#FA Success Ep 314: Focusing On The Planning Work You Enjoy By Providing Outsourced Virtual CFP Services, With Sue Chesney

Resources Featured In This Episode:

• Sue Chesney
• Delegated Planning
• Planning Zoo
• Kitces Research On Advantages Of Niching In Time Use, Planning Approach, Pricing, and Productivity
• Caleb Brown
• Carrie Jones
• Toggl
• MoneyGuide Pro
• eMoney
• Holistiplan
• NaviPlan
• RightCapital

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

Full Transcript:

Michael: Welcome, Sue Chesney, to the "Financial Advisor Success Podcast."

Sue: Thank you so much for having me. It's great to be here.

Michael: I'm really looking forward to the discussion today and talking about what, to me, is this rising phenomenon of advisory firms that do financial planning, that are starting to outsource parts of the financial planning process. I feel like historically for us advisors as we started doing financial planning and hopefully went and get our CFP marks to do more financial planning, the whole implicit thing was you're going to do more financial planning, like meet with clients and gather their data and do a discovery meeting, enter it in the planning software and do the analysis that CFP board helps teach us how to do, and make the plan and deliver the plan to the clients, and implement it and monitor it and go through the whole process. But there's this rising shift I'm seeing, I mean, we see it in some of the Kitces research data that we do, that firms are starting to find different ways to handle some of that middle part of the process, the gathering the data, getting it in the software, doing the analysis, building the plan. The advisor typically still holds onto the… I establish the relationship and I present the plan recommendations to clients. But a lot of that middle portion gets a little bit more systematized. It becomes a squeeze point of advisory firms as they start to grow and scale up. And so, some are starting to hire team members just to do this on a dedicated basis. Some are starting to outsource to solve for on a dedicated basis. I know you've spent the better part of a decade now building one of the larger outsourcing firms that helps to solve for this. And so, I'm excited to talk about how the planning process is starting to change in our world as these parts of the planning process are breaking apart and it's no longer just a given the advisor will do every step of the financial plan building process.

So I think as we kick off here, I'd love to start by just having you describe the business that you have and what you do in the advisory community today.

How Delegated Planning Supports Financial Advisors With Outsourced Virtual CFP Services [06:13]

Sue: Sure. So Delegated Planning is an outsourced financial planning support firm. I think that we differentiate ourselves in that we're trying to provide virtual CFP services as opposed to, like you said, the whole middle part. You have the data entry, you've got the, what I consider paraplanning, and then the virtual CFP service. And if you think about it with an advisory firm that has a number of employees, you can see where that role might actually change. In a larger firm, they might have maybe newer people, junior people, interns, doing the data entry. You might have somebody else doing the analysis, somebody else making the recommendations and then the lead advisor making the presentation. So, we created, or I created, I guess, Delegated Planning back in 2011 to provide planning support. And we have chosen to focus on being the virtual CFP, so meaning not only doing the data entry and the paraplanning but taking it further to thinking through strategies and recommendations and how we can improve, partnering with the advisor to figure out how can we improve that client's plan, if that makes sense.

Michael: It does. But just take me a little bit further on that distinction because again, for better or worse, I feel like to the extent that firms start talking about or thinking about outsourcing some of the financial planning support, I feel like the number one place that they go is that kind of data entry, get the numbers in the software and maybe build out the skeleton of the plan, the template of the plan so the advisor then can figure out what we're going to recommend and then get ready to deliver it to the client. And so, I'm intrigued that just you're making a distinction of a couple of different layers here. There's data entry, there's paraplanning that's different than data entry, although I don't know that a lot of other advisors think about it differently, so I want to understand the difference, and then there's virtual CFP. So, help us understand in more detail these three pieces of the difference between data entry, paraplanning and the virtual CFP part.

Sue: Sure. So I think data entry is pretty self-explanatory. The advisor will collect the data, source documents, get the discovery questionnaire, any meeting notes. And the individual would then turn around and get that data entered into whatever financial planning software program they're using. They're not making any analysis about the data. They're just literally putting it into the correct field in the program. And for most programs, that creates the base case, right? This is what you have and what you're currently doing, if you're saving or whatever, and that's it.

And then, the next step for me, how I view this is the paraplanning piece. Okay, let's go to the next step. Let's start analyzing this. What does this look like? Where are the gaps? Where are the risks? Maybe create a scenario, a separate scenario like with the recommendation of, "Okay, well, if you changed your investment from where you currently are doing it to our 60/40 portfolio, here's how that would change." Does that make sense first?

Michael: Yeah. Yeah. So, my data entry is my pure just collect the numbers, get the numbers into the software. It's, I was going to say putting data into fields, although obviously given the complexity of some financial planning software today, it's a little bit more complex than just typing data into field. Figure out how to get the planning numbers into the planning software. The paraplanning is, at least as I would frame it based on what we were discussing, this is more intellectual knowledge worker or...

Sue: Yes.

Michael: ...this is the data's in the planning software, we can start looking at the output. We can create a scenario around the output. We can spot, okay, this client is really far off from actually being able to retire and is probably going to need to save more and do some different things. So we can start spotting the actual areas where we're probably going to be formulating recommendations and doing something different and might even build alternative scenarios to show the impact of what happens if we do something different.

Sue: Correct. Yeah. So, identifying… analyzing that data. So we've got the data in there. Now we're going to analyze what is it telling us.

Michael: Okay. So then, what's the next part?

Sue: So then, the next part is actually thinking through strategies and coming up with recommendations. So, we know they're underinsured for life insurance, let's say, or disability. So then, it's going the next step. Okay, how much do they need? Is it a permanent need? Is it a temporary need? If it's temporary, how long? Is it an estate tax issue? So we want a second-to-die. So really going further and having much more knowledge and expertise in planning. So, we have 15 planners on our team right now, all of which have had many years of experience in front of clients as well as doing planning. So, it also comes back to framing of, okay, what is truly realistic for this client? Is this strategy far too complex for this client to implement? And with that, we partner with the advisor because the advisor actually knows the client. We don't know the client. So, we can come up with all these recommendations and then that advisor comes back and says, "Yeah, this person is absolutely not that organized. They're not going to follow this. I'm not even going to recommend it."

Michael: So, this last domain, thinking through the strategies and recommendations, that's what you would characterize as the virtual CFP work?

Sue: Yes.

Michael: So, if I'm thinking about this in pieces, I thought your insurance example is a good one. So, my data entry tier might take the insurance information that they put on my data gathering form, or look at the insurance policy that they gave, and enter in they currently have $500,000 of term insurance. It's 20-year term policy. Here's how much they're paying. That's the data entry numbers part. The paraplanner part may be, okay, but then we've run a capital needs analysis based on their retirement goals, what a surviving spouse could do on their own if the person passed away, the kid's college needs, the rest…It looks like they need $1.5 million of insurance and not $500,000. So my paraplanner determines they're underinsured.

Sue: Right.

Michael: My virtual CFP may then be the one that comes in just to figure out, okay, so how are we going to bridge this gap? Well, we can buy more term insurance. Are we going to need to buy 20-year or 10-year because the time window is very limited, or 30-year because there's other stuff going on. Do they also have an estate tax issue, which means we're going to have to wrap this thing into an ILIT. Do we have other permanent insurance needs tied to the business? Do they have an old annuity that we can do something with? All these other pieces start cropping in to figure out, okay, what would my actual concrete strategy or recommendation be? And that's my virtual CFP work in the last part.

Sue: Exactly. That and one that cropped up recently is thinking through, okay, this is how you own these assets now. What is the ultimate desire for those assets? So we've been doing a lot more estate planning stuff recently, which is why that popped in my head. So what is the ultimate goal for this asset and how you want it to eventually be used and by whom? And so, thinking through titling of accounts, things like that, if that helps.

Michael: So I get it about the three different layers. I'm thinking about this relative to where a lot of us are as advisors. For better or worse, we don't typically make these distinctions because historically, I think if we're doing planning, we just did all of this.

Sue: Do all of it. Right, right.

Michael: I enter the data and then as I'm looking at the data as I'm entering it, I'm seeing some gaps. So I'm starting to spot my paraplanner stuff. And then as an experienced advisor, I'm thinking about, okay, they're clearly underinsured so I'm going to be thinking about what kind of insurance recommendation they're going to need. And I'm just formulating all of that together as I'm doing the planning process. So help me think about how does an advisor break this apart if I've always done all of it together? Or how do I even know if I'm breaking it apart or if I should break it apart this way?

