Welcome back to the 133rd episode of Financial Advisor Success Podcast!
My guest on today’s podcast is Danna Jacobs. Danna is the co-founder of Legacy Care Wealth and Inspired Vision Accounting, a combination of financial planning and small business accounting firms that serve nearly 80 high-income, next-generation clients. What’s unique about Danna though is that she launched her advisory firm and accounting practice jointly with her brother, where she focuses on the financial planning and he focuses on the accounting and tax planning as they grow the businesses together.
In this episode, we talk in-depth about how Danna’s firm works with next-generation clients, their blended fee model of charging $150 to $250 a month for ongoing planning advice that shifts into an AUM fee as their client’s savings and portfolio grows, the four-meeting financial planning process that all clients go through, the unique ongoing monthly report tracking client cash flows and growth and net worth that they use to show their client’s progress and help justify their ongoing monthly fee and the way they divide up their rotation of quarterly planning meetings for clients between tax planning, debt repayment, insurance matters, and an overall annual review. With the structured agenda that Danna uses for every client meeting covering their accomplishments since the last meeting, current discussion topics, and key client takeaways that become the client’s homework for the next meeting.
We also talk about how Danna and her brother grew the business in the early years, the way they leverage their differentiation as being some of the only fee-only CFP professionals in their area willing to work with young clients with no minimums as a way to get clients through local SEO and the CFP Board’s Find a CFP Professional site, the way they’ve been able to bring in small business owner clients by starting with their bookkeeping needs first, and why Danna doesn’t regret walking away from her prior salary working at a major firm and taking the leap to go out on her own even though it took nearly five years to get back to her prior income.
And be certain to listen to the end where Danna shares why she decided to go out on her own and start an advisory business with her brother and then start her own family and have two children, the way that she balanced early motherhood and the early stages of the business, and how early on she hid the fact that she started a firm with her sibling but now embraces the story as a way to further differentiate the firm.
So whether you interested in learning about the pros and cons of starting a business with a sibling (and how it helps her balance being a mom and a business owner), the services that Danna provides for her clients (and how she charges for them), or the most valuable deliverable that she provides for her younger clients, then we hope you enjoy this episode of the Financial Advisor Success podcast.
What You’ll Learn In This Podcast Episode
- What It Was Like Figuring How To Build A Business With A Sibling [5:00]
- What Danna’s Side Of The Business Looks Like [28:45]
- What She Does For Her Clients [31:46]
- How Danna Sets Fees For Her Various Services [36:17]
- What She Does For Her Clients On An Ongoing Basis [47:41]
- What Danna Covers At Her Quarterly Meetings And How She Keeps Track Of Everything [58:58]
- Where Her Clients Come From [1:07:14]
- What The Accounting Side Of The Business Looks Like [1:11:20]
- What It Was Like Taking The Leap From A Salaried Job To Launching A Business From Scratch [1:16:29]
- What Surprised Her The Most About Starting An Advisory Business [1:28:42]
- Danna’s Advice For Advisors Looking To Launch Their Own Practice [1:35:42]
- How Danna Defines Success [1:38:48]
Resources Featured In This Episode:
- Danna Jacobs
- Legacy Care Wealth
- Inspired Vision Accounting
- XY Planning Network
- Partnership Resource
- Episode 77 with Tanya Rapacz
- How The Financial Planning Process Differs For Young Clients: Not Simpler, But Different Complexities
- eMoney Advisor
- Betterment For Advisors
- SEI Private Trust
- TD Ameritrade Institutional
- Constant Contact
- Find A CFP Professional
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Michael: Welcome, Danna Jacobs, to the “Financial Advisor Success” podcast.
Danna: Thank you so much for having me, Michael. How are you?
Michael: I’m doing well. I’m doing well. I always enjoy kicking off podcasts and getting underway and just new guests, new stories. Someone had asked me the other day, is there a point where you just wind down the podcast because you run out of guests that you want to talk to? I’m thinking, there are about 300,000 financial advisors, and we’re about 130 episodes in, so, no, I don’t think we’re going to run out anytime soon. There’s still a lot of cool guests and stories. And I’m excited for you as you are I think the first of a new category of guests for us, which is an advisor who launched a firm with a sibling. We’ve had parent-child, a father-son, father-daughter, daughter-son, daughter-daughter. We’ve had parents and children before. As far as I can recall, I don’t think I’ve ever talked to an advisor who did a launch with a sibling though, and I’m kind of curious to hear more as we get into this, how that’s gone, because I think for a lot of advisors, just in general, that whole process of launching a partnership, like a real partnership firm, not just, “Hey, you do your thing and I’m going to do my thing, and we’ll split on office space and then admin staff, and share expenses.” You’re just making a real partnership business, has a lot of pressure to really define roles and responsibilities and who’s going to do what and who’s going to contribute what to the partnership, and I feel like that’s hard for a lot of advisors in general. I can only imagine how much more complex that gets when you put sibling dynamics in the mix as well. And so I think I’m both excited to hear just the path and the journey for the firm, because you’re doing some neat stuff and blending together planning and tax, but also what it’s like to try to figure out all these roles and responsibilities with a sibling.
What It Was Like Figuring How To Build A Business With A Sibling [5:00]
Danna: Yeah. So just to get started, Rob and I, we’ve always been super close. We’re three years apart. I’m the older sister. He always drove me nuts in many different ways, which I tell him all the time to my face and to our clients, and he loves that. But one thing that drove me nuts was just that he’s so…he was an intuitive genius always, very creative, very smart, and I would be the super diligent student. I did every single assignment. I remember one time in sixth grade French, I forgot my homework. That was like the only time I can remember. And I was in tears, and I pulled the teacher aside in advance. I just was like that kid. And with that said, I had to go through every lesson and every homework, assignment to really get to that level of understanding and comprehension that I was comfortable with. My brother, on the other hand, was one of those osmosis learners, and he always had good grades, but he didn’t have to do quite so much to get there. And it drove me nuts. But I always acknowledge his sort of intuitive genius, and it just floored me, always floored me.
So we were always very close, but we’re always polar opposites. My mom called us cookies and cream. We come from a Puerto Rican-Sicilian family, and I have the darker skin tone, the darker hair, and eye color, and my brother pops out with very fair skin, blond hair, and blue eyes. We’ve just always been the sort of balance of one another and polar opposites. But because of our upbringing and I credit our parents so, so much for this, we’ve learned to…we always embraced our differences. I always knew he’d handle something differently than I would. I think we gave up trying to convince one another that our way is the better way so, so, so many years ago. And…go ahead.
Michael: Was that something about what your parents tried to instill in you or was that just you were so different, eventually you gave up and just decided to embrace each other’s difference?
Danna: Yeah, just a combination. I just always knew. I remember our parents just disciplining us differently, us having different sets of rules, and then explaining why we had to have different sets of rules. And that was just sort of okay, and we just sort of accepted that and joked about it and teased each other about it, but all from a place of support and understanding and just ribbing because we’re siblings and not from a contentious place. And I think that very much carries through today into the business. So our dad was in financial services, he worked his way up from a runner on Wall Street in order to be a managing director. And so he had a lot of experience there. And so when we both through in our respective fields, we sort of…or in our education background and then starting business, we sort of assumed we would be in financial services in some way, shape, or form. And we had always joked or sort of halfheartedly said, “Oh, we should run a business together someday,” but had no real plan for it at that phase in life. When you’re in high school and college and we first started our careers, it wasn’t really on the radar of saying, “You get this experience. I get that experience. Someday, we’ll start a business together,” it really just didn’t happen that way.
Michael: So, were you both going to school for econ/business, something financial services? Your father was in the industry, were you, from the start, all studying to come this direction?
Danna: I sort of was because I have to go in order of everything. I had an econ undergrad degree. I went to a super liberal college, so they didn’t have a business program. The best they had was just an economics major. And so I did that, and then I was a double major in Italian more because I wanted to study abroad in Italy. And then by the time I got back from my study abroad experience, they’re like, “Oh, if you just take two more classes, you’ll have a major.” I was like, “Oh, that’s easy enough.” So that just sort of came together. Rob dabbled a little bit more again, my creative, intuitive brother, and he was in engineering, and I think chemistry, and then he landed with physics and PolySci. double major by the time he graduated.
Michael: It’s quite a journey unto itself.
