Growing From $200M To $1.4B In 5 Years By Spending 15% Of Revenue On Marketing (That Still Works): #FASuccess Ep 452 With Gabriel Shahin

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Resources Featured In This Episode:

• Gabriel Shahin: Website | LinkedIn
• How the Rich Get Richer: Your Ultimate Guide to Building Wealth by Gabriel Shahin
• #FASuccess Ep 160: Accelerating Growth By Spending More Than 10% Of Revenue On Marketing (That Works), with Gabriel Shahin
• The Long Tail, The Big Head, and the Dangerous Middle Of Financial Advisory Firms
• Zapier
• Research Based Solutions
• Google Performance Max Campaigns
• SmartAsset
• NerdWallet
• Ramsey SmartVestor
• FinanceHQ
• Advisor.com
• WiserAdvisor
• Zoe Financial
• Bill Bachrach

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Full Transcript:

Michael: Welcome, Gabriel Shahin to the "Financial Advisor Success" podcast.

Gabriel: Michael, super happy to be here. Excited.

Michael: Good. Excited to have you, really to have you back. You are now one of our select group of two-timers who have been out for the podcast and the second time, I think, really, once again, to talk about marketing. Like, what happens when you really start spending dollars on marketing, and marketing that isn't just, like, solely reliant on you. Because I find... I mean, we see this industry in best marketing sites. Like, most advisory firms spend very little on marketing, 2% to 3% of revenue on marketing is typical. And, like, a lot of that is basically, you know, lunches with CPAs, and maybe one client appreciation event. Like, I'll call them marketing-lite marketing spends.

And we do find a lot of firms spend anywhere from 15 to 25% of their advisor time on marketing in time though. Which means, if you look at what advisor compensation is and then allocate, like, 15% to 25% of that to marketing, you find most firms really do actually spend about 10% of their revenue on marketing. But 2% or 3% of it is hard dollar, and the other 7% or 8% of it is the cost of the advisors time that they market instead of serving their clients, which then breaks down for most firms because you can't scale it. Because as the firm grows and the client base gets bigger, advisor time gets more expensive, and there's less time available. Which means, when your advisor time-based marketing, like, all your marketing costs get more expensive as the firm grows, which is, like, literally the opposite of scaling.

And so, I'm excited to have you on talk about marketing as you had joined us back in 2020, you were five years in, you were spending more than, like, 10%, 15% of your revenue on marketing, like, hard dollar marketing costs. And I think it was everything that you were doing, Google ads and SmartAsset and the radio show and seven-hour marketing, all these different things. It's now been five years since. And as I understand it, you've gone from, you grew, 200 million in the first five years, you've averaged 200 million per year for the past five years. So, over a billion of AUM growth in the past five years. Still spending 10% to 15% of revenue on marketing, which as we'll get into now, I'm assuming that's actually, like, a pretty big number. That's probably seven digits. So, I'm excited to talk, like, what's really working when it comes to spending money on marketing, and how you've been able to sustain the growth rate, even as the firm is getting so much bigger.

Transitioning From Client-Facing Advisor To Firm Executive [05:31]

Gabriel: These are all great points. So, a lot to discuss in that. And, yeah, the number, it's well over a million dollars. And so, I think probably the biggest thing is just the consistency of just knowing what your margins are and how much are you comfortable to spend. And for us, it's always been 10% to 15%. I just look at that as almost, like, rent or payroll. We just have to spend that. So, we consistently reinvest it because our goal is to grow nothing less than 25% and target closer to that 40% to 50%. And if you start looking since the show to now, we've consistently been roughly at that 25% to 50% year-over-year return. So, that is very, very important to us. And we haven't stopped that.

And, yes, we just added so many more facets to our growth model, to our marketing model, because when we spoke five years ago, I was mostly...I mean, a good ROI was really me teaching classes. And that was, show came out in January of 2020. March 2020, the world shut down. And I couldn't...so, really, that was probably one of the best things in hindsight that happened, was for us to reevaluate our digital marketing campaign. And really, since then, we've been growing ever since.

Michael: Interesting. So, COVID was very much of a turning point for marketing for you because it broke some of the in-person marketing that you were doing. Like, you were doing well. it was working, but not once the world shuts down.

Gabriel: Right. And it was all, like, me driven. And one of the biggest, hardest points last time we spoke was it's so hard because everything is about me. Like, I'm the guy teaching the classes. At that point, I don't remember how many advisors we had, let's just say maybe four or five, like, everybody still wanted to meet with me because I was the main source of everything. And even now, you see my face on things, and we have actually gotten clients through social media, it is still me, but it's just so much larger of an organization. There's no more, "I need to meet with Gabriel." They just can tell that we're a much larger firm. And it's not an issue anymore to just meet with me.

Michael: So, I'm actually fascinated with this, because you changed something about the marketing or the messaging, or there's just something about the size and the gravitas of the firm that prospects just sort of get that they're not literally going to get Gabriel, this is a big firm with lots of advisors.

Gabriel: Yes, I would say a little of everything. I think our business development team does a really good job saying, "Hey, you know, Gabriel's a CEO. He doesn't meet with clients." I think they do a fantastic job of that. But I think at the end of the day, we've gotten really well in our messaging, like, "One of our advisors will be reaching out to you. Hey, we're in multiple states. Hey, we are able to service nationwide." And so, I think they just the way we message, the way we market, and truly, just the expectation setting is huge. And as I was on the show with you, just kind of still fighting through passing over clients, and just hearing that show not too long ago, it's just funny how we've evolved. It was one of the most excruciating things to pass over clients when I realized it was probably more me than my team alone. But that really helped.

Michael: So, did something change for you that made it more easier to pass along clients if you're saying, like, some of it maybe was you and not just the clients willing to move?

Gabriel: Yeah, I don't know if humbling is the right word, but I think everybody has this sense of, "Oh, they can't live without me."

Michael: Nope.

Gabriel: In reality, another advisor that's capable can do a really fine job without you, "I'm sorry, Gabe, but you could be replaced." And I'm not trying to say advisors could be replaced. And we have fantastic team members. Nobody wants to turn over with their advisor. I completely understand that. But the messaging of me telling my clients that, "Hey, I now have to run the company and not be a glorified advisor. We are growing. I'm still here. You can still call me anytime you need." There is something really just honest about that that they can see. And if they really loved you that much, they can appreciate what you have to do. And I think that that was the big thing. And for me, because actually, I loved them that much. And that's what was excruciating. I mean, why did we enter this business? To help people at the end of the day. I loved helping people. And it was harder on me, I found, than them.

And then, of course, there was that other side of it. It's like, well, you know, they know me. I'm sure if I was in that meeting, it's a higher probability to close and have new clients. That was another side of it. So, once I just had to do kind of the math behind it of how much I value my time, versus how many clients we probably didn't get because I wasn't in the meeting, once I figured that out and was comfortable with that, nobody likes to lose money, but once we were comfortable with that, I think that was a big light bulb, because we turned into an organization at that point. I had to be a manager. I had to be a leader. I had to work on the business, not in the business. And it was hurting the business. We had turnover issues shortly after the show because we're growing so fast, but there was no leader. And that's that was kind of the big thing.

Michael: So, I'm fascinated by this dynamic with the prospects as well. So, I mean, almost all of us, by definition, start out in a founder-led growth model for like, hang my shingle, have an advisory firm. I'm the only person. Go get clients. If I can get enough to survive, I get to keep this advisory business and run it. So, we all live founder-led growth if we start our firms. So, the transition of, what does it look like if I'm not the one meeting with prospects to close them? And can anyone really be trained to close them as well as I can? Just talk to us more about what that shift or transition was like.

Gabriel: I mean, it was difficult. I mean, I'm a winner. I'm a competitor. I don't know how to lose. So, to see clients leave, I think it was difficult. The only way I can articulate it is an all-star in a basketball team. They can't take 100% of the shots. And some of them try to, and they don't probably go far in the playoffs or whatever the case is. So, at the end of the day, not saying I'm Michael Jordan, but just as an example, Michael Jordan needed teammates to hit shots. And there's some famous game winning shots with John Paxson and Steve Kerr and so on, where they just needed those people to step up. So, sure, could Michael Jordan have probably done a better job? Yes. But it would kill the guy. He probably wouldn't have played 13 years or whatever he played. He probably would have played a lot less. And that was the only way I could justify it. I'm a big sports guy, and I put it in a sports context.

Michael: That is an interesting analogy that, you know, the star player on your team, I mean, if you're going basketball, like, really might have a better shooting rate than anyone else, but you still can't give them 100% of the shots to take. Like, you have to share it around the team. You'll burn them out. You'll wear them out. Eventually, the team from the opposing team learns how to play defense. It goes five on one. Like just you have to operate as a team because there does become some crossover where what the team achieves collectively is better than what happens if everyone on the team passes to one superstar.

Gabriel: And this key, I had probably three to five, maybe key moments of Falcon Wealth. And one of them was an advisor came to my office, and in the middle of the conversation, I had this revelation and I shared it with them and I told this advisor, "You are now my biggest client." And it was such, like, an impactful thing for me to realize, like, that one person helps 150 or so households. And that was, like, the game changer, right? That's like, "Okay, let me rest at the end of the third quarter and come in..." It was just a different mindset of, we have to help our team. You can't be so...not self-centered, you can't be so small-minded to focus on one client. Focus on one production advisor and they will help 150 people. So, instead of helping, for example, 150 clients, just think big. How about helping 150 advisors? And those 150 advisors, the cumulative effect of that would be just ginormous.

