#FASuccess Ep 427: Finding The Director Of Operations That Can Rebuild Your Team To Get To The Next Level, With Sten Morgan

Resources Featured In This Episode:

• Sten Morgan: Website | LinkedIn
• GoBeElite.com (Includes Sten's "Iterate To Elite" Tool)
• Becoming an Elite Financial Advisor podcast with Sten Morgan
• #FASuccess Ep 210: Growing Your Client Base By Making Advice The “Product” And Quantifying Its Value, With Sten Morgan
• Who Not How: The Formula to Achieve Bigger Goals Through Accelerating Teamwork by Dan Sullivan
• JobVite
• HighLevel
• The War of Art by Steven Pressfield
• 10x Is Easier Than 2x: How World-Class Entrepreneurs Achieve More by Doing Less by Dan Sullivan
• Implementing Client Meeting Surges To Boost Advisor Productivity And Systematize Client Value
• The Iceberg Illusion

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Full Transcript:

Michael: Welcome, Sten Morgan, to the "Financial Advisor Success" podcast.

Sten: Michael, man, good to see you again. It's been four years since we recorded. I looked it up. It's wild.

Michael: It has been four years, almost exactly. And much of the theme around that discussion was growth and really gaining growth momentum, how to really position our value for this ephemeral financial planning thing that's really hard and difficult to explain. What is financial planning? What is the value that a client's going to get? How do you quantify what that value is to show that your value is worth the fees that you're going to charge? And you were on this great growth path for the firm.

And to me, one of the fascinating things about the advisory business overall is, most of us, the way we're taught to scale the business is essentially to scale ourselves. Spend all your time on the highest and best use. Delegate the rest of the tasks down. So we hire administrative staff so we don't have to do the paperwork, digital paperwork, the scheduling, the task-y things for clients. Maybe we hire an associate advisor so we don't have to do as much of the plan construction, the plan preparation. We hire someone on investments to handle the trading tasks and someone maybe to help us out with marketing. And we start building these teams around us to leverage ourselves up. I almost think of it like the doctor model, the very successful doctors have three, four, five different nurse and administrative support team [members] around them to make sure that all their time is as optimized as possible to be patient-facing.

But there are limits to it. You can still only get so much maximally personally leveraged productivity out of yourself before you just hit some...I was going to say some wall, I guess the better analogy is some ceiling, as we're leveraging up where it just can't get any further if you don't do something much more substantively different. It's a version of the old, I think, Drucker's "What got you here won't get you there." And I know you've lived some of this, Sten. You joined us previously in this fast-growth firm. So now we've had several more years of ongoing fast growth and the kind of challenges or ceilings that can introduce. So I'm excited to talk about what happens when you keep growing fast and you start smacking these walls and ceilings.

Sten: Yeah. I think step one is the humility to even say you have limits. So if we had recorded this three years ago, I might not have told you that. But now I fully embrace that I have capacity issues, limitations as a leader, and all these things that the path of kind of getting beat up has kind of had to reveal that in me to where, as a business owner now, I can say I will not defend my inability to do everything perfectly. There are some things I can do really well, but for the gaps, to your point, both of my businesses have hit a point to where if it relies fully on Sten and support staff to support Sten, we're done. We hit a ceiling to some degree. But there's more. There's more impact that can be made. So now it's, what's the next higher quality problem to solve? And to me, it's a talent thing.

Recognizing The Need For Staff Changes To Take The Firm To The Next Level [06:23]

Michael: Well, it's interesting to me how it's played out for... So for folks who actually want to go back and listen, Sten's prior episode was episode 210, kitces.com/210. And it really is a cool episode around how to explain your value, how to position your value, how to show it and talk about it in client meetings and prospect meetings to help get them on board. But at the time, you were, I think, closing in on $2 million of revenue, 200-plus clients. It was you plus, I think, three-team. There were four of you in total, which is a pretty darn lean, efficient, high-productivity practice. So I guess, first and foremost, just wondering, help us start to play out. What's happened over the past few years as you continued that growth trajectory?

Sten: So to me, it reignited my passion for the industry when I finally convinced myself that I was able to get paid for my time and ideas. So I grew up in the insurance world to start, and then I jumped to the AUM at all costs world. And in both worlds, I really didn't talk about anything but the thing I had to sell. And so when I was introduced to, "Hey, there's actually a third pillar you're missing where people will pay you just to advise them and not sell them anything," and so as I stumbled down that path and tried to say, "Well, how do I do this?" I undercharged a lot and I was really inefficient with delivering plans. And so EAN [Elite Advisor Network] and a lot of the stuff I talk about today, if you're listening and you're driving, we're going to put it up on gobeelite.com. So just go there, find any resources, tools we have, we'll just give it to you guys. But I feel like I'm blazing this path kind of on my own. So I was kind of getting punched a lot, but I was committed to...

Michael: In what way? Again, you were running a $2 million revenue practice with three teams and 200-plus clients. So by most standards, that's a pretty darn amazing, good metrics business in and of itself. So, where were the challenges and punches coming for you in practice? What was going on that we can't see in those numbers?

Sten: That's fair. Yeah. I think there's a version of that where people who might be listening would be, "You did it. Just hang out. Put your feet up." There's something in me that wants to find a better path. There's kind of the average path. You build a practice that makes you great income, and once you get there, then you just kind of let it coast. And I think that's fine to some degree, but I was in my early 30s, still kind of hungry as an entrepreneur to say, "What's next?" And so build this AUM practice, make more money I never thought I could, and then I introduce a new business, essentially, within my business that requires new systems, a new way of prospecting. And when you do something like that, you kind of shake up the team and you shake up your business to where you're really saying, "I'm taking this thing that has gotten to some level of streamline and I'm going to break it on purpose."

Michael: And that shift was going from AUM to alternative fee models. What was the shift?

Sten: It was introducing financial planning, and my first financial plan was 1,500 bucks for a 12-month engagement.

Michael: Okay.

Sten: And I still laugh because when I gave that proposal to these two doctors...they were lawyers and they were making 350 grand combined, and I swore they were going to tell me no. So the head trash of Sten growing up in the business was, "You're not worth the money. The product is the thing. But your knowledge and your time, you got to give that away for free."

Michael: It's just me. Who would really pay me $1,500 for things just in my head that I'd talk and they give me money for that?

Sten: Yeah. And then, how do I present that thing? What's my onboarding paperwork? What's the actual deliverable I give them at this point? Because I've never had to do that before. I've kind of sprinkled free financial planning on while I managed the money, but I say, "Because you're paying me the AUM fee, I'm going to give you this stuff for free." And that was hardwired into me. I had to kind of break that in myself to say, "Hey, maybe there's a different way." And then the head trash is, "Well, wait, does that mean I've been doing it wrong the whole time?" And so there's this period of wrestling, and your team feels that if your leader is semi-midlife crisis of career, "Maybe there's a different way to do this. Maybe I can actually get paid really well for my time and ideas."

So I had to start restructuring the team to support this new product. And what's great about financial planning is we learned we were getting paid for the thing we were giving away for free, which was our time and ideas. We had to build a system to kind of formalize it and give them a deliverable with action items. But then we got more AUM, and we got more insurance deals that were large insurance deals that we wanted to help clients with. And so it was going really, really well.

And the challenge became the team was starting to get overwhelmed. And so I was like, "Okay, we need more team members." But as our revenue got to 2.5 million, 3 million, and we were making high 6 figures of consulting financial planning revenue, our AUM is growing, the current model started breaking down, and the team members that were once able to handle a certain level of responsibility and work started getting frustrated. And the culture started falling apart, and it started breaking in front of my eyes.

Michael: So, as you grew from 2 million of revenue to 3 million of revenue, were you expanding team at this point? Was it still the four of you, the three plus Sten, or were you at least trying to add seats and it just wasn't working?

Sten: We grew to where we had a team of three, four, five, six, seven. And we were probably about eight people at this point, with some junior advisors, a paraplanner, a portfolio manager, support staff, and then my director of ops. And so the team grew. I felt like if I put it on a whiteboard, I was like, "This is a good team structure. This feels like we should be able to handle what we're trying to go after."

Michael: Okay.

Sten: What I had to then admit to myself, and this was hard because you get to know these people and you spend a lot of time with these people, is that, is there a chance these people are not capable of going there with me? And I fought that. I'm a loyal person, but the idea, and you mentioned earlier, what got you where you're going will not get you there, to me, my mind went to processes and systems and tools. I fought really hard that it was the people because of what that was going to mean as far as difficult conversations and finding new people and training them up. That was something I was trying to avoid at all costs.

Michael: I think there's an interesting reflection there that I didn't want to have to deal with the fear or the prospect of letting people go, with all the loyalty implications of hiring new people and training new people and all the stuff that goes with that. And so the response was, "Maybe I need different systems. Maybe I need different processes. Maybe I need different tools." There's a meaningful nugget there to me because I've seen that, I've witnessed that for a lot of businesses over the years that maybe we can just find a new piece of tech that will make us a little more efficient, and then it'll all work because we don't really want to have to stare down the possibility that it's a people problem, not a tech or a system or a process problem.

