of the links, and I see some of that stuff. And then I turn around and find ways of applying it. But I generate all my own content past stuff that I source if you will.

Michael: So, how often are you doing the webinars? And is this all live delivery, you in front of the camera doing your thing?

James: So, great question. We do them every week. Now, the live events, I would only do once a month. I do a lunch and dinner. But now that they're virtual, I do them every week. And interestingly enough, as we've grown, what I found was only having me do them was creating an environment where prospects only wanted to talk to me. And I've got several very gifted and very skilled advisors. The last thing I want is this sole dependency on me because obviously, that creates natural capacity constraints. So I very quickly pivoted to have my entire advisory corps. They all do webinars now.

And recently, we still have been doing them weekly, we haven't been putting them up on the website simply because we've been going after additional initiatives. And until I get some material mass on those initiatives, I'm not throwing them on the website yet. Like for example, I won't hide it, we're going after ConocoPhillips, we're going after Chevron, we're going after BP, we're going after Oracle, SAP, Lockheed. We're doing all targeted initiatives into these companies where it's really relevant content. You can see a lot of the stuff we've done for Exxon, it's on our website because naturally, it's just low-hanging fruit at the moment. But it's been one of these things where it's provided that catalyst for those advisors to be perceived as the subject matter expert. It used to just be me though, and that was pretty brutal.

Michael: And is it just always like a set time live webinar thing? Like every Tuesday at 2 is someone from Bogart Wealth doing a webinar on something?

James: Yeah. Every Wednesday at 12:30 Eastern, 11:30 Central, we do the live events. Now, they're all recorded. So there's been some of these events, by the way, where I have 35 attendees on the webinar itself, the live event. And then when I watch the statistics 7 days later, they've had 5,000 views. It's like, okay, people obviously aren't always wanting to watch live, they can watch in the evenings.

Michael: So how do you put it out that you can get like 100X, the follow-on after the live event?

James: So now it's known. They're all recorded. And again, they're on the website. So once I get really, really, really into that material mass, we just throw them up on the website.

Michael: And it's still recorded with the details and the call to action at the end. And if you enjoyed this webinar, please reach out for your complimentary plan, no cost, no obligation?

James: Which by the way, I do that at the front, I do it in the middle, and do it at the end. So it's that perpetual reminder of, “Hey, you really should come in for a plan.”

And what I will also note, and call it marketing sales strategy, but I also tell people, get multiple plans, talk to multiple advisors, you got to find the right fit. And that's exactly how I present it. But it naturally kind of softens, if you will, the sales side of it.

What Bogart Wealth Looks Like Today [54:12]

Michael: So now, take us back to just the overall numbers and the metrics of the firm at this point. Like AUM and client count and staff count. And now that we've talked about kind of the content machine that you've made, and we talked a little bit earlier about the growth that you've had, but help filling up the picture for us now, just the state of the firm as it looks today.

James: Yeah, and it's been changing so dramatically over the last, just call it 15 months. Pandemic, we were down to, call it $700 million in AUM. And I'm giving you a gross number, but here we are today approaching $1.9b. And in two weeks, after July 1st, I'm going to break $2b. And a lot of it's just been the perpetuation of this.

But then I have a really, really cool dashboard in Salesforce that my guys have built for me where I can track all of our pipelines. So like, for example, I see my next 18-month pipeline is $1.3 billion in AUM. And of that, I break it down what's existing clients is $489 million. The rest of it is basically prospects that we need to go win, $845 million of prospects. And then I look at the conversion off of those. So prospect conversions versus assets. You can see the funnel of how many households we've closed.

So, for example, third quarter of 2020, we had 42 new households, the fourth quarter of 2020 we had 64 new households, the first quarter of 2021 was 70 households. The second-quarter was 54 households so far. And obviously, I can see projections for the next couple of quarters. And then I track prospects. So I look at how many new prospect databases do we have that have continuously been coming in through the firm?

Now, I define a prospect as someone who's come in for planning, not just somebody who's asked to get on my marketing data. But when I look at this volume, it's mind-boggling where, for example, the second quarter of 2020, we did 56 new prospect plans. And in the third quarter of 2020, we did 279 new prospect plans.

Michael: Whoa.

Yeah, mind-boggling numbers. And, yeah, I got to say my staff has been incredible. And the timing of this is pretty cool because it's on our five-year anniversary, but I look at the volume we've had, the amount of plans we've done. It's...

Michael: And that was just the ramp up because you had all this specific content around things like how to plan for your ExxonMobil lump sum, given current discount rates. And then ExxonMobil does a giant layoff and a whole bunch of people are suddenly going on the internet and trying to figure out what to do with their lump sum because they just got laid off and they're getting all the paperwork from Exxon. And lo and behold, you get this massive influx of prospects.

