My guest on today’s podcast is Caleb Brown. Caleb is the founder of New Planner Recruiting, a recruiting firm that, as the name implies, focuses specifically on hiring newer associate-level financial planners.
What’s unique about Caleb’s recruiting process, though, is the way that he vets prospective financial planners to determine whether they’re likely to be successful in the advisory business in the future, with a strong focus not just on their technical skills, but the initiative and effort that they put into the process of trying to get hired through his recruiting business in the first place. Because the reality is that you can provide education on the book knowledge of financial planning, and train a lot of financial planning skills, but it’s almost impossible to teach someone to have that go-getter kind of attitude that it really takes to succeed as a financial advisor.
In this episode, Caleb talks at length about what issues you should consider in the hiring process for a prospective new advisor, the role of using various types of personal and other assessment tools to evaluate potential hires, what you should – and shouldn’t – expect your new hire to do and bring to the table to make your advisory business more successful, and what the going rate salary is that you have to pay as an advisory firm to get quality talent.
And be certain to listen to the end, where Caleb talks about his tips on how to work through the inevitable difficult times that arise as an entrepreneur, and how an executive coach has helped him to keep his focus.
So whether you’ve been struggling with finding good financial planning talent for your firm and are looking for ideas on how to better identify and screen potential hires, or you’re a prospective financial planner looking for insight about what it takes to get your foot in the door with a good financial planning firm, I hope you enjoy this latest episode of the Financial Advisor Success podcast!
What You’ll Learn In This Podcast Episode
- Why it’s so important to look for new financial advisors with a go-getter attitude, rather than simply focusing on their financial planning skills and knowledge, or college GPA. [11:24]
- What issues you should consider during the hiring process for a prospective new advisor. [11:24]
- How to put yourself in the best position to survive the screening process for a financial planning position. [29:07]
- The role of using various types of personality and other assessment tools to evaluate potential advisor hires. [38:47]
- What you should and shouldn’t expect your new hire to do and bring to the table in the first year or two in working for the advisory firm. [44:39]
- The going rate salary that you should be willing to pay as an advisory firm in order to get quality talent. [52:47]
- How to work through the inevitable difficult times that arise as an entrepreneur. [1:26:04]
- How an executive coach can help you focus and become more effective. [1:26:04]
Resources Featured In This Episode:
- Caleb Brown – New Planner Recruiting
- Rocket Fuel by Gino Wickman
- Financial Planning Association
- Texas Tech Financial Planning
- Paul Brown, Brownstone Advisors
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Full Transcript: How To Properly Vet New Financial Advisors By Hiring For Attitude And Not Skills with Caleb Brown
Michael: Welcome, everyone. Welcome to the 31st episode of the Financial Advisor Success Podcast. My guest on today’s podcast is Caleb Brown. Caleb is the Founder of New Planner Recruiting, a recruiting firm that, as the name implies, focuses specifically on hiring newer associate-level financial planners. What’s unique about Caleb’s business though is the way that he vets prospective financial planners to determine whether they’re likely to be successful in the business in the future. With a strong focus not on their technical skills, but the initiative and effort that they put into the process of trying to get hired through his recruiting business in the first place.
Because the reality is that you can train a lot of financial planning skills, but it’s almost impossible to teach someone to have that go-getter kind of attitude that it really takes to succeed as a financial advisor. So in this episode, Caleb talks at length about what issues you should consider in the hiring process for a prospective new advisor, the role of using various types of personality and other assessment tools to evaluate potential hires. What you should and, frankly, shouldn’t expect your new hire to do and bring to the table to make the business more successful, and what the going rate salary is that you have to pay as an advisory firm to get quality talent these days.
Be certain to listen to the end, where Caleb talks about his own tips on how to work through the inevitable difficult times that arise as an entrepreneur, and how an executive coach has helped him to keep his focus. So with that introduction, I hope you enjoy this episode of the Financial Advisor Success Podcast with Caleb Brown. Welcome, Caleb Brown, to the Financial Advisor Success Podcast.
Caleb: Hey, Michael. Glad to be here.
Michael: I’m excited to have you on the podcast. Because I think one of the biggest single transition points for most advisor careers is when you first decide to hire an associate planner, like a second advisor that’s going to sit second chair next to you. For the first time, you’re not the only advisor who’s interacting with your clients anymore. I know for a lot of advisors, this is really actually somewhat terrifying, because clients pay us a lot of money. We try to deliver good value for that money. But losing even just one valuable client can hurt a lot, which makes it really scary to hire an associate advisor who’s eventually going to start interacting with your clients, and potentially if they do something knuckleheaded, could lose you a client.
But obviously, on the other hand, the reality is we’re all constrained to the same number of hours in a day, in a week, in a year, which means there’s only so many clients any one advisor can handle. Beyond that point, you hit capacity and you stop growing. The only ways you grow from there are you either have to get wealthier clients who pay you more than your current clients, so you can make more money from the same number of clients, or you have to begin to hire people and actually build an advisory business that goes beyond you as an advisor. That’s a tough crossroads, I think, for almost anybody when they’re hitting that transition point, and you have to acknowledge or accept that other advisors are going to start interacting with “your” clients for the future of your business.
Now, Caleb, you actually run a recruiting business, aptly called “New Planner Recruiting.” I suppose for the interest of full disclosure for everyone listening, I should say, we run a business, since I am Caleb’s partner in New Planner Recruiting. But I mean, you’re the one that runs the day-to-day execution of the recruiting business with a four-person team of your own, and hire literally dozens of associate planners every year. So I was excited to have you on, because I think there are few people in the country who are really more qualified to talk about the dynamics of how you hire good associate planners, and evaluate them and vet them, and bring them into your business than you, because you do this for a living.
So as a starting point, why don’t you just tell us a little bit about New Planner Recruiter. I mean, what do you do? What is the business as it exists today?
Caleb: Yeah. Essentially, it’s an outsourced hiring solution for independent financial planning firms nationwide. So a CFP firm owner can call me and say, “Look, I’m thinking about hiring someone. I know it’s time-intensive. I know it takes a specific skillset that I really don’t have. Quite frankly, I just don’t enjoy doing it. Can you handle this for me?” They can, with one phone call, basically, dump everything onto me and my team very similarly to what their clients do to them. Their financial planning, “Hey, we don’t want to do this. We’re smart and educated. But we want to hire a planner and pay them a fee to do this, because they’re frankly going to do a better job.” So our value proposition is very similar.
But just, we’re focused on the… It’s not executive search. So we’re focused on the entry-level CFP types. All of our people are CFPs or are pursuing a Certified Financial Planner designation at some state. Some of them are enrolled in the courses. Some of them have passed the exam and are waiting for the experience. But they all want to work their way up to a lead or senior advisor. Most of them are going to be entering in at the associate planner level, so that zero to five-year. So right now, it’s really just a niche business with really one type of placement in one type of firm.
Michael: So can you talk a little bit more about that type of firm? I mean, you said “independent financial planning firm.” I feel like there’s a couple hundred thousand advisors out there that say, “I’m a financial planner, and I’m either independent because I’m an independent broker dealer, I’m independent because I’m an independent RIA.” Like how do you frame what independent financial planner means in terms of who you work with?
Caleb: Yeah. So most of our people are going to be fee-only or fee-based, and they’re going to be with some sort of an independent broker-dealer. Anywhere from size-wise. Our smallest firm is probably $40 million in assets, about $400,000 in revenue. We help them bring in usually their first hire, like you were talking about at the top of the show. Boy, that’s a fun engagement. I mean, talk about a lot of pressure and a lot of risk on both sides. But that’s very exciting. Then, our biggest firm is probably in the $7 billion range, so different dynamics, different issues there. Just a lot bigger.
But our average client is probably in the $200 million to $500 million range. So they’re growing. They’ve got a nice asset base, anywhere from between $2 million and $5 million. But they’re not big enough to have a bunch of people on staff to do this. They might hire one person or two people every year, and like to be able just to say, “Look, we don’t have to have someone here that we’re paying their health insurance and we’re doing this, and doing a retirement match. We can just call New Planner Recruiting whenever we need them, kind of on-demand,” and that works out for them.
Michael: I’m curious of the larger end, though. Because you mentioned you’ve got larger, multibillion-dollar firms in there. Which frankly, some of those, they do have the size to have a full-time HR person who can post job ads and screen candidates, and do things like that. I’m curious what you find. Like why do large that already can staff the resources to do this still end up hiring you? Is that about how you do the work, how you find the candidates, something else about the engagement?
Caleb: I think a lot of it boils… You’re right. The bigger firms have dedicated non-advisor, sort of HR operation staff. But I think it comes down to two points, and first is our screening process that we developed. So we have a multistage screening process that even these bigger firms… Some of them have it in place. But a lot of times it’s just disjointed like, “Hey, we’re going to give a personality test,” or, “We’re going to have this person interview with this team, and we’re going to take them to lunch.” It’s just a little bit, kind of ad-hoc and shoot from the hip. There’s not a lot of financial planning-specific exercises. I mean, they might give them a case study or have them do an Excel thing. But it’s not all put together.
So we can bring that to the table. So when the candidates deal with us, they’ve got to go through multiple stages to, one, demonstrate their competency, but also, really, at the core of it is to demonstrate effort. That’s what we’re looking for, for people to demonstrate effort. If they can do that and they can even just do reasonably well on some of these assessments, they have a good chance of getting in front of one of our clients. The second piece is, I think, just the sourcing. I mean, it’s tough out there. You and I talk about this a lot. If you read any of the headlines, we just don’t have a lot of people that think this is an exciting career, which gives me nightmares and night sweats, keeps me up at night.