Danna: Yes. And again, that’s how we’re different, but he actually credits my feedback to him for that journey, which was that, when I was applying for business positions, someone with business background or econ background was a dime a dozen. But at that point, if someone had a science degree or science background or something a little bit different that they could bring something different to the table, they were actually sort of more desirable as a potential candidate for a higher as opposed to someone who just had a more traditional business background. And so I was giving him that feedback, so he was starting, we were four grades apart, so he was starting college when I was finishing it and I had done summer internships and been through this application process a couple of times. And I was just sharing that with him, so he said, “You know what, I’m not going to pursue business.” He said, “I’m going to…” and again, the way his brain works, he’s like going towards sciences made a lot of sense for him. And so he said, “I’m just going to do that.” And really, he’s like, “I learned how to problem solve. I learned how to think. And that’s what employers wanted and that’s what sort of lent the most to my future.” And he will still say the same thing when he is looking at a financial plan or trying to solve a tax issue. He says it’s still all those same problem-solving skills that he credits back to his physics major that really gives him what he needs to be able to get the job done. And again, he really is a very smart man, it drives me nuts.
Michael: So you finished school, you graduated with an econ and Italian degree. So, did you come straight into the industry from there?
Danna: I did. I worked for Lehman Brothers actually. I worked…
Michael: That was good timing.
Danna: Yeah, I started there about a year-plus before they went bankrupt, which I say this time and time again, and I feel terrible saying it, while Lehman Brothers’ bankruptcy I know was a global disaster and served many people very poorly, for me and my career personally, it actually was a wonderful opportunity. To have to see and go through that experience literally, it’s something out of a movie, where we thought we were going bankrupt, we thought we were getting bought, we thought we’re going bankrupt again. The MD was in the corner office, comes out, stands on the big desk, we all gather around, he makes an announcement. Part of the business was being bought by Barclays. All of it was a big deal. Every quarter leading up to bankruptcy, the Thursday before, we knew there were going to be layoffs. And so we knew every desk was pretty much losing ahead. And so that whole experience was just really out of this world. We were working really hard. We’re working a lot of hours or a lot of things that were needed at the time. And then post-bankruptcy, it was so funny because some desks couldn’t touch their computers and other desks were just swamped with work. And so I was on one of the desks that happened to be acquired through Barclays. We had to revamp all of our products, offerings. So we were collaborating with the product and support teams, the IT teams, and then the client services teams to make sure that…so I was sort of on that development team specializing in all of those integrations and commandeering what that process looks like.
Michael: High dollars, highly intense compressed timeline. I’m presuming like…
Danna: It was crazy.
Michael: …large numbers of hours.
Danna: Yes, it was absolutely nuts. But otherwise, it was sort of a boring job until bankruptcy, and then bankruptcy happened. I got so discouraged.
Michael: And that is a growth opportunity, yeah.
Danna: It really was. It really was. So that, for me, was a good thing, and that’s actually how I landed from there on to the client services desk. And there, we were working with ultra-high net worth clients, and they all had family offices and CFPs running their family offices. And I was just floored how much the CFP understood about the client’s financials, you know, where their accounts are held and the estate planning implications, the tax planning implications. But we were really just product-focused, not saying all financial services industries are like this or all investment advisors are like that. But I think the history of the industry tends to have more focus on product and sales, and it’s trying to change and evolve. But with these larger institutions, it just takes that much longer to shift.
Michael: And I guess, you were literally on a product desk for the first couple of years.
Danna: I was initially, but then at that point, I was on client services. But it still was very much product sales oriented. And so I just was seeing that misalignment. I wasn’t comfortable with it. And I said, “I want to know my client’s finances as well as they do when I’m making a recommendation.” And so at that point, I went back to school, I got my MBA, got my CFP. And then at the same time, Rob was coming out of school, he was working, same thing, retail, client services, and he was just racking up designations. And when he was taking his CFP, he said, “Oh, tax is my weakest category,” as it is for most of us. So he said, “I’m just going to start doing tax preparation.” So he starts working for his then-girlfriend, now wife’s parent’s accounting firm, and he’s been doing tax prep ever since. He’s like, “I’m going to become an enrolled agent,” so now it’s a huge strength of his, whereas it started as a weakness. And so we both were just sort of seeing this misalignment where we wanted to have more global understanding of what’s going on for our clients. And our other big tenet was we were seeing all of our peers at that time having all these financial questions and not really a place to go to get answers.
And again, this is a similar sort of XYPN story, a lot of us sort of see that same need. But it’s just you do, by the house, we live in the New York City area, property values are just so, so high. A lot of people are dual-income earners, so they have their kids in daycare and they’re trying to cover the daycare expense. And so there just was a big need for more financial information, and so we just both sort of came to this…we had similar aha moments at the same time. I remember we called a family meeting with our spouses and parents. So the six of us got together around a dining room table and just sort of said, “This is the vision for the business,” and asked for feedback and how do we go about it. We did this just at the same time as XY Planning Network was coming together, so we thought we were making it up because we didn’t know about other people doing it at the time. And when we started sort of talking about it, people thought we were crazy. People in the financial services industry said, “You’re not going to make money that way.” I’m like, “I’m charging a fee for service like a lot of other folks.” And I think that’s what makes sense for our target client. That’s really what they need. They have cash flow, they don’t have assets yet. And so we were developing this strategy and this idea around the business together with our families. We knew it was going to be a family-focused business from day one. And so that’s really the genesis of where the financial planning firm came from.
And on those early days, we wrote every email together, we did everything together, even though, like I said, I know we’re very different, but we collaborated on everything. And then as the businesses grew, and we already knew our strengths, but we’ve found that we were able just to independently focus on those, he then took on more of the tax-related matters, and I took on more of the financial planning related matters. And in the beginning, we actually just started doing bookkeeping for a lot of our clients who are entrepreneurs, just because they’re like, “Hey, can you just do this for me?” And so we’re like, “Okay, sure, yeah. We know how to do that. We can do that.” And then it was tax season, they’re like, “You already know all my stuff, can you file my taxes for me?” And we’re like, “Okay, yeah, we can do that.” So we just sort of organically grew out that business. And honestly, in those early days, that was almost our side hustle to keep the lights on for the financial planning business. So really, it became very easy to then get new bookkeeping and tax prep clients. It’s harder to scale that business, what we knew and that’s the place we’re at right now, where it takes a lot more to continue to scale that business. But in those early years, it was easier to grow. And so Rob then sort of began managing that side of the business, and pretty quickly, became big enough that we said, “We need to separate LLC.”
So we rolled it out completely as its own entity. And so now, we have two different businesses, Legacy Care Wealth for planning, Inspired Vision Accounting for tax preparation and accounting services. And I pretty much manage the planning and he pretty much manages the tax, but then there’s, for every financial planning meeting, Rob is in there for almost every meeting with our clients. I send him everything in advance, he’ll refuse it, he gives me feedback on it, but I’ll be the one that dives in. And I do a lot of the planning, I manage our Power Planner and admin, I manage all the client communications back and forth, and organization of all the aspects that go into the plan, the implementation, the follow through. And then, conversely, I help on an admin level and managerial level sort of on the bookkeeping tax prep side of the business, because he needs a little more help with the organization there.
So we just sort of…while we’ve had conversations around it over the years, when you work with a sibling, there is also so much intuition, and you just know that person to their core in a way that it takes a lot longer to get there with someone that you just meet from your various professions. And so that’s where we have so much intuition and trust. I know how he’s going to handle something. And we had so many conversations in those early days about our joint missions and our joint vision for these firms that all the other things that we’re doing are still aligned with that still core vision that I know we’re both on the same path towards. So it’s a lot easier to trust everything else as well. And he’s my brother, he only wants the best for me and I for him and our respective families. So that, I think, helps a lot, knowing that there’s, you know that other person is looking out for you in a way that someone else that you might meet that you’re exploring a business opportunity with might not quite have that same deep level of commitment to your wellness. So it takes…
Michael: A good point.
Danna: Yeah, it takes more understanding, yeah.
Michael: Yeah, there’s kind of that dating, get-to-know-you process of trying to figure out whether you want to work with someone as a business partner and go into business with them and just trying to get familiar with them. And even after you do, sometimes it takes years before business partners really get that level of trust. And yeah, I get it. When you’re already coming to it after 25+ years of having been together as family, you kind of got through some of that early stuff already like, “I know this person, what they do, and how they think already.” So I guess, for better or worse, you know exactly what you’re getting at that point.
