Making The Sell-Or-Keep Decision When You Hit A $260M AUM Wall: #FASuccess Ep 465 With Todd Pisarczyk

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Resources Featured In This Episode:

• Todd Pisarczyk: Website | LinkedIn | Podcast
• "Sell Vs Stay" Calculation – Download (Excel)
• Kitces Report: What Actually Contributes To Advisor Wellbeing
• FP Transitions
• The Efficient Advisor
• Driving More Client Referrals In The First 100 Days By Crafting An Exceptional Onboarding Experience: #FASuccess Ep 444 With Libby Greiwe
• "Rocket Fuel: The One Essential Combination That Will Get You More of What You Want from Your Business" by Gino Wickman and Mark C. Winters
• Diamond Teams
• Implementing Client Meeting Surges To Boost Advisor Productivity And Systematize Client Value
• "Unreasonable Hospitality: The Remarkable Power of Giving People More Than They Expect" by Will Guider

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Full Transcript:

Michael: Welcome, Todd Pisarczyk, to the "Financial Advisor Success" Podcast.

Todd: Thanks for having me, Michael. I am very excited and just honored to be here today.

Michael: Well, I appreciate you joining us, and looking forward to getting to talk about just the challenges that start to crop up when advisory firms start to grow past our individual capacity to handle clients and we hit the wall. And we see this really directly in the Advisor Wellbeing Study that we run every other year. It's a very interesting phenomenon. The unhappiest advisors have an average of $225 million under management, $225 million of AUM. And in fact, it's not just a random number or data point. If you break that down further, we all talk about 1% fees, but most of us have some householding, some discounting, some break points. Most of us actually charge something more like 70 to 80 basis points of actual revenue yield relative to assets, which means $225 million of AUM is usually somewhere between $1.5 million to $1.7 million of revenue. Most of us at that size have about one team member every $250,000 to $300,000 of revenue. So, we usually have about five or six people on the team.

And as the firm owner, that means essentially, I've got half a dozen people to manage. Because usually, at this point, they all report to me, and I have like 200-something clients. And you hit this point, you hit this wall of, and I've heard this over and over again through the years, something to the effect of, "I'm making more money than I thought I'd make, and I'm working too many hours, and I'm burning out. I feel miserable. I've never been less happy in my business. It's never been bigger and I've never been less happy." And then especially in today's environment... And then someone calls and says they'll offer you like six, seven, eight, nine, ten, 11, 12 times your earnings to just walk away, or at least to tuck into them, let them figure out all the scaling challenges, and just go back to serving your clients. And it becomes a really high-stakes question of, "Do I keep it or do I sell?" And if you look at industry data overall, and the sheer amount of M&A out there would tell you a lot of advisors are making the decision to sell at that point.

And Todd, I know you have hit this similar threshold. You did the analysis, there's a spreadsheet, which we're going to talk about later that will warm my heart. And did the math and decided to keep the firm despite the amazing multiples that seem to be out there. I'm excited to talk about, I guess, both the journey hitting the wall, what happens when you hit the wall, and end up with this business where like, "I'm doing well financially and I've never been less happy." And then how you evaluated and came to the decision despite the offers coming in, "I think I actually want to hold this thing and keep going." How you do that analysis.

Todd: It's like you had somebody stationed in my office, Michael, all the stuff you described.

Michael: We do. We try not to tell advisors because we don't want to make it awkward.

Todd: In listening to the show, I assume that was the case. But we were almost exactly experiencing the numbers that you just described to a T with regards to staff count, clients, everything else about three years ago. And I would say that, when I just think about the career and everything that I've been through and seen over the years, I do feel like three years ago, I was looking around, just realizing all the things you just said, where on one hand, the company is doing well, clients are doing well, we're earning as much money as we ever have. But as far as happiness, I would say I was probably at peak unhappiness a few years ago in the practice.

Michael: Was this peak earnings and peak unhappiness at the same time?

Todd: Yeah. Yeah. And I think the exciting thing is, and for all the listeners, we've worked through it. And part of what we're going to be talking about today are some of the decisions we made around the firm. But I can just say that where we've gotten to today, I feel like we've officially gotten through that period, and life is just a lot better these days. There were a few significant things that happened over the last few years that I think helped us work through that.

What Momentous Wealth Management Looked Like When He Hit The 'Wall' [07:09]

Michael: So, talk to us a little bit more about, really, what the state of the firm was three or four years ago. We'll fast forward in a little bit to where we are today and where it's come, but as you were living this peak earnings plus peak unhappiness at the time, can you paint a little bit more of a picture, if you recall, of just really where the firm was then, I don't know, revenue, and clients, and staff count, and just literally, what was going on day to day that made it not so happy?

Todd: Yeah. I started my career in 1999, and basically, just started right out of college. I was working for Waddell & Reed for a bit, and then Edward Jones. And then in 2004, I went independent. And so, the firm, really, has just grown just from me doing the thing. And we've just experienced slow, steady growth over those years. But to fast forward to three years ago, we were about $260 million in assets, and we had a staff count of between 5 to 6 then. We added our sixth person right around that time period. So, we had experienced really good growth. I remember the first time we hit $100 million, and it was really exciting. And it seems like we went from that $100 million to $200 million really quickly.

Michael: Compounding is an amazing thing.

Todd: Yeah. Love it. Love it. Things got really crazy.

Michael: Do you recall, where was client count? Where was revenue at this time?

Todd: So, revenue was around $1.2 million, roughly, at that time. And our client count was around 350. And so, that's also the time that we started to get several inquisitions about firms wanting to buy us. The first time we actually looked at a potential acquisition was actually back in 2019. I just remember because it was pre-COVID. I remember the day, because I remember we hadn't experienced COVID yet. And then we actually had another firm that we talked to pretty seriously during COVID. So, it was about 2019 that we, again, started to just get offers from other firms. And obviously, being where we were at the time, you start to get these offers and they look really good. And then also, there's also that element of just feeling very... I was honored that we even got the offers. The fact that somebody looked enough into the firm and liked what we were doing to the point where they wanted to acquire us was really exciting.

Michael: It's phenomenally flattering. "I worked my backside off building this thing over the years, and you want to offer me millions of dollars because clients like me?" It's fascinating. We don't have factories and equipment in the tax and literal sense. You're just buying goodwill that I've created with my clients.

Todd: Yeah. Yeah. Exactly. And to just think, it's like, "Okay." And I went through all this stuff. I remember when I was working for the brokerage firms, you have these thoughts of, "Man, it'd be really cool if I went off on my own because I want to have a different-looking website," or, "Man, it'd be really cool if we had this, that, or the other thing." And you get in this mindset where you want to create those things. And then you do it all, and then you're kind of like, "Oh, wow, this is just a lot of work to maintain the website and the payroll and the this and the that." When some of these other firms start coming along and talking to you about being acquired with the proposition too of, "Hey, we're going to take all that work off you, and you don't have to worry about that anymore. You can just work with your clients." That also can be attractive.

Michael: Yep. I guess, just fill us in a little bit more, what was making it unhappy? Why was this peak unhappiness as you're a million-plus revenue with a full team of supports, what was making it so not good despite peak earnings, peak size?

