Gaining The Skills, Experience, And Team Needed To Serve UHNW Clients Effectively: #FASuccess Ep 474 With Blair duQuesnay

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Resources Featured In This Episode:

• Blair duQuesnay: Website | LinkedIn
• #FASuccess Ep 204: Being Able To Just Focus On Clients By Choosing To Be An Employee Advisor At A Growing Firm, With Blair duQuesnay
• Certified Private Wealth Advisor®  Certification
• Kitces Report: How Financial Planners Actually Do Financial Planning
• The Wealth Ladder: Proven Strategies for Every Step of Your Financial Life by Nick Maggiulli
• The Art of Spending Money: Simple Choices for a Richer Life by Morgan Housel

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Full Transcript:

Michael: Welcome, Blair duQuesnay, to the "Financial Advisor Success" podcast.

Blair: Thank you so much for having me, Michael. I am honored to be back.

Michael: I'm really excited to have you back on the podcast again. One of a few guests that we've been having lately rejoin us because it's been five-plus years since the last time you joined us and stuff has changed. Stuff has changed. When you came to us many years ago, back for, I had to look it up, it was Episode 204, so for anyone who wants to go back and listen, kitces.com/204 and you can listen to Blair's original episode. At the time, all the stuff that was going on when you had made the decision, "I'm going to tuck my existing advisory firm into this much larger firm, not because I'm selling and getting my exit or doing a PE [Private Equity] roll-up thing, because they seem like cool people, and I share their vision and they just already have some stuff figured out that I don't feel like dealing with, and we can grow better together than apart."

Blair: That's right. I jumped on a rocket ship.

Michael: And I was looking it up that the firm that you had joined, Ritholtz Wealth, was a little over a billion dollars back in late 2020 when we had that conversation and is, dare I ask now, what's the asset base today?

Blair: Six and a half billion on our last ADV.

Michael: So roughly quadrupled in four or five years, it's a little bit of growth. And I know part of that for you, as Ritholtz has grown as many firms grow, often the larger the firm, we've seen this in our research data for a long time, the larger the firm, the more it tends to attract high-dollar clients. It's not exclusively so. Some of us can run very small, solo boutiques and get some very, very large clients, but there definitely is a trend that larger clients seem to skew towards larger firms for whatever the reasons. Brand, perceived stability, it seems like a lot of people, it's got staying power.

And when firms get bigger and start moving "up market" as that happens, they often then start rolling out higher tiers of services. Most of us start with, call it, the mass affluent, a couple hundred-thousand dollars, up to a million or two, then maybe we move to the higher-net worth clients, the millionaires and multi-millionaires. And then some firms, as they get bigger and bigger, you start moving into what the industry really calls ultra-high net worth, different folks draw that line at different lines. But you're talking usually about 10-million-plus or tens-of-millions-plus and going up from there. Sometimes you get your hundred-millionaires and your billionaires.

And the interesting thing to me about firms when they start moving up, I guess for us as advisors, when we start moving that far up market, is serving really high-dollar clients, deca-millionaires and multi-deca-millionaires, they're different. They're really actually quite different in the depth of expertise you need to serve them, the true complexity of their situations when you start getting into multiple businesses and private investments and lots of entity layers of various types. And everyone does it on their own truly unique journey, so very not conducive to having a repeatable standard financial planning process for them, which means when every client's unique, often it's really hard to learn how to serve them well and kind of get in the proverbial reps, the repetitions with them, until you do it. There are some programs, like CPWA out there, that help from the designation end. But serving ultra-high net worth from, everyone knows I live that space well, it's incredibly experiential. You'll learn it by doing it, which is then really hard because you can't get really good at ultra-high net worth clients until you serve a bunch of them. And you can't serve them until you're already good at them, and then you get stuck in the chicken and egg thing.

And so, I know you have lived this path now over the past five years of the journey, so I'm really excited to talk about how you have actually made this migration up market to learn and do what it takes to serve very high-net worth clients.

Blair: Absolutely, and that has been my journey through all of those levels of wealth, working with clients and still working with clients at all ends of the spectrum. It has been a journey and I think it's going to be different for every firm, so our story may not be the story of all of your listeners. But I think there will be some threads and some corollaries that will ring true to a lot of people and maybe some things to think about for those who are aspiring to work with ultra-high net worth clients. Because I tell advisors all the time, "You may not actually enjoy this work the way that you do your clients who 'only' have a few million dollars. It's a very different way of working with clients."

Calculating Appropriate Fees For UHNW Clients [08:15]

Michael: It is, I find, it's sort of fascinating for the spectrum of wealth and service in our industry. Most of us discover pretty early on in our career, you get a client that's much bigger than your average client and you discover, "Wow, twice the assets, twice the fee," or almost twice the fee depending on your break points, "and it definitely doesn't take twice as much time. This feels a lot more productive." You're serving $250,000 clients, you get your first half-million dollar client, this feels better. You're serving half million-dollar clients, you get your million-dollar client, it feels better. You got a million-dollar client, you get a three-million dollar client and go, "Wow, this is amazing."

And I find a lot of advisors just, that's a fun productivity game to play and our research data really vets out. You really do get material of some productivity as you move through that spectrum because you really are working with clients who are willing to pay more for your time and expertise. But there is some ceiling level where they're not paying you more for your expertise. They're just paying you more because they expect you to do more. And you're getting paid well for that work, but the workload goes up a lot at a certain point.

Blair: It does and one thing that never occurred to me until I was physically doing the work is a lot of times you get paid more because your work is so much more valuable. The tax planning advice that you give is worth so much to them, so much more to them because there's another comma there, there's more dollars to deal with. The estate planning work is so valuable to your clients now. Your work is worth more simply because your client has more money for you to provide value and that's the truth.

On the other end of the spectrum, there is a point at which assets under management as a fee no longer really makes sense. It gets to a point where how many hundred of thousands of dollars should this client actually be paying. And so, the other thing that advisors should think about in working with large clients is, don't think of the same profit margin that you do for a $1 million or a $5-million client. You're probably at some point going to say, "All right. Here is the fee we think is appropriate for the annual amount of hours we're going to spend on this relationship and we'll review it every two years and make sure it still makes sense."

Michael: So can you share a little bit of where, in your experience, those thresholds are? When does it stop being an AUM conversation and start just being just a flat-fee conversation?

Blair: I wouldn't say there is a specific dollar amount because every ultra-high net worth individual has a different makeup of their wealth. So we may have a client who we're managing $15 million in assets but everything else is locked up in a company that was founded, and so the hours of work is tremendous. And so, the AUM fee doesn't make sense because it's too low, right? And then on the other end of the spectrum, there's a couple of more commas there and our AUM fee ends at 35 basis points and it would just never make sense for someone to pay us 35 basis points. That's too high.

And there's no magic solution that I personally have found. Each of these fees is truly individualized and sometimes the fee that starts the engagement is not enough and that's a very interesting ask. But hopefully the value that your team is providing becomes so obvious to the client that raising the annual fee by a couple hundred-thousand dollars, which is a very scary thing to ask, can make sense. So there's no magical number. If you have $100 million or $50 million, this is when the retainer fee makes sense. It really comes down to man-hours required to do the work. And so far, we have decided we're not going to become lawyers tracking every six minutes of our time. So we just have to estimate it and that's one of the benefits of being an employee-owned firm. We have no outside investors looking to squeeze all the juice possible. We can decide for ourselves what feels profitable in each client relationship.