Sue: Yeah. And that's the conversation I tend to have with a lot of perspective advisor clients. So, they'll call and I'm trying to fare it out, okay, what exactly do you need? Do you really love doing the planning work yourself? You just hate putting the data in? You probably just need a data entry person. Do you want someone to get just the scenario set up and you're going to take it up from there and come up with all of your own recommendations? You probably just need a paraplanner. Now keep in mind, a paraplanner is doing the data entry also. You can, you can have one person do data entry, a different person doing your paraplanning and a different person doing your virtual CFP work. I don't recommend it because each person, it's going to take a little extra time to understand the client situation.

Michael: Right. Every bit of this requires a knowledge of the client and every handoff means a new person in the scenario...

Sue: Exactly.

Michael: ...that also has to get up to speed. So you wouldn't necessarily have a three-person line. Not that we'd literally do it this way, but the factory line process. You wouldn't have the data entry person that does their piece, and then hands it off to the paraplanner who does their piece, and hands it off to the CFP, like a Henry Ford style, everybody does their one little thing in the process, because the ramp-up to know the client makes that too burdensome for each person has to learn or relearn the client.

Sue: Yeah. And like you mentioned, you're looking at a source document. You're immediately getting some red flags, right? You might be looking at a property and casualty declaration page and be like, "Wow, they don't have an umbrella" or "they're underinsured." And so, you want to make a note instead of...so we have had people hire us and say, "Okay, well, I'm going to have my assistant or somebody else in the office to the data entry and I just want to pay you for your brain on the strategy piece." And I've done it and it depends, is the person entering it really know what they're doing? Do they want us to check that work and confirm that they did it correctly? Because oftentimes, there's a disconnect there. But again, I think there's a time component that gets added because you're going to have to go back and look at a lot of the source documents anyway. So having the same person do all of it is the most efficient than breaking it apart.

Michael: Which, I guess, in practice is why either A, advisors historically just tended to do the whole thing themselves, or B, that when they're hiring someone full-time to support them, they tend to hire a full level associate advisor who can grab all of those pieces. You have your CFP so you should be able to at least think through strategy recommendations. I may supervise it, but you can think through strategy recommendations, and you can do the paraplanning work, and you can do the data entry work. Maybe ideally, that would have been handed off to someone else, but if I'm the senior advisor building my business, better you doing it at your salary than me doing it at mine, because I got to grow the business. So that's a good handoff. So that clicks for me of why it feels like most firms either have, at least in the past, either just retained this and the advisors did it themselves or they got that associate advisor right-hand person who then handles all that stuff and the advisor simply is reviewing the plan at the end to make sure we're formulating the right recommendations and putting the right action items in place for clients.

Sue: Right. Yeah. But then you have to think back, okay, so there's a lot of smaller firms that either don't want to hire, they're not great managers, potentially. They don't want to deal with the whole HR and having an employee. And thinking through is that the best use of their time. Is it really the best use of the advisor's time to sit there and look at a property and casualty declaration page? As opposed to delivering to them, here are the red flags from this and then if the advisor wants to go check it out, they can.

Michael: So is that the distinction of who starts to look at this as an outsourcing opportunity? Is it, it's the solo advisor who's got enough of this stuff that either they probably should be delegating it or there are just parts they don't want to do? I don't want to do the data entry more. I don't want to frame up the base case. I'd rather just do the recommendation stuff at the end that I like doing. I like doing the strategies part. So, either they need to delegate or they've just got parts that they don't want to do anymore that they're handing off, but they don't necessarily want to hire a full-time associate advisor in the firm that they then have to manage and make payroll on, all the other pieces that go with that. So they say maybe an outsourcing firm can do this for me on a contract basis?

Sue: Yes, and that was sort of the original business model when I started this. It was sort of being a part-time CFP for a number of firms. And when I started it, I thought, "Okay, this is great. I will continue to even work with their end client, communicate with them." And we can go down this road separately, but I quickly realized from a compliance standpoint, it's a nightmare.

Michael: Because you were actually in communication with the clients as well?

Sue: Yeah, and that requires you to keep all the correspondence and have separate emails. And then, Dr. Smith would call, and you'd have no idea which advisor they were working with because there's five Dr. Smith's. And so, you can see where that goes.

Michael: Yes, I can vision how quickly that goes downhill.

Sue: Yeah. So that was the original idea. And that, I would say, is the majority of our advisory firms. We support, I don't know, about 55 firms right now. The majority are smaller firms or firms that want to be completely virtual. They just don't want to have staff to manage. However, I do recall getting a larger firm that had three partners, five CFPs and two or three client service support people. And I just was like, "Why would you hire us? You've got five CFPs. I don't really understand." And he told me, and it made sense at the time, was, "We have promised these services to our clients." And I think they were doing at least two meetings per year, one was a plan update. "And we are so busy servicing the client, doing the things that we promised that we can't focus on the business." And so, at that point they were using, oh gosh, was it dbCAMS still from the '80s?

Michael: Oh, yeah, portfolio performance management.

Sue: And they were trying to find a new...they needed a new program. Could you imagine the disruption of switching historical data 40 years?

Michael: Yeah, it's painful. Yeah, if you were early days dbCAMS or early days PortfolioCenter and you literally have data well back into the '90s. Yeah.

Sue: Yeah. That's probably an 18-month process to transition that data and how do you continue to service your clients while you're doing that? That was one project they had. Another, I think, was they wanted to move physical offices. They were trying to figure out career paths for people, so some of the junior, they wanted to move some of the junior advisors up to be more client facing. So we were stepping in to do some of that. We were mostly doing a handful of new client plans, but the majority of plan updates for them, for their meetings.

Michael: Okay. Interesting. It strikes me, we've been doing some research on the Kitces platform just in how advisors through structure and manage their teams as they grow and have seen something very similar, that most firms seem to bring paraplanners in at either two places in the process. It's either you've hired a...your first hire's usually a client service administrator, just take...

Sue: Absolutely.

Michael: ...paperwork stuff off your, off your plate. The next hire is usually an associate CFP type to really sit second chair in all the meetings, but that's an expensive position if you have not hired before, you've only hired administrative staff before. And so, for a lot of firms before they're ready to go that full-time associate CFP, we found a lot start hiring part-time paraplanners, outsourced paraplanners, to fill that gap. There's too many plans for me to do all the plans in the client's port work because now I probably have 30, 40, 50 clients. There's too much planning work to do all of it myself, but there's not quite enough revenue for me to hire a second full-time person at the cost of an associate CFP in today's very competitive marketplace. So they take on an outsourced paraplanner. And if they don't want to scale it very big and manage people, they may stay at that level indefinitely.

Sue: Yeah. My very first advisor client, that's exactly what happened. It got to the point where I called her and said, "This isn't really sustainable. It's not very cost-effective for you. I think you've hit the point where you probably need to hire another person." And so, I helped her find the other person and basically trained him on the part that I was doing for her firm. And then, he took over half the client base and was doing business development for the firm. And I kept the other half.

Michael: Interesting.

Sue: I've had it happen where a planner left, so I stepped in and did the work until the new planner was hired, trained them on what I did for that firm, left. Six months later, they're like, "We're busy again. We need you." And so, I think five times for that firm, we've come and gone helping them just plug in when they need us and leave when they don't.

Michael: Yeah, the other scenario that we saw starting to crop up in the data, ironically again is actually a version of the larger firm that you were talking to, which is we see firms start looking at paraplanner type support again when they get out to four to five-person teams. Because usually by then, there's an owner, there's a second lead advisor that's handling relationships that the owner's bringing in and handing off. There's an associate CFP that's usually sitting second chair in everything, but they're in a lot of meetings because there's two senior advisors to support now. And then, there's a client service administrator supporting all of them. And so, there's a good amount of clients, a good amount of revenue, but there's a lot of clients. There's just a lot of financial plans to do and analyze and update. And the associate CFP doesn't have a lot of time because they're in a lot of meetings with the other two doing the client facing support work. And so, they hit another crossroads where either you got to make the investment to hire another full-time paraplanner who's not revenue producing but just leverages up the other three planners in the office. Or outsourcing appears again for the firms that say, "No, no. We just want to hire the full client facing folks. We'll outsource everything else so that we can keep our payroll more lean."

