#FASuccess Ep 095: The Never-Ending Process Of Iteratively Building An Advisory Firm with Linda Lubitz Boone

What You’ll Learn In This Podcast Episode

• The Lubitz Financial Group as it exists today. [04:10]
• Changes Linda plans to make to her fee structure. [12:10]
• Her typical clientele. [30:30]
• How she’s transitioning new and existing clients to her staff. [43:09]
• The simple thing they do that helps clients to feel welcome. [51:31]
• What technology tools they use. [52:58]
• How long it typically takes to reach a livable wage after starting an advisory firm. [1:22:13]
• Where Linda goes for inspiration and ideas about improving her business. [1:02:38]
• What can help you stay accountable and keep your firm focused and growing. [1:08:27]
• Her philosophy as she built her business in the early years. [1:13:06]
• The major life change Linda made that she feared would result in losing clients [1:30:18]

Resources Featured In This Episode:

• Linda Lubitz
• Lubitz Financial Group
• Linda's Engagement Estimator
• FinaMetrica
• eMoney Advisor
• TriNet PEO
• FPA Residency
• Tamarac
• Assemblage
• Fi360
• Dynamic Wealth Advisors
• Capstone Study Group
• Toastmasters
• IPS Advisor Pro

Full Transcript:

Michael: Welcome, everyone. Welcome to the 95th episode of the "Financial Advisor Success" podcast. My guest on today's podcast is Linda Lubitz Boone. Linda is the founder of Lubitz Financial Group, an independent RIA in the Miami area that oversees nearly $250 million of assets under management for 125 affluent clients. What's unique about Linda, though, is that despite having reached a phenomenal level of success building a $250 million AUM firm over the past 25 years, she continues to proactively iterate on and make changes to improve the advisory firm, from the service provider she uses to support the business, to the very business model itself.

In this episode, we talk in depth about how Linda continues to evolve her advisory firm. From exploring a potential shift from charging an AUM fee plus an upfront planning fee, into a consolidated income plus net worth retainer fee instead, as a way to shift the focus of clients away from the portfolio and towards growing their entire net worth instead, the decision to outsource her back-office investment operations to a third party provider but without fully transitioning to a TAMP, and how Linda is shifting her own role in the business to transition new and existing clients to her next-generation advisors while formalizing a business development training process for the firm.

We also talk about how Linda got started in the first place. The way she built her business in the early years with the philosophy of, "Meet a lot of people, answer the phones quickly, and do what you say you're going to do," why it's so crucial to plan to cover two to three years of personal living expenses when starting an advisory firm, even if you're confident it's going to succeed, and how joining or even forming your own study group to have a network of peers to hold you accountable to your own business plan can help keep the advisory business focused and growing.

And be certain to listen to the end, where Linda shares how she made a key personal life transition in the midst of growing her business, splitting 50% of her time between her home base in Miami and out to San Francisco, where her then-new husband's firm was based, and how in the end, even though we're often so fearful about how existing clients will react to a change, in reality, once clients trust us, they tend to stick with us and even support us in our own life changes as advisors.

And so with that introduction, I hope you enjoy this episode of the "Financial Advisor Success" podcast with Linda Lubitz Boone.

Welcome, Linda Lubitz Boone, to the "Financial Advisor Success" podcast.

Linda: Thank you, Michael Kitces. It's great to be here.

Michael: I've been looking forward to this episode because you are in, I consider this rarefied club of advisors who both created an advisory business and created a tech business for advisors. Because you have your own advisory firm, and I know you were also a co-founder and then ultimately later sold IPS Advisor Pro, one of the first, I guess the first I'm aware of, software for doing investment policy statements in a much more standardized way than what we had done with them previously. And so you wear this, like, dual hat having seen both sides of what it's like building advisory businesses and building businesses for advisors. And so I'm very excited to have you on the podcast today to, you know, share with us what, like, demons possessed you to say, "I'm already running a firm, but let's make a second one. Wouldn't that be fun?"

Linda: And the demon's name was...I don't remember, but there was a demon. Yes.

Michael: Yes. So it was like, "You should do this. It'll go great. You should do this." Seems fine at the time.

Linda: It did. Made perfect sense.

Michael: So maybe as a starting point, why don't you just tell us about the advisory firm first as it exists today?

The Lubitz Financial Group As It Exists Today [04:10]

Linda: Okay. We are a, I guess people would call us a boutique firm. We are in Miami, Florida. Currently, there are seven team members. We had eight. One of our colleagues left. And I'll talk about that in a minute because it gave us a wonderful opportunity to do some things that we might otherwise not have done. So there are seven of us now. We serve about 125, 130 families. I started the business out of my home bedroom office 25 years ago. And we really have as our foundation financial planning, investment management to us as table stakes. You have to be able to do that well. There's too many competing robo platforms and everything out there. So to me, doing good investment management is something that everybody has to do. And I think everybody, generally, if they have a philosophy and a discipline can manage money very well.

But the financial planning part of it is where, in my opinion, the rubber hits the road, and we really can provide a value to our clients. If we earn, you know, one or maybe two basis points more in investment portfolio returns for a client, that might make a difference, but our making sure that they have a discipline to save enough to send their kids to college. And as importantly, their estate plans are accurately representing what they want to have happen. And we can help them with tax work and basically be an accountability rock for them. I think that's really what makes a difference in people's lives. And so we generally will not take on a client unless we do a plan for them up front.

We have a couple of institutional clients. That's not really our sweet spot, but I think comprehensive financial planning is. We have the best team I've ever worked with. As I said, I've been doing this 25 years, and I can say without hesitation, every single one of them cares deeply about our clients and wants to do the right thing for them. And that's hard to find. And they really are my treasure.

Michael: So out of curiosity, in this world of, "We do investment management, but it's table stakes, everyone's kind of got to do that, financial planning is the focus," but you don't want investment clients who aren't willing to do a plan upfront as well.

Linda: That's correct.

Michael: I guess I'm just wondering, like, what does that look like in conversation with prospects? Like, do you get people who come in and say like, you know, "Here's my assets for you to manage," and you're going, "No, no, no, we want to talk about financial planning," and they're saying like, "Yeah, but my assets," and you have to pull them along into this sometimes, or do the people who find you just tend to know like, "Oh, if you go call Linda, you're going to be doing a bunch of financial planning?"

Linda: Pretty much the former. Although now... I've never done any advertising. Pretty much all of our new clients come from referrals or just my connections and our advisors' connections in the community. But until you've actually gone through a pretty rigorous financial planning process, you don't really know what it is. So most people come in, the majority, with a, you know, "Gee, I inherited some money," or, "I'm suddenly divorced," or, you know, "I'm really getting some serious money now. I don't want to make mistakes. And here it is. Please manage it." And our response is, "We love to, however, let's talk about the investment management process." And the key driver is really, "What return do you need to get on your money to meet your goals?"

I use a story sometime of, you know, there was a young man who came in. He was in his mid to late 50s. He wanted to retire early. He was a single person. His parents had died. He hadn't saved very well, but he accumulated a fair amount. He generally spent every penny of income that he had. And he had a very low volatility tolerance. I try to talk to people, not about risk, because there's so many different kinds of risk. I generally try to frame the conversation around volatility. He had a very low volatility risk. And as we're talking, you know, back in those days, we had a risk tolerance questionnaire, which we don't really have anymore. We use FinaMetrica to have that conversation.

And he came back with a low volatility, low-risk tolerance. And I basically said to him, "You know, I honor your risk tolerance, however, it would be malpractice, in my opinion, if we designed a portfolio based on your risk tolerance because you'd run out of money. We must if you want to have any chance of being able to retire early and live a long life because you're not going to inherit any money from your parents. This is it. We're going to have to invest for some growth, and we're going to have to educate you about what risk is, what volatility is. How you can protect yourself so that we can really know what rate of return you need to get to meet your goals. And if you came in here with a lot of money or you were going to be inheriting a lot of money and it really didn't make a difference if you didn't have a real return on your portfolio then yes, we can invest it very, very conservatively. But your fact pattern, your life fact pattern doesn't allow us to do that."