Michael: So I'm struck by your point that I feel like for a lot of us, when we're starting to talk to higher-dollar clients, the flat-fee conversation usually kicks in, really the version you said second, I've got some break points in my schedule. The basis points number gets pretty low but there's some point at some number of tens or hundreds of millions of dollars where any basis point number is...not even hundreds of thousands of dollars of fees, it could literally be millions and the math just doesn't make sense and we have to flat-fee it and figure out an appropriate number.

I'm struck by your highlight that you can't just look at it on an AUM basis though because the irony is sometimes the problem is not you apply the fee schedule to their assets and the fee just seems too high and you have to flat-fee it. It's because sometimes it's too low because there's a lot of planning work to do and their liquid assets are too small a percentage of their total net worth for you to feasibly apply this as an AUM fee.

Blair: And usually that's a very rare find, but one of the things that I'm feeling in my little subset of client base that I have access to is there are a lot of Americans right now who all of a sudden in the last five, ten years, have multiple tens of millions dollars and/or multiples of that because of the growth that's going on in various parts of our economy. And not only people who may have worked for tech startups or owned them or publicly traded companies, but simply just regular folks who the grandparents owned a bunch of real estate out in California and now it's worth a whole bunch.

So I was talking to a friend about this the other day. There's unexpectedly a whole lot of people with taxable estates and now that's $15 million in January for a single person and $30 million for a couple. There's a whole lot of those people that have just recently inked those dollars and it's a really interesting time. And it's a testament to the U.S. economy. We have been growing and creating a lot of wealth in very recent years.

Michael: So can you help us understand what kind of fees we're talking about? At the end of the day, are these $50,000-fee clients? Are these $100,000-fee clients? Are these several hundred-thousand-dollar-fee clients? Again, when most of us are used to, I charge 1.1% on the first $500,000 and then it's 1% and then it's 0.9% and my average client is $1 million or $2 million. That's an amazing business to have an average revenue per client north of $10,000, but those numbers, I suspect, are much smaller than the scope of what you're talking about as a typical client fee.

Blair: In what we call our Multi-Family Office, yes. So keep in mind, I have not necessarily left behind my $1 million, $2 million, $3 million, $5-million clients who are paying those types of AUM fees and it's a handful of newer clients, a handful that I work with, a handful that several other of my colleagues work with that make up our Multi-Family Office, which is where we say there's an estate tax issue. We've got multi-generational wealth. We have estate tax planning situation here and that's where the Multi-Family Office team comes in. Some Multi-Family Office clients are still paying 35 basis points on $30 million, $40 million. It still makes sense but we do have clients who pay retainer fees in the multiple hundred of thousand dollars a year. I don't think we have anybody that's paying us more than a million, but if they were at, say, one of the trust companies or one of the large brokerage firms handling the same relationship through not-so-explicit fees, they'd probably be paying millions of dollars in fees a year and not necessarily knowing that.

Michael: And how many hours of work is it for a client at this level to do what it takes to earn multi-hundred-thousand-dollar fees?

Blair: So the important thing to know is it is not just me or the lead advisor, right? So the lead advisor in this situation is orchestrating a team of people who are doing work for the client. So there's always a lead and think of that as the quarterback, the person who literally knows every single thing that's going on with that client relationship. But each Multi-Family Office client also has a market strategist assigned. So the Ben Carlsons or Callie Cox, our chief market strategist, will be involved, providing market updates at periodic calls.

There will be an actual portfolio manager assigned, so this is not just a trader but somebody who is very well-versed in portfolio management, tax situations, knows how to properly allocate all of the cash that's coming in that we're waiting to reinvest. So that portfolio manager is managing the day-to-day cash flows of the investments. There's always an associate advisor, we call those co-pilots here, so the sort of, I hate the word junior, but the advisor who's assisting the lead advisor who also pretty much knows everything and does a lot of the work that is not done by other members of the team.

There's usually a tax person, so we do taxes in-house. We don't do taxes for all of our Multi-Family Office clients but we are consulting and working with their tax provider. So there's usually a tax member of the team. There will be a CSA [Client Service Associate] who is a senior CSA who is really well-versed in complicated account opening and transfers.

And then, there will be somebody who fills that role of estate planning specialist, the person who can work with the attorney to make sure that we're executing, say there's a GRAT [Grantor-Retained Annuity Trust] program, making sure that all of that is being handled properly. So that's a lot of people for one client. And so, I actually don't want to try to calculate how many hours we're all collectively spending because we'll probably realize that we're undercharging and we know that. But one of the great things, what I love about our Multi-Family Office is we're able, so far, to do that with the number of employees, we're at 80 employees at the firm, to provide incredible amount of value at much lower of a cost than you would get at a very large institution, which is pretty much who we're competing with at this point and at this level of client.

Michael: So how do you get to some number for any particular new client who's coming in, in this model?

Blair: So you really have to give it your best estimate. The other thing that we have done is unlike a lot of larger family office-type firms, the trust companies and so on, we have allowed our services to be selected a la carte. So not every client needs help with their charitable giving. They may even have their own foundation with staff there. Not every client needs help or wants our help in every single area, so we don't have to charge on everything. They could say, "I want you to come in and provide an investment policy statement for me and help me work with other money managers that are already in place and reinvest cash flows and do some tax consulting." And so, we have to take the estimate of how many hours we believe that is going to take. Sometimes we will also just sort of do a double-check, how does that equate to a basis point fee, just to make sure we're not totally off, of course.

And then, after you've been working with that client for a year or two, it can become apparent whether you have over- or under-charged. The other thing that's great is that sometimes there is a lot of work early in a relationship with a client and then things may actually normalize. So the up-front fee could actually be lowered, hypothetically, if the work required is not as much after we've done some sort of initial complicated planning and gotten everything sort of set on, I don't want to say, auto pilot. There is no auto pilot at this level of wealth, but the processes are in place. Everything's running smoothly. It's not taking as much of our time as we expected.

And then on the flip side, of course, realizing that, okay, this is way more work than we initially, you, the client, and us thought we were going to be doing for you. And so, we're going to change the fee because it just makes sense to. And then on the others side of that, now I talked to you five years ago, I wasn't working with any Multi-Family Office clients, so this is a very new service model, is that there will be probably just every so often, a cost-of-living adjustment, an inflation-type adjustment to the fee.

Michael: But it sounds like not every year and automatically. That's a periodically revisit and just have the conversation, "Hey, it's been a few years. Costs do go up. Your fee was $150,000. We need to move it to $165,000 to keep place with inflation over the past few years."

Blair: Sure. And we just don't want to be doing that conversation every single year. It feels too intrusive. So every time we sign a new engagement, we say, "This is the price for the next two years."

Michael: Okay. So it's steady two-year cycles for you because that's just the time window of the engagement scopes in the first place.

Blair: Yeah. Think about it. Rather than saying some esoteric, "It's a 50-basis-point fee," and maybe some clients calculate that in their mind but a lot of clients actually don't, you're actually bringing a number, a round, large number to the table and that's just not a conversation that's fun to have every single year with a client. It's more comfortable to say, "Here's everything that we've accomplished over a multi-year period, and here's the new people who are now on the team that we've had to hire, and we want to make sure that we can keep up with the service level, and so here's the new fee."

How Blair Communicates The Value Her Team Provides When Charging Six-Figure Fees [23:45]

Michael: And so, how do you explain, I was going to say justify, that feels more negative than I mean it to be. But how do you explain and justify six-figure fees when you just start quoting, it's $150,000, it's $220,000, $305,000. I'm assuming at some point, people are going to ask something about it. "Blair, I'm sure you're wonderful but where did that number come from and how do I know that that's a reasonable price?"