Making Investments To Improve Efficiency With An Eye On Future Growth [13:14]

Michael: Interesting. So, what else shifted like that? I mean, you said there were, like, several key moments in the evolution.

Gabriel: I mean, one that stuck out, our COO who wasn't COO at the time, a gentleman by the name Ray, I came into work and we're just struggling. I think that we probably had 11 people at that time. This could have been 2020, maybe even 2021. And we're just always just behind eight ball. I don't know. We always felt like we're just always needing to hire somebody, whatever the case is. Our mind just wasn't there. I walked into the office one day and goes, "Gabriel, I figured out what the problem is." And we were probably at, let's just say 350 million [dollars in assets under management] at the time. He goes, "We're already a billion dollar firm." And he goes, "We're just not there, yet. We're operating, the amount of meetings we're doing, everything, we are a billion dollar firm."

And so, right then and there, I feel, like, I just stared at him. Didn't really have a response. Just kind of did, like, the head bob, walked to my office, thought about it for another five to ten minutes. And then within probably three to four months after that, we doubled our staff. And that was such a huge indicator where we started hiring for the growth. And that's where we really started delivering. That's where we really started to see...because here's the thing, we have direct marketing costs. Everybody talks about that. Nobody talks about the indirect marketing costs, like, the business development team, the planning team, the ops team, like, we have to do things to catch up with our growth. And so, I mean, it's a big investment. And we just were struggling.

And once we realized we were...so, even now we talk about the dangerous middle, your famous dangerous middle. And we had a consultant come in and they were like, "If I were to ask anybody in your team if there's any doubt you'll break 2 billion in AUM, would there be any doubt?" Kind of thought about it, we looked, I'm like, "Well, there's no doubt." He's like, "Correct. Stop thinking like you're one and a half billion dollar firm. Start thinking as you're 2, you're operating at a level of 4 billion in AUM. Start thinking at that level." And he was right. There's no doubt we'll get there. It's just a matter of time. So, it's just these certain things that happen is just instrumental in our growth.

Michael: And the takeaway of that in your context is, therefore don't be afraid to staff up. Don't be afraid to hire at the next level. Like, is that how it, like, manifests into the business when you have this takeaway?

Gabriel: Love that question. That's 50% of it, yes. The other 50% is, and I say this all the time with my team, if we were to have ten times more clients, if we were to have ten times more advisors. If we would have to do ten times more trades, can we do it in scale? Would we need ten times more staff? That's always what I ask. And so, what that really started to have is just us going heavy into R&D and now moving to Salesforce. And that was a massive project. Us building infrastructure around where it might seem premature, but at the rate we're growing, it's going to save us so much more money and time. And that has been a big thing.

Where now, just kind of the inside joke of the company is, well, some people upset it to us is you're more of a marketing firm than an RIA. That's one. I don't know. I that's sometimes I feel that's a knock because other people tell us outside of our organization. And the second one is we're more of a tech company than RIA. The amount of infrastructure that we have on technology is just... I mean, to this day, we only have a BD [business development] team of 9 people and we have 2,500 leads coming in a month. And for us to handle that, when you compare it to other firms, when I hear how many leads they have and how big their business development team, we're probably almost three times less than theirs.

Michael: Well, because most others don't have 2,500 leads coming in a month, they have 27 people calling outbound trying to generate a fraction of that, which we'll probably get into further soon. Just curious, like, I'm now I'm fascinating with some of these takeaways. So, like, my advisor is now really my biggest client, not my big clients. You know, be the, like, future growth firm that you're becoming, and don't be afraid to hire and invest into it and think about what you want to invest into to be much, much larger. So, what else? What are some of these other, like, key moments or realizations that have hit you as you've been sizing up the business?

Gabriel: I have a saying that was really put into the company. One of the associates here used it against myself, and that is, you can't afford to be cheap. And you really start to think about you can't afford to be cheap. And I used to always say, you think it's expensive to hire a professional, try hiring an amateur, you'll see what expensive it is. So, it's the same logic there. So, sometimes when you're looking at have a technology that's going to cost a $100,000 a year, $150,000 implementation, so on and so forth, and you just start to think, how much time will that save? And how much will that help us increase our efficiency? How much in the snap of a finger instead of waiting 8 to 10, to sometimes 20 hours for a report? You can now do it in 8 to 20 seconds for a report. And so, you start compounding that over and over and over again. I think, that's huge. So, can't afford to be cheap is another one. And then just don't be afraid of technology.

I always say fail forward. And that's something that's taught to me early on in my career, fail forward. And that's one of the mantras of this company, is just don't be afraid to do it.

Michael: So, can you translate that a little further. And so, what happens in the business? Or what, what changed in the business as you've embraced this? What is it leading you to do that you didn't do before?

Gabriel: Somebody wanted to create an automated system for an intake. So, we have a questionnaire that we have with prospects. And they're like, "I think I can automate this." They're really good with technology. And, you know, we're stuck in our ways, but I refuse to allow people to just say, "No, thanks. We're stuck in our ways." So, I said, "Sure, just do it. If you think you can do it, do it." And then we started to implement it. And it wasn't 100%. But then as we got the committees involved, we ended up using it. What used to take us 20 minutes for an intake, now takes five minutes. Well, when you're doing 50 to 60 of these a week, I mean, that saves a lot of time, 15 minutes for each one. And so, that's one, like, big aspect. And also utilizing Zapier, just automation. "Hey, can we automate this." And then just like, "Okay, let's just do it. Let's just try it. Let's just implement this and move forward." You know, obviously there's some trial and errors, but then we realize like, "Okay, this actually saved us a boat load of time." And that's super helpful.

Michael: So, I've got to ask, did this shift as you got bigger? Because I just find there's a phenomenon for firms. You know, you did a lot of stuff on tech. Like, you built the intake form. It didn't fully work. Committees got involved. Some of us small firm entrepreneur folks are, like, rolling our eyes at the sound that committees got involved. First, that there was a committee, and second, that there's more than one. You pluralize that. Like, committees got involved, but now, a 20 minute intake takes five, and you have dozens of intakes per week. So, that's a bajillion hours through the year. The math adds up really quickly.

But is that a function of how large and scaled you are? So, I mean, like, would you have been as thrilled about that five years ago at 200 million, and for where you were there, like, 7 or 18, as you are now with a billion plus in a much larger team. Like, did that move? Like, does that tech role move with size, I guess, is what I'm trying to ask? Do you think about it differently at your size now than when you were five years ago?

Gabriel: So, we always were on the forefront. I think we were using Zapier before or when we were on your podcast five years ago. So, we always pride ourselves in being, like, very tech focused. And I still feel I'm a young entrepreneur at 40 years old, young business owner, young RIA owner. So, I feel like we've got to take advantage of that. Plus I'm a little hyper, for those who know me. And so, I think one of our competitive advantages, one of many, is we move quick. And I never want to lose that. And so, because we move quick, it's something that's just part of our culture of the firm. And for that reason, I don't think it's because we get bigger.

Now, because we get bigger, the math and the science and the more times you chip your teeth will happen more and more. Because somebody will give an idea that say, "Hey, I think this could save ten minutes." And when you multiply that by 250 meetings a week, I think that's important. So, now it's like, "Okay, it's worth it." We almost have, like, our ops executive leadership team, we almost have three or four people that are consistently looking at new processes, systems, and technologies because of what you just said. Because now when you multiply it by, I don't know, 1,500, 1,600 clients, like, it matters. And when you do it by 2,500 leads a month, it matters.

And the only thing I'll say for the, for those who are rolling their eyes right now is the committee was me. I was the committee. And it was actually funny, the evolution of that, Michael, is because I was in the committee meetings. And I was like, "Why am I in the committee meetings? Why is there committee meetings if I'm just going to be in the committees." So, then we pulled me from the committees, and I would just see the itinerary before and after, and give my inputs of what I want them to talk about. And so, it just leveraged out. So, you don't need committees, because normally, it's just a dictator running the company, which is fine. I was a dictator for a long time. It's just now we're empowering other people to come to conclusions, and hopefully, you're hiring people that's in your blind spots that can bring things up that you wouldn't have seen.

Charging A Premium Fee For A Premium Product [22:38]

Michael: So, now, help us just visualize the firm as it exists today. So, I guess, just some of the metrics as it were of, like, client count and team count and AUM in revenue, just, like, paint the picture for us.

Gabriel: Okay. We've got about 1,500 clients, about, well, let's just say over 1.4 [billion dollars] in AUM, probably 1.5 almost. We have a team of over 70 people. And the revenue, if we didn't add one more client for the rest of the year, it's like, we'll call it 16 million [dollars] or so.

Michael: Okay. Interesting. So, 16 million on 1.4 billion of AUM. So, are you, like, advisory fee plus planning fees? Is your AUM fee higher than 1%? Like, how does that math?

Gabriel: So, yes, and yes. So, we have planning fees that are about a million bucks, we'll call it. We also have tax revenue. We'll call it, like, maybe 600,000 plus. So, I'm including that in there.

Michael: Okay. Sure, sure.