James: Bingo. Yeah. And so, I do genuinely believe that every sector has its down cycle. And they don't correspond with each other at the exact same time. And so, as we're talking about the future of my company, what we've been really pushing on is I want to have exposure in every sector. And so it's kind of all right, let's be ready for when these types of environments happen. And naturally, having the client-facing capacity to be able to accommodate and sustain as these types of environments continue to occur. Obviously, the pandemic is unprecedented. No one knew this was going to happen.

Michael: Right. It's an interesting way to frame it, though, that just if your business is that tied to lay off events, and mass transitions, and you've really got content that's hyper-targeted that makes people show up in the pipeline and check you out that the more diversified your pipelines are across different industries and sectors, the better positioned you are that as different sectors do well and poorly at different stages in the economic growth cycle, you've got exposure to whichever sector is most likely to be laying people off at that particular time through the market cycle.

James: Exactly. And it's really fascinating too recently because I'm a, I'd say, pretty young guy. I'm 35 still. And the inorganic opportunities have been incredible this year because of potential tax policy changes, and I think being younger makes you a pretty decent acquisition opportunity, or acquiring opportunity. But it's like, why would I even think about inorganic stuff right now with how strong our organic is? These are the constant battles I have internally.

Michael: And so, how many households does this add up to in total now for the firm?

James: Nine hundred and two.

Michael: Nine hundred and two. And then how big is the team?

James: So we have 28 now. It's funny, Michael, I feel like every day I come in the office my CEO says, "We've hired somebody." But it's an interesting environment because staffing is probably, in my mind, the biggest struggle we have. And I should probably add that I've got 10 open job requests right now. So, for anybody looking, we’d love to talk.

Michael: For a firm that's got the new client flow figured out, they just need advisors who will actually service the clients coming in. This is Episode 243. So go to kitces.com/243 and we will have links out to Bogart Wealth if you are looking for job opportunities.

James: Thank you, Michael.

Michael: Absolutely. Well, to me, it really is the interesting distinction that's emerging in the industry that, historically, just very few firms were very good at sustaining any kind of organic growth. And so the only people you hired were people who could grow their own salaries. Like we lived in a "eat what you kill" world. But when you actually figure out an organic growth strategy that works, and that you can sustain, and that you can scale, all of a sudden the hiring dynamics turn around.

And I'm just imagining for your firm and your flow, the worst possible thing you could do would be to hire an advisor with an existing book of business because they can't take the leads you're bringing in because they're already full with the book of business. Like almost every other advisory seems like always wants to hire people who bring books of business because basically, they bring their own revenue to pay for themselves. But when you actually have an organic growth engine, it's like, "No, I really want people who are not coming gummed up with clients because I need to be able to give you a lot of clients because we're bringing them in."

James: You're hitting the nail on the head for me right now. Because I even tell folks in the final interview when I come in, advisor hires, when they come in, I said, "I want to be crystal clear. I don't want a single one of the clients you've talked to at the other firm. First off, I don't want the litigation. But second off, I need your capacity."

Michael: Which I guess gets really hard from the hiring and for the firm that, in general, if you're trying to hire experienced advisors, it is more likely they have clients because they've been doing it for some period of time, and presumably, have established client relationships. So the dynamic of finding advisors who are skilled and experienced but "don't have the baggage of actually having existing clients" is sort of a unique hire unto itself in the client world.

James: Well, don't get me wrong. If a client follows a client follows, right? My point being...

Michael: Yeah, yeah. But just bringing someone who already has 100 clients doesn't really help you.

James: Well, it does if they have the right skill set where they can delegate. I think if there's one guy that I'm in conversations with that'll be leaving a firm. And he's got probably about 100 households with him. And he's got the skill set. He's got the gift. You can tell he's a very successful adviser, but he doesn't have the business development acumen if you will. And I looked at his book that would migrate and would immediately build a team around him to help support those customers and facilitate the ability for him to continue to go after some of the other BD initiatives. Now, because he naturally asked me, Why go to you versus go to one of these other firms that are writing him a big fat check? And I'm like, "Well, will those big those other firms give you the engine to grow like I will?" And the answer's, No, of course, for that.

Michael: So now take me back like a year and a half, two years ago, before the pandemic because I just want to keep the growth in context and the dynamics in context. Like, where were you a year and a half to two years ago when you were in like second half of 2019?

James: You know what, since you asked that question, I'll give you exact numbers and just pull them up. Let's see. 2019, I had, you're really making me dig into my spreadsheets real quick.

