#FA Success Ep 334: Finding Clarity On Fees And Clients By Allowing The Business To Evolve Over Time, With Meg Bartelt

Resources Featured In This Episode:

• Meg Bartelt
• Flow Financial Planning
• XY Planning Network
• AdvicePay
• The Efficiency Benefits Of Niching From The Start To Launch An Advisory Firm
• Abandoning Surge Meetings To Better Meet Client Needs And Promote Advisor Well-Being
• RICP Designation
• Kristin Harad
• Kinder Institute of Life Planning
• Carl Richards
• J.D. Bruce
• In ‘The Second Mountain,’ David Brooks Chronicles His Journey Toward Faith

Looking for sample client service calendars, marketing plans, and more? Check out our FAS resource page!

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Full Transcript:

Michael: Welcome, Meg Bartelt, to the "Financial Advisors Success" podcast.

Meg: Thank you. Thank you for having me, and for pronouncing my name right. Always a delight.

Michael: Yes. I guess you get your share of Bartlets, instead of Bartelts. So welcome, Meg Bartelt, to the "Financial Advisors Success" podcast. I'm excited for the conversation today. And there's this dynamic, I find, for the growth of advisory firms that just the 1st year, or 2, or sometimes 3, pretty much sucks horrifically for everyone. Some firms get going a little faster than others or find things that work for them a little quicker than others. The first 2 years are basically sucky for everyone. And then the promise of it is eventually it grows, and it gets a little better, and you get a little more revenue going, and the financial pressure is off, and then you get a few more clients, and the dollars actually start getting pretty good, and maybe you can hire a person if you want to, and off-load some things you don't like doing, and get a little time back. It gets to a better point.

And then for some firms, the problem is it doesn't stop at that point, where by now, you're many years in, you're getting more clients, your presence and brand is getting now. You've got an actual decent base of clients that can start sending you referrals. The growth keeps going. And when the growth keeps going, the pressure tends to be, at some point, you got to hire more people because you got to do the service for all the clients that are getting added in. And then sometimes it starts feeling less good. And there's this more money, more problems complexity stuff that starts to kick in. And so, I was struck in just we've crossed paths in many times and ways over the industry, and I know that you're many years in, and experience a version of this phenomenon, where, "I'm in my seventh year, and I think this was the worst year since my first."

Meg: Yep.

Michael: Just, that's an interesting transition. So, I was just going to sort of make an analogy, the 7-year itch in marriage dynamics where you get to a certain point. I guess it's not that dynamic exactly. But just this...when the business grows to a certain level, it's supposed to get simpler when you've got dollars, and you can hire people, and solve some of these problems. And then sometimes it doesn't. It doesn't get simpler. And so, I'm looking forward to hearing a little bit more of your journey of how it got going, and grew, and got better, and then how it kept growing and got not better.

Meg: That's diplomatic. Yes.

Why Meg Feels Fee Transparency Is Important [06:08]

Michael: So, I think to kick us off, if I can ask you, just get us level set a little bit about the advisory firm, what you do as it exists today. And then we can talk a little bit about how this journey has evolved over the years.

Meg: Okay, so my financial planning firm is Flow Financial Planning. It is 7 years old next month. We are currently a team of 3. So, I am the lead planner. We have an associate planner, Yerim, and an operations person, Janice. We work with roughly 60 clients, and our target clientele is women in their early to mid-career in the tech industry, with a particular specialty in pre-IPO companies.

Michael: Okay. And are you in a part of the country that is IPO-ish? Is that like a local thing for you?

Meg: Well, I'm 90 miles above Seattle, so I'm sort of tech kind of sort of adjacent. But the firm has been virtual since day one.

Michael: Okay. So, it's not like, "We're right outside of Seattle, and working with Microsoft and all the other local Seattle-ish companies."

Meg: Correct.

Michael: But there happens to be some local.

Meg: It's a pretty small minority of our clients that are in the state of Washington. In fact, mostly in California, obviously the Bay Area, Southern California, and then New York City.

Michael: Okay. And then how do you...help us understand typical clientele and fee structure? I mean, do you measure assets under management? Do you measure total revenue? Help us understand sort of revenue size of the business overall.

Meg: Sure. AUM, we have...I think it's around $60 million. I'm not sure how useful a metric that is because of a lot of our clients have very little to no assets under management with us. All of their assets are in their 401(k). And then we have a handful of clients who got very lucky in tech IPOs over the last few years. And they've got between $5 million and $15 million under management. So, it's just really skewed. So, probably more helpful is, this year we'll probably have about $650,000 of revenue.

Michael: Okay. So, 60 clients mean, math kind of straightforward, typical client is a $10,000 plus client household.

Meg: Correct. So, currently and for the last year or two, our minimum fee per year has been $10,000. We still have a good handful of clients who signed on with us before we raised the minimum to that, so we have a good handful of clients below $10,000, but that is the minimum for any new clients we've signed on for a couple of years now. And then some clients who pay us meaningfully more because their assets are so huge.

Michael: And how does that work just in terms of a fee structure? I mean, are you like a flat fee or retainer fee style model, or are you like an AUM style model that goes up as they add assets, you just also have a minimum to cover the core overhead?

Meg: I would say I'm closer to an AUM, a traditional AUM model with a minimum annual fee, as opposed to a minimum asset under management size from the client. But also, I think, the one thing that distinguishes our fee model from the traditional percentage AUM model is that we actually set our fees annually as a dollar amount. So, every year a client gets an email that says, "Your fee for the next 12 months is $10,000 or $15,000."

Michael: But you might calculate that number because they have 1.5 million with you, and 1% of that is $15,000.

Meg: Right.

Michael: So, then why that...So, I guess I have a few questions. And so first, why that structure?

Meg: In part, it kind of reminds me of...so 8 years ago, my family left where we were living in Virginia in search of a new place to live. We didn't want to live in Virginia, but we didn't know where we wanted to live. And so, my husband, and I, and a 4-year-old, and a 1-year-old got in a minivan, and drove around the country for 2 and a half months. And by the time we ended up in Bellingham, Washington, I was like, "Here's good. Here doesn't suck. And I really, really need to get out of this minivan, and live in a house."

Michael: It's a long way to get from Virginia to Bellingham, Washington in a van too, especially with little ones.

Meg: Yes, right. So, we can drive 4 hours a day because we had to drive while they were sleeping. So, sort of in an analogous way, I've tried a lot of different approaches to fee models. And then I got to this one and thought, "You know what? I am sick of changing fee models. This one seems to be reasonable. I'm sticking with it until something pushes me off of it." To put a little more color on that, years ago, there's part of the XY Planning Network community, which you know, of course, but there is just this ongoing conversation around what is the proper fee model. And I remember Will Kaplan, fellow advisor, years ago said something like, basically, "Who cares what the fee model is as long as you're being paid an appropriate number of dollars."

And that really stuck with me. So, over the years, I paid more attention to, "Okay, for the work I'm doing for these clients, for the value we're providing them, what's an appropriate amount of money for us to be paid?" And then tried to make a pretty simple fee model that would get us close to that dollar amount. And I really thought that ultimately being paid less than $10,000 a year for what we do was too little. And our AUM structure, the percentage tails off really quickly after a million. It's not 1% to the moon. So, the calculated fees do tend to cluster around $10,000.

Michael: Can you give us some further context? I mean, how far do they fall off? I mean, you're talking like it's 1% on the first million, and then 20 basis points thereafter, it just drops all the way down?

Meg: Sure. Yeah. It's 1% to $1 million, 50 bips from $1 million to $3 million, 25 bips from $3 million to $15 million, and then 15 bips after that.

Michael: Okay. And then help us understand just where did this, "We don't just calculate this AUM fee. We convert it to dollars and email it to you."

Meg: Yep. Going back to the sort of raging fee debate that never dies in our profession. The one stake I will put in the ground, the one hill I'm willing to die on is that it needs to be very clear to the client how many dollars they're paying you per year. I don't care if you calculate it with complexity calculator, or net worth income, or percentage of AUM, but it needs to be in very obvious black and white how many dollars they are paying you. That's a sort of point of principle and point of pride for me.

Michael: And so, that's not necessarily, "I said it this way for a billing process, or I said it this way for a particular type of clientele I'm working with” per se. This is “my philosophy around fees, and how I run my business and show up for my clients. And that's the hill I'm dying on."

Meg: Yes. I mean, it certainly is appropriate for a lot of our clients who don't have a lot of assets, right? I mean, that was the whole sort of essence of the XY Planning Network, sort of the thrust of it was, "Look, there are plenty of people in their 20s and 30s and 40s who make a lot of money. Their income's high, their manageable assets simply aren't."

