#FA Success Ep 372: Quadrupling Revenue By Restructuring Your Business Model To Reflect Your Entire Value To Clients, With Melody Townsend

Resources Featured In This Episode:

• Melody Townsend
• Townsend Financial Planning
• CFP Board site
• FPA
• Garrett Planning Network
• NAPFA
• CFP Board program
• Western Kentucky University
• Morehead State University
• NAPFA boot camp
• NAPFA conference
• Sheryl Garrett
• The Wall Street Journal
• USA Today
• Kentuckiana FPA board
• Fidelity
• Q2 Consulting
• Clifton StrengthsFinders
• Kolbe scores
• It's HOW You Say It: Effective Business Communication Skills by Barbara Teicher
• Lead From Any Seat:10 Ways to Get More Involved in Your Job, Make a Lasting Impact, and Advance Your Career Fast by Andrei Anca
• FP transitions

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

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Full Transcript:

Michael: Welcome, Melody Townsend, to the "Financial Advisor Success" podcast.

Melody: Hi, Michael. Thank you for having me.

Michael: I really appreciate you joining us today, and I'm looking forward to getting to chat a little bit about just the ongoing evolution of how our businesses change over the years. I feel like, for a lot of us, when we get started, we put so much thought and energy into how we're going to start the business, what we're going to do for clients, and what we're going to charge, and how we're going to structure our fees. And we do it with the best of efforts and intentions because we really want a thing that's going to last. And then sometimes we get a little ways in and find, "All right, maybe I need to adjust that fee," or, "Maybe I need to change how I'm doing my service a little." And sometimes the changes are even more dramatic, "I think I'm going to change my whole business model."

And I know you have gone through a version of that journey with a pretty significant business model change of what it looked like for the first 10 years and what it's looked like for the last nearly 10 years. And so I'm looking forward to the discussion, understanding more of what it's like when you look back over 10 and 20 years to see the whole model of how you're providing advice to clients changed.

Melody: Sure, yes. It's been an interesting journey, and I love where it's landed so far and look forward to where it's going in the future. But definitely had some of those very intense decision-making sessions of who I wanted to be when I grew up and what I wanted this business to look like and what model best served our clients.

Townsend Financial Planning As It Exists Today [05:21]

Michael: So I think to kick this off, just help us understand the advisory firm as it exists today. What is the business now? Who are you, what do you do, and who do you serve?

Melody: Sure. So Townsend Financial Planning is a financial planning and investment management firm, wealth management, if you will. We serve about 160 households in and around Lexington, Kentucky, and we also have offices in Louisville, Kentucky. Our main office is in Mount Sterling. And so we do have those other two meeting locations where we see clients at their convenience, and then, also, we have clients in other states as well. So the world of the internet and Zoom and Teams has made it such that we can serve a lot of different clients. We have a small team of two CFPs, myself, and Nick Bailey is also in our firm. And then we have more of a junior advisor that is Series 65 licensed. His name's Jeremiah. And then we have three support staff, one being an office manager, one operations associate, and then one as a receptionist.

Michael: And what does the business look like in terms of revenue or AUM or however you measure on that end?

Melody: Sure. We have just hit $112.5 million under management. So last year, we were $23 million or I think $26 million less than when we started the year at the beginning of 2023. And so we're just incredibly amazed at the growth of our clients as well as the markets. And so we were just really thrilled to hit $100 million under management in July, and that was a big milestone for us. And so then we were able to eke out $112 million at the end of the year. So we feel really good about that. As far as revenue, we're just shy of a million dollars in revenue. So we should kick over that million dollars this year. And so that's another great big milestone that we're looking forward to hitting.

Michael: You were down 26 million and had a trough, or you started 26 million lower, and that was how much growth you picked up through the year with clients and markets.

Melody: Right, that's how much growth we picked up with clients and markets. So we definitely did not have any sort of trough. But yeah, 23 million for two advisors and support staff is, for us, it was huge.

Michael: Yeah, yeah, that's a big number of growth. Very cool. Very cool. So from a business model end, how does this work for the firm? You noted $112.5 million of AUM. Are you AUM fee-based? Is it other fees in the model as well? How does the revenue actually come together for you?

Melody: Sure. So we still offer our services on a flat fee basis. So clients can come in under our financial planning model. And a lot of times, our financial planning model tends to work for clients for several years before they really need to make the decision or want to make the decision to have a true wealth management relationship with us. And we like to be accessible to clients. And so we have a core financial plan that usually clients in their 40s or 50s will start out with. And then they might move to more of a retirement roadmap because they're getting within 5, 10 years of actually retiring. And then, eventually, they'll be in our navigating retirement plan, which is, actually, they're in retirement and they're trying to make decisions about tax planning, Roth conversions, cash flow projections so we can meet their income needs, and things like that.

So our financial planning is still the crux of what we do, and that is on a flat fee basis. We are a fee-only firm. We're only paid by our clients. And so, on the other side, once someone gets into navigating retirement or even when they're in retirement roadmap, they might want someone to help them manage all of the decisions and implementation. And so, in that way, we will partner with some of those clients and become a wealth management advisor for them.

We do have sort of a breakpoint between $750. Anything below $750, most of the time, they have to pay an upcharge if they want additional financial planning services. So below $750, our asset management fee covers portfolio monitoring, trading, capital gain and loss evaluation, dollar cost averaging, things that are investment management related. And anyone with more than $750,000 in assets under management, their fee is going to be an all-encompassing fee. They will be able to get retirement projections and education planning, Social Security analysis. Even their children get financial planning services from us if they're under that model. And we also coordinate with their outside professionals, like their CPAs, estate planning attorneys, and insurance agents, to make sure everyone's communicating and working in the best interest of the client for the different financial puzzle pieces we're trying to put together.

Michael: So, for clients that are below the $750 threshold, how do you handle the planning portion of fees?

Melody: So, for clients below $750, those financial planning services are available upon request under a separate service agreement. So they would be under one of the financial planning services that we offer. So a core financial plan or maybe a retirement roadmap or navigating retirement plan, they would pay separately for that. And that just makes sense because, most of the time, they wouldn't need as detailed of a planning engagement as maybe someone who has tax-loss harvesting or Roth conversion analysis, or things like that, that might not be applicable to the $750 or below.

Michael: So when you talk about things like a core financial plan or retirement roadmap, it sounds like those are actual specific offerings. It's not a generalized label for financial planning, retirement planning. Those are specifically a financial plan package, a retirement roadmap package. That's part of how you've systematized your planning.

Melody: That's correct, yes. So, on our website, we give a full description of each of the plan packages under our financial planning tab. And so you can really see what all is included. If it's a detailed plan for navigating retirement, then it is going to include things like Roth IRA conversion opportunities and two years of tax planning and really looking at their retirement and cash flow projections so that we can make sure their distribution plan is built out and that they have the right money in the right buckets to be available when they need it.

And of course, retirement roadmap, we're more focused on, are we saving enough for retirement? Are we going to be ready whenever the time comes? We're really hoping that we can retire at 64 or 66, or whatever. Then we're just building out projections, and we're talking about when they should claim Social Security. And are their assets positioned in a way that is going to be good for whenever they are set to retire? So it's more planning for retirement, and navigating retirement is more, "I'm in retirement, and I need to do all the things to make sure that I'm optimizing all of my options."