Michael: I just love that you've got it in spreadsheets. Sounds glorious.

James: So 2019, I actually finished the year at $947m. 2018 I was at $748m. 2017 I was at $708m. 2016 I was at $526m. So 2019 was effectively a flat year for us. We had some growth, but it wasn't what I would say was... I'm sorry, I said 2019. 2020 was effectively a flat year for us because of the pandemic. The roller coaster down then back up. At the end of 2020, we were just over a billion in AUM. And so, nominally, because of market fluctuations and ebbs and flows, our net new assets in that year was $166 million in 2020. Now, 2021 is the scary one. It's almost $800 million in the first 6 months of this year.

Michael: And so, even relative to last year, what changed from last year to this year because it sounds like you were having prospect flow last year in some pretty big numbers, particularly Q3, like the market did finish up, overall, and fairly materially, which gives AUM firms a lift. So it sounds like there really was a distinction of some challenges last year versus this year. Was that like you had the flow, but it was hard to bring them all on board? Was it like you were...

James: When you meet a prospect, it doesn't mean that immediately they're retiring in the next month and they're handing you or $3 million. Typically, again, it goes back to this pipeline component where you're investing in the longevity of the relationship. And a lot of times, kind of going back to our onboarding, when I ask for a win, I open up starter trial accounts. And even if it's just a $7,000 backdoor Roth just to get something so that the relationship starts. And they can see what our statements look like, how we communicate with clients. And it gives us a more intent reason to engage and talk about ways that we can enhance value for them. Because once somebody becomes a client, we're at like 97%, we get all of the money at retirement. It's almost every single time we get the rest of the money.

Now, some of our clients, all of their money's in their 401(k)s and their retirement benefits. They have no ability to do outside accounts. And we're just staying engaged. Truthfully, a lot of what happened this year, in 2021, was because I pushed a lot of it out. And as I mentioned, we saw discount rates going down. And because of it, and it was in the client's best interest, I pushed it into the first quarter of 2021.

Michael: Okay, so big influx of prospect inquiries in Q2, Q3 of last year, just as pandemic did what pandemic did and layoffs emerged meant, “Okay, so tons of people showed up in the prospecting pipeline, but then they have to go to a webinar, and another, and a third, and then do an initial meeting, and then go through the three-meeting process for TFPs. And then eventually decide they want to come on board, and then sign the paperwork, and then begin doing transfers.” And so just all of that playing out means explosive growth this year, it sounds like off of a lot of the activity you were getting last year from organic lead flow. Just it took a while to show up. It wasn't showing up that much in 2020.

James: Absolutely. And as you know, there's a lagging effect that happens with the materialization of assets and revenue. And that's a lot of it. Yeah.

How James Ramped Up Hiring To Accommodate The Rapid Growth And What The Bogart Wealth Org Chart Looks Like [1:06:19]

Michael: And then so then, what does this look like from the staffing side? So I understand all the growth of just like the clients and the organic flow and the assets. But I'm presuming if assets are basically double where they were in 2019, and particularly, just double where they were almost six months ago, that you're in the midst of like lots of hiring right now.

James: Oh yeah. Yeah. Yeah. So when this started breaking last year, I went to my COO as like, "All right, we need more staff immediately. And then it turned into an exercise of strategic planning of who are we hiring? When are we hiring them? So going into the pandemic, we had 12 people, and now we're up to, what did I say? Twenty-eight. I think so. She hired somebody else yesterday. So somebody accepted an offer yesterday. So we keep growing. But...

Michael: So, how does that work? I mean, you're basically hiring a new team member every single month on a continuing basis. And it usually doesn't smooth out that evenly. But on average, you're hiring almost one every month. So...

James: Yeah. And as I've done this strategic planning, we've got the need right now, in my mind, for 10 additional client-facing hires, and 6 additional support hires. So, I actually would project that by the end... Yes. So I finished out 2020 with 19 staff members on board, and now, I'm going to probably be at 40 by the end of this year. Yeah, true double.

So the first hires we had were planning. It was so imperative given the volume. Saw that happen and getting them ramped up. Going into it I had two and a half people in planning and then the next thing you know it was reshifting internal resources to be able to get more bandwidth there. Because this movement was like a tsunami where it went from planning to then operations to then portfolio management. And obviously, advisors were just busy the whole way. So it was initially planning, then it was more ops, then it was more portfolio management. And some of the hires along the way, like I hired a head of HR and staffing, bless her heart. She's basically become an internal recruiter. And she has been very patient with me. But of course, key need right now is more staff, more capacity. So staffing...