Sue: Yeah. And I'd say the other advisors that tend to support us, they want to remain smaller. Maybe they want to remain as a solo. But they really want a second set of eyes, right? They want the expertise of am I missing anything. Should I be looking at it differently? Is there a better way to do this? We get a lot of consulting questions, like how can we make this more efficient and how do I communicate this? I've had a number of calls of just framing. The plan success is not where I want it to be. How do I frame this with the client?

Michael: I've seen just so many advisors over the years who are solos on their own. It's lonely not to have anyone else to bounce client scenarios and ideas off of, especially if you started in a larger firm environment where there were other people to talk to and commiserate with. But you went out on your own for whatever reason you wanted to go out on your now, around independence. Good news, you can do whatever you want and don't have to deal with the large firm. Bad news, you don't have co-workers in the office the way that you did in a large firm. There's no one to talk scenarios through with if you don't have a study group or some other kind of community group to work with.

Sue: Yeah. There's that and then there's also when you get the one-off client that has a situation that most of your clients don't have, like the student loan forgiveness.

Michael: Right. Specialized scenarios.

Sue: So, they're like, "Oh, gosh." Yeah. So now I've got to go research this whole thing for this one client that it may never pop up again. And the same is true probably with the financial planning programs, right? So, they're constantly coming out with updates and it's like, okay, do I want to be an expert in the program or do I just need to know how it works so I can use it for presentations with the client and explain it. But I don't really need to know the nuances of they changed, they moved the healthcare entry from here to over here and we got to watch out for the IRMA, you know, that kind of stuff.

Michael: They change how you do the executive comp option stuff into the little module. Yup. Lots of good memories. So, for firms that go through this process, per your comment of it creates a lot of client knowledge overhead to have too many handoffs, of those three pieces, as you frame it, the data entry, the paraplanner and the virtual CFP, do firms typically engage for all three of those? Are there some that still try to carve up pieces of that? I've got a client service administrator, they can actually enter the data. He doesn't know that much about planning things. He's not a CFP. He can't do the paraplanner work and the rest. I got a person that can enter the data, do the rest. Or hey, I like making the strategies and recommendations because I like learning all that planning stuff. But please, just do the data entry and set the base scenario. Do you have advisors that still carve it up that way or because of the handoff dynamic, does it tend to be very all or none, if you're going to hand it off, you're really just going to hand off everything or you're not?

Sue: I would say 95% have us the whole thing. I just got off the phone this morning with someone who really just needed data entry and I called him, I was like, "We're expensive. I have another solution for you." They literally were like, "We just want you to get the base case set up." And their planner had left and they were trying to hire somebody. And I said, "Okay, we can do it." But yeah, I'm always willing to try it and we just explain the pitfalls of it if they want to try it. And usually, the first time through we'll be like, "Okay, are you sure that the rental income that you listed as the MoneyGuidePro income is net of expense or gross of tax? And they're like, "Oh, no, I just took the gross rent off the tax return." It's like, "Okay, well, that's not the number." That's going to be flowing into the plan, right? So, we usually catch a few of those things, which then they start to rethink, okay, is it really worth, maybe it's just better just to have the person do the whole thing.

Michael: Maybe I just need to stop doing this myself.

Sue: Yeah. Yeah.

Charging Fees For Virtual CFP Services Based On Time Complexity [30:55]

Michael: So how does this work from a business pricing perspective then? How do you charge for these kinds of services? How do advisors budget around these types of services?

Sue: Yeah, so we… and I struggled with this. We bill hourly to the minute because every plan is so unique and every advisor is so unique. I tend to give estimates, and it also depends on the program they're using, right? NaviPlan requires a whole lot more input than MoneyGuide does. So it depends on the program generally. It depends on how organized the information comes to us. So some solo advisors are just take whatever the client gave them and hand it off and tell us to sift through it and figure out what we need. And others...

Michael: Right. I’m imagining…Some are like, "I've got a really rigorous data gathering process. Here's all the information. It's perfectly meticulously documented in my data gathering form." And others are like, "Yeah, client uploaded 17 PDFs to the vault. Here you go." Have fun, Sue.

Sue: More like 50. Here are the 50 documents.

Michael: I guess that's true. That's probably low at 17.

Sue: Yeah. Here's the 50 documents but we really only needed 20. But we're going to look at them if you're giving them to us because we don't know. So there's that piece. There is the are we entering all the accounts down to the holding data or are you linking accounts? So there is ways to get efficient there. Estate planning. So one of the questions I always ask is what do you consider a financial plan? What are all the areas that you cover? So, estate planning, a lot of people check that and I say, "Okay, what does that mean? Does that mean you just ask them if they have documents and were they reviewed recently? Or does that mean you're actually reading the documents and having...you would want us to read the documents and illustrate visually how the assets are going to transfer, who you've named in these different positions." So we don't get that often, but maybe for some advisor's larger clients, it's labor intensive the first time but people don't change their estate planning documents that often. So you can pull it out at every meeting, say, "Hey, has anything changed? Your child is now 21. Your will says you're going to pay it out at 25 outright. Are you still comfortable with that or do we need to adjust that?" So it is nice, but it's labor intensive, right?

Michael: And so, just curious, how do you track time internally hourly down to the minute?

Sue: Toggl. We use Toggl.

Michael: Okay.

Sue: Which is great because not only...so we bill monthly in arrears for work done the previous month, but plans can go beyond a month. So what's nice is we can pull a report for the whole year and say, "Here is how much time and money you spent on this client and you should compare it to your revenues for that client and make sure that that's a profitable venture for you." Because I don't think...a lot of advisors have no idea how much time it takes them to do a financial plan or how much time they spend supporting a client.

Michael: It strikes me that for a lot of advisory firms, there's, I guess a double-edge sword, there's nothing like putting dollars on the line by paying someone to do this work in a hard dollar cost to A, to really see how much the planning service costs and just how...I was going to say how invested you are into the planning, but how complex and expensive the planning process is that you've created that you're delivering to clients. And then, secondarily to raise the question, so is that actually really aligned to the fees that you're charging? Or are you undercharging?

Sue: Yeah. Another labor-intensive piece is the deliverable, right? So some folks will have us write a 30-page financial plan. And others will just have you print out the report from the program and go from there. So yeah, it's interesting to see how that plays out.

Michael: And so, what's the actual pricing structure or rate? Is it different hourly rates depending on the nature of the work or who the person is or do you just have a single standard rate for everything?

Sue: Yeah, it's a single standard rate. Right now, it's 160 an hour, although I haven't raised it since, gosh, 2018. So I am kind of relooking at all of that. That's what I pay the contractors and what we charge.

Michael: And per your earlier discussion at [$]160 an hour, look, if I'm an advisor that is ideally billing my time at $200 to $300 now or more for client facing work, this is a good deal for me to delegate. If I could train my CSA to do some of the data entry, it's probably a better deal for me to train the CSA internally if that's the only thing I need is someone to do data entry. But if I'm going to do the whole thing all the way through, it still becomes cost effective to outsource because otherwise I have to add up cost with the handoffs anyways, which doesn't save me in the end.

Sue: Yeah. Exactly.

Michael: So, I am curious just for being a firm that charges by the hour down to the minute, invoices every single part of every single financial plan down to the minute. I'm really curious from your perspective, what do advisors do that makes the planning process more time consuming? And what could we be doing differently that saves time? Because in your context, it literally saves cost. But what do we do that makes it longer or could change to make it more efficient?

Sue: Good question. The data gathering up front, so we definitely have gotten calls over the years, I want to start adding planning as a service to my current investment offering. And I have that conversation, do you understand the labor involved to just add "planning as a service?" And so, you're trying to explain here's all the data you need to collect. And if they ask a question and they say, "Oh yes, I have this," that begs five more questions. So it's helpful if they, up front, the advisor knows what to collect and understands why it's needed. So you don't have to have somebody go back to the client five times and say...

Michael: Because otherwise, the advisor, who isn't as experienced with it, just says, "Hey, I gave him a standard data gathering form and..."

Sue: Here you go.