Sten: Yeah. And there's some healthy shame that comes with that because I'm the one that hired them and I'm the one that trained them. But now I know more, and I've changed. So every company has to hold space for everyone to change and grow, and that means you're going to learn stuff. And you will always look back and say, "If I only would have known, I would have done this different." And that's just probably true in life, relationships, business. We're always, "Hey, man, somebody tried to tell me that when I was 25, and I tuned them out and didn't listen at all. I wish I would have." But I think we can try to limit that. And so, as I go through these cycles, and I know we've talked in the past, I'm like, "I bet Michael's been there." I bet, now that I'm in a place of more humility, if I call him, "Man, just tell me what you did here," I do not have to take every punch right on the nose if I'm willing to kind of be curious and humble.

But the one that hit me in the face right now was this, 100% turnover of my financial advisory practice, which is, if you would ask me 5, 6 years ago, no, there's somebody that's going to be here for the next 40 years, I bet. I'm loyal. They're loyal. And so to come out the other side of it and say, "I have to completely rebuild this thing," while owning my part in whatever caused it to get to a place of not working or scaling like I wanted it to, which is my skill level of attracting talent, hiring talent, now there's a skill set that I was good enough for a while, but I'm realizing, "Man, to take this thing from 3 million to 6 million, it's a different type of person that has to be on the team."

Michael: So I want to get further into this in a moment, but before I do, I want to make sure I'm really clear on just where the business was in the state of affairs when you're having this, "It's not working. I think I'm going to have to pull some things up," kind of feeling. So you're 3 million of revenue, you're 8 people on the team at that point?

Sten: Yeah. But it was built with kind of a junior advisor, a paraplanner. At a point, I had another kind of senior producing advisor in here.

Michael: Okay.

Sten: But what I didn't do was create a consistent culture that said everyone that works here is required to work hard. But if I have an advisor that joins the team, it's, "Hey, I'm making enough personal income for myself, so I'm going to show up to team meetings late and not really care about the company." And I wasn't clear about, "Hey, there's a standard of you actually have to add new clients and grow." So my lack of experience in this or anticipating people's tendencies is I ended up with a bunch of people that were like, "Hey, I'm pretty comfortable. Sten, you go do your thing. Let me know if you need my help." And then I become the sole problem-solver, and everyone...team meetings where people sitting there looking at Sten, being like, "What do you want us to do?" And I'm like, "No, I need you guys to tell me what problems are happening, and I need you to come up with three solutions because I'm hitting my capacity," and then throw into that my personal world, kind of takes a huge turn and kind of falls apart while I'm trying to show up at work.

And so, all of a sudden, when the team is getting less of Sten, these gaps reveal themselves, and I'm like, "Oh, no, unless they're getting 100% of me every day in a healthy way, this thing's not working." And I take credit for some of that, that I didn't hold people accountable or I didn't hire them right with clear expectations. But those roles, I started almost looking at each role individually. It feels like my director of ops, we transitioned to the Schwab platform. That fell apart. We missed billing for four months on our accounts and lost hundreds of thousands of dollars. And I was like, "That's a miss. What happened there?" Or it was my junior advisor that was wanting to be an advisor, but he was unwilling to prospect, and he'd say, "I'm not going to prospect. I just need you to give me clients." I'm like, "Well, I can kind of do that, but you also need to prospect." And so it was almost a role-by-role reveal that the people were kind of willing to be average in their role but not be elite and didn't want to be pushed.

And so I feel it as I talk about it, that it almost felt like, one at a time, they just fell apart in front of my face until the point where I'm like, "Man, I'm left...there's four of us." And it was kind of a cleansing and a restart, but in the moment it was like, "I failed. The thing I've spent eight, nine years building that I thought I arrived." And I'm the guy that's on podcasts. I'm the guy writing books on this stuff. And this thing is just falling apart in front of me.

Michael: So this is helping to kind of clarify. So you get scenarios like, okay, we transitioned to Schwab. We got to figure out the new billing structure, how to actually get on their platform. My director of ops can't seem to actually figure it out. And so if I, Sten, don't get in there and figure it out for them, we're just not going to have billing happen. And since you had too many other things going on for other parts of the business, you couldn't get in there, and then a whole bunch of billing doesn't happen and revenue doesn't come in. So it's scenarios like that across the firm. I'm inferring that that means, all of a sudden, things just aren't getting figured out and solved if Sten can't come in and literally personally solve them.

Sten: That's right. And there's a point in that where I've gone through days where I've kind of lost faith. I'm like, "Maybe these people don't exist." Then I talk to some peers, and I'm like, "Okay, they do exist. I need to do my part. I need to level up." There's times when I hire people, I ask them in a meeting, I draw a circle on the whiteboard, and I'm like, "If this represents 100% of what is necessary for you to thrive in your role, what percentage of responsibility do you hold, and what percentage of responsibility do I hold as the business owner?" And the hope is whatever percentage they come up with and tell you is it's mostly them. I'm here to help you succeed, but if you're relying on me for your success, you're not going to come ask me for help and somehow I have to chase you down and kind of force you to do the things to be successful, I don't have the energy for that.

And most likely, I will always get it wrong. I need you to drive the success of your role, the curiosity to get better. And that is a type of person. I think some of that can be trained if you have a good culture and a good system. But as soon as you realize that someone's not willing to do that, they can't stay on the team for another year or two. You have to have the hard conversations as quick as possible. Because part of that is you defending the culture for everybody else. You think you're being nice to that one person, but everyone else is suffering to some degree by doing that.

Having Difficult Conversations To Determine Whether An Employee Is A Good Fit For The Firm [20:13]

Michael: So when you said, suddenly, staff starts winnowing down and you're down to four of you, so help me understand what's playing out there. Are you having hard conversations and letting people go? Are you having hard conversations and people are saying, "Maybe I don't want to work here after all?" Are some people just quitting because they're not enjoying work at this point because hard things are happening and it's not going well? How did actual headcount start winnowing in practice?

Sten: I think I had one in every one of those ones you just said.

Michael: Okay.

Sten: I think there were some that I started applying a healthy pressure to, "Hey, by this next Friday, I need to have this thing from you," some accountability, and they kind of crumbled under that and emotionally kind of rejected it and got frustrated with that. And so the healthy accountability kind of weeded some of those people out. There were some other advisors that were really content with their personal income, and they were taking up a nice office space and didn't want to really be part of the company. They're kind of a lone wolf. And so I went to them and I said, "Hey, here's what's about to change. You're going to be held accountable. We're going to have metrics. Is that something you're going to get on board with?" And two of them said no, and so I said, "Here, we're going to figure out a way for you to transition your book out."

And so where we stand today is we have a little more AUM than we had in the past, but we have 90 households. And so we're even more of an efficient practice because we've kind of weeded some stuff out. And then some of those were just really direct, hard conversations of, "We've talked about this. This isn't working. I think we need to find a better place for you to go where you can thrive because you're not thriving here." So it was a combination of all of that.

Losing one person is challenging. If this starts happening all at once, it is a feeling as an entrepreneur and a business owner of, should I even be allowed to do this? Where am I missing? And I think, for me, as I coach other advisors and work with other business owners, I'm like, "Part of it is I just want to normalize the challenge of this," that I got spoken into, "Sten, this doesn't mean you're doing anything wrong." It's the good-to-great principle. This is a good sign. You hit a plateau, but a plateau means you're on your way to your next plateau. Grow to the next place. It's not a sign you're doing something wrong necessarily.

Michael: And so I'm presuming you're taking client hits, you're taking revenue hits as this was going. Because if advisors have to part ways that were under the firm and the umbrella, now, revenue and profitability is walking out the door as well. Were you actually facing going backward on some of this?

Sten: Yeah. Yeah, there was a season of that. And at one point, at our peak, we had 50 active financial planning consulting clients. Purely as a function of capacity, that dropped to 25. And that's revenue of upper six figures, I think, at one point, 700,000, 750,000 in our best year of financial planning fees alone down to maybe 400,000, 500,000, which is still a great, healthy revenue stream. But to me, as a business owner, it's so hard when I know the opportunity is sitting there for the taking and people want us to help, but I cannot deliver it because I need people.

And that's still where we are. I'm looking to hire two junior advisors to come in and be, "Dude, link arms with me, and let's get to work." I'm going to do it better this time, but the capacity is the thing where I have limitations, and the people are going to be the only thing that take this to the next level, because the opportunity isn't the question. It's there for the taking. Can I build a business with a culture and find the right people to take advantage of it? And going through this, I have a newfound respect for people that build good organizations. They may not communicate as well as me, they may not sell as well as me, but if you're an advisor that just gets people around you and motivates people well, that is a superpower for the advisor that wants to be a business owner.