Gabriel: Because a lot of that is actually Falcon Wealth Planning sponsored as well. So, it's going from one hand to another. And then we have, the AUM is over 1%. So, a firm like us, a true wealth management tax planning firm should probably have minimums of close to, like, $1 million to $2 million. And we've seen a lot of people that have done that, which makes sense. For me, I don't know. I'm just weird. I feel like I can help everybody. It's a kryptonite for me. So, what I said was, "Why don't I just make my fees higher?" So, for people under, clients under $350,000, we charge 2%. And so, where other firms that are maybe on a referral network on a million dollar client at 1%, you know, they're probably lucky to clear, you know, we'll call it $6,000 to $7,000 of revenue, where we are happy with 350,000 client because that makes 7,000 revenue. So, we just wanted to make it worth our while. And they didn't balk at it. When you are offering just supreme value and service, then when you're saving somebody so much on taxes and so on, then they're happy to pay that fee.

Michael: So, I'm fascinated. So, how does the advisory fee scale as you're over 350, I guess? Like, I mean, does it jump way down from there, or is it still steadily graduated down, and you blend out higher than 1% for a while?

Gabriel: Yeah, that's a good question. So, I mean, it goes...there's break points at 500, 750, a million, but to keep it simple, like, a million dollar client is a little less than 1.5%, $2 million clients, like, 1.3, and then $3 million, it starts to get closer to that 1% mark. And then we're pretty conservative, like, 10 million, they're probably no more than 75 bps [basis points]. And it just gets higher. 50 Bips at 20 million, probably around there.

Michael: Is your fee schedule, like, cliffs? You know, if you get to $351,000, the whole fee is lower, or is it more, it's, like, tax brackets is graduated rates? Like, you fill the lower bucket at the higher rate and then the next bucket and lower and the next bucket the lower.

Gabriel: Totally. Yeah. It's the latter, for sure. So, $500,000 client might be 9,000 in revenue. It won't be just, you know, 1.5%, which is 7,500.

Michael: Okay. And so, I guess, I've just got to ask again. So, in the so-called, like, "everyone charges 1%", so fee schedule that starts at $2 million clients that are still 1.4 and change. Like, not a problem. I don't know, fee competition, fee sensitivity, like, I mean, there's so much discussion about it. So, I'm always fascinated by someone's like, chugging right along adding several hundred million dollars a year. It's like, "Yeah, our fee schedule starts at 2%, and things are going fine."

Gabriel: Yet again, if you're operating a supreme value, it's almost like people are comfortable to pay for the same steak, you can get at Costco to a prime steak, you're comfortable paying five to ten times more at a Ruth's Chris, or some of these other fancy spots, it's the same. So, it's the perceived value. So, some people just want to get full, forget it. Give me beef at McDonald's, you know, at the value menu. So, to me, in our brain is the same logic. Which is why our sales process is a lot longer than other firms because there's just so much more we have to go into, especially when we're doing tax planning. Because for us, if we can't save them, we have a tough time quoting them.

Michael: Okay. So, tax planning is just a big hook for you in practice.

Gabriel: Yeah, which is why in 2018, why we built the tax division, is just some of the accountants we found... There's two types of accountants, one is that were humble and say, "Oh, these are great strategies." The other side of it was, "No, it's not my idea, so it's a bad idea." And so, we don't want to butt heads with the accountants. So, we just said, "Okay, instead of fighting, we're just going to now compete with you."

Michael: So, then break down for us a little bit further, the 70 people on the team, it just, just departmentally or structure wise. I'm not going to challenge you to name all 70 people or anything. Well, paint the org chart for me a little bit, or the departmental structure.

Gabriel: We got, you know, five C level with myself, COO, CMO, CCO, CFO, like, the normal stuff.

Michael: Wait, wait. Just, no, I want to understand those seats. So, what's at the C level for you? So, CEO is you.

Gabriel: Yes. Then we have a chief operating officer, chief marketing officer, chief compliance officer, and chief financial officer.

Michael: Okay. Chief financial officer. All right. So, help me understand a little bit, I guess, what the roles are responsible for, what departments roll up to them. I'm pretty clear what roles up to chief compliance officer. But help me understand the rest here.

Gabriel: Chief operating officer has a team of...they pretty much handle the op side. And CEO, I guess, you can say, handles the advisory side. But essentially for the COO it's, we have about seven people in operations. Compliance is more billing. There's two people in billing for the chief compliance officer, but the COO is still involved in that. We got five people in the trading department. So, that's COO again. We got nine people in business development. That's on the sales side. We have six people in the administration side, just miscellaneous roles, if you will, just, it could be executive assistants. It could be office managers. It could be director of education. We have 20 advisors. Six people in the tax team. Five people in the planning team. And then we have just interns that kind of float around. Marketing team, we have six people as well in the marketing team.

But the advisor breakdown is we have two managing directors. So, these are just kind of the leaders. Everybody rolls up to those two. Three regional directors, thirteen advisors, and two associate planners. So, associate planners help the advisors. The RDs kind of very similar to the Fisher [Investments] model, if you want to. They're the ones who probably 60% of the leads go to those three people. And then once they become clients, they hand them over to people to complete the financial plan. And that model has worked out pretty well.

Creating A Business Development Process To Handle 2,500 Client Leads Per Month [30:05]

Michael: All right, wait, help me understand that a little bit more. Like, the levels of managing director, regional director, advisors, associates, and, like, who gets what, how you allocate lead flow, how you manage new clients and ongoing service.

Gabriel: Okay. So, the managing directors, they're just the managers. They do still have some clients, but they're the managers. So, if there is kind of an org just on that, it would be three are the original directors. These are the ones who get 60% of the qualified leads. And these are people that...essentially, like, the Fisher model, they are the ones that, what do you call it, hunt. And then the 13 advisors are the farmers. And those are the ones that actually finish the plan and maintenance the relationships going forward. So, the RDs are always looking for new business.

Michael: So, what's the difference between what regional directors do and what, like, the nine-person business development team does.

Gabriel: Great question. So, our advisors...which I'm finding is, like, very hard to just get advisors. It was probably one of the easier things starting off. But our advisors, they're great at being advisors. So, I don't want to bog them down on setting appointments. So, when you have 2,500-plus inbound leads a month, like, I can't have my advisors making those calls, especially if 80% of those are getting voicemails, on maybe the first time. And so, that's the nine people. They're handling the 2,500 leads, and they're setting roughly 500 of those 2,500. So, 20% of those on a monthly basis for the advisors, where 60% of that, our goal is to give to RDs. So, these are people on the phone, unlicensed people, not giving advice, and setting appointments. So, the business development is appointment-setting team.

Michael: Okay. Because you have so much flow that literally, like, nine people doing follow up on leads to set appointments is actually, like, a good ROI, a good efficiency for you.

Gabriel: No, I was going to say, absolutely. I mean, and when you compare it with the technology that we have and everything of setting those appointments, I mean, it's a no-brainer. So, when we did those numbers...because originally, we didn't have a business development person, it was the advisors. But the advisors are in meetings. And what happens when the meeting comes in and it's SmartAsset and it goes to three different people? Like, what do you do now? You're in a meeting. You just lost that lead that you just pay 200 bucks for. So, by having a team that now we try to call some...depending on the lead where it comes from, it could be, like, less than ten seconds or within ten minutes, depending on where the lead comes from. So, that's very important for us on the timing and the lead and the messaging of where these leads come in, and the business development team is all over it. And yet again, the advisor skill set is to be a financial advisor, to be a planner, to go deep into the weeds, not to set appointments.

Michael: So, the biz dev folks... So, relative to how I feel like a lot of our industry talks about business development folks, which maybe this is my own stereotype, but expensive people who are out there building relationships with the community and trying to build the brand and drive referrals and COIs and such. That sounds very different than what you talk about as nine business development people. Like, these are unlicensed appointment-setting folks. I mean, if you can give us a sense of what kind of salary range is this? Like, just what level of people-business cost is this to fill this department?

Gabriel: Yeah, it really ranges. It could be... I don't think we have any anybody in the 40s, but let's just say it could be 50s to six figures. I mean, so it really depends. I mean, they are incentivized for setting appointments. So, some people get a lot better of a quarterly structure than others. And there are some aspiring advisors. I would almost say, a majority of them want to be advisors. So, there are some licensed people there. To say there isn't is just inaccurate. So, we allow them to get licensed there. And then the progression would be to the planning department, from the planning department, then maybe associate planner, and they'd be licensed and studying for the CFP in that planning department.

Michael: Okay. And we're going to get further into the marketing and where a bajillion leads come from every month soon. But I'm understanding the flow now. So, the marketing makes the proverbial phone ring. Nine business development people feel 2,5000 leads, get 20% of them or about 500 of them to actually set, like, first meeting appointments. The regional directors on the advisory side then actually take those meetings and I'm presuming have responsibility to do the sales and closing process. And then the regional directors, when they close a client, hands it off to one of the 13 advisors.

Gabriel: Yes, exactly.

Michael: Who actually start with the client going forward because the regional directors have a very high volume of leads, so there's really not going to be a ton of time for them to keep and service any clients.

Gabriel: Right. I mean, it would have to be an eight figure client or more. And we make it up to them. We're not going to tell them what to do, but it's in their best interest to pass off as much as they can because they just the comp structure is just better.