Michael: Pre-IPO tech employees at some of the companies on that track, not only is there a lot of potential assets in the future as they may IPO, but they tend to make really good income-y income now too and have a lot of complexity because tech company options, and ISOs, and non-calls, and RSUs, and phantom, and all the different. There's a lot of stuff for potentially a lot of years, before eventually, hopefully, this thing IPOs, and there's a liquidity event.

Meg: Right. And I want to be...I mean, the earlier people like that work with a financial planner, the more likely it is that their IPO is going to be successful by their definition. So, I definitely want to sort of offer up a service that is more appealing to people before they have gonzo actual dollars in the bank.

Michael: So, you quote them what the coming fee is going to be. But are you still otherwise billing on an AUM basis? Do you still divide it by 4, and pull it out the account every quarter? You're just doing a separate proactive, like, "Let me make sure you're crystal clear about what this fee is coming out to be."

Meg: We do both. So, practically speaking, we use both AdvicePay and managed account quarterly debits. So, for clients who...

Michael: Because some people literally don't have an account for you to debit in the first place.

Meg: Right. Or if they've got their $6,000 Roth IRA, I'm not debiting from that. So, it really is, in a way, up to the client, but we definitely suggest, "Hey, do you want to switch to debiting from your managed account now," if we think that might be appropriate for them.

Michael: And maybe this is just my brain nerding out on the mechanics of this. But if you tell them your fee for the year is this, does that mean they're locked for the year? I mean, what if the market goes up after the first quarter? Are you still going to bill them whatever...

Meg: Sucks for me.

Michael: ...the AUM comes out to be? Because like I say, because I'm just channeling the regulator, it's like, "Meg, I have the documentation of your email, what you said the fee was going to be. You can't make a different fee 3 months from now because the market went up." So, you do that. When you tell them the fee, and you do that calculation, you're locked for the year at that point.

Meg: Yes.

Michael: So, is that everybody at the beginning of the year, just you go through that cycle for everybody?

Meg: No, they're smeared out over the year, more or less just tied to when they started working with us.

Michael: Okay, which I guess helps from the business end. You...

Meg: It's not this giant step.

Michael: Yeah. Or it reduces the exposure of, "Wow, that was an absolutely horrible two-week stint right before my billing periods for me to lock a year of fees in." So, if every client goes through this on their renewal, at least the adjustments up or down are graduated throughout the year. So, you kind of buffer your own market volatility.

Meg: There you go.

Michael: Am I thinking about that correctly?

Meg: I'm dollar cost averaging my client revenue.

Michael: Perfect.

Meg: I, to be honest, have never thought about it in that way. But hey, that's good rationalization for continuing to do it this way.

Why And How Meg Evolved Her Fee Model [17:45]

Michael: So then, now, I'm curious, as you've gone through this journey, what are the fee models on the cutting room floor? If you've been iterating through this, where did it start? And where did it go along the way?

Meg: Yeah. Well, it started with $150 a month because that was the XYPN patter when I was first starting out and had no idea what I was doing. And then after I got my first client, and did 1 month of work for them, thought, "Oh, that's not going to work." So, then I just kept the same fee model, and just raised the monthly minimum. And I also charged separately for...there was a fixed monthly fee for planning, and then a low percentage. Don't ask me what it is at this point. I've forgotten. But a low number of bips for investment management, so there'd be 2 separate fees.

Michael: So, like $300 a month, and 30 basis points or something. "And you pay me both. This fee is for the financial planning, and then this fee's for the investment management." And that was the structure. I mean, I get raising the monthly fee, right? Just, "Oh, my gosh, I did a lot more work for that client than I am recovering at $150 a month." I get raising the fee. What brought you to saying, "All right, I need an asset management layer on this as well."

Meg: I think it was just simplicity. The client sees $1 amount that they're paying me as opposed to $2. Especially if, of those 2 numbers, 1 is a dollar amount and the other one's a percentage of assets.

Michael: So, that's why you eventually consolidated it into just saying one asset management fee with a minimum.

Meg: Yeah. Look, I'm offering you one comprehensive service, I'm going to charge you 1 fee. And then I'll loop back to the...I know this isn't the perfect fee model, but it's good enough. And I'm so sick of having to think about ways to improve it. I'm just not going to.

Michael: I guess I'm just curious, when you started in a monthly subscription only, why in the AUM direction instead of just ratcheting up the fee? I mean, you could have gone to $1,000 a month, instead of $150 a month to also be $10,000, $12,000 per client. What led you in it layering the AUM in, and then just saying, "I'm going to do it at the AUM end, and just make the minimum so I get the revenue per client minimum that I need."?

Meg: I think because of all the fee models out there, the AUM calculation is sort of the easiest. And this way I can have 1 fee model that had 1 variable, and I just set the minimum fee so that I'm making sure to get paid enough. And then if they happen to have a lot of assets, I get paid a little more. But it's the world's simplest math calculation.

Michael: Okay. And so, it sounds like the overall thrust and journey of fees for you has just been, in a sense, "I just keep raising the fee and/or the minimum until eventually I got to an equilibrium point where I really feel like I'm getting paid for the amount of work that I'm doing."

Meg: Yes, exactly. And determining how much I'm worth, how much this work is worth during year. I had no clue when I first started out. That's something I really needed time, and experience, and practice, and a business coach from the industry to help me sort of figure out a number I felt was appropriate or reasonable.

Michael: I was going to ask how that journey was in trying to figure out how much it's worth? What should you raise the number to, and when are you at the right threshold? What was that journey like for you?

Meg: It was basically just incremental. I think I converted from the separate financial planning and investment management fees to a single fee that covered everything. I think I converted to that fairly early. And then I just had a $ 6,000-a-year minimum. And then it was a $ 7,000-a-year minimum. Then it was $8,000. And then my business coach at some point said, "Meg, the work you're doing for people is really worth at least $10,000 a year." I was like, "Really? Oh, my gosh, that's a lot of money. Okay, I'll try it out."

Michael: And then nobody said no.

Meg: Exactly. Well, that reminds me of the first time I did my biggest fee increase. I mean, this was probably in year...it was 2 years in or something. And I was talking to Scott Frank and Will Kaplan again. And they were a year ahead of me, or something, in terms of their businesses. And they said, "Meg, look, just raise your minimum fee to $5,000. I guarantee you, not only will your prospect funnel not dry up, you will get more prospects." I was like, "All right, man, I don't know. That's crazy." But I closed my eyes and sort of trusted them and jumped. And they were absolutely right.

Michael: Because? Why?

Meg: Well, because there are always going to be people out there, potential consumers, clients, who are the right fit for your fee model, or fee level, no matter what your fee level is. So, people for whom $5,000 was an appropriate fee started coming to me as opposed to people for whom $3,000 was an appropriate fee. And now people for whom $10,000 is an appropriate fee approach me.

Michael: I guess it's an interesting way to frame it. So, for anyone who is thinking, "If I start charging $5,000 instead of $3,000, I don't know if the prospects I'm talking to you are going to be able to afford it." The answer may be, yeah, they probably won't, but you're not going to attract $5,000 minimum clients when you're advertising $3,000. If you want to talk to people that have $5,000 problems, tell them you have $5,000 solutions.

Meg: Yeah. I mean, it really is...I mean, not that this is a surprise to anyone, but price is a signal. So, you charge $10,000, and people are just going to think, "Wow, she's got it going on, that must be worth something."

Why Meg Chose Women In Early To Mid-Career In The Tech Industry As A Niche [24:06]

Michael: So, you had also said you've got this focus of women in early, mid-career in the tech industry, particularly pre-IPO. So, did that also evolve as fees evolved and the rest of this moved?

Meg: Oh, yeah. Everything in my business has evolved.

Michael: So where did that start?

Meg: Yes. So, it started...the XYPN Kool-Aid that I drank the hardest when I joined, again, because I joined...I was like, "I have no idea what I'm doing. I don't feel the entrepreneurial spirit in general. I am a financial planner who has sort of been driven to open up her own firm because that's the only way that she can practice financial planning the way she wants to." But the 1 drum you guys beat so hard from the beginning was pick a niche. So, I picked a niche. And I went through, I think, Kristin Harad's workbook at the time. I think I even wrote a post for your blog years ago about niching from the beginning. So, she had a workbook that I just worked through. And it came out with a completely unsurprising result, which was my previous career was in tech, I am a working mother, so put the 2 together. My initial niche market was working mothers in tech.