Danna: Exactly. And so I think, a lot of times, siblings, it’s still hard because… Look, every person I meet, they’re very different from their sibling. I see it in my own family. I now have two sons. And it’s so funny, when you have your own kids, for some reason, it surprises you. I don’t know why. I know how different I am from my siblings, I know how different the other people in my family and friends are from their siblings, and yet you have your firstborn and you’re like, “Okay, it’s the same family, same parents, same genes, same household,” and then you have your second one and it’s like, they pop out just totally…like they have their own personalities, from day one.
Michael: Yeah, it blew us away as well, but the differences from one to the next, as we had our first and our second, and then all the gender differences as we went from the second to the third, because we had two girls and then a little boy, and it’s like, “I swear, we’re not going things that differently.” I know you relaxed a little by the third kid, you’re a little more tense on the first. But I swear we’re not doing things that differently but like, “This is going completely differently with this kid. Wow, okay, that’s just bundled right in them apparently.”
Danna: Yes. I mean, probably energy, that’s my household, it’s the energy that comes out of these little people, especially the boys, and I only have two boys. But I see it with my friends and stuff like that. It’s crazy, and I know it’s a gross generalization, so it’s not always the case, but a lot of times, it is and you’re just like, “Oh, my God.” And honestly, me and my brother, we’re textbook firstborn and second-born. My babies, they’re textbook firstborn and second-born and you’re like, “But I really don’t think I’m doing anything that differently.” And so, for some reason, it continues to surprise us.
Michael: And ours are, too. And it strikes me because I was a psychology major, and I literally remember going through and learning all the research about Adler’s birth order research of, “Here’s how firstborns are, and then here’s how the middle-borns are, and then here’s how the youngest are when you got three or more.” And then, decades later, I’m now starting my family and doing this and watching it play out like, “Oh, my God, it’s all true.” It’s a little disturbing.
Danna: Right. So I think the struggle with siblings though is because you’re so different, a lot of times, you try to change the other person or you’re so rooted in your own perspective that you struggle to understand where the other person is coming from. But I think for us, again, I credit my parents and then also just our life experiences, I know he’s different, I know he’s going to do something differently, but it doesn’t mean it’s necessarily the wrong way. And I understand his perspective and I understand why doing something for him a certain way will work better for him and, therefore, all of us in the end than if I try to force my approach on him.
Michael: Well, I feel like that’s a challenge for almost any partners in a business. Frankly, there’s probably a marriage metaphor in there as well about trying not to change your spouse and accept them for who they are. But I’ve seen that play out I think just in business in general when you’re trying to get into partnerships. And just, at some point, you have to get to a…unless you form a partnership with your clone, in which case there actually probably won’t be a much better business because you’re just doing more of the same thing, you get no new perspectives, no new skills if you clone yourself, unless you’re working with your clone, you’re going to end out with someone who does things different than you do, will handle at least some situations differently than you do. And I think, to me, one of the biggest reasons why I see advisor partnerships blow up is one or both just can’t get comfortable with that at the end of the day. “He or she is not doing it the way I would have done it.” And that becomes the deal-breaker.
And it’s like, well, at some point, you have to say, “It’s not whether they do it the way you would have done it, it’s that they do it in a way that meets the core values you have and gets the business in the direction of where it needs to go.” But you’re not going to do it the same way, and arguably, that’s actually good, that’s how you get more skill sets and different perspectives and can even avoid blindsides in the business. But it’s so hard, I think, for so many of us to just, and particularly when we start as solos, that you start the business with the vision of like, “Here’s how it should be. That’s why I’m making this business. I’m making my independent firm because I want it to be the way that I want it to be.” And then it gets really hard when you have to bring in a partner and he’s like, “Yeah, that’s totally cool if I’m going to do a different way.”
Danna: Yeah. I would imagine starting as a solo and then trying to partner up after the fact. It depends on how you handle it. I mean, I’m sure there’s a way to do it and remain somewhat siloed in some parts of it that help maintain your independent integrity, but then have sort of the group dynamic around a lot of your support services and more of the ongoing operations that probably makes sense. But I don’t know, I’m just trying to imagine starting the business by myself and then having to introduce someone else new into something that was sort of my baby that has a lot more, I think…I don’t know. It sounds more complicated than what I felt starting with my brother was, which was that we knew that we had this joint vision, we knew we had this joint trust, and we sort of took all those steps together instead of having to hand over the reins on my baby to someone else.
Michael: Right, yeah. Well, and it strikes me, we actually had a prior guest on the podcast, it was episode 77 with Tanya Rapacz, and her whole business is essentially either A, helping partners that have reached this conflict stage and are having problems, need to work out their differences, or she’s got a whole service called Partnership Resource where they basically do compatibility assessments. It’s sort like the business partner version of, I don’t know, a dating/eHarmony profile thing. Not that she does the matchmaking, but two people coming together and are trying to figure out like, “Okay, we chitchat well together, but can we actually work together as business partners?” And she’s got a whole assessment process just to help people figure out, “If you enter this partnership, are you going to end out finding later that you got such differences and views, or perspective, approach, or values, and not that you have good values and I have bad values, but just that we may value different things.” You take two people, one of whom just wants to do the business for very altruistic reasons, the other that wants to do the business for an entrepreneurial growing and scaling endeavor. And there’s no right or wrong to those, both of them can serve clients well, but if one person wants to scale the profits and the other one wants to give the profits away, this isn’t going to go well.
Danna: Right. There’s an inherent conflict there. Yes, absolutely. And that sounds really interesting, and I think a big part of that too is when you go through that process if you do decide to continue to work with someone, hopefully then you’ll have more perspective and understanding. And then you can hopefully not harbor anger or resentment or those more negative conflicting emotions, which honestly, again, as an entrepreneur, that kind of stuff trickles through. And with that said, like Rob and I, certainly, we have conflicts, absolutely. And sometimes it’s personal, and sometimes it’s professional, and sometimes it’s a very blurry line. And over the six and a half years that we’ve had this business, I’ve had two kids, we’ve had a very sick family member that we’ve both been very much involved in caring for, we had two grandparents pass. Again, we’re the part of the family that manages a lot of all the logistics that goes into all of that. So there’s been a lot of stuff that arises, but I think, for us, we keep coming back to that understanding and knowing that that’s there and you know you can work through it. But when you have strife, it trickles through to how efficient you are and how you start your day, and every minute matters when you’re the one that’s driving everything.
And so it’s helpful to be in a place, is what I’m finding, that you try to keep all that somewhat reduced or keep it at bay or have it channeled in a healthier way. And so I think that’s something that we were definitely always learning more about and always looking to learn more about as well. But we do a pretty good job of, when there’s a conflict on the professional front, he still will come over for a holiday or something for my kids, and he’s 100% Uncle Rob (or Uncle Wob like the little one says), and he’s very present and loving with my kids. And honestly, that always coming back to that part of it, the more personal relationship we have as siblings and with the family sort of always helps heal a lot of other things. That again is a benefit that some other business partners don’t necessarily get to have.
What Danna’s Side Of The Business Looks Like [28:45]
Michael: So talk to us a little bit about the business itself, or I guess the businesses since you got a planning business and a tax accounting practice. So maybe let’s start on the planning side of the business. So just talk to us a little bit about Legacy Wealth Care. How big is the firm, who do you serve, what does that look like?
Danna: Yeah. So we have about 80 active clients at most given times, which includes our…we do have some percentage AUM, we have ongoing clients, and then we also have clients that we’re doing sort of more upfront financial plans floor or specific projects floor. So the relationships do break out into many different forms, however, most of it looks like a typical…our target client really is a HENRY, and so that’s High Earning, Not Rich Yet. Again, a lot of young families in our area, because we’re close to New York City, dual-income, probably student loans, trying to buy a house or just bought a house, trying to have a family or has a young family, and they’re just trying to figure out. I mean, one client had 7 401(k)s from old employers, and they’re trying to find that right balance of how much do I put towards retirement, how much do I need for the down payment on the house, can I afford this house, what if there’s a job transfer, how many children should we really plan for, what’s daycare cost really going to look like, how much insurance do I really need. I know I probably need a will, what does that process look like? I’ve read about a three-to-six-month emergency fund, I can’t get there. How do I get there? What’s the best use of my credit cards? And we sort of work through all of those questions, very, very common…
Michael: Oh, I see. And what strikes me about all those is virtually everything you said of all the things they’re dealing with that you’re doing and helping them with has nothing to do with retirement planning.
