Building The Team And Tech To Serve Thousands Of (Advice-Only) Clients Efficiently: #FASuccess Ep 487 With Lori Atwood

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Resources Featured In This Episode:

• Lori Atwood: LinkedIn
• Fearless Finance
• Kitces Report: How Financial Planners Actually Market Their Services (2024)
• Income Lab

Full Transcript:

Michael: Welcome, Lori Atwood, to the "Financial Advisor Success" podcast.

Lori: Thank you so much for having me.

Michael: I'm really excited to get to talk in today's episode about this ongoing evolution to me in the industry of the emergence of advice-only advisory firms. Which I find is generally framed as some version of, we charge fees for advice services, and we don't do the investment management part. We can't. You cannot give it to us. We don't do discretionary asset management with a custodial relationship. We just "provide the advice under various models."

And there's been a number of advisors out there, including a few that we've had on the podcast that have built, I'll characterize this as practices like this. We individually get paid. We can make a pretty good income at it and they've done it successfully. But as with almost any business model, it's different when you're trying to build a business. When there are multiple advisors, when there are multiple people, when it's not just you delivering the services, it's the team and the business delivering the services and all the infrastructure, that you have to actually build to size and scale up in any type of advice business.

And what I think is a different kind of path when it's an advice-only business, because there is this interesting dynamic to me in the AUM [Assets Under Management] model, that AUM fees just naturally grow with every client over time. Ideally, they're still contributing early stage, maybe later stage. They're retiring a little. But markets grow, and they don't even just grow at the rate of inflation, they grow at a real rate of return over inflation. That's why we invest in markets. Which means AUM models naturally grow revenue per client at a pace greater than inflation. And as the advisor, you simply have the opportunity and privilege to take your rising profitability and reinvest it into services for clients so that you still run a reasonable margin business and, hopefully, provide a great value to your clients.

And I think a lot of firms do that well. But, dare I say, there's a certain luxury and the revenue grows automatically. You just have to choose what to reinvest into to provide enough quality for your clients to make that worthwhile. It's very different when you're operating some kind of fee-for-service model where you have to make something valuable and offer it in the marketplace and have them say yes just to have the opportunity to then deliver it to them and get paid for it.

And that's what we all have to deal with the moments that we're running any kind of advice-only, fee-for-service oriented model…subscriptions, hourly, whatever it is. And so, I know, Lori, that you have been building a business in this direction. And so, I'm very excited to get to talk about what it's really when you're trying to grow an advice-only business and value proposition and make the reinvestments that you might need to make to grow it beyond just you being the sole advice deliver in the bills business and really building it into a team environment.

How An Advice-Only, Hourly Fee Model Is More Akin To A Dental Practice Than An AUM Firm [05:48]

Lori: Yeah. I think that observation is quite right. We're hourly. And I know there's some fee-for-service people out there who have a quarterly fee, or something like that, but we happen to be hourly. And so, what we do is more akin to a dental practice or a therapist's practice, or for that matter, a plumbing service, and less akin to what you think of as a traditional AUM model. And so...

Michael: Can you explain that further? What's the distinction for you? What's the directional difference of dental and therapist practices versus traditional advisor AUM model?

Lori: So, with a traditional advisor, as with any company at all, you've got to build your reputation, and people have to you to refer their friends and their cousins and that kind of thing. So, that's similar. But with us, it's a fee-for-service model. And so, the margins and the build out are more akin to a fee-for-service model. We have to make sure that we are priced in a way that delivers the client what the client wants, and that we can pay our people a living wage to keep great people and have a margin that makes sense. As opposed to what you described where, hopefully, that firm has great people on board, and now, the offices are suddenly nicer, and then there's this and then there's that, whatever.

Michael: We're rolling out a new service. We're rolling out a new service. Because why not? We have a new group and we have the dollars to reinvest and we want to keep our clients and serve them well. So, that's what you do.

Lori: So, that's almost top down and I'm building bottom up. We're building the brand, and in our case, because it's somewhat disruptive, if I could use that term...some people are allergic to that term because it's overused and I have sympathy for that. But it's disruptive in the sense that there aren't a ton of hourly models out there, and it's hard for clients to find someone that they can pay for financial advice by the hour. And so, for example, if you just look up on Google, searches with financial planning, people don't search hourly because they don't even know it exists. So, we have a discovery challenge that a dentist doesn't have. We all know what a dentist is.

Michael: Right. So, I guess, following on that theme though, is it a discovery gap? They want it, they don't know to look for it, or is it a narrower segment? Just there are people who want hourly and there are people who want, dare I say, good, old fashioned AUM, just, "Manage my money things. I don't want to deal with this stuff. I'll come in a couple of times a year."

Lori: Right. I wake up every morning believing it's the first of the two things that you said. And the reason I believe that is because we've had a lot of great experience. Once people know we exist, the close rate is very, very easy. It's very, very high. And...

Michael: What is high in your world? Just for context.

Lori: It's 61% of people filling out a Contact Me form on the site, fill out and sign an engagement letter. And that...

Michael: Which notably, in a world where I know a lot of advisors get very nervous about putting pricing and fees and exact details up on their website. And I know you have all of it in all the glorious detail. It's $280 an hour for this, it's $360 for that.

Lori: Exactly.

Michael: Like, it's right there, and off you go that almost two thirds of the people who reach out are like, "Sign me up."

Lori: Yeah. And I think, when I went into this, I deeply believe that there was a segment, especially of people in the asset accumulation stage of life that were not served because they were afraid. They were afraid of being sold stuff by a traditional broker. And they felt they were too small. They had questions that weren't necessarily related to half a million dollars of liquid net worth. And that's fair. From 28 years old to sort of 55 years old, it's hard to find super wealthy people who want you to manage their money. And I didn't really have that much interest in that. I have done that before in a past life, but I didn't have much interest in that.

Where I had an interest was reducing the stress people feel around money. How am I going to get this kid into college or through college? How am I going to pay for daycare? How can I figure out a down payment on a house? How can I make a change in my career because I really want to start a business and I know the first couple of years it's going to be tight? And somebody sitting in a marble office that does assets under management and manages your liquid net worth simply doesn't care that much about that. And rightfully so, that's not where his or her incentives are placed.

Michael: So, I'm fascinated by this sort of dynamic and how you're framing it because there's a case made out there by, frankly, a lot of the commission-based world that says something to the effect of, most advisors, particularly in RIAs, because that's sort of the required registration to do AUM, have evolved to AUM models, and AUM models typically have asset minimums. And at some point, those firms start distancing themselves from, say, the true middle of America. We can work with maybe the mass affluent, the people who have "merely" a few hundred thousand dollars and not a few million dollars. But that's actually still, if you look demographically, that's the top 20% to 40% households. It's maybe not the top 1% to 10%, but it's not median American.

Lori: That's right.

Michael: And the case of a lot of commission world is, some combo of either no one's out there charging fees to serve that middle America part. That's why we've got to go out there and sell them an A-share mutual fund and get our 5% because we have to get paid somehow and no one else is serving them. And/or that they make the case that those folks just don't want to pay for advice. They won't pay for advice. The "only" way they're going to get advice is if I'm out there hustling in the streets, trying to get someone to open their first investment account and buy a mutual fund, and if I got to put them in an A-share mutual fund for a commission to get paid, that's just the only way that the model can work because they don't want to write checks, and someone's got to get out there and give them advice. So, I'm just like, I'm curious to hear your thoughts and reactions because it feels like you are playing in that same swimming pool with a very different looking model and perspective.