Michael: Running out of people who want to come into the business is not good if your job is hiring people coming into the business.
Caleb: Yeah. I’m on a one-man mission, it seems like, to try to encourage these career-changers and these millennials, and even Gen Z, even the generations after the millennials to try to get them interested in financial planning. So they see it as an exciting and an established, and a reputable profession, much like accounting, law, and medicine. Most of these firms, I mean, they have an admin assistant or operations, an HR person, that they’re paying $50,000 a year to, and that person is posting jobs and doing resumes. But they haven’t been an advisor. They’re not a CFP. That’s one of the benefits that we have. I am a CFP, and I’ve been in the position that we hire for.
Then, pretty much everybody in our team has either been in a firm, has gotten a financial planning education, or is some way and shape or form affiliated with the profession. So it’s not like we’re just recruiting for positions that we don’t know anything about. I think a lot of your sort of generalist HR people, they just have a list of questions and they’re sort of going through. They’re going to administer some tests and things. But they can’t do a nationwide, extensive search like we can. Just because even if they have four or five people, they’ve got other things to do. They’ve got payroll to process for their 100 employees.
Also, too, most of their stuff is going to be inbound. “Hey, we’re going to post a job, and I hope we kind of throw our line out there, and I hope somebody bites.” Whereas our firm, we do some outbound stuff. We’re going to reach out and uncover some rocks, and look for some of those passive candidates in certain markets, in certain instances. Again, your $50,000 HR person, once they get that CFP with five years’ experience on the phone, they’re not really going to know what’s going to be appealing to that person and how to get them to get the interest in their job. At least, that’s our experience.
Why It’s Important To Look For Financial Advisors With A Go-Getter Attitude [11:24]
Michael: So I’m curious how you look at the process of vetting good folks. You said a lot of firms, just they list some job ads, go to some of the popular websites, maybe use a couple of industry sites. You get a bunch of resumes back, you ask a couple of questions, and you pick someone that sounds promising. So what does your evaluation and vetting process look like? Because you’re certainly implying here you do something differently than just field a couple of questions, and kind of decide who’s promising. So what does that vetting process look like for New Planner Recruiting?
Caleb: You got it. So initial contact, we either find a resume or a resume is sent to us. We’ll do a couple-second, probably 20-second review of that. Then, if there’s some characteristics on there… What I look for is really just what have they done in and outside of school or outside of work? What kind of commitment to their career or passion for the profession, their chosen profession, have they demonstrated? If they’ve done that, and they’ve got the education or they’re in the right location, approximate salary range, then we’ll talk to them. So we may get 100 resumes for one job, and we might talk to 10 people, just from sort of the resume cut.
We do look at, like especially for students, grade point average. I think a lot of firm owners are really hung up on that, especially the baby boomer types. They only want a 4.0 GPA. We’ve actually found that that’s not as good a predictor of success as they might think. They don’t like to hear that from me, because it’s an easy thing to screen for. You’re just like, “Hey, look. We want this and above.”
Michael: Right. Just look at the resumes and…
Michael: …chuck all the ones that don’t have a 4.0 or nearly.
Caleb: Let me give you an example of why. Because I know some of the people that are listening, they’re going to get really irritated, because that’s their recruiting process. Would you rather have the 4.0 student who never worked, whose family or someone paid for everything, they got to sleep all day before their exams, they crammed for their exams, they got 100 and scored perfect? Or the person who couldn’t afford to buy any books, had to work from midnight to 6:00 stocking shelves, and was taking out loans and they had a 2.75 GPA? So also, maybe they were a single parent. We’ve had some of those types of people, they’re just… When I talk to them, I can see the difference in somebody that’s maybe just been, “Hey, I’m just focused on getting good grades,” and they don’t have as well-rounded background. The positions that I’m putting them in, this is what I tell them, I’m saying, “Look, I’m putting you into controlled chaos. I don’t care how big the firm is, how structured it is.” So someone who’s been running all over the place and demonstrating just being able to handle this controlled chaos, they tend to do better.
That does not mean somebody with a 4.0 is a bad candidate. That’s not what I’m trying to get across. Some people are going to take it that way. But I’m just saying, that’s not the only factor. So once you get past that… People need to have a minimum level of competency, absolutely. But at the end of the day, guys, what we do as financial planners is not advanced chemistry. It’s not advanced physics or mathematics, or anything like that. It’s not rocket science. It’s pretty straightforward, blocking and tackling, a lot of these basic personal financial issues. Now, as someone’s situation gets more complex, obviously, a higher skill level is necessary. But my thought is if anybody can read and get through a college program, they should be able to handle this.
We have a cognitive piece in our screening. So if someone gets their resume reviewed, they’ll have a talk with one of our recruiters. The way that works is we’ll spend about 15 to 30 minutes on the phone with them. Have they researched the job that they’re looking for? Can they articulate clearly what type of value proposition they’re going to bring? Are they members of FPA? Are they members of NAPFA? Have they been to conferences? Where are they in the CFP process? All those things. Essentially, they have to convince me and my team, or whoever the recruiter is that’s handling that, that they are serious, they’re serious about this.
Because if they’re not, once we start explaining the screening process and probably how much time it’s going to take, they’re going to bail out anyways. So assuming that goes well and they’re excited, and they’re saying, “Yeah. Yeah. Yeah. We want to go forward.” Because it’s not really us on… I mean, we certainly describe the position, “Here’s the benefits. Here’s what’s going on.” But they really have to sell us on… The type of people I’m looking for are similar to me when I was coming out of school. I was not going to be denied entry into the profession. I was not going to be stopped. I say that and I was trying to get an internship in 2001. I was trying to get a full-time job in 2002, and they were not available.
So I got told “no” a lot, but finally just hung in there long enough and someone said, “Man, this guy is probably not the best candidate. But I want the tenacity and just sort of the determination, because I want him in here fighting for my clients.” That ended up working out for him and working out for me. So the tides have changed now. I mean, candidates essentially don’t have to do anything right now. They have to do nothing, exhibit zero effort to get job offers. So it makes what we do a little difficult. Because I just said, we’re over here trying to make them convince us that they’re worthy. Some of the candidates are like, “Well, screw you guys. I’ve got four or five job offers over here and I didn’t have to do anything.”
You know what my answer to that is? “That is fine.” Because if you cannot go through our little screening process and spend the time, and you’re not curious about how you’re going to do, you don’t have the natural curiosity about how you’re going to do on our little exercises, you are not ever going to make it at one of our client firms. You will be annihilated in the first month. So assuming they get into the screening portal, which is tough to do with our firm, they have to do a little mini cognitive assessment. So we call it the “mini CFP exam.” It’s 30 multiple choice questions, five time value of money, and then there’s a couple client essays that they have to respond to in email.
Michael: For anyone who’s wondering, I wrote that mini CFP assessment. I actually wrote it originally for our advisory firm. We were doing hiring at Pinnacle Advisory Group. Then, we adapted it into the recruiting business as well. It’s designed to be hard. It’s designed to be hard. Because the challenge that we found, kind of similar to the point, Caleb, that you are making… If you tend to screen on things like higher grade point average, and people who are reasonable at reasonably good book smarts and memorizing stuff, if you give them basic CFP questions, they’re going to nail most of them. Because if you can get good grades and you’ve been through the CFP coursework, you’ve learned the book knowledge enough that you should be able to do okay.
We had an early version of the exam. It was 30 questions, and everyone got between 26 and 29 of them right. It didn’t really help screen anyone, because they all got approximately similar scores. Basically, the difference between a 26 and a 28 was just whether I happened to ask a question or two that fit their background. Because they were a little more tax-tilted and I asked a few more tax questions, and they got them right. We deliberately made it really hard. I have to apologize in advance for candidates who take it, because it kind of kicks their butt. But I made something where the average score was going to be about a 70, and a lot of people get under 50% of them right.
Now, when we give that assessment tool and someone gets a 90-plus, you know they have real critical thinking skills and have really mastered the material. Because we make the tool deliberately difficult to try to screen out who just has book knowledge, but can’t actually figure out how to apply it, and who actually understands the material to the point that they can apply it to hypothetical client situations.
Caleb: Yeah. That’s exactly right. It is tough and it’s timed. So we’re able to measure, can they manage their time? How do they react under pressure? Do they have a minimum level of competency? Can they write well? Can they formulate response? Again, it’s all client stuff. I mean, it’s a response… The emails that we have, they were questions that you guys had gotten, clients had actually emailed in. So it’s great, and that tells us a lot. If they make it past that, then they will do a… We use Kolbe. I’m Kolbe Certified out of Phoenix, Kolbe Corp. I believe in that, because that’s the conative part of the mind.
Everybody is focused on the affective, which is your personality, and your introversion and extroversion, and then also focused on the cognitive. So you’ll see a lot of firms give a Wonderlic, or give an IQ tests. Again, back to sort of what everybody does and all the psychology folks, their suggestions are, “Look, guys. Just hire the smartest person you can find and just get them in there, and they’ll figure it out.” For most firms and for most industries, that is correct. The people with superior cognitive ability can just do that. However, there does have to be a certain level of training in there. We all know that the RIA space is not the leader in terms of training.