Todd: So, I think the biggest thing for me was just time. I would often think back to when I had fewer clients and was making good money. Obviously, life was good and the income was good, and you're feeling pretty happy about things. But also just realizing, there was a time in my career where I feel like it was that perfect mix of, had plenty of money to do the things I needed to do, but also had all the time in the world because you just weren't as busy. And then the nature of it is, the business is successful, you get more clients, but there's more work that goes along with that. So, I think for me, the biggest thing that just made me realize that there was a problem was the time aspect. Before, I would realize... A friend called and said, "Hey, do you want to go hit the mountain today or go golfing today?" And I'm like, "Oh yeah, I'll be there in an hour." I realized I couldn't do that anymore. It's like, "Oh, no, actually, I have meetings all week. I can't even get away for another three weeks."

And so that's when I started to get a little, I don't know, I guess just frustrated by it, was just that increasing lack of freedom and time. But what I've realized over the last several years, because one of the things that we've done that I think has helped us get through it and get to a really good spot is the fact that we just did not have very good systems and processes and things like that. So, one of the things we did a couple years ago is we hired a consultant to really start building out and helping us build out really great processes for things. And so, just realizing that everything that we were doing to that point required either me or one of my two associates that had been with me for a long time, we knew how to do everything, but as we brought more people to the firm, we were realizing more and more that, if anything was going to get done, we would have to be involved with explaining it or doing part of it. And we realized that was a function of just really not building out the right systems.

Michael: Okay. And so, as I'm hearing, time commitment is going up, everything has to run through you, so you end out feeling very little freedom. You literally don't have a lot of time and just don't have a lot of freedom and flexibility because all this growing volume of things all runs through you, routes through you, or is stuff you're really not energized to solve like payroll.

Todd: Yeah, exactly. Payroll, benefits, again, all that stuff that was fun in the beginning, like building out a cool website. Now it's like, "Oh, we have to maintain the website," and, "Oh, we were supposed to be doing social media," so you're having to come up with social media posts. And really, like you said, no matter what's happening at the firm, being the owner, it all runs through you. And so, you just realize that day to day, you're just in touch with so many different things. And so, even as you're adding team members and that, the work comes down. And I think, like you said, a lot of people, it's just been very interesting for me to hear a lot of advisors talk about it, hear you talk about it over the years, and to be in the phase of like, "Oh, huh, I'm glad that's not me." To all of a sudden waking up one day and being like, "Oh, that's me." Yeah, exactly.

Michael: So, you're living this environment and it's not a lot of time, not a lot of freedom, system process stuff that, I guess, is not fun to build anymore or outright run the business things that you don't enjoy, like payroll, and then the offers start to show up.

Todd: Sure. Yeah.

Receiving And Considering Acquisition Offers To Acquire His Firm [15:27]

Michael: I don't want to get you in trouble with any NDAs [Non-Disclosure Agreements] or anything, but tell me about the offers. So, what started to show up? What kind of firm's call did you decide to take and why? What made it interesting to start entertaining these?

Todd: I'm sure, again, and I've talked to a lot of advisors that experienced the same thing, but the first person that reached out to us, the first firm, was back in 2019. And then another firm reached out in 2020. I noticed that the amount of emails and things like that and inquiries that I was getting really started to ramp up.

Todd: But different firms offering to acquire us in different methods. So, some firms effectively just wanting to buy in. We did talk to some consultants as well. So, at one point, when I started to get offers, I actually reached out and spoke to a couple of consultants as well that help with these things. And I feel like I might even have heard one of them on your show.

Michael: Do you recall who you worked with that had good experiences? Just nice to shout out for folks if you recall who you were getting support from.

Todd: Yeah. I did some work with FP Transitions. So, I think that they were one of the places that helped me quite a bit just realize that there were more options. Because I think for me, when I started to get these offers, I didn't realize that there was actually more to it. So, the primary people that we were talking to were firms that wanted to acquire us and effectively have me stay on and keep working as an advisor. But then also realizing that there's the opportunity to have PE [Private Equity] firms buy parts of your firm and things of that nature as well. I actually had no idea that that was even an option. I started to talk to a lot of places because that's just how I am. When I get, I guess, an offer like that, my nature is always to say, "Okay, well, I got to do the research and figure out, what's the best thing?" I'm not the kind of person that generally just talks to one person. I'm talking to friends. I have a lot of friends and other advisors in the industry that have gone through similar things. And so, really, what I did is I always go right to the numbers. What was a complicating factor for me is that the idea of selling the firm and being able to continue to work with clients. Because I'm 49, I'm not ready to retire. I love what we do. I'm still super energized by it.

So, I was not in this mindset that I wanted to be done, but I was in the mindset of just thinking, "Man, it would really be nice to work differently." I was thinking about things like, should I...which, again, a lot of people go down this road of like, is it time for me to just be full-time CEO of the firm, run the firm and have other advisors here to work with all the clients? Or is it time for me to just effectively sell and have someone take over that CEO stuff and allow me to just work directly with clients? I was just realizing that I couldn't keep doing it all. I needed to get rid of some part of what I was doing. And so, the complicating factor for me was the fact that I have three kids, so two sons, one of them is working here now. I have another son who's getting ready to graduate. He's going through the financial planning program at Grand Canyon University. He'll be done in a year or two. I have a daughter in high school who I'm trying to convince that she should get into the industry, but currently, she's not yet interested. But we'll keep working on her. But that was the other factor for me, is the fact that a lot of these offers sounded really, really great, but I was also getting to the time where my two sons were really committed to wanting to get into the industry.

And so, not only did I have this element of... it's something that we've talked about our whole lives, having them come work in the business. But when they're ten years old, obviously, they don't know what they want to do. But as they grew and started college, both of them gravitated towards financial planning. So, my older son, Aiden, who's working here now, there was a time where he knew he wanted to major in business, but he wasn't exactly sure if this is what he wanted to do. But then his last couple of years at school, he really got very interested in the financial planning area. In fact, one year I had the opportunity to take him to IMPACT [Schwab IMPACT Conference]. He points to that as when he really saw what the industry was about.

And also, his whole experience with it is me, but to actually meet and interact with other people also closer to his age, I think got him excited. And so, I was really struggling because I'm like, "Okay. On one hand, this sounds really great to, one, obviously, these firms offer you quite a bit of money. So on one hand I'm like, "Man, I've been working my tail off all these years. And finally, I could realize a good amount of money for it." I could continue to work with my clients, because obviously, for all of us, we deeply care about our clients, and we have all these really deep relationships with them that you don't want to let go. Again, knowing that I wasn't ready to be done, I just knew I needed to do something different. And then complicated by the fact that, "Oh, if I just sell the firm, then what have I done to the boys?" This is something that at this point in their life, they're really invested in and actually doing the work to become part of the firm. And so, all of that was going in my head to like, "What do I do?"

And so, for me, we're numbers people. I love building spreadsheets. So, I'm like, "I'm going to solve this with a spreadsheet."

Michael: I love this. I love this.