Michael: Okay. And so, then help us understand the, I guess, just, like, the next layer of teaming of structure. Like, I'm just trying to visualize, are the mean are the 13 advisors, like, carved up to regional directors, as each regional director have four or five advisors under them, or do the advisors go under the managing directors, not the regional directors? Like how do these fit together, team wise?

Gabriel: Yeah, great question. So, we have one in Arizona, one in Orange County, and one in our headquarters here in Ontario, just outside of L.A. So, we have multiple advisors in each location, so naturally, the Arizona person will pass more to the Arizona person. And just for location, regional marketing, we get more Arizona clients for the Arizona person. Same thing with Orange County, and the same thing with Ontario. But we also get service clients nationwide. And so, for that, we try our best to make it regional. But we also have kind of... How do you say it? Like, a management training system where you analyze personalities almost like, what is it, Briggs, Myers.

Michael: Myers Briggs.

Gabriel: Myers Briggs, similar to that, where we are able to assess the type of personality and matching with the personality of not only the RDs, but once they become clients, passing them over to the advisors. So, now, do they sometimes play favoritism? Our commentary is, well, and by the way, the RDS become like a quasi manager. Because if somebody was going to pay for planning, or somebody was going to pass assets under management, and they go to the advisor and they don't convert that, they're like, "What happened?"

And to this day, 80+% of our meetings are through Zoom, and those are recorded. So, they're able to watch that meeting, see what happens in that meeting. And either the regional directors will talk to the advisor or the managing directors, the actual, like, managers will go in there for training. So, you can't keep passing it to somebody if they're not bringing it home. With that being said, sometimes it's inverse. Why are you passing it to this person? Well, I had two planning-only cases, and that advisor turned them into AUM. So, like, this guy is awesome. I'm not going to not give it to them because I have to diversify it. They've proven to be awesome.

Michael: So, really quick, do you know what the personality tool system is? Like, I'm just kind of intrigued. Like, what do you run them through to try to do this matching process?

Gabriel: So, I worked for TD Ameritrade for about five years, and they had this research-based solutions getting a rod that I worked with very closely. So, they have, like, just quadrants that they work with, and they call it, like, the commander, the performer, the analyzer, and the empathizer. And so, I just it always stuck with me from TD Ameritrade. And that really helped me in my sales skills, people skills, marriage skills in general. And I just remember working here and it was, like, in 2020, where we're like, "You know what? I still use that to this day. Maybe we should..." Or somebody brought it up to me, Kevin, one of the managing directors, said we should look to incorporate that. That was awesome tool, easy to manage around, and we have a universal way of talking. And so, we said, okay, so we've been using them since then and they've been really good partners

Michael: And wait, and just and who's the vendor that does it?

Gabriel: Research Based Solutions. I could share their information with you and you can post it.

Michael: Okay, sure. So, for folks that are listening, this is episode 452. So, if you go to kitces.com/452, we'll have a link out to the assessment tool, folks, if you're curious to try this out. So, the idea, Gabriel, and I guess is just you, you match personality styles to advisor styles, like, whatever, commander style clients get commander style advisors because they'll sync up well.

Gabriel: Yeah, that's exactly right. And same thing with performer. And sometimes it's just self-awareness, because our firm just being, like, the good guys, unfortunately, we have a lot of empathizers. Empathizers have a tough time with commanders. Well, I do really well with commanders. And so, does other people in the...typically, those commanders are CEOs and things like that, business owners. So, it starts with the business development team, the biz dev, and it goes to the regional directors and it goes to the advisors. So, sometimes it's not so much perfect match. It's, "Hey, you have to pick up your energy here. You can't just be the soft spoken person." Or, "Hey, this person, you got to calm down," because if you start steamrolling them... Or, "Hey, this person is more logic driven, versus report driven. They don't care about your family. They don't care about your dog. They don't care about anything. Just get to the data," or you're going to lose them. And for us, there are some positive things that really helps us in our sales psychology.

Falcon Wealth Planning's Compensation Model [40:26]

Michael: So, now, if I can ask, how does how does compensation work for you guys? I just I'm hearing, in particular, all this routing of who gets which clients and already kind of have some apparent incentive or desire to get their clients to advisors who get the business done and win the clients, retain the clients. So, how does compensation work in this structure where you're feeding them leads, but they still have to close, and there's layers of who closes and who services?

Gabriel: So, we have a grid. We have a grid model. And so, for example, it could be, like, 250,000 to 500,000, 500,000 to 750,000, 750,000... And they get paid per. But let's just keep it real. Like, what does that come out to? It comes out to about 15% to 20% of revenue. That's just what it comes out to. So, simple as that. But here's the problem of doing that. It's if somebody is making a salary of 100 grand, let's just say, to keep it simple, it could take them two years, three years before they ever see a raise. And so, because we have it overtaking the salary, it's not plus salary. So, if they're managing a book of, let's just call it, 2 million in revenue, that could be $300,000 salary. And so, that's what their pay would be. And so, it wouldn't be 100 grand plus 300. So, that's a very important distinction.

And so, with that, because it could take a while before, you know, that it goes over, it could take maybe a year and a half, two years, we've implemented just 25 client tranches after 25 clients, depending. What I did to share, so there's actually a distinction between relationship manager and financial planner. One has over five years of experience, gets higher clients, and one has less than five years of experience. And so, they just get, like, less than 500,000 [revenue]. The financial planners get over 500,000. And so, they'll get raises of roughly 5,000 on the relationship manager every 25 clients or 10,000 on the financial planner side. That way, they do feel they are growing, so versus waiting two years for a raise.

Michael: But nominally, just it's you're effectively getting paid 15% and 20% of your revenue, and you've got 100,000 salary base until you earn your revenue high enough that you just get your revenue. So, you don't have to start at zero while we fill you up. We'll eat the difference and try to fill you up quickly because at that point, it's in our interests.

Gabriel: Absolutely. And I mean, the salaries, you know, it's more than 100, but we'll just say that for the simplicity of it. Yeah, they're starting closer to 120 and up these days, depending on experience.

Michael: Okay. And just at that level, so they still have to do the final close of the client, but it's served up to them until eventually they hit capacity and then they "just" have to be an awesome advisor to these clients going forward.

Gabriel: Yes, and it's funny, as we have more advisors that are getting full, we are now creating separate KPIs [Key Performance Indicators] for as we have quarterly recognition events now and so on. But we are saying, "Okay, you have to get still new assets, referrals, and retention." So, we're just building that out because they're living a happy life. But they kind of go, like, appreciated, but a little ignored. You know, we don't really care for their PTO [Paid Time Off]. I mean, we have some people that, as long as their clients are happy and they have a protocol in place when they're gone, dare I say, it's almost, like, unlimited PTO, like, who cares? You're a business owner.

Michael: Yeah, retain your clients, or you're comped on your client revenues, so retain your revenue, and do that by whatever time allocations work for you.

Gabriel: Totally. So, yeah, we're very loose on that. But at the end of the day, we're happy with our model. It's taken us a while to do it. We got a lot of consulting on it. And we feel it's fairly competitive. Because it's still the same as it was five years ago. And since inception, the advisors best use of their time is in a meeting. So, they're going into that meeting from one right to another. And everything is prepped for them. They don't do anything outside of showing up to the meeting, having a fantastic, best world-class service. And for those who are prospects, converting them over to want to do business with you.

Michael: And it's plug and play for them because you got the support team and the rest of the folks that it takes to queue up all the things they need so that they can just walk into their meetings and do what they need to do.

Gabriel: Totally. Yeah, I kind of... I mean, it sounds crazy or simple, but I just thought, "What firm would I want to work for? What would I, Gabriel, a CEO, be comfortable to work for another company and give my career to?" And that's how we built it. Like, I don't care for paperwork. I don't care for data entry. I don't care for anything. What I love is meeting with clients and helping people. So, let's maximize that. And that's how we're able to hire some really good people.

Michael: So, how do you think about client capacity? Like, where do they fill up?

Gabriel: I mean, realistically, I mean, industry studies show about that 150. And I do think that's true, especially a firm like us that does so much planning and tax binding and so on. With that being said, we have advisors at 200, maybe closer to 250 even. And these are hyper personalities, maybe somebody like myself, like, where they can multitask. They're just they're not they're okay to work more than 40 hours a week. And they make more. And so, I used to say 150 is your cap. But now, it's like, "What am I going to do? Shelf my best person and not give them more clients?" Like, that seems silly. So, if they have capacity, just keep on going.

Michael: And so, revenue wise, I mean, I think from your earlier numbers, your average client is right around a million of assets, a full advisor, presumably, then ends up somewhere up around one and a half million of revenue for the client base that they're managing.

Gabriel: Yeah, it's a great question. It ranges between...because you got to think our fee schedule, if we just were to say a million, it's at 1.5, so we're really talking 2 million. And then some of these, especially as you get to 130, 150 clients, we're going to give you 5, 10 million dollar clients. Sure, the average fee will be less, but now, Michael, we're just...

Michael: You're right, the total dollars go higher, yep.

Gabriel: Totally. So, like, I would say probably just 2 million is that mark. Like, the goal is you're bringing in 2 million for the firm between all our costs, the marketing costs, the cost to build the book, and if they're paid at $300 [thousand], that still leaves, even after marketing, hopefully about a 20% to 25% margin for the firm, which is...