And the core financial plan is more just, typically, it's a younger person. They are not thinking about retirement. It might be a family, a couple. And so, a lot of times, we're just looking at the basics. So, do you have a 401(k)? Are you at least saving as much as the employer match? Are you eligible to save in a Roth IRA? Do you have a good asset allocation? Are you too conservative for being so young or too aggressive? Do you need to do education planning for children? Do you have disability insurance? Things like that that are really important when you're considering those younger working years and making sure they have all your bases covered.

Michael: So, how do these different packages price? Where do you ultimately set the fees on these?

Melody: That's great. So we actually did a study of...because we were originally hourly with a lot of our engagements, and we did a study of what the average price was for each of these packages. And so we were billing hourly, and eventually, people just kind of really wanted to know what's the price and they didn't want to be on the clock, if you will. And so we priced the core financial plan at $2,650, and the navigating retirement plan is $3,250, and the retirement roadmap is $3,725.

Michael: Okay. And those prices, for you, come pretty directly from, when we were hourly, we were doing them repeatedly, we were really good at tracking our time. So we know how much time it takes, and therefore, we price them based on the amount of time it takes.

Melody: Right, right. And some of them are discounted, because obviously, there were times when we would have a retirement roadmap where someone had 20 different investments. So we were really looking at the average. Sometimes somebody would only have 1 retirement account. And so it was really easy to do theirs, whereas the other was really intensive.

Michael: I feel like there's a lot of advisors that have some range their planning fees or, "Come in and tell us about your situation, and we'll craft a quote for you. We'll estimate the time it's going to take and craft you a quote." And I feel like you've taken a little bit of a different approach by saying, "No, we're just going to articulate 3 packages.

So I guess, just talk to us more about that evolution of how you got to a point of just saying, "We're going to have 3 packages and a fixed price for each," instead of saying, "Come in and tell us about your situation, and we'll give you a quote."

Melody: Sure. I think one of the things I always try to do when I can is take a step back and think about, if I am purchasing a service, what is important to me to understand? And one of the things that was always very difficult to explain is somebody would call and say, "How much does it cost to work with you?" and, "I'm getting ready to retire, and I really need to know which pension option to take," and things like that. Well, for me, I would want to know how much that's going to cost. I wouldn't want the answer of, "Well, we're really not sure. We need you to send in all of this data to us, and then we're going to analyze it. And then we can give you a quote after we have a 'get acquainted' meeting with you."

And that just sort of lengthened the onboarding process. It kind of stalled it, if you will. And so we bought in to sort of some lean principles. I don't know if you're familiar with the lean manufacturing principles, but really just trying to take out steps and unnecessary hurdles and roadblocks. And so I think, once we sort of bought into that concept, we started going through all of our workflows and all of our services and everything and trying to find ways to streamline and make it easier for clients to understand and everything to be straightforward. It was also very difficult for our team to be able to take those phone calls if they were not an advisor to really handle them in such a way that they knew, "Okay, this is what Melody would say," or, "This is what Nick would say if they were on the phone. This is kind of what this person needs."

And instead, I find that, at least for me, I love being on my phone or my iPad at 10 p.m. researching things, seeing this description of these services and saying, "Yes, retirement roadmap is exactly what I need," and then go to schedule an appointment right then on somebody's Calendly, pick a date and a time. It really leaned our onboarding process, and most importantly, it was just much clearer to the client what we were going to do for them and how much it was going to cost.

Michael: And do you worry that there are people who are going to come, see the stuff on the website, and just walk away because they're sticker-shocked or they're not used to how much it actually costs to get financial advice and that you didn't have an opportunity to meet with them and kind of explain the value and make your case?

Melody: I used to. I used to worry about that. And then I sort of...I don't know if I had an epiphany or what, but I was just sort of, there's plenty of financial advisors out there. And if those people want to really go through jumping through all the hoops of explaining why a fee-only financial advisor, a certified financial planner with 20 years of experience is valuable, then they can do it. But I just wasn't willing to do that anymore. I think when we did this too, it was the leaning part was trying to get rid of tire kickers and not because we don't care about people being educated about the importance of financial planning, but it's going to have to come outside of our website. It's not going to be... we're not going to be trying to persuade someone that financial planning is important on our website.

And so we're going to be parts of the FPA and NAPFA, the educational pieces of those, to try to get the word out. And the CFP Board is doing a good job with that as well. Just a lot of people trying to promote financial planning and the difference that it can make. But I had to get to a place where that wasn't going to be my focus with my website. When people come to our website, they can self-select. If they didn't see the value, if they got sticker shock and they researched and saw how much a financial plan engagement typically is and they moved on, then I have to be okay with that, because I hate sales, quite frankly. And I just didn't want to try to do that dance.

Building A Prospecting Process Around Ideal Clients [20:36]

Melody: Now, if I were hungry, like early on in the business, I was more of I will do anything for anybody, and I will try to convince them of my value. And I talked more about what I didn't do than what I did do, which was a terrible mistake because then people said, "Okay, well, what do you do?" I don't charge commissions. I don't sell products. I was very focused on those things instead of just talking about, "I help people retire. I help people find a much more peaceful place with money." I was focused on trying to differentiate myself by talking about what we didn't do. And now, I don't do that so much.

And so once we kind of broke away from that whole "who we're not" to "who we are," then I think that that started to attract more clients to understanding, "Okay, their value is they're committed to helping people succeed financially. And they do it in a way that tries to promote the client's best interests.

Michael: I'm fascinated by that shift. What led to that transition? Because I feel like there's still a lot of advisors out there that lead the way that you were leading, right? We don't charge commissions, we don't sell products, all those distinctions that you were making.

Melody: Right. One of the things, I think, personally, to me, again, I try to put myself in the client's position, but anytime I'm in front of someone who seems very hungry for a sale, I'm very turned off by that. And it seems like I have clients that naturally gravitate toward me because they're very similar to me. So they read my website, and they hear the way I present things. And so it tends to attract the people who are similar to me. 

Michael: So, what was the transition from talking about the things that you don't do to the things that you do? What triggered that change?

Melody: Yeah. Going through the process of knowing I was hungry for a sale and on a roller coaster in terms of revenue, but also recognizing that if I were going to work with a client, that it was a 2-way street. It had to be something where I could benefit from it and they could benefit from it. I could enjoy the engagement. They could enjoy the engagement. It wasn't one-sided, and it wasn't just about me making a sale or adding a client under my belt. It was really about the process and the relationship.

And so once I started seeing that the relationships were what were really important to me, then after that, once a client came in, if they were really not a good fit, it was very easy for me to say, "I really don't think that I'm the best person to serve you in this way." And then I would redirect them to one of the "find an advisor" sites that I felt they could find someone to meet their needs. But even though I was hungry, I didn't act hungry. I was very selective about who I wanted to work with. And so that kind of made the transition, I think, a little bit easier.