Todd: And looking at the numbers, actually, and there's other factors I'll go into about just some of the emotional stuff behind the decision, but I think that when you can have the emotions, but also the emotions are backed up by the fact that the numbers make sense, that was what I was able to find out, is that because there's all these factors around, okay, so let's say that I do have the boys come to work here. Eventually, I'm not going to give it to them. This is part of my retirement plan. Eventually, I still need to sell this thing to them, but there's no way that they're going to be able to pay me what some of these other firms are offering. So, then there's that factor as well. I feel like I was able to solve that for myself, and say, "Okay, here's why it actually makes sense for me to keep running the business, sell to them eventually." But actually, I found that in my...and again, I'm not going to, obviously, say that this is right for everyone, but for me personally, it just made a lot more sense both financially and emotionally to just keep doing what I was doing.

Building A Spreadsheet To Help Evaluate The Decision Of Whether To Sell And Finding Surprising Results [23:08]

Todd: Most firms, I feel like, when you hit a certain level, you are offered a certain amount of money based on the earnings of your company. I remember back in the day, everything was, "You're going to get two times revenue." At the end of the day, it's always two times revenue. And then there was a time where it was like, "Oh, maybe now we can get three times, things are getting..." And I found that with a firm our size, everything was more based on earnings. What I found through my research, and you can tell me if this is wrong, but it just seems like...and I'll say, a lot of these numbers come from just not specific offers we got, but just people that I talked to that were like, "Hey, it seems like this 10 to 13 times earnings tends to be what people are seeing." I don't know if you agree with that.

Michael: We see some similar numbers. There is a size premium out there. So, the bigger the firm, the higher the multiple. I'm overgeneralizing…some solo practices might end out at four to six times earnings. By the time you've got a couple of people on board, you might get to seven to nine. By the time you get a couple of advisors on board, you might get ten to 12. The multi-billion dollar firms sometimes are going as high as 13 to 15. So, that's a little rough. I think you said then you're a million-something revenue firm cruising towards $2 million. You probably have seen anything from as low as six or seven to as high as 11 or 12. And usually at the upper end, there's some contingencies, "You'll get this if all your clients retain and you hit certain growth numbers after you come on board." So, there may be contingencies. The old joke is, you tell me the multiple you want and I'll just tell you the terms that you have to give me, like, "Hey, I'll give you 30 times earnings today. You have to grow at 70% a year or I'm going to take all the money back." But hey, if you can tell you friends you got 30 times earnings, you just did a ridiculous growth rate on it that you're probably not realistically ever going to achieve.

So, the the super big numbers usually have some super high contingencies on them. The more moderate numbers usually don't have a lot more than some modest growth. And you actually have to retain the revenue and keep the clients if you sell and transition and the clients don't come, that will still get adjusted.

Todd: That's what I was thinking in the back of my head, is I thought, "Okay, on one hand, I could sell the firm, I could get a multiple of earnings." In the spreadsheet I built, we'll share it with the listeners, I just put a million bucks in there just to make the math easy.

Michael: Oh, a million dollars of earnings?

Todd: Yeah.

Michael: So, for folks who are listening, Todd, if you're okay to share. So, this is episode 465. So, if you go to kitces.com/465 and just scroll to the show notes section, just a tiny bit down the page, we'll have a link to the the keep or sell, sell or stay spreadsheet. We'll talk about this a little bit as best we can, because it's always fun to do a spreadsheet live in an audio format. But we'll talk about this a little. But I guess for folks who want to even follow along you can pause, kitces.com/465, you can pull it up and look along if you want, or just listen as we talk some numbers.

Todd: Michael, I thought it'd be fun if we just went through each cell individually. So, let's go ahead and start with cell A3.

Michael: Just dissect all the formulas. That sounds fantastic. This is a reference cell anchored to B2.

Todd: On a side note, there is nothing more satisfying, I feel like, than just building a really good spreadsheet. I've done these for, "Should I buy or lease a car?" It's just so satisfying.

Michael: To set this up a little, because you were kind enough to send a copy along so I've got something to look at as well. The spreadsheet, to set this out, we've got a series of columns for, "How does this project out if I sell the firm to an external buyer and then I just stay on and they pay me a salary? And then what happens if I hold onto this for the next ten years?" Because as you said, you're 49, you've got energy. This isn't the walk-away scenario. Because those are a little bit different in dynamics. This is, "I'm still going, but this building stuff and the payroll's getting tedious and other people say they'll do that for me. So, do I want to sell and stay with them, or do I just want to hold onto this and keep going?" So, you've basically got to a column of, "What happens if I sell and they pay me a salary while I get my check and then I grow my money?" Because if you've got cash, you can put it in the market. "Or what happens if I hold on to my firm and keep chugging along?" So, we'll talk about these more detail. It's essentially two sets of columns that we now start looking at, is, "Sell, get the check that you can grow, plus a salary, or hold onto this business and see what you can get in profits plus future business value."

Todd: Yes, exactly. If I look at our firm, I think growth as a factor as well, we've roughly doubled in size over the last five years. And in the last three years we've been growing pretty well also, around 14.5% has been our average growth rate. So, that's a factor as well. And so, just like when we're doing planning for clients, I tried to plug some more conservative numbers in there. So, I also factored in different growth rates. So, hey, I keep doing what I'm doing, the business grows at 10%. So, that's in there as well.

Michael: So I'm just following through. You at least for default assumptions here, and bless spreadsheets, they're all formulas, so anyone who wants to play with this, you can change all the numbers in Column M, which will make sense when you see the spreadsheet. You can change all the numbers in Column M. They're inputs that calculate through. But it's fine. We start with a million dollars of earnings to just makes the math easy. You've got the full value multiple in here. Let's say we get a whole 12x that someone's willing to offer us. Sweet. Cha-ching. I'm just following along. It looks like payments break out. It's one of those, you get half at closing and the other half over the next few years, assuming clients stay.

Todd: Exactly.

Michael: And again, I don't want to get you in trouble with any NDAs the firm signed, but was that pretty typical for what you were finding of you get part upfront and then you get part of it over a couple of years, and you have to retain and grow a little bit to earn that?

Todd: Yeah. Over the years, what I found is that most of the firms that I had talked to, the same idea where it's just like you spelled it out. There's a certain amount that you get at closing, and then over the next several years, assuming you continue to hit certain growth rates, then the remaining payments are paid out. I don't know that there was a lot of...it's just like what you said. You described it so well, the amounts that you get down the road are so variable based on what the required growth rate is. You can get a higher multiple if you hit certain growth numbers. I just set that in a way that people could play with whatever scenarios they're being offered.

Michael: So, then you pull some taxes out, ostensibly, this is most or all goodwill, so we're 20% cap gains plus state that kicks in. So, the gross value might be $12 million, but you're going to get it over several years with contingencies minus taxes.

Todd: Exactly.

Michael: And the sheet here, you actually net eight-point-something.

Todd: Yes. And being in the State of Washington, I didn't have to add the capital gains tax until recently. So, that's a fun new thing we're dealing with over here.

Michael: Unfortunate timing on that.

Todd: So, that might not apply to everyone. So, that would be the net amount that you would actually have to go and then invest in a portfolio. So, because that's obviously the kicker that we're all looking at, is I get to take this $8 million, go invest it somewhere, and earn a return on that, and then keep working, and obviously, keep getting income.

Michael: Good old time value of money.

Todd: Yeah. So, the column, basically, when I put the portfolio, that's effectively the value that you would have in an investment portfolio. And it comes in, the first three years, it ramps up quickly because...