Michael: And is that how you think about it? Like, we're investing heavily in the marketing, but we want to try to maintain at least a 20% to 25% percent margin?

Gabriel: Yeah, yeah, totally. It's, like, the way I look at it, "Hey, advisors, we're almost 50, 50 partners here. I'm making 20% to 25%. You're making 15 to 20. You shouldn't be upset." You know, and they don't really get that, you know, because they see how much we spend, they see how hard we work. And we treat them very fair. And so...

Michael: On the same…they get their books filled up to potentially make 300 plus of income in a world where a lot of advisors cap out of 300 of gross revenue, have their expenses come off of that and had to hunt all of it themselves over 15 years. Like, it's, to me, it's an amazing career proposition for the folks that don't necessarily want to go out there and hunt and build all their own books from scratch, and just want to get to be great advisors for clients that come to them.

Gabriel: Yeah. You know, one of...we have a gentleman by the name Min Song, he was really the proof that the firm can grow outside of myself. I mean, he was gone for three weeks. He's getting emails. He's still checking him. He's responsible, but he's pushing the forward button. Like, he's putting the forward button to the associate planners to help with the work you need. So, how many people can really do that, enjoy a vacation, and not worry about their clients being serviced. And so, there's definite benefits. And we do that intentionally. We want people to enjoy life as well.

Building A Support Team For Falcon Wealth's Advisors [48:07]

Michael: So, how does support team work for these advisors? Like, are there para planners that are associates? Are there, like, admin, CS, like, client service administrator, CSA folks supporting them? Are they using central resources or team resources? Like, how do you build support structure around them to be this productive?

Gabriel: Yeah, it's a centralized system. So, we used to have assigned, but we just found that it was heavily skewed. Like, certain advisors just use them way more than others. We tried even thinking about last names, like, about M through Z and A through, you know, M. Like, let's have them go to these people. But yet, again, it was heavily skewed. So, what worked out really well…and which is naturally happens with that department is like, "Oh, yeah, I remember these people, I'm going to call them." And so, that's worked really, really well.

Now, associate planners will do unique things that advisors may do, like, rollover calls and things like that, or just helping facilitate an estate planner introduction or researching an estate planner that we need to use. So, that's, like, the associate planners, like, more advisory stuff. But then we still have the departments, centralized ops, trading, planning. All the associate planners came from the planning department. So, they're updating the plans. They are, you know, uploading paperwork that we need. So, they're really able to utilize just multiple departments.

Michael: So, how many people are in centralized planning? How many people are in centralized admin operation support?

Gabriel: Okay, so ops, we have seven people for operations. We have the tax department at six. So, that really helps for, like, tax projections and so on. We have five people in planning. We were really able to just streamline that, automate that, where that department used to have maybe eight people, now it's five. And so, we feel really happy about that. Trading department, for cashiering and stuff like that, where one person is just the cashiering person of the trading. They also do trading. We have just rescheduling appointments. We have admin people to help with reschedule. So, the advisors do not have to deal with it. And depending on where they are, if it's a review meeting, that's a whole different than someone who didn't even show up for a first initial meeting. That's a two different groups who would set that appointment.

Using Content Creation, Dedicated Landing Pages, And Google To Drive Client Leads [50:18]

Michael: Okay. So, now, I've got to shift tracks a little and just ask, so tell me more about where 2,500 leads per month come from.

Gabriel: You know, it's really the answer is everywhere. But there is a heavy focus on Google. So, for example, 40% of those come from Google. And the irony is, it's about 40%, 50% of our new clients come from Google. So, not only the leads, but the clients also come from that as well. So, we like to think of ourselves as a Google juggernaut. Just...

Michael: You don't have to totally give away the secret sauce or anything like this. What does that mean, "Come from Google?"

Gabriel: So, when I say Google, there's a lot of different pieces to Google. So, for example, I mean, for those who understand digital marketing, like, there's Performance Max campaign, they call them PMax campaigns. We have, like, multiple different, like, over a dozen PMax campaigns. We have nine different search campaigns targeting just new markets. We have retargeting, which people who catch us on social media, Instagram, Facebook, LinkedIn. But the main source of when I say Google is downloadables. They're just downloading very similar to Fisher Investments. Here are the nine great tricks to saving taxes this year, or, you know, whatever it may be. Or here is the 100 best financial planning techniques or what you should be doing. So, a lot of it's based on downloadables.

Michael: Okay, so you create, like, a lead magnet style downloadable. If they're googling for whatever, you know, tax savings in 2025, they may come to your downloadable or you're paying Google ads to put your downloadable in front of them. They click the ad link. They see the downloadable. They think it's compelling enough to hand over their email address and exchange for the downloadable. And they are now a lead that your biz dev team is going to follow up on.

Gabriel: Yes, and we have probably three to five of those. And some of those are getting well over 100 downloads a month. So, those are really good for us. Yet, again, very similar to Fisher, if there is a firm similar to Fisher, it would probably be us. And so, that's very helpful. And then just the classic, like, financial planner. I need a financial planner or whatever it is.

And here's the thing, SEO [Search Engine Optimization) is a big thing. We all know what SEO is. But what we really started to do earlier this year, as we figured with the AI, is we started doing AEO. So, we started learning about answer engine optimization. So much so where one of our managing directors, Kevin, he typed in, "Best financial advisory firm in Orange County." And sure enough, we popped up as one of the top five that was out there. And we take great pride in that as we have hundreds and hundreds, over 300 pages, or close to 300 pages of pages that are just data, data, data, information, information. So, we are a content provider, for sure. And that has really helped just with our search.

And the one thing that I really did different from five years ago to now was, me, Gabriel himself, having a presence. Like, before, it was like, "Well, I don't want it to be Gabriel Wealth management. It's Falcon Wealth Planning." And so, now, it's just me being out there has also helped, because I'm able to put my name behind Falcon Wealth and just be on whether it's just podcasts, whether it's articles, whether it's news, probably once every two weeks we're with CBS to MarketWatch to whatever it is. So, we're consistently being out there, which is really drives. Like, that helps our SEO, like, search.

Michael: So, when you talk about, like, there are hundreds of pages that have data that are helping to drive AI overviews to highlight you, just can you explain more what that means? I mean, is that data, like, articles and data things you're publishing on your website, on a blog that's your existence out in the general internet ecosystem? Like, what is it you're doing that's driving those kinds of outcomes?

Gabriel: So, like, we have a knowledge center. So much of stuff on our website, Falcon Wealth Planning and just knowledge center. You just go to Falcon articles. It's a lot of articles. And so, a lot of it is it could be just, "Explain the one big, beautiful bill." A lot of it could be, "Estate planning for wealthy people." And so, certain tax strategy, tax planning strategy. So, like, when you click into it, there's a lot of information. So, if somebody's googling something that matches there, it's not just pay to play, but we actually match. And so, that is a big piece.

And then, of course, we have that connected the knowledge center to YouTube, which we have, well, over a million views on that. We've got to get better and getting followers like some of our peers here. But we have some really good content just in general. And I think just staying active, trying to get something out every day. I think social posting every single day. So, we're on social. We're on YouTube. We're on articles that we're producing. We're on third-party articles. It's like everywhere you turn, you see this Falcon bird somewhere. And that it was just almost, like, guerrilla marketing. And it seems to be working as our cost per click. When we were originally talking, we're probably from 13 to 60 bucks a click. And now, it's less than $2.

Michael: Wow. So, what changed to bring cost per click down so much?

Gabriel: Just the blogs, essentially, articles and blogs on our site. They're not really blogs, but essentially, they are because it's just us writing information on certain topics that people are looking at. And I think it's just you Google Falcon Wealth, you Google Gabriel Shahin, like you're going to see a lot of crap that pops up, and, like, a lot. And I think that alone, like, the Google algorithm can't avoid but to give us attention. And on top of that, us paying them just on retargeting campaigns. We still pay heavily on retargeting campaigns through people who visit our website, people who are on Instagram and Facebook. I mean, that's a very heavy thing that Google does is retargeting. And that is super strong.

Michael: So, when you say cost per click, like, that's paid ad results. That's just, like, total Google click volume divided into your total spend of all sorts. Help me understand what you're measuring, or how you think about quantifying this.

Gabriel: Impressions are free. But impressions do matter and see what the click rate through is. And then they compare us to peer groups to see how we're doing. And it seems like we're doing really, really well. So, yes, it is actual paid clicks to drive to landing pages that are customized based on what they're looking at. So, that's part of the reasons that we have 300-plus or however many pages on our site. Because depending on what they're googling, depending on what they click on is the landing page they will receive. So, there are multiple different landing pages.

Michael: And then, so you pay some ad word spend to try to get people to the page. They get to the page. It's a landing page with the lead magnets. They enter their information, and now they've converted. And then once they've entered their information, converted, I guess, you don't even just start drip marketing on them, you start following up with them more proactively to see if they want to schedule an appointment.

Gabriel: Yes, absolutely, especially when they fill that out, that's, I mean, 100%.

Investing In A Range Of Paid Advisor Lead Gen Services [57:35]

Michael: So, I understand the Google emphasis. So, what else is heavy marketing channel for you?

Gabriel: Oh, gosh, probably, like, SmartAsset, NerdWallet, Ramsey, FinanceHQ, advisor.com, Wiser Advisor, Zoe, like, literally anybody who markets us, we do it.