Michael: So I'm fascinated by this dynamic of sort of the things that we do when we're hungry, hungry for a sale, just hungry for clients and revenue, that's not even necessarily about a product sale thing, there's the things that we do when we're hungry. I stretched a little more for prospects. I'll entertain the tire kickers because I want to pull a few across the line. I'm willing to have more of a back-and-forth discussion about my fees because I'm just trying to get someone across the line. And then there's the changes that come when you're not as hungry anymore. I don't mean that in a bad way. We don't still want to grow or move forward.

There's not the same pressure there. And it goes from "I'll talk to the tire kickers because I might win some" to "I just don't really want to talk to them anymore." If you don't value what I do, I'm just not going to talk to you. No, my value is this. And if you don't agree that that's my value, that's fine. Just move on. I don't need to spend my time with you convincing you of my value. I'll find other people who appreciate my value.

Melody: Right. And we're in a unique market in that we don't advertise other than our website. We don't network necessarily. I did a lot of those things when I first came into opening my business, and I kind of made a splash. And I came back to my hometown and opened it. I was 25 years old when I joined the Garrett Planning Network, launched my own practice, and I thought I was crazy.

I realized that a lot of the clients that I was serving, they were finding me through the CFP Board site, FPA, feeonlynetwork.com, Garrett Planning Network, NAPFA. And so I wasn't having to do a lot of that myself. And so that was kind of a shift too in that I don't have to be hungry. I just have to have a really good process. I have to identify who is the person that I want to serve, what type of person are they. I have to be able to identify them quickly, and then I have to do a really good job for them. So it was every time I met with somebody that I really wanted to work with, I would always follow that up with a personalized handwritten thank you note. I would make sure I documented my notes really well so that if they did come back, which I hope they would, that I remembered every little detail about them so that they wouldn't have to repeat themselves.

And then, at the end of the engagement, I always ask them, what could I have done better to make this a more meaningful process for you? And I was very candid and open with just that feedback and trying to be transparent because I really wanted to improve. And then I would follow that up again with a handwritten thank you note for just trusting me to help them with their financial decisions. And so just repeating that process over and over and getting really good at that, I think I started building confidence and not trying to do all the things, market, be in the yellow pages at that time, social media now. I wouldn't put a lot of effort into those things. But I am in a different market and that there aren't as many fee-only financial advisors, CFPs in my area.

And so I just feel very lucky. I know a lot of other advisors do not have that same situation, but it was really always up to me to screw it up, basically. It's just kind of the way I tell my staff that too. It's up to us to screw it up. Most of these people, if they come to us, they've already read their website. They've already self-selected. They already know that this is something they're really interested in pursuing. And there's not that many people in my area that do this. And so it's kind of on us to screw it up once they get in the door, if we feel like we can add value to them.

Michael: So, in practice, how do they find you? You've mentioned sort of internet and web searches, you've mentioned some of the "find an advisor" platforms. Were there particular "find an advisor" platforms that drove most of the growth for you, or does it come more directly from people Googling financial advisor near me, and you come up on that list? What's actually brought the business in the geographic area that you're in?

Melody: Yeah. So NAPFA was probably one of the primary websites that our clients would find us earlier on. And now, we do get inquiries from feeonlynetwork.com. On the Calendly page, we have some very pointed questions that just say. "We understand your time is valuable, and our time is valuable too. And so we really want to be prepared for your meeting. So please share anything that will help us prepare. How did you find out about us? What city and state are you located in? And do you have any deadlines that you need to meet?" So because we are a small team, a lot of times, we deliver a deep and wide service model to our clients.

And so we really can't have someone call us today and say, "I need to make this decision by Tuesday." It's probably not going to be something that's going to work well for us. So we want to know that kind of out of the gate. But yeah, we do ask them, how did they find out about us? Kind of, specifically, did they do a "find an advisor" on CFP Board or NAPFA, FeeOnlyNetwork, Garrett Planning Network? And we find that it comes from a group of places. It's not just one, individually, but NAPFA probably is the most popular.

Michael: So, in that delineation, you said there are a lot of clients that may come planning first. Do you still lead with the planning? You charge for the planning, but you lead with the planning. Sometimes clients may even be planning clients for years before they get to the point of delegating investment management. So I guess I'm just wondering then, from a client's perspective, when you were talking earlier about 160 households, is that a combination of the planning and the asset clients, or is that only the AUM clients and then there's another segment that are planning only?

Melody: Yes. So that is the AUM set, and then there's another segment that is AUM only. So when we look at our client households, we can look at those by AUM clients or we can look at those by all clients. And so, at any given time, we probably have about 185 clients that we're servicing at any given time, but a chunk of those are those hourly or project clients, not necessarily hourly but project clients.

Michael: And then, from a revenue perspective, you'd said earlier it was...you were closing in on $1 million of revenue. So, from the revenue perspective, how does the business break out now between the AUM side and the planning side?

Melody: That's a great question. I was actually just pulling up my QuickBooks to look and see what the breakdown was last year, because it has evolved. We do a lot more work for our ongoing clients, and so we do take on less and less new clients as we've moved along. And as Jeremiah gets up to speed, he's getting ready to start a CFP coursework in March, and so, as he gets up to speed, we'll be able to start onboarding more new clients. But I've throttled growth a lot of times because I want our processes to be really good.

Sometimes we've needed to improve those and take a step back and say, "Wait a minute, we want to deliver an exceptional client experience. And we're not going to be able to do that if we try to onboard 12 clients in a month." It's just not going to happen in a small firm. And we have values, work-life balance, family first. So nobody's staying in the office until 6:00 or 7 p.m. Everybody's leaving at reasonable hours and not working 70 hours a week or anything like that. So we do have to throttle growth quite a bit because of that.

Michael: Sorry, so then I just want to come back. So, how does that break out in practice from a revenue perspective when you're trying to manage the relative load of these?

Melody: So 10% is financial planning, new financial planning work, or ongoing financial planning work. And then the other 90% is due to our AUM service wealth management.

Michael: Okay. So AUM has become the driver economically at this point.

Melody: Right.

Launching A Firm As a Young, Fresh Advisor [38:56]

Michael: So, then, take us back, historically, for the evolution of the business, because I know you did not start this way, thus, kind of the discussion or introduction I was giving at the beginning here. So, what was the advisory firm when you originally launched? How did it start?

Melody: That's a great question. So I always loved the topic of money. It was a big stressor in my house growing up. And so when I got into high school, I got involved with the high school bank and learned more about finance, ended up getting a job at a bank, and went to college thinking I would be a banker. About midway through college, a professor told me about the CFP Board program, and it was new at that college. There was only 2 schools in the state that offered it, Western Kentucky University and Morehead State University. And I was at Morehead. And he told me about the NAPFA boot camp training that you could write an essay and win a scholarship to go to a NAPFA conference.

And so the weekend after September 11th, I had never flown, I flew to Chicago to go to the NAPFA conference and learn about financial planning. And I just sort of fell in love with the profession. I love just the transparency of the fee-only profession. I love that they did not want to be salespeople, that they really, truly wanted to be advisors to their clients and act in their best interest and help them. That just really resonated with me. And so when I came back from that conference, I sent out emails to all the fee-only planners in Kentucky and just said, "I'm in love with this profession. I really think this is what I want to do. I graduate in May, so I have about 6 months to intern. And so I would love an opportunity to know more about your firm and to see if I could help you in any way."