6 months in, I had attracted some clients, and not one of them, nor any prospective clients were working mothers in tech. They were women in tech. And I'm not sure had I just persisted, I would have found some momentum at some point. But the way I was thinking was. "Okay, the women in tech thing, that's a thing. There's even a hashtag for it, for goodness’ sake. It's a shared identity out there. And working mothers is a thing. But I'm not sure there's a shared identity of working mothers in tech." And that's one of the things that makes a niche market really powerful is if they think of themselves as that shared identity. So, I initially just backed off the working mothers part, and just did women in tech. And then drilled down a little harder into the early to mid-career, because I did not want to focus on retirement planning.

And then probably in the last 2 years started talking more about with a specialty and IPO and pre-IPO planning, because we just gathered so much, earned so much of that expertise doing work with clients going through IPOs.

Michael: So, I'm struck by how you frame that you're...if you're picking a niche, it has to be something that people form some shared identity around for which...working mothers is a thing and women in tech is a thing. But working mothers in tech might not be. That just doesn't happen to be a version of it that is coming around, or at least that people of have naturally organized themselves around a hashtag for. So, you picked the one that they're showing up for. Which I think is a notable thing, even just in the broader niching context. One of the aspects that makes...that helps to define good niches that work is that they have some place where they show up. There's a place that you can find them, because otherwise, at best, your only other choice is to create some kind of community, and hope that you can attract them to you, and make the place that they gather.

But professions work because they have professional associations. You just go to a professional association meeting, and you know where to find the people. Women in tech, as you noted, it's got the hashtag. So, there's places that the group shows up, which means if I want to get go in the niche, I just have to go to where the people already are. I don't have to reinvent the wheel on this.

Meg: Yeah. I mean, maybe partly I'm a genius, but it's also definitely partly luck that I chose that niche market around the same time when sort of the women in tech identity, at least from my perspective, really seemed to be gaining momentum. One of the first organizations or Facebook groups, I'll say, I joined was called Tech Ladies. When I joined it in 2016, it had 600 people. Today it has over 50,000. So, there was just a lucky alignment between my niche focus, and that professional social community growing at the same time.

Michael: Interesting. And so, you're there and present in the community, and kind of an early active participant in the community. And so, lo and behold, as the community grows, there are more people there who are seeing you as a prominent visible member of the community, and the few that have $10,000 problems come and talk because you have $10,000 solutions.

Meg: Right. Although, at that point, I had much cheaper solutions.

Michael: Yes, $3,000 solutions going to $5,000 solutions.

Meg: Yeah.

Michael: And I was struck as well, you said you drilled down further on early, mid-career because you didn't want to focus on retirement planning.

Meg: Yeah.

Michael: So, what's wrong with retirement planning?

Meg: There's nothing wrong with it.

Michael: It's not like you said, "Well, I went after early, mid-career because I love early, mid-career." You were like, "I went after mid-career because I didn't want to do retirement planning."

Meg: That's true. The way I framed that might lead you to believe that. So, I worked in 2 RIAs as an employee before I founded my own RIA. And the way I describe them, they were sort of stereotypical of sort of the first wave of independent fee-only RIAs. The founders had worked in trust departments and banks, and sold insurance, and worked at broker-dealers. And after a career doing all these sort of other financial services related things, started their RIAs and worked, again, not surprisingly, with people approaching retirement or in retirement who had big investment portfolios. And then they charged 1% AUM and that's how they make their money, and that's their target market.

And so, the exposure I got to retirement planning was in that context, where you met with the client once a year. Most of the discussion was about their investment portfolio. "Oh, you want to do a retirement plan? Okay, that's sort of a separate add-on thing that we only do on occasion." And it was the 30-page money tree printout or something. And I mean, I think I appreciate a lot more now that I've been running my own firm for 7 years than I did when I was working in those firms. But investments have never interested me. And so, running a firm where investments seem to be central to the value, at the core of the value proposition, didn't interest me and that was really what I saw. That was my exposure to retirement planning. Now, since...

Michael: So, for you, retirement planning was so investment-centric, and you're not as into the investment side, therefore it wasn't appealing to be in the retirement side?

Meg: Right. So, that was what pushed me away from retirement planning. And then what attracted me to the early and mid-career is that's where I was. So, all these things that are going through my head, I wanted to work with clients who were also doing that, getting married, and changing careers, and having babies, and moving, and buying homes. That was very attractive. So, that pulled me toward the early to mid-career. I will say that in the 7 years I’ve been running my firm, and especially since I’ve been taking this RICP coursework, my appreciation for just the breadth and depth of retirement planning has completely changed. Yeah. I just wanted to get that out there.

Michael: So now, the concern is just, “Oh, maybe I just wasn’t going as deep, or our firm wasn’t going in the deep.” And knew all the other things you actually can do in the retirement realm.

Meg: Yes. I mean, it’s not a concern. I will just say that I just simply have just a much richer appreciation, almost sort of an overwhelmed appreciation for the scope of doing retirement planning.

Michael: And so, what’s led you in that direction now? You went to take the RICP after trying to stay very focused in early, mid-career?

Meg: Yeah, twofold, I would say. One is really just forward-looking, which is, God willing, my clients are going to retire someday, that they will age successfully, and they will remain my clients. So, I need to be able to serve them well. And I don’t think that what I know of retirement planning is sufficient to serve them well.

And then the second motivation is a much more useful in the current moment motivation, which is sort of inspired by one of things I didn’t like about retirement planning shops is that 60-year-olds show up in a prospect meeting, and the effective message to them is, “Well, sure hope you’ve done everything right for the last 30 years, because if you have, we can work for you. But if you haven’t, sorry.” And so, I wanted to get a better sense of, well, in order to arrive at that point when you're 60, and you walk into a retirement planner's office, how do I get my clients to a point where they would be the ideal client for a retirement focused planner? And I think understanding what goes on in retirement planning, it gives me a target.

Michael: So, I'm struck by just how evolution-y...going to pretend that's a word.

Meg: Good word, yeah.

Michael: How evolution-y this is for you of the fee model shifted and evolved over time, "We started monthly, then we raised monthly, then we had monthly plus assets, then we just consolidated in the assets, then we rejiggered the assets, and then we raised the minimums, then we raised the minimums again, then we raised the minimums again. We started out working mothers in tech, and then it's women in tech, and then it's early, mid-career women in tech, and it's early, mid-career women in tech that are IPO or pre-IPO planning." Just these layers keep coming over time. So, I guess...I don't even know how to ask this. Is that comforting for you? Is that like fostering of, "I wish I could just figure out the thing and get the answer, but it keeps changing." Or are you reveling in the journey of, "I'll figure it out as we go? This is great. We're making progress." How do you think about that? Because that's a lot of change while you're building.

Meg: Yeah. I think it has become more of a comfort and less of a frustration over time. Because the more I see the evolution of every aspect of my business, the more I simply recognize that this is the essence of running this business. Because what I'm doing is I am making changes that allow me either to serve my clients better, or that allow me to have a better experience running the business. Either more money, it's less stressful. I'm doing more of the stuff I like, less of the stuff I don't. So, it's actually reassuring to look back and see all the different instances of Flow Financial Planning. And they were all doing fine. I mean, outside of the first 2 years, of course, that sucked. But they've all been doing just fine. They just did a little better in the next iteration.

So, I think it's mostly comforting at this point. And my guiding light, as you well know, I've tried different service models, right? I tried surge, and now I'm back to annual renewal meetings. My guiding light is something that Carl Richards has said, a story he's told a few times about some colleague of his who ran a very successful business. And I guess Carl asked him, "My gosh, Bob, how did you grow such an impressive business?" And Bob said, "I was there for my clients when they needed me." And I just imprinted on that sentiment. So, I can make all these changes to the fee model, the service model, technology, deliverables, whatever. But as long as I am keeping that central to how I run my business, that's the only guiding light I need. That's the only through line I need.

Michael: So, is it a distraction or a challenge that...I mean, I'm struck that, as you kind of framed, the business has evolved with these sort of layers over time. And I'm almost visioning the rings of a tree that form as the layers as the tree ages. But you have all these clients from basically different instances of the business. I can almost envision a time stamping, "Oh, yeah, my 2017 clients, good year. Oh, my 2019 clients, yeah, I was a little different then, they came for a different thing because I was more early career then, so they kind of show up differently than my 2017 clients." I guess I'm wondering, does that present a distraction or a challenge that you kind of have these cohort effects of different clients depending on what year they happen to come to you as you were going through this journey?