Michael: You do all of those?

Gabriel: Oh, yeah, why not?

Michael: All right. Wait, so what's the list again? So, SmartAsset, Ramsey Smart Investor, Advisor HQ, Zoe.

Gabriel: Yeah, NerdWallet.

Michael: NerdWallet.

Gabriel: Advisor.com.

Michael: Okay.

Gabriel: Wiser Advisor. I mean, that's enough. That doesn't include, like, LinkedIn and Instagram. Now, LinkedIn, we don't pay for anything, actually. And so, we've thought about that, just advertising. But we have a pretty strong following on that. And I'm shocked with the amount of messages just that people are reaching out wanting help, they like our messaging. And so, that's been very helpful.

Michael: So, take me back a moment for just the paid lead gen site. So, can I ask, I mean, like, how much are you spending there? What do you get in terms of results? How do you even, like, math or quantify the results? I feel, like, this has been a somewhat controversial space. Like, there are folks who swear by these platforms, and others who swear at these platforms. And I'm like, I'm not even sure about lead quality. So, as someone who is, like, just bought all of them, I'm fascinated by, like, what you're doing, what you spend, what kind of outcomes you see, how you evaluate these.

Gabriel: There are some good ones and there are some bad ones. I'm going to... Gosh, I mean, I do business with some of these, like, you know, and some I do a lot of business with. So, it's hard to say negative things about them as I'm still doing business. And some of them I know their CEOs. So...

Michael: You're served. At least, if I understand what's getting more of the dollars and flow from those?

Gabriel: SmartAsset is solid. I mean, if you have a good team, if you're a one man shop, you're going to struggle, you just are. And you have to be comfortable with that. That's why I'd probably say, just find your niche and stick in that lane. Find something you're super passionate about. If you have a team and you're looking to grow and you're committed to it, like, SmartAsset is probably the best.

Michael: Interesting. And

Gabriel: And so, Zoe...

Michael: So, they really have the volume. It's not a terribly high conversion rate. But when you have a nine-person biz dev team, they just play the numbers game until it comes in.

Gabriel: Yeah, I mean, it's about a one-to-one spend. You know, and what do I mean by that, you spent $10,000 a year. So, let's just say 800 a month. You'll probably get 10,000 annualized revenue. So, just for a normal person, that's a million dollar client for every $10,000 spent. And you kind of see there's firms out there that spent, you know, 10 million and brought in a billion. And, you know, we see the same thing. So, for us, it's like, why not do it? It's, like, well, we are. But it's...

Michael: Well, like, it's the revenue covers itself in the year and clients stay 15, 20, 30 years. Cover the expense in year one, profit the subsequent 19 years. Like, to me, that that's cash intensive, but that's still really good math in the long-run for the firm. I don't want...

Gabriel: Very good math. Unlike the Schwab and Fidelity and Zoe models, and which I have great relationships with all of them. I use all of them. I don't get referrals from Fidelity and Schwab just because I feel, quite frankly, it's a race to the bottom. But nonetheless, yeah, paying a one-time fee, I'll do that all day long over…

Michael: Because Schwab, Fidelity, Zoe are rev shares. Like, good news, you don't pay anything unless you get the client. Bad news, you're paying on the client for life in a rev share. You'd actually rather just stroke an upfront cash check for SmartAsset because if the numbers average out in the long run, one-time payment for lifetime revenue is a better deal.

Gabriel: Yes, exactly. And there's some good ones out there, like, NerdWallet is also good. FinanceHQ is good. Like, there's some good ones out there, but at the end of the day, the other ones... Wiser Advisor can be good. They're just different. Like, we asked just can we get a hold of them? Like, we're not asking much. Just, like, can we get a hold of them? And that's even the issue with SmartAsset as well, is just the quality of the leads. And then some of them just really struggle with integration APIs. Like, "Hey, we want to be able, through Zapier, to be able to call these people pretty quick and to send an auto email pretty quick." And some of them just have a tough time integrating.

Michael: Oh, interesting. So, I guess from the flip side, I mean, for all the firms out there that are trying to be proactive when a lead comes in to do a follow up call or follow up email with some of these, you are literally API connected, that the moment the lead triggers, your system is, like, firing off a follow up literally within seconds.

Gabriel: Yes, on certain leads, yes. We're getting, like, an email, a welcome video from me on some of them, yes. You know, they changed this rule. I think it was January 26 of, like, auto dialing or TCPA [Telephone Consumer Protection Act] or whatever they call it. So, it used to be where the second comes in, like if it's SmartAsset, you could just call them right away. Those days have changed. So, it got a little bit more complicated. But, like, through Zapier, we were able to customize it, where...

Michael: So, what changed? You don't follow these rules and laws.

Gabriel: Yeah, you can't auto call them. You can't auto dial a lead that comes in. So, it used to be, the second it comes in, you can actually have it talk to your...we use Zoom phone systems, and it would automatically dial out from Zoom. That's what used to happen. And now, you can't do that. We have to actually dial it. So, now, we just have it set up where it just loads and our people are the ones who are actually dialing...or not dialing, pushing a button to connect.

Michael: Pushing the dial this number button.

Gabriel: Right. So, we have to have humans, not automatic robo. But it works. I mean, it's fine, especially with, like, a SmartAsset, you're going to want to get a hold of these people pretty quick. It's kind of interesting. And depending on the size of the lead that comes through, we've actually found waiting ten minutes is actually better. Because then you're going to have two, three people calling them all at once and that pisses them off. And so, some of them, we have our own little internal lines that we developed to deescalate the annoyance of multiple people calling on the lead that you just...as your internet browser is still reloading the next page, your phone is ringing. Like, we're trying to deescalate that annoyance.

Using Social Media Platforms And A Book To Further Nurture Prospective Clients [1:04:01]

Michael: Yeah. So, we've talked about, like, Google, paid lead gen from the various sources. You mentioned a little around social media and LinkedIn. So, I guess, is there more there in the social media realm of what you're doing?

Gabriel: Yeah. I don't wanna say it's, like...but we are probably converting to maybe, like, six to ten meetings a month from it. So, it's not massive, but just the clients that we've gotten through YouTube, LinkedIn, and Instagram. Maybe two clients or two leads. I'm not sure if they became clients on X. So, I'm starting to become just a little bit more proactive on that. It's just, I'm not a social media guy, so it does not come naturally at all. I can get in front of a camera and record ten YouTubes in a two hour span, but just actually social media is not really good. So, it is me and my team that does post on my behalf. Like, you know, they get annoyed with me because I have to, you know, I post what I want to say. Then they clean it up. Then they send it back. I'm like, "Well, I don't like how that sounds. That doesn't sound like me." You know, so it goes back and forth a little bit. But, I mean, clearly it's working. I'm just a little shocked that an organic LinkedIn, like, there are followers who actually care about you and are just waiting. And it's crazy people with $2 million, $3 million are, like, "Yeah, I didn't think I had enough money." You know, and that was kind of part of the thing, because we do get qualified leads that do get turned off with SmartAsset and so on.

And I remember just, like, two, maybe three years ago having a conversation with Bill Bachrach and he understood. He's kind of like a legend in the industry. And he pretty much said, "A firm like you needs to have a book." And that was another thing that we came out with July 1st, was a book, How The Rich Get Richer. And we give that to prospects. And it's just a little note in the book. We mail it out to them. And it's been about, like, a few weeks and it's been working. Like, people thank us. It's just a different touch. And especially when it's an actual book. You know, I think we went through Forbes on it, which I think was just a genius idea. I think that was super smart. So, Bill Bachrach obviously smart for a reason, legend for a reason. But I think depending on those who do a lot of leads, I think whatever you could do to enhance value, I think is huge.

Michael: So, the book for you is not like, "We published a book because we're hoping to make the phone ring." The book for you is this is now a physical thing I can mail to prospects to, like, enhance our credibility and try to nudge them forward to a first meeting.

Gabriel: So, that was my original intent. Yes, the latter. That was exactly. Like, "Hey, let's make this book as cheap as possible, as fast as possible, just so we can make it as a lead magnet." Because it's a really nice gesture. Then we went through Forbes, like, "Listen, this is actually a really good book. This could help outside people actually want to work with you." So, it's really cool seeing a bunch of people tag me in social media saying, "Thank you for the book," reaching out to our firm as... I mean, we hit number one bestseller in, like, eight or ten categories. And so, like, that was humbling, that was shocking. And I know our marketing team really marketed that, but it was super cool to see. Like, I did not ever imagine that.

Michael: And what's the book. Just what's the actual topic and title and focus the book.

Gabriel: It's literally, "How the Rich Get Richer: Your Ultimate Guide To Building Wealth." Like, how the rich get richer. Like, of course, people come up to me and make comments, "Okay, well, I missed the first book of how to actually get rich." So, I'm getting a lot of those, but, I mean, really, people get what I was meaning is, "Hey, let's learn from smart people, what they've done." And, you know, being in the industry 20 years and helping a lot of people, there's a thing or two I've learned from my clients that are in that book.

Breaking Down Gabriel's Hard-Dollar Marketing Spend [1:07:39]

Michael: So, what else in terms of, like, channels for you? Like, we've talked Google, paid lead gen, social media, books, are there other marketing channels, or are these, like, the main things?