Michael: Did anyone reply?

Melody: Yes, actually, all 3 of them did. So, as you know, there is a shortage of...

Michael: All 3 of them. You sent an email out to all the fee-only planners in Kentucky, and all 3 of them responded.

Melody: Yes. So they were NAPFA members. And so yeah, they all responded and said, "Yes, we would be interested in talking with you." And so I had a couple of phone calls, and the Lexington office was the one that made the most sense because it was closest to my house. And so I ended up getting a job there. And I grew up poor, so working full-time and going to school full-time. I had 3 jobs. So it really wasn't that big a deal to me. But I loved it and definitely wanted to pursue that profession.

So I studied under that CEO, and I was hired on when I graduated. And then I got recruited by a trust company, and I went there and I learned a lot more about the investment management side. So the other firm was much smaller. I learned a lot about financial planning. And then I learned about how investment management and financial planning sort of dovetailed at the other firm. And then I remembered meeting Sheryl Garrett back at that boot camp conference, and I would always say, "Someday I want to be a solo. I want to serve middle America, and I want to do this Sheryl Garrett thing."

And so my husband and I...I got married in between there. My husband and I talked, and we just really felt like we probably wouldn't have children if I kept commuting back and forth to this job. My kids would be in daycare from 6:00a.m. to 6:00p.m., and that just wasn't the kind of family lifestyle we wanted. So at 25 years old, I told my boss that I was considering opening one of these hourly financial planning firms and joining Garrett Planning Network. And the amazing thing is he was just very encouraging, and he said, "I wish I had started my practice sooner. And you're an amazing employee."

Michael: I thought he was going to say, "What are you doing, starting a firm at 25? You got to stay here and work here 5 more years. Then you can go out on your own."

Melody: Yes. Thankfully, he believed in me. I had worked with his clients directly. He was the CEO, and I was working with his clients directly because he had a lot of other things to do. And so I was primarily servicing them. And thankfully, he said, "If this is what you really want to do, I understand. Family is important to you, and you want to move back to your hometown. And if it doesn't work out, call me. We'll hire you back."

Michael: That's nice. So there's a safety net, as it were. "Go, try it out." The "worst case scenario" is you'll go get another job again for a pretty solid salary, a firm that said they'll give you a job if it doesn't work out.

Melody: Right. They'll hire me back because I worked hard for them, and I had promoted and I really loved it there. It wasn't that I didn't like the job or that I was wanting out of there, or anything like that. It's just I really felt like this was kind of a calling that I really needed to do this, and it was going to lead to the type of family lifestyle that I wanted.

And I was hourly only. I was in the basement of a real estate building, a walkout basement. And these clients would come see me from Lexington, which is, I'm in Mount Sterling, about 40 minutes away, small town, a population of about 30,000. And I started cutting my teeth on doing more individual financial planning with the power of the Garrett intranet and the NAPFA intranet. Every time I would have a question, I could post there. And there were just a lot of people who invested in me. Still kept in touch with all my mentors and people I had met from my previous jobs and just started growing from there. And the first couple of years was really hard.

Michael: Just out of curiosity, what were you charging back then?

Melody: So I think I started out at $120 an hour. I think that was my going right rate in the beginning.

Michael: Okay. So, how long did it take to get back to what you were making at the trust company?

Melody: In the beginning, it was definitely a lifestyle practice. My husband and I didn't have kids yet, and we didn't have a ton of debt or anything like that. And so I'd spent a lot of time investing in networking and marketing and working kind of hours that I wanted to work because it was by appointment. So I didn't have a 9-to-5 job. And I answered a lot of media requests, which also helped me get quoted in "The Wall Street Journal," "USA Today" magazine.

I was serving on the Kentuckiana FPA board as the media relations director, and so I would send out these requests to our membership. And then, if they didn't answer, then I would answer to try to help the journalists out. And so that ended up leading to me being able to get quoted in several of these publications, which was the timing could not have been better because it was my first year. But as far as how long did it take me to get back to making what I was making at the trust company, I would say it was 5 or 6 years. Because, really, I moved my office. I kind of reinvested in the business. In the beginning, I think, I took a $500 a month salary or something like that. It was nothing.

Michael: Was it just sort of direct hourly, literally, just come on in and ask your questions, and I'll start the clock and bill you at the end? Or were you already doing these project fees, planning fees, "I'll quote you a flat fee for the plan," kinds of options?

Melody: Yeah, it was definitely comprehensive financial planning and project planning. And so most of these clients would come in, they would describe what their questions were. I would tell them what services that they needed in order to answer their questions. So you need a Social Security maximization analysis. You need a retirement projection. You need an investment, current, and proposed portfolio kind of thing.

And so I would estimate the number of hours that that would take. And generally, it was between 10 and 12 hours. Most plans were probably between 10 and 12 hours. So I would say $1200 to $1500, a client, and then the occasional $2,400 client or $3,600 client, depending on how much work they needed. And then, of course, I had repeat clients that were coming back for checkup appointments in between projects.

How Melody 'Right-sized' Her Advisory Firm Fees To Align With Her True Value [41:27]

Michael: So then, what shifted? Because obviously, today, you're not still running this hourly model. You shifted to assets under management. So, what changed, and when did it change?

Melody: I had a mentor who was my senior planner at a previous firm, and he kept telling me when I was going out on my own hourly, he's like, "That's great." But I really think you're undervaluing the advice that you give. And so I sort of approached it like it was a public service that I really didn't require being paid a lot so I could do as much work as I wanted to. A lot of times, I wouldn't bill for the full amount of work that I did because I'm sort of an above-and-beyond kind of person. And so sometimes I would do a few things extra that they really didn't ask me to do, but it was building goodwill. And I knew it would help them. And so he told me, "I really think you're undervaluing the service that you're giving." And I really didn't believe him because he really wanted me to offer AUM services, and he wanted me to charge what the going rate was for that, which was 1% or close to 1% of assets under management on a sliding scale, of course, once you reach certain levels.

And I was kind of closed off to that in the beginning. And then I started having more and more clients that I noticed were not implementing their recommendations. They started leaning on me a lot more for help with implementation of recommendations to where it became almost like I was doing more quarterly reviews and almost helping rebalance things for them and open accounts and do transfers for them. And so I was just doing a lot of the things that an investment management firm would do.

And when I looked at one of the clients who I had served for almost 10 years and they had paid the rate that I charged, happily, they paid me probably $2,400 for the first plan. They probably paid me $1,200 a year after that to do updates to their plan, help them with rebalancing. And then, when the gentleman retired, he rolled over $2 million and their fee was $1,200 for me to help open his account at Scottrade, help him place the trades. He logged in on my computer, and I walked him through every step of getting himself invested, all the things that I did. And when I finished that plan and they sort of walked out the door, I remember kind of putting my head down and putting my palm in my face, and saying, "Okay, I kind of get what my senior planner is trying to tell me now."

I did a lot of work. That's a lot of liability for helping someone roll over a $2 million plan. I ended up pretty much doing all the trades with him, and he would not have known how to do any of that had I not been sitting beside him. And I am not getting paid anywhere close to what anybody else in the industry would get paid for doing this type of work, nor when I was getting paid at the previous firms I worked for. So I just kind of had an epiphany that for anybody who wanted to be an ongoing client and they wanted investment advice regularly, quarterly, or semi-annually, if they wanted me to review their portfolio and help them rebalance it and do the things, then they were going to have to be an investment management client.