Meg: To an extent, yes. I mean, let's say we have 60 clients now, I have certainly had cumulatively way more than 60 clients. So, clients have come and gone, especially in the first 2 years where it was like, "Hey, here's my stated niche. But if you will pay me money, I will take you on as a client." That was the most sort of egregious example. But even later on where my niche simply narrowed, and clients were no longer sort of as good a fit for sort of the new narrower focus, clients have left. Sure. Sometimes I've suggested that they leave, and sometimes they have identified that they're really not a good fit anymore, and they have chosen to leave themselves. Yeah, I mean, clients leaving is always stressful and emotionally difficult, and scary sometimes.

Michael: What happened with those early non-niche clients, when you're in, "I'll take anybody who will pay me fees because I'm just trying to get the revenue up to a certain level." Did you have to go and let those go?

Meg: Yeah, yeah, yeah. The ones who are definitely not in my niche, I just let them all go.

How Meg Got Comfortable With Rightsizing Clients [39:11]

Michael: Talk to us more about why let them go? Why not hold on to the revenue after all the work it took to get them in the first place?

Meg: Gosh, who are you? Socrates? I know you know the answer to this. Because there is an efficiency, there's a vast efficiency to working with cookie cutter clients. Now, I'm not saying my clients are cookie cutter, but I can really demographically at least get them very similar to one another, so that I only have to understand sort of a pretty small fraction of the whole world of financial planning in order to really serve them well. But if I have these other clients who are closer to retirement, or an entirely different industry, then I have to go struggle through learning this entire new domain of knowledge to serve this one client, it's incredibly inefficient.

Michael: Yeah. Well, I remember a version of this discussion that we actually had years ago. It was after one of the big tax laws had come out. Like Tax Cuts and Jobs Act or something.

Meg: Yes, it was that.

Michael: And as we always do, one of our 10,000 words on every possible provision of the tax law because we read the whole legislation and find it. And you had sent me some message that...it was something in the effect of, "That was great. I found the 2 sections that were really helpful for my clients. And I'm so glad that I didn't have to read the other 95% of your article because it just didn't matter for my clients. I work with these. And it was mostly retirement things that I don't really do. So, I read the 2 sections that mattered, and I'm so glad I didn't have to read the rest." And it just kind of stuck with me, yeah, I guess that is kind of the perk when you're really clear who you're going after. You can literally just ignore the other stuff that truly isn't pertinent to your clients. And just stay really deep on the things that do matter to them.

Meg: Yeah, it's really freeing. I think people still tend to think of niche as mostly a marketing tool, and it's just so much bigger than that. It’s got fingers into every aspect of how you run your business.

Michael: I guess I am still wondering, the mental journey from, "I need revenue. I'll take anyone I can get," to, "I really don't want their revenue anymore." When does that crossover point come? I mean, when did it come for you? When did you get to the point of saying, "I think I just got to let them go."

Meg: Yeah. I mean, honestly, this was enough years ago that I don't have a great memory of it, but I think it's once I was making enough money from the business. So, probably in year three or just after year three, where I certainly wasn't making a lot, but I was sort of making enough, and also was optimistic about sort of the trajectory and the momentum in the business. And every planner feels this way when you're sort of dreading interacting with the client, not because they're jerks or anything, but just because there's just not a fit there for whatever reason. And I felt safe enough to sort of buy myself the ease of not serving those ill-fit clients anymore.

Michael: What I hear from a lot of advisors is that a lot of us attach this sort of loyalty significance to those early clients, "You took a chance on me when I didn't know that much." "You took a chance on me early on. I knew my thing because I had experience, but who knew if my firm was going to survive." There's this, "You took the chance on me. I'm obligated to be loyal to you." How do you process that early client loyalty thing?

Meg: Maybe deep down, I'm just a sociopath. I don't know. I mean, I really do think it was because I got so much clearer on my niche, and on the business I was building to serve this niche. And it just became so clear, "This piece doesn't fit anymore." Sort of for any definition of this piece, "This client doesn't fit anymore. This deliverable doesn't fit. This service model doesn't fit." But with clients, it was really like, "Look, I'm growing in this direction, and learning all sorts of awesome ways to serve clients in this direction. I'm not going to able to serve you well anymore." And so, it wasn't a, "Hey, thanks for your money. See you later, sucker." It was a, "I don't think you're going to get value for the money by working with me, because I'm not developing my skills to serve someone like you. I don't think that this is going to work. I know a lot of financial advisors. I can almost certainly find someone who's a really good fit for who you are, and what your needs are. Would you like me to provide you with some introductions?" And then if they said yes, then I would provide them with some introductions?”

Michael: Do you then regret that you had to go through the process of taking them on just to let them go, I guess, 2 years later? I mean, it's not like you took them on early, and then 10 years later, "I don't know if this is a fit." It was not a huge number of years that they were on that journey with you.

Meg: Exactly. Do I regret taking them on? I don't think so. I don't know how I could have done years one and two any better. I mean, not that I did them well, but...

Michael: It's awful for everyone. Yeah.

Meg: I didn't know what I was doing. And I have just learned so many times in so many different circumstances in running this business that I simply have to go through the experience to actually understand it. I mean, I seek people's advice all the time about all aspects of this business. And sometimes it's really helpful to get their advice, and it does shape the decisions I make. And sometimes I simply have to go suffer through it for some definition of it, and then look back and say, "Oh, that's what they were talking about. All right, well, I won't do that dumb thing again." So no, I don't regret taking them on.

I also didn't create for myself this huge load of sort of...what are they called? Legacy clients or something, these people, I don't know if that's the right word, but this huge load of people who are just a poor fit. And I got rid of them pretty quickly. So, from year three on, I was pretty...maybe after year three or something, my client base was very high percentage in my niche.

Michael: So, can you give us some context of the pace that it grew at in the first few years? I don't know if you remember, but what the clients or revenue was like? I mean, just how did that ramp up come for you?

Meg: Yeah. I don't remember the number of clients except for the first year. The first year, right? So, I make this business plan before launch, having never written a business plan before, and just being like, "All right, I'll fill in these parts of the template." And have my husband watch me as I'm doing it. And I set a goal of 5 clients in the first year. And then I ended up getting 7 clients in the first year, and still felt like a complete failure.

Michael: Come on, you meet your goal by 40%. Celebrate your wins, Meg.

Meg: I know, I know. But I do remember revenue very clearly. $17,000 of revenue in year 1, and $17,000 of expenses in year 1. So, $0 take home. Revenue was $25,000 in the second year. No, the revenue was $50,000 in the second year, and I think $150,000 in the third year. So, at least at that point I'm sort of thinking of all the XYPN benchmarking surveys. So, back then getting to $150,000 in the third year was actually...that was definitely above average. I think that has become less impressive in recent years as people have launched their firms sort of more quickly/successfully. But I really attributed that jump, I tripled my income from year...tripled my revenue, excuse me, from year two to year three to my niche. And also, the fact that my niche... So, year 3 would have been 2019. And I'm working with women in the tech industry, tech industry is going gonzo. And the fact that I had been so clearly and consistently focused on that niche market putting out content marketing relevant to that niche market so consistently that I've really attracted a lot of clients in that third year.

Michael: Interesting. Interesting. So, just that it took 3 years for the niche to actually gain momentum.

Meg: Yes. And I feel as if I am just going to read off all the benchmark study results because I'm pretty sure that's what that shows, that it takes 3 years to know, like, and trust someone, or something like that.

Michael: Yeah. I've seen that across a lot of different businesses built over the years that there's just this...the first year you show up and...I mean, the truth is anybody you know, who even might work with you some day, They're just trying to figure out whether you're actually going to stick. Are you really going to stick around, or is this just a thing? Is it going to flare out? I don't know. You got to get a little further in. Then by the second year, a few people in the personal circle start showing up, it's like, "All right, you stuck around for a year. It seems you're sort of in this now. I'll work with you." And you're getting to know other people in the network, but you're mostly still just showing up for them for the first time. So, they're kind of getting to know you, and maybe they like you, but they're not really at the trustee phase yet.

And then you get to the third year and people are like, "All right, you've been around for a while. You've been showing up for a while. Seems pretty trustworthy, I can kind of see from a distance, you're doing this. You seem to have more clients than you did before. Okay, I'm there now. Let's talk." And then a whole bunch of them show up in year three because they've been watching you since year one. It's not that they didn't notice you. It just took a while for them to show up. And so, for a huge number of advisors that I know it's incredibly common that you get more growth in year three than the first 2 years cumulatively, which is frickin infuriating. Like, "Where were you people in the past 2 years while I was suffering and slogging through it?" And it just takes a while for people to get to the point to trust, and there's only so much you can do to speed that up.