Hiring An Integrator To Manage Firm Operations [23:56]

Michael: So, what happened next as you're going down this path? You're growing, but it's not working great. So you say, "Okay, I got to start. They're not trying to solve their own problems. They're not trying to grow the way I want to grow. So I'm going to start holding them accountable." So you do, and then half of them noped out the door. So, what happens next?

Sten: To me, I realized at the time that the integrator had to be the next hire. I needed an A-level integrator. Because I'm still managing a book of business at this point. I'm the deliverer of our product, which is advice in financial planning. I'm pretty tied up, especially a couple of times a year. And so I went out and found April who joined the team, and I'm like, "Okay, 19 years of investment industry experience. She's got a fire on her. She's ready, honest about where we are and where we want to go." And she's like, "I can do this. Let's go." So she was the first step in saying, "Okay, let's rebuild this healthier." And again, by many standards, we were successful. There's so many people that were like, "Sten, you did it. You're 30. Now what?" But I'm like, "No, I think there's another season, another chapter for Legacy, but I have to have somebody next to me." And I know you have these people where it's like, without them, this doesn't get done because there's not enough of me to go around.

So once I found April, we started saying, "Okay, let's rebuild this." And we didn't do it perfect right away. I lost three people in December. And some of those were kind of holdovers from kind of the prior world, but I'm like, "Okay, how can we get better with that?" And I think it's the ability to kind of sit in the tension and keep walking forward that it's like a black belt is a white belt that never gave up. I know if we stick in this thing, we will figure it out if we don't quit, but let's try our hardest not to make it any more challenging than it has to be on ourselves.

Michael: So, what was the role for April? What was the title? What was the job description? What was the new thing that you were hiring for that was going to get through this that hadn't been working previously?

Sten: It was my integrator. So it was an operations manager. It was this kind of leadership-level person that was going to handle the day-to-day. I'm still going to own marketing, being the advisor, BizDev, but when it comes to, as soon as somebody says yes to delivering a great experience and making sure we're getting paid on time for it, that is not Sten's superpower. So I need somebody else to own that to give me the peace of mind to keep doing what I need to do. And we were accomplishing that. Now, the season I'm going into is, "Hey, we have a system. We have a great office in Franklin, Tennessee, really popular city. It is ours for the taking. Now I just need people that can go help me find clients and deliver our product," which is advice, AUM, insurance at times. And so, now, if I get a bunch of people applying to come work with me, okay, now I've got to be really careful. Do they have what it takes? There's people who are, "Sten, I'll move from across the country and work for you for free. Can I work with you?" I'm like, "That sounds great, but you're going to go through this system that's going to put you to the test to some degree to make sure you can hang, because I cannot afford to have high turnover in very important roles."

Michael: So I think you said earlier you had a director of operations. What's the difference between the person you had and hiring an operations manager now?

Sten: So the first person I had, she was my first hire ever, my administrative assistant, and then she worked her way up. And it's so rewarding to run a company and watch people reach levels of professionalism that they've never thought they were capable of. And I still talk to her, and she still says, "I've done things that I never thought possible because I got to work with you." But I still remember the meeting when she was like, "Sten, I don't think I'm the right person." And this is a person I knew since I was 18. She was a family friend, and we worked for ten years together. She had my back, I had hers, but the realization by both of us that, for us to move forward, you can't sit in that seat anymore, and for her to be even able to admit, "I can't take us where you're wanting us to go. I've tried. I don't want this to be challenging for you anymore." And I was just agreeing together, "I think you're right."

And so it was one of those things where I think people, at times, can elevate themselves to a level, and within some companies, they can stay there satisfied. She said, "I don't think I can stay here and have somebody above me in a role that I wanted to be in." And I said, "That's great awareness." And so we had to go through that. It was emotional and challenging. I'm thankful she was mature enough and we could sit there and have that hard conversation together. And she wasn't defending, and I wasn't blaming her, but it was just this joint realization that that was needed. That was the only super healthy transition and conversation. All the other ones didn't go great. It was Sten's fault. But that one, I'm so thankful she was able to do that.

And I think that's true for all business. You will have people...as a leader, give people a chance to level up if they want it. Don't put a ceiling there and hold them down. And sometimes that means they level up outside of your business. Sometimes that means they level up to the C-suite, and this is great. I think there are stars in the waiting if they can be cultivated and fan that flame. But I think those are rare. I think you have to be more aware of, are people hitting their limits? And does a change need to be made?

Michael: I'm struck by that evolution that it was the first administrative assistant who came with you and grew with the business as the business grew for a decade to then have the business grow to a point that she can't actually do what needs to be done at that level of complexity.

Sten: Yeah. And the tricky thing was that she had the desire to do it. So it wasn't like she was just upset and frustrated. She cared about the business and the team and our clients. She really wanted to. But I think we all have limitations. There's a role out there that you would get in and want, and you'd realize, "Nope, I'm good. I thought I wanted it, but this is not what I thought it was. I don't have the skill set that this role needs." And as a leader, we have to admit that to ourselves at times. If you own the business, you're not really going to fire yourself, but there's probably some internal roles you should fire yourself from, like if you're in charge of marketing but you suck at it. Whatever it is, I think, the more aware you can be, and I think the most successful people I've ever met just have this heightened sense of awareness, they're aware of themselves, they're aware of people around them, and that requires humility and curiosity.

 

Michael: So I'm just curious, the actual evolution of this conversation with your prior director of operations. How long did it take to come to this mutual realization that this wasn't working?

Sten: Probably two years.

Michael: Okay.

Sten: Yeah. I think part of that, for me, is me learning my story. Why does Sten do the way the things he does? And part of that is I take care of people. I grew up, single mom, three sisters. I take care of people. And while that is great in so many ways, there's downsides to that. And I think, as a leader of a company, if you lead a company trying to take care of everybody, you're going to hit obstacles. It'll work for a while, and people will like it, and you'll have fun at work, but when it comes to performance and results, you're going to eventually probably delay some hard conversations if you operate too much out of that. So I had to go through a season of kind of saying, "Okay, Sten, why does it feel like you're repeating things? Why does it seem like there's a theme of people coming on your company that are nice people, but when you eventually hold them accountable, they get uncomfortable and they can't handle the heat? What's at the root of that?"

And so as I'm kind of learning more about myself and why I make the decisions I make or the habits I have, I'm gaining a sense of awareness of, "Okay, what things are breaking in the company, and who is ultimately responsible for those things?" And there was a theme that it was, "Okay, that really falls under the director of operations role." I'm the business owner, so ultimately, it's on me, but I have to start having some more direct conversations of, "Hey, why is this happening? Okay, you're actually the one in charge of hiring these people, but it's not working out. Youre letting the wrong people in."

So, as opposed to leading with anger or emotion, trying to lean with curiosity and saying, "Okay, let's talk about what's breaking. Why is that breaking?" And then, when there was a theme of, "It seems like the decisions you're making on your own are not working out well consistently, let's readdress your job description and the level of responsibility." And if, together, what we're looking at is a whiteboard full of decisions that are not yielding results, it's a lot of activity, you're showing up to work, you're passionate, you care about everybody, that's not in question. But for some reason, in this role, we're not having success with the things you're in charge of.

And I think that's where, as a leader, if you can lead with data and curiosity and questions, you have a better chance of leading somebody to a mutual understanding as opposed to a posture of defensiveness or, "Hey, are you saying I don't care about the company? I've worked here for ten years. What are you telling me?" I think it can derail fast if emotions guide you as opposed to, "Hey, explain this to me. Hey, if you owned the company and this happened, how do you think you'd feel about that?" And so I think it was a long process. It'll never take me two years again, but I think just based on my personal growth, that one had to take a while to end well.

Michael: So, now help us understand. So the first move was, okay, if a lot of these things are ultimately tracking back to operations-related things that I, Sten, I'm not good at, that's not my gift, I'm good at driving the business growth, I need someone to solve that. So you went and found April. So, what happens next?

Sten: It's me trusting her to a degree to kind of audit our system and company. When you get fresh eyes, you're just going to get some good perspective. Things are going to be revealed. And so I think we had some low-hanging fruit of her saying, "Hey, I've been in the industry for 19 years. Why are you doing it this way? We should probably change the system. Hey, you have six tools. We really only need one to do that." And so we kind of had some immediate improvement of efficiency within the practice. It's having some additional capacity also for her to say, "Okay, I'm going to start interviewing a bunch of people. You don't have to sit with all of them, but I'm going to go through 50 to 60 people, and I'm going to bring you three." That's also just a pure capacity issue increase towards, "Okay, good, now we can do things in a better way than we were before just because somebody has time and expertise in doing that."