Michael: And what was the charge for it? Were you going right out with 1%, or were you trying to change the fee so it wouldn't be as far off from where you'd been on an hourly basis?

Melody: That's a good question. So I remember, I believe I had 55 clients at that time, what I considered ongoing type clients that I proposed this new relationship to. So it was 10 years into my business, and I just explained, "This is how I'm going to operate now. I'll do retirement projections for you. I will do insurance analysis and review and tax planning with you for an hourly fee if you want to just keep those services. But if you want this investment advisory service, then this is how it's going to have to be, basically." And I was scared to death, and I had prepared myself that probably I was going to lose 50% of my clients.

And I just kind of did the math, and I was like, "Well, if this 50% signs up and I'm managing their investments, then I will almost make the same money. So it's not that big a deal." Although, it was a big deal to me because the relationships that I had with those clients were really important to me.

Michael: That's a striking shift though. If I'm mathing that, what that basically means is the average client was going to have a doubling of their fee, such that, if half the clients leave, you actually still end up with the same revenue. But the shift was that dramatic.

Melody: Right. It was huge to me, and I was scared to death. I remember still the feeling and just hoping that these clients wouldn't be too mad at me. And the amazing thing is I think all that maybe...it was three or five. I can't remember the exact number now. But all of them signed the agreement to become an investment management client. And I did start out at 0.90%, which my senior planner said was crazy. He's like, "If you look at all the studies, if you're charging 90 basis points, everybody knows, everybody already decides in their mind it's 1%. They've already decided that they've given up 1% anyway, so you might as well just charge 1%." But I did 0.90% on the first, I don't know, 500,000 and 0.70% on the next 500,000 and maybe 0.50% on anything above 1 million or something. I can't remember the exact parameters, but yeah, it flew. It flew a lot faster than I thought.

Michael: So if the math was that, if half my clients leave but the other half take the new fee because it's basically double the fee, my revenue will be the same when you roll this out. And instead, 90% to 95% of your clients stay. So basically, your revenue doubled overnight.

Melody: Yes. Yes, it was great.

Michael: So, how does that feel? On the one hand, I got to imagine it's, "Yay, all of a sudden, these economics are really good." And then, on the other hand, there's, "Wow. You mean I probably could have been charging this a while ago? What have I been doing to myself for the past couple of years?" How did that process for you?

Melody: Yeah. So something I left out in between there is I had 2 babies. So when I was 32, I had my daughter, and when I was 35, I had my son. And so that was 2012 and 2015. So before 2016 is when I rolled this all out. I think a lot of the driving force was how hard I was having to work and how I was really worried about where the next plan was coming from. And I would find myself up till midnight working on plans and had these 2 babies at home. And I was just, sort of, I can't operate like this anymore. I need to be charging what I'm worth. And yeah, I used to, when I didn't have a lot of obligations and bills and kids, I could do things more charitably. But now, I've got to get serious.

If this is going to be my business and I'm going to help provide for my family, and I don't want to be working all the time because hourly work is hard, let's face it, it's hard to bill 20 hours or 30 hours a week when you're actually running the business and you're the janitor, the bookkeeper, kind of everything. And so that also was a prompter to say, "I'm a mom now, and I'm going to create a family first," work-life balance. And that's going to be one of my culture values, and it made it a lot easier to make those kind of tough calls like that. It was still a very different place. The next day when I walked in and it was, "Okay, so I guess I need to make some phone calls." And so I talked to custodians, and there was just so many things to get in order in a very short period of time to make all that happen.

Michael: So I'm curious of the sequence here. So you went to clients to sort of roll this out and see who was on board. You got the yeses, and then you went out to custodians and said, "Okay, I got to figure out how to implement this," as opposed to, "I'm going to make my whole implementation plan first, and then I'm going to go tell the clients about it."

Quadrupling Revenue In 1st year After AUM Shift [01:02:47]

Melody: Right. So it's kind of a mixture. I had been sort of vetting different custodians because, even though, as a fee-only hourly advisor, Scottrade had allowed me to onboard onto their platform and have advisor viewing privileges, and so that was really nice. And then I had Vanguard advisor viewing privileges where the client had kind of turned on my ability to view their stuff. And so I sort of knew that I already had a big chunk of money in my view that if these clients had on boarded, they were going to want me to manage things for them. And so, initially, it was...

Michael: That's how you knew and had a sense of, "If half the clients say yes and the other half walk, I should still be revenue neutral, because I can literally see the amount of assets that are already there in my advisor view, such as Scottrade and Vanguard."

Melody: Right. I could see a lot of it, and not all of it, obviously, because I let clients keep their stuff wherever they wanted to. When I was hourly advisor, it didn't really matter. But definitely, that made it easier. And so I had some talks with several custodians, and ultimately, I landed on Fidelity. And they wanted me to use a back office team to onboard with them because I couldn't guarantee them that I would have 25 million under management in the first year.

And I said, "I know I will have 15 million under management in the first year. I can't guarantee you'll have 25 million because, at this point, I didn't know how many people would onboard." And so we opened that process up November of 2016. And by December 31st, we had 15 million on the platform. And by June 30th, we had 40 million on the platform. And I don't remember how, it went really fast. It was a very crazy time period. Exciting crazy, not bad crazy. A year later, we were close to 50 million, probably.

Michael: So talk to us a little bit more about just this change. I'm just envisioning, also, by just approximate math of the fee schedule that you were talking about, this is probably $400,000+ of revenue after a year.

Melody: Yeah.

Michael: So, do you even recall, what were you on the hourly before you made this shift?

Melody: So before I made the shift, I was billing out about $100,000, and that was after 10 years of practicing solo, which I thought was really good because I hardly had any overhead. And so I was making a decent living. I was working probably about 35 hours a week, being very flexible with my time because I had my two babies at home, but still not really earning what a reasonable wage would be for how much I was working and my years of experience and being a CFP. And then, a year after doing the AUM shift, yeah, I think that first year, we billed out $425,000.

Michael: So, how does that feel when it's the same clients?

Melody: Well, we did onboard quite a few clients in between there, too, that were new clients. So once they found out, "Oh, she now offers this service."

Michael: So even more. You rolled out AUM, and you got more clients who actually wanted that service.

Melody: Right, right. So that was really nice. So the first year, the revenue went up, between 2016 and '17, 125%. And then, between '17 and '18, it went up 95%. And then it started being 16%, 15%, and 21%. So the growth was huge. Our AUM went up 148% the first year. And then after that, it was 25%, 22%, 19%, 31%.

Michael: So, is there...I just envision this as an epoch change, before AUM and after AUM, two different stages of the business. That's such a dramatic shift to be working, 10 years. And as you know, you'll get to a good income working reasonable hours with a lot of control and flexibility. That's a good living, and I'm assuming dollars go pretty well in Kentucky to spend that.

Melody: Oh, sure, yes.

Michael: But then you changed your fee model, and within a year or two, the revenue quadrupled.

Melody: Yes.