Lori: I think that's a fair observation. Again, I wake up every morning believing that the people in the asset accumulation stage of life, maybe you call it mass affluent, maybe median, I think was the term you used, that they do want advice. And when they can get advice in a way that makes sense for them, people understand what hourly means. They pay their plumber hourly. They understand what that means. And then all of the prices are up on the site so they can do that calculation on their phone calculator. They know, and if the stress or the pain is enough, they say, "Yeah, let me go get this advice."

And we are fully fiduciary and people feel comfortable in that space. Because there's developing a whole other sort of world of financial coaching, which is not regulated the same way we are. And sometimes people fall to that kind of an offering, if you will, because they're looking for someone to tell them what to do when they need a $20,000 French drain in the basement and they don't know how to figure that out. And we do that. And I grew up in a household that had nothing. And so, I think part of my sort of obsession with getting people more comfortable in their financial lives comes from that.

Michael: And so, it sounds like it's the... I mean, it makes sense. Ultimately, it's how significant or tangible the pain point is for the client, that the end of the day gets them to, "If it hurts that much, you go out and pay someone for an hour or two of their advice to figure out how to solve your thing."

Lori: That's right. And people are extremely...clients are very sticky. I started this business nine-and-a-half years ago and I still have my original clients. And people stay with us. Because a lot of times, people who do the AUM model say, "Well, we want a deeper, more lifelong relationship," and I say that's fabulous. But we also have that long relationship because you become a trusted advisor. They know exactly how much they're going to spend. And they come when they have life changes, or when every year to get a physical, like you do with your regular doctor to make sure everything is ticking over the way it's supposed to be. And we found that people are quite sticky with this model.

Building From The Inside Out To Ensure A Consistent Brand [15:49]

Michael: So, tell me more about it. So, I guess, let me take one brief step back then and just ask, Lori, if you can walk us through just the actual business model. What does the firm do and how do you charge for it?

Lori: And how do we do it? And so, when I first started, it was just me. I was taking clients and they wrote me a check and that was that. It was all pretty simple. And in 2019, when I started to expand, I was looking toward people I knew who were therapists who took on associates. And I thought, "Okay, well, there are therapists, they're taking on associates, why can't I do that?" And so, I started to take on associates. And at first, in my mind, I had that kind of, what I call, the realtor model, where there's a broker, somebody who has a broker license, and then there are agents who go out and find their own sort of book of business selling and buying houses for people.

Michael: And the broker gets a slice or gets some of the portion.

Lori: A smaller slice. But, yeah, to keep that sort of compliance umbrella over the agents, right, with a small amount of infrastructure, but really not huge. And I was doing that right there in 2019, and to some extent, 2020, so I don't know what COVID had to do with any of this. I can't pull it apart like that. But in 2020, I started to think, "My big hairy goal for this business is that we are the brand name in hourly financial planning. We are the TurboTax of hourly financial planning." And so, you may do your taxes online and you may use any number of a few dozen apps. But when you say, "Oh, no, I don't use a taxpayer, I use a TurboTax," everyone knows what you mean. Even if you're using TaxAct online or one of the other millions of them that are out there.

And so, we want to be that TurboTax of hourly financial planning. And for that to happen, what I realized is that can't happen in a broker model. It has to happen from the center out, meaning the brand and the business itself has to be built, and then you have as many associates as you end up having. And that was pivotal for me, I guess, as an entrepreneur, if you will, because that changed everything.

Michael: So, tell me more about why that can't happen in a broker model. Because I'm struck as you're describing it here. You framed this as the realtor model. There's a broker who has the license, the agents get their own books and make their own books a business, the broker gets a slice of it, but outside of realtors, that also happens in our industry in the brokerage, broker model as well. We very much have a version of that in our world. I see a lot of advisory firms out there today very much building in some frame of, "We hire advisors, they build their books a business, and the house gets a cut." So, I'm intrigued by, in that vein, what doesn't work about that to get your big, hairy goal that has to change? What breaks it down?

Lori: It probably would eventually have gotten to the same big, hairy goal. But what I was worried about is that it would be less sustainable than building it from the inside out. And when I say inside out or center out, I mean building the brand and the fact that hourly financial planning is a thing, and then trafficking out prospects to highly qualified associates that work with you. And the reason that I prefer that model is because I have more control over the process and the brand and the internal culture and the way we treat clients, and all of that's very important to me. Whereas, what I'm calling the realtor model, but you're right, it happens in financial advice as well, I think for most people, they can relate to the realtor model a little bit easier. It's a much looser knitting, if you will.

Michael: Well, to me, that's an interesting dynamic I'm just seeing cropping up all over. Even some of the mega firms and the mega aggregators, one of the hot things in PE investing in a mega RIAs right now is take what, essentially, were historically affiliate broker-style models. Even in RIA, it's still kind of the same thing. We give you a platform, we cover the compliance a little bit, the infrastructure, you build your own book, the house gets a cut. Taking those models and trying to transform them into W2 employee, centralized brand, centralized culture, or centralized process, which...

Lori: I think because the brand is more sustainable. That's what I think. So, I think you were saying this a few minutes ago, the move from one person to having a team. So, in the realtor model, it's still a one-person company. My daughter has a friend whose father, his broker is some broker in Kansas and he's here in Washington DC. And he gets some infrastructure, he gets compliance, as you just said. He's a lone gunman here. And so, it's still an individual business. And that's not where I envisioned the hourly model for us going. And so, what made more sense was that it was a hub and spokes, if you will, and it's Fearless Finance. That is hourly, virtual, financial planning, fiduciary, RIA, blah, blah, blah. And these are the associates that work for us and they all follow the same process, you have the same standard of excellence, etc. And that's the brand from the center out, in my opinion.

Michael: Okay. And so, very much then it drives from... I like how you framed it. Just the brand becomes more sustainable. At the end of the day, when we build it this way, ideally, clients come and buy the brands, and they buy the brands because they know whichever team member they happen to get is going to deliver the way the brand has promised, if you want to get into fancy marketing brand promises. They know that they will get an experience consistent with what the brand has promised, and that makes the business more sustainable because now, I'm not reliant on the person who gets the clients. Because this is very hard, but I "just" need to create the system that teaches, that trains the advisors to do it our company's way, and then clients come to the brand, and we can staff the brand in a way that's much more sustainable."

Lori: And it's more sustainable because all businesses have turnover. Just again, using that friend of my daughter's father, if he decides he doesn't want to do this anymore, that broker dealer in Kansas doesn't care that much. But they lose his whole book of business, and so, they have to go out and find someone else who's going to do, at least, that much if not more, right? And with me, I don't want to lose any of my associates, but life changes and etc., etc. And if someone goes, "The clients feel a tie to Fearless Finance and our model and our company. And I don't want that to happen, but if it does happen, then they can go to another associate who's going to treat them as well and with the same process and the same culture, etc.

Michael: It's an interesting mindset shift to me, the way that you're framing it, especially when you come to the question of turnover. I find for most of us in the business, the single most negative, scary thing of anything is turnover. As you said, if an advisor leaves, their book of clients tends to leave with them. If they retire, it can be hard to retain them. Hopefully, we're putting the right people behind them to hold on to them. Hopefully.... Turnover is a high stress point. And so, I find so much of the industry, we try to get clients to be clients for life, and then there's an expectation that advisors will be advisors for life. Because if the clients can be a client for life and the client follows the advisor, the advisor has to be the advisor for life, otherwise, we lose the client.

And you're bringing a fundamental different framing to say, "Look, folks, all businesses have turnover. This is a reality." So, we can fight really hard to never have turnover, which eventually becomes really challenging and expensive because you start making combinations you don't want to make or pay comp you didn't want to pay because you're so terrified of losing someone.