Meg: Yeah, and I think, honestly, the hardest part of it is not that you're not making the income in the first 2 years, is that you're not sure this is going to work. So should you...

Michael: Because you're putting in so much time. It's great to get 7 clients in the first year. I mean, that really is a strong outing out of the gate when starting from scratch. But you're working 40 hours a week all year long.

Meg: For my $17,000.

Michael: Yeah. 7 clients for the year, that's cool. That means almost half the months there wasn't one all month. It's a lot of hours to have no new clients to show for. It's just brutally depressing early on, and then eventually it starts gaining momentum.

Meg: Yeah. I remember one of the milestones in the growth of my business was I think it was month 10, I got a prospect call request from someone whom I had no connection to. And I was like, "Oh, here it goes. I sowed a lot of seeds, and I just got one of them sprouting." That was very exciting for me.

Michael: For stranger prospect.

Meg: Yes.

How Market Volatility Affected Meg’s Growth Plans For Her Practice [51:40]

Michael: So, when did it get to the point that you started expanding team, and it went beyond you?

Meg: Yeah. Two and a half years in, I think. I just wanted some help. I mean, I'd literally put...the job description was, "Jack or Jill of all trades," because I couldn't even define specifically what I wanted help with. I was like, "Hey, can you just come spend some hours with me and then do whatever I ask you to do?" And so, I got a lovely woman who was, in fact, herself still working in tech, but making a gradual transition or wanting to make a gradual transition to financial planning. So, she just worked as a contractor for me. And working with her helped me better organize sort of the kind of tasks that I do, the kind of work that I do, so that about 6 months later, I was able to hire a dedicated admin person because by then, Sarah, the name of the contractor, had helped me sort of define, "Well, there are all these administrative tasks that you could simply hire an admin for."

Michael: Interesting. So, the process of just trying to figure out and package, "Okay, I've got Sarah. What can I give her? I can give her this. Okay. I found this to give her. I found this." And then you find enough things, you're like, "Wow, if I actually make a list of those, that's a job description." That's an actual job description besides, "Jack or Jill of all trades."

Meg: Oh, my gosh. Follow me for more business tips. Yes, that is exactly...

Michael: So, what were some of the other milestones for you as you think about growth and evolution of the business?

Meg: So, yeah. So, month 10, right. That first stranger who reached out to me, indicating that sort of my content marketing was working. Sometime in the next 6 months, I actually paid myself enough to pay my mortgage. That was very exciting. And hiring people certainly was a milestone. I think when I hired Janice, who's our operations admin person, when she became full time, and that was in basically year...3 and a half years in, I think she became full time, I want to say.

Michael: So, was she the...you started with Sarah as a contractor, and then went to Janice full time?

Meg: Yep. Yep. And by then, sort of the flywheel of my marketing had developed momentum. And so, I was getting more prospects than I could...more people interested in working with me than I could reasonably take on. I never thought that I could start with more than 3 new clients a month, 2 is a much better number. And I had more than that 1 to come in. So, I was like, "All right, I need an associate planner." Sarah has been great, but she's very much part time. And so that's, I think, 3 years in is when I hired Maddie full time as a dedicated associate planner with an actual job description that sounded like an associate planner. So, that was a milestone. And then we grew. And then February of last year, we hired Yerim as another associate planner, so that Maddie could move up to lead planner.

And now we're getting into...my God, 2022 sucked. 2022 sucked because the stock market went down, the IPO market dried up, the tech market collapsed. So, my prospect funnel basically dried up at the very same time that I had just gone from a three-person team to a four-person team, incurred all the expenses of growing a team. And then growing a team is a lot of work. And I would probably be better at it now that I've done it once, but it was the first time I was really doing it. And I'm transitioning very seamlessly from milestones into why last year sucked.

Michael: Yeah, why last year sucked. Yeah, so tell us more why did last year suck? I guess just even where was the business? I guess just maybe reset us a little. Where was the business heading into 2022, from clients, or revenue, or team. Just give us context for where it was.

Meg: Heading into 2022, gosh, we were probably around $550,000 of revenue, $500,000 to $550,000. Probably around 50 clients. And it was a team of three, me, Maddie, who's an associate, Janice, who's operations. And I was the only lead planner. And the idea was for Maddie to move up to lead because I was like, "Hey, we still have all these prospects, let's grow the firm." And in retrospect, I realized that I was being driven by these external forces. There's a demand for our services, therefore we should have a supply of our services. And also, that's just what you do in this business. You grow, right? So, we promoted Maddie to lead planner, and we sort of backfilled her spot by hiring Yerim as an associate.

And the idea was... I've seen the Angie Herber sort of growth chart a 1,000 times where your profitability totally takes a hit every time you reach one of these. I forget what she calls them, but sort of profit thresholds or something like that. You hire a new person, and obviously your expenses go way up. But the idea was, I take on this new employee, I take on these extra expenses. Profit takes a hit for a while, but then obviously we grow the revenue because now we've doubled the lead planner capacity. And then that didn't happen. And that didn't happen for a variety of reasons, in large part because the prospect funnel, by the time I got around to opening back up to new clients, all the relevant markets had crapped. And that scared the bejesus out of me because I think that was the first time since month 10 that I hadn't had a steady stream of prospects. And it was at the very moment that I most desperately needed them.

Michael: Because you're feeling all the overhead pressure of...

Meg: Oh, my God, yes.

Michael: ...having put a new person in.

Meg: My profit and loss statement was not pretty. What I lost was a lot of spaciousness. That is a word that's really come to be very sort of central to what I'm trying to build into the business, is I want there to be a sense of spaciousness, both financially and also in how I show up in the business, and how I spend my days.

Michael: So, can you talk about that more? I guess both financially and business end, just what does spaciousness sort of mean and show up? And how was the spaciousness gone when you added someone? I feel like, for a lot of firms, four-person teams are like you're there. You've got a lead planner you can hand folks off to. You've got an associate, the planner who support them. You've got an operations person. That's supposed to be all the people where you can start letting stuff go, and your time comes back, and that's supposed to create the spaciousness, at least in working theory. So that seems to have gone very opposite for you. So, I'm just trying to understand, what made that not spacious? Because the standard line is you hire so you can delegate and create more space for yourself.

Meg: Right. So, let me just start off by saying other people might have been able to do it well. And I just did it poorly. Everyone's got their special skills, and maybe mine is simply not growing teams. So, part of the spaciousness went away because now there is a lot of training. There's this new associate planner. And Yerim is fantastic, and smart, and diligent, and always looking to grow. But she was also really new to the profession. And so, there's just time spent bringing her up to speed on things. And then also Maddie, who transitioned from associate to lead, that's a bigger change than I appreciated, because it's not an evolution that I went through personally. Right? The day I launched my firm, I became the lead planner just by definition.

And so, I don't think I did a particularly good job of creating an easy path for that development to take place. So, I felt, just being from a selfish perspective, I felt a lot of pressure to help facilitate that growth, like, "Oh, my gosh, what does she need? What does she not have yet? And so, I just felt all of my energy was being used, or so much of my energy was being used to grow these people in my firm. And then I had this really sort of pivotal experience at the end of the year, in December 2022. I went back down to the Bay Area. I hadn't been there in 3 years because of COVID. I used to go there once a year to visit family, but also to see clients.

Well, I sort of lost track of the fact that I had a lot more clients in the Bay Area in 2022 than I had had in 2019. So, I ended up scheduling conversations with 15 clients over 2 and a half days. And when I realized what I'd done, I looked at my calendar and sort of hyperventilated a little bit. And these weren't financial planning meetings. These were just life conversations, like in a local coffee shop.

Michael: Sure. There's one thing, "Oh, it's great to be in town and catch up with friends," until you're like, "I'm in town catching with friends, 6 a day."

Meg: 6 a day, right.

Michael: For 2 and a half days.

Meg: Yes, yes. And then I felt like...I was physically tired at the end of the day, at the end of the 2 and a half days. But I felt invigorated, really sort of was...it filled me up in a way that I hadn't had in a while. And that sort of sat on my conscious for a while until I realized, "Oh, that is in fact what I want to be spending my time doing. That's what energizes me. That's what I like about this job. I am a financial planner who owns a business. I am not a business owner who practices financial planning." And so, all of the difficulties of 2022, at least the ones specific to growing the team, I realized, "Oh, I started creating...I started growing a business that doesn't serve me." Maybe eventually I could have turned it into more money, I don't know. But I was creating...I was taking myself away from work that I liked, and giving myself work that I didn't like.