Danna: Yeah, it’s a factor. It is like, “Okay, are you contributing to your 401(k) and how much? And are you meeting your employer match?” And we definitely look at that, but it’s a balancing concern, and also for tax reasons, we want to make sure we’re making contributions, but it’s balancing that concern with seven other balls that they have in the air at any given… Almost none of them have disability insurance. So there are so many other aspects of financial planning that we have to really dive into with our clients, and it’s not just retirement planning. Whereas when you do have a target client base who’s in a more accumulation phase and in their 40s, it’s really just making sure we’re planning for college education for children and retirement planning… it’s like more of a core focus. So it’s just less balls that we’re juggling. So yeah, that’s really what most of our clients look like. With that said, we have clients all ages, all life circumstances. It really comes down to a very goal-based oriented and holistic approach to financial planning. And so we do have clients that are about to be retirees or early retirees or even some late retirees that they still very much like the experience of working with us, but they just sort of fall a little bit less into what our target client looks like.
What Danna Does For Her Clients [31:46]
Michael: And so, what’s the business model for clients? You kind of mentioned, there are some upfront planning, there is some ongoing stuff, there are some AUM. So, how do these get structured? What do you do exactly?
Danna: Yeah. So most of our clients… the process for most of our clients looks like they come in, they meet with us, they decide if they want to work with us, they sign off on the client agreement, and we start an upfront financial plan. And that typically is a three- to four-meeting process in which we sort of dive deep and we ask for copies of all their statements. We do use eMoney. We haven’t yet set up on eMoney for most of our clients. And then we present back to them for the next meeting a summary of their facts, and we ask a ton of questions based on all the stuff we saw on their accounts, “Did you know about this? And what about that?” And then we also try to get really precise about their goals. Then, so the next meeting when we sit down again, we say, “Okay, this is what your life looks like from now until age 90 or 95 based on all the things we talk about from the past 2 meetings.” And we know that life will change, but our guideline is, “If we can establish a roadmap that everyone’s on board with and we could start implementing a plan, when shifts happen in life, as they inevitably will, we’ll know how to recalibrate and adjust. And we won’t just be putting our head in the sand for another six months or a year and not really knowing what to do next.
So we do a full-boat financial plan, and then the very last meeting, assuming everyone’s on board with the financial plan, we will do an implementation guideline. So we make recommendations all throughout. They have homework every time they meet with me. I’m always chasing people on homework. That’s like most of my job these days. But for that implementation guideline, I take all the recommendations we’ve had of the hundred-plus pages of content they’ve gotten thus far of analysis and recommendations, and I organize it to just say, “Okay, this is what I want you working on this month. This is what I want you working on by the end of the year. This is your goals for 2020, 2021, and we’ll go out however many years.” It makes sense based on when we see things happening for them. So a lot of clients really like that last piece, because then they could say, all this stuff is sort of swirling about in their head and they just still are struggling to see how this will actually happen for them in their lives. And so once we’ve finished our implementation meeting, that’s sort of the close of our upfront financial planning process.
And then we have another conversation with them and we say, “Okay, how do you want to work together on an ongoing basis?” We always prepare people in our first meetings, say, “There’s a myriad of ways we can together on an ongoing basis. We will have a subsequent conversation about that. This is what some of them look like.” So they can expect it at that point. But then essentially, sort of like we revisit, and honestly, Rob and I sort of know from looking at their finances, getting to know them as people, where they’re going to probably lie once we get to this point, but we still always like to have these open discussions. And we say, too, we look at every line of your cash flow, we want to make sure that everything makes sense, including our fees and our services. And so, at that point, we say most of our clients work with us at that point on an ongoing retainer. So we do flat fee that’s paid monthly, and that’s where most of our clients fall, unless they do happen to have assets they want to move over or older term in accounts or something like that. Then we’ll go through all the appropriate steps to bring them on. And we sort of absorb the financial planning fee instead as a percentage of assets and their investment management fee. But we still treat them as financial planning clients moving forward even though we’re just managing investments.
There are some clients that say, “Okay, we just sort of need a break from all this. Can we talk to you in six months about working together on an ongoing basis?” That happens for sure. There are some clients who just want to meet with us like once a year and they pay us hourly or clients who just reach out when there’s a big life event, and then we do project basis for them. So it’s really case-by-case for the more ongoing relationship because we want to align that to what makes the most sense for them. But for all of our clients, we say from day one, “We want to be your trusted resource.” And so, even just yesterday, I jumped on with a client who was no longer a client, because she really was more on the bookkeeping side and had a business and such like that, but now she has a job relocation and she just needed to jump on and run some things by me. And so we went ahead and brought her just sort of as an hourly one-off. She gave me a call and she had a bunch of questions she wanted to run through. And so we’re happy to do that as well. So on an ongoing basis, like I said, it takes many shapes. Really, all of our clients, we do that upfront financial plan, and then we roll most of them into that ongoing retainer model.
How Danna Sets Fees For Her Various Services [36:17]
Michael: And what is the typical fee for ongoing retainers, or how do you set the fee? Is it just a standard number for every client? Is there some calculation process? What is a typical number? And how do you get to that number?
Danna: Yeah. So it ranges from $150 to $250 a month. Most of our singles, for example, fall in that 1$50 category. It’s just easier to manage one person and one party than some of our more complex cases. And it really comes down to a judgment call for us if they’re going to be that $150, $200, or $250 based on how much time and how…if we’re going to be talking to them every month or if they’re going to be more self-starters but needing us quarterly and for ad hoc requests. So we really gauge it that way, and we tell clients that that’s how we’re going to do it. And so they absolutely understand which category they fall into.
Michael: And so if they also have assets, now, so more like are you charging a blended…your $150 to $250 a month plus a separate investment management fee or if you get to certain assets then we waive it, or you always a fee offset, how do the two come together when someone actually has assets?
Danna: Yeah. So when they’re just starting, like some clients that were just starting to do some auto-recurring savings for super small account sizes, they still are paying that monthly fee and then a smaller percentage of assets under management fee. Once account sizes are such that, essentially, that the percentage AUM would offset what the ongoing retainer is or it’s getting closer, we say, “Okay, we’ll cut back the monthly retainer.” And it’s really case-by-case, we’re looking at it each year for each client to make sure that it makes sense. But really it’s one step, percentage AUM would offset what the annual retainer would be, then we move them over to percentage AUM at that point.
Michael: Okay. And what’s a typical AUM fee if you’re actually a people in parallel, where you’re charging planning for a planning fee and then investments for a management fee?
Danna: Yes. So that ranges, again based on how much managing we’re doing if we’re really doing it all in-house or if we’re using a third-party manager or if we’re using, for example, Betterment Institutional, Betterment would be 50 basis points usually for doing an outsource manager closer to 60 to 80 basis points, and then if we’re going to be doing a lot more, the independent management’s going to be closer to 1%.
Michael: Okay. And so, in essence, you’ve got multiple investment options, platforms, things you’re working with, you’ll send it Betterment Institutional or you’ll do it yourselves with models. How do…?
Danna: Exactly, yes. And so based on if we’re modeling for using a third party or for using Betterment, it’s three different fee schedules.
Michael: Okay. So, wait, what were the choices? So it’s either it’s going to Betterment. I’m always interested in how people break these out. So some you’ll send to Betterment, some you’re doing your own models, and then what’s the third path?
Danna: If we use…like for example, we use AssetMark as a third-party asset manager for, especially our larger accounts, stuff that we need much more oversight on, then that’s a TAMP. So we’re going to cut our fee back because we’re not doing as much of the active management also to offset the TAMP fees. So the net fee to the client is still going to be on par with all the standards.
Michael: Okay. So is that how you do it? Like you aim for an approximate total all-in fee to the clients, “Hey, when our fee plus the underlying fees are put together, it’s going to add up to blank.” And then if you use AssetMark, they’re doing a little more so you’re going to draw a little bit less of that fee, Betterment they’re doing not quite as much, you’ll draw a little bit more if you make the models, then you’ll draw the whole fee?