Lori: That's very true, yeah.

Michael: Instead of saying, "No, no, no, all businesses have turnover. This is a reality." The question really is, how do we make the business more robust to the inevitability of turnover. And that leads you down the direction of, well, then don't run the real term model where they all build their own books.

Lori: That's it.

Michael: Run the centralized brand model.

Lori: Bingo.

Michael: Where if for some reason the advisor leaves, clients are connected to the brand and we can train another advisor to deliver that quality. And what an amazing gig for them. So, to be clear, you get trained and you sit there and we give you clients, you give them all awesome advice, and we pay you well. This is a good thing for all involved, I think.

Lori: That's exactly right. And I don't have the kind of turnover…I still have everybody who had started with me. We've had some situations where somebody has come in to train and it just didn't work out. But the people who've actually started and started taking clients, they're still with me. And a lot of times, some of it is due to the fact that these are more experienced advisors, not 22 years old. They're experienced advisors who were never comfortable with the AUM or the brokerage model, and now, they have a home. And it fits with their own personal sort of vision of what they wanted to do when they wake up in the morning every day.

Fearless Finance’s Business Model [26:28]

Michael: So, now, take me further down this road. I think I want to understand the actual business model. Literally, what do you charge? What do you do as you went in this direction of, "We want to have a more standardized, firm-level thing that the brand promises and delivers on?" What's the thing? What's the pricing and service model now?

Lori: So, the big thing, and I don't want to put words in your mouth, but I think it's what you're asking, is when we were the realtor model, the advisor, the associate had a percentage of the hourly rate. The hourly rates are right on my site. It's clear to everyone. And so, there was a split, if you will, with the firm. And that all makes sense. Everybody's used to that. That's all normal.

Michael: Year, percentages of revenue, split rep codes. We've all got all the payout ways.

Lori: Yeah, that all makes sense. So, in the hub and spoke model, if you will, or the branding model, we have an hourly rate for associates based on their experience and their qualifications, the letters after their name, if you will. And we break it into A, B, and C. And they have an...

Michael: A, B, and C clients, or A, B, and C pricing tiers of the advisor?

Lori: No. A, B, and C hourly pay to the advisor.

Michael: Okay.

Lori: Yeah. Clients are not broken up. Clients are clients for us. Which is a great question, by the way. A client is a client. Somebody who comes to me with $20 million is paying the same amount that a 28-year-old who's just out of grad school is paying us, period. And so, the associates, when they come in, we agree sort of what level they're on. And that's their hourly rate until they either, one, get an additional certification or they've been with us a certain amount of years and then they get moved up to the next rung or the next level. And the firm keeps the rest because the firm is paying the crucial cost of customer acquisition. And that was laid at the feet of the associate in the realtor model. And now, it's moved to us. The bookkeeping and the insurance and all of that is pretty much the same. None of that changes dramatically. But it's the CAC, it's the customer acquisition costs that's now been shifted. And that's not nothing, as they say. So, that's how we do it.

Michael: So, I guess, let me start even on the client end. What are the hourly rates? What do you actually charge to do this work?

Lori: Oh, okay. Yeah, so I have a book of business, but I'm not going to include me in this because I charge a different rate and I don't really take new clients. So, let's put me aside. So, the other associates, Katie, who's out in Spokane, Washington, she's also an enrolled agent with the IRS. And so, she's a retirement specialist and she does all the Roth conversion and anything related to tax and Roth and that. We do not file taxes for anybody. It's just tax advice as related to their financial planning. They all go to Katie. And Katie charges, as of April 1, by the way, $310. And if you're going to a non-Katie, let's call it, a non-Katie associate, it's $280 an hour for an initial plan.

That's typically two to four hours spread over two to three meetings, depending, you have kids, you have kids from another relationship, it can get complex. And then ongoing or what we call existing client meetings, those are $240 an hour. And so, that would be your yearly check-in. That would be, "Hey, my company just got a new retirement plan. Can you help me with my allocations?" That stuff. Yeah, and then I have a junior partner in my firm. Her name is Elizabeth. She is also at $310 as of June 1st, that will happen because she just made partner for me.

Michael: And so, the idea of these is, differences in fees between Katie versus others or soon Elizabeth versus others, is that essentially a reflection of A-B-C advisors internally? They have a higher hourly rate internally in what you compensate them because they hit the years of experience and qualifications threshold. So, then you've got the same thing externally.

Lori: That's correct.

Michael: Okay. And...

Lori: Yeah. And certainly with the Roth conversion, there's a much higher level of complexity.

Michael: Right. I'm assuming those also may be even longer or deeper engagements because...

Lori: Totally.

Michael: ...there's actually a lot to analyze there.

Lori: Yeah. And that's absolutely true. And on the retirement side, again, it's all Katie. We do have a premium service for existing clients where they can pay a flat fee quarterly. And she, basically, does non-discretionary, again, non-custodial, but she takes care of everything for them. Because we find that clients when they're sort of on the brink of retirement, there's a paralysis that sets in, "I've been saving my whole life and earning, and now, you want me to take money out of my savings. I don't even know how to do that." So...

Michael: So, can you explain a little further just, what is the quarterly premium service for you in arrears if it is still non-discretionary? The most straightforward version for us is premiums. I actually manage a portfolio. But it sounds like it's not that.

Lori: It's not that.

Michael: So, what's the service model in your world that characterizes this premium model different pricing?

Lori: So, we worked... I love my compliance attorney and he puts up with us because we're his only hourly clients and we always have the weirdest questions for him. But so, we've specified a situation where, and it's all in the ADV, which you can see on the site if anybody's interested in that. You pay in arrears, but so Katie will email you and say, "Hey, I took a look at your portfolio. I think we need to do a rebalance. This is what I'm suggesting." The client will write back and say, "Yes, I approve that." And then she can go in and do that rebalance. But she does not have the client's login. She does not have discretion. This is not a custodial relationship. And it's mostly like, "It's time to take your RMDs. Let's set up some time and talk about that and where the cash will go." And I know you had this goal of funding blah, blah, blah, grandchild's 529, etc.

Michael: So, it's how to label a co-working relationship, "Let's just do the thing together. Turn on the screen, log into the thing, and we'll just do it." And basically, I'll hold you accountable to do it because we have a meeting on the calendar, and I'll make it not scary because I'll just literally, like, we will click through together and figure it out. Don't get overwhelmed by the screens and the problems.

Lori: That's right.

Michael: We're just going to figure this out together on a screen share.

Lori: Yep. That's exactly right. But everyone else is just providing hourly financial planning. And we have a specialist, Kim, who does student... She's a Certified Student Loan Professional. She's a Certified College Planning Specialist. So, she's got clients who are worrying about that kind of thing. And otherwise, we have generalists.

Michael: Okay. And so, now, when you do these engagements with clients, right, I think you said a typical plan is $280 an hour. It's going to take two to four hours spread out over two to three meetings. Just in your world, do you then ultimately quote some project fee? "It's going to be $1,080 or $2,000" or some number because we've estimated the scope of work. Or they just are like, straight bill, it takes what it takes, and you get billed for whatever the time actually was at the end of the day.

Lori: Yeah. At the risk of sounding immodest, we're pretty good at knowing that it will fall in that two to four hours. And so, they can take their calculator on their phone and based on what we charge and know what they're kind of in for, and then they can decide. And they know…again, it's all on the site. We typically want an annual check-in. A lot of our clients, especially ones who are closer to retirement, want a six-monthly check-in and that's their prerogative. That's fine because they know that if they sit for an hour with the associate, this is what they're going to pay, period.