Gabriel: I mean, those are referrals are still a big part of our business. Not a big part of, like, the leads that we get in, not a big part of the 2,500, but still a big part of the actual, new clients that we get. So, we're still probably about 50% Google, 20% referrals of actual new business. And the remaining probably 30%, 30%-35% is through everything that I said, LinkedIn, SmartAsset, Wiser Advisor, all those things is the other 20%.

Michael: And so, how does that align relative to marketing spend?

Gabriel: Yeah, great question. Right, so like last year, we probably did about, let's just call it 13 million in revenue, when we spent about 1.8 million in direct marketing costs. So, that's almost 14% of revenue. And so, there are still...here's another thing, we're a firm with, you know, well, last year we ended with, like, over a billion in AUM, let's call it 1.1, little over 1.1 billion. And so, you know, we had probably 65 team members at that time. And so, we have roughly about 3 million to 4 million of indirect marketing expenses, just, like, what we talked about, all the BD team, the planning team, ops team. So, anyway, yeah, we're on track yet again. This year, we'll probably, assuming we don't grow anymore, maybe 16 million in revenue, we're on track yet again, for another 13%, 14% in revenue to be spent on marketing. And it makes sense when you're bringing in about 450 to 500 clients a year.

Michael: So, like, pie chart that for me. Just how does the 1.8 million in direct spend actually flow out between things you spend money on? Because it sounds like you're on social media, you've got indirect staff costs, but you're not spending there, you are spending on paid lead gen and Google, at least, some of the Google. So, like, I'm trying to visualize how the spending pie chart compares to, like, the actual client flow pie chart.

Gabriel: I would say probably about 100 plus thousand a year, about 10,000 a month, pretty easily. And I think some of these, like, advisor.com and FinanceHQ, I think they even require, like, 10,000 a month, and maybe NerdWallet too. But easily 10,000 a month on all the ones I mentioned outside of Google. Google is the one that's still about 50% of the cost.

Michael: Interesting.

Gabriel: So, we're spending well over six figures a month. I shouldn't say that. Google is interesting. Their stock is down for a reason. Like, they have problems with their algorithm. There's something there. They're focusing too much on AI and it's really messing up the flow and the leads and so on. So, let's just ignore their...but normally it could be as much as 100,000 a month on Google, recently. There's months, it's been 20,000. There's been... Just because it's, like... Okay, we're used to... Let me just put it like this, $100,000 dollars of spend, we can get 60% of that with only, like, $25,000 of spend. Like, something's wrong with Google. Like, they don't even know what's wrong with them. Because we're testing them out. Like, we have people on our team, that's all they do when you're spending that much. So, I'll say that again, we can spend $100,000 a month, let's just keep it simple, for a hundred leads, you know, just keeping it very simple, $100,000 a month for 100 leads, or we can spend $25,000 a month for 60 leads. Like, something's wrong with them. But in a normal situation, let's just say 50% and maybe 10% on everything else, roughly.

Michael: Okay. So, Google still remains the thrust here. It's the biggest portion of the spend and the biggest portion of the client flow. And just Google for you is, I guess, as contrasted with some others where maybe, "We write a blog article on our website and hope we get traffic and hope they check us out." Your version is like, "No, no, no, I've made a landing page with the lead magnet. If they Google around that topic, they're not just getting a miscellaneous blog posts, they're getting a landing page with the lead magnet that's inviting them to share information in exchange for that. And if we get the information, we actually, proactively go out to them with our biz dev team and try to set the appointment." Am I thinking about that correctly?

Gabriel: You are. And I think one thing that I left out is inside that Google number is Facebook and Instagram. And so, they are in that, but it's still well over 80% is Google of that number, which is why I just keep calling it Google. So, that's just, in our brain, it's utilizing a service for their search and pop-ups and impressions. So, I've ignored Facebook and Instagram, but that is part of that 50%. And that probably also kicks out to about $10,000 a month on both of those. And Instagram and Facebook, I think are, like, almost the same thing, but that's what it is.

Finding Ways To Serve Leads That Wouldn't (Yet) Make Good Clients [1:12:55]

Gabriel: But I think that the issue with all that is, and where I found is, it's like, okay, I'm excited about the 500. I want to grow the 500 qualified leads, but what the hell are we doing with these 2000 people calling us? "Hey, you told me to call and now you can't help." I think this was kind of the biggest thing. And so, we have landing pages. We tried financial coaches here. We still have licensed financial coaches for people who really press us hard. But, like, there's a reason our industry doesn't do that. You don't make money doing that. It's literally, we call it our good deed. We used to be the week, now it's good deed of the day. So, we have landing pages truly for unqualified people.

And it's also just... I'm actually working with a guy named Yaroslav who actually helped, who created the Calendly and ParentSquare and a few of these other monster billion dollar companies. And we worked on the Zelth kind of Zelth app, Zelth planning, and essentially designed for 18 to 42, maybe 52 year olds, could even be older. But I always say, everybody needs a financial plan. Not everybody can afford a financial planner. And so, the idea is, like, some people just need to ask the question, "What do I do about my student loans? What do I do? Can I afford to buy a house? Can I afford to get married? Can I afford to have kids? What is the ramifications of that? What should I be doing?" So, it's literally just with very little to no CFP interaction, human interaction, just to answer that question. So, I feel, like, really partnered with a good partner there. And, you know, that's hopefully coming out later on this year.

Michael: Wait, so what is this? So, it's called Zelth.

Gabriel: Yes.

Michael: And it's, like, a DIY financial planning thing.

Gabriel: Yes, it's a DIY. So, it's, like, Zelth, like Zelda and wealth. We're going to make them, like, quests. What quests do you have? The quest may be, like I said, "I want to buy a house." Well, we'll ask the questions, "How much you make. How much are you saving in all the vehicles? What are your expenses? How much you pay for rent?" So it's smart enough to say like, "Okay, you need this much down, whether it's 3.5% or 20%," or whatever. And then this is what would be the cost, but then we factor in potential tax benefits and principal buy down and equity building. And you can afford to do this. And so, then here's the cool part, which is yet again, I envision this as I was obsessing about these 2,000 plus people that we sometimes can't help is, like, we want to give them options of how they can be interactive. So, they're able to not just have a recommendation, but if they don't like the answer, they can adjust what some of these key points are very quickly. And so, I'm thinking just with the small use case that we've used it for, the original idea was just, let's just do it for Falcon. And we have enough leads, we can do it. But then….

Michael: Is it free? I mean, do you, do you charge for this? Like, they're going to pay for the app?

Gabriel: Yeah, that's the idea. They're going to pay. I'm just going to call it, like, maybe $25 a month or something, or something like that, or $200 a year, maybe just, you know, discount there. And the idea is, they'll have something that can help their answer their questions. And our job is to make it very interactive. And I mean, you got 2,000 leads that these are people who called went out of their way and asked for help. We told them to have this downloadable. We told them to reach out. If you need anything, reach out. And then, sure enough, it's like, "Yeah, we can't help you unless you pay us $2,500, $5,000 for a plan." And that just didn't sit right. Like, my business development team is like, "We need something. This is embarrassing. We can only defend us so long."

I think that's probably one of the best things of our culture is people comment. We're hearing straight from the troops and exactly what they need. And, you know, just like the advisors, "Hey, you want us to do more, help us more." And we're able to build amazing careers for them, more time in their day. And it just validates the culture as we see people who had an idea that now we've invested so much time in this idea to come to life. It's just they're going to want to use it. And we've done that with technology, tech stack, and so on, where it's just...we call it the Falcon family for a reason. And we would have never have done this if it wasn't for our business development team. And one of my brothers on the team named Earl, he's just like, "Hey, we got to do something to help these people." And that became a really big focus.

Michael: So, are there, like, other paths for you now going forward, and, like, how do we monetize leads that we otherwise can't convert into the core business?

Gabriel: Yes. I mean, we built tax based on that logic. And we realized through just some very, just great people in marketing space, let alone in the industry like, "Gabriel, you do know you built this incubator here, where if you wanted to create a mortgage company, create a mortgage company. Why aren't you doing estate planning? Having an estate planner on staff. You can really build this out in multiple ways." So, yeah, we do have a bigger vision here. But I like to say, if you're a jack of all, you're a master of none. So, I really have to make sure we get the right people that takes ownership that wants to be that master, or where our advisors are trying to learn, like, you know, 500 different strategies. Just because you can do something, it doesn't mean you should do something.

What Surprised Gabriel During His Growth Journey Over The Past Five Years [1:17:43]

Michael: So, what surprised you the most about, I guess, this stage of the growth journey over the past five years. I mean, just, like, the numbers to me still blow me away. You were 200 million in the first five years, and you've averaged 200 million per year since then. I realized it's compounding, it's not linear. So, it wasn't perfectly that that pattern. But, I don't know, like, entire notch up in the growth trajectory, I don't know, what surprised you the most about this stage of growth in the business?

Gabriel: I would say just finding great talent. And I think I made a lot of mistakes early on just hiring people too young without experience with great personalities and thinking they can just do it. But there's a lot of knowledge that's needed to do what we do and to say it and portray it with confidence. So, finding great talent was just extremely difficult. It continues to be one of the hardest things that we do, which is why we want to have a competitive pay structure for that and why we're looking at equity structures for the team and for these revenue-generating individuals.