Michael: So you have a full-time HR person at 28 team members just because the sheer number that you need to hire means you need someone continuously on this?

James: 100%. So I noticed the first bottleneck was with my COO, originally, again, we're 12 people, she was doing all the staffing with me. And what I noticed, the first bottleneck was her and capacity for her. So then, the next thing I'm like, "Look, I need to get you help." And that's when we brought on the HR staffing person.

Michael: So, paint a picture for us to just what the organizational chart looks like. Just you're talking about having a COO, which a growing number advisory firms are starting to hire at a billion-plus of AUM, although it sounds like you've had someone in the role earlier. You've got a dedicated team in HR. Like, what does the organizational chart look like at Bogart Wealth?

James: Yeah. And I should probably give a plug to my COO because I'm sure she's going to listen to this when this goes live. But I would be lost without her. Having someone in that role is so imperative to keeping the ongoing operations running. But the org chart itself is obviously, I'm serving as CEO and president, she reports directly to me. And then we now have a advisory department, we have a planning department, we have an operations department, we have a portfolio management department, I have my HR department, and we have a business development department.

Michael: What's the difference between, I think you said there was an advisory department and a planning department?

James: So we do everything departmentally. So, for example, all of our plans, and this goes back to consistency of client experience and uniformity, but all of the plans get actually built by the advisory department. So when a prospect comes in, the data input is all the same. Everybody's data goes into the same form, which then gets submitted to planning. Planning builds the plan. The advisor then reviews it, and obviously, if there's anything that needs to change, they'll go back to planning and planning will make the adjustment. I don't have my advisors building their own plans.

Michael: So planning is the plan building department and advisory is the client-facing, deliver the advice department?

James: Precisely. Yep, precisely.

Michael: Okay. And why the split?

James: To be perfectly honest, it came back to consistency of client experience. And then I'd also say, compliance associated with it. At one point, we had advisors who were building their own plans, and the next thing you know, the plan version that one advisor would be very, very different than another advisor. And because what we've done within the firm is very system and process-driven, it prohibited some of the redundancy effects. So, for example, if I needed to step in on one of my other advisor's meetings, then it made it very challenging for me to step in, in this example, and understand all of the nuances of what's going on. But in the context of when I have a consistent output across the board, I can step in or any other advisor in the firm can step in and see very quickly what's going on, why it's going on, and how it's going on, and then ultimately, how to execute and implement.

Michael: Interesting point. Interesting point that just when the planning process is that standardized because the central planning department makes it in a standardized manner, obviously, an advisor stepping in doesn't necessarily know the individual client details as well and might have to get up to speed on it. But they know exactly what the plan is going to look like. They know what the output is going to look like. They know how to read through and find the key areas of the plan because it's their plan because it's the same plan they've been delivering to their clients in their area. So you get more cross-functionality of the advisory department of the client-facing folks by having the planning department make every plan in a consistent way.

How James Is Managing The Business Itself To Handle The Sheer Volume Of Growth [1:12:23]

Michael: So, how do you just manage the business itself and the sheer volume of growth? Just not a lot of advisory firms have had the kind of growth cycle you have. Just adding dozens and dozens of clients every quarter, adding team members like basically, every month on an ongoing basis, not the world for a lot of advisors as they're coming in. So, just how do you manage the business itself to handle all this?

James: So what I would say, it's imperative to have systems and processes. But I'm a big believer in EOS, Entrepreneurial Operating System. And having an implementer to help with that. There is zero way I would be able to do what we have done without my leadership team. And one thing that I'm still having to get good at it is delegating where people are making decisions that don't involve me. It's been a struggle, that's on me, more than my team. But it's interesting because the culture has changed in the last 15 months. And some good, some bad, right? You go from having like a very family-oriented feel to having, now you've got different leadership levels, managers.

And I should note, we've got three offices in three different geographies. One's in Houston, one's in The Woodlands, Texas, and one's in McLean, Virginia. And we're looking at opening up two others in different geographies, different conversations we're having. But it's very fascinating to see how, for example, call them the legacy employees, employees who have been through the growth and what we've gone through have adapted to that environment.

And, for me, culture is everything. Employees and having them incorporated in everything that we're doing and feeling included in what we're doing, it's been imperative. But now we're at a place where that some of that is shifting. And where I push back, I lean on my leadership team extremely hard to be able to accommodate some of that.

Michael: And how did you come to the EOS world, in particular?