Michael: But you're not giving them a fixed project fee quote because, I guess, you don't want the business risk. If it turns out they bring up a bunch of things they didn't tell you about before and it gets longer, just then, "We'll bill you for the time." If you say you're fast and simple, it's really fast and simple, "We'll bill you less because it'll be done faster."

Lori: That's absolutely right. And we get a lot of adult children of our clients. They're like, "Oh, you've got to see my kid." And that kind of thing can be an hour to 90 minutes. It's really pretty simple.

Michael: So, then do you have to live in a world of time tracking? How much time do we spend in each meeting and each phone call and reviewing documents and prepping and software, and all the stuff to get to a trued-up bill of all the time spent in all the areas to deliver the plan?

Lori: It's a great question. I was the guinea pig of this because I was doing this for a few years before I took on an associate. And we've built the model…there's very little prep time, again, with the exception of Roth conversion. There's very little prep time. And we prefer to do the data gathering with the clients. We give the client a list of the data we're going to ask about at the meeting. They don't send us anything prior. I don't have any place to store it. I don't want the paper, that's for sure. My goodness, yeah, somebody did send me paper just a few weeks ago and I've got to find a shredder. I don't want to deal with it.

So, we've built the system so there's almost no prep time because that can be a barrier to access for people. They're like, "Oh, I have too busy to think about gathering all that data." Well, what if I said, "Hey, there's not a lot of data to gather. You're going to be fine." And that helps get people in. And it also reduces the drag on the associate. And so, where the real drag on the associate comes is, after each meeting, the client gets what we call a summary email. It's a report of everything we talked about in the meeting. And that goes out. It's the archive of the meeting. We don't produce big white binders with Monte Carlo simulations because we find that, at least, our clientele, they're not looking at that.

Lori’s New Client Meeting Process [38:06]

Michael: So, help me vision just a little bit more what the two to three meeting planning process is? Just what happens before and after each of the meetings in the process here?

Lori: So, we start with the balance sheet because I find that I just can't see without it. And so, we ask the client to come to the first meeting knowing or being able to access on their phone or their computer their balances in various accounts. And so, we gather the balance sheet. We talk through their retirement contributions. So, we ask them to either be able to access a pay stub or know what they're, you know, "Hey, I'm doing 5% and I make $150,000 a year." So, that's math we can do. We go through their retirement contributions. We talk about account organization, what we recommend for account organization, consolidation of accounts, if they have 15 legacy 401(k)s, like, "Oh, my gosh." So, to try and make it easier for them.

And that's typically the first meeting after intake. We take a lot of time to really understand at the outset, what's going on for this client? What are they worrying about? What's keeping them up at night? And a lot of times when it's a partnered client, what's the friction point? What's bugging you on your finances? And sometimes it's nothing. Sometimes it's just, "Hey, we want to know that we're doing everything right." And that's okay too, but we're trying to get it at the goal. And sometimes it's...a lot of times I joke with people about it now. I'm like, "Don't tell me one minute before we exit the Google meeting that, 'Oh, by the way, I have an elderly parent who needs... I'm going to have to pay for them and they have to go into assisted living.' Tell me that upfront." Because we need to think through all of that stuff. And so, we really spend a lot of time trying to get to know what's going on for the client. And then we go into the balance sheet and the other things I just mentioned.

Michael: So, what planning software are you using in the process?

Lori: So, we have our own platform that we've built. And then we also rely on Income Lab for retirement. We love Income Lab. We're big fans. And we use... Well, this is not planning software. We use Zoho as our CRM.

Michael: So, Lori, I guess I'm just trying to visualize though, where's balance sheet getting built? When clients are ideally knowing or able to access their balances, you can build a balance sheet. Where are you actually building the balance sheet?

Lori: On the platform. On our platform.

Michael: So, tell me more about, what is the platform? What does that mean, in your world?

Lori: We used to use Google Sheets, and now, I'm being a 100% honest, we're back on Google Sheets because we're doing an update of the platform, which I'm hoping is going to be done in the next few weeks. But it's temporary. But so, I'm going to speak about it as the platform and not as Google Sheets, if that's okay. So, the platform is built, the database is in Ruby on Rails and the front end is React. And so, we go in and we ask the client to create an account and they say who their associate is. So, then the associate can go in and see everything. And together, we use Google Meeting, you could use Zoom or anything else, I guess. When we're on the meeting together, the associate is going through the platform, sharing the screen so that the client can see it.

And we do the basics like, "What were you born…" And then we gather the balance sheet information. We gather estimates of their monthly expenses, their large annual expenses. Maybe it's paying for camp, it's vacations, whatever it is. Their incomes, whether it's a job or somebody has several jobs or they rent a basement apartment, whatever it is. And any annual bits of income, maybe they get a bonus or they get a commission check or whatever.

And then we go through their retirement on the platform and what I call uses of savings, cash use is another term for it. What is their available cash? We need to set some aside for emergencies, some for rainy day. And then they said they need to do this French drain in their basement. We know that's going to be $20,000. So, what's the cash that's left for us to help them employ for gain? And then we've built…we've done the data gathering and we've built the main part of the initial plan. And then once that part is built, we can then pivot to the insurance, estate planning, and then ultimately, the portfolio and our recommendations for their investments.

Michael: So, I understand now, in context, you're capturing, say, a lot of flows and states, right?

Lori: Yeah.

Michael: That is so their balance sheet, cash flows in and out, but not a lot of the forward-looking financial projections stuff that we often do in financial planning software and traditional planning software.

Lori: Well, we do. We run scenarios if it's like, "Well, what if I take this job in Kansas?" So, our platform allows for us to run those scenarios. "What if I what if Junior goes to this college and not that college?" So, we'll just run the scenarios right there within the platform. But the forward-looking, the scenario-running in terms of their portfolio and how that's going to perform into the future is done with Income Lab.

Michael: Okay. Because it's even the scenarios, "What if I take this job in Kansas?" I guess, literally, we're going to project what happens in their household cash flow for the next few years of this transition. But this isn't projection, as we talked about, like retirement projections. Well, that increases your retirement balance at retirement by $372,133 and your Monte Carlo went up by 7%. It's not...

Lori: Yeah, we don't do Monte Carlo. We use Income Lab. And the reason we Income Lab is because I just had this... I love this story. It just happened a few days ago. This woman comes to me, she's worth $15 million. She's like, "One of the reasons I came to you is because they told me I had a 2% chance of running out of money." And I'm like, "Unless you have something that changes with your spending…" And she was freaked out by that because nobody explained the Monte Carlo to her.

Michael: Yeah, yeah, yeah. Two percent sounds scary. It's like, "Well, if the 2% happens, can you cut your spending a little, and then you won't run out of money?"

Lori: I didn't even go into all that detail with her because Income Lab says, "Look, this is what you have and this is what you can spend. And here, let me test it for you." And in her case, not in every case, but in her case, it said, "You have zero chance. There is a zero situation where you run out of money given the way you spend." Now, if something happened and she fell into some hideous addiction or something, of course, that could change. And so, we don't do that because we find that people can't...one, a lot of associates can't explain it well, and two, people don't get it and they don't take it on and own it. Whereas Income Lab, they really understand it and they print it and they put it up on their refrigerator. So, they're like, "This is what I'm going to have." And it feels good for them. And so, we're fans of that approach.

Michael: So, what do you call this platform? Is there an internal name, the planning software, the tool, the something. Or do you just call it the platform internally.

Lori: Oh, God, I wish I was that creative. I wish I was that creative, Michael. I'm not.