But it took me months, I mean, almost a full year, I would say, of sort of suffering through this disconnect, and not understanding why it was so damn hard, why I was so stressed out all the time. Other people do this. What is wrong with me? And then I was actually sitting in a therapy appointment, I think, in January of this year, and talking about that trip down to the Bay Area where it was just this light bulb moment of, "Oh, that is what excites me. And I have taken that away from myself."

Michael: So, then what happens next? Cool realization, but you have 3 employees who you have to make payroll on, while growth has been lousy, and you've realized you don't even actually want to have them all, maybe after all.

Meg: Yeah. Yeah. Well, what happens is one of the most unpleasant experiences I've ever been through, but I am reassured that it is something that all business owners, or at least employers go through, is I laid a team member off. And it was not a commentary on their performance. It was a commentary on this is not the business shape I want. And it's my business. Now that I've made this realization, I need to create this business to serve me. But in order to serve me, I had to... I get stressed out just talking about it. I had to lay someone off. Yeah.

How Letting An Employee Go Helped Relieve Meg’s Capacity Constraints [1:04:37]

Michael: So, it's got to be tough when it's...I mean, the irony to me is it's almost easier when it's a performance problem. Just like, "You're doing a bad job. It's harming the business. And clients don't like it. We need to let you go for the sake of the business and the clients." It's different when it's like, "Yeah, I just realized that I'm not liking the direction of the business. And if we go another direction, that means there isn't a seat for you."

Meg: Yeah. Yeah. And that's...I mean, I talk to so, so many...I talk to my business coach. I talk to a mentor of mine. Hell, I emailed with you about... Because it just felt like this monumental thing, and kind of is. You're toying with someone's livelihood. And I really, really wish that I had made different decisions that I didn't have to go through that, I didn't have to put someone else through that. But I made mistakes along the way. And this was the way I figured out how to rectify them.

Michael: So, how do you get there, and get comfortable with that's what has to be done? Because candidly, I know advisors who have gotten to that position, that person still works there at the firm, and the owner is pretty miserable. "I can't let them go. I can't do that. I can't do that to them." And they put themselves in a place of being not very happy, and either dealing with it, or maybe hoping and praying that maybe if this thing grows enough, eventually it will get better again. Just how did you get there and get comfortable with the conclusion, "I'm going to have to actually do this and let them go."

Meg: Yeah, I think the first really big clue that this might be the right decision was, again, in therapy. I started working with the personal therapist in December because 2022 had been so stressful, and I didn't know how to handle my stress. And in a January session, it came up maybe...I don't know if the therapist proposed it, or I did. Just the notion of, "Well, what if we let her go? What if we lay her off?" And I took a moment to actually think about the implications. What would the business look like if I did that? And I just started crying. And it instantly tapped into something really emotional. And I thankfully had the sort of wherewithal to think, "Oh, Meg, that's important. You should pay attention to that."

Michael: Wait, I just want make sure I understand, the crying...it hit you, the thought of laying someone off, or it hit you, though, the thought of what the business would look afterwards if you'd done it and was like, "Oh, wait. Why am I feeling so different about what that business would look like?"

Meg: Yeah, sorry. I'll make that clear. The thought of how much relief it would be if I did this and went back to a three-person team. The idea I had sort of skated around in my unconscious for a while, and I just shoved it back. I was like, "Nope, nope, not a choice." And then that one sort of innocent question in my therapy session, and it just came roaring to the forefront, and lodged itself there. And I spoke to my business coach. And also thought about...I went through the Kinder Institute Life Planner stuff. And so, I'm sort of a...I'm a life planning oriented planner. And so, I have this lens on the work I do with my clients, but also try to bring it to my own life, which is what is the life I am trying to build. It sure as hell is not being stressed out all the time, and not being able to bring my energy and attention to my children. And I really felt as if the stress over my work were detracting from my real presence in my family. And so, it was a pretty quick…After that therapy session, it was...I don't know what's uphill or downhill from there, but that was the point at which the switch flipped for me.

Michael: And then what happened next? Just how do you go about this?

Meg: Oh, yes. So, if you're me, you talk to your business coach who tells you to, among other things, run some numbers. What would happen if you did this? What would happen if you didn't do this? And who also, my business coach, she sort of brings a life planning equivalent to her work. So, she's also...I mean, we've been working together for 6 years. She's also very attuned to...she knows a lot about what I want in this life, and what's important to me. So, she was able to sort of help me keep looking at things through that lens.

I also reached out to J.D. Bruce, for example, at Abacus. I know you know who he is. But, "I'm thinking of doing this. I know you've been through it before because you seem to have done everything in this business, so what are your thoughts around this?" Talked and emailed with other people who had done this, or even friends and colleagues who hadn't done it but who could just be emotional support. And I think I just needed to say it. I needed to talk about it out loud. I sort of do my best thinking outside of my own head. And just the more I talked about it, the more certain I became. And it's not because I could trace it back to some sort of objective calculation. It just felt right. And I think part of my training with the Kinder Institute has helped me really pay attention to just what it feels like to follow the emotion. Right? If there is really big, tangible emotion around this thing, you need to go there because that's actually what's going to give you the energy to do hard things.

Michael: And so, when you had to get to the point of having the conversation when, it sounds like you had not been through the process of having to terminate someone before. So, what was the preparation going into that conversation, and how did you approach it?

Meg: Yeah, well, I hired an employment attorney both for obviously sort of legal reasons, because this is sort of a highly legally fraught thing to do, and also for best practices. The employment attorney I hired has helped lots of people. Lots of employers lay people off. She's laid people off herself. And so she could give me best practices about what to say in the meeting, what the employee is going to be thinking and feeling. One of the interesting pieces of advice she gave me is like, "Look, get to the point immediately, and then basically don't answer any questions because as soon as you tell someone that they've been laid off, they're not going to hear anything else. Or at least they're not going to remember anything else from the conversation. It is not a favor to them to go into great detail in that call. You can have a call later if they want to." So, I just got some tips from the employment attorney around that.

Michael: Any other big tips that stuck with you in that context? That's a pretty powerful one.

Meg: Yeah. The other one I really remember is, "Look, I understand you feel a compulsion to care for this person, to take care of them, to want to ease their suffering." Because that's what we all want as humans. "You can't do that for this person. You are causing the suffering." All the things you might want to do, "Oh, I'm so sorry. Or let me give you all this explanation," or whatever sort of dithering you might be tempted to do, it's not a service to that person to do that. It is a service to that person ultimately to make it clear, and clean, and respectful.

Michael: And how did you find this wonderful attorney with helpful advice?

Meg: Oh, yeah. I asked my estate planning attorney for a recommendation, then I asked a local friend and colleague, and they both recommended the same person.

Michael: Okay. And then as you got to the conversation itself, did it take the direction that you had said earlier of, "This is not a commentary on your performance. The business is not taking the shape that I want, and I just need to go another direction. And that means you don't have a role here." Is that how you actually served up that conversation?

Meg: Yes, because I wrote that sucker out. This was...

Michael: Oh, you scripted it for yourself.

Meg: Absolutely. This was not a conversation I wanted to ad lib. Yeah. So that's in so many words what I said.

Michael: Is this in person, or is this virtual for you?

Meg: No, we're all virtual. So, this was over Zoom.

Michael: So, I guess the irony in that you literally can script this, you can put this on the screen as you're talking, right? You can't quite do that in person. I can't hold the piece of paper up in front of us so I'm seeing it as we're talking. But I guess weird reality in a Zoom virtual context, I actually can sort of keep this as notes and scripts in front of me to just stay focused on what this conversation needs to be.

Meg: Yes. And normally in Zoom calls with clients, or whoever, I sort of pride myself on being comfortable, and casual, and real, not scripted. And I just abandoned any attachment to being natural. This meeting, this conversation is too important. This needs to go exactly as I planned it. So, I'm pretty sure it was obvious I was reading a script, even if it was on Zoom.

Michael: So how does it feel now?

Meg: It had the desired effect on the business. I really do feel way more spaciousness. It is definitely a transition that's not finished yet. But all of a sudden, one day we're a firm that needs to acquire 40 new clients in order to sort of fill up to lead planners, to a firm that's like, "Oh, we don't really need any more clients at all. I can be done now if I wanted to be." And so what goes away? What goes away is really the need to prospect. I mean, I still enjoy all the marketing stuff I do, so I still get prospects. But there's much less attachment to them now, to converting them into clients.