And so I find when I talk to clients about it in that term, they begin to understand, "Hmm, maybe there's a little more to this." And then we go and we talk about, based on, you know, their age, you know, if they're young, doing a capital needs analysis really isn't relevant. You know, if somebody is in their mid-40s then you want to start doing some capital needs analysis, Monte Carlo projections, because it will have some level of validity.

Michael: Interesting. But the anchor point is kind of that conversation of like, "I can't invest your portfolio if I don't actually know what goals we're working towards because I literally don't know what return we're investing towards." So that's kind of the draw endpoint for you to say, "We've got to have some of these financial planning conversations or we don't know where we're steering towards in the first place."

Linda: Exactly. You know, one of the interesting things over the years, I don't have children, so the desire to leave money to children isn't something that I can personally relate to. And that desire ranges all across the spectrum with clients. And I've seen clients that have had a low volatility tolerance but who really have a driving desire to leave their children an inheritance. That driving goal can overcome their discomfort with the short-term volatility. So you've really got to dig deep into people and question them about their goals. And sometimes they have to prioritize. And you can't ever guess in advance what their priority is going to be.

Changes Linda Plans To Make To Her Fee Structure [12:10]

Michael: And so, if you're doing this blended, you know, "We will manage your portfolio, but we have to do the financial planning work first," how do you handle this from a business model perspective? Like, are you charging a separate upfront planning fee and then doing an ongoing AUM fee? Do you just bundle all of this together?

Linda: We are currently charging a separate financial planning fee. We're in the midst of reviewing how we are doing our ongoing relationship pricing. I'll tell you how it is now and a little bit of our thinking about our changing. I set the business up to have the financial planning part be separate because I really feel so strongly that the financial planning is the most important part of what we do. If someone, and again, think back 25 years ago, there were not a lot of people doing financial planning. And certainly, there were not any stockbrokers doing financial planning. And today there are a few that do good comprehensive planning, but it's a few. So I didn't want to be a barrier for people who already had a relationship with a stockbroker or, you know, financial person, trust officer, whatever, to force them to leave that relationship that they'd had for a long time. So back in the early day, that was the way that we set it up. And we got a lot of resistance because you're trying to get people to pay for something that they have no idea what they're going to get.

Michael: Because they never experienced it, at least historically. I feel like that's changing a little bit now that planning has been out there enough. There's actually a chance sometimes when we talk to a prospect they've done some version of this with another advisor. But historically, like, when you talked to people about financial planning, it was the first time anybody was offering it to them.

Linda: Exactly. And I give a backhanded compliment to the Merrill Lynches of the world, who have...they've spent their marketing budgets on financial planning to educate people about financial planning, now that the quality of the delivery can be debated. But at least financial planning is a part of the nomenclature now, where it wasn't before. And so trying to get people to pay for something that they really don't have an idea what they're going to get is not easy. And I would say we're successful 80% of the time when people come in that don't know us to talk to them and convince them to pay a planning fee. Pretty much everyone that comes in that's referred, they've been a little bit preconditioned by the referral source. But it is not easy. Yeah, go ahead.

Michael: I was just wondering, like, what's your typical planning fee that they've got to agree to?

Linda: Typically, our goal is $5,000. And, you know, again, one of the frustrations of my team, we've created an engagement estimator, which is basically a Chinese laundry list of pretty much everything we can do for a client. We've got it segmented by things that we must do. We have to have our discovery meetings. We have to dig deep into your cash flow. We have to look at your tax return. You know, we have to look at your employee benefits etc., etc., etc. And we go through this with the client after we've had our discovery meeting. And if they're interested in continuing then we get out the engagement letter. And we go through, and, "These are the things that you want us to do for you." And quite often, during that conversation, we'll get to an area that we haven't talked about during our initial prospect meeting, and they'll say, "Oh, you know, yeah, I really do need you to help us take a look at that." So it is sort of a little income generator for us, but it also helps the client understand the breadth of all the things that really need attention.

But a frustrating thing for the team is, I'll go through that and my other advisors, you know, I'm the role model. I'll go through it and I'll put numbers of hours next to each area because I've sort of got an idea of how much I think this person will be comfortable paying. You know, we ask them during this discovery meeting, "Do you work with any other advisors? Do you pay fees to other people?" to kind of get an idea of their, you know, experience with paying fees for things. So I sort of modify the...I make a guess as to what I think they will pay without balking. And so, because I've been doing this so long, I know what we charge on an hourly rate, and I'll go through, and I'll say, "Well, this is an hour," or, "This is two hours," or, "This is half an hour," and I'll come up with a number, and I'll translate it based on our hourly fee. And that is not a good way to do it.

Michael: That's not a good way to do it. Like, this is your default, but then you don't want to do it that way.

Linda: I mean, it's not a good way to do it because it puts a burden on the other advisors who are doing the same thing of, "Well, you know, what's really a number that'll work?" They haven't been doing it as long. They don't have the experience. And I don't think it's fair to them. And it's not really a good way to scale a business.

Michael: Your concern is not that, like, literally you may quote them the wrong fee because you're building the fee from the ground up by saying, "What are we going to do for you? Let's list out the things and estimate the hours." You're just concerned that other advisors in the firm may not be able to look at the same situation and come up with the same fee, which is obviously a little awkward for a client. Like, depending on who you talk to, you might get a slightly higher or lower number is not ultimately good for a consistent business experience.

Well, I know this is the challenge for so many firms. Like, I think we never thought about this way, but historically, most of us advisors never actually had to set our own pricing before, right? In the commission-based, just the commission was what it was. Like, you could choose to do a different product, but you didn't get to say like, "Well, I would really like a different commission on my A-share mutual fund for this client." Like, the number was the number. And even in an AUM fee world, like, we have a little bit more flexibility, but the whole industry is kind of roughly glommed on around this 1% on $1 million. A little higher if you work with smaller clients. A little lower if you work with bigger clients.

But when you get down to fee-for-service financial planning, like, you can pick any number. There's really no anchor point aside from maybe, you know, "Here's roughly what a professional's time is worth, and let's guesstimate the hours." And so, we end out with this huge variability in fees on fee-for-service, even within firms sometimes, because different people look at a client situation a little differently and say, "Oh, you know, I'm really good at this tax stuff." It's like, "A client has got a tax mess, but this is only going to take me two hours." And some other advisor says like, "Are you kidding? That's a six-hour research project." And now you've got, like, nearly $1,000 swing in the price for the client's plan.

Linda: Exactly. And you never get totally paid for the planning work because there is always things that come up. And if we truly did charge the actual hours that we spend, people couldn't afford it.

Michael: And so was the whole point then of creating this engagement estimator, like, your approach to try to standardize this more? Like, "Let's put down all the things we might possibly do on one sheet of paper so at least everybody is thinking about all the same things when they're trying to figure out what to quote a client?" And out of curiosity, are you willing to share this out just so other people can see like, "What would an engagement estimator look like?"

Linda: I'm happy to.

Michael: All right. Wonderful. So for folks who are listening, this is episode 95. So if you go to kitces.com/95 and you scroll down to the resources in this section area, we'll have a link out for Linda's engagement estimator as well.

So your fee kind of starts at $5,000 ideally, but it's essentially kind of dynamic to the client's complexity? That's basically what we end out with? Like, the more complexity you check off on the engagement estimator, the higher the fee is going to go because you just literally start adding up all the hours.

Linda: Exactly. Exactly.

Michael: Okay. And so that's an upfront planning fee, but now you've said you're thinking about making changes. So are you thinking about making changes to the upfront or something you would do different ongoing or some combination of the two?

Linda: To, again, have the ability to have the advisors have a foundation to be able to cost out a plan and have an ongoing relationship, as a lot of the... You know, you've written about it a lot. Bob Veres has written about it a lot, the conundrum of ongoing pricing if you are doing financial planning. And what we're trying to come up with is some combination of an income and net worth pricing. It needs to have an income component because if it's only net worth-based and you have a young couple where, you know, they may be DINKs or whatever the current...

Michael: Dual income.

Linda: Yes, dual income, no kids. I'm sorry, dual income.

Michael: For people who don't know, yes, DINK is an acronym, not, like, a pejorative label for clients. Dual income, no kids, DINKs. And are accumulating a whole lot of savings, dollars, and be high-asset accumulators because they've got high income and two of them and no children.