James: I gotta give credit to John Furey for that. I've been part of Entrepreneurs Organization, EO, and YPO, and all of those for some time. But the real kick in the butt, if you will, was from John Furey at Advisor Growth Strategies who I had been speaking to him and engaged to him for some of our strategic planning work. And I would highly recommend him, by the way. But he flat out said, "You need to get this implemented immediately." And so we then went and hired an implementation coach. Part of me, I like to read as much as I can outside of the business. But if anyone hasn't read the book, "Traction," I love "Traction," I think it's a great way to get yourself acclimated to what EOS is, and why it's so imperative to continue to grow and scale. But yeah, it was kind of that kick in the butt. And it's almost like you recognize you need to make some structural changes, but at the same time too, necessarily knowing specifically what to implement and execute. Yeah, that's always the hardest part.

Michael: And so, what was the distinction for you between getting into something like EOS versus, you said you were a part of YPO, EO, like some of the other networking growth organizations in the past?

James: So, for me, EOS, it's more directly going into exactly what the business needs to be able to operate and execute. It's all well and good to have great ideas. But at the end of the day, what really causes growth is execution. Implementation of those great ideas. And I needed something for me to have a platform to be able to talk to the different people in my firm, and really get some help. It's like, “Look, I'm drowning because of capacity constraints and all this growth,” but at the same time too, for a typical entrepreneur, it's just going to be faster if I do it myself, right?

Well, that's not any way to grow. So I needed to have something in place where I had more people who were invested in the success of the firm, but also really wanted to understand how they can help me. And so, EOS really gave me that platform where I could have a leadership team, I could talk about all of the different issues that are going on, or just even things that are bothering me, and giving them the power and ownership to be able to go and run with it. Here's the problem. Let's go fix it.

And interestingly enough, recently it's kind of coming back to, All right, take these other initiatives and push them out a quarter because this is the only one that matters right now. And then it becomes an all-hands-on-deck, everybody knows what is the core thing that they need to be working towards, even if it's a different department that they can't drive it, they can at least support the departments that need the help.

What Surprised James Most About Building His Advisory Firm And The Low Point In His Journey [1:17:20]

Michael: So, what surprised you the most in building your own advisory business and scaling it up?

James: Oh, geez, you didn't prepare me for that question.

Surprised me the most. Yeah, I'd honestly say, I don't think I would ever have imagined it being this difficult to get more staff and scale up at this growth. But it's been a series of, call them growing pains. These are really the 1% of the 1% problems, but it's managing all of the things outside of the client relationship. Staffing, office space, legal, compliance, client services. All of those have good and bad to them. And so it's like you have an office space lease where let's just say it's a 7-year lease, and you're at capacity in the first 12 months of it.

I mean, good problem, of course, but now, of course, it leads to other dynamics that have to get at play. Yeah, my COO, and I were talking, she's like, "You know, in the five years we've been in business, you've had eight different offices." Like, "Yeah, that's a good point." She's like, "Yeah, I'm going to kill you."

Michael: Yeah. It's a funny thing to me that just that world of stuff that no one ever talks about when you're dealing with a fast-growth business. Like, office space is a huge one. Just a lot of advisory firms grow at 10% to 15% a year is usually like "a good growth rate" for an advisory firm. Which means if we pull out your financial calculator rule of 72, you're going to double in 5 to 7 years. And when you double in five to seven years, that works, okay. You take down some office space, it's got a little room to grow, you grow, it gets a little squeezy at the end, but then you come to the end of your five-year lease, and you expand or go get some new space, or relocate, or maybe you've got someone where you need a little more space, but you can take down an office next door, or the same floor or one floor up and down, like you can flex into it.

When you're growing at a pace like yours, “Hey, we doubled the headcount in 12 months.” Like, it's not even a “Hey, if we all squeeze a little and someone has to work out of one of the office supply closets for a few months until we get to the end of our lease, but we'll make it through.” That doesn't work. You just obliterate your space needs in a year or two into a five-year lease, and either have to bust the lease and just treat it as a cost of doing business or have a lot of other challenges around splitting up your office space. Because fast-growth companies are just not, or I should just say traditional office leasing is not built for fast-growth companies.

James: Well, and of course, in this environment, you're forced to kind of say, Well, why not just go virtual? And employees are accustomed to virtual. And I'll be honest, and again, everybody's different. But for me, virtual in this growth mode did not work. We were actually only out of the office for six weeks. And I actually feel really, really blessed because when we came back into the office, my new office space was ready. And so, initially, I could spread everybody out. They had window offices, and I didn't have to worry about people sitting on top of each other. Now, fast-forward, we're 12 months into the lease, and it's like all right, we're back on top of each other, and what do we do next?

Again, good problems, but still problems nonetheless.

Michael: So what was the low point for you on just the career journey over the past 10, 15 years that you've been doing this?