So think of it as a season of cleaning up and kind of righting the ship, "Hey, are we even getting paid for the things we're doing?" It made me sick to my stomach and good for some of our clients, I guess, that I would look back and I'm like, "Wait, we haven't been billed on that $3 million account for how long? Six months. Ouch, that's not good." And so I had to have some confidence instilled in me of, is this thing running smoothly? Clients were still happy. Our retention was 99.5%. This is me with everybody listening and talking kind of business owner to business owner here of, "Man, this stuff behind the scenes was we were at war." This was a battle every day to keep the appearance outside of, "Hey, things are fine." Clients felt some turnover and had some questions. "Oh, I miss that person", like that. But internally, it was, "Man, I'm white-knuckling. We got to get through this thing."

And as we cleaned it up, and it felt like, "Okay, the ship is good. The holes are patched," now we have to evaluate our hiring process. We have to evaluate, "Hey, what does our handbook look like when people start here? Because from this day forward, when people start here, I don't want confusion." At the end of the day, it's up to everyone that's hired. We're all professional adults to make things happen, but I will own part of the responsibility of a clean onboarding process of a really clean job description, communicating the process of, "Hey, every two weeks, we're having a meeting, looking at your KPIs [Key Performance Indicators]. I'm not a systems person, but from learning the hard way, I think, as a business owner, I owe that to anybody that works here to have some frameworks to operate within.

Best Practices When Using Recruiting Firms [36:27]

Michael: So I want to come back in a moment to how the hiring process began to change and what you were doing, but I actually want to go back for a moment. How did you find April? Where did you find this magical person that could come in and audit everything and start telling you, "You need to fix this, and you need to adjust that?"

Sten: Oh, yeah. I finally went down the high-end recruiter path.

Michael: Okay.

Sten: And sometimes that makes you sick. You're like, "Wait, what? I have to pay you what percentage of what?" But the book, "Who Not How," I just got to a place where I was, "I bet I could try to figure this out by using my natural market or asking around or doing some job posts, but the business deserves to find somebody really good as quick as possible." So April was kind of the first really successful hire from a recruiting firm.

Michael: And with the whole you pay them, whatever, 20% or 30% of first-year compensation kind of thing. This costs you tens of thousands of dollars to get the hire.

Sten: Yeah. What I learned the hard way using recruiters is that I need to know, do I pay them 100% of that fee the day that person starts? Do they have a 90-day period where, at the end of 90 days, I pay them the rest of the fee? What happens after 90 days if they don't work out? Is there maybe a 120-day where they'll replace that person? So I learned the hard way, if you use a recruiting firm, get really clear on, "I will not know what this person is truly like until I engage with them and work with them. If I'm going to pay a fee that large, what protections do I have in place?" In the first couple of times I used recruiting firms for some different roles, I didn't know what questions to ask, and we placed somebody. Fifteen days in, we paid the fee, and that was it. They're totally off the hook at that point. And I'm like, "Okay, that hurts." Because 15 days in, people are still getting their computer set up and I haven't really experienced them.

Michael: Yeah. Yeah. I don't have any sense of whether...a really catastrophically bad fit you know in 15 days. But really understanding, if someone's a good fit and going to jive, it takes longer than that.

Sten: Yeah. So I think with finding, there was just a learning curve there. And luckily, I reached out. I got counsel from other people to say, "How do I do this well?" It puts you in a posture. It's one of those things where you're forced to a place of, "I thought I knew what I was doing, but I don't. And I'm more receptive than ever to feedback and help." And I guess the hope for all of us is we don't have to be hit so hard and knocked down before we're receptive. That's been my story a few times in my life. But finding an April and holding a new high bar and then saying, "Okay, we have to hire better, what's our process going to be like?" And then reinventing the team in a way that this is going to probably be slower. The goal is not to fill a seat with a person as quick as possible. Because I found, at times, I've had operations people where they just love completing tasks.

And so if I'm like, "Hey, we need to hire these two people," their goal was to hire them as quick as possible instead of, "No, we have to hire the right person at all costs, no matter how long it takes." And I didn't set that expectation because there were probably some assumptions there of, "Of course, they're going to hire somebody great. Well, I need to put a framework and an expectation of what that person really needs to look like."

Michael: So, was the April hire the first time you had used a recruiter?

Sten: Successfully. I think I engaged some other recruiters and maybe the person started...I think I did it for a marketing person once, but the person just didn't show up to work two weeks later, and so the fee was refunded. But for April, it was the first full good experience of, okay, there's good people out there, but the challenge is a lot of times the person you want is working somewhere else. And they're probably kind of happy where they are, ideally. Trying to find somebody that's disgruntled with their past job, hasn't been employed for three months, and they can start tomorrow, that's maybe not the person you want. And so, how are you going to get those people's attention? Is it a recruiter? Is it, "Hey, I'm going to be really creative with my natural market? And hey, who do you know that's working somewhere?" And then I'm going to woo them away somehow.

At a certain tier of team member that is that capable, they're probably being capable somewhere else right now and probably being compensated fairly for it. And so, is it a salary increase? Is it, "Hey, I'm just going to sell you on my mission to get you over?" And so I'm in a season. 2025 for me is, "I'm going to try to solve this talent issue." Maybe a recruiter is involved, and there's probably some better onboarding and expectation setting, but if I'm going to grow future businesses and Legacy is going to go from 3 to 6 to 12 [million in revenue], I think we almost have to build a superpower of, "We hire and keep great people." I think that's going to be the secret sauce for the next season, but it's not a skill set I have yet.

Michael: So then my one other question in this transition, if you're a losing team, kind of initially leading up to the hire of April, you were at eight. You went down to four. Is the team drowning with how much client workload there is? Because you had eight people to service the clients and now you have four, or was there some natural right sizing effect? Because some of the people who left were advisors whose clients went with them. So at least when they leave, you don't need as much team to service what's left.

Sten: There was some of that, but there was this risk. I remember I lost an admin person because she was just overwhelmed. And she said, "At this workload, I could handle it, but at this workload, I can't." And she quit. And so there was definitely the feeling of the people that are left are going to have to step up temporarily, and part of that is communication. It's me going to them and saying, "This is hard. We don't need to pretend like those people didn't work here and not be upset or sad that they left. That's true. Let's sit in that. So, you know, it is my priority to get great people in here to help us as quick as possible" to try to relieve any of the fear that was created with, "Hey, the company feels totally different now than it did." And there were days where I was, "I might wake up and go to work, and I'll be by myself." Well, it was because this shift was happening. I'm like, who wants to stay here and make this happen with me? Because it's going to have to be a different kind of person than the people that were leaving.

And so we were able to get through that kind of scary time where it's, "Okay, now we're going to start backfilling these roles with higher quality people that want to work hard, that want to solve problems. And where I became conditioned to worry about people and, "Hey, are they overworked? Maybe I need to go check on them," I became the type of leader that was trying to care-take people that were not really healthy employees. But if you can find healthy team members and set great expectations, it requires a lot less emotional effort for me to manage and lead those people. And so now I'm realizing, man, the power of getting good people has an exponential effect on your business from a culture standpoint, from a revenue standpoint, from freeing Sten up personally to do things with his kids standpoint. I almost can't under-communicate or emphasize the cost of having the wrong person on your team and keeping them too long versus the time and energy and expense of getting the right person on your team at all costs.

So if that means I have to pay 20% over market, that's a deal compared to hiring the wrong person, losing them, and trying to rehire somebody else. It's such a good investment. It's not a cost. It's an investment because the people are what will allow you to have balance in your life as a financial advisor and not have to be doing service on your phone at home. So the people are so important.

Creating A Five-Step Process To Make Better Hires [43:57]

Michael: So, what changed in the hiring process as, I guess, you/April rebuilt this, and you came back to reconstitute the team? How did this work? How did this play out? What was new and different in hiring that would make this better than it was before?

Sten: I think, practically, it came down to even the job description when we post a job, it seems like a fun place to work. The language we use is not, "Hey, here's the job. Here's the ten things you're going to do." It's, "If you want to join a fun team that's trying to shake stuff up..." From the language to the formatting of it, it's, "Let's reimagine this thing in a way that the right person, it will catch their attention." And so then we would start boosting job postings and spending some money on that. I think for a period of time, we kind of relied on who applied first, and let's interview one or two people. Let's at least interview six people for every role. Even if the first person comes in and gives us some good feelings, let's put some rules in place to protect ourselves. And so we have things like that where we have to interview at least this many people before we make a decision.

Michael: And is six actually the number that you set?

Sten: I think, the number, it kind of varies by role. I think, for an administrative assistant, I think it's four. For an advisor, a junior advisor, I think it's six, which sometimes is tough. Man, we did five, and these two feel pretty good. But it's almost the system is going to hold us accountable and stop us from maybe slipping into old habits.

Michael: Okay.