Linda: Exactly. Exactly.

Michael: So DINK is good.

Linda: DINK is good, not bad. Maybe not our ideal client profile, but that's... So when we have clients that are younger, that have not accumulated, you know, a good net worth, a pure net worth pricing basis isn't really fair to them and fair to us. So we're trying to come up with something that does have an income component to it, because folks that are younger have a lot of complex issues that they need to deal with that are not necessarily net worth-based. As people begin to accumulate assets then you get a little more of the net worth-based issues. You know, the perennial, "Should I pay off my mortgage" question. "Should I refinance my mortgage" question. "How much do I invest in my business" questions. So we're trying to come up with a blend of those two.

And some stumbling blocks are with the clients that we have that are business owners. How do we come up with a value of their business? Because we were not business consultants per se, but somebody who's an entrepreneur, their business is part of their life, and there invariably will be questions about it. So how do we include that when someone has a really large equity in real estate? Do we take all of the real estate or do we take half of it? How often do we come up with a valuation? In my perfect world, we would come up with a fee for each client once a year, and then we would just bill it, one-quarter of that every quarter. So we don't have to go through this not so AUM billing every quarter and the auditing and everything we have to go through, and the timing of it.

Michael: So you'd set the fee once a year and then just bill it quarterly as you do with other clients. But you don't have to recalculate quarterly, which would make you revalue assets quarterly.

Linda: Exactly. Yeah. And honestly, I think that's fairer to the client because... You know, one of the things I, again, don't like about our business model is our revenue is based on four days a year basically: March 30th, June 30th, September, however many days September has, and the end of December. You know, our planning fees are a nice source of revenue but not nearly as much as the AUM fees. And because we don't charge on an average daily balance, our fate is based on the markets on those four days. That's not a good way to run a business, but that's what we all did when we started. It's tough to change. But I think probably if we were to talk a year and a half or maybe two years from now, I think once we go through some of the business changes we're undergoing, we're going to move towards that, asset and income-based pricing.

Michael: So you're envisioning a shift to this, like, income and net worth pricing for the whole client base, including all the existing clients.

Linda: Yes. Yes.

Michael: Okay. As a way to do it on an ongoing basis. Would you still do a separate upfront planning fee and it would just be upfront planning and then into this as opposed to upfront planning and then into AUM?

Linda: I'm not sure. Good question, Michael.

Michael: Still to be determined.

Linda: Still to be determined. Yeah, I haven't quite gotten that far yet.

Michael: And, again, what's driving the change for you? Like, is this mostly about opening up new markets and new clientele? Like, "I want to be able to work with the DINKs that just the math doesn't work on an AUM model for a while because they just literally haven't accumulated the assets yet, even though they may eventually," or does this feel like a pressure for you even with the existing AUM clients, that you feel like you need to go away from AUM and out to a new model for the existing clientele?

Linda: I think that it's more a business decision, not a market decision. The fee compression for AUM only is stealthily knocking at our doors. And I think if all we're billing on is AUM, it's going to be increasingly harder to justify our fees. What we do, our client meetings are generally not about performance of their investment portfolio. That's the last thing that we talk about in our investment meetings. And so for people to really understand the time and the value of what we're doing, it is a net worth, it is a personal kind of a relationship.

And if all they're paying us on is their portfolio value, there's a disconnect I think in people's minds about what are they really paying for? Well, they're paying for investment performance. Well, not really. They're really paying for a dispassionate, independent, unemotional, disciplined accountability source for them to touch base with, to make sure they're on track, to be there when they're scared, to hold their hands. And that's, you know, as the MasterCard I think says, that's priceless. And it is priceless because I think one of our biggest benefits to clients is we help them from making big mistakes. How do you charge for that? I don't know.

Michael: Yeah, like...

Linda: I don't know.

Michael: "I'll let you make a few mistakes, and then I'll fix some of them and charge you the difference." Like, if only that worked. If only that worked.

Linda: You know, one of the other challenges is, when we do our investment management, we are really good, I think, at tax-efficient asset placing and tax loss harvesting. And that's not something that a client can quantify necessarily, but we are saving them a lot of money. After 2008, I think we had...we saved our clients about...we've calculated roughly $2 million in income taxes by our tax loss harvesting. So for about the next four years, clients didn't really...the fees that they paid us for asset management were kind of offset by their tax savings, but people's memory is a little short and our long-term clients kind of forget about that. And so the value that we bring from our tax-efficient placement and from the tax loss harvesting, they don't see that value. I'm not sure that they would on a net worth pricing basis either, but it just, I think, moves the discussion away from, "Well, you're just charging me for investment performance."

Michael: Now you're charging them from net worth performance.

Linda: Exactly.

Michael: At least you get wider latitude.

Linda: Yeah. And for most people, that's what's important, is building their net worth.

Michael: So can you give us a little bit more of a sense of just typical clientele? You know, you said 125 to 130 families. Like, what's the AUM or the asset base for the firm overall?

Linda’s Typical Clientele [30:30]

Linda: We have about $250 million.

Michael: Okay. So average client is like right around $2 million or give or take a little bit.

Linda: Yeah.

Michael: Okay.

Linda: And, you know, Michael, when I say how much we have in assets under management, there sort of is this undercurrent of size matters, and, "Gee, you've been in business for 25 years and you only have $250 million under management. Boy, what's wrong with you?" going on in my head as you asked that question. And because we're all measured by the size of assets that we manage. And one of the things that happened to me early on in my career, I worked for a savings and loan for 18 years, and my last position with them was as president of a securities brokerage firm that I basically built for the S&L. And there were 70 people in my subsidiary company. I was 32 years old at the time. And one of the things I realized was I really didn't like managing people. That was not my sweet spot. That's not what I do well. I don't like it. I get energized by sitting across the table with the client and helping them solve problems and learn.

So when I set up my own firm, I knew I did not want to set up a big firm. For me, it's important to have some person answer the phone that knows me, in my relationships with professionals. That's important to me. May not be important to other people, but most of us I think that are the entrepreneurs, or at least from my generation, we built our firms kind of...we had the wonderful luxury of building it based on the kind of firm that we'd like to have, that we'd like to work with. And so which now pretty much try to only take on one and a half clients a month. We have a waiting list. And I will tell clients, you know, prospective clients, "We really want to spend a lot of time with you upfront to get to know you, to really learn what your issues are. And we can't do that if we're a factory. We don't have a telephone system where an automated person answers and you press a button to get to the extension."

So we're a small firm. We're a small firm by purpose. We're also a small firm because 15 years ago I started being bicoastal, living 2 weeks a month in Oakland, California and 2 weeks a month in Miami. I have been but it's changing the main marketer for the firm. And it's tough to market if you're only in your market for two weeks a month. So it's been a challenge. So we're at a size now that is manageable, wonderfully profitable. So that's my little...we're small for a reason.

Michael: And what does it look like to actually have a waiting list? I don't hear that from a lot of advisors, that, "I have a waiting list." And I'm just trying to imagine, what does that conversation look like with the prospect? Like, you're talking about all the financial planning work you do and they say like, "Yeah, yeah, that sounds really great. Let's get going." And you go, "Oh, well, wait, wait, wait. We can't work with you for three months because we have a waiting list."

Linda: Well, for some people, it works really well, for others, they have more immediate needs and it isn't going to work. What we try to do in a perfect world is have an initial meeting with the person to see if it's a good fit. If we're a good fit for them and they're a good fit for us. So, we can have that initial prospective meeting at any time. And if their issues are not, you know, immediate and they're willing to wait a couple of months, most of the time they will. I say to a lot of our prospective clients, you know, "Most people don't wake up in the morning saying, 'Oh, I need to get a financial plan done.'" That's not your first thought when you wake up in the morning. But there always has to be a trigger for people to ask for help. So we try to find what that trigger is. And as we're working with them and coming up with our financial planning deliverable, we try to address that trigger first, because that's what got them in the door. That's their main concern. So if someone has a trigger that needs immediate work, we're not the right firm for them. And that's okay.