James: Oh, low point. And I probably should take a step back and talk a little bit about the career path, but I started out of college, went to a small broker-dealer. They got acquired in 2009 by RBC Wealth Management. In 2014, we made the decision to leave RBC and go to Morgan Stanley. And then very, very quickly left Morgan Stanley to go independent.

And I would say that the low point for me really was that second transition. Not because going independent wasn't what I was excited about but it ultimately was that point in time where, despite all of the reasons for going to Morgan Stanley, and the logistical hassle of making a transition to go there really starting to question some of your decisions. Why did I do this? Was it really the best move? Because that second move to go independent was extremely expensive. We lost almost 30% of the business on the second move to go independent.

And so then, all of a sudden, it's like, all right, based on all the financial modeling that we had done to build out the RIA, is this the right move? And the thing is, everybody, again, you see the highlights, and you see the rewards, but it's the demons at night when you start questioning yourself, and you start questioning, “Did I make the right decision?” And I'll never forget the day that we had made the final decision to go independent and we're getting ready to go moving was the day I found out that I was pregnant with my first child. And that's the pucker-up moment of, "All right, I have to make this successful because I'm going to have a kid. It's not just me anymore."

And in some ways, I would say my daughter has become the ultimate motivation for me. I now have two children. But that was the kind of, "All right, I really need to make this work, because someone else is now really depending on me." But going back to your question of what was the darkest days or the most challenging was probably the decision to make that second move, because naturally, transition from broker-dealer to broker-dealer to then going independent, we were only at Morgan Stanley for let's just call it 19 months. And naturally, when you make that type of change, not only do you lose business on the second transition, because clients are going to naturally question why two moves in two years? And I would argue that it was called the unthinkable, but at the same time too, there was legal that followed with it, there was, obviously, new office space, cash outflows everywhere.

And a lot of people don't necessarily see the behind-the-scenes stuff, but I went all-in on Bogart Wealth. Selling houses, selling my house, selling my cars, and pretty much everything, clearing out retirement accounts to make this thing work, because we were spending hundreds of thousands of dollars to get the firm launched.

Michael: So help us understand just because I'm sure other people have made these leaps or struggled with these leaps as well. What was it that pulled you to Morgan Stanley? And then what was it that ultimately made you say, "Wait, this just isn't the right place for me. I think I got to go somewhere else." Given, as you've noted, the risks and costs involved, which were quite significant.

James: So yeah, they were. I mean, significant is probably an understatement. But originally, we went to Morgan Stanley with a lot of things that were promised to us. And interchange the firm name. It's all of these guys. You got to recognize when a recruiter is looking for you, they're trying to sell you something. It's a lot of promises were made both to support the existing business, as well as the growth. Even leading up to the decision to move, if I go back and look at my AUM from when I was at RBC, it went from $120 million up to $600 million in a very, very short period of time. Call it six years. But the decision was really done for a couple of reasons. First was supporting existing business and then the growth. My dad was very much involved, at the point in time, and we were going to use some of the Morgan Stanley transition to help with his retirement.

But then what happened was not more than a week... And then I should also add, we were very much an ExxonMobil shop at that point in time, and Morgan Stanley had the stock plan with ExxonMobil. And that was probably one of the biggest drivers to be perfectly honest. But very quickly, we were there for maybe a week and we got called into managerial office saying, "You're not allowed to solicit existing clients for the firm anymore. And I'm like, "Wait a minute, what?"

Michael: Oh, no. So, all of a sudden, it went from Morgan has the ExxonMobil retirement plan, so maybe you can get some cross-selling introductions into, “Oh, wait, since Morgan has the ExxonMobil retirement plan, all of them are off-limits to you because they're already clients of the firm.”

James: Exactly.

And so that was the, call it the real eye-opener as to what had really happened. And the next thing you know, it put us into a place where we either had to reinvent what we were doing, or just be content with what we had and not grow, or do the unthinkable.

And my dad was still very active at the time. He used to like to call it "the Sword of Damocles." Every day you kind of felt like you were going to come in and get fired. Because anything that you were doing could have potentially put you on the radar. And like I said, it forced the unthinkable.

Michael: And so, if I'm remembering my timeline correctly, how do you get a then-pregnant spouse on board with, "Hey, I got a great idea. I'm going to blow up my retention payments and go out and start a new thing. Oh, and this house that you were settling into for the family that we're about to have, we're going to be selling this."