Michael: So, how do you think about that reflecting back to what you'd then been doing for the first 5 and 10 years? Was that the journey you had to go through? Do you wish you'd done something differently in retrospect? How do you process that significant of a change?

Melody: Yeah. I really did not or still do not wish I had done something different. I think the 10 years that I invested in those client relationships were what brought them to a place where they trusted me explicitly. And it made it so easy to roll $40 million onto the platform in the first year because of those relationships. And I wasn't hungry and forcing AUM down their throat right from the beginning. And in fact, I told them, "I think you can do a lot of this stuff on your own. I think we can work together and make this happen."

I think, eventually, some of them got to a place where they're like, "Can't you just do this for me?" And at that time, I had young kids, and I was like, "No, I can't. I don't want to be tied to my desk." I remember saying, "I don't want to be tied to my desk from 9:00 to 5:00. I have to be there when the markets open," and I don't want to do that. I like by appointment only.

Michael: That was the fear was, if I do AUM, I have to be responsive to whenever they need a trade.

Melody: One hundred percent. Not just whenever they needed a trade, but whenever they needed to talk. The market's going down, they're fearful. My service model would have been you have to be there. Somebody has to pick up the phone every time it rings. And just it was me and a part-time person. And if I were in a meeting and the part-time person was at lunch, that wasn't a good model to me. That service model did not...it just didn't meet my standards.

So I hired an office manager. Even whenever I was billing out $100,000, that was the year...the year before that, I hired an office manager. And so I pretty much gave my salary to her, and that was my investment in the business. I just had a lot of faith in her and her ability to run the office efficiently, to be available. She helped run my life because I needed somebody to run personal errands for me. I needed somebody to just help me plan birthday parties for my kids. There were just so many things to do, and I needed.

And so in order for me to leverage my time, I had to outsource as much as I could and get it off my plate so that I could invest in this business. So I hired staff before I was ready. I hired Nick, who is now a CFP and a partner. He made partner this year. And so I hired him in 2017, and the goal was for him to become a CFP and an advisor. And that was before I was billing quadruple.

Michael: So I guess, then, talk to us more about the mentality of how you get comfortable with these hires when you're still trying to draw out enough dollars from the practice for yourself.

Melody: That was a leap of faith, I think, I felt like, as long as I have the right people on the bus in the right seats, and they had the right character. One of the things when I would interview, I would really be looking for work ethic and character, a lot more so than a lot of the technical things, because I felt like I could teach them kind of how I wanted clients to be served, and I could teach them how to do paraplanning work, but I couldn't teach them to be a good person. I couldn't teach them to have integrity or a strong work ethic. They had to embody that before they came in the door. Otherwise, I wouldn't have trusted them with my clients.

And bringing on employees was kind of that leap of faith that they can also help me service these people. They're good people. They're trustworthy people. They have integrity. They have demonstrated leadership abilities. And so bringing them on before I could really pay myself a good wage after that point. My husband and I definitely had the conversation. "Should you do this?"

Michael: So, what changed from your perspective as you added team, what changed in your time or what you were doing?

Melody: I really understood why people say hire people before you think you need them, because it is very, very difficult to train and serve clients and run the business and all of the things that you need to do. And so, definitely, my time was very divided. I was a mom, a wife, I was also an elected official in my town, and I was trying to train employees, new employees. So I felt very stretched to the max, basically, to make sure that my service standards were met for our clients, that our employees were happy and were learning and growing, and that my family was taken care of, and also that I was fulfilling my role as a county commissioner.

Michael: So, does it basically mean...as you're describing it, I feel like you were feeling stretched, you hired a team, and it got worse.

Melody: Yes, it definitely got worse before it got better.

Michael: Then you were stretched, and you had to train them.

Melody: Right. Then I felt guilty because I didn't get to spend as much time with them as I wanted. They had to figure things out on their own, which I had to figure things out on my own. So part of me was like, "Figure it out. I had to." But then the other part of me is like, "That's not a good leader. I really should have made more manuals and written things down and have more standard operating procedures." And so then, as I taught them things, then I started requiring that they develop standard operating procedures and wrote things down so that any future hires would have a leg up on that. They would not have to go back and have the same experience.

But fortunately, both of those employees are incredible people, and they completely understood, and they were right there digging in the trenches with me. So they didn't get too perturbed with me, running every different direction and just giving them half sentences.

Michael: So, how long was it until you actually felt the lift, the relief?

Melody: It was probably when a couple of years in, and Nick became Series 65 licensed. He got a CFP. He was able to meet with clients for simple review meetings and basic financial planning questions on his own. And that was when...this is why I've been doing this. This is why I've been investing in him. It was sort of...and the practice was that way too. When we look back at the revenue growth or whatever, it just kind of reminds me of an investment, right? So you put some money in, and you hope it will grow at some point. So my money that I put in, in the beginning, was a small part. My real investment was my time and my energy and building these relationships.

And then, eventually, when the practice transitioned and all these clients trusted me enough to take care of their money for them, then the investment started paying off. And then I started reinvesting into employees, and then that started paying off. So it felt really good to see it pay off but also to feel the weight of being able to delegate things to them and cheering them on to success, to see that their confidence was growing, and they were becoming more capable and knew they were making a difference, not only for Townsend Financial Planning but for our clients. Because our clients were so complimentary. "Melody, you've hired a great team. You can tell they really care. They always answer the phone." So those were some really cool things to see the investment paying off as we went on down the line.

Michael: How does the team process work with the clients at this point as you continue to grow?

Melody: So our clients definitely know that they have a team servicing them because they are going to get contacted by everyone on the team at some point or another. And so we've never siloed it out and said, "These are Melody's clients, and these are Nick's clients," or whatever. We do have an advisor point of contact based on our segmentation internally of who is what level of client as to who serves them. And so a lot of our 5-star clients, I still am the one that meets with them primarily for their checkup appointments. And they're the biggest book of the business. They're a huge chunk of the overall business.

And then other clients who have had Nick sitting in on meetings with me or Jeremiah sitting in on meetings with me, sometimes they will be willing to meet with them individually over short questions if they can't get on my calendar. And Nick now brings on clients kind of start to finish on his own. One of the reasons our revenue jumped so high at the end of the year was he brought in a $6.5 million client from our Louisville market that we thought was a planning-only client that ended up wanting to be a wealth management client and asked to talk about that after we finished their plan. And so he did that from start to finish without me talking with them.

So that's kind of when I knew we've made it. Nick can bring on huge clients, and I don't have to touch them. And I did review their plan before he presented it to him just because he told me, "This client's net worth is 10 million," which is, we have a few clients that are net worth of 6 million, 7 million, 8 million, but not a new client coming in the door. These are clients that I had worked with and watched their net worth grow over time.

How Townsend Financial Planning's Fee Structure Continues To Evolve [01:06:06]

Michael: So, have fees continued to evolve for you?

Melody: The AUM portion has definitely changed and evolved because we used to have different levels of service. And so we had many more. I think we had one that was anybody less than 500,000, anybody less than a million, anybody over a million. And so we had three different kind of you get different services based on which one you fall into. And then we just went to below 750 and above 750. Again, that was a leaning thing. That was the ease of explaining it to clients. That was the ease of writing proposals and saying, "This is the services you get based on how much we manage."