One of the interesting challenges of a relationship business, which is what I really think we're in, we're not in the numbers business, we're in the people business. You've got to know the numbers, but I truly believe we are in the people business. We're not in the financial planning business. And when we have a client that we took on, and we're actually, my colleague and I are dealing with this I think at this very moment. He's having breakfast with a particular client who was a insurance person, a good, strong referral source but really didn't want to do financial comprehensive planning. And because he was a good referral source, we didn't stick to our guns and say, "Well, Mr. Person, we really need to do a good financial plan for you." We did a rough one. He and his wife never came to the office. Never did what we really do best. And the relationship with him has been based primarily, and it's been a short-term relationship, on investment performance.

Frankly, our investment performance the last 12 months, because we have...our investment philosophy is one where we want to invest globally. We invest in the equities sector based upon the GDP of the world. So only half of our equities allocation is to U.S., the other half is to overseas. That hasn't worked very well these past 12 months. We have a large alternative allocation, that hasn't worked very well the last, you know, seven years because the U.S. market has surprised everyone and gone up so much. So the clients that are based with us purely on an investment return, which are a handful, aren't very happy with us right now.

And so we talk about these clients. And are they really a good fit for us? And if they're not, tell them when we meet with them, "You know, you're not happy, we're not happy. This isn't working for us. We don't think it's working for you. We think you should find somebody that really has an investment approach that you're comfortable with, because you're clearly not comfortable with ours." We are comfortable with ours. We've seen it. You know, I've been doing this 25 years, I've seen it work over and over and over again. The people have to have patience and understand that their success is a shared journey with us. We can get them good risk-adjusted returns, real rates of returns, but they also have to save money. It's not just about the investment returns.

Michael: I can only grow the pot of money if you put something in the pot to grow.

Linda: Exactly. One of the things that we tossed around is a, instead of having a one-year financial planning contract, which is what we have, having a two-year contract where the second year, or after we finish our initial analysis, is really focused on helping the younger clients really develop good savings habits. We're wonderfully getting a lot of younger clients, and we're starting to have a retainer model for our clients' children that's not based on a $5,000 minimum, because that's not enough that they can generally afford. But they sort of put us on retainer, auto-pay retainer every quarter.

Michael: What are you billing at for clients' children that you find they'll actually take you up on?

Linda: Generally $1,500 a year. That seems to be something that doesn't get too much pushback. And, again, it gives us the opportunity to build a relationship with the second generation, which frankly, I think we could get all the new business we can handle if all we did was focus on our clients' children. We don't even need to market. We just need to market to our clients' children. And that's sort of a wonderful self-fulfilling prophecy. That the net worth won't leave when the parents die. And to some extent, we've been successful in that, not through our efforts, but through our clients' efforts, introducing us to their kids. I can't remember your question, Michael, I'm sorry. I tend to go off on a tangent.

Michael: I was just asking, like, what you were charging for retainers for those next-generation clients. And then what are you doing for them?

Linda: We're doing a initial cash flow with them. Getting them set up on...our client portal is with eMoney, and we have a private client portal. And try to get them set up if they don't already have a system to track where they're spending. I try not to use the word "budget." People tend to shrink away from that.

Michael: Yeah. I'm a fan of "spending plan." It's not a budget, it's a spending plan. Because everyone likes to spend the money, it's just part of the spending plan will be not spending all of it.

Linda: Exactly. And we have a very rigorous spending policy for our clients that are in distribution strategy. And we're working to develop a savings policy for the younger folks to help them with their accumulation. And so the $1,500 a year fee is to do an initial review of employee benefits. Make sure that they have a will in place. Take a look at their insurance needs. We don't sell insurance, but we can give them a number of what is a reasonable amount to start out with. Get them set up on either our client portal or Quicken or some of the other more high-tech tracking systems. Because, as we explain to them, it's not a budget but really knowledge is power. If you don't know where your money is going, you have no chance of making any changes. It's seat-of-the-pants. And invariably, one of the hardest things about our financial planning process with clients is getting that cash flow data.

And I used to say, "Well, we can back into it. We can, you know, see what your net cash flow take-home is and how much you save and kind of back into, "This is what your expenses are." That really never works well in the long term because it doesn't give the client knowledge of where their money is going. And I think for most clients, it's an aha moment. Over and over again, after we push the clients to get us this information, invariably they say, "You know, this was really a pain in the ass to do, but I'm so glad you made me do it because I really didn't know where my money was going."

How Linda Is Transitioning New And Existing Clients To Her Staff [43:09]

Michael: You mentioned that you've built this firm with a very deliberate design intent about the size of your team and keeping a team that didn't bury you all in management duties that you didn't want to do because you did that in the past and didn't like it. So can you talk to us about the team structure that exists today? You mentioned you have seven team members. Were eight but went down to seven. Like, who are these people? What do they do? Like, what does the staff infrastructure, like, the org chart of Lubitz Financial Group look like?

Linda: Okay, I'm going to put the investment operations box to the side because I'm going to talk about that in a minute.

Michael: Okay. That's the one that's changing. I take it.

Linda: Yes. Yes. Yes. And we're really excited about it. I'm president. I'm also a client advisor. I'm trying to wean myself away from a lot of the clients to our younger team members. And that process of transferring trust has gone very well I think because of the quality of the people in the firm. But it takes about three years to where a client is not really asking for me to be in the meeting anymore. It takes time to transfer trust.

Michael: And is there a particular, like, technique or strategy? Like, how are you doing the transition with clients? Like, how do you tell them about it? What do you do to get them over to the next-generation advisor from you?

Linda: I would love to say we have a firm, deliberate process, and we don't. What we're doing now is, as new prospective clients come in, if the client is referred by an existing client where I'm part of the team, the advisory team, we always have two advisors working with clients, except for maybe some of the smaller retainer clients where two people really aren't needed. So now, if someone comes in and has called and asked to see me, I will be part of that meeting, but there will be the advisor who will take over the relationship probably in that first meeting, just advisor who will become first chair. We call them advisor one and advisor two.

Michael: So a referral comes in and it's already team environment. Like, just out of the gate you set the expectation, "Linda is not advisor one on this. I'll be there as advisor two. I'll support." You know, new clients sometimes need that just to see the person that they got referred to or the person at the top of the firm. But, you know, you're only there to support someone else being advisor one with that new client from the start.

Linda: Yes. Yep. The others, you know, you look back on things that you could have done better. I think having a more deliberate transferal communication probably should have been done. People don't ask for me that much anymore in meetings. And, again, I think one of the things we're going to be doing next year is purposefully, now that we've got a much stronger, solid bench of advisors, is to begin to purposely transition clients away from me. So I'm here. My senior client advisor and a Principal of the firm is Jorge Padilla. Jorge has worked with me for the last 10 years. And hopefully, one day you'll have a conversation with Jorge because I think he's a magnificent representative of next-gen. He grew up in Spain and is in his early, mid-30s. And he has presence. Jorge, I know you're going to listen to this. I hope it's okay that I tell people about this.

Michael: He doesn't have a choice now.

Linda: He doesn't have a choice now. I think because he grew up in Europe around older people, that's a culture that sadly I don't think we have in the U.S., he has a wonderful patience and presence with them that they respect. Clients have complimented me on that. So I think that has helped in the trust transference a lot. Jorge has led a lot of great initiatives in the firm over the years, is a key member of the firm.

The other key...everybody is key members but on the management team side is our business operations manager, Nancy Mele. And Nancy has worked with us over 10 years as well. Nancy is one of the most organized...great in what she does.

Michael: Oh, I so treasure people like that. Who have that skill set.

Linda: Me too. That's why, you know, Nancy gets frustrated with me at times because I'm a little more loosey-goosey and she, you know, wants things done. You know, that's her job. Great at it. So she's in charge of our business operations. She's the liaison with the TriNet. We're a PEO, Professional Employee Organization, with TriNet, so we get some nice healthcare benefits and payroll support and HR support. She's our IT liaison. She directs our marketing efforts. She's a jack of all trades and reminds me, I think also reminds herself at the time that she loves to be busy and do lots of different things. She's great at that.

Our client advisory team now is Phil Herzberg. Phil, some of the listeners may know of Phil. He's a regular columnist in the "Journal of Financial Planning." Phil joined us a little over I think three years ago and just loves looking at tax returns and looking at estate planning work.