James: Yeah. Yeah. I might let my wife actually answer that question. But she has been supportive of me. And I think what I would say is very few women can get behind the ambition of an entrepreneur and some of the decisions that have to get made. I mean, you know this, but there's a lot of really difficult decisions that have to get made in order to be successful. And the sacrifices along the way. Let's also note, I am a Texas resident, my wife lives in Virginia with my kids. So there in itself is a huge sacrifice that has to happen. She is the COO of the household, she runs the family, and she's very good at keeping me as balanced as possible, given that I am very much in growth mode and continue to be in growth mode. But I would say, to answer your question, it's a lot of trust. There was absolutely a lot of trust. And I have to give her every bit of credit for putting her faith in me knowing that despite the fact that I'm literally blowing up everything that we had, at that point in time, I don't think she truly grasped how much it really was when I said I was going to go independent. But yeah, I would argue she's benefited from what's happened since then now.

What James Knows Now That He Wishes He Knew Earlier [1:28:13]

Michael: So, anything that you wish you'd done differently? Like, what do now you wish you could go back and tell you from five years ago, as you're making the transition to independence or thinking about the transition?

James: Yeah, I would have said go virtual faster. Get the educational content digital quicker. I didn't appreciate the value that was. And I would also say integration attacks. Those are the two things, I look at these last 15 months, what we've done so well, and what's really logarithmically caused us to grow, I would attribute the two of them together.

And I probably I should mention it, but in 2020 is when I gave up my licenses. When we went independent, initially, my plan was give up the licenses...

Michael: You mean the BD licenses, the 7, the 66?

James: Yeah, thank you. Yeah, my 7, my 66. Originally, that was my plan, give them up. And then, all of a sudden, it goes back to the sales people when you're going independent, it's, "Oh, it's going to be easy. We'll just link it in." Yeah, it's not that easy.

So the next thing you know, fast-forward three months of being into being independent, I'm going back and getting my licenses with an RIA-friendly BD. It wasn't originally what my plan was, I wanted to, obviously, launch Bogart Wealth and be a true fiduciary. But recognizing that, effectively, we were orphaning a bunch of these assets. And that really upset clients. So the next thing you know, we got the licensing and then got it all integrated, and the infrastructure was correct. And then, fast-forward to 2020, where we created the solution and where we could still be able to effectively service the assets without having to orphan them. And it made the decision crystal clear to drop the licenses to be able to not have any level of inherent conflict of interest. See, I never viewed carrying my licenses when I went independent as a conflict. But of course, from the optics perspective, it always could be, right?

And I would say, going back to that, the decision to create a firm, there are a lot of decisions that go outside of just, “Okay, I'm going to transition my clients and I'm going to have my own office.” It becomes staffing, payroll, office space, compliance, legal. Just all of these different things that... What technology I'm going to use. It's just... stuff. And being able to have those processes in place is extremely important.

But going back to the question of what would I do differently, I would go virtual with my educational content much much quicker. I would integrate tax much, much quicker.

Michael: And out of curiosity, like what was the BD you ended out using that at least was friendly when you were an RIA? And then what was the solution for being able to serve assets without orphaning them and dropping lessons?

James: So PKS is the BD I was affiliated with when I was hybrid. And PKS has a platform where, and don't quote me on it, of course, it's a recorded podcast, but where you can have assets custody there within a limited power of attorney relationship to be able to still help service those assets.

Michael: Okay, so that was the transition in 2020 was like the client's brokerage assets stay at PKS, you get an LPA that lets you be able to service them and interact with them. But I'm presuming that means you are not necessarily getting trails, you can't get paid on it, but at least, they're not stranded or transitioned to some other broker who's then going to call on them and potentially, try to poach your clients. Like PKS gets the trails for taking the legal responsibility, but you at least can stay connected to the clients and the accounts so that you're not completely stranded?

James: Yeah, bingo. Exactly.

And I got to say, they've been a good partner. The BD stuff, it's stuff. I personally didn't love having a FINRA audit simultaneously with an SEC audit. That was not fun. But when I look at it, the trails were like 1% of my revenue. And it just did not justify the cost associated with it other than being able to give the client the experience. And so, when we started digging into it, and as soon as I talked to PKS about this solution, like, "Perfect, do it. How fast can we get this done?"

Michael: Basically, just to get FINRA audits and the layer of FINRA out of your life because the trail revenue just wasn't worth the FINRA hassle at that point?

James: No, to be honest, I don't mind. Audits aren't fun, and compliance, it's part of what we do. But to be honest, it really came back to being able to market myself as a true fiduciary.

People do not give it enough value, in my opinion, because clients are becoming a lot more educated on what a fiduciary is and ultimately, what the difference between a hybrid and true fiduciary are. And at first, again, even myself, do clients really know the difference? They know. And am I going to correlate all of the growth that we've had with not having the licenses? Absolutely not. But at the end of the day, can I say that it was another, call it "feather in my cap"? Absolutely.