Now, we charge 1% of assets under management for clients with 750 and below. And then we're on 1% and a sliding scale for clients that are 750 and up. So it has...I did buy into the 1%, but I also know that we offer our full suite of financial planning services included in that. So it is a true wealth management fee, not just an investment management fee.

Michael: So, did you reprice existing AUM clients into 1% as you went there, or was that a new clients-only existing or grandfathered thing?

Melody: For the most part, we left all of our grandfathered clients on their same fee schedule. So we have rewarded some clients that have a long longevity with us, they have a reduced planning fee schedule. For example, the client who was paying $1,200, who went to paying 90 basis points, then I gave him a 15% discount, I think, when he hit his 15th year anniversary with us.

Michael: So help me understand that conversation, though, because it's just such a good case-in-point example. This is literally a client with a 15% discount on 90 basis points on $2 million. He went from $1,200 to $15,000 as a fee.

Melody: Yes. Actually, I think it went to more than that because I think they brought more money over under our management after that.

Michael: So you 10x-ed your fee, and they consolidated assets with you.

Melody: Yes. Yes. And so, now, I think...

Michael: How does that conversation go?

Melody: I think we manage about 5 million for them now.

Michael: So, how does that conversation go that you're trying to break to a client that you're moving to an AUM model and the fee is going to be 10x?

Melody: Sure. I was already certain that they were not going to hire us, and I had resigned myself to that fact.

Michael: I'm just going to tell them, and then they're going to fire me.

Melody: Right, exactly. I sent out the letter, and I just fully expected. This was my epiphany client, and so I just have to be willing to lose them even though I love them. They're amazing people.

Michael: They just accepted the approximately 90% discount, as long as you were willing to give it. But they were basically fine to pay you the full rate in the first place.

Melody: Right. They never quibbled over their invoices. When I was an hourly employee or hourly planner, they were great.

Michael: Because they knew they couldn't get that deal anywhere else.

Melody: And so I just kind of got more and more confident that this was worth it. And when they said that, I was just like, "Well, that solidifies it." They knew they were getting a good deal. They paid what I asked them to use. I can't blame them, but I'm not going to do it anymore.

Michael: They gave you everything that you asked, yep.

Melody: They did. And they were loyal and complimentary and appreciative. So it was a good relationship.

What Surprised Melody The Most On Her Journey? [01:10:30]

Michael: So, as you reflect back on this journey, what surprised you the most about trying to build your own advisory business?

Melody: I don't think I could have anticipated the roller coaster feeling that I had in the first probably 3 to 5 years. Although, I was in the black my first full year of practicing.

Michael: Not a lot of revenue, but not a lot of expenses.

Melody: Right. I think I billed about $30,000 that first full year, and I think my expenses were $28,000. And so I think I netted $1,400. And the next year, I netted, I don't know, $26,000 or something like that. So it just started growing. But I don't think I anticipated just how long it would take and how long the roller coaster ride would be and how much I needed to invest and reinvest my time into the business for it to be successful. I think the mental ability to fight the mental fatigue that constantly working the financial planning puzzle, I always thought, being physically tired was exhausting at the end of a long workday, but mental fatigue was intense because I was doing every plan and the bookkeeping and the marketing and everything.

So I just really stretched my mind constantly. There were a lot of late nights, a lot of, "Is this really what I want to do?" kind of questioning in the beginning. For sure, it was a tremendous amount of money invested in employees, a tremendous amount of money invested in coaches and advisors to help me learn how to do things faster instead of trying to figure it out all on my own. And so those investments were surprising. I didn't know I would have to pay that much for consultants, but they definitely paid off.

Michael: On that end, what were the coaching or consulting engagements that had impact for you?

Melody: Definitely, when I brought in employees, I really wanted to understand everybody's strengths. And so I brought in a firm named Q2 Consulting, and Coleen there was just fantastic in working through our Clifton StrengthsFinders and also our Kolbe scores, just really helping all of us understand what we were really good at, what our natural working styles were. And that really helped our team be very cohesive because we understood each other.

We got to know each other on a really deep level. We also read books together about how to communicate, because we all don't share the same brain. And so we read a book called "It's HOW You Say It: Effective Business Communication Skills" and "Lead From Any Seat," how to lead no matter which seat you're on. So we invested a lot in those things.

A lot of these coaches told us about that. I talked to the coaches a lot about how to delegate, how to build career paths, paid FP transitions to work with me to value the business and make an ownership pathway for our financial advisors that wanted to be employee-owners. And then just spent a lot of time fellowshipping with employees, so taking time to go and do canoeing down the river. And yes, we did strategic retreats and things like that, but we also just try to make it a point to break bread together on at least a quarterly basis, just make time to play games that are conversation starter, games to learn more about each other. And so we did a lot.

We also got to know about the EOS system. which has just been a game changer for everyone. So there's just a lot of different ways to approach how to do business and trying to keep all the team together and making sure everybody feels on the same page and everybody feels valued and having one-to-one meetings once a month to say, "How can I make you successful this month? How can I make your space more comfortable? What do you need from me to make sure that you can get your things done this month?" And just listening and trying to implement their suggestions.

The Low Point On The Road To Success [01:15:08]

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

Melody: I would say the low point would have been right before I decided to offer investment management, because I was getting really tired. I had 1 kid, with another kid on the way. I was an elected official. I was sick in my pregnancy for about 17 weeks. And so I was really struggling, and I was like, "This is terrible. I can't believe I've opened a business on my own." Because if I'm not there, then nothing's getting done. Even though I had a receptionist that was taking messages, she still couldn't do financial planning work, and she still couldn't deliver advice. And so I think, during that timeframe, I was just like, "Have I made the right decision?" Because I was spending more on expenses. I was throwing money at the problem, trying to make sure that everybody was taken care of, and having more outsourcing things done because I wasn't able to do it. I was puking my guts out for 17 weeks. So I think that that and just being a mom and having the sleepless nights and trying to come to work the next day and realizing that it was all on me, that was probably the low point, for sure.

Michael: And is that part of what drove the change to AUM and the expansion of the team, was feeling that pressure and trying to rectify that?

Melody: Yes, 100%. I knew at that point that I did not want to be a solo lifestyle practice, because solo lifestyle practice was great until I was sick and until I wasn't able to have the clarity I needed because I was so tired from being up with my baby. And it was at that point that I was like, "I need other people to help move this thing forward and keep things firing on all cylinders kind of." And so growing the team became a very real goal, and having an ensemble firm became what my target was at that point. It was no longer, "I want this lifestyle practice so I can have a lot of flexibility and be a mom and go to homeroom, mother kind of events." It was, "Okay, I've got to get serious. I've got to build the business. I need other people helping in digging the trenches so that if I am out of the office because I'm sick for a week, somebody else is moving things."

Advice Melody Would Give Her Younger Self [01:17:41]

Michael: So, what else do you know now you wish you could go back and tell you 15, 20 years ago in the early days? What would your future self mentor messages be to prior you now?