Michael: You all just call it the platform internally?

Lori: It's the platform. Yeah, it is.

Michael: All right. I love it. So, then help us understand why the time and effort to build the platform and not use MoneyGuide, eMoney, RightCapital?

Lori: I've tried all of them.

Michael: One of the existing...

Lori: I tried all of them.

Making The Decision To Build Her Own Financial Planning Software Platform [46:41]

Michael: All right. So, I'm fascinated. So, what is so missing? You went, "Darn it. I'm literally going to hire software developers and make my own darn thing because I can't take it anymore."

Lori: That's right. And developing software is painful. So, it's definitely not...

Michael: I'm going to have more questions about that in a moment.

Lori: Yeah. It's definitely not something you want to take on for giggles, if you will. But the reason is because eMoney, etc., don't understand our client base. Our client base does not care as much about things like my portfolio into the future because we're index fund people. We're not picking active management. And so, we spend a lot less time on that and more time on what they're going to do to afford the French drain. Because eMoney didn't do that. eMoney was too focused on all of the different scenarios for this portfolio that this 27-year-old can't really conceive of yet. But he does know his wife is expecting and they need a bigger house. And so, what I needed was software that worked for our client base.

Michael: And that's where you get into, its balance sheet, its cash flow, and its...

Lori: Scenario running.

Michael: ...scenario planning, but not the way we talk about "What if" scenarios, "If you have this different saving pattern, here's how your wealth changes over 30 to 50 years." It's, "If you take the job in Kansas and your salary changes, but your cost of living changes and this is the new mortgage, let's figure out whether you could afford this or not."

Lori: That's it. That's it. And here's your savings rate. So, don't think that we're disregarding that because it's critical. And so, "Here's your savings rate. And with your savings rate, you're going to get to whatever the goal is, "We want a beach house," or whatever it is. "You're going to get to that beach house in X number of years or months if you can take... But if you take the job in Kansas, it'll be Y number of years." So, our software allows us to do that, which is what we find our clientele is asking about because we already have them making sure they're saving in their respective retirement plans as they need to. It's the other stuff.

Michael: Right. And if we do need to do, dare I say that, the fancy, long-term retirement projections as it were...

Lori: The fancy, yeah.

Michael: ...so then we pull out Income Lab because that's their core strength.

Lori: That's right. And clients really like Income Lab. They like the way the morsels of information are being fed. And we did. I tried countless ones. It had to be a dozen of them.

Michael: Interesting. And that's the common gap for all of them, is the short to intermediate term scenario planning that's more about cash flow projections than asset projections. That's the functional gap.

Lori: That's right. It's not answering what our clients are asking. And so, I would have to sit there and do it on sheets anyway.

Michael: So, now, talk to us for a moment about just the world of being a software developer.

Lori: Oh, Gosh, oh, my goodness.

Michael: I know it has this change in the emerging AI era. How did you find someone to build this? Can I ask, what does it cost? What did it take? Ground us or warn us, whatever it is.

Lori: Yeah, exactly. Or freak you out.

Michael: I know there's others listening who are like, "I also hate my software," whatever it is. We've all got gripes about something. "I hate my software. It doesn't do the right things. I just want to build my own. So, Lori, share with me the wisdom of experience."

Lori: Yeah. So, the first thing I would say is, only do it if it's the absolute last, last, last ditch thing that you can. Honest to God. One of the things I hate the most is testing software. Now, we can use AI to test software, which is really, really, really keeping my sanity intact. It's nice.

Michael: What does that mean? How does AI test the software?

Lori: Well, so I told you a few minutes ago that we're back on Sheets because we're fixing the platform. We're updating the platform. The person I have that does the Ruby, and you had asked me how we came to all that, so I definitely will go into that in one second, he's like, I think he uses Claude, "We can get Claude to test it so you don't have to test it." So, testing means running a million different scenarios like, "I'm a young person right out of college. I'm a couple that's about to retire." And you're just trying to hit this software to see if there are any bugs. And it used to be a human that had to create the scenarios and keep running them and looking for bugs. And now, Claude will do it, which is music to my ears.

And the software, I started the software. I wanted to develop an app for people to use where they could track their spending in a way that made sense for them because all of the millions of apps that I tried didn't make sense. The way I see it with clients is they don't want to fill in line items of how much they spent on clothing that month. There are some people who do, but for the most part, people don't. And so, what our process involves is a pool of full discretionary money each month. And they just track that because they, as the adult, get to make the decision of whether they're buying clothing or they're eating out or they're taking Ubers or whatever they're doing. And they're not being asked to fill in line items, which I do this for a living and I don't want to fill in line items.

And so, we developed an app in 2018 that tracked that kind of spending. And from the app came the platform. And the guy who developed the app, he's a Ruby guy, right, a Ruby on Rails guy. And so, the database part of the platform is developed in that. And it's been over these years, I don't have the exact amount, but it's most definitely six figures. I would say it's, at least, $200,000 to $300,000 that we spent over the years on that.

Michael: You don't do it at once.

Lori: No, no.

Michael: It's just, we spend whatever, a few tens of thousands of dollars.

Lori: It seems like always.

Michael: And then the next year there's more features and we spend more. And then there's more features, we spend more. And then the world changes a little, and we have to update it and welcome to the world of maintaining software.

Lori: Yeah, that's exactly right. But it gets me further down the line of what we were talking about a few minutes ago of that hub and spoke. We use our own platform, everyone's used to our platform, the clients are used to the platform, and we gather the data that we precisely need. And again, it's all part of that.

Michael: And so, now, as I look from the flip side, for a lot of advisors out there doing comprehensive plans, the idea, the whole thing gets done in two to four hours. It's like a punchline to a joke, just it takes longer than that through all the planning software and all the things that we project and do. And you're getting the whole process done in a few hours, plus the meetings. And so, part of that is because our planning software is built to our process and it's allowed us to shorten our process. Which means now, we get the total engagement length down, which means the total price is down. Which means now, we can attract more clients. Because what I mean if I'm mathing, $280 dollars an hour built out over the span of 4 hours, you're an $1,100 plan, not a $2,000, $3,000, $4,000 plan with a lot of firms. So, I think that's right, the software gets you faster, the speed gets your price point down, the price point lower makes you more compelling in the marketplace so you can get a higher volume of clients.

Lori: Yeah, all of that, all of what you said is correct in my mind. And what I would add to it is that the process itself spends a lot less time on the things that people traditionally do, which is, "Well, if you invest in this mutual fund, this will happen." And because we're index fund people. So, there's...

Michael: You just don't need that level of the...

Lori: That's right.

Michael: "Here's the impact of our various portfolio changes proposed, the current versus proposed." We're just now getting down to the, "Here's what you can actually afford to spend in retirement, and here's how you would need to change your spending if bad things happen, not our performance, but markets." And, again, Income Lab is good at that kind of modelling.

Lori: It's excellent. And it gives us the guardrails, which is another feature that clients really, really like, Because they're like, "Just tell me where to stop." And then I can say "Here, here, this red line." And so, as opposed to, "Well, you have a 22% chance of this failing." I just haven't met a client yet who knows what that means. And it's hard, it's complex, Monte Carlo modeling is complex. And so, we really we found a good fit with Income Lab for our client base.

Michael: And so, is there some vision that eventually the platform also gets sold to other advisors? You know, a lot of us do that, we make a thing for ourselves, then we sell it to our peers. Is there a vision for that, or is the idea like, "No, no, this is our proprietary software, as it were to make our brand unique. So, we don't want others to have our special sauce. This is part of what makes our services quite unique."