So I always caution firm owners when they just sort of blow out of the gates on, “Well, I found this person who’s a genius.” It was like, “That’s great. They’re going to be able to figure a lot of stuff out. But you need to make sure you’ve got some level of training, not just kind of throwing them out there.” I think most would agree with that. So Kolbe, mini CFP, then we give a little case study. So it’s pretty simple. No small business owner, no stock options, or anything, but just kind of a couple million-dollar retired couple, and see if their retirement plan will work. Do they have enough assets to retire? If not, how are you going to communicate that to them? If they do, how are you going to communicate that to them?
Then, they have to respond to five or six questions that the client, me, asked about their plans. So it’s not only entering data and creating reports. But it’s also extrapolating the important figures out of there and relaying those to the clients. Because again, the people in this business that have success, it’s not the person who has the IRS tax code memorized. That’s not really the person that has success. The person that has success in this business is somebody who can sit down with somebody and take these complex tax issues or whatever and convey them, and get the client to take action. That’s how you’re graded as a planner. This is what I tell all the candidates.
You will be successful if you can develop a skill, or if you have it now or learn it, where you can sit down in front of the Smiths and they don’t know you, and after 30 minutes they’re revealing things to you. They’ve dropped their guard. They’re comfortable with you. They want to pay you a fee. There’s very few people that have that ability. If you do, in our profession, the sky is the limit.
Michael: Yeah. One other thing that I used to use when I was director of financial planning, hiring for Pinnacle, in addition to giving them the assessment exam to kind of evaluate critical thinking skills, I would give them basically a communication test, which was a written exercise. I would give people two or three scenarios to work through. Like, “Your client calls or sends you an email that says, ‘I’ve got such and such a situation.’ Write the email that you would send in response to the client.”
The primary, the one that we would push at them was, “Your client just contacted you. Their mother passed away. They’ve inherited about $300,000. They have a $300,000 mortgage on their $0.5 million home, and they’re wondering if they should use the inheritance to pay off the mortgage.” Just one of those classic like, “How do you explain the concept of return of the portfolio versus the cost of the debt, and the tax deductibility of the mortgage and the tax ability of the portfolio?” We would kind of check through all those technical things.
But the two primary things, actually, that I would watch for when I would give that assessment, number one is, when I say, “Write the email you would write to the client in response to this,” is it actually formatted like proper professional-looking communication? Do you use paragraphs? Does it say “Dear Client,” and end with “Sincerely yours,” or whatever your signature is? Just can they write like a professional? The number one thing that we actually would grade for in that assessment is that the opening of that letter, that email to the client, better start out with, “Dear Client, I’m so sorry to hear that your mother passed away.”
The real thing we were trying to assess for in that was not just, do you have the ability to explain the technical issue of pay off the mortgage or keep the inheritance and invest it? It was, do you have the natural empathy to realize that when someone says, “My mom passed away and trying to figure out what to do with her inheritance,” the first thing you should say is, “I’m really sorry for your loss? Because your mom passed away, and that’s a really sad thing that deserves to be acknowledged before we get into all this technical financial stuff to answer the question that you posed.”
Just to look at someone’s ability to naturally spot those opportunities for empathy and rapport, because that’s really hard to teach. Like if you’re pretty smart in critical thinking, I can teach you how to do a mortgage analysis. If you don’t have the natural relationship skills to realize that when someone says they’re mother passed away that you need to connect with them for a moment about that before you talk about all the technical stuff, that’s much harder to teach people.
Caleb: Absolutely. I agree completely. Another instance is, a lot of times we’ll get resumes from people that say, “I was a fundraiser or something in college, and I had to call rich alumni and try to solicit donations.” Whenever I see something like that on a resume… Because with me it’s almost like every interview is different. Because I’m picking things out and making them prove things, and I put them on the spot, man. We go there. “All right. I’m the alumni. Pitch me.” For some of these candidates, it’s been two, three, four, maybe five years since they’ve done that, and just I’m putting them on the spot to see how they do. That tells you a lot about the person. Then, another one we…
Michael: Can they really drop into that pitch, just like that, because they’ve actually done it over and over again, or not? It gets really clear, really fast, whether they were seriously doing those calls and really trying to solicit the alumni when you say, “Okay. So give me an example of how that conversation goes. Ring, ring. I said ‘hello.’ What do you do next?”
Caleb: Yeah. Another thing too is, more on the personality side, just how humble are they? We had one candidate on the phone we were interviewing, and this person was like the world champion, finalist, or whatever, in ballroom dancing, had that on the very bottom of their resume. We did an initial interview, didn’t ask anything about it, went through the entire screening process. That person never even brought it up. Never even brought it up. I asked her about it. I’m like, “Well, tell me about this.” So instead of blasting, “Hey, I’m so good. I’m doing well,” it’s a little thing, but it tells you a lot about these people and just how to…
That’s what we do in our screening process. We have the time and the infrastructure, and the resources, to put a candidate in a system and just see how they handle it. We just sit back, and we have all these different little data points, that by themselves… Like you traditional firm, “Oh, I heard Caleb Brown say I need to give this and this, and I heard somebody else say I need to give this test,” or something and they just sort of do that. Or, “Man, I’m in love with this candidate, but I know I need to give them something. Okay. I gave them that. The results say they’re horrible, but I’m going to hire them anyways.” There’s a lot of that going on.
But we’re able to sit back there and just watch how quickly they navigate through the system. Is their work client-ready? That’s what I compare these people’s work to, the standard. It’s a high standard. I mean, “If I put you in a firm, could we send this to the client?” If the answer is no, “Here’s what you need to do to improve.” The candidates that we found that, again, have the… It’s all about attitude. It’s like, “Hey, thank you so much for this feedback. I had no idea. What else can I do to be a better candidate?” Versus some of the candidates that we talk to, that’s not their approach.
It’s like, “Why am I having to go through this to get an interview? I don’t really need the feedback. This is kind of silly.” It’s like, “Not a fit. You aren’t a fit. You look great on paper and I’m sure my client would love to interview you, and they probably would hire you, because you can interview quite well. But you are not going to make it long-term.”
How Candidates Can Best Position Themselves For A Financial Planning Position [29:07]
Michael: So can you talk about that a little bit more from maybe the candidate’s end a little? Because I’m sure we have a few folks that are maybe younger and a little earlier in their careers. Of course, we’re basically talking about a whole bunch of our tricks of the assessment process as we go through this. So maybe a few people will have a chance to do a little better as they go through the system. But what is your advice to candidates, people that are coming in and looking for new financial planner opportunities? How does a candidate make themselves better positions to actually get hired and survive the New Planner Recruiting screening process?
Caleb: Yeah. There’s really two types of candidates out there. There’s one that says, “Hey, Caleb. I’m thinking about getting into financial planning,” or, “I’m looking for a job.” “Hey, I’m looking for a job. Can you help me, or what can I do to be a better candidate?” Then, the other type of candidate is, “Hey, Caleb. Here. I’ve researched. Here’s the game plan that I’ve come up with. Here’s what I think I need to be doing. What feedback do you have for me on this, and do I need to be doing anything else?” The latter is the more preferable, I feel like, even though we have a lot of people in the first category and that’s fine. We can help them too.
But it’s like, are you going to invest in your own success? I’ve tried it. I mean, I’ve seen this with my own team and just over my own career too. When I went to my bosses and said, “Hey, I need help with this? Can you help?” and it’s like I was putting it all on them. Versus when these candidates come back and say, “Look, here’s the game plan,” or my team that works with me, “Here’s the problem. But here’s what we’re going to do and here’s our game plan to fix it.” The candidate perspective, “Here’s what I think I should be doing to be a better candidate.” Those people are going to be successful.
We’ve placed them and they’ve done very, very well. They may not have had the best GPA. They might not have done the best on our screening process. But man, just the fact that they’re going there, and they have the awareness. They have the emotional intelligence. If someone has that, and you can screen that out through interviews and some other testing that we may talk about later, but that’s really what we’re looking for. I tell the people all the time, “I don’t need…” I mean, having a CFP, Series 65, 7, some internships, some software knowledge is all really good. But the intangible is where it is. I need commitment to your career.
“Hey, you know what? I’m not going to wait around for someone to tell me that I need to go over here and get my Series 65, because I don’t have to be sponsored and I’m looking at a lot of fee-only firms. I’m going to pay the fee. I’m going to register for it. Hey, I’m going to go over here. I keep hearing about all these personality assessments. I’m going to go get a DISC on myself. I’m going to do the StrengthsFinder. I’m going to go do Kolbe. I’m not going to wait around.” So commitment to their career, passion for their profession. “I’m going to be an FPA member.” I joined the FPA when I was 20 years old in college, and I’m still a member.
When I get people on the phone, I’m like, “Well, I don’t…” It’s just I don’t really relate to that.” It’s like, “If I can do it, and I didn’t have any money either, you can too.” Being a part of the profession, “I’m going to conferences. Hey, I volunteered on the Career Development Committee.” If you’re looking for a job, they’re plentiful right now. But if you’re having trouble, get on the Career Development Committee. All of the job opportunities are going to come through the Career Development directory. Typically, you’re going to get first pick.
Michael: Yeah. Of your local FPA chapter. Join the organization. Join the committee for career development, and just literally get first look at whatever hiring is going on. I guess, if your chapter has one. I know not quite all the chapters have a Career Development Committee. But a lot of them do. So just literally put yourself right next to where all the hiring is happening locally.