Blair: Until you have worked with and met people at this level of wealth, I call them the extra-comma-or-two club, you don't realize how much their life in general costs. And that $250,000 or whatever it is, seems like a deal. Not to mention the fact that if our GRAT program rolls $3 million or $4 million out of their estate tax-free, we've already earned multiples of our fee. So again, it comes down to the advice that you're giving is actually worth much more than you're charging and they understand that because they're seeing it and living it every day. And oh, by the way, they understand that larger firms with higher fee structures are going to cost them much, much more.

Michael: I guess it is a good reminder that so much of costs of expenses of what's a "reasonable" spend is just so relative to your wealth and income in the first place. It reminds me of a piece of Nick Maggiulli's book, I forget what he called the rule, but if there's an expenditure that's less than 0.01% of your net worth, just do it. Stop stressing. Just do it. It doesn't matter. Granted a few hundred-thousand dollars might be more than 0.01% of their net worth, but it might be 0.03% or 0.05%. You're actually not far off from that number. If that makes their life a little bit easier, cool. Problem solved. That's in the too-small-to-matter expenditure range.

Blair: And that's the flip side is you have to make sure also that you're charging enough that it seems legitimate. There could be a level of wealth where $100,000, it's questionable because it's too low. How could it possibly be? How could I actually get access to this seven, eight professionals who are some of the most talented people in the business to work just on my wealth and it would only be that? Something's wrong here. So very interesting mental framework that requires a shift in yourself personally when you start working with clients at this size.

Michael: Different scale but it reminds me, I had an advisor friend years ago who was rolling out a subscription model and was really kind of anxious about the price. It was going to be $400 a month. It just seems like that's going to be a lot of money to a lot of people. That's almost five grand a year and they were doing subscription because working with a lot of clients that don't actually have liquid assets, so they're going to pay it from cash flow. And he was just a little anxious if people were going to think it's too expensive or just right and was trying to figure out how to get in front of people who make enough money that it would be okay to them.

It ended up getting this meeting with someone who was making $1 million or $2 million a year from their business, which probably means their enterprise value would have been, I don't know, $10 million or $20 million or more, depending on whatever their EBITDA [Earnings Before Interest, Taxes, Depreciation, and Amortization] multiple was on their business. And he got blown up in the other direction, which was he was so nervous to say this $400-a-month a fee and the client was like, "You're $400 a month? My lawyer is $700 an hour. You can't be a credible professional at $400 a month. If your monthly fee is less than my lawyer per hour, you must suck. You can't be a credible professional, in my eyes." He was a wonderful advisor, provided great value for his clients but was so unprepared for how the lens of what is a reasonable price changes as he went from working with doctors that made $300,000 a year to working with a business owner with a $20-million net worth.

Blair: Right. Yeah. That is so perfectly encapsulating the shift in framework that you have to go through, as an advisor, to go up the scale to these astronomical levels of wealth. Yeah. You couldn't have put it anymore perfectly with that example.

Michael: So when you're structuring these fees, it sounds like this is kind of scoped to the amount of stuff you've got to do. Is there estate-plus stuff, because you're doing rolling GRATs? Are you doing their tax return, in-house or not, and how messy is it? How does the portfolio part fit back in? Is the flat fee also covering all of the investment management stuff or is there a…this is for the advanced financial planning things. We also have an AUM fee for the pure portfolio side. How does the portfolio part mix in?

Blair: So every client in the Multi-Family Office has a custom written multi-page term paper IPS [Investment Policy Statement]. So think about doing the CFA Level 3 exam and you had to write in an IPS or what you learned about on the CFP. We're actually writing those for each client custom, and it's more because if somebody is coming in from the outside and needs to learn the relationship, they could just pick it up and run. If, for whatever reason, all of us were gone tomorrow, somebody else would have all that information, so who are the people involved.

Michael: So someone else on the team, internal? This is an internal redundancy cross-over thing.

Blair: Right. But in ultra-high-net-worth clients, there are other professionals involved. There may be other asset managers involved, relationships that aren't going to be severed. There are private investments that have already been made that we didn't recommend them but now we're servicing them. So who are all the money managers that are involved? Who are all the people involved? Some of these clients have their own staff that we are also coordinating with. They're part of our team but they're on staff with the client.

If we're not doing the tax return, who is the tax return? Who is the provider? Who is the estate planning attorney? And then, how should the portfolio be allocated? And does that differ based on ownership structure? So most ultra-high net worth clients don't just have money in their revocable trust, in their IRA. In fact, they have very little IRA money most of the time. They have potentially assets in a DAF [Donor-Advised Fund] or a private foundation or a GRAT for their children or grandchildren. Each of those structures might need a different target asset allocation.

They may have different liquidity concerns. There's different tax concerns for each entity. So each entity has to be described what was the set up for. What was the purpose of this trust or that trust or this entity? So all of that has to be written in the investment policy statement. And from that drives the investment recommendations that we make. So we're not charging an additional fee on those investment recommendations. Sometimes they are AUM to us, meaning we're driving the train. Sometimes they are AUA [Assets Under Advisement], maybe there's a private equity portfolio that was already invested before the client came to us but we are reviewing all of those managers' updates, servicing the capital calls and the distributions, reinvesting the distributions. Believe it or not, private equity's not always a one and done, so there might be LP [Limited Partnership] agreements that we have to review and tell the client, "Here's why we agree and why you should sign this update or this extension on the fund." So that's where the asset management comes in.

But as far as our investment philosophy and the products and tools and investments that we recommend, it still comes down to what should their overall mix of stocks, bonds, in this case, cash and private equity always play a role instead of just stocks, bonds and cash. Or just illiquid investments, I would say, it's not all private equity. What should that overall asset allocation be? How are we going to implement that? Is the U.S. stock going to be in a direct index platform? Is there an active manager that they're still going to work with? Do we have tax loss, wash sale concerns? So coordinating all of the pieces, that's why each Multi-Family Office client has to have its own dedicated portfolio manager, not just a trader. And so, there are costs associated with those investment vehicles, right? So if we're using a direct index provider, they may charge 10 basis points management fee, but that's not obviously our fee, that's just the cost of the underlying investments.

Michael: So is part of the fee scoping, whether or how much you're actually managing versus monitoring?

Blair: It's not and that's one of the strengths of the way we work with these clients, is we're agnostic. So if we recommend, "Maybe you shouldn't work with this manager anymore," hopefully the clients understand it's not because we're trying to get more assets to manage and more fees. We're doing it because we truly believe maybe this isn't working in your asset allocation anymore or maybe it's too large and you need to take some money out. So no, it's literally the fee is based on the work we believe we're going to have to do throughout the year and sort of a best-case scenario of what we should charge for that work.

Michael: But it also ironically is probably, from that vein, it's actually more work when you don't manage the money and have to monitor everybody else's stuff and whatever strange things they're doing all over the place. It reminds me of, was it the meme, "We can do it for you at a low cost or we can do it with you, but we'll have to charge you twice as much."

Blair: It is and again, it goes back to the client is not the only client. So sometimes, the client is also the client's staff. Sometimes the client is also the client's illiquid investment managers. Sometimes the client is also other money managers where there's a relationship there that's not going to be severed and we have to work collaboratively.

Creating An Appropriate Meeting Cadence For UHNW Clients [35:18]

Michael: So then, how often do you end up meeting with clients in this segment?