Michael: Because you're not looking at this from the...it's no longer the pressure of, "Yeah, I'm basically getting killed on the salary for this new advisor until I get new clients and revenue up to the point that's covering them. And then this gets profitable again." So, all this go get more business, go get more business, you got to dig out of this hole. You dug yourself by hiring the person, and just that vanishes when the person's not in the picture anymore.

Meg: Right, right. So yeah, the pressure off of the revenue...took the pressure off the revenue because the expenses went down a lot. And now more of my time is just around client interactions, which is my favorite part of the job.

Michael: So, what about just...I mean, I guess you were in the first year of this, in the first place, and growth had slowed down, so I'm presuming only so many clients had transitioned. But how many clients boomeranged back to you in this process?

Meg: I think it was 22.

Michael: A lot of meetings and clients to suddenly show up on your calendar again.

Meg: Yeah. Yes, yes and all but 3 of these clients had been my clients before.

Michael: So, they just came back to you, "I know this relationship. I know these dynamics. I don't have to build a relationship from scratch."

Meg: Exactly. "I might need to get up to speed on sort of developments in the last year," or something, but there's sort of an established relationship, and 3 of the clients I had never worked with. So those were sort of my higher priority in terms of making sure the relationship felt tended to.

Michael: So, I'm struck by this in part that...I mean, a lot of what you had shared was just over this journey is kind of the evolutionary nature, "My fees are here, and then they're here, and then they're here, and then they're here, and then they're here. And I'm serving these clients. But then it's this version, and it's this version, and it's this version." It iterates you...I thought you had said it well earlier, that just there's this effect that the clarity comes over time. You have to do some of the things in various ways to find the clarity. A lot of what you'd talked about earlier were sort of the positive clarities, "My fees kept moving up, and my niche kept getting nichier, and the marketing flywheel kept growing."

This, I'm sort of struck was the version of the evolution that didn't work out well. Like, "I added 1 people, and then I add 2 people, and I add 3 people, and I got to 4 and it’s like [vocalization], okay, that didn't work. We're going to take a step back." So, I guess I'm wondering just other evolutions you tried that didn't work out? Because we always talk about the ones that do, because that's the ones that stick around, and we're still doing. What are the other evolutions that didn't work out?

Meg: Yeah. I mean, there have been multiple sort of minor ones over the years. And I think the underlying...the common theme is me trying to solve problems before they're actually a problem. Like, "Oh, this deliverable would be awesome, or this process would be awesome." And then creating this whole infrastructure around it, and then realizing, "This doesn't actually help the client anymore."

Michael: So, what did you create?

Meg: Oh, I used to have this beautiful written financial plan that my designer helped me with. And it was aesthetically very pleasing, but it was a pain in the ass to update, and the client seemed to get no special value out of it. So now my plan is...I mean, it's a "one-page plan," but it's literally a Google Sheet.

Michael: So, you went from beautifully graphically designed plan to, "Here's my Google Sheet."

Meg: "Here's my Google Sheet," yep. That's exactly what I did.

Michael: While your fees went from $150 a month to $10,000.

Meg: Exactly, exactly. And processes around, we made a workflow for helping people's IPOs, which was just super detailed, 30 different steps. And we would just get lost in or stuck in it. Eventually we just realized, "Can we just have...we'll replace these 10 steps with...have a meeting between the associate planner and lead planner to talk about what comes next," or something like that. But I think the biggest example is what I wrote about for your blog recently, which was an experimentation with surge meetings which...I mean, I learned a lot. So, I mostly don't regret the experiment.

Why Meg Stopped Using A Surge Meeting Structure [1:21:05]

Michael: Just walk us through what you did. Surge has been out there as a thing. I mean, we've had a number of guests on the podcast who have done the surge approach, who have adopted the surge approach, who've been pretty universally happy with the surge approach. It'd be usually something to the effect of, "Yeah, it gets pretty intense for that 4- to 6-week period when you're really surging the surge meetings." And a couple of weeks beforehand with prep, and a couple of weeks afterwards when you're done. But then you get half the year back with almost no client meetings aside from a few ad hoc things. And most everyone, it felt like, would essentially say, "Yeah, it's a bit of a grind when you go through it. But I get all this freedom," almost in your words, "I get all this spaciousness in the rest of the year, and it's so worthwhile." So, they've been happy about it. So, share with us more just the surge journey of what didn't work. What you did and what didn't work for you?

Meg: Yeah. So, I will say, obviously, the blog post, thanks to your editors, has a lot of words dedicated to this, far more so than I'll get into right now.

Michael: Absolutely. We'll put a link in the show notes for anybody who wants the full details and backstory and context to this. So, this is episode 334. So, if you go to kitces.com/334, we'll have more of the backstory around the journey through surge.

Meg: Sure. So, what didn't work for me? And I want to be careful to say, much like I was saying earlier, having a four-person team didn't work for me in my firm at this time. I don't know how other people do it. Same thing here. Surge did not work for my firm with my clients the way we do financial planning. What didn't work about it? I never got that sense of spaciousness. Never. Surge meetings would extend, I don't know, probably 2 months, twice a year. And throughout that 2 months, we just developed this ever-growing backlog of tasks that came out of the meetings, so that as soon as we finished the surge season, as it were, then we just have a bajillion tasks to do for clients.

And so, that was one thing. Through 3 different iterations, we could never figure out how to fit surge meetings into few enough days, few enough weeks with a consistent enough agenda to get efficiency. We're meeting with a ton of people, and just having a completely different conversation with every single one of them, with no chance to recover from any of those meetings. So, that's one thing that didn't work.

Two, I never knew when we could take on a new client. I mean, it seems... I was always frustrated I couldn't figure this out. But I was like, "All right, if surge lasts for 2 months in the spring, and 2 months in the fall, and for the months leading up to surge, we need to do all this prep. And then like the 2 months following surge, we have a boatload of tasks to do. I've got August when I can take on a new client." I couldn't figure it out. And I tried taking on new clients, and then sort of before they were done with the initial onboarding, sort of have them be part of the surge process. But I tried that once and it just sort of blew up in my face. The client was like, "What even is this like? What about all the other stuff you told me we're going to talk about?" I was like, "Yeah, that didn't work."

And I think I'll end with...I've mentioned this a couple of times in this interview that I sort of trained as a life planner. And to me, life planning requires time because sometimes, it requires conversations about one thing that you need to explore. And so, we would have these "surge meetings" that had this technical agenda, and we would spend the entire hour exploring the one topic that the client brought to the meeting, and never get to any of our agenda, because the one thing they brought, "Should I buy a house? Should I quit my job?" That is, in fact, what is most valuable for the client to discuss now, not my agenda.

Michael: But then you never get to your agenda.

Meg: Never get, so all the prep was wasted. Or how do we get this information conveyed to them outside of the meeting? It was just a problem I could never solve.

Michael: So, how long did you go down this surge-y journey before stepping away?

Meg: Well, we started in spring of 2021. So, we did spring '21, fall '21, spring '22. And then I literally felt pained inside at the prospect of doing surge for fall 2022. So, that's when we ended. We did not do surge meetings in fall 2022. But we had spent as a team probably 10 months gathering all sorts of information, and drafting agendas and workflows, and [vocalization], for that first spring surge. So, it was probably a two-year journey at least.

The Surprises And Low Points That Meg Encountered On Her Journey [1:26:25]

Michael: Interesting. So, as you reflect on this journey over the past 7 years, what surprised you the most about building advisory business?

Meg: Surprised me the most? I think just the fact that I could do it, that people actually find me credible, and are willing to pay me money, and that I'm good at this, and people listen to me. Really, I mean, I think a part of that is just, like I said before, I don't think of myself as an entrepreneur. I mean, clearly kind of by definition I am because I started a business, but oh, my goodness, I'm a business owner. I'm an employer. How crazy is that? Both of my parents, one was a university professor, and the other one was a federal government worker. This is sort of not my family's lifeblood. Yeah, it worked. Crazy.

Michael: So, then why did you take the leap when you seemed to have had not a lot of confidence that people would find you credible, pay you money, or that you would or could be an entrepreneur?

Meg: Yeah. Sounds kind of dumb when you put it like that.

Michael: I wouldn't call it dumb, but something was driving you to take a leap through all that.