Michael: "...here it is." And they include their tax returns. And you get their tax returns, there's three Schedule Es here. They have a whole bunch of real estate. Do you have all the information the real estate?

Sue: Right.

Michael: Oh, I didn't know they had a real estate. Cool, follow up with them and grab that data and let me know. And now suddenly we're in the back-and-forth process because a firm that hasn't done planning before doesn't realize that you might want to check further into real estate and here's where you look for it on the tax return.

Sue: Yeah. And it's even firms that have done planning, but they've got their CSA doing the data gathering and they're not planners, so they don't really know what to ask for. So, you always have the document checklist, right? We all have all of our own templates that we're happy to share or we try to use the advisor's version because they have a very specific way they want to ask questions. They've been doing it that way for a long time. So, we try to work the first couple projects following their process, and then we meet and do a debrief and say, "Okay, how do we make it more efficient?" But if someone doesn't have anything, we've got plenty of templates to start with. But yeah, they'll check off that they've got...well, the tax return's a good example. Oh, so they're writing off mortgage interest. There's nothing about a mortgage in here." Did they pay it off? Maybe they paid it off. I don't know. We need to find out. So that adds a lot of time that I don't think it's accounted for on their CSA work or the advisor, depending.

Michael: So, quality of data gathering, which I'm presuming ideally that gets solved by advisors building a better checklist of just ask your client for all of these things. If you give the client a checklist, that includes the mortgage statement. They'll give you a mortgage statement and we don't have to look at the tax return to see that there's a mortgage interest deduction and then come back and ask you why there's no mortgage statement.

Sue: Yes. I remember we brought on an advisor who, I think he was in the 401(k) space originally. And he started his own RAA, so we gave him the document checklist. He's like, "Well, this is really personal information. I can't ask for all of this." I'm like, "What do you think we're doing? This is personal stuff." So we literally had to do a table to say why we needed each piece so that he could communicate that to the client, like why we needed a tax return.

Michael: And so, is that actually something that you've built and provide to the advisors you work with? Like hey, if you don't have something, here's a document checklist that you can use.

Sue: Yes. I have a lot of templates I've created. I've kept them over the years. We tend to start with it. So I have one advisor client, I love her to death, she works with nurses. Nurses are a great market. They're organized. They follow a plan. Her data gathering form is four pages and it's got everything that you need on it. It's pretty amazing. But yeah, if they have nothing, we've got something to start with. We work with the advisor to fine-tune it for their types of clients. And then, if we find we have to keep asking a follow up, then clearly we're not asking it correctly at the beginning, so let's improve the way we ask for it.

Michael: I guess that's just part of the nice effect of the work that you do and how you do it is, you're doing this for so many clients repeatedly on an ongoing basis that if something is persistently not providing you the information that you need, you get to see it in your repeatable process and...

Sue: Yeah, it's our problem. It's not their problem. And we get to see how a lot of other folks do it. So, we get to see, "Oh, well, that's a great way to think about it. Let's try that."

Michael: So data gathering becomes an area where a lot of time suck and wastage happens if the firm doesn't know to ask the right questions up front and/or doesn't have a good document checklist to solve for it up front.

Sue: Yup.

Michael: So, where else?

Sue: There's that. The manual entry of accounts and their holdings. With integrations now, it's like why wouldn't you just link the accounts? The option's out there.

Michael: So, you're saying eMoney, RightCapital, all the tools that have account aggregation, just having your clients set up their account aggregation to link all their investment accounts.

Sue: Yeah. And what I tell advisors, a great way to do it is quote your price and say you'll knock off X if...”Mr. Client, I'll knock off X dollars if you're willing to link your account. And if you're worried about us having access, all you have to do is change the password.” They break so easily, right? It’s very easy to reverse that decision later. So maybe you quote a little higher price than you normally would to try and motivate them, and then knock off $250, $500 off the plan price.

Michael: Okay. I like that. I like that. It gives people a little nudge, a little skin in the game of here's why you might want to take a few moments to link your accounts. So what else saves time?

Sue: What else? So again, if we're digging into estate documents, that's just you have to read through it and you have to understand language and all that stuff. I would say the other biggest piece is the deliverable. So deliverables really vary by advisory firm that we support. Like I said, we've got some that will have a 30-page Word document, right? And a lot of it's static. What is life insurance? Why is it important? Here's what you have. Here's what we recommend. But having to write that and check it for grammar and every time something changes, you got to go back and double-check everything, that takes a long time. We have the one-page plan, right? People that want to really get it down to a one-page plan. The majority of our advisors, we do an executive summary. Really just trying to focus on what we think is the most important message the client needs to hear. And if they want to dig into the plan, we'll do the printout from eMoney or MoneyGuide and they can go dig into all the numbers later.

Michael: So not necessarily a lot of custom plan writing as your standard, but we'll do a very specific executive summary for the client and then essentially supplement that with the standardized financial planning software...

Sue: The output.

Michael: ...output if people want to look at their numbers or dig into where the numbers came from for the engineering clients.

Sue: Yes. Yeah. And what's interesting is where in the process...some of our deliverables are internal. It's never client facing. The majority are client facing. So they're very customized to that advisor and how they like to present information, PowerPoint, Excel, Word. And then, you've got folks that will present in the program, looking at the what-if area of MoneyGuide or in RightCapital and do some co-planning there. So the writeup won't happen until after. So here are some choices. Here are some scenarios we built. And here's the impact of those. What do you think, Mr. Client? And then, they can say, "Okay, yeah, I think we can probably do this." Say okay. Then we do the writeup and say all of those things.

Michael: Interesting. The firms that do it more collaboratively, more co-planning style, you'll do the data entry and formulate initial recommendations or some summary, but then the advisor will do their live collaborative co-planning thing Decision Center, Play Zone, whatever it is, figure out which things the client actually wants to do. So I'm not going to print you three scenarios. We're just going to grab the little sliders in the meeting and you can see what each of the three scenarios does by dragging around the sliders. You tell me which one you want to move forward with and then after the client meeting, we'll write up the plan with the path that you chose.

Sue: Right, right. Because a lot of...

Michael: And it becomes a post meeting deliverable.

Sue: A lot of the other recommendations are really based on that initial retirement goal. So, if that changes, well then, that might change your insurance recommendation. That might change your disability recommendation because now we have to save more in order to achieve this. So that means if you get disabled, we need more money coming in.

Michael: So does that save time in the process because you don't have to make the big deliverable up front? Or does it just shift the time in the process because now you still have to make the deliverable after the fact and you have to debrief on the meeting after the fact, figure out what's going to go in the deliverable after the fact?

Sue: No. I think it actually, it doesn't take more time. I would think that either saves time or it's the same amount, because then we're not writing up five scenarios like you said.

Michael: Oh, the writeup's happening either way, but printing three to five different scenarios and building them out just takes time.

Sue: Right. And your recommendation might change on the scenario they chose. So now you're writing two different recommendations. Be like, well, if you decide to do this, if you're willing to work longer, then here's the recommendation for this. But if you really want to retire now, if that's your priority, then we need to look at it this way. And so, it cuts down on all of that. And personally, I think co-planning is the most effective way to communicate with the client, because you're not telling them what to assume. You're letting them have some impact on it. They're having buy-in on those decisions. Say, "Okay, look, your plan is looking successful." And they say, "I'm really worried about inflation." Be like, "Great. Let's just plug in a higher inflation rate and here's what happens. And now let's talk about that." As opposed to us advisors deciding and giving them a static report and say, "Here's what it is."

Michael: So it sounds like four primary domains where advisors may be either can save time or may unwittingly add time and cost. Not a good data gathering process that creates back and forth. Manual entry of accounts instead of using account aggregation to pull the balances in. If you do estate planning, just if you're going to go through the documents, that's not a lightweight process because they're not short documents. There's a lot of stuff there. And then, how you produce your deliverables and whether you're making long deliverables versus one-page plans or more collaborative planning style approach that cuts down on the scenario printing.

Sue: Right. Yeah, I would say the majority of our advisors do have us write an executive summary that's probably three or four pages. And that hits on all the topics, cash flow, emergency reserves, debt management, that kind of stuff. Because there's a lot of planning that gets done that is not in the program. These programs are just fancy calculators, right? And mainly focusing on retirement. So, it's not really looking at cash reserves. It's not really looking at property and casualty coverage or titling for asset preservation, liability reasons. So, there's a lot of other analysis that goes in outside of the program. Debt pay down, that can take time.