Caleb: Yeah. So commitment to the career, passion for the profession. I think, sense of urgency. That’s one thing that I get from my clients all the time, and I see it here in my own business. You can tell pretty quickly when someone has the attitude of, “I have got to get this done right now, or we’re going out of business. We’re going to lose the client, and we’re going out of business.” That’s the type of mentality. That’s the sense of urgency right there. You’re going to face if you’re in a financial planning firm.
The Smiths are heading out to the mountains on Friday and they want to stop by on their way. They’re just calling, “Hey, can we come in just for a quick chat and look at our statement,” or something. Urgency. You’ve got to get your stuff ready. You’ve got to prepare. Not, “Well, no. I mean, we can’t meet with you. It’s going to be next month.” No firm is going to say that to a $4 million client. So sense of urgency, and again just not waiting around for someone. It’s like, “Look, we’d really like to have this done by…” “What’s my deadline?” “Tuesday.” Well, shoot. Have the thing done by Friday or Monday, or whatever it is.
Then, the last one, which is very similar to the sense of urgency is really just taking initiative. Not waiting around for someone to go through some leadership training, or go get an EA, or get another certification. That’s partly on the career thing too. But then, you come back to your supervisor in your firm and say, “Yeah. I thought that we were a little bit weak in sort of the IT stuff. There wasn’t really anybody here, and I was having to do all the computer stuff. So I went and did a little training course at the community college on basic networking.”
Or, “You know what? We’re getting all these tax questions, and I went through the H&R Block Preparers Class, just to kind of get some practice.” Or, “I’m going to go get materials to study for an EA.” That’s what firm owners want. They don’t want to have to go to their people and say, “Hey, you really should think about going to that FPA retreat. You should really think about going to that NAPA National Conference, or that AICPA Conference.” They want their people coming to them and saying, “Here’s what I’d like to go to these places. Here’s how it’s going to add value to the firm and my career.”
Michael: To me, it goes back to that old adage that I always heard and really never appreciated until I’d hired a bunch of people in my businesses over time, and had some not work out. The old saying that you hire for attitude and train for skill. I can teach someone how to do a mortgage analysis, but I can’t teach them to care about the clients and to care about getting the answer right. And to care about getting the answer to the clients in a timely manner, and recognizing that they should show a little empathy that the client’s mother just died. That stuff is so much harder to train for.
Now, you need some level of basic mental capabilities and critical thinking skills. Which is why, even we always use a version of that CFP assessment tool as well. But that first and foremost, it was about trying to find attitude, like people that want to be professionals, are serious about trying to be professionals and develop themselves as such. The ones who really are serious about it, just it pervades everything they do. Even in the interview process with this go-getter attitude, it’s really powerful. I still remember one of my first early associate planner hires was someone that we did a similar thing. We would give them this assessment, and it was timed. You had… I think, back then we gave them two hours to do it.
Because he was interviewing while he was still working somewhere else, he asked to do the assessment on a Friday afternoon, basically, after he got off work. So the first check in his box he was willing to basically blow from 5:00 p.m. until 7:00 p.m. on a Friday afternoon just to apply for the job. So we sent him the thing at 5:00, and he sent it right back at like 6:59 for the, I think it was two hours at the time. I went and I took a look, and he actually did okay, but not great. Like he missed a couple of questions. Like one of the math questions we give is, basically, build a mortgage amortization table in Excel, just to show that you can calculate how a mortgage amortizes down over time.
He didn’t have great Excel skills and didn’t know the numbers well yet. He wasn’t even through his CFP classes, and he didn’t do very well on it. But then, Sunday morning at about 11:00 in the morning, I get another email from him that basically says, “Hey, I know the two-hour thing has already long since passed.” It’s been two days. “But I know I screwed up that mortgage problem. I ran out of time in the two-hour block. That’s why I sent it to you at like one minute before the deadline. But it was still bothering me. So I’ve been working on it for the past couple of hours this Sunday morning, and here it is.”
He sent me an updated version of the spreadsheet that he’d been working on. The irony is that the second one was only slightly better than the first one. He actually still hadn’t entirely figured out how to do it. He just didn’t have the math and the present value, future value, interest, payment stuff. He hadn’t learned any of that yet. So he was really just trying to brute force it. But the sheer attitude that he was so bothered that he didn’t think he’d gotten the right answer for the hypothetical client that he had to spend the rest of his weekend working on it, because it just bothered him so much, that’s who I want to work with.
I can teach him how to do the math problem. It’s hard to make people care that way. So we hired him. He’s since had a fantastic career. He learned his math stuff. He’s very good on his Excel spreadsheets now. But that kind of attitude focus first, and recognizing that you can teach the skills over time later, is pretty powerful.
Caleb: I love it. That’s great. Back to the effort, that’s exactly what he demonstrated.
Various Assessment Tools Used to Evaluate Potential Hires [38:47]
Michael: I’m wondering what else you look for in the process. You had mentioned Kolbe and doing Kolbe tests as well. Some people may not even be familiar with Kolbe. So maybe as a starting point, just can you explain even what the Kolbe personality test is, and how it gets used?
Caleb: Yeah. Let me correct you. It’s actually not a personality test. So this is where a lot of people get this confused. Because there’s really three parts of the mind. You can trace this all the way back to ancient philosophy and Aristotle, and those guys. There’s the affective part of the mind. Just think of the mind is the software. Your brain is the hardware. So there’s three parts of the mind. There’s the affective, which is personality, introversion, extroversion. That’s StrengthsFinder. That’s like Profile XT. That’s like Caliper. There’s literally thousands of them.
Then, there’s the cognitive. Everybody is familiar with that. That’s your just basic intelligence, and the big one for that is Wonderlic. That’s what they give all the quarterback draftees going into the NFL. See how quick can they read defenses and blitzes, and do they have the mental horsepower to make these audibles, learn these offense… You know? Stuff like that. So there’s a place for that. Then, Kolbe. Kolbe measures the conative. So we’ve already talked about the thinking and the feeling. The last part is the doing. That’s the conative. So you could have this brilliant, bright person who is just flaming extrovert, but they may hate details.
They may love putting together processes and procedures. They may hate taking last-minute, uncalculated risks. Not that those are bad or good, or right or wrong. We need to know that so we can get that… I mean, it’s not a good fit if I put somebody in that’s preventative quick-start… Which means they’re going to kind of prevent and be more of a “stick with what works” person, and they want to gather lots and data and details, like most financial planners do. It’s not going to be a good fit if I put them in a position where they’re going to have to make snap-decision judgements on client situations all day long without all the facts.
Even if the office is right next to their apartment, they’re making all this money, they’re eventually going to get burned out. Because they’re going to leave the office just so unsatisfied, and they’re expending so much of their mental energy. That’s what Kolbe is measuring. Really, they’ve, Kolbe Corp. has, spent millions of dollars defending their IP. So if you type in “conative assessments,” there’s really only one of them. Whereas the effective measure folks didn’t really do that, so now it’s just kind of watered down.
Michael: Interesting. So when you look at this from the associate financial planner perspective, what are you looking for? Like are there particular cognitive assessments that work best for hiring into the financial planning business?
Caleb: It all depends on… We have the firm owner or the position, so we have them. There’s an empirical peak to this Kolbe as well. So we use the A and the C, and the RightFit. So we’ll give the firm owner, the supervisor, typically, a Kolbe A, and that’s their natural instincts. We’ll also give them a Kolbe C, which is the supervisors’. What the supervisor thinks this person needs to have and how they need to approach things to succeed in the job, and we create a range. Then, every candidate that comes through, we have them take a Kolbe A, and we match that up against the range that we’ve created to see if that candidate would be a good fit. We get a score on that candidate, A to F.
Michael: Interesting. So if I come to you and I want you to do hiring, you’re not just giving the candidates that you screen a Kolbe. You’re going to give me a Kolbe test, as well as the advisor that’s doing the hiring.
Caleb: Yeah. I guess, I kind of forgot to mention that. So we make the candidates go through a lot of effort, but we also make the firms go through a fair amount of effort too, because this is a boutique operation. We’re very precise. We strive to be precise here and get this stuff right. Partly because mine and your reputation is dependent on it, so we can’t have a lot of bad fits out there. It’s not just kind of like, “Oh, the person has got a good resume, and they kind of did okay on this. Let’s just go…” There is some empirical, some science into this as well, in addition to some art.
So yeah. I have the firms… They have to do an onboarding. Again, it’s very similar to when they onboard a new client of their own. They gather data, they go back and do some analysis, and then they come back and present to the client what they ought to do. That’s exactly what our process is on the recruiting side. So when I explain that to these firm owners, I think they get it. They understand what we do. It’s like, “We’re going to have you onboard. We’re going to learn the culture.” You’re Robert Half or your executive headhunters, they don’t really care about your culture. They don’t really care about that.
All they care about is getting some people in front of you the very first day they’re under contract. Hopefully, one of them will stick and they can close you out, and collect 35%. That’s just not our model. So we have some onboarding, and some of the firm owners… Again, I’ve had firm owners that say, “Screw you, Caleb. I’m not going through all this.” I was like, “Okay. Well, that’s fine. This is our process.” Because you know what? If a client walked into your door and said, “What stock do I buy, what investment do I buy, or when can I retire?” there’s no way you’d give them an answer. You would make them go through a process.
If you won’t treat me with the same and you don’t value that, not a fit. Okay? So the point here is we do not take every candidate that contacts us. We actually take very few. We do not take every firm that contacts us. We actually take very few.