Lori: Yeah, I can see a world in which that happens. I don't have any particular plans right now because I'm I spend 150% of my time on growing our business. But I can see a world in which that happens for sure. Because I think that, me personally, I believe there are enough clients or potential clients out there that really would love this model, that sharing it would not be shooting ourselves in the foot kind of a thing.

How Lori Thinks About Advisor Compensation Under Her Hourly Model [56:57]

Michael: So, now, very helpful to understand now more of the software and where it fits. So, this helps then helps me understand further, just outside of Katie's specialized retirement projections, let's do Roth conversion analyses and Income Lab and all of the things, that most of the planning work, basically is the meetings and the follow up emails, but not a lot of prep. So, similar to that, I'm trying to take all this in. So, in your world, associate advisor... I guess, in some firms, an associate advisor, associate is essentially the label for a support person, a support role, you're not a lead advisor or you're an associate advisor. But it sounds like that is not the context for you. Associate advisors in your firm are fully client-faced. They're literally an associate of the firm.

Lori: I'm sorry. You can't take the investment banker out of the girl, right? So, you can take the girl out of the investment bank, but not the investment banker out of the girl. So, it's an investment banking kind of a thing, associate principal partner. It's not a back-office front-office thing.

Michael: Okay, that's helpful. And so, as you now build this model with the associates, they get their rate, A-B-C, based on their experience and qualifications. And then it sounds like now, you're adjusting pricing externally, right? Just if you get the more experienced specialized advisor, the hourly rate is a little higher to you because we comp them a higher rate because they just literally are more qualified experience such as the way of things. So, I guess, I'm just like, how does this work from the business end? So, do you have a... Is there still some internal goal of I want a certain percentage of the fee that gets billed to the clients to go to the advisor, or is there a salary that you shoot for, or is there a percentage of my revenue that I want to go to advisor servicing versus overhead versus...? How do you think about...? Also, the dollar still have to get allocated across the budget to run the business. So, how do you think about that? How do you build that?

Lori: Okay, so HR, what I call HR, which is, it could also be called the COGS, the Cost of Goods Sold, the payment to advisors to for advising clients, the payment to advisors for sitting in front of a client, that should be 55% at most, 55% percent of what I'm taking in. I have support staff, but they're part of my admin, they're not client-facing. And then we have things like we have to pay for the insurance and we have to pay FINRA every year and all the stuff, right? We have to pay for Income Lab and Zoho, and that's all my general admin. And then there's the cost of customer acquisition, which in our firm is about 18%, 19%. I don't want it over 20%.

Michael: Eighteen percent of revenue that is revenue marketing things.

Lori: Of revenue. Yes, that is what I mean.

Michael: That's hard dollar spending.

Lori: That's right.

Michael: Okay, that's a big number relative to most firms, where the media advisor was like 2% to 4% percent, more than 2%.

Lori: That's right. And that's the difference. That's it. That's the hub and spoke difference. And that...

Michael: Not necessarily the advice-only difference, it's just that's the hub and spoke difference that are...

Lori: That's exactly right. Yeah, it's not the advice-only. You're right. That that nuance is correct. And so, we sponsor podcasts and we have a social marketing plan and I have a woman who runs our social and she costs money. So, that's all part of that.

Michael: And so, then is there a margin that you aim for the firm at the bottom line to say, "We're running well. This is healthy?"

Lori: Yeah, I'm looking for 10% to 20%. Now it's lower down at 10% when I'm having to do a bunch of software. And it's higher up when the software is kind of just going along and maintenance. I got to be honest, it really does have a lot to do with the software.

Michael: Well, I guess, and also, the marketing. If you're running 10% to 20% margin, spending almost 20% on marketing, then if you are a traditional advisory firm that spends about 2% percent on marketing, your margins would be almost 30%, just if you pulled out the marketing spends and higher from there in the years that you don't have big software investments. This maths well for you, I guess, because you just don't have a lot of support staff admin. So, I guess, what's the total team? How many people are in the firm, and what are the roles and seats?

Lori: 10 of us. So, I have an assistant, a virtual assistant, she's the admin assistant. We have someone who runs our social, and then there's a social manager who works for her that just is part time and just does engagement. And then we have an operations manager who basically takes care of all the stuff.

Michael: Yeah, bless those people. Thank you.

Lori: Yes, exactly. All the stuff, all the stuff. And these people, none of these people are full time. And then I have, there are five advisors and there's me, so six. When I'm in my advisor, I take a lot fewer clients than they do because somebody has to run the company.

Michael: Yeah, you got to run the business and go to business. So, 10 people, kind of nominally six advisors, including you, and four admin folks. But the admin folks aren't even full time. So, maybe two full time equivalents or something to that effect.

Lori: That's right. That's probably two-and-a-half. That's probably right. Yeah.

Michael: Okay. So, I follow you. You've managed to keep the upside lean to manage the margins. So, that gives you the dollars to then build the software, do the marketing, still run healthy margins after those costs, and be able to size up the firm.

Lori: That's right. And a lot of our clients come in through referral, which is the most efficient way. But a lot come in from our direct marketing. So, from referral, from word of mouth, if you will, we're getting about half of our people, and the other half are coming from social media and podcasting and the stuff that we're putting dollars out into.

Sponsoring And Appearing On Podcasts To Find Prospects Looking For Financial Planning Services [1:04:16]

Michael: So, in that vein, I guess, just tell us more about what you're putting the stuff dollars into. Just where are you spending that much revenue to drive growth?

Lori: Yeah, the biggest challenge I've felt in this business other than testing software, which I've already complained about, is the marketing, is the customer acquisition. Because the thing that, at least, in my experience...my personality is I'm the person who walks in the room and says the emperor is naked. And if it weren't for my husband, I'm sure I would have gotten into a lot of trouble because he's usually like, "Yes, everybody knows. You don't need to say it." So, that's my personality. And so, I'm going to be that blunt here.

And I've tried a lot of marketing consultants and growth consultants and search ad consultants and Facebook ad consultants and agencies, and none of that works. You cannot buy the revenue. You have to build the revenue. And if anybody out there has ever seen "Shawshank Redemption", where he's tunneling through with that tablespoon or whatever he had, that's what it is. That's what it is.

Michael: That's a colorful example.

Lori: Exactly. I don't want to be any more graphic than that.

Michael: Understood.

Lori: But that's what it is to build a brand. And it takes a long time and you hit a lot of walls. And I don't know when the tipping point will come, if it comes, or whatever. Our growth has been steady and strong. And I knock on wood when I say that. I do believe that hourly financial advice is going to hit a tipping point just like index funds did. And I believe that and I want to be part of that. But there are no corners to cut. You got to do the work.

And when I was younger, somebody once said to me, "You’ve got to do your own physics homework," and that person couldn't have been more right. Because you can't know what the client really wants and how to find the client unless you're really doing the marketing and building the brand yourself. I just don't believe it can be outsourced easily. I think it can be outsourced once you're Coca-Cola and everyone knows what you're doing. But the building is tough, and that's where most people decide they don't want to put their energy and they just...and so, that's okay. But we're putting our energy there.

Michael: So, help us understand, though, just literally, where are the dollars going? What are you actually spending money on?

Lori: So, we sponsor podcasts. We have some podcasts that work really well for us. I go on podcasts, which is what I'm doing today. And we sponsor influencers. And we do some conferencey stuff, not much, we do some.

Michael: So, what kind of podcasts and influencers do you sponsor? I see very little of that in the financial advisor world, particularly influencers. We usually have the opposite kind of views around...

Lori: I'm sure. Yeah, yeah.