Sten: We also have part of our interview process, there's a tool where you can send them a question. They get a minute to read the question. They get a minute to answer via video the question. And so from maybe an initial phone call to kind of verify the resume and get initial feedback, we say, "Hey, great. We're going to send you an email." I think the website is called Jobvite. And you say, "Here's five questions. You have a minute to answer each." And now we get to see them kind of answer a question on the fly because they get a short period of time to answer it.

Michael: Oh, so the whole thing, they know it's time. They know, whatever it would be, "Be at your computer at 4 p.m. or whatever because we're going to send you the Jobvite email." It's going to give you questions. It knows exactly when you opened the email to click on the link, to start the process, to see the first question, and it's just going to tell you, "Okay, you got a minute to read it. Now you have a minute, record a video answering the question, and then we'll move on to the next one."

Sten: Yep. Because I've heard some companies that have a 12-step hiring process. I'm like, "Oh, gosh," because they have so many tiers of managers they meet with them. I don't have that many people I need to meet with at this point. But it probably shouldn't be two meetings. It doesn't need to be 12 meetings, but there's probably this happy medium that's healthy. And so it's initial, get your resume, quick Zoom call, verify, "Hey, we're going to send you this link. If that goes well, we're then going to give you some type of assignment. We're going to pay you as a contractor to complete a task for us to some degree." So for a junior advisor, I may say, "Hey, here's a case study. Build me a general plan. I want you to present it to me." For EAN, if it's a coach, I'm going to say, "Hey, I want you to come use our conference room and I want you to teach me something. Coach me for 20 minutes."

And I'm not asking them to do that stuff for free. I'm going to pay them to do it. But I need to experience you in some capacity. It could be an administrative task for a new hire on the administrative side, "Hey, I need you to go and learn how to use Trello to do project management, and I want you to come teach it to me. Show me that you can solve a problem. Ask me questions to come up with a solution. I have to put some kind of pressure on you." Perfection is not the goal. You may not do great with the presentation because I didn't give you everything you needed, but I get to see how you approach it. I get to see how you get to the end result. And then, if that goes well, then there's the final interview, "Hey, here's the expectation of the role more clearly. Here's kind of exactly what the compensation would be." And by building this kind of five-step process, I think it's going to limit and save us from ourselves of, "Hey, this person seems nice. Let's give them a try."

Michael: Wait. So, can you walk me through again? So, what's the actual five-step process? What are the steps?

Sten: So I guess step zero is put the job posting out in a creative way. Boost it on LinkedIn. Use different job things. There's some level of your funnel, "Let's get a bunch of people to apply." Have some internal filters of, "Hey, these people need to be willing to live in Nashville." So maybe that cuts 50 resumes down to 20 resumes. And then, from there, April just gets on Zoom and says, "Hey, how are you doing? How did you hear about the role? What do you like about it?" And she's doing this kind of initial scrub to say, "Are there any kind of knockout things here that doesn't make sense for us to even go to step two of the process?"

Michael: So how long...so that's like a screening-style Zoom call from April?

Sten: Yeah, 15 minutes.

Michael: Okay.

Sten: I think she's come up with four key questions to say, "What of these things are true?" in a kind of knockout scenario.

Michael: Okay.

Sten: Then we do the Jobvite.

Michael: Okay.

Sten: Scales. We get to see them on video, kind of put on the spot, how are they answering a question on the fly?

Michael: So, what kinds of questions in the Jobvite? I'm just trying to visualize what kinds of things you're giving them to stump them and see how they do.

Sten: Yeah. I went down a huge kind of rabbit trail, the best interview questions out there, and how do you get creative with them. And I think there's the standard ones that probably still stand the test of time. But one I heard that we're going to try to use is, what movie star or character do you most relate with?

Michael: Okay.

Sten: And part of it is that's just a surprising question. "Wait, what? I don't..." And so it's something, it's a question they're not anticipating to kind of say, "Well, how are they going to respond to this on the fly?" And then some others are, what was the most challenging thing you've overcome in your life?

Michael: Okay.

Sten: And so questions kind of along that, probably four to five, kind of depending on the role, might be more directive, how do you handle conflict at the workplace, what motivates you the most, things like that.

Michael: Okay. So then, what, next?

Sten: Then the folks that kind of make it through that round is our first in-person interview.

Michael: Okay.

Sten: And sometimes we've flown people here for that interview. And the goal of that is I want to sit across the table from you, and we're going to describe the role in more detail. And then, from there, we're going to come up with an assignment or a task. And then we're going to say, "Hey, we're going to pay you to do this. Do you feel like this is a fair fee? You have two weeks to prepare this. Ask us for any information you need." That could be anything from, "Here's a scenario for a paraplanner. I want you to build this plan out. Let me know what questions you have, what gaps are in the scenario." And I have some of those scenarios that we teach on, "Hey, here's a couple, both are W-2 employees, and here's the facts. Here's a business owner and here's the facts."

I want to see what kind of work you have. I want to see what kind of problem-solving, what kind of questions you'll ask, and what kind of tenacity are you going to show to do this really well. Are you just doing it to check a box, or are you really bringing it? We've had people present things on the whiteboard to us and coach us on something like a prompt. I've said, "Hey, in two weeks, I want you to come back here and sell me on why coaching is necessary." If you're going to be a coach, I need you to believe in coaching so much that you can convince me that you believe in coaching. And so, how practical can I get in seeing them deliver something?

Michael: So, does everyone who gets the first in-person interview get the work assignment as well?

Sten: That's the goal. We had somebody recently that was a marketing hire that was really good in GoHighLevel, which is a tool. And so hers was less of a short-term assignment. It was a three-month contract to help us build out something specific in GoHighLevel.

Michael: Okay.

Sten: And then we got to say, "Okay, you were responsive. You got this thing done on time." And so there are some people...I can't remember if it was Mark Cuban or somebody I was listening to, kind of a business podcast, it was like, "I never hire anybody until they work for me as a contract person for a period of time." It's a rule. I'm not just going to hire somebody and hope it works out. They have to show me they can deliver and they can kind of hang with us. I don't know if that's fully applicable in every role in our business.

Michael: Yeah. I get it in some contexts, but, look, if there's a good prospective advisor and I say, "You have to work for us as a contractor for a couple of months". They're just probably going to get another advisor job.

Sten: Exactly. Yeah. And part of it too is if they want to be there, if your firm is the right place for them to be, I bet they'll jump over some hurdles. I think you can apply some resistance and see if they overcome it. But yeah, to take this too far, there's a point of diminishing return probably of, "Hey, you're being a little cute with your hiring process."

Michael: So then I'm presuming, so your next step is basically the delivery of the work assignment itself, and you get to see what they did, how they did when they come back two weeks later.

Sten: Yep.

Michael: And what do you...I'm going to assume it varies a little bit by the role and the task, but what do you pay when you pay them to do these work assignments?

Sten: There's been a couple where it was kind of 1,000 bucks. I think there's times I'm overpaying. I'm probably paying them 100-something bucks an hour for it. But I'm like, if anything, I want them to be, "This was really fair. Sten never asked me to do stuff for free for him." If at all possible, it's something we need help on anyways. "Hey, if you'd go research this thing and come back to us with three solutions to this problem," that could be a great one for an advisor. So it's, "Can I apply some pressure here? Can I see how this person responds? Is their energy more of an annoyance of the process, or is it a game-on?" I like to solve problems, and I want to be here. And so that's the hope with some of these key roles, is that we just refine the process of finding the right person.

Michael: Is there a final step after the work assignment comes back and they deliver it to you?

Sten: Yeah, that's then kind of, obviously, we're, "Hey, thank you for spending the time on that," encourage them in a way, "What questions you have for us?" And then it's a team debrief to where we say, "Okay, let's not let our emotions jump in," whether it went really well or really bad. What does the team think here? So typically, at this point, that's a me and April decision to say, "Are we going to send them a job offer?"

Michael: Okay. So screening interview, Jobvite, in-person interview, work assignment delivery, and then an internal debrief. Okay. Who are we going to take? And you try to put, it sounds like it, at least four to six people that get to the interview and work assignment phase, varying a little by role as to exactly how many.

Sten: Yeah. I think, at this point, in the last two cases, it's been more of three people made it to the assignment. As I talked to April, I'm like, "The more, the better," the more reps we can get if we can. But if what it's going to do is take us three more months to get three more people to make it that far, is there a stud kind of in the three we have? Let's be open minded to that. So I think we give ourselves a little bit of leeway on that, but we have to keep each other accountable. I told her that this year. No matter how bad we need help and want to hire people because we see this potential sitting out in front of us or our lives would be a little bit easier, let's hold each other back on jumping the gun if at all possible.

Michael: Okay.

Hiring Principles For Firms Of Different Sizes [55:25]

Sten: There's nuance to every situation. So I don't think anything we've said so far is this is the only way to do it and this is always true. But I do believe it's true that, as you grow a business, if you are not having turnover, if you're 20 years in and your whole team is the same, and I think the way you put it, and you probably said it better, is either you did something defying all odds that you hired perfectly from day one or you're avoiding some hard conversations.