How Delegated Planning Structures Engagements [49:02]

Michael: So, walk us through a little bit more. If an advisor actually wants to do outsourced planning support, how does it work at the individual client level? Just what's the actual process of how the steps flow and who does what and what things go back and forth and when? How does it actually work?

Sue: Sure. So first we have an engagement agreement that sets up the roles and responsibility of the advisory firm and our firm. Then we go through an onboarding process where we try to capture their default planning assumptions. So, every advisor will use their own inflation rate, their own longevity and it's really just a starting point for their plans. And of course, on a client-by-client basis, we can adjust. But what's helpful, well, not only is it helpful that we're always starting at the same place, but if we're doing a plan update, so if there's information already in there and we're just going in to update it, we're going to double-check it against those plan assumptions and call out anything that's different and find out if that was intentional or if that just got missed and we're supposed to update that now.

So the advisor will fill that out. We'll have a Zoom call with myself, the advisor and the planner supporting that advisor. So, we do assign, we do match a planner with the advisor so they're working with the same planner throughout the engagement. Which is helpful because you get to know the person, how they think, kinds of scenarios they like to see.

Michael: So you've got 15 folks internally that may be doing planning work for the firms, but if I'm a firm I'll have a specific person? Or...

Sue: Yes.

Michael: ...for any particular client, I'll have a specific person?

Sue: No, for your firm.

Michael: Okay. So, we'll know who we're working with and over time, we get to know them, they get to know our idiosyncrasies, all that good stuff.

Sue: Right. Yup. So once that's ready, then we're ready to get going. When the advisor has a client project, let's say the Smith Plan, they let us know, we send a work order. It's an electronic document. And it's really a checklist of what is it you are hiring us to analyze. So, it's got retirement projections, education funding, survivor needs, disability needs, long-term care, estate, tax, the topics, right?

Michael: Oh, interesting...

Sue: Because...

Michael: ...because truly, if I don't specify it, you're going to do everything. And if I really just wanted to do a slightly simpler plan...

Sue: Quickie. Yeah, a quick retirement, yeah.

Michael: ...quick one for this client, I'm going to get really unhappy when I get an invoice for 10, 20 hours and I thought it was going to take you 3. Okay.

Sue: Exactly. Yeah. And really it's more the opposite happens. They'll check off retirement and then we'll get in there and say, "Hey, this is a young family with a single income earner. Are you sure you don't want to look at disability?" Because it's a huge...we're still going to call out the big risks and say, "I think this might be a risk." Long-term care's a good one. We don't want to spend a bunch of time looking at long-term care if the advisors already had that conversation with the client and they're not interested. So that gives you the scope of the project and that actually came out of working...so we are registered investment advisor in the state of Colorado, which is strange because we don't talk to end clients, and we don't provide investment advice or manage money.

Michael: But you're based in Colorado?

Sue: I'm based in Colorado and Colorado interprets the rules that if you provide financial planning services, you must register. And it is a state-by-state issue, which makes it very complex on an advisor-client basis as well as hiring planners. So yeah. So, they were like, "You should have a contract for every single project." And I thought, "Oh, my gosh, how am I going to make this easier?" And so, we have this one-page work order basically. It's electronic. They just click the areas they want us to analyze and that kicks off the project.

Michael: Because by definition, the firm's already been onboarded. The firm has a contract with you to provide services. So that's why this boils down to this is a work order for each particular client to make sure we're all clear about the scope of engagement.

Sue: Exactly. Exactly. So then, the advisor would...so it's really important to us that the advisor own and control all client data. So they would dictate what kind of file sharing service they want to use. If it's eMoney, we usually just use the eMoney vault because we're already getting in there anyway. RightCapital, same thing. MoneyGuide doesn't have a vault, yet at least. And so, folks can use DropBox, Box, ShareFile, Google Drive, whatever they choose. And that way, they can cut off access at any time, if they choose to.

Michael: Okay. So that's for, I see, the boatload of client PDFs of all the different documents. Where are we putting them so that the advisor owns and controls the data for their client, but you can get to it to do what you need to do as the planning support service.

Sue: Because we're an RIA, we are now subject to the same record retention rules as everybody else. So we have to download and save them and keep them. So, anything used to create or update a financial plan, we have to maintain for five years beyond termination. So, we do encourage advisors to redact unnecessary PII, like Social Security numbers from tax returns. Now it's time versus money, right? So, if you're a solo and you're like, "Here, just take it and do it," you can do a search and redact in PDF and find them all and redact them. So, we'll try to redact everything before we save it, if we don't need it.

Michael: Okay.

Sue: So the documents are uploaded. We shoot for a three-week turnaround, and we break that down as you've got them uploaded. We need about a week to work it into our flow to review all of the documents that were provided, create any assumptions and notes, any red flags, any observations, any questions that we have. And then, we would shoot the advisor an email saying, "Okay, here are some things that we want to discuss." And we actually have a call and review it together. So we make sure that we've got time. We're on the same page for these assumptions before we get too deep into this. Here's what we need more information on. Half the time, the advisor knows the answer and it just didn't get imparted in the document so it's more from conversations with them. And the other half, they have to go back to the client and get more information.

Michael: Okay. I should just expect, as the advisor, once I've given you the data, in week one, you're getting it all initially into the software. You're spotting any issues or gaps and we're going to have a check-in call of is it all there or where are the gaps or what's going on.

Sue: Yeah. And actually, the first couple projects with a new advisor, we won't get everything entered in, because what we don't want to do is have to go back and fix something. So, until we've worked a few and we're comfortable with how they work and that they understand the process, so we're trying to avoid that kind of issue.

Michael: Because it's expensive to repeat that $160 an hour.

Sue: Yeah, to go back. Right, right. So then, the second week, assuming we have everything, it's getting everything entered and doing our preliminary analysis, running some scenarios. And then, we meet again and look at the results with the advisor and say, "Okay, here's the red flags. Here's what we're thinking." But that's when we need the advisor to provide their input about the client. So, if we maybe suggest that they work a couple years longer because it improves success significantly between delaying Social Security and the extra income and the extra saved years and the fewer years of spending, they can say, "This guy's got one foot out the door. He's ready to retire yesterday if he could. So let's get rid of that. Let's assume he's able to save a little bit more between now and retirement and can spend a little bit less. And so, let's solve for that." So ideally, coming out of that second meeting, we know the scenarios that they are going to want to present. And then, the third week, whether that's the next week or after they present, is creating deliverables. And that piece, like I said, every advisor's a little bit different. So it could be a five-minute thing of just printing the report from the program. It could be us writing a 50-page document. It could be us doing a five-page executive summary. Everyone has their own deliverable.

Michael: And you don't impose any particular version of deliverable on them, caveat just I'm billing you for the time. You tell me what you want.

Sue: Right, right. But I can tell you it really gets old writing really long things over and over again. It is funny. People are like, "Well, you could slow things down and take longer." We have enough to do and nobody wants to do that. It's boring. Writing over and over the same concept of Roth conversions, it gets old. And so, what we do for each advisor, so every advisor has their own process checklist that we create for that advisor so that we don't miss any steps. And if they have a particular way they like to describe something, we just make a verbiage library and copy and paste it in and customize it. So, if they like to explain it this way, then we will use that in your deliverable.

Michael: Okay. Interesting. So, if I'm working with you over time, you'll help me start to templatize what I'm doing if I wasn't doing that already.

Sue: Right. Right.

Michael: And so, then I get my deliverable at the end and if I've gotten any issues or modifications, I can come back to you and otherwise I've got my deliverable and I can go schedule?

Sue: Right. Yeah. And ideally, the advisor's going to bank in at least a week to look through it in case, and this has happened, we missed something on the cash flow. Either it was our fault or the advisor's fault or it didn't get caught for whatever reason. Now that changes the whole plan and we've got to go back and fix it.

Michael: Right. Okay. And otherwise, essentially week four is advisor does their final review and schedules with the client?

Sue: Yeah. And then, we usually keep the project open until after the meeting, just to see if there's any updates, like post meeting updates that need to be done.

Michael: So, sounds like three-week process on your end typically going to end out, I guess four from the client's end from when they send data into the advisor until the advisor's actually coming back to them to schedule and deliver because of the three-week process you've got in the middle?