Michael: I'm with Phil. I'm with Phil. That sounds glorious. Just tax returns and estate documents to review, I love it.

Linda: And I will share with you, and this is not kissing up, you are his idol. So he wants to be another Michael Kitces, and he is definitely on his way.

Michael: Yeah, we cover his articles on Weekend Reading quite a bit from "Journal of Financial Planning."

Linda: Yeah, I'm really proud to be affiliated with him.

We have a new advisor in our firm, Debbie Badillo, who is going to residency in a few weeks and come out and will have passed her three-year mark. And she's going to get her CFP. Debbie is helping us. She's at this point even more of a treasure because we're going to be undergoing a very important computer conversion. And in a prior job, she had helped with the conversion into Redtail. She's a career-changer. She had a career earlier in her life in the sciences, so she's very analytical. She has a great personality working with people as well. She's been with us I think about, coming up to 10 months and really happy to have her.

Our other key foundation folks, and I think one of the people that gets more positive comments than anybody in the firm is Madeline Jusino, who is our client service representative. Maddy has the patience of a saint. She's got a tough job. She kind of works for all the advisors and she works for all the clients. She's able to balance that with grace. And she gets the work done, and clients regularly say how much they really enjoy working with her. And we're trying to now do some restructuring so that she can become a little bit more involved in the financial planning work with us. So we're looking at, how can we do some outsourcing of some of the client paperwork so she can begin to sit in on client meetings and have a bit more of a robust career path?

The last team member rounding us up is another relatively new to the more tenured folks. Nercys Rijssenbeek is our administrative assistant. She works most closely with Nancy. Does our internal bookkeeping and keeps the office running. Is the wonderful smiling face that people see when they come in.

The Simple Thing They Do That Helps Clients To Feel Welcome [51:31]

Speaking of that, one of the things that, I can't remember, I may have heard it on one of your podcast years ago or at a FPA meeting, someone said that what they did was they set up a computer in their reception area and they put "welcome" and the person's name on the computer screen. So we do that. And I've got to tell you, clients so appreciate it. Prospects are bowled over when they see it. It's just a little laptop, and it says, you know, "Welcome Jane and John," or Jane and Sarah Doe or whatever. And it's just a small, little simple thing, but it helps them feel welcomed when they come. So Nercys handles a lot of tasks. We're having a big client event coming up, and she's taken the bull by the horns. And she's creative. She had a job before doing some web-based marketing, so she is multi-talented. And again, I'm so fortunate that she's part of our team. And I don't think I've left anybody out.

Michael: So it's an interesting balance that you're four advisors, including you, and three support staff. Because I know for some firms, they're flipped the other way. It's like one or two advisors and five, six, seven, eight administrative and support staff, whereas you've got a lot of advisors involved and a pretty lean operation support team.

Lubitz Financial Group’s Technology Stack [52:58]

Linda: Yes. It used to be equal, four and four. Our investment operations manager wanted a lifestyle change, which we're excited about for him and his wife and his baby, but he left and he was our investment operations and a research foundation. So when he left, it forced us to step back and say, "Let's look at the business. Here we have one person that basically is..." You know, we have SPT, Schwab Portfolio Technologies. We use Tamarac for rebalancing. We use Assemblage for helping produce the quarterly reports. And we use Fi360 for doing some of the mutual fund fiduciary testing. So we have all these systems that don't talk to each other, which drives everybody crazy.

So we stepped back, and Jorge really, Jorge has been the project leader on this, to look at what our range of options are now. And we started with a, you know, full range of, hire another Josh or merge the firm with somebody else that has already a robust in place investment operations team. And the gradients along that extreme scale were looking at all the other options. And unlike 25 years ago, when I set up the firm, we didn't have a lot of breakaway brokers that needed investment operations outsourcing. We do now. And so we looked at a wide range of outsource choices, and we actually just made the selection of a firm headquartered in Phoenix, Dynamic Wealth Advisors. And they are taking over. We switched over from Outlook to their email Salesforce system two days ago. And my palms are still sweating, but we're going to do it.

They have a wonderfully integrated platform, Salesforce, Orion-based system that's wonderfully integrated, and they're going to take over and do all of the portfolio reconciliation. We've got some pretty robust models that are going to go into Orion. They're going to come back do rebalancing recommendations. They have a part of their business where they will do the investment model work for advisory firms that have hired them. That's not currently what we're doing with them.

Michael: So you're not outsourcing the actual, like, model management creation running. Like, they're not functioning as a TAMP, they're solely functioning as a back-office outsourced provider.

Linda: Exactly. We're, again, keeping our eyes open for possibility. And, you know, I'm the kind of person I try not to close doors on anything. So we may explore that as a possibility. But that's not our initial intention.

Michael: So out of curiosity then, how does a relationship like this price? I mean, TAMPs are usually basis points, and, you know, they do some of the management and get a basis point allocation. Is this still a firm that works in basis points as well when you're kind of outsourcing the investment operations but not the investment management per se or do you just have a flat fee with them?

Linda: It is a basis point, and then there's some monthly technology charges.

Michael: Okay. Not to, like, divulge their whole pricing model details or so, but can you just give us a sense, like, what does it cost to outsource? Because I have to imagine, you're sitting down and saying like, you know, "We have $250 million and it cost this many basis points and we could just go hire another person for X thousand dollars of flat fees." So, like, what does this look like as a basis point charge, and how do you think about that comparison?

Linda: I can't quote you the basis point because I don't remember it quite frankly. Jorge was the one that did the negotiation. I'm very transparent. I could not quote it to you off the top of my head, but I can talk about sort of the business decision. We talked with the firm, and it's... You know, talking about not closing doors. For your listeners, if you've been around a long time, you've probably experienced it. This is a very small-world profession. It's really, you keep kind of stumbling across folks that you met years ago.

The president of this company and founder, a fella by the name of Jim Cannon, I used to be with SunAmerica Securities. And way back when I had a securities license, I hung it with SunAmerica. And I had met Jim probably 30 years ago. And Jorge was talking with him, and Jim goes, "Gee, Linda Lubitz, I think I know her." So we had another blast from the past. And that knowledge of him and, you know, his ethics and how he worked was frankly for me a key in the decision-making process. Because, you know, character is everything. And I knew his character, and I knew that he would stand by his word. So in any case.

But I asked them. I said, "Why do advisory firms leave you?" And the response was, "Well, if they start to get too big, we can become pretty expensive because it is a basis point kind of a structuring." And I understand that. But as a business owner, what's exciting to me, one of the exciting things is that we're no longer counting on one person. And we've got backup so that if something happens to that one person, we're not stuck. And it's a little bit of an insurance policy. And frankly, if we grow and we continue to make a profit, I'm in this business to make a good living, but I'm not a pig about it. And if we can have a business operation where our team can function with efficient, reliable systems, have good resources for them to be able to do their job well, we can make a good profit. And it costs us a little bit more. To me, that's not a real big deal.

Michael: And I guess the flip side is you're also not trying to build for massive, rapid, exponential growth in the first place. Like, you're comfortably adding a client or two every month. So at least if you're going to decide at some point the basis point pricing is no longer appealing, you will have lots of time to either have a kind conversation with Jim about breakpoints and changing that basis point schedule or making a decision, "Do we have to bring this back in? Does it make sense to bring it back in?"

Linda: Yep. But we are excited because the systems will pretty much all talk to each other for the first time.

Michael: Because that's their job being a platform is, "You all figure out how to make integrations work between Salesforce and Orion and the rest. We just want to log into a thing that works."

Linda: Yes. Yes. And boy is that going to save time and efficiency.

Michael: So I guess both the good and the bad of that, like, you have to go to their Salesforce, their email system, their Orion. Not that those are bad platforms, but, like, those all become changes for you. You, I guess, keep your independence around planning software, because that's not really their thing, so you can choose to keep using eMoney Advisor but the rest you pretty much go to their systems?