Michael: Yeah. Yeah, very much so, having been through the growth cycle multiple times. This depends a little bit on how far you want to grow the business. There's no right or wrong answers. We all get to define our own paths of success of how far we want to grow it, how big we want to make it, and what we want it to look like. But there are realities of when the complexity and needs of a business change. A two- to six-person team that's built around the founder is different than a team that's supporting multiple advisors where you need to have some actual shared resources while also allowing some autonomy to advisors to do their own thing, which is different than by the time you get to a 20-plus-person team and you tend to have much more formalized department structures and leaders of departments and an actual management team that does management team things and has autonomy over their departments but is accountable to company goals.

And so I find there are sort of these thresholds where a company up to 6 or 7 team has different needs than a company that's growing from 8 to 20-plus as sort of departments and structure forms, which is different than who's good in the company that's 20 to 50 people. And then there are different things that change when you get to 50-plus people because you end up with another layer of management and depth of teams, because you can only have so many direct reports in each layer. And so the skill sets that are good at one are different than at the next. In the up to five or six, I just need people who are really good at doing the things I delegate to them. As I'm growing from 6 to 8, up to 20, I need people that start operating more autonomously, because I can solve the problems for a couple of people. I cannot solve the problems for 15. You all have to start figuring out things on your own with some leaders besides me. But the leaders only have so many people reporting to them. So you end up with a lot of, call it, player-coach style roles.

Sten: Yeah. That's a good way to put it.

Michael: When you start getting 20-plus and 30 and 40, departments start getting big. Suddenly, you need managers whose literal full-time job is to manage. They don't do anything. The whole proverbial "Management doesn't actually do anything around here," it becomes true after a while because there are so many people doing the things that one manager who effectively levels up six to eight people on their team has so much more impact than what any superstar manager could ever personally do themselves.

Sten: Yeah, it's true.

Michael: You get to a size where your ability to impact the business through people is exponentially larger than what you could ever do by being a great player-coach that also gets in the trenches with the team in the same way. And so great delegees aren't necessarily great semi-autonomous player-coaches. Great player-coaches are often not great full-time managers because they want to keep getting in there and playing while they coach, and so they limit themselves. And even great manager dynamics are different when you're a manager of a team who does things versus when you're a hundred-plus person company and you need VPs who manage people who manage people who actually do things. You start getting people that are two or three layers removed, and that's a different kind of manager and leadership skill set. And there's other thresholds that crop up when you're larger, but very few advisory firms get larger.

So I do find, again, it's a version of that "what got you here won't get you there" or who got you here won't necessarily get you there, because, A, an amazing right-hand delegee may be a terrible player-coach. Because they're so good at doing things, they themselves don't know how to delegate anything to their team and coach them.

Sten: That's fair.

Michael: Great player-coaches often are not great managers of large teams because they keep trying to get in there and do things, and they don't want to "just be a manager" that leverages their team without getting in there. So there really is a "who got you here won't get you there" thing that starts to crop up.

Sten: Yeah. And I think for everyone listening, no matter what your practice looks like, if you're a leader at a firm, if you are a solo advisor with one assistant, I think what I find to be true is that there's future versions of your business and yourself that you will not achieve without other people. That could be kind of a "who not how" thing where you just kind of outsource some stuff. But we spend a lot of time at the Elite Advisor Network for the advisors we coach saying, "Who is your next hire?" Because most advisor's issues come down to capacity. I don't have time to do the thing I know I should do. And as we talked about early on in the podcast, there are some efficiencies you can find, but every advisor needs to say, "I need to always know one or two hires ahead." And if I'm not spending weekly time thinking about my organization and my talent development, you are going to run into an obstacle someday, and you'll be playing from behind. And so we teach our advisors, "Who's your next hire? What's that job description look like? Do you need it in six months?" Because by the time you realize you need it, you needed it six months before.

And I think that's something in the business that kind of the order of operation to me feels a little wrong when you get in the business, and it's, "Hey, just learn to sell really well." And then learn more about the thing you're selling next. And then, eventually, when you sell enough of that stuff, you should probably learn how to run a business and hire people. And I think there's a better way to learn multiple things at once because it'd be great in business if you just got to focus on one thing. But if you do that, the other stuff starts to light on fire. And every business owner has to be able to have this sense of awareness. You're up in the press box, looking down at the football field. Because if you're trying to just be the quarterback and you're not looking at everything else, that will only work for so long.

Improving Internal Operations Before Starting A New Growth Phase [1:02:03]

Michael: So now take us through how this starts playing out and changing as April comes on board, this hiring process gets rebuilt, and I guess you start hiring. I'm just trying to think of where you are in the process. You've gotten knocked back to four members, and now you've got a new hiring process. Are you trying to rebuild the four back to eight? Is there other stuff going on? Where's the actual evolution of hiring and management of the business at this point?

Sten: Yeah. So we're looking to add two junior advisors to kind of support, learn from me, build their business. I enjoy helping people level up faster. Building our support team, we probably need one more support person to kind of level out the workload there. And then I'm looking for a full-time content person, in the future, building Legacy organically, with Sten kind of doing brute force marketing work in his natural market and his referrals. But the future legacy for multiple advisors to have a flow of business is we need to create a content machine. We need Sten to be out there speaking, writing on a whiteboard, conveying ideas, getting people's attention. And then we need somebody managing that flywheel of new business.

But part of it is chicken, egg. I can't turn on that faucet yet until I know that the machine can handle what I'm about to do to it. And so '25 is probably us building up a rock star team, getting people settled, and then positioning for '26 to say, "All right, game on. We know who our ideal client is. We know where they are. We've created content for them. Maybe it's a book. Maybe it's a podcast. How are we going to get their attention? And let's now go pull them in." So that's the business plan as of now.

Michael: So as a growth-oriented advisor and business owner, does it hurt when you say out loud, "We're going to push all the growth to next year?"

Sten: So painful. But I know it's more painful to start doing it now and I won't be able to deliver to clients. There are some financial planning clients now where I said yes to them when the team was this, and I'm engaged with them, and I got to show up on Saturday for two hours. I'm doing stuff I haven't done for a long time just to honor the people that we've committed to, and I'll see that through. These are the things...my dad grew up, owned an excavating company in Oregon, and he was like, "There were times I was taking jobs just so I could pay my people, and we were losing money." And I think every business may have a cycle where it's, "All right, the people that are here, let's strap our boots on and just get to work."

And so I'm kind of embracing that season as, "Man, I'm learning a lot." And this is almost a necessary transition hockey stick moment for us to say, "We got to do this to prepare us for what's coming next." And whether it's my life story or what I've been through, I'm not under the illusion that it should always just get easier. If you're doing something right, that means your life just gets smoother. It might for a little bit until, if you're looking for it, there's a new peak, there's a new mountain you can maybe cross. And if you decide to go that way, get ready for what comes next. And fortunately, as opposed to when I was young, I kind of ran from discomfort, because discomfort meant you were doing something wrong. I've been trained over time to say, "That's maybe a sign I'm doing something right." If I go to the gym and my muscles hurt, it's, "Hey, that's probably a good thing." And so embracing discomfort, looking for challenges, hopefully in a healthy way and hopefully to a point where you can tolerate it and those around you can tolerate it, but at least leaning into it as opposed to avoiding it.

Michael: So, what else has happened and shifted just as you've gone through this transition, I guess, kind of rebuilding phase?

Sten: I think there is an acceptance of a different level of growth than I used to experience in my businesses, meaning, some things can't happen overnight. And my future self will thank me for letting some stuff mature before I push it too hard again. And part of that, especially for my three kids, is they get to benefit from that mindset because me just doing more because it rewards me in the short term or gets me attention, a huge part of me knows, "Sten, that's not going to get you the outcome you want, and you're going to probably have some regrets." I do not think that means I have to lose my edge or my fire. But there's this way of somewhat being present now, letting things mature and settle.

But I am somewhat of a horse behind the gate too, that it's, "Man, when it's game time and you pull that lock off, we're going." And if I can be patient enough when we go, it's going to stick, and it'll be healthy. And the people around me will be ready for it. And I won't do what I did in the past unintentionally where it was, "Hey, I'm going to run this thing, and we're going to go." And there's somewhat some collateral damage behind me and around me, not intentionally, the people signed up for it, but my lack of experience and maybe wisdom at the time caused me to be surprised when stuff started falling off the rocket ship because we were going too fast and too high.

Michael: So in practice, when you say accepting a new, a different level of growth now, what does that mean? Is that like, "We used to grow X%, and now we're going to grow Y%?"