Blair: So the service model is also customized. Most clients, it's at least a quarterly meeting, but some it's a monthly meeting. Now when it's a monthly meeting, sometimes it's ten meetings a year because not everybody is going to be able to meet every single month during the summer and every single month during the holidays, right? So let's say it's ten meetings a year and there's the preparation for that meeting. In one case, there's a call before the call with the client staff to set the agenda. And so, the service model is customized to each client but most of these clients have at least a monthly meeting with us because there's an update, because again, there's just so much money happening from dividends being paid to bonds maturing to distributions from private investments. There's just always tweaks that need to be made. We need to talk about how we're going to reinvest this money that came in. We need to talk about how we're going to raise money for your estimated taxes. So there's always something that needs to be discussed at least on a quarterly basis and sometimes monthly.

The other thing about our service model is we can customize how often they want to receive certain communications for us. So if you think about we're looking at everything, managing some but not all, we are doing performance reporting on the whole portfolio, right? So some clients receive a monthly customized performance report from us. In the case where they're bringing legacy illiquid investments and we're reading those manager reviews, we might send a monthly update, "Here's all of the updates that we got from your money managers this month."

There might be a monthly cash flow report. Here's how many capital calls went out and how many distributions came in. But that is very client-dependent, right? So in the case of a client who has a few tens of millions of dollars liquid but everything else is in the company that they founded, maybe there's not as much of that. And so, really this comes down to every client is unique.

And that's one of the things I always stress to advisors who are dreaming of doing this work is, it doesn't scale in the same way that traditional wealth management does. As you get more clients, your revenue will grow, but then you're just going to have to hire more people to service that revenue. It's not the same beauty of the scale that you get in a lot of different types of wealth management.

Michael: Ultimately, almost all of the wealth management advice business is a humans-delivering-service business. You can measure out things like revenue per employee, just how many people do you need to do the things for the revenue. And revenue per employee is remarkably stable across all advisory firms. It gets slightly better as you get larger. Just little bit of efficiencies as you build systems and roles specialize. But it's incredible how similar revenue per employee is for a billion-dollar firm, a $5-billion firm, a $10-million firm and a $100-billion firm. A $100-billion firm on average has almost exactly 100x the employees of a $1-billion firm, 100x the assets, 100x the revenue, 100x the headcount.

Blair: That's fascinating.

Michael: The super-efficient ones, then their head count's only 95x instead of 100x. Congratulations, you're saving 5% of margins by saving 5% of your head count, but you still have to 95X your staff to 100X your business.

Blair: And somebody's working too many hours a week probably.

Michael: Usually, at that point.

Identifying The Asset Level Where The Client Workload Picks Up Noticeably [39:10]

Michael: So in that spirit around workload, I guess, taking one step back to the earlier conversation. Clearly, these ultra-high net worth clients are super complex. I say it kind of jokingly. Our 'mere' millionaire clients are not that complex. We need expertise. There's real value provided, but I don't have to check in on how the seventh rolling GRAT is doing while also clearing up the distribution from their PE fund and the capital call from the other one. The complexity is a bit simpler which is why the hours don't spike as much. So I guess, I'm wondering from your perspective, you go from a half-million-dollar client to a million-dollar client and the workload doesn't go up that much. You go from a million-dollar client to a $2-million client, service expectations are often a little bit higher but it's not a radical shift in service model and monthly meetings with a call with their staff before the call with the client kind of thing. Where is the shift? Where is the cross-over? Is there some assets or net worth or just fee level where we're no longer in the, they're just paying us more for our expertise and the fact that they have more money any stake and this is just more work? Good fee for more work but this is clearly more work.

Blair: Yeah. I would also say that because we try to touch anything where money is involved with our clients, some of our Wealth Management clients who aren't as complicated, we're doing a lot for them. So I had a bunch of clients turning 65 in the last couple of years. We found a Medicare enrollment consultant and I'm setting up those calls and getting them to fill out forms of what prescriptions do you take and what's the right Medigap policy for you to choose.

We work with outside providers to review homeowners' and umbrella policies. Give me all of your coverages there and let's have somebody review it and see if they can do a better job. Obviously, we're doing taxes for a lot of our million-dollar clients, and so there's the complexity of, okay, we've done the financial plan review but, hey, now somebody on the tax team is wanting us to remind you that your estimated payment is due. We have life insurance in-house not to sell a bunch of life insurance, but because we didn't want to refer it out. And so, when the life insurance need arises, there's somebody on our team that's sending them that crazy questionnaire about their medical history, right? So we're doing a lot at all levels.

Michael: And so, is that revenue for you? You've got some, 1% of your revenue is insurance implementation commissions because you brought it in-house instead of sending it out?

Blair: At the firm level. So what we don't do is incentivize individual advisors or even the advisors who write the insurance policies and are licensed on individual revenue.

Michael: Because the advisors are salaried and the revenue is such a small percentage of the firm overall? It's not a growth lever to incentivize?

Blair: Right, and we don't want that incentive, right? We want that to be going into the pot for bonuses or some other type of compensation, not in a direct correlation to the life insurance policy that was needed for the client, because you just happened to get the client who needed the buy-sell agreement, and so your client has a need or an expensive insurance policy, whereas everybody else's clients just needs cheap term coverage, so.

Michael: I got to ask just because it's so much in the industry debate right now. Does that give you concerns or challenges around being able to market as fee-only versus not when you bring insurance in-house?

Blair: We don't market as fee-only.

Michael: You can't at that point, but were you in the past? Is that something that went away? Is that something that comes up with ultra-high net worth or other clients?

Blair: It honestly doesn't come up and I actually was kicked out of NAPFA before I joined the firm because my prior firm had insurance licenses but we had never written any policies. But in NAPFA's definition, that disqualified me so they very nicely informed me that I could not be in their group anymore. I just don't think it comes up...

Michael: Because their rules, if you could write a policy, they don't want to find out after the fact that you did it and you were violating, so you had to not have an insurance license to be under the umbrella?

Blair: Right. And I think that's something that overall, the fee-only crowd gets wrong, because at the end of the day, we can't change, or hopefully one day we could change the way insurance is sold, but that requires all 50 states to amend their insurance laws. So in a perfect world, we wouldn't have insurance commissions. It's not the reason we do it. But referring out to the insurance agent, no matter how great that relationship is, who is incentivized to use the hammer that they've been given, it just doesn't work. And so, we wanted to wrap our hands around that, and so I can't think of a time that I talked to a prospect or a lead who reached out to me who that was the defining issue. What they want to know is are we fiduciaries. And I think that's more important than how you're compensated.

Michael: I'm sorry, I pulled you off kind of the thread of where does the workload really start to pick up.

Blair: So I don't know that I can say it's a certain dollar amount. But if you go back to how we define Multi-Family Office, it's a taxable estate. It's when the conversation begins on what are we going to do to work around your estate tax bill? That's where the complication begins and that's where multiple...it's more than just the lead advisor, the co-pilot and the CSA, which is who works with the majority of Wealth Management clients. It's when you need to pull in a specialist, when you're going into multiple entities for one client relationship. You're in the meeting with the estate planning attorney, you're coordinating with their office, that's the level where the workload really does go up.

As for the team, as a whole, as the lead advisor who's sort of orchestrating all of this, it just depends on which Multi-Family Office-type client you have. Do you have the one who has staff and you're coordinating not only with your team but with their team and there's a lot of people to conduct there? Or are you working with a hundred-million-dollar client and you're talking to them directly and they don't have a need for complicated estate plan yet at this point. So there's no magical dollar amount but I would say sort of that threshold of the taxable federal estate really is sort of the line where the work starts to go up.