Linda: Pretty much. They have MoneyGuidePro as a integrated part if we wanted to take advantage of that and plug into it. It's a really nice, flexible, we can plug into a lot of the software technologies that they make available. They've negotiated, you know, much better prices than we could on standalone basis. And again, this is a learning process for us. Talk to us in a year when we've come out the other side of the tunnel. Actually, we're hoping to come out the other side of the tunnel in about six months. But it really, as we're thinking about this investment in time and staff and systems, it will be a wonderful business decision because we'll be much more efficient. It can also be a wonderful business decision because it frees us up to really focus on what we bring value to the client in, which is the financial planning, and also to free us up to do some more marketing. Maybe hire another advisor. Maybe grow a little more. So it just it...we're all excited about it, and we're clenching our teeth as we go through the conversions.

Where Linda goes for inspiration and ideas about improving her business [1:02:38]

Michael: As someone that's owned an advisory firm and run it for 25 years, I'm curious, like, where do you go for inspiration ideas about changing the business, running the business better? You know, I know there's a lot of complaints, at least that I hear these days, that there comes a point where you've just done the business enough that the industry conferences aren't quite the excitement that they once were. It's kind of like, "I've seen these things. I’m not really new anymore." It's great when you're getting started, everything is new and amazing, and at some point, that dynamic shifts. So where do you go for learning ideas and inspiration about how to run the business differently or better?

Linda: Okay. So I'm going to turn this into an X-rated conversation. I roll over in bed and ask my husband. No.

Michael: Because he's an owner of an advisory firm as well. Just to be clear for folks.

Linda: Yeah. My husband, Norm Boone, president of Mosaic Financial, one of my inspirations. He is a wonderful thinker, explorer. And we truly try not to talk about business when we're in bed, but sometimes it does pop up. You know, he's been the touchstone for me these 15 years we've been together. And I learned a lot from him. I run things by him and I know he'll be brutally honest with me, whether I want it or not. So he's one of my resources.

Capstone, I'm a member of a study group that I think we're celebrating close to maybe our 20th anniversary.

Michael: As a study group.

Linda: As a study group. Yes.

Michael: So how did that come about?

Linda: Actually, at the old Conference for Advanced Planning. The old...I'm really going to sound like a dinosaur.

Michael: It was the old ICFP Conference for Advanced Planning?

Linda: The old IAFP, International Association for Financial Planning, which was one of the precursors that joined with the Institute of Certified Financial Planners to form the Financial Planning Association. At that conference, actually, I think that may have been where I may have met Norm 20-some odd years ago for the first time.

Michael: That was a very, very productive conference. For anybody who's wondering whether you should go to a conference or not, I'm just saying, business growth, 20-year study group, and a spouse.

Linda: Yeah. But actually, Norm was one of the thought leaders behind it, and Bob Veres, who we had gotten to know. Again, just a little side diversion, I had the wonderful opportunity to start my career working with Harold Evensky after I left the bank, which is another story because I got fired, which was the best thing that ever happened to me. Don't be afraid of getting fired, folks, it can spawn amazing growth if you embrace it and you let it. But one of the things that when I started working with Harold, he said two things that are really important. Number one, "Give back to your profession through your volunteer work, give back to your community through your volunteer work or writing checks, and go to national conferences because that's where you're going to meet the thought leaders, whether you can afford it or not, whether your company pays for it or not. Pay for it yourself. Go to the national conferences."

And back then, that's where we met Bob Veres or Bob Clark, Michael Kitces. You know, so many of the thought leaders. Eleanor Blayney. I mean, I could go through the wonderful list of people that I've had the honor to meet and learn from over the years, and I met them all by going to national conferences.

So at the Conference for Advanced Planning, there was a group of us that just met and hung out, and we decided to form a study group. We asked Bob Veres, who knew a lot of people who he thought we should maybe call and contact. And that happened. And there's now I think about 11 of us. Generally is ranges between 10 to 12 folks. And we meet three times a year, twice in person, one virtually. You know, in creating a study group, you have to build trust to really be able to be open and honest. And I remember the early years, I think it took us maybe two or three years to begin to tell each other how much we earned and kind of...

Michael: Sensitive subject, taboo subject. Kind of hard to give business advice if you don't actually know what the profits are.

Linda: Yep, yep. And now it's full disclosure of everything. They're a wonderful sounding bass. We've, you know, got a very active email back and forth if we have a question. You know, "Gee, do you have E&O insurance? Do you have cybersecurity insurance?" One of our latest email questions was, we have someone that is just getting their CFP, what do you do in terms of salary adjustment, if anything? So, you know, having a group of people like this that can be devil's advocates for you and question business decisions or directions that you're going is truly invaluable, especially if you're a smaller firm. And they've been part of my success.

What Can Help You Stay Accountable And Keep Your Firm Focused And Growing [1:08:27]

Michael: And so what do you do when you do these three-times-a-year gatherings and meet?

Linda: We have a rotating schedule to present our business plan. And what that forces you to do is to have a written business plan. My guess is a lot of advisors don't. And this forces us to have a business plan. And that's where we can review and critique. And I remember in the past, one of our members was going to change how she was handling some things with the business or bring on some folks. And as we were questioning her and trying to kind of poke holes in it to get her to think about it in a different way, she kind of said, "You know, this probably is not a good idea." And so she didn't go down that road. The meetings always involve I think two business plans. We try to bring in outside speakers to come in and talk to us about topics of interest. We create an agenda generally six months in advance. And we'll have topics that we'll have responsibility to do research on and present. And just, they've become friends. When Norm and I got married, I think all of them came to our wedding, that could. They're friends and truly trusted and valued colleagues.

Michael: How long are these meetings when you come together?

Linda: Generally, well, they'll start at noon. Kind of depends on which coast they are. We try to get geographical distribution so that we don't have advisors that are in the same market because we are sharing totally confidential information with each other and we don't want to necessarily share that with competitors. So generally the format is, we'll start at 2:00 in an afternoon, a full day, and then leave noonish on the third day.

Michael: So a couple of people will do their business plans each time. Like, 10 to 12 people, so 3 or 4 people do their business plans at each meeting, 3 times a year everybody rotates through once? That sort of structure?

Linda: Right. We used to initially tack on the Capstone meetings before or after a national conference because one of the requirements initially for consideration for membership was you had to have held a officer position in a national professional organization. That demonstrates the giving back to your profession because it takes a lot of time and energy.

Michael: Oh, interesting. So it was actually a requirement. So, like, everybody in the group is like a former FPA National, IAFC National, ICFP National, NAPFA National volunteer.

Linda: NEFE. Yes. Yes. And I would say most of them have had president positions in those organizations over time. That's not the case anymore, and we're trying to get some younger folks in the group.

Otherwise, and, again, not to suck up, Michael, but I read your material. It's wonderful. You are a credit to the profession. We appreciate it. You're sharing your knowledge freely. So I read your work. We're big fans of Rob Arnott from an investment perspective. You know, I try to read as much as I can. David Kelly, I follow from an investment perspective. You know, Carolyn McClanahan is wonderful for her work in the medical and healthcare arena. I was going through the list of folks that you have had on podcasts before, and I've had the pleasure of knowing, I counted up about 40% of them. And truly, you know, it's a blessing because I've learned from all of them.

So just ask questions. You know, if you're starting out, find... This is one of the most sharing professions I have ever seen. In my prior life, I was president of a broker-dealer. I went to the Wharton School for the Securities Industry Association, SIA conferences. Brokers don't share. Brokers generally do not share. People in this profession are open. They share and ask questions, ask to be mentored if you're starting out. Ask people their mistakes. What would they do differently? What do they find hard in what they do? And I think a lot of people will share and be open with you.

Linda’s Philosophy As She Built Her Business In The Early Years [1:13:06]

Michael: So take us back for a moment. You made a very interesting comment earlier about actually going out on your own because you were fired from the bank anyway, so kind of had to make a transition. But can you share with us a little bit more about I think what the birth of the firm look like? What you were doing when you got started. How that transition occurred. You know, even today, as you know, women are not well represented amongst advisors. They're even less represented amongst advisory firm business owners. And, you know, I think we're at 23% CFP professionals who are women now. But the number was not better when you were getting started. It was worse. So what led you down this path that so few other women were going down at the time?