Because if you think you're going to go independent to get away from compliance, or just be registered with the SEC and get away from compliance, you're so much under a misconception there. Compliance doesn't go away because you're an RIA. Do you have a little bit more latitude on making the call, and you owning the responsibility? Absolutely. But you're still beholden to compliance.

The Advice James Would Give To Newer Advisors Entering The Industry [1:33:40]

Michael: So what advice would you give to younger or newer advisors getting started today?

James: I do a lot of this, to be honest. And right now, one of the things that I see is younger advisors getting in the industry or a couple of years in, this is one of the best opportunities ever. I think 2008 effectively cleared out a majority of the mid-tier, mid-age range advisor because of just lack of training programs, and anybody who wasn't performing got fired.

So the advice that I would give is, first and foremost, have confidence, have competence. Between confidence and competence, those are the most important things that any advisor could have. I would push very hard on having a CFP. Being a certified financial planner is extremely important. It gives you the tools you need to be able to adequately service all of the needs that a client household has. And then I would also place an emphasis on having goals.

And again, you asked the question about younger me. Being more diligent on having goals that push me, and specifically, putting them on paper. Being able to see them day in and day out. I've got my goals on an app on my phone. It sends me a reminder throughout the day. Now, admittedly, sometimes I just silence it. But it's that perpetual reminder of what you're working towards.

And then something that I'm working on, right now, myself, personally is celebrating the successes that you have and remembering the people that got you there.

I think about my COO, I think about my wife, I think about the people who have been through the roller coaster. Because you're guaranteed to have dark days. To me, you think about the amount of times, you question what you're doing, if you're going to quit. And obviously, when you're having those darkest days, that element of doubt continues to perpetuate. But finding that light at the end of the tunnel is so important. And then ultimately, being able to strive and know what you need to execute upon to be able to get there.

And I would also say, get coaching. I am a very big believer in having a coach. I actually have three coaches. But it's different things, of course. But having someone to be able to just even be a soundboard, but also push you and hold you accountable. Because accountability is the recipe, in my mind, to success because it's all well and good to say I want to get to a billion in assets, great, but if you're not doing the steps to be able to do it and ultimately, prioritizing going on vacation over doing some business development initiatives, then you're not going to get there. And I hate to say it.

I have a colleague of mine, I talked to him six years ago that I said, "Hey, come on board, I'd love to have you on the team. You’d do extremely well." And he flat out just said, "No, I'd rather have a lifestyle practice." And that's his priority. Fine. If that's what your goal is then have that be your goal. But know that that should be one of your goals, and what do you need to be doing and execute it so you can have more of that "lifestyle." Which means you need more help, you need more people to be able to support you while you go and travel and have fun.

What Success Means To James [1:36:47]

Michael: So as we wrap up, this is a podcast about success. And one of the things I've long observed, just the word success means very different things to different people. And so, you're on this great rapid growth trajectory for success of the business to some just incredible organic growth numbers. But I'm wondering, how do you define success for yourself at this point?

James: That's a relative question, of course, as you said.

Success now to me is to be in a place to be able to enhance the industry, educate the consumer, and ultimately, find fulfillment in what I do. It took me a while to get there, it really, really did, at least the latter part with fulfillment. And now it's having that element of gratitude on a day in and day out basis of who's been there with me with this entire journey? What's gotten me there? And ultimately, because it's not really about the monetary or material things anymore, it's being able to have an impact. And that's why when people keep asking me, "Why do you need to keep growing? Why does the company need to keep growing?" And I come back and say, "I know the value we provide and I know the impact we have on these people. And they are entrusting us to facilitate all of their needs through the next chapter of their lives. And it's important." And I know that we can continue to get better.

So when I look at growth and success, I look at it as continuing to empower the industry, empower the advisors. And I think of the next iteration of what I'm working on right now is, I'm calling it Bogart Wealth University., but it's really going to be more of that practical application for that next generation of advisors so as they come into the workforce, they have that competence, but also the confidence to be able to deliver and execute on this stuff. Because that's where I see the big disconnect still.

Michael: I love just that focus. That framing of have the confidence, have the competence.

James: Well, having each of them independent of each other is actually a very dangerous recipe. Because you can be very confident, but not have the competence and you're just giving bad advice. But you could also have the competence without the confidence, and ultimately, you're not going to get anywhere. So it's the empowerment of the two in cycle, it's just so beyond important.

Michael: I love it. I love it. The confidence plus competence together.

James: Exactly.

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