Michael: Because you're getting the tranches of payments as they come through. It takes you four years just to get all the payments in, and then you just get to grow the dollars on the backend.

Todd: Exactly. Yeah.

Michael: Which I see. You've got a market growth assumption here. It's pegged at 7%...to each their own about what you want to plug in for your growth rate. And then I see there's an addition to, "Okay, now I've basically got a portfolio of the proceeds that are growing. I'm also getting salary checks. I'm getting paid out from the firm because if I'm selling and staying, I still get salary for, at the end of the day, a pretty sizable practice, but I only get the salary in the business. I don't get the profits from the business because I sold that." So, you've got a $350,000 lead advisor salary in here that then grows as the client base grows. So, it looks like you've got conservative 10% growth on the revenue of the practice itself. So, basically, your income grows at 10%, and that gets taxed.

Todd: Exactly.

Michael: And we get down to a net-net-all in number, god bless, ten years from now with compounded growth. It's somewhere between $19 million and $20 million before or after tax of a portfolio of the proceeds that's now like $15 million and $4 million to $5 million worth of salary that you got out along the way as well.

Todd: Exactly. And for the tax numbers, for the listeners, the reason I put a gross and net column is because, frankly, when I was building this, I had no idea I was going to be building it for anyone but myself. And so, I just put an average federal income tax rate in there. That could be off, but in reality, that's why I put both gross and net. Because in reality, at the end of the day, the most important thing is to compare the two columns. So, I just figured, if taxes go up, then it would go up on both sides of the spreadsheet.

Michael: And so, then on the other side, we've got a, what happens if we just hold onto the firm? We keep getting our profits, gets netted down for taxes. We've got an RIA value to stay. That, again, is we can plug a multiple in our earnings, although I'm noting the multiple, you're assuming here, this is labeled as "keep the firm and sell internally." I'm assuming sell to the boys and/or all the kids if the third one comes in.

Todd: Thank you for recognizing Macy. She'll be happy.

Michael: So, much lower earnings multiple here. Now, you're only assuming, "Okay, if I'm selling internally and my internal successors have less buying capacity, I'm 'only' selling at five times earnings instead of 12."

Todd: Exactly.

Michael: "I'm getting the profits, but I'm taking a big step back in the multiple."

Todd: Yes. And that was the key for me. I was initially really trying to think about, if I keep this thing, what is...and again, that's what started me down this road of building this in the first place was, "If I keep it, how much do I need to sell it for internally to feel like I got what it was worth?" Because obviously, if you're selling to family members, it's different. Maybe you're going to be more willing to take a bigger discount. But even selling internally, and frankly, this is just something that I've heard from a lot of places, just "Hey, if you sell internally, it's more than likely that you're not going to get the same types of multiples. There are a lot of benefits that come with it, but you are going to have to take a little bit less money." And so, what I was trying to figure out at the end of the day was, how much less could I sell it for internally and still get out of it what I felt like it was worth? And this is, frankly, the part that shocked me the most.

Michael: You go through all of this and the keep and internal successor at 5x still actually adds up to more dollars than the sell at 12x today.

Todd: Yes. It was a game-changer for me because I think I had this relief that was like ok…obviously, we can get into this too, but after seeing this, I did some things. I built this spreadsheet. It's been a few years now that I built this thing, and I've plugged in several other offers into it along the way. But it really just gave me the freedom to say, based on the numbers, it makes sense to keep it. But then also I can make decisions around what's going to make me happy. Because this didn't really just initially solve the problem of like, "Oh, this makes me happy now." I still was struggling with a lot of that stuff. But it made me realize that from a financial standpoint, I could solve those problems in other ways.

And I thought the other big takeaway from this because not everybody listening is maybe considering an internal sale or a sale to family or anything like that. But we also hear this phrase all the time, "Hey, we should take some chips off the table." But again, what this made me feel better about, even with regards to that, is to think, "Okay, let's just say hypothetically that over the next ten years, multiples drop in half and right. In ten years from now, we're only able to sell firms for half of what we can get for them today." Again, even if that's the case, you find by looking at this, that at the end of the day, you might still end up making more money by just continuing to run your firm and sell for a low multiple down the road.

Michael: Well, to me it's wild what happens when you just sort of you use this spreadsheet and start adjusting some of the assumptions. So, as is, head to head, you're like 20 to 30% higher in just keep the firm and successor internally than to sell for the big multiple today. It's a 20% gap. And that's at the very conservative growth and multiple numbers you have in here. It's like if you just grow closer to the 15% you have been growing, now it's like a 60% difference. If you just sell for 7X internally instead of 5X internally, it's literally twice the value of holding onto it versus selling, but staying internally. It's so striking on the difference.

And granted this is a scenario that the acquirer gets all of the equity, and you are only riding along with salaries, you continue to stay. Just to be fair for some of the acquirers out there, some will allow you to have some level of equity or roll some equity. You don't necessarily grow on your book, but you grow on their whole thing, and they're trying to grow it fast. So, maybe if that grows really well, that math will work out for you. So, there are different iterations of this, but at its core, it's very striking how the keep scenario, so keep with internal succession scenario, so wins even when the valuation multiple is half at the end. And then it wins dramatically more with anything higher than 10% growth rates and any internal succession multiple higher than 5X.

Todd: Yeah.

Michael: Double the dollars or more.

Todd: Yeah. Exactly. I think, again, I think all of us would probably agree that, "Hey, obviously keep the firm, keep running it, make it bigger."…if we knew the multiples were going to be the same at the end, that's a easy decision. It's like, "Well, if I knew the multiple was always going to be what it is today, then I'll just keep it as long as I can." Again, there's these fears that we have of like, "Well, what about AI? And it's going to take everything over and multiples are going to crash," and all this stuff. And again, this just gave me the sense of just what you said, Michael, it's like, "Well, okay, let's say they fall in half, I'm still okay." I will still look back and say, "It was still a good idea for me to keep this thing."

Again, all of that, assuming that you're in my situation where you want to keep working. You're still feeling good about things, you still want to keep working. Obviously, like you alluded to earlier, if you're trying to be done and retire, this isn't probably the right numbers to look at.

Michael: To me, it does highlight, at least, or especially in those scenarios where we're in the, "I've still got time horizon, I'm not actually looking to be out. It's just not fun to run it anymore." That context. Look, if you're miserable and your alternative is, "I'm just going to be out anyways, then I may as well take a thing that lets you stay in the game instead of being out of the game," sure. But assuming you've got some desire to stay in, then it very quickly comes down to...it's hard for the math to work in the favor of the sell and stay with the buyer, simply put, unless you think the whole thing can grow more with them than you do on your own. If you give them a higher growth rate than yours, at least you can get the scenarios a little bit closer to each other.

But they truly have to enable a growth rate that you couldn't have achieved on your own. And even then, it may be difficult to make the scenarios in parallel because you don't benefit from all of that growth because you don't have the equity. You got the cash, you don't necessarily get all the extra growth of the good growth rate. You get the market return on the cash that they paid you. And I have seen versions of that, even for some of the folks that got really eye-popping, high multiples. I joked earlier, I'll give you 30X earnings, you just have to grow at 70%. But I have seen some deals for multiples that get into the teens where everyone's astonished at the multiple. And then when you get into the fine print, it's like, "Well, we really have to do 20 to 30% growth rates to get that number," which is a pretty hefty growth rate for most of us.