Linda: A lot of it was driven by what I did not want to do. I think in life, it's as important knowing what you want to do. It's equally important knowing what you did not want to do. I was president of a broker-dealer that I built. I did not like the ethics of the brokerage world. I spent a lot of time in New York. I built what's called an omnibus clearing firm. So we weren't just a little...we were a fully operational brokerage firm. The only thing we did not do was give ...we didn't make markets, but we did everything else. And I didn't like the ethics on Wall Street. So here I sort of "got pushed out." I won a battle and lost a war, and I left the day my stock options were exercisable.

So, you know, here I am, I'm president of a broker-dealer, what am I going to do? Hmm, I didn't know what I was going to do. But I knew I didn't want to stay in the brokerage business. I had, as part of the brokerage business, created an advisor group of allied professionals, insurance professionals, trust officers, a whole variety of people that worked in the ancillary financial services world, one of whom was Harold Evensky. Harold had Just started his firm, and we met through some...I don't remember even how we met. And Harold was just starting his firm. Back then it was Evensky & Brown.

When I left the bank, he called me and said, "You know, I'm starting my firm." At that time they had some commission work. They had a commission arm of the business selling mutual funds. And he said, "You know, we need somebody with all your licenses, and we're a startup, and you want to come and join us?" I'm like, "Okay. Sure. Why not. I'd love to." The brokerage firm started in '87. This was I think in 1990. And so it was Harold and Peter Brown and a group of folks that did mutual fund sales and wanted to be financial planners. I didn't get paid for the first two years because we didn't make enough money. But boy, did I learn a lot.

Michael: So was that effectively part of the transition plan? Like, stay long enough at the broker-dealer for stock options to vest, get dollars and use it as money to cover personal household expenses for the first year or two because you just don't make any money starting in the business?

Linda: What it was, my role that Harold hired me for was really as sort of a managing partner, not as a financial planner or a securities person, because they needed a business manager.

Michael: And you were a president of a broker-dealer, so you knew how to manage your business.

Linda: I was president of a broker-dealer. Yeah, I wanted to go. Yeah. Not. So in any case, I'd say probably after about the first year, I realized, and I kind of joke about this. And Harold, if you're listening, I hope you'll remember this conversation, sort of Harold didn't really want to be managed, and I didn't want to manage people. So we decided this wasn't a good way to work together, so I started studying and got my CFP. People say, "Well, so, how did you build your business?" And I was ubiquitous. I was out in the community. I joined Rotary Club. I joined as many organizations as I could, got to meet as many people. Fortunately, part of my earlier job was to learn how to do public speaking. Part of my job was to welcome all the employees every Monday to the bank. And so I had to stand up every Monday morning at 9:00 and be on stage representing the bank. So I had to be up and positive. So if you don't know how to do public speaking, learn how to. So I think it's a key, key talent or skill to have.

Michael: I know a lot of advisors that have had breakthroughs just joining organizations like Toastmasters just to learn how to get up in front of people and at least have it be slightly less terrifying than it is for most.

Linda: Yeah. Yep. So, you know, how do you build your business? You meet a lot of people. You do what you say you're going to do. You answer the phone calls quickly. And it just started happening. It wasn't magic. I honestly don't know other than that's what I did. I didn't have an elevator speech other than a few years later I sort of created a, "Who do you work best with?" And it was, we work best with amiable delegators who value financial planning and have at least $1 million in investable assets and who ideally are going through a life transition such as a sudden inheritance, divorce, death of the spouse, or retirement. Amiable because we kind of have to like to work...have to like the people we work with.

Michael: If you're going to be in this financial planning relationship for a long time, it's really nice when you actually enjoy showing up to the meeting where the client will be.

Linda: Yeah. I don't want to work with jerks. Life is too short. And so delegators. We don't want people that are calling us every day, "Well, what's the market doing?" Up and down and everything. If someone can't delegate the transactions and the discipline of the investment work, they're not a good client for us. People who value financial planning, they have to be willing to pay a fee for it. Who ideally are undergoing a transition in life. I find, again, one of our values, because we're in the people business, is at times of transition in people's lives, the futures that they thought were going to happen aren't because of what has changed. And they're vulnerable, and a lot of times they're scared. And I think we're a very caring firm. And I think we're a very patient firm. And we don't rush people to do things. And I think that's what people that are in transition need. And I think we do it very...the team does it very well.

So bottom line, I was with Harold for I think maybe four years. I got my CFP. And then I don't remember exactly, but there was a bit of a change of direction in the firm that wasn't one that I was comfortable with, software or...I can't remember exactly. But in any case.

Michael: Some, like, back-office systems thing that you just didn't want to have to manage as the business manager person?

Linda: And so, I think I had 25 clients at that time, and I just said, you know, Harold and I just said, "You know, why don't you go out on your own?" So I went out on my own. One of Harold's assistants decided she just wanted to make a change. So my first official employee worked out of my home office until I could get office space. And she was with me for I think 18 years and just retired. And, you know, I don't come from a family of entrepreneurs. Nobody in my family ever started a business, but when I was at the bank, apparently I had skills to be able to conceptualize things and build things, which are, I guess, traits of entrepreneur. So I was an entrepreneur in the bank for 18 years. And I worked in a lot of different departments, set things up. So I guess I learned to be an entrepreneur on somebody else's dollar.

Michael: Not a bad way to have to learn.

How Long It Takes To Reach A Livable Wage When Starting An Advisory Firm [1:22:13]

Linda: Which is a wonderful life. So when I was an entrepreneur, I was on my dollar. And for folks starting out, be prepared to probably go for two to three years without taking an income out. So either have a spouse that's earning enough to pay the bills or set aside a couple years' worth of your living expenses because it's going to take a while. Don't expect it overnight.

Michael: You know, I tend to advocate that for most people, it basically takes three years to really start getting back to a livable wage. Like, almost no one gets anything out in the first year. The second year is usually only slightly better than the first. Sometime in the third year, you start getting a little bit of momentum. A few more clients start showing up. Someone starts referring someone, because, like, you've been around long enough that people are saying like, "Oh, I guess she's going to stick around. I guess we can go and do business with her." And then suddenly in year four and beyond, it starts to really pick up and accelerate. But you've got to plan for a two to three-year income gap while you're trying to work back to where you were. Good news is, then it just compounds. So it gets really good beyond that. But really, really challenging for everyone early on.

Linda: It's so much easier today to start out on your own because of, again, that little...hats off to the Merrill Lynches of the world, that people want to leave them to start their own firms. You know, you know very well, you've got, you know, sort of a broker-in-a-box business opportunity for folks that I think if I were starting out today, I'd take advantage of your companies, your subsidiary companies' service offering. Focus on what you do best. And if running a business isn't what you do best, find people that do, and don't be afraid to ask help. And you've got to pay for it. You know, it doesn't come for free.

Michael: But it does strike me that today, you know, I mean, we have...obviously, we've tried to build support platforms with what we're doing at XY Planning Network. But, I mean, even just the sheer amount of technology out there, right? Like, when you started, you had to bring an administrative assistant with you essentially from day one to handle the tasks that are there. Now, most advisors I know, like, they don't even think about hiring a part-time admin support until maybe the first 30 to 50 clients because the technology just handles most of the stuff now that you needed staff to do in the past. Like, it's so much more feasible to launch a lean advisory firm today than it was in the past, with the caveat that everybody still has personal bills. So, like, the fact that you can't, you know, pay your personal expenses while you're getting started, that's still on you. But the actual business startup cost just keep getting lower and lower. So, you know, more seem to be starting from scratch.

And that crossover point where people transition from broker-dealer or similar platforms out to the independent model, like, I remember when I started, the rule of thumb was, like, you didn't even...nobody would break away and go to state registration. Because if you were breaking away, you had to have at least $100 million or the math didn't work. And then you could break away at $50 million, and then you could break away at $20 million or $30 million. And now, if you're growth-minded, a lot of people just start independently from scratch because you'll hit your crossover point very quickly anyways. Those barriers keep getting lower and lower as the tools and the technology get better.

Linda: Yeah. To date myself, when I started, we would get paper copies of the mutual fund statements every month, and we would have to manually put the transactions in our system Believe it or not.

Michael: Yeah, there was no data downloads and feeds. Like, you type that. You type that information.