Sue: Right. Unless they're going to present the draft plan, right, before we write the deliverable.

Michael: Okay. How often do you see advisors that do a version of that where they want to present a draft plan, have you firm up the deliverable and then present the final plan?

Sue: I'd say a third.

Michael: Okay. That's a big number.

Sue: And I've got a couple of advisors that, and I think this is a great process, is they'll send out the assumptions to the client in advance and highlight any remaining questions. So, after we've reviewed the assumptions and we've got all our questions down, we'll send it and get buy-in from them. Again, that will prevent future updates, like oh, we don't spend that much on a car. Or we forgot our vacations, or whatever.

Michael: I'm assuming your Social Security is this and it's going to inflate at 2%. And the client's going to come back and say, "No, no. I don't think it's going to be there that much. I want you to cut it way back." At least we can have that conversation now rather than having you blow up the plan presentation because you didn't like our Social Security assumption.

Sue: Or we create another scenario to illustrate that, just to cover that concern.

Michael: So, from a time invested into the plan, I get that it varies by some of those factors of quality of data gathering and length of deliverable. But is there an average for you overall of how many hours you actually spend building a typical financial plan?

Sue: There is an average. Again, it depends on the program and it also depends on how comprehensive the plan is. So what I will give you is for a comprehensive plan. Meaning we're at least glancing at the estate planning documents. We are looking at property and casualty. We're looking at the tax return, maybe running some scenarios in Holistiplan for people, maybe doing some Social Security analysis outside of...

Michael: And so, you'll pull in add-on tools like that as well, Holistiplan, tax analysis, a third-party software Social Security analysis?

Sue: Yes. Now and again, it's important that the advisor own and control the client data. So all the work we do is generally under an admin license of that advisor, so that if and when we terminate our engagement, they have their data updated. Okay. So back to average. So I would say, and again, depends on the deliverable. So it can shrink or expand depending on all those factors we've already discussed. MoneyGuide, I would say 8 to 10 hours. eMoney, probably 12, maybe to 15. NaviPlan is over 15 just because it's an excellent program, it's very tax sensitive. So you've got a lot more fields you got to pay attention to.

Michael: And then, you do work in RightCapital as well?

Sue: Yeah, RightCapital. RightCapital's sort of in between because those folks tend to do a lot more co-planning.

Michael: Because it's got a very collaborative planning software interface with those guys.

Sue: Yeah. And so, a lot of them don't even have us write deliverables from that. They'll have a conversation, present online and then print the report to the vault and just say that's the deliverable.

Michael: Which means you end out with a much shorter engagement because it's really just the data entry and building out the base scenario?

Sue: Well, and still doing the analysis and we still have the conversation with the advisor about here's the recommendations, or here are the big risks we're seeing. Here's what we would recommend or at least have this discussion with the client.

Michael: So does that put you back in the MoneyGuide zone of 8 to 10 hours? Is it shorter than that because...

Sue: Probably. I think it might be shorter. Because it doesn't go as...you know what? It really depends. It doesn't go as in-depth in some of the other areas that MoneyGuide does. Although it's improving all the time, so I shouldn't say that I haven't looked at it in a little while. That's one that's hard because they send out updates every week and you're like, "Oh, gosh, I did a workaround last time for this plan. Now they've fixed it and now I have to remember how I did the workaround."

Michael: Yes, the "good news" is they keep making updates. Like it keeps getting better, but you keep breaking the workarounds that I had for the old thing because we've all done workarounds in planning software.

Sue: Yeah, now I'm double-counting.

Michael: So out of curiosity, do you have a favorite for which planning software you like working in the most for the work that you do?

Sue: So each of our planners knows anywhere from one to three programs. And if you're asking me personally, I personally prefer MoneyGuide, mostly from familiarity. I've used it for the longest. And it's not cash flow based. So you're not getting into all of that stuff.

Michael: So, how does it work from the licensing end of the planning software? Something like from my individual advisor end, my clients are in my instance of my planning software. So, do I have to give you or your firm, do I have to give you access to my planning software? Do I have to buy another license for you on top of my license? How does that work?

Sue: Depends on the program. So eMoney, you would...we have a license for eMoney. And so, you would share the plan with the username of the planner supporting you. So they have their own eMoney license. That's the only program that requires it. RightCapital, the advisor combined admin license, I think it's $35 a month now and you can start and stop it at any time. MoneyGuide gives you a free admin license. Holistiplan gives you a free admin license, which I think is smart. I'm kind of surprised eMoney doesn't do that because really, that's not the best use of advisor's time. They have a paraplan, I think they call it paraplanning license. But you couldn't even get to the reports. I'm like, what's the point of that?

Michael: And then, what about NaviPlan?

Sue: NaviPlan, it's funny. So I've got one planner who supports NaviPlan. And she has two advisors that use it. And I almost never get calls. So I believe she...

Michael: Interesting. which I guess is part of the overall the client and adoption of NaviPlan is just not as widely used, at least amongst the independents, as it used to be.

Sue: Right, right. So I believe she's logging in under the advisor's license.

Michael: Okay. So, your planning work, I just want to be clear, this is purely the planning stuff, not the investment related side.

Sue: Correct.

Michael: So you're not doing investment proposal generation supporting on that kind of work. This is very specifically the financial planning side of things.

Sue: Absolutely. So, I like to look at it as okay, the advisor's going to dictate in the program what model they want us to use, if they've built portfolio models in their program, if they're allowing the program to calculate the return to standard deviation based on what's entered, or if they're going to apply a 60/40 portfolio, whatever that is for that program.

Michael: So, if they've got models that you essentially, you'll build their models into the assumptions part of the planning process.

Sue: Right. So, they'll give us all the data and say, "Hey, we did a risk tolerance and we're going to assume the 60/40 model that's built in there." So we'll apply the 60/40 model to the projection. And let's just say that that gives you a 6.5% return is their average, let's just say that. So this is what your plan looks like if you can achieve a 6.5% return. How you get that is a totally different conversation. That's portfolio management and here's how we do it at our firm. Because every firm is very different on their investment philosophy. And we think we can get you 6.5, and actually we think we're going to bring you alpha doing all these other strategies, tax planning strategies, distribution strategies, asset location...so you can talk through all those other things at how you're going to improve it even more.

Michael: And so then, I've got to ask from the other end. How does this work from an E&O perspective? What are the consequences or risks if a not good recommendation manages to get its way into this process?

Sue: Yeah, yeah. So according to Colorado, when I got audited, so we are a fiduciary to the end client as well as the advisor client, right? Now we don't have a contract with the end client. And the advisor is a fiduciary for their client. So, I think we are once removed from that because ultimately, they have to approve whatever is presented to the client. That said, we don't even actually know what gets presented to the client. So, we could write in this whole disclaimer about this recommendation, while objective, may increase the fee you're paying to XY company. They might remove that before it goes to the claim. I mean, hopefully not.

Michael: Okay. So you’ve got an obligation to be writing and crafting fiduciary recommendations but you're not actually in control of the end recommendation. That's up to the advisor. So, if they're going to take your recommendations and change them, that's on the advisor's shoulders.

Sue: Right, which is why we keep copies of everything that we provide.

Michael: So what about from the other end? Just not to get negative, someone's going to be worried about it. What happens if you made the recommendation, the advisor runs with the recommendation you made and it turns out there's a problem with the recommendation?

Sue: I haven't come across that. We carry E&O, which extends to our planners. We haven't had that issue yet, thank goodness. Where's some wood? I got to knock on some wood.

Michael: It does help to do this for a living and be focused on it with a review process.

Sue: Yeah, right.

Offering Flexibility To Virtual CFP Staff Through Part-Time Work [1:09:59]

Michael: And so how does this work from the staffing end then? Who works at the firm doing what? How do you actually get all this implemented?