And maybe the buyer lets us grow more, but if we actually are at all capable of achieving a 20 or 30% growth rate, the math is still dominatingly better to hold onto the thing and grow it like that yourself. It just gets back to you. For better or worse, you truly have to find a partner where you feel like you're going to grow more than you could have grown or last longer than you were going to last.

Todd: Yeah. And that's a really great point in looking for a potential partner. Obviously, if there's someone who can come along and infuse a much higher growth rate into your firm, that would certainly be a factor to consider.

Getting Energized By Bringing In Newer Advisors And Taking On A Coaching Role [43:58]

Michael: So, you went through this spreadsheet exercise, the math said, "Huh, actually not even better to necessarily to sell," including if I want to eventually sell internally, to the kids at a more favorable number. And I get to hold onto it for the kids, which was already a complicating factor for you. But then we get back to, and kind of my next question, the point where this all started, which is, but you're still in a firm in peak unhappiness where you have to do the freaking payroll that you don't like doing. So, I'm very curious to know. So, what happens next in this journey for you, where you build the spreadsheet, you run the numbers, all of a sudden it's not so compelling math to do the transaction after all, but you're still stuck with the thing that made you unhappy enough to take the phone call and go through this exercise in the first place.

Todd: Yeah. So, what changed?

Michael: Yeah. What did you do?

Todd: So, again, for me, it's just like everything. I think for me personally, just some timing things really lined up quite well. In fact, when I look back at the first offer that I looked seriously at back in 2019, I would say that I don't even know that I necessarily had all these same thoughts. At that point, I actually was looking at that more along the lines of...frankly, I was so unhappy. And again, I shouldn't say unhappy. I'll back up a little and just say that my peak unhappiness, I was still happy.

Michael: That's fair. It's still a good business and making a good income. So, we can keep that in appropriate perspective.

Todd: Yeah. And I think that's a really good point for us to discuss is, even at my, I would say, least happy point, I would still say overall I was very happy and just constantly realizing how blessed we are to be in this industry. When I think about how I got into it, I graduated college, I didn't really know what I wanted to do. And I started interviewing for jobs, and this financial advisor thing sounded pretty cool. And then it got to a point where I'm like, "Hey, this is all I've ever done. I'm not even qualified to do anything else. I can't build anything or make anything. So, I got to stick with it."

And I just love what we do. So, I will say, for me, when I get to the peak unhappiness component, I was still overall feeling very happy. We have a great team that we work with here. And I love our clients, and I love what we do. So, I'll just put that out there. And so, for me, it allowed me, as I alluded to earlier, to say, "Okay." I realized that the idea of me doing everything did need to change. So, me trying to run the firm, be the CEO, do the payroll, do the website, do the social media, meet with all the clients, that just wasn't working. And I will say, this is still in process. So, this is what we're working on now. But we hired a consultant, started working with The Efficient Advisor. I know you've had Libby [Greiwe] on your podcast.

Michael: Yeah, yeah.

Todd: A really great program. So, the timing of that was great because we had started that, and it just really allowed me to kind of see how I was going to make this happen. So, to actually have a roadmap of...because I really did identify that one of our, I think, biggest issues was the fact that myself and Linde Carroll, is her name, she's my business partner. She's part part-owner of our firm as well. And then we have a long-time staff member, Mara. We were thinking back to when the three of us effectively started the firm. We just knew how to do everything, and everything lived in our heads.

And so, we kind of started this process of like, "We're all roughly the same age, and we really need to start to build things in a way that the next generation can take over." And so, what started off as, I think, a process that seemed pretty overwhelming actually became pretty exciting, and gave me a lot of energy. And so, when I think about what we've been working on and what my goals are moving forward, for the first time in a long time, I feel like I know what I'm doing and I know what we're working towards. And I think that also has allowed me to just be kind of re-energized in this whole thing because I think the type of people that are in this business, I think we all love working with clients, and we get a ton of energy from working with clients, and it's great.

But I've also now gotten just a lot more excited about mentoring and kind of teaching the next generation. So, we have six advisors at our firm now, and three of them are younger. And it's just so fun to, I guess, show up every day and realize, "Hey, my goal is to teach them how to do all this stuff so that eventually when I'm just too old to do it, they'll know what to do."

So, one of the things I do outside of the office is I coach a high school baseball team, and I almost had this thought of, it's like going from that player role to coach role. If you're someone that grew up in sports and you were a player all those years, how many times do you watch football, baseball, whatever, and see that a lot of these coaches are former players and they went from being energized by making the great play to now they're energized by teaching and coaching and mentoring the next?

So, that has helped me because it's almost like I've started over, and I just have this new excitement every day. Obviously, one of those young advisors being my son is amazing. He just started in May, so he hasn't been here too long. But just to show up every day and be able to work with him is amazing. We have a great young staff here. Again, it's just different because I really look at my role differently, and I actually think having that direction is what has made it fun again, and helped us get through the unhappiness. For me, I would say that it wasn't a number thing. It wasn't like, "Hey, we were at $200 whatever million, but oh, once we hit $400 million, everything just got better because we were at $400 million."

It really had nothing to do with the numbers. Because we do this with clients all the time. You do retirement planning for clients, and how many times do you meet with clients and you're showing them the numbers and it makes no sense to you why they're still working, because you're like, "You could retire. You don't need to work." But they keep working because there's no direction. It's like, "Well, I don't know what I will do in my next phase of life." So, they just keep working because it's like, "I like it, it's fine. I don't mind it." But as soon as they find that next thing they're passionate about, that's when they really enjoy their retirement. And so, I think for me, it wasn't retirement, but just officially saying, "Hey, my role now here is different. My role is now to coach the next generation." Because our long-term goal is to build this firm that's going to be around.

So, looking at the numbers, again, we're all numbers people. So, you look at these numbers and you wouldn't tell somebody, "Hey, you, if you can find that next thing that you're fulfilled by, you should retire just because you're fulfilled." The numbers have to back it up too. It's like, "Well, you also have to be able to afford it." And that's the process I went through is in looking at the numbers and the spreadsheet we just went over, it's like, "Well, hey, the numbers are there." So, that's the whole, you can afford to keep this thing and keep growing it and doing what you're doing. So, the numbers back it up, and then you put that on top of, "Oh, and also, I have now found my passion and what I really want to do in this next phase." So, those two things together, I think, are what really gave me the energy to just be really excited about the next however long.

Michael: I'm also trying to understand what changed to find the new passion? It was this reorientation to say, "Now my goal is to have this firm stick around for the long term, therefore, I need to be the coach for the next generation. Therefore, I'm going to get into the coaching part like I do with the sports teams."

Todd: Yeah. I don't know that there was a specific moment I can even point to. I really feel like for us it was just this progression in looking at numbers, again, working at just making our processes better here at the firm. And then you just hit a certain point where you're like, "Oh, yeah." And I do think that when a couple of our young advisors started, that helped a ton, because just to see the energy that they bring, it's almost like, again, in coaching when you have a player that you can tell just really wants to get better. They're really coachable. They listen to what you say, they just really want to learn, it just makes coaching much more fun. So, I think a lot of that was just the energy that we have at the firm, also with the people that are here.