Linda: And again, hats off to technology major mover and shaker for Schwab to have the mutual fund consolidation platform. And to Fidelity to some extent. Because before that, literally, you would get a statement from American Funds or from Janus or Twenty-First Century, and you have to manually input all the transactions.

Michael: Even when I started in 2000, like, portfolio performance reports we were making, we would take information from statements, manually type it into Excel, into a little, you know, chart template that we had made, manually print all the Morningstar Principia Pro reports on the funds one at a time. All that stuff was manual step by step.

Linda: So do I wish I were starting out now in some ways? Yes. In other ways, no. It was great doing what we did and growing and learning. It's a lot easier now from a technology perspective.

Michael: Was there some, like, transition point where you said like, "This is going to work. I'm going to make it?"

Linda: It's going to sound ballsy. I never thought I wouldn't make it.

Michael: That's awesome.

Linda: Well, I was going to make it. It just didn't occur to me that I wouldn't. Now, my dirty little secret is, I'm a financial planner and I don't really have a life plan. So, you know, the old saying is, you know, if a goal without a plan is just a wish, well, my wish came true. But it just...

Michael: What's the other saying? Not all who wander are lost.

Linda: Oh, I like that one. I hadn't heard that one, Michael. Thank you. That's my new motto. You just keep plugging. I, somewhere along the way, just kind of evolved from, true confession, somebody who didn't have a lot of self-esteem, to somebody that just really, "I'm just going to keep pushing the button until I get a yes. I'm not going to take a no from, you know, somebody on a telephone. I'm going to talk to the supervisor. And I'm going to do my darndest to get what's important to the business, to the clients. And in a nice and professional and appropriate fashion, but I'm just not going to back down." I just kept going. You know, it sounds kind of elementary and simple, but there wasn't any grand plan. I found something I loved doing.

You know, young women will ask me, and men too, you know, "What is it that you like about what to do?" And for me, that is such an easy answer. First of all, how many people can say that they can really make a difference in other people's lives? Now, for some people, that's not important. For me, that's a rush. That's a wow. To be able to make a difference in someone else's life is so fulfilling to me.

I have an analytical skill. I was always in advanced math in high school, so, you know, I love the analytics of the people puzzles and looking at numbers and finding solutions. And you can make a very comfortable living. You know, you're going to get rich. You know, define rich. You can make a good, comfortable living. If you want to be an entrepreneur, you can build a business where you could at some point have a liquidity event, if not. You know, I think the financial planning world pays people very fairly. And so if you have those three things in what you're doing, how can you fail?

Michael: So was there a low point to you somewhere along the way?

The Major Life Change Linda Made That She Feared Would Result In Losing Clients [1:30:18]

Linda: Oh, I got really scared when... Oh, my voice is starting to shake now thinking back. When Norm Boone and I became a couple, I have no children, he has two children, who at the time were in high school, so it was really important for him to continue to be part of their lives. So it was important to me. So we had to figure out, "How are we going to build a personal relationship from Miami to San Francisco?" And I had more flexibility in time than he did, so we started where I would work remotely two weeks a month from the Bay Area and he would come to Miami one week a month and work remotely. Fortunately, technology had gotten to the point where that was doable. It was a bit archaic, but it was doable. But I was terrified that clients would leave when they heard I was not going to be there two weeks a month. I lost a lot of sleep over it. But I set priorities, and honestly, Norm was more important. And you've got to build a relationship by being with somebody. And this was the way we figured out it could work, and it has. But I was very scared. As it turned out, it didn't happen. Clients are still coming in.

But what did happen, and I think I was talking a little bit before about, you know, size and rate of growth, people thought I had left Miami. And I still when I'm walking down the street, if I'll see somebody, and I know a lot of people in Miami, they'll say, or I see them at a meeting, "Oh, I thought you'd moved to California." So there is...you know, I've kind of got a bad, little perception of I'm not here anymore. But if we do really want to ramp up and market and hire more team, and that really is not my decision, that's our next generation's decision, but I was very scared that I would lose clients. And I didn't. And that was a real wow. Been hard. Haven't been easy. It's not the optimum paying for a lot of airline tickets, but it's worked.

Michael: Where does it go from here? Like, what's your vision for where the firm grows next? It sounds like you're kind of starting to gear up for a little bit more growth. Maybe I'm reading for that.

Linda: No, you're reading it correctly. You mentioned early on that I was in a wonderful rarefied club of people that had started a software business. And when we sold IPS Advisor Pro, I think it was about four years ago, I looked back at my life and I was spending a lot of time on IPS Advisor Pro, as was Norm. And that...I was working almost, you know, 18, 6, I guess, and weekends were working with IPS Advisor Pro. And I loved it. It was our baby. We built it. We were making a difference in the profession. Advisors were learning what an investment policy statement was. It was exciting.

But when we sold it and we got our lives back, that really gave me some bandwidth to look at growing the firm. We've added an advisor. It used to just be three of us. We've added, I think about two years ago, the fourth advisor. We went through a strategic planning exercise with Schwab's help and I brought in a consultant to help us come up with a strategic plan. And I really positioned it with my management team, you know, "Let's look at what you want the future to be, not me. You know, I'll play devil's advocate, but really think about what you want the firm to be in the future."

And the sort of dedication to being a boutique firm where financial planning is the foundation of the relationship was something that everyone felt very strongly about. Again, I think we're at a very...once we come through this DWA conversion tunnel and we hit our efficiency growth is, what do we do with that time? And how do we build the business? What do we want it to look like?

One of my goals, each of us in the management team have some quarterly goals that we want to accomplish, and one of mine is to have some formal business development training in place. I never had any formal business development training, and I think it's important that people do. So we're kind of looking...I'm looking around and seeing what's options and available so that we can begin building experiences with all of the staff, not just the advisory team, and how do we talk to people about what we do? How do we focus? I have been just a key proponent of, all we need to do, because we're not a factory, because we don't have massive growth goals, if each advisor or member of the management team, if we found three, maybe four centers of influence that we could have fall in love with us, that ideally might even become clients, so they really know what we do, that all you need is three or four referral sources. That's it. You focus on them. You reach out to them. You become part of their trusted advisor group. That's all you need.

You know, finally, after dragging my feet, we have a much more wonderful, great web presence which supports who we are, but we're not planning to go out and market through the internet because we're kind of picky about who we work with. And so I think the business development work needs to be focused. We need to have a plan, which we don't have right now, but we will next year. Because we need to have everybody become part of that growth engine, not just looking primarily to me.

Michael: So as we wrap up, this is a podcast about success, and one of the themes that always comes up is that success means different things to different people. So you've built this successful business with $250 million and a team of 7, but as you look at it at the personal level, how do you define success for yourself?

Linda: Having choices in my life. Being in a loving relationship is success. As I said before, you know, being able to make a difference in someone's life for me is so profound. Maybe because I don't have children. Maybe that's my surrogate child projection. I don't know. I never really thought about it that way. But that's important to me. And I know I've made a difference in so many people's lives.

A real teary moment was, one of my very first clients, not a wealthy family. He was an architectural draftsman, she was a schoolteacher, who sadly died about six months ago. About two years ago, she brought her daughter in and her granddaughter in to meet me. The daughter had moved out of Miami. And the daughter walked in, and she walked up, and she threw her arms around me, and she said, "I am so glad to meet you." She said, "You have been part of my family since I can remember. Whenever mom and dad had a financial decision to make, they said, 'Well, we need to call Linda.'" And I've got to tell you, to me, that's success.

Michael: Well, very cool. I'm excited to see what you do with it from here. As the firm grows, you get to do that for more people. I think that's still what drives a lot of us for growth in the business. Yeah, it may get more valuable and may or may not be a little more take-home pay, but it's such a rewarding thing to do the financial planning work for clients that it's also cool just to literally impact and help more of them.

Linda: Yeah. And I really want to end by saying thank you to my team because they all share that as well. And without them, I couldn't do what I do. So thank you, folks.

Michael: Amen. Well, and thank you for joining us and sharing your story on the "Financial Advisor Success" podcast.

Linda: Great. Thank you, Michael. It's been an honor. I appreciate it.

Michael: Thank you, Linda.