Sue: It was just me when I started in 2011. And then, as I'm sure most of your listeners know, you start working seven days a week and you can't take vacations. And you're like, "Okay, this isn't working." And I have an hourly model, not ideal because there's only so many hours in a day. So, in 2014, I think it was, I hired my first planner. They are contractors. And this gal, her husband had relocated. She was a CFP. She had gone to Texas Tech, worked for a fee-only firm in New York and then worked for an ultra-high-net-worth firm out of Dallas. And she was pregnant. And she's like, "I don't want a 9 to 5 job. I want flexibility." And so, that opened the door...well, and she was amazing. I think if that relationship had not work out, it might have just stayed me only. Seriously. When you have a bad first experience, you're like, "Okay, this is too much trouble. I'm not going to deal with it." And I've had bad ones since, so it's not like it's perfect. But I do think the first one is a tester.

But yeah, so that kind of opened my eyes to a wonderful talent pool of...this happened to be at the time, it happened to be women wanting to start families that were CFPs. And they wanted to keep doing their work. They just didn't want to do it on a set schedule, a 9 to 5 schedule.

Michael: Interesting. And so, you got to tap into a unique market of women who had the expertise and the desire and ability to work, but specifically wanted something that was flexible and part-time. They want to go 100% with 50% of their time.

Sue: Right.

Michael: For which you have a very unique offering because you can scale that to the advisor. It's almost by definition. No one advisor is likely using 100% of a person's time. If they were, they would probably just hire their own person at that point because it's cheaper to put them on salary if you're going to pay for a full 40 hours a week, all year long. So, you get a particularly good fit for those who had the expertise but only wanted to do… I want to work 100%, 50% of the time.

Sue: Mm-hmm. Yeah. And I joke around but you want something done, give it to a busy mom. They're the most organized, best at time management. They're going to knock it out and get it done in the shortest amount of time possible because they have 18 other things they've got to get done.

Michael: Interesting. Does that continue to be the model of how it's grown and scaled?

Sue: No. So, then it evolved. So, it became interesting, so more… XYPN started and I think more people wanted to go out and strike out on their own and see if they could do it, but they were terrified that they would not have money for the first three years, whatever. And so, now I would say half of our team have their own RIA and are building up their business. And the other half are planners that truly, they don't want to work with end clients. They just love doing the planning work.

Michael: Interesting.

Sue: Yeah, it's been really fun. Eventually they transition out, which is fantastic. That means their business is doing great. So I love the idea of helping both of those groups of people while also helping advisors.

Michael: Interesting. So the initial base was a lot of those folks that just only wanted a 50% capacity job or whatever percentage it was. They only wanted a part-time work because of external dynamics like parenthood. And now you're also getting a segment who are, at least I would think, starting a business and want some side hustle money while they're ramping up their business. And so, their side hustle money is I'm an experienced advisor. I just don't have clients of my own yet in this firm, so I'm going to do paraplanning work and outsource virtual CFP work for Delegated Planning while I build my client base. And in some point in two to four years, or however long it takes to build out my client base to a critical mass, then I can dial down the virtual CFP work and focus on my client base.

Sue: Exactly. And what's interesting is one of the gals that I have, I keep asking her, she had little ones at home, and she had her own business, and she had acquired another business in the meantime. And I kept checking in with her. How are things going? Because I need a long runway to transition a planner away, right? She said...she's supporting two firms right now. She's like, "I love these guys. I know exactly what they want. I can get it done. I will do it for as long as I'm working." I'm like, "This is great!"

Michael: So the other platform, at least that I know of out there, where advisors have done something similar, is for both of these segments, the folks that go out to Simply Paraplanner and list that they're available for paraplanning outsource services and just try to get a firm or two to work with directly, and either that same vein, in either I just want part-time work so I'm trying to find part-time work, or I'm building my firm and I want a side hustle while I build my firm. So how do you distinguish, advisors that go list and do that in Simply Paraplanning versus the ones that come to work with you directly?

Sue: I think the ones that tend to come to work with us directly like the idea that A, we've been around a long time, and B, we have a process and we're a company, not just an individual, and we're an RIA, so we are subject… This is where the compliance comes in. They're required to do their due diligence. If they work for a broker-dealer, there's a whole other hoops you have to go through to get approved. I kind of joke around. I'm not just some guy in the basement with a laptop working on your client's plans. We've done background checks. We do the vetting, all that stuff.

Michael: So how do you handle things like if it's an advisor who's doing paraplanning work while they're building up their own advisory firm as well, is there a conflict of Sue, I'm going to give my clients to one of your planners that's also doing their own firm. Do I have to worry that they're going to try to take my client away or that they're going to try to establish a relationship with my client, that my client might go to them?

Sue: Right. So we have non-competes. We have NDAs. We are always happy to sign off on the advisor if they have one as well. It's never happened before. And we're not communicating directly with the end client anyway.

Michael: Oh yeah, I guess that's a good point. How many firms that work with you even tell the clients that they work with you? Do clients know?

Sue: Yeah, right. That's an interesting thing. So that's a compliance. So it really depends on their compliance. Their privacy policy has to allow for them to share information to do the job they were hired to do. I would say a handful of the smaller firms put us on their website as part of the team. This is part of our professional network team. It just has to be clear we don't work for you, we work with you. So it's not just me. I've got a CFP team that looks over my stuff. And I think that's the other benefit too. Having 15 planners, we've got people in all different kinds of expertise. Some super strong estate planning people. We've got a CPA and two enrolled agents. So even if that planner isn't 100% on something, they can reach out to the team and get more information.

Michael: So, the other thing I'm wondering in that context, when the business has a number of people who are contractors and there's going to be some shift in who's doing the planning work over time as they're building their businesses, then three or four years from now, their business gets to a good point, they stop and you bring someone else on. How do you internally manage things like quality control of the plans to make sure that that individual virtual CFP is actually crafting appropriate accurate recommendations and doing the analysis properly?

Sue: Right. So we have pretty in-depth training when we're onboarding a new planner. I tend to micromanage a lot during that time period. I'm not teaching them to be planners, but I am teaching them our process. And then, as they are completing plans and writing recommendations, I'm reviewing them. I'm talking through how I would maybe communicate something. Why did they look at this, did they look at that. And so, we have a pretty extended time period for doing that. And it becomes pretty evident those that are excellent and good to go, and those that might need longer time.

The other thing I was going to say too, interestingly, about the worrying about clients leaving and going to the planner. I actually had one advisor who called me and said, "I want my planner to be my emergency succession plan since he already knows my clients and knows all the...and how would that work?" And I'm like, "You have to work directly out with them because that's between your RIA and that person's RIA. I don't want to be involved in that." But I thought it was pretty smart.

The Surprises And Low Points Sue Encountered On Her Journey [1:19:55]

Michael: Interesting. Interesting. I like that. I like that idea. What surprised you the most about building this virtual planning support business over the past 10 plus years?

Sue: The fact that it's, I really started it to create a job for myself. I had had a couple iterations of different positions throughout my time in the profession with it culminating in I was going to take over another advisor's business. And finally, I don't know why it took me so long, I finally realized I really just like doing the planning work. And...

Michael: And that you didn't want to actually take over their whole business because...

Sue: No.

Michael: ...then you'd have to actually deal with all the clients.

Sue: Deal with the clients and my previous firm did a lot of private placement investment work. And I thought, "I don't have any expertise in this. This is not my strength." And I really just like doing the planning work. So yeah, I talked to a virtual assistant that we had been using. And she said, "Why don't you just go and become an outsource CFP?" And I thought, "Well, who's going to hire..." I had my masters and I had my CFP, but I thought, "Who's going to hire..." And this was in 2011 so technology was just kind of getting there. People were just kind of getting out of the paper world. But at least there were servers you could log on to at the time. It wasn't all cloud based.

Michael: Right, you still could actually VPN into a server that's sitting in their closet of their office.

Sue: Yes. And I had been in a NAPFA study group with some folks. And so, I had talked to them and they said, "Yep, I would hire you in heartbeat." And I thought, "Okay, let's try it and see." And it really was just creating a job for myself. And then like I said, when I got so busy I thought, "Okay, let's just see how this works hiring, bringing on another planner" and it's kind of just grown from there. And then, with COVID, I think there was a whole segment of advisors that would never have worked remotely or allowed it, that have now opened up to that possibility.

Michael: And are you seeing that from your end, an uptick in growth and inquiries from firms in a post-COVID era?

Sue: Yes. Yeah. It's funny. One of the firms I was talking about before, where we kind of have come and gone with them probably five times over the 10 years, he was very against hiring remote planners. And he kind of lived in an area of the country that was not ideal. It was hard to find people to come there. And I think he solely networks from home and he's hired at least full-time employees. So it's really amazing to see. It really does open up the talent pool options.