Sten: Yeah. I think, just based on some other things I'm doing, I could probably show up for work and serve people well and be in the community and add 15 to 20 million of AUM pretty easily. I could probably do 250,000, 350,000 of consulting fees just because the same people come back to us for advice, and organically, we have a good flow. So there's some reasonable level of growth that maybe in our industry people would say, "Yeah, that's great. Why don't you stop there?" My business mind cannot help but recognize the opportunity that exists if you can scale the model. And if what you're doing at this scale works so well and you can build it in a healthy way with the right people, 2x is easy, 10x is totally within reach. And so it's now me having to open my mind to kind of bigger possibilities. But the book, "10x Is Easier Than 2x," you can't think about it the same way you used to.

If I think about legacy growing because of Sten's natural market or his prospecting efforts, yeah, my 2x. But 10x is, man, I need some studs in here and we got to create a podcast. And I maybe have to write another book that has a course that goes with it. But that takes time to build out. Your iceberg, the illustration you use all the time, someday people are going to be, "Man, look at Sten, look at your practice." And I was like, "If you only knew the framework that was laid and the pain that occurred so the hockey stick could happen," and I think that's what we're in now.

What Legacy Looks Like Today [1:09:01]

Michael: So then, where does the business actually sit at this point? Just the snapshot of today, I don't know if you measure by team, clients, assets, revenue, just help us understand where it sits now.

Sten: Yeah. For '24, I think we'll end up at maybe 2.8, 2.9 [million dollars] of revenue.

Michael: Okay.

Sten: The team, we're five people now, rebuilding, shooting for probably eight to nine as a fully built out healthy team if we can fill all those seats we want. Financial planning, probably 25 active clients, probably doing $350,000 of revenue on some of those from business consulting to traditional financial planning. So by many metrics, we're in a healthy place. We have good cash flow. I think the pressure I feel is just the business problems we're trying to solve day to day. Our clients are great. They love us. I do surge, so March is going to be busy for me. And the team gets excited and ready for that. And so, by many standards, the gap and the gain, I want to focus on the gain, we are doing good things, but there's still this part of me, once you see something, you can't unsee it. And with some of the people I get to hang out with, with EAN and advisors in the industry or personalities and business owners I interview on the podcast, I'm like, "Oh, wait, there's this different level of business where leaders lead leaders." And it doesn't have to be as challenging as it's been if you do it well.

Michael: And what is it just in terms of client count or asset base?

Sten: We're at 90 households, $220 [million] of AUM.

Michael: Okay. So, again, I guess that's an interesting...

Sten: But we lost $100 [million] or so of AUM as I kind of trimmed advisors. And one of the paraplanners probably had 20 million or so of people that he had kind of serviced well. And I was like, "I could probably keep them." But they know him, so I'm going to let him buy those out from the practice. And so, yeah, it's tough when you measure yourself as an AUM number for so long, that was the measure of success, and then you cut it by a third. You're like, "Hmm, okay, but now we're actually pretty lean, and the smaller team can handle this pretty easily." But now we need to position to 2x this in 2 to 3 years.

Michael: And so, what are, I guess, the seats on the bus for the five team members you've got, and what are you trying to fill out to be at the place you want it to be to service and grow if you're not feeling it's there yet?

Sten: So we have an operations manager, a portfolio manager, a relationship manager, Sten, and a marketing person, kind of a content flow person.

Michael: Okay. And so, then, what are you hoping to add?

Sten: We need at least one more relationship manager, at least just to kind of make our service team not overwhelmed at times.

Michael: So relationship manager, for you, is that an ops admin-oriented role, or is that an associate advisor kind of role?

Sten: No, they're service-related, paperwork-related role.

Michael: Okay.

Sten: And then I'm looking for two advisors to some degree. I know a lot of advisors with the podcast and the people I coach, and so many of them are...I'm doing good in this other state. I've yet to find a four- or five-year stud advisor that's in Nashville. It's like, "Hey, I want to leave the big firm. I want to come hang out with you because I know..." I want me at 24, a little bit overconfident, wanting to work hard, knows that he wants to take his exams, but just needs a little bit of rocket fuel and some resources around him or her.

Michael: So you're not necessarily looking for advisors that have to join with a big book of business but sounds like you're hoping they bring some.

Sten: Maybe. But I don't need to. I'm going to salary this person, pay him well. I'm going to teach them. Because for me, I just need people to help me with the capacity of delivering the advice, gathering the information, putting into eMoney, building out the financial plan. I can be in meetings and I can get people in the room for now. I could give some people some time to grow into it, but you're not just going to hang out in that role for too long. You don't just get to hang out with Sten and he's going to hand you business. If that's your expectation, you'll be disappointed. But if you get to watch me do what I do and you get to learn, which I think is apprenticeships, that's the best way to figure it out if you can find somebody to watch firsthand. And then my hope is, how do I level you up into an advisor in a year or two to where you have some of your own clients. That path that I got to follow early in the business, it was challenging. I didn't have a lot of support. But I was like, "Give me a little bit of support in some direction and turn me loose, and I'll make you proud and I'll make you money."

So if an advisor came tomorrow and said, "Hey, I'm moving to Nashville. I love what you've built. I got 100 million [AUM]. Can I come hang out?" If it was a culture fit, I'd be like, "Game on." You're not going to come here just so I can take 15 bps [basis points] off the top of your book and make some extra money. I've done that before, and it was a cultural disaster. It was like, "I need people that are bought into the company and what we're trying to accomplish, not just looking for a nice office space. So in the near term, it's kind of two advisors, even if they're junior, younger advisors that can step in, get their CFP, and just get to work.

What Surprised Sten The Most During The Latest Stage Of His Growth Path [1:14:10]

Michael: So, as you reflect back on this journey, evolution, getting through the new ceiling phase of the past four years, what surprised you the most about this stage of the growth path?

Sten: I think my understanding of people and myself, I think there's a healthy way to connect and communicate with people. There's a way to say hard things and not put somebody on the defense. And so I think what was revealed to me is, to lead well, there has to be an awareness, and that put me down the path of therapy, which is great, being willing to say, "Hey, I think maybe I do have some blind spots. And how can I work on those?" I'm not trying to become a different person, but if I can be aware of what the things I'm doing and maybe why I do them and how people receive them, that probably leads to a healthier work environment. And I think it's also just the point of acceptance of, "I wish I could have done some things differently. I can't go back in time. I'm in a posture of learning and willing to get better." And so I'm going to be easy on myself to some degree, but I'm also going to hold myself to a high standard.

So I think learning about people is challenging, that people don't see the world the way I do. Some people just don't want to work that hard, but they want to get paid a lot. And so I think I've had this crash course over the last couple of years of human nature of myself and others. And whether it's right or wrong, to me, it's just I understand it better now. And so I can go into meetings with a little more clarity and curiosity. And so I think, as a young advisor, I was so in my world of I just have to grow and make enough money to survive. Picking my head up and learning about myself and people and how to lead almost felt like a luxury I couldn't afford. But it eventually found me because I did grow to a point where the version of me at that point was not...just the version of my team was not going to go to the next level. The version of me was not going to get to the next level. So I had to go through a period of change also.

The Low Point On Stens Journey [1:16:15]

Michael: So as you reflect back, where was the low point over the past few years?

Sten: I think, two and a half years ago, I think a low point personally and professionally when my personal world kind of fell apart and then, professionally, people started leaving. It was one of those things where I reflect back and I'm like, "How did I get through that?" I took it a day at a time, and for everybody listening, I don't know if there's a point in your life that you think of where you're, in hindsight, I'm, "How?" There was so much going on and changing so quickly. My faith is a big part of that, but also, I started cold plunging, which might help, and sauna, self-care. And so, yeah, probably two and a half years ago is when it's, "Hey, this thing's shifting. I'm feeling it happening."

And part of life, too, when you get healthier, things get exposed. You see unhealthy relationships. And so I think, as I reflect, it makes sense why so much stuff changed in my life because my eyes kind of opened, and I was getting healthier, and I was learning more about business and people and life. And so I think it's one of those things where when you start changing, whether you like it or not, stuff will change, the ground is going to shift. And are you ready for that to happen? And it's going to be challenging, and you can't skip it. You just have to learn to, live in it.

Stens Process For Iterating On Ideas [1:17:31]

Michael: So, what else do you know now you wish you'd known a couple of years ago? You highlighted that it's been a crash course of human nature, but what were the things that you didn't realize then that you know now that you wish you knew then?

Sten: There's this tool I created for myself, and I'll send it to you. We can put it in the show notes. But I found myself using it a lot. And so I was, "Hey, I want to share this with other people."

Michael: Sure.

Sten: And I like to put titles on things. So this is called Iterate To Elite. And for me, it's trying to understand the power of iteration, meaning, your first thought or idea is probably not good. It's actually probably pretty bad. And if we can just accept that it's not great, but you need version one to get to version two to get to version five. And so I'll share this with you, and we can put it up, but it's a spectrum from zero to ten, that I use this tool. And to me, it helps me sit in something. Our hiring process is a result of this tool. Because it's something I'm not good at, naturally, or I haven't developed the skill, my first instinct is probably going to be the thing that just gets me to accomplish it or check the box. And so I almost have to just put that one aside right away. And I use this now with podcast content, if I'm writing a book, if I'm working with a client on a strategy, I try to get through at least three or four of the first ideas and sit in the tension. Sometimes this is me in a room on a whiteboard by myself being like, "I think I ran out of ideas."