How Ritholtz Wealth Management Handles Advisor And Team Capacity [46:13]

Michael: Okay. So then how do you think about and manage capacity? How many clients like this can you handle? How do you deal with having these clients and some of the ones that you had historically, so you just got clients with wildly different service needs under one umbrella. Where is capacity? How do you manage the load across these clients?

Blair: So this is, at a firm level, something that we have been really focused on in recent years. In the beginning, every advisor who joined Ritholtz Wealth was a senior advisor, their clients were coming with them and they were going to talk to new people who were reaching out to us and bring on new clients to the firm. And those advisors, those senior advisors were supported by a CSA and a trading team, and you could bring in Barry [Ritholtz], Josh [Brown] or Michael [Batnick] or Ben [Carlson] as needed to certain conversations.

But then, there was a group of us who kind of got to this level where we were tapped out. We didn't physically have time to schedule all the calls with the clients, prepare for the calls, give the calls, do the follow up after the calls, put everything into the CRM so that the traders could execute. So that's where we started bringing in co-pilots who are advisors who assist a lead advisor. They're CFPs for the most part, they're fully functional. It's not someone you're having to train to do financial planning, and they can come in and share the load while also talking to new people and starting the process over again themselves so that then maybe one day they can have a co-pilot working with them.

And that capacity level before we started having hundred-million-dollar clients reaching out, was for a lot of us, it was around $200 million in AUM was where we were finding that threshold.

Michael: Okay, which is, I guess, probably one and a half million of revenue, give or take a little because not everybody's at 1% on everything.

Blair: Depends on the average household size and the fee.

Michael: And that's where it was when it was you and the CSA or that's where you got to when it was you and the CSA and you added the associate advisor, co-pilot?

Blair: That was when we needed co-pilot, those of us who were at that level, we realized, "We're tapped out." Now some of us tapped out at a different number of households, again, because $200 million might be a whole hundred households or it might be 75.

Michael: Or six clients with $30 million-plus that you have to do continuous meetings with.

Blair: Right. Exactly.

Michael: So where is capacity moved for you with the co-pilots onboard?

Blair: So I think I'm about two and a half years into having a co-pilot. I might have to get back to you on what that means, but I would assume that we can be at least more than double. I think the two advisors together is more than two single advisors alone, without a doubt. And I'm sure that Jay Tini, our president, has looked at this data more closely than I am. One of the things I love about this firm is I just get to be an advisor. I don't have to worry about the business side of things. But I can say that I do believe that the two-advisor model is more than the sum of its parts. What I'm interested to see is when our co-pilots need their co-pilots and how we handle that, because...

Michael: Is there a plan for it? Do they break off and form their own new team or do they start sub teaming under you with tiers?

Blair: I think it could differ based on the co-pilot. So Alan Brockhaus is my co-pilot and we sit in the same office in New Orleans together. So we would love to make a mega team. There might be another situation where a co-pilot is not working as closely with that advisor and would rather just go on to be a senior advisor themselves. The one thing that's great about Ritholtz Wealth, it's a rocket ship and everybody can go on their own path. There's plenty of growth for everybody and that's obviously a really privileged place to be. But that's what helps us attract that younger talent is that we had recently a CSA who said, "I think I want to be an advisor," several years ago and she has now moved fully into the paraplanner and co-pilot role and made that transition. So those things are possible at our firm. There's no ceiling for anybody.

Michael: It sounds like the baseline team then is a three-person dedicated team, senior advisor, associate co-pilot, then CSA and then lots of centralized service support from centralized investment team, trading operations, all the things that you've got from an investment-support perspective.

Blair: Right. It's sort of build your own team from that central team of advisor, co-pilot, CSA, then you, based on the client's needs, build your own team around that. So if they become a tax client, they're going to be assigned a tax advisor. And we have multiple tax advisors now, so I work with my clients' four different tax advisors depending on the timing of when that tax relationship came on. And it's the same several people working if it's life insurance. So it is sort of a pick and build the team based on the client's needs.

How Blair Gained The Skills And Expertise To Serve UHNW Clients [51:58]

Michael: So now, take us back to where we started this whole thread. How does Blair, who had wonderful, mass affluent and millionaire clients, learn to do the things that it takes to effectively service this ultra-high net worth clientele? What's your learning growth, training, upskilling journey?

Blair: It's funny because when the firm was founded with less than a hundred million in assets, two of our founders, Kris Venne and Michael Batnick used to laugh and say, "We'll never have anybody that has more than $7 million as a client. That's where we top out. That'll be our biggest client." So few years back, we were having a lot of $7 million-plus clients, and so that's when we created this idea of the service model of the Preserve, where the conversation changes. It's not, "Hey, am I saving enough? Am I on track to retire? Do I have enough?" It's, "Okay, I know I have enough, right? I don't need to see your Monte Carlo, am I going to run out of money." It's, "How do I not make a mistake?" And if you've taken the CFP, you already have the book knowledge but now all of those letters and numbers and things that you studied and memorized and may have forgotten, now you're going to actually implement those things for a client. Your GRATs and your QPRTs [Qualified Personal Residence Trust] and all the things that you probably already know, you might have to study up on them.

And then, you've got to realize when you have the expertise or when you need to go hire it or outsource it. So we have made incredible relationships with some of the top, in my opinion, estate planning attorneys in the country. And so, we work with them and they are leading the expertise on the legal side, and then we have people who have joined us. So Taylor Hollis is a hire that we made several years ago just in time for the Multi-Family Office to kick off. And she leads the Multi-Family Office. Well, her career prior to joining our firm, was inside of a Tennessee trust company that worked with ultra-high net worth clients, and so we hired that. And so, in working together as a team and having taken the CFP, you've learned all of these things. It's just now you have to actually go out and do them. And so, having those people on your team or working with the right outside providers is really the only way to go.

So the advice that I would give to anybody is know what you don't know and know when you need to either hire somebody with that expertise or find it outside of your firm.

Michael: So how do you start getting in the reps? How do you solve the chicken-egg problem?

Blair: I really don't know if the chicken or the egg came first, to be honest. For us, it was, we grew to $1 billion and then $2 billion and then $3 billion and no longer was it $7 million is the largest client we're going to have. All of a sudden, it was 20 and 30 and 40 and 50 and 100 [million dollars] and higher than that. And they just came. They came to us because of course, we have an incredible marketing machine that is very unique, very public-facing and their friends heard about us or their staff member heard about us and told them to talk to us. And so, the clients really came to us but it wouldn't have worked if we hadn't had that preparation and had that talent or been willing to go out and hire that talent to service it.

And the CSA role is very important here. It's one thing to be a CSA that can open your typical rev [revocable] trust and IRAs and Roth IRAs and UTMAs. It's another to be able to open a joint tenants in common owned by two separate trusts, who are the actual end beneficiaries, and get all that paperwork right at a Charles Schwab or a Fidelity. That takes a really high-caliber CSA, so that's a very critical role in all of this as well.

Michael: Is that one you also hired, I guess, as opposed to training, developing internally?

Blair: So we are so blessed. The very first CSA, she was the fifth or sixth employee ever at Ritholtz Wealth, Erika Mauro. She's just a veteran and knows everything you could possibly ever know. She's probably the top CSA that exists. She has, all along the way, been involved in the growth of our firm and came on as the first Multi-Family Office dedicated CSA. And then since then, we've been able to make other key hires who've already been working in the space at other firms.