Michael: What was the low point for you on this journey?

Sue: Just working too hard. Working all the time. And so, that was a lot. And just January this year, I stopped supporting advisors myself for the first time because running the business was taking over, which is a little bittersweet. I loved the advisors… I was worried about not having contact with clients, but our advisors became our clients. And so, that was unfounded. And then, but now I worry about am I losing my chops as a financial planner, because I'm not in there all the time. Although I do jump in during tax time. Like I said, we've got a CPA and two enrolled agents, so I'll cover when needed for that when it happens. But yeah, and then of course, my plan this year was to really focus on Delegated Planning and getting our foundations better secured for scaling now that we're at 15. I have to start thinking like a CEO now, not just a manager, which is what I was doing. And then, we launched Planning Zoo at the same time. So now I'm working too hard again.

Michael: So what is Planning Zoo?

Sue: So Planning Zoo offers data entry services only, back to our if you split planning into three spaces. And really the objective for that was to teach and train aspiring CFPs. So I would get calls...first I would get calls for data entry only and I would tell them that we're not a good fit for that. Then I would get calls from graduating students or career changers that want to enter and they want to work for Delegated. And I'm like, "You don't have the experience. I can't charge what I'm charging if you've not been in front of clients and done thousands of plans already." And so, we were finding that the new planners, the planning firms weren't hiring them because they didn't have the time or the resources to train them. So, they were being hired by the larger broker-dealers or custodians, Vanguard, Fidelity, MassMutual, that kind of stuff. And it was frustrating because I want the planning firms, I want them to join planning firms. So this was our solution. So, Caleb Brown of New Planner Recruiting and Carrie Jones, who works with me at Delegated Planning, and myself, did a beta test this summer. And so, we are using the real case projects that advisors will give us using the source documents to teach the students or the new planners, I should say, teach them planning.

So we're training them in the programs so they can absolutely enter data into the programs. But more than that, really teaching them what can you learn from this piece of source documentation, from this tax return. What can we gather from this tax return? Just even a mortgage statement. We're explaining what is an amortization. How does that work? Hey, there's an address listed on this mortgage statement. We can now go to Zillow and find out the value and add that into the program. And we can find property taxes, so we can carve that piece out. And they're actually learning some really advanced planning strategies. So what we do at the end of the project is the advisor, they get the data entered, of course. They get a printout out of what was entered from the program, but they get what we call Zoo inspection report. And so, the first part is really just commentary about the quality of the data they provided, what was missing, what's critical for them to update, how we entered certain things and any assumptions we had to make. And then, they get a very high level of here are some big red flags we see or considerations you should look at.

But then, with the email that says, "Okay, we've uploaded these reports. Here's what the Zoo Crew got to learn." And some of the things I've seen are qualified business income deductions for rates. They learned about gifting low basis stock for charities. So, the Zookeeper is the experienced planner that oversees the Zoo Crew, who are the new planners. One by one as they review the...they double-check the work, they make sure it's accurate, but they use that time to also train the new planners on financial planning concepts. So, our hope is, we're looking for high turnover on our Zoo Crew, so that when they graduate, they can be hired by a planning firm and add value day one.

Michael: And then from the advisory firm end, how does this work? How does this price? How is this different from Delegated Planning?

Sue: It's just data entry. You're just getting the data entry piece. If that's all you need and you like to do the planning and the analysis yourself, this is perfect. Or maybe you're a firm that does, maybe they do like a mini plan for their prospects before they get the client to commit to a full plan. You just want to get the data in there to show the client what it's looking like. Or we found it's good for advisors that do surge meetings. They have a lot of plan updates that need to be done in a short amount of time. It's a flat fee. It's $250 for a basic case and then we add $100 per complexity. So, if you're in eMoney and you've got to enter rental properties, that would be a complexity. In MoneyGuide, that would not be a complexity because you don't have to add a bunch of fields. It's just the one entry. And we're shooting for a seven-day turnaround. So we did our beta test this summer with eMoney. We've just got our MoneyGuide Zookeeper who they're ready to go now for MoneyGuide. And we've got our RightCapital Zookeeper ready to go. So January 1, we should be able to support all three programs, and we're I think what we're going to do is we have, gosh, I think 75 applicants of Zoo Crew people. So, I think we're going to...

Michael: Okay, Wow.

Sue: Yeah. I know. We need advisors to get us some cases so we can train them. But I think we're going to split it into three sleeves and have a group for each program. And then, if they choose to stay on the next, so we'll do spring, summer, fall, if they choose to stay on the next period, they can switch and learn a different program. So by the time maybe they graduate, they're experts in all three programs. And they've done 100 or 200 cases.

Michael: And out of curiosity, why the separate offering in Planning Zoo as opposed to simply having a data entry tier with Delegated Planning?

Sue: Number one, I couldn't do this by myself. It would definitely require more people. In fact, it was Caleb and I and I kind of dragged Carrie in because I was like, "I can't even handle doing all of this right now." Two, Planning Zoo is not a registered investment advisor. So it's separate from all of that piece because we're not giving recommendations. We're not going to have to keep copies of documentation. What we've done is we've set up a virtual desktop environment, so when they log in, they can't download, copy, paste. Students can't do any of that stuff. And once the case is done, everything is gone. It's deleted. We don't need it anymore.

The Advice Sue Would Give Her Former Self And Younger, Newer Advisors [1:30:10]

Michael: Okay. Interesting. So, as you look back on this, what do you know now about building and scaling up virtual support services that you wish you could go back and tell you from 10 years ago?

Sue: Well, I think my downfall is I want to help everybody. I think a lot of advisors have that downfall. And then, you realize it's really not cost effective, right? So I'll bring on planners that want to work, but they really only are putting in 5 or 10 hours a month, which would be fine except that I pay a per user, per month fee for the software programs that we're using, right? So some of there just breaking even. But they're really good and the advisors really like them, and I think, "Okay, do I just keep them happy and just don't make anything on them?" Which isn't terrible except there's still all the compliance stuff that I have to do. So it really does end up costing me. So, thinking through, okay, and again, this is me now trying to put on my CEO hat this year to go back. I kind of went back through all my revenues and profits over the years preparing for this interview, this call. And I was like, "Oh, okay. This is interesting. When did it jump and where the profits have stayed the same or not." So it's been really interesting.

Michael: So any other advice you would give younger, newer advisors looking to come into the industry today and start their career?

Sue: I think I would say, especially if you're younger, it's worth trying it out. If you want to go on your own, it's worth trying it out. My dad worked for IBM and took the train into the city every year. And I always just figured I'd work for some, I'd be an employee for some big company and that's just the way it worked back when I was growing up. And then I moved to Colorado and have probably 10 friends that have started their own business. And I thought, "Wow, that's crazy. That is so risky. I can't imagine doing that." And then, you try it and it works. You have to prepare yourself. I'm not just saying go do it and fingers crossed. But I think it can be done. I think it's worthwhile. I think it gives back in so many ways between helping clients, helping advisors, just educating people, trying to get the new planners into the industry. It's just, I think, a really great profession.

What Success Means To Sue [1:32:39]

Michael: So, as we wrap up, this is a podcast about success. And just one of the themes that come up is even the word success means different things to different people. And so, you've had this wonderfully successful growth journey with Delegated Planning over the past decade. But I'm wondering how do you define success for yourself at this point?

Sue: I would say making a living doing what I enjoy. I worked in a couple...well, not just this industry, but others, and they're fine. But you come home and you're unplugged and you're like, "Okay, I'm done with that for the day." But this, if it's something you really enjoy, it's kind of always on your mind and you're always thinking about it in different ways to make it better. So definitely that. And then, I'm happiest when I feel like I've helped others and provided value. And so, advisors are really great about getting back to us and say, "This went really well." So that's always exciting to hear about how they value our partnership. And then, also helping the planners. Helping people start their own firm or start their family, or maybe they're just shifting. They've done the 9 to 5 thing and now they want to travel more. So just giving opportunities to other people has been really fun to see.

Michael: Very cool. I love it. Well, thank you so much, Sue, for joining us on the "Financial Advisor Success Podcast."

Sue: Absolutely. Thank you so much for having me.