You can tell that the people that we have here, we just have the fortune of they're all in. You can tell when somebody has that ownership mentality and that they really care about what we're doing and the people that we serve here. So, when you have a group like that, it just makes you much more excited to be involved in that.

Michael: So, was this like a new round of hiring you did to bring in more young people after you had the revelation of, "I'm staying, therefore, I need to bring in more young people to do this"? Were there like staffing and headcount shifts that went with this transition?

Todd: We now have nine people here. So, yes, my business partner, Linde and I, we both realized we're around 50, and so, just thinking down the road of...and again, I know that advisors will often say, and I hear advisors all the time talk about the fact that you're maybe more disposable than you think you are, Michael. I don't know that that's fully sunk in with me yet. I do believe it will. But I think for us it was realizing we can't just hire someone and then a year later say, "Okay, you're working with all the clients now." We just decided that we needed to get some good young people in here now so that we could start training them and mentoring them and having them get to know clients, so by the time we're ready to be done, it'll just be a no-brainer. It's like, "Oh, we've known this person for ten years. It's great."

So, just trying to really get ahead of it. And so, we knew Aiden was coming, but we specifically decided to hire another advisor, and then we potentially have my other son, Isaac, coming to work here in another year or two. And then we have another younger advisor coming to work here in another eight months or so. But that was by design, to just realize, if we're going to do this, it's going to be based on the fact that we need to get the next generation of people in here that want to do the work and make it last.

Michael: And then what happened to all the other stuff that you were not relishing the payroll, the website, the social?

Todd: So, what I realized about myself, and again, this is me, fully, there could be a lot of people out here that don't think about it the same way I do. But what I realized about myself is that I don't actually mind doing a lot of that stuff. It was just all of it, combined with also having to do all the client work. So, when you're the one that's having to get ready for the meetings and do the meetings, and do the follow-up from the meetings, and then also at the same time trying to do payroll and websites and whatnot, that's where it gets to be overwhelming. Even when we went through the process of building out some better processes, there's parts of it that I really love, and that whole visionary, integrator exercise that a lot of people have gone through, I really love that role of being the visionary, and that's exciting to me.

And so, I don't mind doing a lot of that work. It was just that I couldn't do all of it. I needed to get help. At this point, I still have a pretty large client load, but even just having advisors here now that can help me with the prep work and help me in the meetings and help with the follow-up, that I don't have to be involved in every single aspect of the client service, has really helped. And again, I enjoy a lot of running the firm work. I'm excited to go to conferences and learn things and figure out how we can implement it. And I just realized I needed to work differently and not try to take on everything on my own.

Michael: Interesting. So, if I'm understanding, you ended out keeping some of the payroll, website, social, other stuff. What changed was when you got more associate advisors to support on the client activity, you freed up time and capacity on the client admin, client support-related task work, which then actually made the other, handle the business things not such a big deal anymore to continue to do?

Todd: Exactly. And I also realized that I love doing a lot of that stuff. It's exciting to me. And again, all this goes back to realizing, I'm not ready to be done. For me, this wasn't a situation where I'm just done with all of it and I want to retire and go sit on a beach somewhere. I love our industry. I love what we do. I just realized I needed to figure out a way to operate differently.

Creating Processes To Streamline Firm Operations [59:59]

Michael: And I guess I'm curious to hear a little bit more about what it was like going down the road of getting the things, I would think you said it was in your head and Linde's head and Mara's head, and trying to create more process. I'm going to assume you weren't like anti-process before but obviously, you didn't have processed things and now you have processed things. So, what changed? Or what did you actually do to start getting to the point of having process where historically you hadn't had as much process?

Todd: I might say that we were anti-process before, Michael.

Michael: Okay. Well, then all the more. As a historically anti-process firm, how do you actually change yourselves to be more on the process bandwidth? It's a hard change.

Todd: Yeah. It was very hard. Again, I would say that's something that we're definitely still working on, one of the big things that happened right in the middle there is this whole AI thing. So, it's like...

Michael: I've heard of that.

Todd: So, also now it's been really exciting to say, "Okay, what part of our processes can we automate?" And so, what we started doing really was just documenting everything that we do. So, for a while, what we would do, especially with a new staff member is, we went from the point of a client would come in and obviously we knew what to do, and we just naturally did it and figured it out, to the point where we hired people, and it was effectively just saying, "Hey, watch us do what we do." For a long time, we felt that was okay. But now what we're realizing as the firm grows is that's not really good enough to just say, "Hey, we know how to do it. Just watch us do it enough times, and then it'll be in your head and you'll know how to do it."

We went through an exercise where we took every part of our business and took every step of what we did and literally just started to document it. And so, at first, we just started document it on spreadsheets because I didn't frankly know another way. And so, it was just a matter of take something, for example, a new client calls you up on the phone, "Hey, I was referred to you, I want to work with you." Before it was just me emailing the client like, "Oh, great. Come on in for a meeting," to where now it's like... So, there's no point in me writing the same email a million times, so, it's like, "Oh, well, let's take that email and now we save that into a spreadsheet."

And so, for a year, what we did is we basically just started putting every step of everything we do into these different spreadsheets. What we're doing now, we actually switched our CRM to Redtail. And so, in that switch, we are also building all of our processes into Redtail using workflows. We have someone here, his name's Taren. He's in charge of doing that. So, again, that's a good example of, I spent the time to create the processes and say, "Okay here's what I want our client experience to look like," from the minute that somebody contacts us, what do I want this whole thing to look like to them?

It was also really important for us to make it consistent, because as we grow on our number of advisors, we wanted to make sure that if somebody's contacting one advisor, they're getting the same experiences if they contact another. And so, I spent a long time creating these things and then working really closely with Taren to actually help me put them in a form where it can be used by the team. Again, a lot of that right now is taking these spreadsheets and building these processes into workflow in Redtail and then also now trying to figure out, "Well, hey, are there any parts of these processes that we can use automations for?"

Michael: And what is Taren's role in context here?

Todd: Taren actually started off here as our portfolio administrator. And I would say that one of the things I've just been really surprised about in this industry is I don't think we ever could have imagined the role that technology would play. I feel like more and more I'm just running a tech firm. And so, Taren's role has really changed quite a bit. When he first came on he was really going down the road of trying to get his CFA and be the one that was going to effectively be managing the portfolios. And what we realized by just going through some work internally was that... One of the things that I just learned so much from, is the book "Rocket Fuel," that a lot of people have talked about. And I will admit, I don't read, I listen to books, so that's why I just...

Michael: That works. I don't know if Gino Wickman audio narrates it now, but yes, it's a fantastic book.

Todd: It's a great listen. But just learning that we had everybody in the firm take that assessment that they give, and Taren's background, I just love his background. He went from high school into the military and served in the military for a number of years, was in Iraq. And then when he got done, he decided that he wanted to go to college. And he graduated from University of Portland out here in the northwest in finance, got his MBA, and really was wanting to go down that track of being a CFA. And so, we were supporting him in that and helping him study and go down that road. But I think one of the big things that's changed is we woke up one day and we were like, "Do you really still want to get your CFA?"