Michael: So what are all the key hires for working into this segment? I'm hearing it's a different level of CSA support because of the complexity and the entities and the specialized investments. So what else? What else did you actually have to hire and bring on board to the firm?

Blair: It's incredible how we already had some of these key pieces in place with the CSA. So Bill Sweet, our CFO, the first advisor doing tax consulting at the firm, has been instrumental in some of these large relationships where maybe we're not doing the tax return, but there's tax consulting going on, there's projections. How much income do we think the client's going to have this year, therefore how much in charitable donations can they make in both appreciated stock and cash, modeling that out over a multi-year period. So Bill Sweet, having him in-house, having a Ben Carlson to give these clients a customized market update every month, an email that goes out, "Here's what we're seeing in the markets." Can you imagine, literally Ben Carlson is writing that for you every month? So we're lucky in that. Taylor Hollis, who I mentioned, who runs our Multi-Family Office coming and saying, "Hey guys, you guys know about markets and wealth management and maybe a little tax, but have you ever done a Roth conversion of the whole IRA and married it with a huge DAF contribution to mitigate some of the tax because you have a taxable estate and you're trying to reduce it?" So she came to us with some of those estate planning tactics that we again, knew on paper but hadn't actually been executing yet.

Patrick Haley, employee number five or six right there with Erika Mauro, who was originally a client-facing advisor and then was our sole trader and led our trading team, has grown into one of the portfolio managers for our Multi-Family Office clients. And so, literally a naval aviation navigator, who else could you want driving the ship? So a lot of it was the pieces were already in place and then a few key hires have really helped us build out that service model.

Michael: And I guess, from your end, part of the chicken-egg solve was the firm has such a strong marketing process that you were able to get some of the initial at-bats to serve these high-dollar clients when you didn't have as much experience with them yet. The firm's marketing helped make them appear. The depth of the team meant that you didn't have to figure this out alone and then you get your reps in and it gets better.

Blair: Right. And a lot of serendipity there, right? I had known Taylor Hollis for several years before we hired her and I was trying to encourage her as a hire. And lo and behold, right when she came onboard, we had our first hundred-plus-million-dollar relationship come on board. So some of it was serendipity. Every successful person will tell you that there's luck involved. There's definitely some luck involved here, but we had been putting in the work of that incredible marketing machine of Josh, three times a week on CNBC, Barry, literally writing, since the late '90s, a blog with a huge readership, and then Michael and Ben becoming these podcast stars and the YouTube channel coming over 100,000 subscribers, right? All of that happening and the convergence of our AUM growing and the talent that was coming here, and then eventually you're going to get a larger prospect reach out to you, and we were ready and we were just able to build that plane while we were flying it.

Michael: So did you go the formal training route, degrees, designations, programs like that or have you stayed focused in the learn it by living it because every client's so unique?

Blair: When you say formal training, do you mean master's degrees or?

Michael: Or advanced designations or all the different stuff our industry likes to cook up to offer to advisors to help them do these things.

Blair: So I actually did a master's in financial planning purely because I thought maybe one day I'd like to teach in a university setting, and the CFA and the CFP don't count to academia and you have to have a minimum master's degree to be an adjunct professor. That was just a bunch of writing papers about what I already knew about financial planning. And the course load is the CFP course load. So no, we don't have any of the additional, I can't say any because we have a lot of advisors in-house and some of them have additional letters behind our name. The majority of us who are advisors are CFPs. A few of us are CFAs, particularly on the investment committee. And we encourage our younger advisors, of course, to go the CFP route as well.

And one of the things I loved when I first joined this firm is because we're not a 2, 3-advisor practice, we are a multiple, 30-plus advisor practice at this point and we're doing a high volume of plans, we come across these esoteric financial planning situations collectively and then we share that with each other. So a lot of times, if you find something that you've never seen before, one of your colleagues has already done it and you can reach out to them and say, "Hey, I just came across this. I've never seen it. I've read it in a book. Can you tell me what this is like in real life?" And so, that sharing of knowledge in a larger group, in a high-volume planning practice is incredibly valuable.

Michael: So did you struggle with any fears, nervousness, imposter syndrome of trying to engage with more ultra-high net worth clients?

Blair: I certainly have imposter syndrome at all times. I spent so many, the first decade and a half of my career just trying to be considered old enough or experienced enough to work with a million-dollar client, right now? And then overnight it seemed, it went from $1 million to $5 million to $10 million to $40 million. It just really went fast. And so, no matter what their net worth is, the fact that people trust me to help them with these most important decisions in their life is just mind-blowing. And so, it's something you have to live up to every single day as an advisor and it's part of the reason that it seems so easy, right? You just go into the office and you don't have work long hours, and you talk to people about their money all day, but it is a mental load that you're bearing at all times, a very emotional job as well.

When you're talking to people who just had a baby or somebody just died or they got divorced or married, these are the biggest decisions they will make in their lives and they're trusting you with some part of that where money touches those decisions. It's pretty incredible actually, if you think about it.

Michael: Where was the experience threshold when suddenly the numbers started moving up quickly? Was there a turning point of career? I got to Year 12 and suddenly everything just started changing?

Blair: Really, it's just I moved over to Ritholtz Wealth and had the benefit of talking to people who had reached out to the firm because they had read Barry's Washington Post column or heard him on "Bloomberg Radio" or seen Josh on CNBC and they knew what we provided. They knew it was financial planning and I'm a good relationship manager. I can't find those people on my own, but once they were provided, I was able to say, "Okay, give me all the pieces of your puzzle. Let's put together your financial plan. We can do this."

And I think when I talked to you in 2020, I was almost to a hundred million and that growth that you said, the quadrupling of the firm since then, I've lived that as well. I think I always joke a lot of us still have PTSD from 2021. That was the busiest we've ever been and we were understaffed, and a lot of us experienced tremendous growth in the number of clients we were servicing and the assets that came with that.

Michael: And what made the year of craziness happen, come, trigger?

Blair: Normally, we see an uptick in people reaching out because the market is crashing. But 2021 was the meme stock craze and I just think that something happened with COVID. Everybody's life was changed by COVID and maybe it was just the combination of a bunch of different things at one time, but we've always worked remotely with our clients. Our clients have always lived all over the country even though we don't have people in all of those cities and people were making changes fast and furious that year. And we had more people reaching out to us than we could physically handle. I don't know how many accounts Erika Mauro personally opened that year but it's an astronomical number of accounts and it never has really let up from there.

What Ritholtz Wealth Management Looks Like Today [1:06:33]

Michael: So then, help us understand the advisory firm as it exists today of size and assets and revenue and team and clients. Help us wrap our head around the firm overall.

Blair: So I mentioned the last ADV that we filed $6.5 billion, we have a lot of households because we have no minimum. We have different service tiers. We have a robo-advisory service called Liftoff. If you've been listening "Animal Spirits" and you want to invest your first $10,000, you can go on there. It's backed by Betterment, and we set the allocations and you can become a client of the firm with literally no minimum. We have a level for the mass affluent called Good Advice, because they don't need just a website and an asset allocation. They actually need to talk to a CFP advisor. These are young families who need advice about how and where to save into their 401(k). Should they do Roth or regular? Do they need life insurance? They just had a baby. So it's financial planing but not full service, so a little bit lower fee, a little bit lower assets. Somewhere...

Michael: What does little bit lower fee mean in your world?