But there's a great book called "The War of Art." One of the key parts of it is it talks about resistance. And it's the thing that makes us all feel bad about ourselves, "Man, I didn't get up and go to the gym in time," or, "I know I should do that thing, but I'm going to go home early from the office." And there were times where I was like, "I can get a lot of stuff done, I'm pretty disciplined, but there was still this cloud sometimes of, why am I not doing the things I want to do?" And the book put it into frame that resistance is the enemy that wakes up every day with us, and its sole purpose is to stop us from doing the right thing. And the way my mind works is that almost put a face to the enemy to where I was like, "Wait, I can win that battle every day."

And so if I can feel resistance happening when it's like, "Hey, Sten, you don't need to write that content, just go home early," but I'm going to sit there and I'm going to use this tool and I'm going to sit there and mark lines on there to be version two, "Okay, how can I make that better?" And advisors can use this with prospecting. So I want to learn how to meet people that are in real estate. How am I going to do that? Okay, my first idea is I'm just going to ask my clients for referrals. Okay, that could work. All right. My second idea is I'm going to go to some lunch-and-learns with people that are in real estate. Okay, that's a little bit better. Okay, my third idea is I'm going to put together a resource with a video that teaches real estate investors about some tax ideas. Okay, now you're getting started.

And so it's this process of sitting in and recognizing resistance is going to fight against me, but I'm going to overcome it in order to come up with a much better idea. And so younger version of me was, "Let's blow and go and just try a bunch of stuff and brute force my success," but that affects everybody around you. And if you have a team, to them, it's going to feel like you're changing stuff all the time. And it's going to feel uncertain, because not everybody wants to sit in that risk of change and trying new things. But if I have a tool where I can iterate and, by time, somebody around me, whether it's the leadership team or my fuller team, they're hearing something that's kind of baked out and thought out. And so I have to use this tool to get me through that because that's just the way my mind works, is a lot of ideas, but this tool kind of keeps me accountable to think about it, iterate it, and then bring it to people.

Michael: And so the idea is just to force yourself. You're not allowed to sit down and come up with an idea and run with it. You have to sit it and come up with the idea, and then come up with version two, and then come up with version three, and you're not allowed to do anything until you get three, four, or five versions in. It's just a forcing mechanism.

Sten: Yeah. It's a framework that's helped me kind of operate and sit in the tension of resistance. And "The War of Art" book says you're summoning the muse, meaning, if you sit there long enough, ideas will come to you, but resistance is trying to get you to get up and walk away and kind of run away from the discomfort of not knowing the next idea or a better version of it. And so I put some rules to it for myself. So the first rule is your first idea can't be higher than a three, which means don't be overconfident. You might think you have great ideas, but you have better ones hiding inside of you. The second rule is you need at least five versions before you get to GETMO, which is good enough to move on, which the goal is not perfection. You're not going to get everything to ten, but I want at least five versions of your first idea before you take action. The next rule is once you get to version four, you need outside input. So don't do this in a vacuum on an island by yourself. And then the final one is, before you go live with it, you need to take a day off, a day or two off, and let it rest, and then come back to it.

Michael: Interesting.

Sten: And we'll give you this...

Michael: So first version is going to be bad. You need to do at least five versions before you're good enough to get there. After the fourth version, get someone else to give you input. I guess that's what iterates you from four to five is now is time for outside input. And don't actually run with version five until you take a day to sleep on it.

Sten: Yep. And we'll give you this and those rules around it. Anybody can download it and use it. Mine is laminated so I can use a whiteboard marker on it as I iterate. And it's just, "Okay, this works for me." This is helping control. It doesn't feel like it stifles my creativity and drive. It feels like it just slightly contains it.

Michael: So, look, for folks who are interested and want to download a copy, we'll have it in the show notes. So this is episode 427. So if you go to kitces.com/427, we'll have a link in the show notes to Sten's Iterate To Elite framework tool. Awesome. Thank you, Sten.

Sten: You bet.

Stens Advice For Other Advisory Firm Owners [1:23:34]

Michael: So, what other advice would you give advisory firm owners? Or maybe, I guess, closer to where you were a few years ago, I'm running a very successful, very financially profitable practice. It feels like it's going well, and I'm excited to keep growing, but…

Sten: I think, for me, the talent needs to become a priority for your business. What I've heard from people is the fear of hiring is they don't know where to find that person. I think the fear of hiring or growing goes down if you have a pipeline of people you've set up. You may interview somebody great and you don't hire them right away. But now they're on your roster and you know they exist. I think a leader or a business owner, and this was not natural to me, I didn't think this way, I was like, "I'm going to work hard until I hit a capacity limit, and I'm going to hire somebody to relieve that." And so I was hiring more in a reactionary mode as opposed to, "I'm going to be forward-looking, always looking for great people. So by time I need somebody, I've laid some groundwork for that."

And so if you're a solo advisor now, that means, "Yeah, I'm going to try to learn from whether it's Sten and EAN about hiring my first admin assistant what's the job description look like," or you're like, "I have a bigger firm, but what I don't have is an integrator. I do not have an A-plus level person that could step in here and link arms with me as the owner and make the next thing happen." Whatever the tier is, get educated now on where those people are, how to find them. So many advisors, when they come to our events and we coach them, they will not argue that they're at capacity and they know they need help. They either see it as a cost that they don't want to pay or they're like, "I just don't know where to get started." And like anything, this is kind of the Iterate To Elite tool, yeah, version one is the "I don't know what I'm doing, and this is kind of awkward." But if you spent two days online learning about how do you hire people, what's the process, you will become better than most people if you give it some level of effort for a period of time.

And my challenge to every advisor listening, every firm owner listening, how would you grade yourself on talent acquisition? And I think that will be a direct correlation to the next phase of your business, the health of it. You'll look back and say, "That was the thing that was the precursor to whether I'm doing the next thing well." Kind of like my business, I was not good at that. I did not prioritize it. I went full speed into a wall, and there was collateral damage, and I'm having to rebuild. In hindsight, if I prioritized that, might not have done it perfectly, I would have been less taken off guard.

Michael: And in practice, where did you go to learn and figure this out? For folks who are listening, yeah, I don't grade well on talent acquisition, that's why my business is where it is right now. Where do you go to solve for this? Where did you go to solve for this?

Sten: I asked clients that had worked at some big companies what their hiring process was. Dave Ramsey has a company, Ramsey Solution that's in Franklin, and they have a famous ten-step hiring process. And so I was like, "I don't know if I want to go that far, but I'm going to try to take some best practices." And I knew some people that went through that process. So I think I'm going to just go into a posture of curiosity and start asking and start Googling and start listening to podcasts about hiring. Nothing we are trying to do has not been done before. And in the world we live in now, the content is there for the taking if you're willing to go find it. And so I just had to enter the season of I have to learn. I have to learn. It's almost the best use of my time right now, one served my clients well. But if I have 15% of my schedule available, the best use of that for the company is for me to figure out how to find and bring on the right people. And I bet that's true for most advisors listening, to some degree. You need help and you need to get better at figuring out how to get the help, even if that's the thing that gets over the head trash of you're not hiring the person you know you needed to hire for the last year or two just because you don't have the confidence in it.

What Success Means To Sten [1:27:32]

Michael: So as you know, this is a podcast about success, and one of the themes that always comes up, just that that word success means different things to different people. It can even change for us as we go through stages of life and stages of growth of the business. And so you continue to have what, by any traditional metric, is an incredibly successful advisory firm. And I believe you're still in your 30s and have a long, long time horizon for this. So the business is in a wonderful place. How do you define success for yourself at this point?

Sten: I think, in the last season, success, launching EAN and building a community of advisors and kind of pouring into people and sharing what I've learned the hard way and that being successful, I think that, for me, was a season of, "We did it." The feedback we're getting is "This is the best event we've been to. You've changed my practice." I love the feedback me and the team are getting on that front. I think the next season for me is I want the companies I have to be able to run in a healthy way without being dependent on me. And so if we talk a year or two from now, and I say, Michael, when I show up, they're like, "Oh, hey, Sten, how are you doing?" and they don't need me and I can be gone for two weeks, four weeks at a time, and the company thrives in my absence, I think that, to me, would be the next professional accomplishment, is to find great leaders, develop them, and trust them to thrive on their own.

Michael: Very cool. Very cool.

Sten: So when you write me the playbook on that, just send it over.

Michael: Will do. Will do. I appreciate you joining us, Sten, on the "Financial Advisor Success" podcast.

Sten: Thanks, my friend.

Michael: Thank you.