So, the probably the surprise part is... I mean, also just the growth. I mean, just how much we're spending. It's crazy. I mean, started in 2015, it took two and a half years to get to a 100 million with, like, 92 million of that was new business. I started the firm with...or excuse me, eight clients at 5 million in management. Then, like you said, in 2020... It was actually end of 2019, early 2020, we hit 200 million. And then COVID happened, we dropped to 150. And then, like, 2022 hit, we hit 500 million, and then middle of last year, we hit a billion. And so, it's just interesting just how much easier that next hundred million is. And it just gets as these numbers get larger and larger. And that's my thing, I want to maintain that 25% to 50% growth. So, just our biggest thing right now is just finding the best talent. That's what surprised me. I just thought there was a bunch, and it's very naive of me to think that.

Michael: So, as strange as it sounds, so it really is hard to find people who simply want to come in and make several hundred thousand dollars to serve clients that you give them.

Gabriel: Yeah. I mean, you know, there's a certain personality for it. Because we still help people that don't have money if there's an appointment set. Like, this business development team doesn't always know what's a great prospect. So, what are you going to do? Just, like, kick them to the curb. Like, that's not our culture.

The Low Point On Gabriel's Journey [1:19:58]

Michael: Okay. So, what was the low point in this stage of the journey?

Gabriel: The low point, probably just the amount of reinvestment it continued to take. Like, it took me really three years to really start making real money. You know, I mean, real money we'll use loosely. And then just consistent reinvestment. I mean, there's quarters where it's just like, "Man, there's no more net profits leftover." We got paid 2 million and we spent 2.1 that quarter. So, that's pretty low. I mean, you know, I think I said in the first episode that I funded the company on zero interest credit cards, and it took me three years to pay them off. So, those were... And then spending the last check with all the savings has gone after having a pretty healthy savings. Like, when you're all in on something, you're all in. And sometimes...and what I've learned is, there's somebody who probably said it, but what I tell my team is what you do today takes about six months for you to see the actual result. And sometimes that six month period feels like six years, and that could be a really low point.

Gabriel's Advice For His Younger Self And For Newer Advisors [1:20:59]

Michael: So, what else do you know now you wish you could, like, go back and tell you from five years ago as you were, like, gearing up for the stage of growth?

Gabriel: I could have said this the first time. I don't remember. But I didn't need to do everything in house. I really didn't. I could have used a TAMP, a turnkey provider to help with the trading, account opening, and all this stuff. You know, versus on day one, doing it on your own…in hindsight, like, crazy, new advisors you do not need to do that. And so, use some of these partners. So much so, I get people asking me like, "Hey, are you going to open a TAMP?" It's like, "I don't know, maybe we do, maybe we don't." But the fact is we built everything in house. And so, wish I knew before is we didn't have to do it. But now, in hindsight, I'm happy I did what we did because it's cheaper that we're doing it in house.

Michael: At this size and scale, like, at the billion plus level?

Gabriel: Totally.

Michael: Or all along, you think it would have been cheaper?

Gabriel: I think now, I'm feeling pretty good because now we've invested so much in technology where it's getting a little easier. I'm starting to see the economies of scale and I'm starting to see in the projections what we're going to have. And it's going to be very fruitful doing what we're doing.

Michael: So, does that mean, in retrospect, you're still glad you actually did the grindy build at the beginning? Or would you have done differently?

Gabriel: Oh, yeah.

Michael: Or started more outsourced, but just flipped it in at some point between starting and today.

Gabriel: Totally. I would have started with a TAMP, and then just built myself so I didn't have to be poor for the first three years of starting the company. And then from there, just slowly switch over to get your own trading team, implement it, taking it, you know, "Hey, we're going to do this on our own." Then having ops, "Yeah, we're going to start opening on your own." And then we're going to start opening on your own and little by little just removing yourself from the TAMP. That's what I would have done differently.

Michael: Interesting.

Gabriel: If I was still... You know, obviously, I say that now at a billion, but there's how many firms are there that are a billion plus, I think less than 1,000.

Michael: Well, then you don't scale past that threshold and you just hang out with a cheaper outsourced provider.

Gabriel: Totally. Exactly.

Michael: So, what comes next for you guys?

Gabriel: I mean, for us, hearing from consultants and people who reach out to us, people are interested in partnering or acquiring and so on, like, my vision is exactly what they say. It's like, "You keep doing what you're doing with some minor tweaks. Bring some good leadership and executive and team members on board, and you could be the next Fisher." And so, for us, you know, you don't compare yourself to anybody else, but at the same time, I know what we're doing. I know how we're growing. I know I can grow the leads still by 5X and not have diminishing returns, which is a lot of leads and a lot of AUM. So, we're going to continue on this trajectory, and we're going to continue going to multiple states and we're going to continue to service people.

And the crazy thing is, like, I didn't realize as people say, "You're more of a tech company than RIA." Our average client for the past two years is 51 years old. And 80+% of our meetings are on Zoom. Like, there's really no boundaries to how fast we can grow even without a physical nationwide presence. So, yeah, we're just going to continue to grow. And my original logic was, let's grow and invest so much in marketing. Because I think the industry is going to change where it all has to go away. And now, we at least have a client base of 1,500, 2,000, 10,000 clients. We could just grow on referrals. I've always said in three to five years, I think it's going to change, and it really hasn't, yet. So, I'm going to continue doing this until for whatever reason the government says, you can't do it anymore. And then grow off referrals.

Michael: So, what advice would you give advisors out there who are still struggling with marketing and not getting the amazing traction you've got? Like, I don't know, what are the rest of us missing that we're not scaling up to the kind of volume that you've had?

Gabriel: Well, I would say just find your niche and be passionate about it. Remember my niche was just always helping people. That's just who I was. It was in my DNA. I could have said this in the first episode or other podcasts where, you know, I was a Sunday school teacher, coached basketball, eldest son in the family. Like, I just always was just, like, a leader, and always wanted to help people. Got into the business of financing, in finance. And so, I was passionate about helping people. And so, I started this company teaching classes, in-person classes, very similar to the Edelman model. And I was passionate about it. And people saw that passion. I had a niche and I was very successful in it. In 30 months, I hit a 100 million in net new AUM. And so, which is all we track here at this firm, is net new AUM, nothing else. So, I think just finding your niche. So, my niche is I'm a passionate dude. Let's take advantage of it. Let's try to help as many people as possible, and hopefully, the most qualified people as possible.

But at the end of the day, just find your niche, stick to that, because then you're going to be excited. You're going to be hungry. You're actually going to care, and clients can sniff that out. So, whether it's helping people in tech, whether it's helping, you know, women only, whether it's helping LGBT, whatever your niche is, business owners, engineers, whatever, find your niche and stick to it. Because then it's just the days go fast and you're enjoyable. And because there are some down days that you get, whether it's not having money or a cease and desist or whatever it is. Like, there is some dark days.

Michael: So, in that vein, how do you characterize your niche in that context? You haven't done the, like I said, the "traditional" niche. Like, you're not doing school teachers or Exxon executives or something to that effect. So, how do you characterize yours?

Gabriel: Yeah, great question. I would say, business owners, analytical individuals, we'll call them engineers, and tax, just people who are in a high tax bracket. So, people who feel they pay too much in taxes, that's really our leg up. Because we don't really ever talk about investments. Like, the AUM falls in our lap. It's the financial planning with the tax planning niche is everything to us. So, our niche is taxes, taxes, taxes. Who has the most tax opportunity? High income people. Who else? Business owners. Who else? Engineers are just smart people. So, because they're smart people, they appreciate the sophistication in tax planning. So, for that reason, I would say that's our niche.

What Success Means To Gabriel [1:27:10]

Michael: Okay, very cool. So, we wrap up here, it's a podcast about success, and well, the theme always comes up just literally that word. Success means different things to different people. Sometimes it changes for us as our businesses evolve, life evolves, goals shift and change. So, you are now on, like, an incredible success track with the business itself as you said, 1.4 billion and growing rapidly from there. So, the business is in a wonderful place. How do you define success for yourself at this point?

Gabriel: I think the fact is that I'm working because I want to work, not because I have to work was such an impactful thing in my life. So, the moving target is just, success to me is whatever goal that you have at that time and you achieving it, and so, you have to look at it in shorter timeframes, that to me is success. So, it's achieving whatever goal that you have at that time. And so, for me, it's I always feel like three months at Falcon is probably equivalent to three years at any other firm because of how fast we move. But I think the SMART goal is specific, measurable, attainable, relevant, and time. I think by just having these goals intact and then you achieving it, it's like, "Okay, great, that's successful. Onto the next." And I think the one thing that I should be better in, and I said this multiple times in other settings, is I just need to just smell the roses better. I think there was only three times in my career at Falcon where I literally just had this moment of, "Hey, just enjoy this for a moment." And so, that's a thing. But I'm trying to be better at that, but I think just achieving goals is success.

Michael: I love it. Well, I'm excited to come back for five years from now and hear what the new goals have compounded to.

Gabriel: Well, now I know it better be 5X. We better be at five billion.

Michael: No pressure or anything, just compounding.

Gabriel: Well, I'm sure I'll see you at some conferences and I'll keep you updated.

Michael: Indeed. Well, thank you, Gabriel, for joining us again on the "Financial Advisor Success" podcast.

Gabriel: Thank you so much, Michael. This has been an absolute pleasure.

Michael: Thank you.