Blair: So Good Advice is 75 basis points, between $250 [thousand] and a million dollars and you can stay on Good Advice. There's no reason you have to move up just because you cross that million-dollar threshold. Our flagship, Wealth Management, which is really where we began, most of the clients of the firm, between $1 million and $7 million, and that's where you start with the sliding scale, it's 1% up to the first $3 million and then there's breakpoints after that, is where you get a dedicated advisor. So at Good Advice, you might talk to two or three different CFPs. You'll probably know their names but you're not having a dedicated advisor. That flagship model is the $1 million to $7 million. Everybody has a financial plan, they have a dedicated advisor. They may have some direct indexing instead of ETF models. We can incorporate existing appreciated stock into their portfolio. There's more customization.

Some of the Good Advice clients are tax clients but Wealth Management is really where we start to talk to people about, "Hey, do you like your CPA? Are you happy with them? Do you want us to also do your taxes?" The Preserve is where the conversation changed, not the service model or the fee structure, but $7 million to $25 million is where it's not about the Monte Carlo. It's more about how do I not make a mistake with this money that I've amassed. And then, the Multi-Family Office is really at that level of the taxable estate. So $6.5 billion spread across almost 4,000 households, but again, keep in mind that we have a lot of households below a million in those service tiers, some of them that may just call in once a year in the Liftoff service.

And we are over 80 employees. What's unique about us that if you did a benchmarking study, you wouldn't see, is that we have media people. We have content show producers, videographers, video editors and the likes. We have a whole staff, so when you see our YouTube videos, that's professionally done. So that's a little different than us. We have our founders.

Michael: And that's professionally done in-house. You're not hiring a bunch of agencies. You've hired the people since you do so much of it ongoing, I would imagine that cost amortizes well of you given the sheer amount of content.

Blair: Yes, and it sort of is a self-perpetuating business unto itself because if you listen to our YouTube videos or podcasts, they are sponsored. So that's interesting. And then, of course we have the advisors, the CFPs, the people who are doing financial plans for clients from Good Advice all the way up to Multi-Family Office. A handful of those are working with co-pilots now. Of course, there's the CSAs. Our trading team is three-people strong.

And then, we have a research team, so Callie Cox joined us as our chief market strategist. She works with Sean Russo, who is our first hire as a research analyst. He supports the investment committee. He also supports some of the information that we need on our media. So he has a very interesting role at the firm and there will probably be future people in that role as well because there's a lot of research that comes into onboarding clients, here's what we're inheriting, do we have any information about this or that investment that they're bringing to us as they on board.

We have some senior management, right? So we made a big hire in bringing in Jay Tini to be our president because at a certain point, the four founders needed a professional manager. I think that's pretty common amongst larger firms. That's been a key hire. Our vice president, Anna Chaiken came to us as a CSA. That's one of my favorite stories in the firm. So she's very involved in looking at the metrics of the firm and how we're growing and what technology we're using and what are our internal processes.

We have a COO in Nick Maggiulli. He's basically a data scientist. There's nobody that you would rather give a complicated data project to. We have the tax team, right? So the tax business is its own LLC entity and there are four tax preparers and they're backed up by at least one service person.

Michael: Do clients pay separately if you do their returns or is that rolled into the aggregate fee offering at certain tiers?

Blair: It is a separate fee because we don't want clients who aren't doing their taxes to subsidize that. And so, the way that the tax preparation fee works is it's a flat, annual fee based on the complexity of the return. It's not just give us all your paperwork in February and we'll spit out a return. It's at the end of the year, "Hey, how much income has come in this year? Any changes from last year? Is there anything we need to do to finish out the year?" Which is why I've been knee deep in DAF contributions, Roth conversions, QCDs [Qualified Charitable Distributions] from RMDs [Required Minimum Distributions], opening SEPs [IRAs] at the last minute or solo 401(k)s. So all of that work comes from the tax preparation. But yeah, it's a flat, annual fee for tax prep based on complexity. We're not the low-cost provider but we're also not the most expensive, so sometime clients who live in high-cost-of-living areas, like San Francisco or New York may be paying a little bit more than we're charging, and then in other areas we're more expensive to do their taxes.

Michael: And then, I paused you as you were going through the list. Are there other functional department areas?

Blair: Are there other people? Of course, compliance, the most important.

Michael: They're very important, absolutely.

Blair: We have our CCO and she's backed up by one employee so far in that department. She's incredible. Our CCO, Patricia, came out of FINRA, just nobody knows it better. In fact, we were working with several different providers to do portfolio loans back when interest rates were zero, right? And we were speaking to Goldman Sachs because they actually had a great service offering in that capacity, really easy to open it up and they said, "We need to have a call with your compliance team first to make sure that you're prepared for this." And the comment we got back was, "Wow, we've never met a CCO at an RIA that's anything like her." So that's the glue to make sure that we're going to continue into the future is compliance.

And I'm sure I've missed a few things but there's a lot of us and there's a lot of extremely talented people here, especially the young people. We opened a second headquarters in Chicago. I think that was earlier this year actually. Wow. Time is such an interesting...it's hard to remember when people came on board. But that second headquarters and we already had several staff there, has allowed us to concentrate some of our younger CSA hires to be physically in Chicago and they're just some of the most incredible young people that I've seen.

Michael: I'm fascinated just, I guess, the scalability of the tech now that $6.5 billion runs on three traders.

Blair: I know...

Michael: It's just high.

Blair: ...I am impressed and the youngest one is a recent hire, just passed his CFA Level 2. We had two traders until recently.

Michael: I remember being at a $200-million RIA in 2002 and we had three traders for $200 million and so many spreadsheets just to handle the sheer number of clients. There was no rebalancing software yet. iRebal didn't launch until 2004. It was all manual with spreadsheets and it was three traders for $200 million. And now you just added the third trader over $6 billion.

Blair: So I used to do that as well. There was a master spreadsheet. Each client account had its own tab, and you would download all the data from the custodian in the morning and it would populate into that spreadsheet. And then, you would go in and manually adjust each spreadsheet, if you needed to invest cash or raise cash.

Michael: Heaven forbid your...

Blair: Don't even try to do the whole firm rebalance. That would take weeks.

Michael: I was going to say, doing the firm rebalance and trying to block trade it and setting up a file to allocate the block trade properly, and by the time you do that, the prices moved and the share count is different and you may need to recalculate the block trade.

Blair: Oh, in 2010, it was very volatile. We would have to sell on one day and buy the next day. We couldn't even do it on the same day, so.

Michael: Because you couldn't allocate the trade.

Blair: Right. Yeah.

Michael: I guess, across the different tiers, I don't know if you know, how many clients is it?

Blair: In each tier?

Michael: And/or total. I'd be fascinated if you know by tier, but…

Blair: At the filing of our ADV in June, we had 3,900 households. Now what would be more interesting is if I had the breakdown as to how many in each tier, because obiovusly there's a lot more households in the robo and Good Advice than there are in the Multi-Family Office.

Michael: The distribution of wealth is a pyramid with a larger base and a smaller peak. So is pretty much every advisory firm as it moves up.

Blair: Exactly.

Michael: But I guess functionally by the tiers, so robo is pure investment backed by Betterment. You have CSAs because someone's got to answer the phone but it's not a planning offering. Planning is Good Advice. Starts at 75 bps and $250,000 in assets but it's a centralized planning team support. You don't get a dedicated person.

Blair: And also a great training ground for young advisors.