What You Should And Shouldn’t Expect A New Hire To Do [44:39]
Michael: Because there’s an attitude piece around the firm as well. Right? None of us like working with financial planning clients that aren’t actually really serious about doing the planning. Because they may pay you some dollars. But then, they obviously don’t take your advice, and then it doesn’t work out well. Then, they mostly blame you for being a lousy advisor. I’m like, “Well, no. I gave you the guidance about what to do. You didn’t do any of it.” Eventually, it gets so frustrating we just don’t like working with clients that we know aren’t realistically going to take the advice that we know works.
There are certainly striking parallels to that in the recruiting and consulting businesses as well. That if you’re not ready to do some level of introspection around what your own personal strengths and skill sets are, to try to figure out who actually should you hire that’s a good complement for you that will make your business more successful… If you’re not actually serious about going through that process, the odds even that you get a hire that’s going to be a good fit is pretty much random luck.
I mean, maybe you’ll stumble on someone that turns out to be a good fit. But if you’re not even sure what you want the person to do and you don’t know where your own weak spots are, it’s pretty hard to find someone that’s going to make your business more successful.
Caleb: Absolutely. Yeah. Just back on the Kolbe for a minute, I get clients all the time, firms that contact us and say, “Caleb, what Kolbe should we be looking for as the best associate planner?” I have to explain to them, “Look, I hate giving the typical financial planner answer of ‘it depends,’ but it really does. It depends on what you need. You’re going to be actually setting the parameters for us to screen them. But in the smaller firms, what you have is an entrepreneur at the head, so a long quick-start. Sometimes long on the fact finder, and long means they want to initiate. So they want to gather data. They want to take a lot of uncalculated risks, innovating, iterating, that type of thing. They’re pretty low on follow-through, which is development, and processes and procedures.
So a lot of times for the right-hand man or woman, the second chair, they’re shooting for somebody who is lower on quick-start than they are, but higher on the follow-through and probably is equal or higher on the fact finder. Just because they know that that way they’re detail-oriented, they’re process-oriented, and they’re not going to be wanting to change things up all the time. That’s a good complement to a firm owner, because a lot of times what you have is if you have all of these long quick-starts, just think of a Silicon Valley. Everybody wants to change things all the time, but no one is ever actually getting the work done. Kolbe is a delicate tool. I mean, it’s powerful, but you need to be careful on what you’re doing.
I get a lot of firms that say, “Well, I just want someone that’s a long quick-start like me.” I say, “Oh, really. Oh, okay. You left your firm 15 years ago and you started your own firm. You just told me you didn’t want someone to leave your firm and start their own. You sure you want someone like you?” “Oh, no, no, no, no, no. I want them to stay the whole time. I don’t ever want them to leave.” I’m like, “Okay. Hold on a second here.” The more entrepreneurial and the longer…” That just means people are willing to take a lot more risk and stuff.
So it’s like, “Yeah. I’ll go over here and I’ll go with this robo-advisor. I’ll try that out.” You’ve got to be careful what you ask for.
Michael: There’s an important point there that I think is missed a lot. That the number of firms I see that say, “I just wish I could get people that were more entrepreneurial and more independent thinkers like I am, because it made the business work for me and I wish I could hire more of them…” And the number times I had to be like, “You realize you don’t work for anyone? You’re not an employee. You ever thought about why?” “Well, because I like to do my own thing. I don’t like to take directions from my boss. That’s why I decided to be my own boss and make my own advisory firm.”
It’s like, “Right. So why do you think the mini-you version of you would be any more happy with the job than the one that you didn’t take for yourself? Because you went out on your own, because you were independent and entrepreneurial, and that’s what happens.” Just recognizing it’s split. Like if you really want a hardcore, independent-minding entrepreneur, they’re probably going to have to be your partner and not your employee. Because if they’re that entrepreneurially-driven, they’re not going to be satisfied with anything less than ownership. The same way that you felt when you left your employee job and went out to be independent as an entrepreneur.
So there’s a trade-off there that if you want people that are going to be happy in employee roles and be a part of the business, but not try to go out and make their own, that means they may be a little bit less entrepreneurial. That’s okay, because you can be the entrepreneur in your business, even more effective when you let go of some of the other stuff. I’ve been reading a book lately called “Rocket Fuel”. It’s a book by some business consultants, Gino Wickman and Mark Winters. The basic thesis of the book is that most really successful businesses actually work not with individual leaders, but with pairs. One who’s a visionary, and the other one who is what they call the “integrator.” That’s basically the, get the stuff actually done behind the scenes to make sure the business runs.
So like everybody knows Walt Disney. Walt was actually a horrible business owner, and repeatedly ran the business into the ground. His brother, Roy, was the one that actually figured out how to turn the thing into a business and made it into the empire that it is. Not to take away from Walt. Roy wouldn’t have had anything to build if Walt hadn’t set this vision. But it took a number two support person to be able to make the vision of the visionary come to life. What that means for a lot of entrepreneurs, you don’t need more mini-entrepreneurs in your business. You need integrators and executors who can help take your vision and put it into action, so that you can then iterate more on your vision.
Caleb: So the reality of most of these, every firm that contacts me and, again, this is our business model, but they are overwhelmed with clients. I mean, they’re drowning in clients. What most of them need is, “I just need someone to get in here, and take some of these clients off of me, that I can work with and I can train, and they can and they can just do all this time-consuming stuff that is financial planning.” For that type of role, you want more like the Kolbe M.O. the strategic planner type, the longer preventative quick-start, and the longer follow-through and fact finder.
That works really well if you have a lot of those people surrounding the primary rainmaker or the entrepreneur. Now, where we get into some muddying of the waters is, “Well, I want about… People that are preventative quick-starts, they can’t bring in any business. They’re horrible at business development. If I retire, what’s going to happen? I want them to start bringing in business to cover their salary. So I need to go out here and hire…” It’s like, “Well, hold on a second here. I mean, just because they’re introverted…”
This is one I get all the time, “I don’t want any introverts. They suck. They can’t bring in any business. They can’t do anything.” It’s like, “You just told me 10 minutes ago that your business is swamped with clients. Why are you worried about bringing in business right now?” One, you’re contradicting yourself. But two, just because you’re an introvert and you’re preventative, that green bar is not accommodating or initiating, that does not mean you cannot be successful as a business owner or a business developer. It just means you have a different style, approach, and strategy. That’s all it means.
Instead the VP of Sales blasting into a marketing event or networking event and talking to all 200 people, it’s like, “No. I’m just going to focus on this little target over here. I’m going to develop deep, meaningful relationships with these people. You know what? It may take them a year to refer somebody. But when they do, it’s going to be good and it’s going to work out.”
The Going Rate Salary In Order To Get Quality Talent [52:47]
Michael: I just look at this from my own perspective. You give me any of those personality tests, I’m an extremely high-scoring introvert. Notwithstanding the fact that I do a lot of public speaking. Like I do a lot of public speaking. Then, I’ve got to hang out in my room for an hour at the end of the evening and just recharge. Because as much as I enjoy a lot of parts of interacting with conferences, I’m an introvert and it doesn’t give me energy. It kind of uses the energy that I then have to rest and recharge, and regain.
You put me through a Kolbe and no great surprise, I score like a 9 out of 10 on fact finding as my primary driver. I score a three in quick-start. I’m an introverted, low quick-start that’s a serial entrepreneur and made a whole bunch of businesses. But I don’t make them like other people do. Right? Like it’s not that I can’t bring in business and grow it. It’s that I do it differently, and I love cold-calling and cold-approach talks, and all of those things that a lot of my introverted advisor friends thrive on. We grow and develop businesses different.
So what does it take then for hiring this kind of talent? You do the hiring for firms all over the country. You see job offers that go out all over the country. So from your perspective on the ground, what is the going rate at this point for good associate financial planners? If I’m a firm owner, what realistically do I need to be prepared to offer and pay for if I want to get some good talent in the door?
Caleb: Yeah. Comp and benefits are certainly an important part of the equation. But I really think it comes back to more of the intangibles. I mean, that’s what the candidates with high degrees of emotional intelligence have. They want to know, has the firm been growing in the last few years, and what its future predicted growth or projected growth rate is. Most of the firms we work with are growing anywhere from 10% to 30% a year. So they’re bringing in a lot of clients, a lot of assets. Hence, why they need to call us and hire people.
Cutting edge technology, that’s becoming more of a table stake, though. Just because, now a $40 million firm can essentially get a lot of the same technology a $1 billion firm can. So that’s kind of evened the playing field out.
Michael: I think it’s worth making a note on that, about just how the technology you use in your firm impacts your ability to hire. One of the most common concerns I actually hear these days from candidates that are looking at prospective jobs is, when they hit financial planning firms that either don’t use financial planning software, or they use outdated tools that aren’t very popular anymore, or they’ve built all their own Excel spreadsheets to do their stuff… I’ve had a lot of conversations with the candidates that basically say, “I’m afraid if I take the job with this advisory firm that built their own financial planning spreadsheets, it’s going to hurt my career or future job options.”
“Because if I ever have to leave the firm, I have no experience in any recognized financial planning software.” I don’t think a lot of firms, necessarily, have thought about that reality. That when a lot of young people are coming in and they’re trying to assess, even if they think in good faith they’re going to stay with the firm, we all know that it might not work out. When you’re not using standard industry tools, it actually puts you at a detriment for particularly the most ambitious and upwardly mobile kinds of talent that you would want. Because they’re actually concerned that they’re not going to learn productive job skills in your firm if there are not transferable job skills in your firm, if you’re using your own proprietary tools and not some industry-standard software.