And he really realized that his strength and his interest and his passion was more in operations. And so, he and I both agreed that it would be really great for him to just focus, not just on managing the portfolios, but really helping oversee the operations of the whole firm. It's been really fun. And part of that was we use Orion, and realizing that in his role, in doing all of our trading and portfolio management, he was just in Orion all day, every day. And not just in the trading part, but whenever anybody had Orion question, they were going to Taren. And so, we just officially said, "Hey, let's just change your role."

And it's really great because he was excited about that, and seeing him...again, for one, he's the kind of guy that will just do whatever needs to be done for the firm, but that really is more in line, I think, with what his passions are as well. And so, that's how we arrived at that is just realizing that things have changed in our world. We used to spend so much time on portfolio management and trading and all that. And as we all know, one of the things that technology has aided in the most is making all that trading and portfolio management quite a lot less time-consuming.

What Momentous Wealth Management Looks Like Today [1:07:29]

Michael: So, then catch us up to present. So, what does the firm look like overall today in terms of assets, revenue, clients, staff?

Todd: So, where we sit today, we have nine total staff. We're fairly heavy on the advisor account. So, of our nine staff, we have six advisors. Right now we have three senior advisors. We have one lead advisor and two associates, our two younger advisors. We have been implementing that Diamond Teams model. So, when we hired the two new advisors, Aiden and Savannah, is her name they're starting off as associates and working their way up that Diamond. We have three support staff, so Mara is still here. Kylie's been with us for a while, and Taren that we talked about. We have a total now of around 450 households. As of our most recent billing, our annual revenue is around $2.7 million, and we're around $410 million in assets under management.

So, like I said, three years ago we were about $260 million. So, it's been quite a ramp-up over the last three years, which has been exciting to see, and also fun, because then if I look at our five-year growth rate, it's been around 14%. And it's been fun to see that go up. Our growth rate in the last three years is closer to 17. So, it's always nice to see those numbers increasing.

Michael: And to what do you attribute the uptick in growth activity?

Todd: I think it's the same story. I think one of the things that I feel like is, I don't know, somewhat interesting about our firm is the fact that we are just the prototypical story of, I started at a college, just started doing the thing and knocking on doors at Edward Jones, and it just grew, referrals. One thing I've noticed in the last three years is I would attribute it to the fact that just having more advisors has allowed us to do more. So, one of the things that we've really tried to focus on is what you had just alluded to, is the fact that with all this technology, our mindset has not been to use that to just do less, but it's like, "How can we use that to be more present for clients and do more?"

So, when I think about the fact that now we have two advisors in most of our meetings, it's just really great because whereas it used to be me or Linde doing our client meetings, but again, being responsible for all the prep and all the follow-up is frankly, you just run out of time. And so, I just feel like the level we've been able to go to has been so much deeper with adding more advisors to our team because there's just more people helping do the work. And I think that's allowing us to do better work for the clients.

Michael: And so, then better work for the clients, just practically is more clients who consolidate assets, more clients who expand the relationship, more referrals of clients coming over, that kind of stuff adding up.

Todd: Yeah. I get really excited about creating just an exceptional client experience. That's the other thing that excites me. And I feel like for us, when I think about our growth, we're not a firm that's really grown through social media and that kind of stuff. We don't have some crazy campaign that's been super successful. It's really just been growing through referrals. And so, I've doubled down on this idea of, in order to get more referrals, you have to be referable. And in order to do that, you just have to do a really, really good job. And so, that's what I attribute to is I think our strategy has been very specific, but it's not flashy. It's just, if we do a better job, then obviously clients are going to talk about us more.

And for us, I've just not been able to solve the algorithms or whatever. We have a podcast that we do that our clients love. We don't get a ton of new clients from it or anything. We do get the occasional client finding us on Google and things like that. That is something that we are trying to get better at. And one of the things that I hope to do as they get more time is just trying to make sure that we're maximizing all the different channels of growth. But for the last several years, it's really just been client referrals.

What Surprised Todd The Most Building His Advisory Business [1:12:07]

Michael: So, as you reflect on this journey now, what's surprised you the most about just the 20-year arc of building the advisory business?

Todd: I think the number one thing that surprises me is that technology component that we talked about. I just could have never imagined that when I think about back in the day what we all thought we were getting into is just completely different. Like I said, I feel like we're mostly a technology firm at the end of the day, trying to figure out how to use these things to our advantage and to better our client experience. But I think that's the number one thing that just surprises me when I look back over that 20-year arc, is all the things you mentioned about just the number of people and the headcounts and just all the stuff we're able to do for people now is fascinating. Just the fact that technology has allowed us to have the time to...

When I started back in the day, it was just talking to people about a certain stock or a certain bond that had a good interest rate to planning. We thought we were different because we did financial planning and it's like, "Well, now everybody does financial planning." But now we're involved in estate planning and tax planning and everything else, and it's really exciting.

The Low Point On Todd’s Journey [1:13:28]

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

Todd: I think for us, one of the things when I think back, and I think this is a potentially good lesson for people listening, is we talked a lot today about being acquired. But there was a point in my career where we were...and we've actually done a couple of acquisitions along the way as well. And one thing for us that occurred was that I was in the process of building my firm, I left the brokerage world back in, it was 2004 is when I went independent, and worked with a group of advisors in town and just really loved it. Great group of people there, and some really good friends that I'm still great friends with today, but had the opportunity to potentially acquire another firm. But in order to do that, just given the size of my practice, it was not a situation where I could stay where I was. In order to do this, I was going to effectively have to leave the firm I was at and go to work for this other firm and be the junior advisor.

Michael: So, is that like an opportunity to acquire, if you moved your clients there, became his next generation, and then you can like successor into his practice, that kind of structure?

Todd: Exactly. Yeah. Again, I just owe so much of where we're at today to the firm that took me in after leaving the brokerage world. When I left, it was good. We left on good terms. The owner's still a great friend of mine, and I remember him looking at me one day because we were just struggling over this decision, we had all these plans and directions we wanted to go. And he is just like, "You got to do this. This is a huge opportunity, you got to do it." And so, I just went a totally different direction and did that for a while. Again, at the time, I didn't really think anything of it, but now in hindsight, I realize that to go to work for someone who's intending to retire someday, and then maybe things change in their life to the point where they go a different path.

And so, it turned out that I wasn't going to take over what I thought I was going to. And so, after doing that for a number of years, it was like, "Okay, I’ve got to go, start over." And in hindsight, it was actually just a huge blessing in my life. At the time, I just really didn't understand why it was happening. But it was actually the first time in my life that I had to effectively go set my own thing up. Because when I left the brokerage firm, I went to work with this other group of advisors and they had everything set up. And then when I went to acquire this other practice, same kind of thing. They had everything set up. For the first time, it was like, "Okay, you got to go put your own sign out and figure out your own technology and your own email and website and all that stuff."

Again, I look back on that and I'm like, "Man, I'm really glad that happened because if that wouldn't have happened, I would've never been pushed to do that." And then a few years down the road, we actually ended up with the opportunity to acquire another practice, which went really well. And then when I think of the group of people and the friends that I have here to work with, again, none of that would've happened if that's not the direction that it would've went. So, at the time, you're just sitting around going, "Man, I had no idea. This is just not what I envisioned." We're all planners and everything's planned out. And then when it goes a different direction, you just don't know what to do for a while. So, it was good, but again, got through it and we're in a better place for it now.