Michael: Sure, they spend a few years there before they move to the Wealth Management division which is now dedicated advisor, every client gets a plan, some more investment customization starts to kick in and your fee actually moves up a little from 75 bps to 1%. And then, you go to the Preserve. Is the service model or pricing different at the Preserve or is it just a function of we need more experienced advisors to have different conversations because the conversation is different at that wealth level?

Blair: It's the second. So our break point is, I'm not going to remember it exactly because when we changed it a few years ago, my brain just wouldn't adjust. But let's say you've got $7 million. Your fee is, I believe, 75 basis points up to 10 million. So it's still the AUM model. It's similar. Some clients wouldn't even necessarily know you're a Preserve client. But when people go out to our website and say, "I want to talk to an advisor," they put their level of assets, and each advisor at the firm has to go through that process of getting their confidence up with the one to threes [million dollars of assets] and the three to sevens. But everybody that wants to gets a chance to grow into those and talking to those clients.

What's Surprised Blair The Most Working With UHNW Clients [1:19:32]

Michael: So as you reflect on this journey now, what surprised you the most about trying to build with ultra-high net worth clients in particular?

Blair: I think it's the imposter syndrome, right? Me? You're going to choose me? But then at other times, it's like, well, of course you would choose Ritholtz Wealth Management. We've got all these amazing people here. So it was just surprising to see how we were able to really intelligently shift and build those new service models and customize in that way and how all the pieces just came together. I would say that was very surprising.

The Low Point On Blair's Journey [1:20:09]

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

Blair: Actually a low point for me personally is the first co-pilot that we hired to work with me ended up getting a really fast education in wealth management and decided that it wasn't for her and she left. And actually, interestingly enough, I just wrote her recommendation letter for an MBA program last night so we're definitely left on good terms. But getting the co-pilot in place, finally leveraging my time, not spending my time putting in the trading instructions in the CRM and all of that, and then having that person leave and it took time to hire the next person, that was a tough time for me because I had just started to transition away from doing all of that work.

Michael: And then, it all boomeranged back.

Blair: Right. Exactly.

Michael: Did that change anything for you? Is there a lesson learned, takeaway beyond turnover is unpleasant and we try to minimize that? Anything you would have done differently in retrospect or learning since?

Blair: I think we have gotten better and I can't take any credit for it in how we hire and the process for interviewing people. It doesn't mean we're going to be perfect. And in fact, I think this person was so talented, we would hire her again today, so I don't think there really is a learning curve except just to know that in a growing firm, don't be despondent if not every hire works out. That's just not reality.

Blair's Advice For Her Younger Self And For Newer Advisors [1:21:45]

Michael: So what else do you know now you wish you could go back and tell you five or six years ago before you started down this moving-up-market path?

Blair: I would tell myself not to worry. You are going to make it. This whole two decades of striving to succeed as a financial advisor, it's actually going to work because I had such a level of anxiety for so many years. I've been working in this for so many years and I don't have a lot of clients. But I've got all the credentials. I've got all the skillset. Why isn't it happening? And I would just tell myself to relax and enjoy the ride because it is going to work out.

Michael: So any other advice you would give younger, newer advisors looking to come in the profession today?

Blair: We get so many people reach out to us, how do I break in? And it's getting better but it's still a very murky profession to enter. And so, a lot of times if you're extremely green, this is your first job, I'll say go anywhere you can get experience. Go to the large firms, even if you don't want to work at them long-term, go to the training programs where they have the money to spend on you to train you up. Go work for an advisor, even if it's not forever. Don't be shy about realizing that sometimes your first job is just getting two years of experience so that you can get the next job.

The other thing I would say is think hard about what really gives you energy and joy in how you spend your day. Do you want to just tell people who are saving and diligently investing and want to know if they can retire and when? Does that bring you joy and it's just enough of a conversation? Then maybe think about targeting clients in the $1 million to $5 million range. Do you enjoy spending an hour looking through 1,000-page tax return to look for a couple of numbers or reading hundreds of pages of trust documents to figure out if there's any clause in there that can help you make an amendment to do a complicated estate planning? Just think about that. It's one thing to say, "Ah, I wish I had a client with $100 million or $50 million," whatever. But think about first the actual work involved and then think about whether that's how you really want to spend your time. Because I could see how people could be miserable, finally getting what they want and realizing it's not really what they want at all.

What's Next For Blair [1:24:26]

Michael: So what comes next for you on this journey?

Blair: So I haven't brought on a new client this year. I've been just laying low, working on sort of streamlining the way I work with my current clients. I've had a couple new things just pop up recently because an old lead referred somebody to me, and sometimes I just come across people and I'm like, "I have to help this person. This person has to become a client."

I really want to do more writing and I finally think I know what I want to write a book about. And it comes from the fact that I had a client at a quite young age unexpectedly die earlier this year. And I've been helping her family with the administration of her estate. It's going to be a taxable estate. And I've learned a lot about what happens in the aftermath of a death like that. And I think that no matter what level of wealth you have today, administering an estate is an extremely complicated process and more complicated day by day. So I think it's a book that can relate to pretty much everybody about how to get your finances in order, what you should know, what you're not thinking about. Yeah, you have your wills and POAs [Powers Of Attorney] in place, but have you thought about the fact that they might have to call all of your next of kin to get approval for your cremation? Just crazy things that I never thought I would be thinking about, but I think it's very relevant and I've never really known what I wanted to write a book about. And I think I know now. So maybe the fact that I'm saying this publicly will make me do it.

Michael: You are kind of committed now.

Blair: I am and that's good, and my friend, AJ Ayers told me, "You got to go out and say it publicly because then you'll never do it if you don't." So that's what I want to focus on next year in addition to just continuing to work with... That's the beauty of this business is we get to choose who we want to work with. And I have the most amazing relationships with clients and it's such a joy to help them out. And it's a blessing. it's really a blessing to get this point. And so, I just want to continue working with them. I have no desire to scale back from that any time in the near future, but hopefully do a little bit more writing and engaging publicly on some of these topics would be nice.

What Success Means To Blair [1:26:58]

Michael: So as we wrap up, this is a podcast about success and one of the themes that always comes up is just that word, success means very different things to different people. Sometimes it changes for us as we go through the life journey and seasons of life. And so, you now have this wonderfully successful practice, moving into ultra-high net worth at a firm that's doing incredibly well. So all the business stuff seems to be going great. How do you define success for yourself personally at this point?

Blair: So you mentioned Nick Maggiulli's book, "The Wealth Ladder." I just finished that and now I'm reading Morgan Housel's new book, "The Art of Spending" which is a total gem and there's a lot of overlap in those two books that really help me define what I think is success. And it's really the ability to spend your time, your days, your weeks, your months going back to my friend, George Kinder in life planning, the way you want to spend it. And of course, money's involved in that because a lot of times, having control over your time means saving money and getting that independence. But success, to me, is being able to spend your time, your time at work, is it fulfilling? Is it something that gives you energy and joy? Is it something you want to wake up first thing on a Monday morning and do? But also spend your time away from work, whether it's your family or the things that you love to do, your hobbies or whatnot.

That, to me, is success, being able to maximize the minutes that you have on this earth because it's long but it's short. And so, for me, being able to have control and joy over the way I spend my time, which means I think, and for a lot of us, that I have to give a lot less of that time to those algorithms, those platform companies. Because I'm a much happier person when I don't and there's nothing that success in a career can do to stop you from doomscrolling, but I think it really does come down to time.

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

Blair: Thank you so much for having me. It's been an honor.

Michael: Thank you.