Melody: Sure. So we talked to a lot of people at conferences, and some of the same things I hear over and over is just the unwillingness to delegate and give ownership and autonomy to their team. And I admit that this was really hard for me in the beginning. And so I would probably have delegated even more than I did in the beginning. I just felt like nobody could do it as well as I could, and I wasn't very good at explaining what was in my brain and how I wanted things done in the beginning. And so I would have really worked on that. I would have really been willing to give my employees a lot more autonomy, which I do now.

I'm definitely not a micromanager. In fact, they probably think I don't check on them enough in terms of getting things done. If they own it, they own it. And I just sort of had to tell myself, because, in the beginning, I was really afraid of making mistakes. Of course, liability, your name is on the door, what if somebody messes something up and costs the client money? So I had to get a little bit more realistic about that, too, is we're all human, we're all going to make mistakes. Hopefully, they're not mistakes that are so damaging that we can't recover from them. And I would just tell my employees, "Look, if it's a decision that needs to be made, you can't let things bottleneck with me." Because in the beginning, I just allowed everything to bottleneck with me

And of course, things didn't move because there's only one of me and there were a lot of them and a lot of clients. And so just that and definitel

 where, in the beginning, I always realized that I was the leader and my employees were my employees. But there's a part of the book, I think it was in Chapter 1, about changing your perspective, and it talked about how your boss is your customer. And I never saw myself as my employee's customer. But it talked about thinking of your boss as your paying customer, and you don't have to really like her to perform well. So sometimes we don't like our bosses or our clients, but we have to perform well. And if you had your own business, what would you do if you didn't like your customers? Would you stop serving them? If you refuse to provide service, they will find someone else who can. Same with your employer. If your company, through your manager, is not happy with your services, what do you think will happen? They will let you go and find someone else. And so that was a perspective changer to think for my employees and for me to think of.

Michael: Say, from your perspective, though, you're framing this as this is an alternative way for employees to think about who they work for, but you're coming to this from the boss' perspective.

Melody: Right. And one of the things it talked about is in order for them to be successful, as the customer, you have to really tell them what you need. You have to tell them what success looks like. And you have to get it out of your head. You have to write it down and say, "This is what is critical to the quality of our work. This is what's critical to the delivery of our work. And this is how I want you to do things." Because they're not mind readers. And so if I'm going to be their customer, then I have to make sure their service is going to meet my needs, but also, I have to choose a service that I explain and say, "This is what I want you to accomplish for me." I'm the client. So there are so many things in that book and several others that just had some mindset shifts for us. But that was one of them that was really, really important.

Michael: So, for folks who are listening, this is episode 372. So if you go to kitces.com/372, we'll have links out to the books in the show notes just if you don't want to write this down as you're listening from wherever you're listening. So, Melody, what other advice would you give younger or just newer advisors getting started today?

Melody: I would say there are a lot of firms out there that are looking for young advisors who are willing to invest in their education and in their skillset to have the potential to become owners of the firm. There are so many advisors out there that don't have succession plans in place that would love to have somebody who could step up and take the lead on some of the client engagements and become employee-owners. And so I feel like there's a lot of opportunity for young people to go to these owners and say, "Look, I'm invested. I want to be an owner someday." When Jeremiah came in, he said he wanted to own his own business. And I said, "Great, come aboard." Because some people might be a little bit put off by that and be like, "Oh, you're training your competition," and I'll be like, "No." Hopefully, he'll want to own this business someday. So I want him here.

Michael: So you'd advise folks who are listening to have that mentality of don't be afraid to have that conversation early, that that's your goal if that's your goal.

Melody: Right. I think the people who are not going to be put out by that are the people you want to work for. Because the people who are going to hear that information and hear you say, "I want to be an owner of a business like this someday. I want to serve clients in this way someday," those owners that hear that and are inspired by that and think, "Oh, this is a young person that could be part of my succession plan that wants to do this, that wants to be an owner, that wants to invest in their education, get their CFP, become a lead advisor, and wants to learn and grow, that's the kind of people I want to work for me." And if I were threatened by that or didn't want to hear that from them because I feel like some way I'm hiring and training my competition, it's probably not somebody you want to work for because they're probably not wanting to see you succeed.

I want my employees to succeed. I want them to grow. And if that means that it's not here, I hope it's here and I hope I create an environment and a culture where they want to stay, but if it's not here, then I want them to do good work for clients. And I think there's plenty of business to go around that I don't feel threatened. I don't feel threatened by that.

Michael: I guess it's interesting framing that...look, there probably still are some challenges if you say, "I'm coming here because I hope to be an owner someday, and my expectation of someday is 12 months from now that I have my partner off." Maybe problematic. Be careful about the time horizon that you set. But the idea of expressing, "Hey, my long-term goal is to have a place where I can become a partner and an owner at the table," if the firm is really concerned and freaked out about that conversation, that might just be a hint that it's not the right fit in the first place. So that's actually okay. It's weeding out the firm that you probably weren't going to be happy with in the long run anyways if that's really a priority for you and they're really that negative about the possibility.

Melody: Right, exactly. And we embraced it, and it was kind of funny because my office manager actually drew Jeremiah's name for Christmas, because we did a little Secret Santa, and she got him an embroidered shirt that says Creech Financial Planning on it. And she asked me if that was okay, because he's only worked here a year and a half, and she's like, "Would it be okay if I get him the shirt just as kind of this running joke that he's going to own the firm someday?" And I was like, "Yeah, I think that would be great." And so when he opened it, he laughed so much, and it was just a really fun time. So we do hope that he's an owner someday, and we want that pathway to partnership and definitely don't feel threatened by that at all, just more inspired to say there's more young people that want to do this. So if you're a young person and you love developing relationships and solving math problems, I think it's a really great career.

What Success Means To Melody [01:26:37]

Michael: So, as we wrap up, this is a podcast about success, and just one of the themes that comes up is the word success means very different things to different people. And so you've had this wonderful path of building, literally, a million dollar business, a million revenue business. So the business is in a wonderful place now. How do you define success for yourself at this point?

Melody: I love this question. It's a good question, and it's a hard question, because I do think that that has evolved over time. And so, now, my definition of success is that I'm able to help our employees and myself hold true to our values. Because as you grow, there are a lot of things that are pulling you one way or another. And so, to have those bright-line tests of, "This is our culture and this is our agreed-upon values," and just sort of running everything through that value set is something that I feel like we are successful. Watching my employees grow and succeed and build confidence, that makes me feel very successful, just knowing that they know that I care about them, and this is not a competition. I actually want them to be smarter than me, and I want them to be more successful than me. So watching them succeed has been really fun.

And I guess, finally, just knowing that the clients are well taken care of, that the service calendar that we have put out and the exceptional client experience that we want our clients to have is being met, because we know that the outcomes for them are going to be better if we are doing those things. And so success looks a little bit different. Just maintaining an amazing culture, having a growing successful team, and having loyal clients, it just seems to naturally lead to the other things that we want, which is the revenue goals and the AUM goals that are just going to help support everybody's families and lifestyles so that we can continue to do this for years to come, I guess.

Michael: Very cool. Very cool. Thank you so much, Melody, for joining us on the "Financial Advisor Success" podcast.

Melody: Thank you for having me. I feel very humbled to get this opportunity to speak with you, Michael.

Michael: Oh, absolutely. Absolutely.