Danna: Yeah. So the logic is, basically, our fee is going to be in line with our level of work, but I don’t try to get every client till a total fee number and then back out accordingly. Because for example, my Betterment clients, they’re always going to be less than any of my other options just because we’re using ETFs and its Betterment. And those are usually a lot of our early savers. So we’re just starting to do some more accrual savings for them, create those accrual savings accounts for emergency funds and travel, and so we’re really not putting a ton into that investment bucket. And so those are really small accounts.
Michael: Okay. And is that essentially how you decide what to use? I guess, it sounds like Betterment’s your small client simpler investment situation, like we just want to get them invested in a thing where the stuff happens. Nobody has to worry about it much. What drives when you use your own models or when you use AssetMark?
Danna: Sometimes it’s based on client preference as well as what really truly, you know. Obviously, we always want to make sure we’re doing what’s in the best interest of the client. So it’s really based on if we think we could do a better job and be more efficient from an expense side than what a third party asset manager would do. So it’s sort of a case by case. We also use SEI Private Trust Company. I like them for our large taxable accounts because they have a lot of tax efficiency that we wouldn’t be able to do in-house. So that would be a good example of when a client would go to that specific provider. So we’re looking at a lot of factors when we make those decisions, but certainly, cost is a component of it. Integration with their other financial planning tools is a factor and then tax planning is a factor, as well as the overall investment strategy, of course.
Michael: So, does this get difficult just keeping track of all the different clients and different platforms and places they’re at and all the different investment explanations that happen, because now, I imagine, you can have three client meetings in a row, and the first one’s with Betterment and the second one’s with AssetMark and the third one’s with SEI. So you’ve got three completely different reps to do for three different clients that have three different portfolios. Is that the reality of the business or is that a challenge? How do you look at that?
Danna: So for me, yeah, I love having multiple options for multiple clients because there are times where I’m like, “You know, this specific provider is not a good fit for this client. I just know it.” And that’s actually why we have so many providers. We did start with just one, and I would say it’s not hard to prep because we sort of more gradually built them on based on what we think serve the clients the most. So SEI has been in my toolbelt for a while. So I’m pretty…
Michael: You know what to expect, you know what the gist is, you know what the story is.
Danna: Exactly. And so as we build each thing on, we’re really confident and comfortable with our other solutions, but we just also know that something might not be the best fit for a handful of our client base, and so we want to find something that’s better. And that’s why we’ve added on now another option. So at that point, it’s not like we started with four different options. We definitely started with one, and then we continue to migrate until we got to a point where we have what served our client base the most. So to me, it doesn’t feel very complicated, but I definitely can see how if someone else is sort of just coming, just launching their business, I wouldn’t recommend starting with four different investment solution providers. I would say, “Find what you think will serve most of your target client the most, get really comfortable with their platform, their contacts there, the investment solutions, the materials. And then you move from there into what you think is the next best fit for your clients. And so that’s sort of how we’ve approached it. We certainly don’t go through all this detail with all the clients. We really explain to them what we think works best for them. And if they have any questions, we certainly can always be happy to explain all the other options. But for them, they don’t have a lot of experience in industry, they will just get overwhelmed.
Michael: Right. You’re just taking them to… We use a whole bunch of different things, and I’ve determined here’s the thing for you and why.
Danna: A hundred percent.
Michael: Okay. And, sorry, I just have to come back to this. I’m just trying to wrap my head around it. Then from a fee model perspective again, so Betterment, you’re at a lower fee, I think you said 50 bps because it’s just a simpler approach. Is that your 50 and then you pay Betterment out of that, or the client pays you 50 and then pays Betterment the Betterment pay?
Danna: Yeah, Betterment Institutional has a platform fee. So essentially, if you get set up with Betterment, and I explain this to my clients too, they can sign up with Betterment online, like any other person, and then you would be on their retail platform. And that would be 25 basis points, 0.25%. Or you can work through Betterment Institutional, through an advisor, in which I send you an invitation to Betterment, and then their platform fee gets reduced now to 20 basis points, 0.2%, but then there’s an investment advisory layer on top of it that you’re paying to me as your advisor. And I can make changes on your portfolio and I’ll be modifying stuff as we go.
Michael: And do you ever get clients that say, “Okay, then I’m just going to go to Betterment and do it myself. Thanks for the tip?”
Danna: A hundred percent. And I explain that to people. But a lot of people say, “No, no, I really want you to be my advisor.” And again, a lot of these account sizes will talk through the numbers and like, “Oh, it costs me 40 bucks a year.” We’re not talking big money here. And then because we’re not talking large account sizes for that solution option, I’m not going to just not explain to then. Again, I’m a fiduciary. I want them to know all the options and make the best choice for them. So I’m not going to not tell them that that’s an option.
Michael: And it just emphasizes that people who hire us are the ones that want to delegate to us. They don’t want to do that stuff that’s why they hire us and pay us.
Danna: Yes. And sometimes I have people who they already had the Betterment account, they want to just stay where they are, 100% fine. Again, for me, it’s more important that our brand and our value is being communicated at all times than it is to try to get the extra $120 from this account. That just doesn’t align with our core goal as a firm.
Michael: So when you go to the other end of the spectrum and it’s your own models and you’re going to manage it directly, what does the fee structure look like at that point? Are you presuming then you’re charging a little bit more because you have to do more of the work directly?
Danna: Yeah. And those clients are pretty much that 1%, where we’re creating a model, we’re doing regular rebalancing on it. A lot of those, we also have ongoing…we’re doing a lot of dollar-cost averaging, we have sort of ongoing money going into those accounts. And so it’s much more involved as you can imagine.
Michael: And then how do you manage your own models when you’re doing it yourselves?
Danna: So honestly for that case, we really have a handful of models that we stick to at that point, and then if that’s a good fit for our client’s goals and it makes a lot of sense, then we will put them into the particular model that makes the most sense for them. And then, like I said, we sort of do that ongoing rebalance. We use iRebal on a lot of fun stuff with TD.
Michael: Okay. So models get managed through iRebal and then TD is your custodian for doing all of this.
Danna: Exactly, yep.
What She Does For Her Clients On An Ongoing Basis [47:41]
Michael: Okay. So beyond the investment side, when you talk about this $150 to $250 a month ongoing fee, what do clients get on an ongoing basis? What are you doing on an ongoing basis?
Danna: Yeah. So we meet quarterly, they get monthly best practices from us, they get access to us as much as they want, and then, in addition, we actually just last year started rolling out monthly reporting to our clients, which I had my Power Planner working on the first week of the month, pretty much all she does the first week of the month. But it’s a series of screenshots essentially from eMoney, because eMoney doesn’t have this sort of level of reporting in which we track for them, how they’re doing in terms of their net worth growth for the past year, including the most recent month, how they’re doing tracking against their budget, and how they’re trending towards their goals. And so they get a report each month that’s delivered to them within the first two weeks of the month. So they have that sort of push to them, because what I was finding is eMoney does have a lot of this information available, but clients weren’t going there to take a look. And they just sort of, “Wait till we call them and tell them what’s going on. And so the feedback from that rollout has been good.
Now, it’s a big-time labor commitment, but if something that I felt was really important for our client experience and our communications that we were having and, thus far, it’s been really well received. So monthly, they’re getting a monthly best practice, which is sort of e-best or use Constant Contact, that goes out to every one of what… Something interesting that I read, some of your content, Michael, that I think that they would find helpful…
Michael: Those poor clients.
Danna: They don’t get your full content. They get like a paragraph-summary of something that you can be thinking about.
Michael: Okay, that’s merciful, okay.
Danna: No, no, absolutely not. But just from the stuff I’m seeing in the industry that I think would be helpful for them to know about or based on a conversation I had with one or two clients, and so many times I get feedback from two or three people saying, “Was this for me? Were you thinking about me?
Michael: If that’s what you want to believe, then yes, absolutely.
Danna: I was like, “Oh, I know.” I just am having similar conversations with a lot of people, and I thought this would be helpful. So it’s really funny. So we got pretty good feedback on our monthly best practices, monthly reporting, and then, like I said, the quarterly meetings and access to us as much as needed.
Michael: I’m fascinated by this, reporting element, what you’re showing clients. I think I heard three pieces, showing how their net worth is growing over time, showing their spending relative to their budget, and then showing progression towards their goals. Those are the three elements. And is it that you can’t get the reports out of eMoney, so you’ve got to screenshot things and then update them over time?