Caleb: Yeah. I ran into a candidate… Well, we get them all the time. But just recently, that basically was sharing, “Look, somebody developed these spreadsheets or these planning reports 30 years ago. Other than just kind of minor tax updates and things, we haven’t changed them.” I mean, that is not what the top candidates are looking for, and that’s not going to get… What I tell firms is, “Look…” Because once someone has been doing something for a long time, it’s just human nature. You’re not really going to change. So getting firm owners to change, I think, is very difficult, just like getting clients to change their behavior.
What I’ve found is, look, it’s fine. You don’t have to change. But do not expect the number one draft pick. Do not expect the A-plus player. Because I can get you somebody that’s a B-minus player, C-plus player, and they’re going to do great. You may not want them. So you have to have a compelling opportunity. So technology, growing firm, collaborative culture, someone that’s going to send you out to these conferences and say, “Come back with four or five ideas on new software and new technology we can use, and new client strategies we can implement.” Not like, “Oh, no, no. Don’t bring these ideas back, because we’ve kind of got a good thing going here. We don’t want to change anything.”
So that, and then the comp and benefit piece, I mean, yeah. It’s there. But again, I think even before that, it’s the candidates that we work with, they know what they don’t know. So, “I need somebody to teach me how to do this stuff that you’re doing. Yeah. I’ve been in this firm over here for three years, but it was a crappy firm. They didn’t do good planning. So I know you put you wanted three years on the job description. Well, I’ve been in the business three years, but really I don’t think I have three years of experience, and I’m being up front with that.”
“I need you to teach me how you do it, because you’re doing it right. If you’ll mentor me and you will let me get in here and do this grunt work, and let me sit in some of the client meetings, and present some of this stuff.” That’s what these people are looking for, above comp and benefits.
Michael: Now, what about the comp and benefits itself, though? Is there some going rate at this point? Like if you want to get a reasonable associate planner, you’ve got to be ready to pay $40,000 or $50,000, or $60,000 or $70,000 or… What kinds of offers are you seeing that actually capture people. Or if they vary, what makes them vary, like what are the factors?
Caleb: Yeah. A nationwide average for a new college grad is about $50,000. So that’s including all size firms, expensive ZIP Codes, non-expensive ZIP Codes. So about $50,000 for that, plus some bonus and some health insurance, and then a retirement plan. Usually, a bonus is between 10% and 20% of whatever their base salary is.
Michael: So they can get all in to about $55,000 or $60,000, because the base salary is $50,000?
Caleb: That’s right. Again, some of your lower cost of living people will be lower than that. I’ve seen people get in bidding wars in some of these higher cost of living. A new grad is $65,000. I’m kind of scratching. I’m like, “Wait a minute. Where was that when I was trying to get a job? I had to pay somebody to get hired.” So for someone that’s maybe been out a couple years, probably $60,000 is kind of base. Somebody that’s a CFP, so they’ve been out three years, they could be 25, passed the exam when they were 22… They could be 24 or 25. That’s about $70,000 to $75,000 is kind of the minimum, at least in higher cost of living areas, like your San Francisco, your D.C., your New York City. Plus about another 10% to 20% in bonus, and then health.
Michael: These are… I mean, what are the qualifications for someone to get a number like that? That’s an undergrad degree? That’s an undergrad degree with a couple of financial planning classes? Is that, they’re done with their CFP and have the marks? What does it take to actually get that number? Because I’m sure there are a few people that are thinking back to what their starting salary was with a bachelor degree and thinking, “You’re going to pay how much for a new grad these days?”
Caleb: Yeah. Well, I’m giving you the hierarchy. So $50,000 for a new college grad. Someone who’s been out in the business for two or three years, maybe has passed their exam, they’re probably going to be in the $60,000 to $65,000, maybe $70,000 range, again depending on where they are. So just think like, here are the bands, 50, 50 to 60, and then like 60 to 70. That’s where the CFPs are going to be, in that $70,000 range, at least in the higher… I mean, I had a CFP in Indiana that contacted me, and she was making like $48,000 a year. That was one of the reasons why she reached out to me. There were others.
Because again, if a candidate reaches out to me and says, “Caleb, look, I’m making $63,000 over here. Man, I saw one of your job postings, and I’m calling you. Do you think you can get me $65,000, $66,000, $70,000?” no dice. No dice. A candidate leads with that… Because again, if they’re going to come work for you for another $3,000 or $4,000, somebody else is going to offer them $3,000 or $4,000 2 years from now, and they’re going to take it. That goes back to our attitude thing, and that’s not a good way to hire.
So I mean, just think of it this way. For a CFP, so this could be someone as young as 25 or 24… Because right now, if you pass the exam when you’re 22 and you get in an apprenticeship model, you’re 24 years old, you have a CFP and two years of experience, you could be making $70,000, $75,000, depending on what market and what size firm you’re going to.
Michael: Does it get noticeably lower when you get to lower cost of living areas? You mentioned someone in Indiana, and some parts of the country are even lower cost of living. Is $40,000 to $45,000 or $35,000 to $45,000 still fair in some lower cost of living areas? Or how low do you see it get?
Caleb: No candidate is going to work for less than $3,000 a month. $36,000 is probably going to be the rock bottom. Tennessee, Alabama, I’ve seen some of that stuff pop up, while firms contact me and I’ll ask them, “What do you plan on paying this person?” They’re like, “Well, $31,000.” I’m like, “I’m sorry. I don’t think I can get anybody interested in that.” Sometimes they work with us and they have to adjust their comp. But sometimes they don’t, because they don’t want to pay anymore.
Again, that’s back to how I screen the firms. If a firm contacts me and is like, “Man…” I’m a small business owner. I’m all about maximizing profitability. But if you’re going into it like, “I just want to pay the person as least as possible,” that is not the attitude that we’re looking for in a firm owner. The firm owners that I’m looking for and I want to work with, and we’ve had success, and who our clients are, are the people who are like, “Look, I’m growing. I’m making a good income. I’ve put in the time. I busted my butt. I’ve done this and built this. Now it’s up to me to bring in the next generation, so I can have a better quality of life. I can do this. I’m tired of working.”
I mean, I get this all the time, “Caleb, I’m just tired of working so much, tired of working as hard. I want to get somebody else in here. I want to pay… What I’ll do is I’ll take these salary surveys or I’ll take whatever you say. Give me a couple numbers and we’ll average that, and we’ll pay 20% more or something.” That’s the type of people that I’m looking for. “We’re going to pay in the top quartile, or something. But also, we’re going to give them training and mentoring. Or maybe we’re not going to pay top dollar, but I’m going to pour everything I have into this candidate in their time here. So they’re going to know how to do everything in our firm in 18 months.” I mean, that is a compelling opportunity that we can get people excited about.
Michael: Again, I think it’s important to note, I hear so many firms that they don’t want to hire any of these people, because they’re not bringing revenue. And that you have to remember, if you’re in this position where you’re hitting your capacity and you’ve got this limit in your business, the path forward is not hiring necessarily other advisors who are going to bring books of business. The path forward is hiring an associate advisor, and transitioning your clients to them so you have capacity to bring in more business. Because, A, you’re good at it, since you got the business to where it is and, B, you own it. So you have a good incentive to keep growing the business.
Trying to bring in people that have books of business already and bring revenue, and want to be employees often isn’t realistic. If they were that good at bringing in people, they wouldn’t want to be your employee usually. Or if they are, they’re going to negotiate a deal that looks more like they get all their client revenue anyways, and you’re just their back-office platform. You can run a back-office platform business, but basically now you’re turning your advisory firm into a glorified temp for independent advisors who happen to affiliate with you. So at least know if that’s the business you want to build, if that’s the road that you’re going to go down.
But otherwise, it’s not about bringing in advisors that bring revenue. It’s about bringing in advisors that can create capacity for you, so that you can go generate revenue. Because that’s what you are good at as the business owner, to get it to the point of capacity. That’s frankly what benefits you the most financially, because you’re the business owner and you benefit from the business getting bigger from all those clients very directly.
Caleb: I think a lot of times, they’re just scared of taking on the extra cost. What I would say to that is if you’re growing, hiring is always more scary than it really turns out to be.
Michael: Ultimately, it still just keeps coming back to you are the one that tends to drive making the business bigger. So do the things that let you be more productive in making your business bigger. To switch tracks a little bit, I’m curious about your own story of what brought you into the financial planning world. You said you joined the FPA when you were 20 and still in college. So were your parents in financial planning, and you just always had this vision that you were going to be a financial planner and go down this road? Or how did you arrive at the point of being a 20-year-old that joined the FPA?
Caleb: Yeah. I was from Texas originally, and I went to Texas Tech to go get a finance degree and was over there for two years, and absolutely hated it. And by stroke of luck, happened to meet the department head of the financial planning program at a university I was attending and wasn’t even aware of it, because it wasn’t in the business program, and switched my major shortly after that. I looked around… I knew I was in the right place, remember this is the late ’90s, early 2000s, when I was in my first class and I looked to the person to the left of me, and I said, “Who are you? What’s your story?” “Oh, I’m from Denver, Colorado and my parents are financial planners.”
I’m like, “Why did they send you here?” “Well, this is the best program.” I looked to the right, a bunch of people in there had that story. I was like, “Okay. I think I’m in the right place,” and I just happened to fall into it. But that’s what everybody did. That was kind of a thing to complete. It’s like, “You’re over here. We’re serious about the profession. You’re going to join the student… We strongly suggest you join the student chapter of the FPA and become a student member.” I think at that point it was like $30 a year, $25 a year or something.