Michael: ...financial influencers in particular. So, tell us more about... I don't know if you have examples. What kind of podcast do you sponsor, influencers do you sponsor? How does this work?

Lori: Yeah, so we don't typically, and I'm not saying we won't in the future, if it works, we're going to do it, but we don't typically sponsor financial planning podcasts. You know, some of our biggest referral sources…therapists, because therapists are like, "Hey, can you fix this so we can work on the stuff that we're trained to work on?"

Michael: Sure, yeah.

Lori: So, we go where the therapists congregate. And divorce attorneys, "Hey, can you fix this, and then I can get on with getting the decree done." So, we go...

Michael: So, in essence, you're trying to find the podcasts of center, I guess, the old industry label, podcasts of centers of influence who could refer out to your services. But you're not going to meet them one at a time in local meetups. You're sponsoring their podcasts and the people they follow.

Lori: Right. Or being on the podcast.

Michael: Or being on the podcast.

Lori: Yeah, when we're lucky enough that they invite us, yes. So, yeah. And so, it's trying to exploit... You just had a great phrase for it, spheres of influence or...

Michael: Yes, centers of influence.

Lori: Centers of influence, referral sources. And so, over the years, we know who refers, and that has helped. We also know that there's a certain type of client who is interested in this, and that client usually is taking initiative to make positive change in their own life, right? And so, that client may be listening to, you know, a home organizing podcast or eating healthier podcast or wherever you…hear kind of Better Help, that's where we're going to go.

Michael: And so, what kind of ads do you put forth in that world? "And if you ever want to get help on your financial situation, Fearless Finance is here for you at $200 an hour." That kind of... Is it that on the nose, or do you do other angles? Just what kind of ad messaging do you put in front of these folks?

Lori: So, we don't use an ad. We do host read, and we give the host we give the host talking points. And most of the time, we invite the host to come through our process so they feel it. And that is priceless. And so, they come on in there, "I was fighting with my husband," or, "my wife," or whoever it is, "and now, this has made all the difference." Because we know what we do makes a difference in people's lives. So...

Michael: Yeah. Forget all this selling the intangible. Just let the host have the experience and then let them speak from the first person experience.

Lori: That's exactly right. That's exactly right.

Adding And Onboarding Four Hundred Clients A Year [1:10:59]

Michael: So, in this hourly world, we're just the scope of each client engagement is fairly limited. It's not a 20-hour plan. It's a four-hour plan. I got to presume then that you end up with a fairly high volume of clients that you need to bring in. What is typical new client flow for you in a month or a year?

Lori: So, in 2025, we had 608 prospects. This doesn't count me, by the way. This is just for these associates. 608 prospects. We closed 64% of those deals.

Michael: Okay, wow. Four hundred-ish clients, four hundred clients.

Lori: It's just about 400. That's right. We have almost 3,000 households of people who have been to see us in, at least, the last three years.

Michael: Okay, so you've got a very high volume of clients that you serve. Which I guess, getting back to the earlier, how much demand is there in the world for this kind of service? I can't help but reflect the median advisory firm out there as something 3% to 5% percent organic growth on 100 clients, which if you do the math is one client every other month is a pretty good growth rate for most advisors. Just truly, keep doing that and getting them in AUM models and do that for 5 or 10 years. It adds up to a lot of money and revenue. You're doing great. And that's a slow week for you.

Lori: That would be problematic. Yeah, that would be problematic. And so, doing…it's the way people always say, it's doing something different is painful sometimes. And so, yeah, had we done an assets under management model, getting a dozen clients a year would be fabulous.

Michael: Yeah. You're averaging more than a half a dozen clients a week.

Lori: That's right, yeah.

Michael: It's just a whole other scale.

Lori: It's a different... Yeah. Like I said, it's much more akin to a dental practice and it is anything else.

Michael: And then you had mentioned earlier things like client acquisition costs. Is that actually something you track and measure?

Lori: Oh, God, yes.

Michael: So, nerd out with me. So, what's the CAC? What's the client acquisition cost in your world to do this, Lori?

Lori: Like I said, it is 18%, 19% of a lifetime value of a client, where what we call a lifetime value of a client is three initial meetings and three check ins. It's somewhere between $1,500, $1,800. The truth, from the numbers, is that people spend a lot more than that with us. But that's what we use for our calculations.

Michael: So, you think of a lifetime value is $1,500 to $1,800, and then you're trying to get CAC under 20% of that. So, you're trying to keep client acquisition costs in the...

Lori: 200 bucks, yeah.

Michael: ...$200, $300 range.

Lori: That's right.

Michael: Well, just which is striking to me because we do these studies broadly for advisors in our marketing research. CAC for the typical advisory firm is like $3,000 to $5,000.

Lori: Yes, because you want somebody with a lot of assets. Yeah.

Michael: Most of it's also the cost of their time. It's like, "Oh, I spent 2% of my revenue on marketing and 25% of my time doing business development." It's like, "Well, what's 25% of your salary?" Imputed in your marketing costs also. Goes, "Oh, yeah, that's really expensive marketing."

Lori: That's exactly right. Especially, you're either meeting them and wining and dining them or you're doing preparatory work, business development work to get them on board. Absolutely. Like I said with the "Shawshank" metaphor, it's got to be done. And it's hard, hard work.

Michael: And so, I guess, in that vein, just as you think about things lifetime client value, so your clients do typically come back for some recurring meetings.

Lori: Absolutely.

Michael: You're not typically a once and done model.

Lori: No, mm-mm. And what I find is sometimes people will go away for two years or three years and then they're back.

Michael: Yeah. Because now, something new in their life changed, they have experience, they want help.

What’s Surprised Lori The Most Building Her Advisory Business [1:15:28]

Michael: So, as you reflect on this journey, what has surprised you the most about this path of building an advisory business?

Lori: That's an interesting question. Some things have been very good surprises. And one is that people really love it. They love knowing who to call when the basement floods. I keep picking on basements, but...

Michael: Well, for anyone who's been a homeowner, it's justified you're picking on it, so justified.

Lori: Exactly. Exactly. They know who to call. Because if they didn't have a savvy relative or somebody like that, people did not know where to go. So many times I get a breathless call from inside a car and somebody's like, "I'm leaving this marriage," and they don't know where to go. We're where you go. And that's made all the difference. And the difference in people's lives based on what we do is really quite moving. So, I would say that that's been...it's not a surprise. Well, maybe a surprise, but better than expected. Let me put it that way. And then...

Michael: So, I've got to ask in that vein. Do you have worries in a more AI-driven future? Are you worried at some point, where they go isn't Fearless Finance, it's ChatGPT or Claude or Gemini or one of those.

Lori: Yeah, it's funny because about 60% of the people that pass through my office, I don't know, I'd have to ask the other associates, somebody's crying. And I just don't think that ChatGPT is coming for my job that soon, maybe eventually. But if...

Michael: They might have used ChatGPT for the less painful issues that they weren't going to call you for $280 about anyways. But when it's that painful and people are crying, at least, they'll need to talk to someone at Lori's firm.

Lori: Yeah. And the thing is, is that they still... Even when they ChatGPT, especially some of my younger clients, they'll say, "I put this through chat GPT, and unfortunately, in my opinion, they'd gotten the wrong answer." But, you know, it's the age of confirmation. That's the thing, it's not the age of information, information is everywhere, it's the age of confirmation. And people, what I found, is they still want a human. And it's similar, not exact, but similar. You can have a group of symptoms and you can put that into ChatGPT, but at the end of the day, if it's something rather serious, you still want to see a doctor.