Danna: Pretty much it’s eMoney and it’s all on the client side of eMoney. I love eMoney, but nothing’s without its quirks and glitches. So, yeah, it’s all available on eMoney.
Michael: Can you get all of those charts and pieces directly from eMoney?
Danna: Yeah, yeah. Now, I know that she revamps the budget, and this is my paraplanner’s intuition, she’s amazing if anyone wants a paraplanner, let me know, she likes the way it looked from an appearance perspective of like she has an Excel module that she uses. She has one for each client, and so she’ll manually update that part and then regenerate the graphic, because the screenshot of the graphic in eMoney just doesn’t come across the way we would have wanted it to. Everything else though, the net worth history tracker and the goal report, is really just literally available in eMoney, both on the client side and then…actually, no, the goal tracker, I’m not sure if they added to the advisor side yet, but the net worth history is available on both.
Michael: And then your fundamental challenge is these things are literally in eMoney but the clients will log into eMoney and look at it, they want you to email it to them.
Danna: Pretty much. And eMoney doesn’t have a way of making it a download. They send some information sort of as like a push, but yeah, there’s no way for them to automatically send it to the client.
Michael: For the eMoney folks who are listening, here’s your development opportunity right here, turn these reports in the dashboard into things that we can easily configure and automate as emails out to clients showing the little widgets of, “Here’s your net worth growing chart,” which to me is a little bit ironic, because tools like Personal Capital does this already for their clients. They automate and email out a bunch of those update reports because they’re doing it directly consumer facing.
Danna: Yeah, they do some stuff. You can get your spending notifications if you’re over budget and you can get a weekly reporting on the spending. But yeah, I think those sort of annoyed clients, because there’s almost too much and you get too much stuff and then you stopped looking at it, but having this one consolidated place where…and sometimes stuff is miscategorized and then you get an alert, and it was a false alert if you will. Whereas when you get this, we sort of scrub the monthly transactions to make sure, overall, it looks like it’s not perfect, I’m sure, so she’d go through all of that unless we know if connections need to be updated, because that’ll sort of go…it’s hard to stay on top of all the client connections in eMoney. And so it’s been a little bit more of a labor-intensive thing to integrate, but again, I get so many people that write back to those emails and saying, either it drives more communication or more questions, so it reinforces sort of our value to the clients, or I have one client that they feel like they’re spinning their wheels because they had a lot of debt. And so it’s like, as soon as the money comes into their account, it goes right back out to serve either a debt need or a savings goal or whatever. And so he lives and breathes by his net worth tracker. Every month, he’s like, “I can’t wait to see my net worth because it’s what I’m holding on to to make sure I’m actually doing the right thing,” because otherwise, he feels like he’s spinning his wheels.
Michael: And that, to me, is one of the things that’s always struck me around the planning work with younger clients in particular that I think we, as an industry and certainly from some of the software providers, just underestimate the sheer impact for clients of just the sense of progression of seeing their net worth increase and their financial situation improve. And we do that to some extent with portfolios, but particularly for younger clients, like a big piece of their net worth improvement for years may be reduction of debt, not building of retirement assets, and even start building assets may be house down payments and short-term things and things that aren’t necessarily portfolio-centric and just showing them portfolio progression understates the progress and the financial momentum they’re having that eMoney at least can show with their net worth graph. To me, MoneyGuidePro has always been weaker in this area. It’s been a frustration for us just as users of MoneyGuidePro in our advisory firm that we can’t show clients that sense of progression. And for our retired clients, not as big of a deal, they tend to be more portfolio-based, but for younger clients, it’s been a big gap in the planning software just showing this progress.
Danna: Yeah. Like when our clients buy a house, they put 100,000 down for a down payment. It’ll show your asset summary essentially. Well, your investment summary would go down $100,000, which would seem like a big fall off. But in the net worth graph, we then add in the value of the home, we add in the mortgage, and honestly, more or less, you’re pretty even. So you can still continue to watch that trend for growth. When you are pretty much all portfolio-based, and that’s where most of your assets lie, you’re going to see a lot more variability based on market fluctuations and things like that. And that’s, of course, a factor when you have severe market downturns. Like Q4 of last year, even a little bit like this past May, you see a little bit of an impact of that, but so many of our clients are really, right now, savings and paying down debt-focused that, again, tracking that net worth is so critical and to see where they are year over year, to see the percentage increase in their net worth year over year. That’s really motivating to keep them on track and that really reinforces the value of having us as advisors and providing that level of oversight. And then also because we’re not just being advisors, we’re also being their cheerleaders and their champions, because we’re pointing out to them, “Look at how well you did.”
Michael: And so, in building these reports, it sounds like your paraplanner pulls some data from eMoney, pushes it into Excel so you can kind of prepare this. But I’m just wondering, as you’re doing this across dozens and dozens of clients, mechanically, how does it go out? Like, does your paraplanner ultimately have to make, whatever, 80 individual emails, where you’re pasting stuff in 80 times? Does, at some point, this batch together in, I think you said you’re using Constant Contact? How does this volume of emails actually get sent out with, “Here’s your monthly best practice,” which I guess is the same for everyone, but then, “Here’s your report of your net worth progress, your spending budget, and the rest,” which is very specific to each client? You can’t crisscross those, people get really upset.
Danna: For sure. Right now, it is all going out individually to each client. And we use ShareFile for all of our communication. So there are secure links to download stuff, even though it doesn’t always have any account information. So we do it that way as well. So everyone, whenever there’s an upload, it comes through ShareFile, and we always send out content through ShareFile as well. So it’s like, “Here’s your link to view your monthly report.” There are a handful of clients that we do attach it as a PDF, mostly our older clients that that extra step of clicking on the link gets confusing.
Michael: Okay, so some, you’ll send it out as a PDF, because like I said, it doesn’t personally identifiable information. It’s not like it’s got account numbers and Social Security numbers.
Danna: No, it doesn’t even have a birthday on it. It’s really just their names.
Michael: And just charts that show trends. And the rest, you load it to their ShareFile vault and send them an email that says, “Click here to go to your ShareFile vault, and here’s our monthly best practice on your finances.”
Danna: Exactly. And people always have access to their ShareFile vaults. Everyone has a virtual financial planning binder. We talked about having deliverables, like all of our content in one binder that they have instead of just sending stuff via email. But we’re like, who wants a big binder these days, right? So we have what’s called our virtual financial planning binder. So it’s a ShareFile folder that they have access to at all times, they can upload and download to, and every note from every meeting, every deliverable we give them, everything goes into that folder. And so they could always go back into that folder and look for whatever they wanted to go back and reference as well. So everything’s always available there as well for clients.
What Danna Covers At Her Quarterly Meetings And How She Keeps Track Of Everything [58:58]
Michael: And then what happens with these quarterly meetings? What are you covering in ongoing meetings?
Danna: Yeah. There’s always an update of just sort of how we’re trending. We take a look at their financial statements and their cash flows and things like that and their net worth, all that kind of stuff. We tend to bracket it out to say, “Okay, Q1, we’re going to focus on tax planning.” Q2, we usually talk about… it has some more of an accrual and debt repayment focus. Q3 is more insurance matters. And Q4, it’s more of a global, end-of-year meeting. So we do sort of try to have categories that we’re going to focus on on a general level for all clients. That doesn’t apply though for necessarily all the clients we meet with. And then the other thing we’re doing is we’re going back to their original financial plan and we are going through all their implementation steps, making sure they’re on track, recalibrating anything that we need to be, and then, of course, updating everything based on what’s going on in their lives, “Oh, we’re buying a house. Oh, we’re having another kid,” which is really funny. The whole “having the second kid” thing, I almost can predict going into the meeting based on all the other conversations we’re having. A lot of times, we know before the parents know that they’re having their second kid or stuff like that.
Michael: Well, it’s been two years since you had your first one. Yeah, we should be expecting this announcement any time now.