So when I get these people that say… I think it’s maybe $50 now or something. When they say they can’t afford it, I’m just like, “Really?” I mean, that’s a couple Starbucks drinks right there. You burn through that easy. Then, I started my career in California in the Bay Area and did a four-month internship out there, a very good experience. It was a nightmare trying to get the internship. I had to get an internship to graduate. So now, a lot of the programs have said, “Well, an internship is voluntary or whatever,” or they’re removing the requirement altogether. If I didn’t get an internship, I didn’t graduate. I had to stay another year. So the pressure was on.
This is right after the 9/11 attacks. So it’s like, I’m calling firms up and they’re saying, “Caleb, we love what you sent. We love your stuff. But our revenue is down 30%. We’re not going to bring you on, even if it’s $10 an hour. We’re not going to bring you on, man.” But I was finally able to connect with Norm Boone in San Francisco, and I was looking for a place. I said, “You know what? Even if my internship sucks, I want to be in a good place that I can have a fun summer in,” and San Francisco was a good fit. I had a cousin that lived in Berkeley, and thought I’d get to stay with her.
But anyways, Norm said, “Look, I’m not going to hire you. I’ve already committed to someone,” and that someone happened to be Sabrina Lowell, who now is the COO of the firm. So that was a real good choice on Norm’s part. So I lost out to Sabrina. But he said, “I like what you sent. I don’t know you. We’ve only spoken by email. I like what you sent. I like the follow-up. Here’s the people in my study group. Here are their names and numbers. Call them, use my name.” One of them was Larry Ginsberg. One of them was Greg Friedman. I mean, these are all big players out there.
Long story short, I ended up getting an internship with Larry and it was a good experience, and got to know Greg and a lot of those people out there. Then, went back and spoke, and keep speaking and attending the FPA NorCal Conference. But that was great. I came back and finished my last semester, and then it’s like, “Okay. What do I do now? I’ve got to get a job.” The market still is tanked. I’m trying to convince somebody to pay me a salary, and I have no book of business. I have a good education, but very little tangible value-add to this person. So I just started networking, and contacted all the people that came and spoke when I was a student.
I connected with one of the past presidents of the FPA of Dallas-Fort Worth and he gave me some contacts. I went on some interviews. Really, I wasn’t liking what I was getting and I started getting desperate, and kind of started hearing what I wanted to hear, and I was calling him. He said, “Man, be careful that you’re not hearing what you want to hear.” Then, after I guess just kind of, I don’t know if he felt sorry for me or just hearing my agony, he said, “You know what? I just started my firm. But if you can hold off until later this year, there might be an opportunity here.” So I got really excited about that.
I decided to stay where I was living in Texas and study for the CFP exam, and then get that out of the way, and then look at joining that firm. But again, to make another long story really short, I ended up getting a job with him. The reason why I did, because I was not the best candidate… There were like two or three other people that I was going head to head against from my same program. But I found out through our interviews that he was using, at that point it was called “NaviPlan,” now “Navisens Software.” I was living in Lubbock, Texas at the time. The firm was in Dallas and that’s where I’m from.
I went to the website to download a free 30-day trial. I got the free 30-day trial just to kind of play around with some stuff, so I could go back to him and say, “Look, I’m ready to hit the ground running on this NaviPlan.” I found out there was a two-day training course in Dallas. They were coming down from Canada. They were going to do their 2-day training course, $250 a day. It was going to cost me $500. So I pulled out… I hope Dave Ramsey never listens to this. But I had to pull out my credit card and put $500 on it.
Took a couple days off work, drove down there, went to the training class. I had no idea what I was doing. I was the youngest one in there by 20 years. But I saw a lot of, the person I was interviewing with, Brian was his name, his colleagues. Word got back to him that I attended this software training program without having any job offer or any guarantee, or anything, and he said, “Let’s do it. I’m hiring you. He told me later, he said, “Look, you were not the best candidate. You were not the best candidate, but no one else took that initiative.”
I knew I had to take that initiative, because I knew I wasn’t the best candidate. So I had to really work on it and just scrapping, and just kind of the effort, demonstrating effort, and joined him. He was 30 years old. I was 23 at the time. I mean, we had less than 10 clients and not a lot of assets. He basically took out a personal line of credit, personally guaranteed, to pay me a couple grand a month to run the business and do most of the stuff while he brought in the clients. That worked. I mean, I was there five and a half years. Then, my wife wanted to get a Ph.D. so we moved to Florida.
Michael: That’s a heck of a leap you took. I guess it makes the point again of you hiring associate planners so that they can do the integrating work in the firm, so that you can go get more business and generate more revenue to pay for it. That’s how it’s done when it works well. So how long were you in that firm? How long did you go down that road?
Caleb: I was there five and a half years. I think when I left we had about 50 clients, a little over $50 million in assets or something like that. So I was there. I helped… I mean, I remember bringing on the assets $400,000 or $500,000 at a time. I know we’ve talked about this before, but maybe for everybody else, is I was 23, he was 30, all our clients were in their 30s and 40s. We had a couple people in their 60s. No one was withdrawing from their portfolio yet. So all this like XY Planning and stuff, we were doing that a long time ago, and we charged a little differently.
We weren’t doing the monthly retainer. But what we did is we went around to all these firms in Dallas that had these $1 million, $500,000 minimums and said, “Send us the people that don’t fit your minimum.” So what we ended out with was all these 30-year-old doctors, 32, 34-year-old doctors that had like $200,000 or $300,000 in income and they also had $150,000 in student loans, and these established firms in Dallas could manage $1 million and charge 1%. So they said, “Forget it. We don’t want to work with you.” So they referred them to us, and that worked out.
Michael: I still say a lot to newer advisors that are getting started and trying to figure out where do they go, how do they get going, what should they do to get some of their first clients going, and I tell them, to put it kindly, “Take the cast-offs from the other firms in your area.” There are already plenty of experienced advisors out there who are talking to people that would be great prospects for you. They just don’t have the time and the inclination to do this.
If you would just reach out to them and say, “Hey, I know you feel bad when you have to turn people away that don’t meet your minimums. Well, I serve people that don’t meet your minimums. They may not be great clients to you, but they’re great clients to me and I’m going to serve them really well. I’d love you just to keep me in mind if this person isn’t a good fit for you.” You can get a lot of business that way from other advisors, by working with the people that they don’t work with.
Caleb: At least, can I just add one thing? I mean, I think that philosophy probably won’t work as well now as it did in the past. Because what I’m seeing a lot now is, as firms have gotten bigger, they’re saying, “Wait a minute here. Hold on a second here. This doctor, I’ve got two ortho surgeons, or an ortho and an OB/GYN, combined income is $400,000 a year. They’ve got $250,000 in debt. But at $400,000 a year, if we can keep their spending under control, it’s not going to be a long time before they’re a $1 million client. So let’s get that business.”
I think, you see it all the time, merging affluent divisions, “We’re going to charge a lower fee and try to turn them into the next generation.” But it’s great, because they’re hiring associate planners to handle those people. So it’s paying it forward and it’s working out. But I think for your solo, sort of random hanging shingle person, it’s going to be hard to get those people to send the referrals.
Michael: Yeah. You’ll probably have to knock on more doors than you had to in the past. Very true. A lot of firms are starting to insource this now. Although, I still see some where it’s like, “Hey, we work with our affluent retirees. They move good dollars. It works for our firm. Ten thousand baby boomers a day are still turning 62 for many years to come.” They’re like, “We’re hanging out there. We’re not taking the people that aren’t a fit.” As you look forward from here, it strikes me that there are a lot of parallels between what you do in a recruiting business, and what the advisors that you now serve do in their businesses, because you start out doing everything.
We do all the advising and everything else, and all the back office for our clients, and you have to do the same thing in recruiting. As the business grows and you start hiring associate planners in New Planner Recruiting, associate recruiters, the team starts to build out. So I’m wondering if you can just talk from your perspective, as the business owner, as the founder. What was it like when you launched the business and what does it look like now? How has that evolution been for you, as opposed to the advisors that you work with?
Caleb: Yeah. When I first started, it was scary. I didn’t know if the concept was going to work. I had people telling me I was an idiot, and I had a few people telling me they thought it was a good idea, and so I just plowed ahead with it. But I had to do everything. I mean, I had to learn a lot. Before that, I was really more of an employee situation, like at the other firm. Even though I was involved and everything, I wasn’t the owner. So it was a good exercise for me, just getting all of the documents set up and all of the financials, and then coming up with a marketing plan and all this type of stuff. It was a lot of fun, a lot of work, and I was having to do…
Recruiting, a lot like financial planning, is just hard work. I mean, it’s just time-intensive, hard work. Again, we’re not doing rocket science. This is not advanced calculus. It’s just trying to understand these people, and deal with their emotions and their temperament. That’s difficult stuff, but in a different way. But just, I having to find the people, place the people, screen the people, bring in the business all on my own. After a couple years of that, I’m like, “Look, I’m making some money, but I want to be able to touch more people.”
The whole reason that I really wanted to start the recruiting business is because when I was at the financial planning firm, we had 50 clients and they were awesome. I knew all their kids. I’d been to all their businesses. I’d been to their homes. A lot of times, I had their addresses memorized, because I’d dealt with them so much. I mean, I was engrained in these people’s lives, which is very sticky and why they had no problem paying us. But I was only able to touch and help 50 people. I said, “That’s good, but that’s not good enough.”