Meg: Yeah. Well, I mean, to first order, I had no idea what it actually involved. And I think if any entrepreneur truly knew what it involved to start their first business, they probably wouldn't do it. But also, I was exploring starting my own or registering my own RIA in the fall of 2015. And at that point I was mostly a stay-at-home mom. My husband had a full-time job. We were fine financially. But whenever I'd meet someone and they'd find out I was a financial planner, they'd say, "Oh, can you help me?" And I said, "Well, not for money, I can't." Because I had to be registered to get paid for advice. And so I thought, "You know what? I'm just going to do the bare minimum registration," which is laughable in retrospect, especially in the state of Washington. So in fall of 2015, I started just doing internet research about registering as an RIA, and that's when I found the XY Planning Network. And even though it was such a smaller offering seven, eight years ago than it is now, they've put on a really...

Michael: They did compliance registration though, so they could solve that problem at least.

Meg: Yes. And also, they clearly knew infinitely more about running an RIA than I did. And it was, again, sort of this light bulb moment of, "Oh, here's someone who can take me by the hand, and just tell me what to do." That's not the attitude of an entrepreneur. They don't want people to tell them what to do. But at that moment, I was very much, "Look, make all the decisions for me. That's cool. Just tell me what to do." And with the assumption that I would have that sort of support that here's this organization that knows how to start and grow an RIA, and they will just tell me how to do that, I don't have to figure it out on my own. With a feeling of that support, I just thought, "Oh, this could actually be a thing." I like financial planning. I really like financial planning. There was just no way for me to do it really before that. So, it really was discovering XYPN that resulted...that was the key to me starting my own firm.

Michael: So, then what was the low point overall in this journey for you?

Meg: I would say there were two. One was about 8 months in, when I was still losing money, and didn't have any sort of sense of traction or momentum. And I just had this week where I just had this nervous breakdown. I canceled whatever meetings I had, and just spent the whole week crying. And sort of cry-face telling my husband, "Maybe you should go get another job. I don't know if this will work." Because he’d become a stay-at-home dad when I launched the firm, so we had zero income in the house. And he just said, basically, "No, we're fine. This is going to work. I know it's hard. Just give it some more time." He also set up a call with me with my therapist, which was very helpful. And so that was the lowest point for a lot of years.

Michael: So, your deal, your structure was, "I'm going to go launch a business, so you're going to be a stay-at-home dad with the young kids while I'm doing this." Because it sounded like just before that, you had been the other way around. He was working and you were the stay-at-home parent because that's what was kicking off the friend saying, "Can you help me?" And you had to say no. So, I guess I'm curious more how that couples exchange comes about, and how that works just financially? You build up savings and say, "If we have enough, then you can go do this for a year or two or three, or however long it is. And as long as you get to this point, then we're good. And if not, then we got to switch back again." And he obviously gets a job. Was that the setup?

Meg: I would say it was much less studied than that. It was more like, "Hey, you and I both worked in tech. We got paid a goodly amount of money. We're ahead of the game financially. If we don't save anything for three years..." And I just pulled that 3 years straight out of my butt, I didn't run any numbers, "That'll would be fine. I mean, hell, I'm 40 years old. Another 3 years go by, it doesn't work, I've got another 20 years of working." So, that was the extent of the analytical rigor on the financial front.

Michael: Interesting. So, it just felt financially secure enough, "We can do this, we're okay. And if it doesn't work out, we'll still be okay. We have time to make up for gone income and savings and be on track."

Meg: Exactly. Yep. I would say the more difficult transition was actually swapping roles as the stay-at-home parent. And I'll just put a shout out for marriage counseling, because about 4 months into him being the stay-at-home parents when I was still making doctors and dentist appointment, we're in marriage counseling, and I am basically yelling and cursing about, "How damn long does it take for you to figure out how to do this, because it's 4 months in and I'm still doing these stay-at-home parent tasks?" The marriage counselor helped us through that one.

Michael: I'm just reflecting on that as I... I had lunch today thanks to my absolutely amazing stay-at-home wife who literally had two containers for me. The first said lunch with green sauce, and then the second was a small container that said green sauce. If you want me to nerd out on tax law, I'll go until the cows come home. But I'm basically not functional for anything in our house. And I'm so, so thankful that she is as amazing as she is. So, I'm channeling a little bit of what your husband went through. Yeah, I don't know how long it would take me to get up to speed. It would probably be a painfully long time. She's amazing. That's not my strength.

Meg: Yeah. For anyone else doing this, it took, I would say, at least 2 years for us to feel comfortable with the new equilibrium.

Michael: Wow.

Meg: Yeah. So that was...we were talking about low points, right? So, that's sort of 8 months in, nervous breakdown, crying all day. And then 2022, and all the struggles that I talked about earlier. I was unhappier in my business in 2022 and early 2023 than I had been since year 2, since the end of year 1.

The Advice Meg Would Give Her Former Self And Younger, Newer Advisors [1:34:33]

Michael: So, what else do you know now that you wish you could go back and tell you from 7, 8 years ago, as your launching or thinking about getting ready to launch? What do you know now you wish you had known then?

Meg: Yeah. Charge more from the beginning, because I started at the bottom and that was a long, steep trail up the mountain. And also, don't solve problems before they're smacking you in the face. And I think I was sort of talking about this earlier, but there are enough problems that are currently smacking you in the face. You don't need to create more work for yourself by trying to anticipate other problems or improvements or whatever.

Michael: So, you've got to help me then, Megs, how do I reconcile this, "I'm a planner. I love looking at the future and anticipating problems."

Meg: Yeah. Well, I think, in practice, you can't avoid doing that to some extent. But I think part of being a planner is looking at what is the current reality of how we are running our business. What are the needs of our clients, and how are those needs being met or not being met? And really only solve for that. Where I've gotten in trouble is, "Oh, the clients would like that," and then creating this whole process to deliver them a really long tax return review email that no one ever read or commented on. Right? And so the next iteration, the next year was we still did the same tax return review, and then sent them an email that basically said, "Hey, we looked at your tax return review. Everything looks fine. Good job."

Michael: So, it sounds like this is really in the context of don't assume you have a problem with client value that you need to do a whole bunch more things to bolster your client value, until actually some people are leaving you or expressing that they don't think you're valuable.

Meg: Yeah. Or that you can truly see yourself. I mean, there is danger in saying, "Well, if clients haven't asked me for it, it's not worthwhile providing." Because part of what they're hiring us for is that we know more than they do about what's necessary. So, it's a balance. I just found that I wasted so much time, and energy, and focus on creating solutions for problems that didn't yet truly exist. Yeah.

Michael: So, any other advice you would give younger, newer advisors thinking about getting started, and trying to navigate their way into the profession?

Meg: Earlier in the profession, okay. For me, I think it comes back to networking always. Go to planners' office hours, go to local meetings of NAPFA or the FPA, go to conferences, just connect with people because you're never going to know what you don't know until you happen to meet someone who mentions it. And you get connections that way. You learn about opportunities that way. And it also just makes the whole professional experience so much more enjoyable when you know more people that you like.

What Success Means To Meg [1:37:48]

Michael: So, as we wrap up, this is a podcast about success. And one of the themes that always comes up, the word success means very different things to different people. And so you have a business that's in a wonderful place financially. Objectively, a very successful business, and happier now. But how do you define success for yourself at this point?

Meg: Yeah, it reminds me a bit, there was an article in "The New York Times" years ago by David Brooks. And I'm going to sort of butcher the paraphrase of it, but it was about sort of the 2 mountains that you go through in life, the mountains of success. In the first half of life, success is defined by all these external trappings, money, professional success, the size of your house, whatever. And then somewhere in the middle of your life, you start coming down that mountain, and start going up the next one where you realize that success is in the relationships you have. And I just turned 47.

And while the age of...well, turning 40 was just like a nothing burger for me. Being in my upper 40s has...I have felt that I am older, and I actually mean that as a very good thing. Because I have felt my lens on my business, my life in general, my relationships really shift with age, and I care less about some things, and I care more about relationships. So for me, my primary purpose in life right now, Carl Richards, his statement of financial purpose or something is spend time outside with family, something like that. It's much pithier when he says it. Mine is to make a memory with my 2 daughters every day. Whether it's a big memory, vacation, small memory of reading them a good book at night. So, success to me is a life that allows me to do that, make a memory with my daughters every day.

Michael: I love that. I love that, Meg. Well, thank you so much for joining us on the "Financial Advisor Success" podcast.

Meg: You're welcome, Michael. I'm so happy you asked me.

Michael: Absolutely. Thank you.