Michael: And ultimately, it just came down to the person you were supposed to successor didn't want to actually sell and get out of the way when the time came?

Todd: Yeah. Things changed and he just informed me one day that that was the plan. Being a business owner and being where I'm at, at the time, I didn't get it, but now I totally get it. And it was just that same story that you might often hear of "Hey, I think this is going to happen, or I'm coming to work here with the intention of buying out these clients." And then owner changes his mind, and they're within their right to do that.

Todd’s Advice For His Younger Self And For Newer Advisors [1:18:42]

Michael: So, what else do you know now you wish you could just go back and tell you 10, 15 years ago as you were early in this growth journey?

Todd: I would think that the answer to that question probably changes based on where your business is at the time. But I would say for me, given everything we talked about today, boy, I wish I would've started to build those processes earlier. I just think that if I were talking to a new advisor today, I would say, from day one just do that work, especially in the beginning when you're not quite as busy. I really wish I would have just documented things much sooner, operated as if I knew someday we were going to have eight or nine people here. Because at the time, when it was just a few of us, it would be really hard to imagine the growth and just realizing you're going to have...because when you're smaller, you're just working with clients and that's what you're doing and you're putting all your effort into that, not realizing that, "Hey, someday this is going to be a real official business and you got to have things documented."

So, I really, really wish I would've done that. The other thing I would say that goes along with that is just routines and schedules. Just this notion of trying to build out an actual time blocking, and just being more proactive than reactive. That took me quite a long time to figure out. And I think that's also one of the things I feel like has helped me move through that period of, I'll call it being less happy, is actually just taking more control of my time and saying, "Okay, these are the things that I know I need to do every day to be successful. And if I can do those things, I'll be much happier and be able to show up better for my clients and also allowing me to be proactive and take time to work on the business and all that kind of stuff."

So, both creating processes for the team, but also for myself because that has also given me a lot more control over my time, which I think that if we have that control over our time, we all feel better about the way things are going.

Michael: So, can you share a little bit more detail there? I find like time blocking as a label means slightly different things to different people. What did you do? What are you doing now to manage and structure your time differently?

Todd: Well, one thing I'm doing now, I'll start on a more calendar year basis, is mapping out the way we want the year to go. And so, I actually implemented the surge meeting model. That's been huge for me because it's allowed me to have a block of time where I just know I'm doing client meetings. And then the rest of the year, I can fully embrace that CEO role. And so, for me, it takes about four to six weeks to get through all of our client meetings. I'm not the kind of person that can do six or seven meetings in a day. Usually, during that time period, I'm doing three to four meetings a day for four days a week, roughly. So, it's not overwhelming. It still gives me time to make sure that I'm doing other things.

But we map out, every spring is when we focus really intently on doing planning for clients. And then every fall is when we focus intently on doing that tax stuff and portfolio reviews and things like that. So, having all of our clients also on a consistent service calendar, all of these are things that we learn during our coaching program with Libby. So, it was really helpful. And then even on a day-to-day basis, I've realized for me, getting certain things done throughout the day...so, every day for me, I get up, I get my exercise in, I have just realized, and especially if I'm telling my 30-year-old self, like, "Hey, this stuff's really important. You've got to take care of your body."

But I've also realized that if I can get up and exercise and get that out of the way, the first thing every day, I just show up so much better for the team and for my clients, and I'm in just such a better mood, frankly. And so, to me, taking the things that are important to you and just not sacrificing. I block out that time every morning and I'm not going to schedule anything during that time. And I say no to a lot of things to just make sure. And I think that when you get to a certain stage, whatever that is for you, you have to block that out and you can't cave. It's like, "I have to do that." I also make sure that once a week, at the end of every week, I am spending purposeful time working on the business instead of in the business. So, Friday is that day for me.

So, even in the midst of my client meetings when we're in our meeting surge, I still have that Friday to just make sure I'm taking care of the stuff. Usually, when we're in the middle of meetings, that work on the business thing, that tends to be when I do the payroll and the stuff. But then, outside of our meeting surges, it's great because now I have all sorts of time that I can spend on all these projects. So, what I'll do is I'll keep a running list of projects I want to get done for the firm. But it takes the stress off because it's not like, "Oh, I'll get to that someday." I know when I'll get to it. It's like, "Okay, as soon as this meeting block is over, here's all the cool things I'm going to be able to work on in-between meetings."

Michael: So, any other advice you would give younger, newer professionals coming into the business today?

Todd: I think a lot of it wraps into what we spoke about, but just that whole idea of time blocking and making sure that you're just really being intent about your day. Because I think that if you start that when you're less busy, it's just going to get easier to do when you're busy. Another thing that I would, I guess, really tell young advisors today would just be...again, I could be totally wrong on this, Michael, but this is just me. I think that right now, we have to look at things... Again, another book that I really love is "Unreasonable Hospitality." And again, that was something also that clicked in this journey over the last few years is just the fact that as we spoke it before, when we first started, no one was doing planning, and then everyone was doing planning, and now even the levels of planning everybody's doing is great.

I've flipped the switch to realize that we're not really in the service business, we're in the experience business. And I think that really trying to give your clients a really great experience is what's going to set you apart because everybody gives great customer service, or at least everybody says they do. And I do think in our industry in general, when I'm around other advisors, it's like, the group of people that are in this industry are people that truly care and want to do the best for clients. So, everybody's given great customer service. But I think if you can go to the next level and give your clients that great experience, it's going to help set you apart.

What Success Means To Todd [1:26:30]

Michael: So, as we wrap up, this is a podcast about success and just one of themes that comes up is that word success means different things to different people. Sometimes it changes for us as we go through the journey. And so, you've had this wonderful growth journey with the firm now, as I think you highlighted, a new inflection point of growth as you're crossing $400 million of AUM, and the team has expanded. And so, the business seems to be in a wonderful place now. How do you define success for yourself at this point?

Todd: I think for me, at this point, and it's really shifted because for the longest time, success was just watching those numbers, because I think that for a lot of us, we just have these notions, or what is ingrained in us is what's "successful." Especially being in a firm and what you're doing for people is investing their money in, you're supposed to make them money. That's what you're hired for, is to do planning and invest well, so the clients earn money. And that's what is ingrained in us from when we start our career. So, it's really hard for us to not envision success just being growing, more clients, more AUM, more this and that. Again, I do think that is one of the things that has shifted for me greatly and just allowed me to be much happier, is to realize that at this stage in my career, success is building an environment that other people can be successful in and other people can flourish in.

So, it's back to that coaching notion, is the success for me anymore is not getting a hit on the baseball field. It's creating a really good environment so that my players can be successful, and they can get a lot of hits. And it's the same thing that I've tried to implement here, where what makes me happy and feel great is watching our young advisors do well and do great in client meetings and bring on new clients and watching them build the businesses they want to build. And so, for me, when you ask what's success to me, it's up to me to build that environment. So, as the owner of the firm, I have to create an environment and build a team, and give them the right training to allow them to do those things.

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

Todd: Thanks for having me, Michael.