So the recruiting business, now I’m able to help three groups of people, three distinct groups. One is firm owners get a new quality hire, help them grow their business, help them do whatever they want, find a successor, play more golf, whatever it is. I’m able to help job seekers get into this profession, because it’s so rewarding and it’s the best thing out there. I’ve never done anything else. I don’t have anything to compare it to. It’s the best thing out there. I don’t need to do anything else. Then, eventually, the more people, the candidates that I can get placed and the more firms I can help, the more Americans will have access to financial planning. That’s an exponential number. I’m not going to be able to measure that.
So that is really exciting, and that’s what gets me up and keeps me trying to move this needle on this profession. So when I was doing it by myself, and I’m only able to do not that many placements a year, I made the decision, “Look, I need to hire someone to free me up to do all these lower-level tasks that I shouldn’t be dealing with. I should be out there getting business and talking to firms about why they should use us, and also about the candidates that we presented, “Here’s why they’re a good fit, here’s why they’re not,” because I’m good at that and I realized I was good at that.
I had firm owners telling me, they said, “This is a neat thing that you started up and a skill that you’ve developed, so let’s capitalize on that.” That’s something I’ve always set out to be is, in job security it’s like try to be a subject matter expert at something. So if you’re a planner out there, a planner candidate, maybe it’s college planning, you just came out of school, FAFSA, student loans, 529 plans, something, because you come out saying, “Look, I’m an investment expert,” I’m sorry, that’s not going to get you anywhere. So everybody is an investment expert.
So subject matter expert, and then I made my first hire… Let’s see. Maybe that was ’11. It was a remote, sort of stay-at-home mom, part-time thing. She was doing some research for me. Then, when I moved the office here, when my wife got the job at University of Georgia and we moved headquarters to Athens, Georgia where we are now, I hired a guy out of the CFP program. He was a sophomore and he worked here for almost two years, and he freed me up immensely. I had to train him. I didn’t have to pay him a whole lot. He loved the hours and loved the flexibility. I was able to focus and do the things I wanted to, and it was just so empowering.
I was still having to do everything and I said, “You know what? This is going to continue to work, but I want more. Because not only do I want to help more people, I want to have some sort of business that lasts beyond me and is bigger than me. You notice we didn’t name the firm Caleb and Michael Recruiting, or Caleb Brown Recruiting Services. That’s not what we’re about, because it’s not about me. But the challenge is, if I’m the one that’s out there and everybody knows me, it can quickly become about me. I see the challenges that these firm owners have now that I’m on the other side, and I’m very appreciate of this experience.
Because someone who’s built their firm from zero and now they’re successful, I know why they don’t want to retire. It is their identity. Just look at Michael Jordon. That’s why he couldn’t retire. Look at Brett Favre. It’s their identity. I’m getting that now. Because to build the business up, it’s got to be about you. So my goal is with this team that I have now is developing them, dump everything I know into them so I can move into more managing the recruiting business versus being the recruiter. Because I think that’s where I can help take the firm to the next level, because I can’t do everything. I can’t work with all the clients. I can’t interview all the candidates.
I tell you, Michael, there have been days where I’m like, “Oh, man. I’m just going to do this.” And I have to tell myself, “No. Don’t do it. Let them do it.” Because where is it going to stop? If you try to get back in and take this over, did they something that you probably could’ve said? Did they say something differently? Yeah. But it’s okay. It’s okay. So there’s that control issue and that identity issue. I’m having to go through the same thing and I’m less than 10 years into this thing. So I get it for these people that have been doing it for 40 years.
Michael: What does your typical day or maybe week look like for you at this point? Just as someone that manages a team of four people, and running a successful and growing business, how do you manage your time through the day and the week?
Caleb: I’ll just make a note here, because I think this is an important connotation, but managing four people, none of them are in this home office. They’re all spread out. I’ve got a…
Michael: So all of your staff is virtual?
Caleb: All of them are virtual. Actually, two of them, I haven’t ever met. I hired them virtually over video and that type of stuff. So managing people in general is a challenge. Managing people virtually is another challenge. Managing people you’ve never met really in person, that’s another level of challenge, and I’m still figuring it out and working on it. But it’s a lot of fun, because the way we work is people are going to have to work. I mean, if I can let them work remotely, I have a whole bigger… I just have a much wider swathe of candidates to choose from.
But my day to day is, really, I’m focused on two things, building the brand, protecting the brand… Really, three. Business development, bringing in clients and getting them excited about what we’re doing and telling them the story, and making sure our clients are happy. So client satisfaction, and then really kind of quality control. I do some final interviews to make sure that the people that are coming through can meet our clients’ expectations. Part of it too is I like getting on the phone and doing these final video calls with the candidates, because I like giving them the advice and I like helping them.
Whether we get them placed with one of our clients or not, I want them to be successful in the profession. If they go through our screening process, they can because I’m going to find something that they can work on.
How To Work Through The Inevitable Difficult Times That Arise As An Entrepreneur [1:26:04]
Michael: Very cool. So as we come to the tail end of the podcast here, I actually have two questions. One, having started out the business on your own and done that grinding process up to the point where you have 14 members, I’m sure you’ve hit challenge points along the way. It’s kind of inevitable as an entrepreneur that grows a business. So I’m wondering, what do you do to get through the inevitable difficult times that crop up in the world of business ownership?
Caleb: Yeah. That’s a good question. I have a lot of good mentors that I’ve had over my career. I work with a coach. I look at business…
Michael: Like a business coach, executive coach?
Caleb: You’ve got it, business coach.
Michael: Anyone you’d recommend for any listeners on the podcast?
Caleb: Yeah. Paul Brown, Brownstone Advisors out in Washington. I’ve worked with him. He’s helped me. He knows the business. He used to work with Mark and those guys at Moss Adams, so he understands the business. And helped me think more… Because remember, I’m in the day-to-day recruiting grind. But I had to take that hat off, and then put the manager/CEO hat on, and that was a difficult transition for me. He forced me to do that and held me accountable, and a lot of those types of avenues, and just challenged me to think about things differently. I was just able to bounce ideas off.
I’ve made mistakes, but I think it’s, two, you’ve got me on this one. I’ve never shared this before, but I guess I will here, because I think this has helped shape my experiences. But 1983, when I was a little kid, a Doberman Pinscher basically had my head in its mouth, and I ended up surviving that and I still have a scar. For the people don’t that know me, I lost a lot of my hair, but they can see the scar. So that was in ’83. Then, November 5, 2009, I was at Fort Hood, Texas giving a Thrift Savings Plan presentation, it wasn’t my building, but it was really too damn close, the terrorist attack. So I look at that and I’m like, “Man, I’m probably not even supposed to be here.”
So these challenges that I run into with my business… Clients are upset or somebody didn’t pay us, or candidates aren’t very good or not doing what they should be doing, or staff, we’re having trouble with them, or revenue is not where it should be, or numbers down. When I think of it in terms of those two incidences, it really puts things in perspective like, “You know what? That really doesn’t matter a whole lot.”
Michael: So as you look forward from here… This is a show about success and one of the things we always end up talking about in every episode is that success means different things to different people about what it is that they want to accomplish with their business, and just with the time they’re given on Earth. So as New Planner Recruiting continues to grow and build from here, and you’ve got four staff members, and you’re reaching more and more advisors to work with them, what does success look like for you over the next 5 to 10 years? Like where are you trying to get the business from here, and how do you think about what success means?
Caleb: Yeah. For me, success means being able to do what I want to do, how I want to do it. I mean, I’m not there yet, but I’ve made a lot of strides in the last 10 years or so. I think in maybe the next 10 years… Let’s say I was working, when I first started the firm, 100% in the business, and 0% on the business. It sounds horrible, but that’s the reality. Now, I’m working 50% in the business and 50% on the business, because I have this team that takes a lot of stuff off me and does a lot of the heavy lifting.
Well, in 10 years, I want to be 100%, or maybe 99% on the business, maybe 1% in the business. I mean, I want my team to be so good, they’re kind of like, “Hey, Caleb. Stay out at that golf trip a little longer. We’re good here. We don’t need you.” That’s sort of my end game, to get these people and really the training. Because this is the same philosophy I have with all the candidates that we work with, I want them to be the top financial planners at their firm. Like these people here in our team, it’s my job to get them to my level and above by dumping everything and teaching everything to them that I know. The only issue is,
I have a 15-year head start on them. So they’ve got some ramp-up time. But as long as they keep working hard and are open to constructive criticisms, and mentorship, and my lofty goals, we can get there. But I want a business that provides a good income for them, that moves the needle in terms of placements and developing, and future workforce, finding successors for these people, and then after I’m long gone, the business is still going. Yeah. We’re still helping people find quality placements, quality staff members.
Michael: Very cool. Well, thank you. Thank you for sharing that story and that vision for our listeners in the podcast. Hopefully, a few people feel inspired to help work with you on moving that vision forward. Again, there’s so much opportunity in our advisory world. To me, it’s a very exciting time for our industry, as much as it’s challenging with all the change that’s going on. As I view it, we’re transitioning from our sales roots into an actual profession of advisors. So it’s a tremendous opportunity for those that are ready to take up that challenge going forward, an incredible opportunity for people coming in the business today. Well, thank you. Thank you for joining us on the Financial Advisor Success Podcast.
Caleb: My pleasure, Michael.