Danna: Right. And they just bought the bigger house, and so we’re like, “Okay, I’m sure this is happening any time soon.” So it’s usually a lot of…sort of the way I view it, there are sort of four categories. The first category is going to be the more global thing that we are trying to focus on Q1 for everyone, for example. There’s going to be the more general thing for them, which is similar to the content that’s in those monthly reports, just touching base on having conversations about that stuff if any are needed. The third thing is going to be cross-referencing back to the financial plan and implementation guidelines and making sure we’re actually taking all the action steps and say, “Okay, now it’s time to apply for disability insurance. Do you have a trusted contact? If not, this is who you can work with, make the introduction. This is what the process looks like, etc.” And then the last part would be, of course, revising and making updates to anything that needs to be based on, “Oh, happy we’re sitting down with you. Guess what, we just found out we’re moving to California because we got a new job opportunity.” And so it’s working through those categories, not necessarily in that order, but those are sort of the four things we’re looking at when we sit down with people each quarter.
Michael: And how do you track all of these action steps you’re doing? Because it sounded like you had a pretty detailed like, “Here’s what we’re working on this month, here’s what we’re working on this quarter, here’s what we’re working on this year,” which again multiplied across dozens of clients that are in different financial planning stages gets messy quickly. So, how do you actually keep track of all that stuff?
Danna: Yeah. It’s funny, we were just talking about this in my study group, because I think we were all sort of like, “How do you keep track of everything?” And someone just gave a recommendation of a new tool that he’s trying out. So I’ll let you know if it’s any good. For me, what I’m doing is I have my implementation guideline. I don’t go back and edit it and say like, “Okay, we did this on this date,” but whenever I look at it, I’m pretty good at, and again, as we grow, something I might need to revisit, but I can look at it and just be like, “Okay, yeah, I know they got the disability insurance. I know we can move on to the next thing.” But then for every agenda, the first category is going to be accomplishments since the last meeting, and that’s going to be all their action stuff that they did or didn’t do, and I have to push along, push them to do. And then we have our actual current agenda, and then it closes with key client takeaways, which is essentially their homework items. And so that, if I just go back to the past few agendas, I’m still actively always tracking where we are on these different parameters. And then anything, in particular, that’s a key client takeaway that I know I need to actually have an action item on, even if that action item is going to be reminding them to do something, it goes right into…I use Wealthbox as my CRM. And so it’ll just become a task under their client name in Wealthbox. If it’s even just me reminding them about something, it’s a recurring task once a week that they get a weekly reminder from me until our next meeting or something like that. And so those ones end up in our CRM under each client contact as well. So it’s still evolving, but it’s sort of working thus far.
Michael: It’s an interesting…it’s a very straightforward framework to your agenda, accomplishments since last meeting, which I guess, to me, is sort of a nice euphemism for “Did you do your homework?”
Danna: 100%, yeah.
Michael: Your current agenda so you can go through your areas, like a check-in, are they on track with their numbers, update projections, check-in on action steps, and then a key client takeaway is at the end of, “Here are the action steps you’re committing to do over the next quarter that we will then hopefully update.” The next agenda, they’ll say, “These are our accomplishments since the last meeting,” because you got them done.
Danna: Exactly, exactly.
Michael: Interesting flow, interesting flow. And what does it look like for just setting those key client takeaways? Does that tend to be very prescriptive for you? “Based on our meeting, here’s what I think you need to work on next?” Is that more like, “Hey, I’m just going to give you options and you tell me what you want to work on next?” What do you find works for that?
Danna: I mostly define it based on our discussion from the meeting, and I tell them at the end of the meeting, “This is what I have for your key client takeaway. Is there anything else you’d like me to add? Do you want to talk about any of this?” But it’s pretty much like, “Go to irs.gov, create a profile, let me know what the IRS tax liability is.” It becomes really step by step. We try to break it down so that, again, we know, clients wouldn’t be working with us if they had the knowledge or understanding or time and energy to be doing this stuff on their own. So for me, I try to envision it as like I want them to be able to just execute and follow through on steps instead of saying, “Okay, you have to go out and figure out how to address a tax issue or an insurance issue or a retirement planning issue.” I try to really make it so they just have to execute on something as opposed to having to create a response or create a next step for themselves.
Michael: I like how you frame that, that just clients wouldn’t be working with us if they had the knowledge, the time, and the energy to do it themselves. So almost by definition, if they’re working with us, at least one of these three things aren’t working. Either they don’t have the energy or the inclination, they need the nudge, they want to delegate, they don’t have the knowledge, they need to be educated to bring them up to speed to get there, or they just don’t have the time, so they need your support to help them do it and get through it.
Danna: And with that said, this actually came up again during that last study group conversation I had, sometimes these meetings become…you haven’t done your homework for the past year, essentially, we are going to do a workshop meeting, where we essentially just sit there and we do the work together for an hour. And sometimes it’s a little boring, but at least you know it’s going to get done. And so if it gets to that point, I say, “Do you want to, instead, use the next meeting as an opportunity to work through these action items together?” At that point, a lot of people will take you up on that, and then you at least know it’s getting done. And so you are sort of handholding a process, but that has happened a number of times.
Michael: I love that. Did you call that a workshop meeting?
Danna: Yeah. Yeah, I call it a few different things, but yeah, that’s like one way to phrase it. Essentially, we’re just going to be doing this together.
Michael: And then we’ll get it done. And when you leave the next meeting after an hour, we know what will be done because we are literally going to do it with you. And you’ll feel better because you know it’s done.
Danna: Right. And a lot of times, it’s sitting and watching them do something, but that’s okay. I’m okay with that. If that’s what’s going to serve you and your personal financial picture the best, then let’s do it. I’m game.
Michael: And are these meetings then generally in person?
Danna: Both. We’ll just do a screen share. We use GoToMeeting for a lot of our virtual meetings. So sometimes it’s like we go to GoToMeeting, I make them the presenter, they share their screen with me, and I just say, “Okay, go to this website. Okay, click over there. Try that. Okay, download this. All right, next step, go here instead.”
Where Her Clients Come From [1:07:14]
Michael: Very cool. So, where do clients come from for you guys? Like, where are you…?
Danna: That’s a really good question.
Michael: I think this is the challenge for so many when they go out and launch a firm from scratch. The majority of advisors get the majority of their new clients from referrals, starting a new business, not very helpful, no clients to refer you.
Danna: Right. We started with our two grandfathers’ accounts, and that was it. One of which, we had every last dollar, he’s one of the ones that passed over the past couple of years. And so, yeah, that was like, we didn’t start with much.
Michael: So, how does that work in the early years? Where do clients come from? How do you get going when you’re starting from zero?
Danna: Yeah. So I think we sort of had timing on our side, which doesn’t really help out someone who’s trying to launch now, in that we were sort of new to this. We haven’t been doing this that long, but just for the sort of subsegment of the industry, seven years ago, we were two of three certified financial planners in all of Jersey City. Now, I don’t even know, but there’s definitely more than a dozen. And there’s other CFPs and XY Planning Network members in our office space. There’s two others. So it’s just changed so, so much. But with that said, like if someone went to CFP Board’s website and was looking for a CFP in Jersey City, they’re going to get me, Rob, or one other guy who works at a big firm but just happens to have a CFP designation. So I think we got really lucky.
Michael: And does that mean you are literally like you were getting clients from CFP Board’s Find a CFP Professional website?
Danna: Yeah, I was back in the day, not so much now.
Michael: It’s the curse of CFP Board’s success is, “Good news, we’re helping more people.” The bad news is we kind of literally end out in competition with each other when more people are getting found off the same designation.
Danna: Right. And there have been a lot more people credential as CFPs and all these organizations that are aligned with sort of this broader movement of either being fee-only or having more understanding and awareness like a CFP would. So like the NAFPA and all that kind of stuff, the Fee Only Network, all those, their membership is growing because more businesses are falling into that business model because of the industry trend. I think 2008 had a lot to do with it, and then others have cultural reasons why there’s been this shift. But you should probably can speak to more than I can. But, yeah. So we got a little bit lucky from that respect. And then the other part of it, we had pretty good SEO in the very beginning, and I think we just…it was a really sort of organic growth. I think having the bookkeeping business…the two businesses are incredible referral sources for one another. So that really helped us a lot as well in the early days because it really was word of mouth, friends and family. We ended up on the Facebook mom’s group. So I know we got a lot of clients from that, for Jersey City, and then again, being a part of all of those organizations that are sort of in line with this trend. We definitely got some referrals from that.