Michael: I love that framing, we're not in the age of information, we're in the age of confirmation. Because ironically, I've heard this cropping up from a few of, I don't know, my advisor brethren who are, shall we say, still a little bit more stuck in some older transactional business models who have said AI is actually getting really challenging for them because they sell certain products that are less popular, and then the client brings that to AI to double check the recommendation, and AI craps all over their recommendations.

Lori: It doesn't work well. Yeah, it doesn't come out well.

Michael: For essentially valid reasons, unfortunately. And then they're all of a sudden like...is I find this common for advisors with a lot of problematic transactional business, clients are using AI to check the advisor's recommendation, which doesn't always go well if you're not actually selling the best stuff. And in the other direction, when we're really deep in advice, clients may still start with AI, but they realize that their situation is too involved or too complex or too many moving parts or we all know AI can hallucinate. And if it's a really complex thing, I don't actually even know how to validate whether the AI is accurate.

The Low Point On Lori’s Journey [1:19:35]

Michael: So, now, coming from the other direction, what was the low point on this building journey for you?

Lori: Oh, goodness. I would say, it definitely is that every other day, I have what I call an existential crisis. I'm like, wait...

Michael: It's probably important it's every other day. Daily would get tiring, but, yeah, just...

Lori: Yeah, exactly. That would be exhausting. You know, it's certainly in the more formative years of this, is there really a business here? Is there a business here? Is there a business here? And my junior partner, Elizabeth, is like, "Can't you see that there's a business here?" And I'm like, "I'm not going to be done until it's done." I don't know how else to explain that. When you're doing something that's different, there's always that, "Oh, my gosh, is this the right thing to be doing?" Because when you're a dentist, as long as you're doing things the way you've been taught how to do dental work, you can be pretty sure that people need dental work. But here, we're doing something different. And so, it's more akin to Vanguard and index funds and ETFs. It's like, "Are we doing the right thing? Is this real? Is this real?" And then suddenly, it was extremely real. Although if John Bogle were alive, maybe he would say it wasn't sudden.

Michael: Again, just when you get down to okay, but at the end of the day, your firm's adding more clients in a week than most advisors add in a year. There's something very real there about consumer demand.

Lori: Demand. Exactly. I started in 2016. We've been around near a decade. Not quite…in the fall, it would be. And even through COVID. And so, that says something too. It wasn't something that just went away.

Lori’s Advice For Her Younger Self And For Newer Advisors [1:21:39]

Michael: So, given that you're now almost 10 years into the journey and learning and going through all the different iterations, what do you know now you wish you could go back and tell 2016 you when you were just getting started? What do you know now with the wisdom of experience?

Lori: So, I would say it's two things. One is extremely boring, which is, I probably would do the software development differently.

Michael: Oh, how so?

Lori: Well, at first I thought it was in the app, and then the platform was kind of a thing on top of that. And really if I had the blessing of hindsight, I would be like, "This is how the platform needs to look." And we could have cut out a lot of that iterating. But that's kind of nerdy. But the second thing would be pricing. I think at the beginning in 2016, it was just me. It was...people say that women tend to underprice. I underpriced. It needed to be priced at a certain level to make it all work.

Michael: Can I ask how low did you go on your pricing yourself at the beginning?

Lori: In 2016, 2017, I think I was probably at about $185 an hour. And that is a very hard model to make work. And so, other than the software, which I know I keep banging on about, pricing has been the biggest challenge. It's a challenge to get the right price where the firm is successful and thriving, and you're still hitting, meaning giving access to the people you want to make sure you can give access to. Because my wealthier clients, they're happy to pay whatever I ask them to pay. But we want to get people who are more in that middle range who need this advice. We're an access provider. And so, we need to find that right intersection, if you will. That's not easy.

Michael: Ironically, because the range is so high, because you live in a realm where $280 an hour is still a lot of money for a lot of people. And for a certain level of more affluent client, they don't even blink.

Lori: They don't blink.

Michael: You could double it, they probably wouldn't blink.

Lori: That's exactly right.

Michael: Because their accountant is $700 an hour and their lawyer is $1,200 an hour.

Lori: $1,200 an hour. That's exactly right. And the way we have our ADV written and the way we have our policies, it's the same price, whether you're worth $15 million or you're worth $15,000 in net worth. And so, what I found, which was really interesting is, my goodness, the wealthy people love coming. They're like, "Yes, yes, I want this. I don't want to spend on an assets under management who, in many cases, not all, many cases underperforms after fees and taxes and everything else. I want this." And so, we have a lot of quite affluent people in terms of net worth. And then we have a lot of, like I said, somebody's thirty two and they just got married and they're looking to buy a house. And the business was built for people in the wealth accumulation stage of their life, but now, we're getting a lot of people who are pre-retirement and retirement because they just the model.

Michael: So, is that just a reality of the business, or is that a thing you want to solve for and change, and...?

Lori: I don't want to change it. Everybody's welcome. Everybody's welcome. It just means that we have to be really right on with our pricing. Our pricing has to be right. And our pricing goes up every two years. It's also on the site. That's the business. And so, we need to be really right about that stuff. And as I said, I haven't always been, not to the detriment of the client, to the detriment of the firm, that's underpricing for a long time. But so, when we live and we learn, who we're reaching, who's willing to say yes and meeting, sign an engagement letter, who still thinks... And part of the platform too, for people, you can go and do some of the data gathering on the platform and pay us a flat fee. And that will reduce the number of hours that you need to be in front of us. And we do recommend that for younger people where they're bristling a little at the $280 per hour. Once things get a little more complex, we don't recommend that because we really won't do the...

Michael: Then they do it wrong and you spend more time correcting it.

Lori: Exactly. We need to do the data gathering with the person or people. But if you're a 28-year-old and you're like, "I really just want to make sure I'm doing stuff right," that that could be a great solution.

Michael: So, any other advice you would give younger, newer advisors coming into the profession who are interested in going this advice-only, hourly-oriented model, and are getting started in today's world looking forward?

Lori: Well, I think the advice is it's out there for you. Absolutely. If you want to be an hourly planner, don't get put off by the fact that, "Well, why isn't everyone else doing this?" It's out there for you. You do need to make sure that you are...obviously, you've got to be regulated appropriately, but you need to make sure you're pricing in a way that makes sense. And it's not one size fits all. You've got to really put some effort into making sure your pricing works for the people that you're trying to go after and build your business with. And, yeah, the regulatory itself is quite daunting, as you know. We're an RIA and we're regulated by the SEC under the multistate rule. And that's no joke.

Michael: No.

Lori: And it was the best day when we finally were eligible to be regulated by the SEC because every state wants you to dot your i's differently and cross your t's differently. And we needed this to be a national product.

What Success Means To Lori [1:28:11]

Michael: So, as we come to the end, just this is a podcast about success, and one of the themes that often comes up is just literally that word success means very different things to different people. And so, you're on this wonderful path for growing this advice-only business as you're 10 years in and thousands of clients and 10 team and expanding. And so, the business seems to be in a wonderful place. How do you define success for yourself personally at this point?

Lori: Success for me is when two people are talking to each other and talking about hourly financial advice, and they're like, "Well, Fearless Finance." When I'm the brand name, Fearless is the brand name for hourly financial planning, I've done what I set out to do. And I'm not going to stop till I get there.

Michael: I love it. I love the passion for the mission of bringing it forward.

Lori: Yeah, it's not a number for me, it's that.

Michael: It's that. Well, thank you for sharing that with us on the "Financial Advisor Success" podcast, Lori.

Lori: Thank you so much for having me. It was really great fun.

Michael: Thank you.