So it’s a lot of different things. And like I said, I think referrals is huge. It’s always my preferred source of new clients, and it always means the world to us whenever we get one that way. But for us having the planning business alongside with the bookkeeping business, like I said, we might initially have a planning couple, and one of them is an entrepreneur, so we start doing their bookkeeping, but then they have how many other friends that are entrepreneurs. So we pick up their bookkeeping and their tax prep. And then those people say, “Everything’s a mess.” We’re working with them, so we see it’s a mess, and then it comes up really organically saying, “Can you help us with financial planning as well?” And so those businesses really fed one another beautifully, especially in those early days, and that’s really how we grew most organically.
What The Accounting Side Of The Business Looks Like [1:11:20]
Michael: And I’m struck that you’ve talked a few times about the bookkeeping business, but you said bookkeeping business, not just tax business or tax prep business, which I feel like is how even advisors that do these blended financial planning and tax models tend to do it. I find it’s often, they’re just literally doing tax prep and tax returns, and the returns become an entree to get in front of clients. But it sounds like you’re doing actual small business accounting bookkeeping work?
Danna: A hundred percent, yes, we are.
Michael: So talk to us a little bit more about that side of the business.
Danna: And that’s where we’re having a hard time scaling that I referenced earlier. But same thing, we have about 80 businesses that we’re doing monthly bookkeeping for. So we have similar to like an eMoney integration we use in accounting software where we get integrated with all of their various bank accounts. And we’d go through and do create monthly balance sheets and income statements for them and payroll journals and all that kind of stuff for them each month. And then, that way, they have end-of-year, they have a full year of books that, at the end of the year, we can have a full year of books that we pull into their tax return. As we’re seeing it midyear, we say, “Okay, we need to make quarterly estimated tax payments because we see what’s going on with the business. Maybe it’s time to move over to an S corp instead of just being an LLC.” We can have these conversations with them all throughout the year instead of it being sort of a one time a year relationship. It’s more ongoing. Does that make sense?
Michael: Yeah, yeah. And so, how do you charge for the accounting side of the business then? What does that business model look like?
Danna: Yes, that’s about $200 a month for bookkeeping, and then we try a separate fee for their tax preparation. So if they need us to create W-2s for employees or 1099s, those are separate fees. And then for filing a business return, that’s a separate fee as well, and that’s sort of based on complexity, of course.
Michael: And so if you’re doing bookkeeping work, I’m presuming this isn’t just a standard for your HENRY clients in general. This is very specifically your clients who are business owners, who have some kind of small business that literally need formal business accounting and managing the books.
Danna: Exactly. And so there’s a lot of overlap, but now that that business has grown so much, there’s also a lot of just purely accounting clients.
Michael: And how many clients are over on that side of the business?
Danna: Yeah, there’s like 80 businesses, but we filed taxes, I think we filed about 300 returns this year. Rob doesn’t sleep or eat pretty much from January through April. Yeah, he’s hustling, and that’s where we’re having a problem, is scaling that business to maintain the revenue growth. On the planning side, you can maintain a revenue growth and scale more easily. Whereas on the accounting side, you just got to do another set of books. You got to file another tax return. It’s a lot harder to grow.
Michael: In other words, the planning side, you can increase revenue per client as clients move up at the accounting side, just the fee is what it is. The only way you grow revenue is you get more clients to pay that fee.
Danna: And then you do more work for those clients, and so you need to hire more people.
Michael: So are you then looking to hire in the accounting business at least try to staff up to deal with the volume? Because otherwise, at this pace, poor Rob’s getting 500 tax returns next year. It’s going to get really rough for him.
Danna: Yeah. So for tax season for a while now, Rob’s wife has been working with us really full time, and she’s been invaluable. So she is in musical theater by trade. She’s incredibly talented, has had a ton of awesome shows and performances, but she was raised by two accountants. So she’s been doing bookkeeping just because her parents told her to at the dining room table since she was like 14, and she’s very smart. So she has been helping us out with that business. So she’s one of our full-time employees and has been since probably almost two years, I would say. So she’s one full-time hire there. So we definitely keep it all in the family. And then we have two other folks that we’re working with part-time to help support that business as well. And then during tax season, I help more on an admin level, really get to the end especially, where it’s all hands on deck all hours of the day, where we’re just churning out tax returns. So we have a pretty good division between the three of us in terms of our competencies, and so that has worked really well. But yeah, it’s definitely yes, we are managing that growth. It’s totally scalable but you have to hire to scale. There’s a very direct correlation between the labor and the revenue.
What It Was Like Taking The Leap From A Salaried Job To Launching A Business From Scratch [1:16:29]
Michael: And so talk to us about what it was like as you were taking a leap to launch this from scratch. Walking away from stable salary job environment, large national firm, who everybody knows the name, into, “Yeah, we’re going to walk away from all of our income and take it back to zero to do this thing from scratch.”
Danna: I had the benefit of having a husband who is gainfully employed. But even at the time when I first left the job, I was making more than he was, and he’s an attorney, he was only a year or two out of law school. So that definitely helped. But we made a plan from the get-go. We aligned our personal finances such that we knew we weren’t going to take any money from the business for at least a year. And so that was…we definitely had accrued the savings to make that happen, and that was a part of the initial goal, but that definitely was certainly scary. It definitely felt tight, and that was, yeah. But again, we put a plan in place hoping that after that year that we’d be able to meet some earnings figures and have more sustainable takehomes and cash flow and support both of our families. And I have to tell you, between all the family stuff going on, there was a window in there where we lagged where we wanted to be which was very frustrating. And we knew it was because of the family stuff so we couldn’t really complain too much. But now, I think we’re definitely hitting the ground running again and definitely back on track towards all of our expectations and annual goals and stuff. So it’s scary. It’s scary.
And because we’re siblings, when something’s happening in our family, it affects both of us, not just one party. Whereas if it’s a business partner, the other person can pick up the slack for you knowing that you would do the same thing in turn. And we definitely had a bit of that going on where there were times where I was more involved with family, and he would just step up with the business, and vice versa. And we didn’t even have to have a conversation. We just sort of knew when each of us were at a breaking point with various constraints that we were managing. And again, that’s sort of again the beauty of being a sibling, we would just sort of pick up the slack for the other one in either realm that we were trying to manage. So that was really sort of a beautiful thing, and I appreciate having the business because it gave us the ability to take care of what we needed to for our family when we needed to, which was nice.
Michael: And so did you actually get back to the number you wanted to be at in a year?
Danna: Yeah, yeah, yeah. We definitely got back about year four, year five, year four. By year four, we were back on track.
Michael: Year four, you were back to where you’d been originally.
Danna: We didn’t lose, we just didn’t grow at the rate that we wanted to. We didn’t meet our initial five-year expectation of where we… We initially created a goal of where we’d be for every year, year zero through five. And there was a window from two to three where we were behind our goal. We were still growing as a firm, but just that it wasn’t growing at the pace that we would have wanted to and we were aspiring for it to. And that was very frustrating for us, absolutely, but we understood the balance and the tradeoff. And we knew that we’re doing a family business, we knew that there’s a lifestyle component to it, and the takeaway at that point was like, “We’re just fortunate, we have this kind of flexibility that we can still have these businesses and still manage all the other aspects of our lives,” which otherwise wouldn’t… Yeah, I think I would have had to leave my job just point-blank. I don’t think I would have been able to keep up with everything we had going on.
Michael: And did it become even more difficult to try to get to the numbers you wanted to be at when you’re starting a business from scratch, and not only do you have to grow the revenue and profits, but then you split them. You only get half, Rob takes the other half, and vice versa. I think at least for some advisors I’ve seen, it’s hard enough just to go on your own and try to scrap out the revenue net of expenses to get back to your number, but you start the business and try to bring in some revenue and not the expenses and try to scrap out a number, and then you only get half of that.
Danna: Yeah. So years zero ad one, I remember Rob looking at me and being like, “Look, these numbers are good numbers,” but we divide everything by two, because we’re effectively operating as one advisor. We were doing everything together. And I was like, “Yeah, I guess you’re right. I guess you’re right.” Yeah, that sucked earlier. There’s no sugar coating. Yes, that was tough. But again, now that we have the two business, we have different salaries from the respective businesses, and so I think it’s coming together in a way that makes a lot of sense and the broader picture definitely makes a lot of sense. It just was getting through those years two to four. Zero to one stinks, but you expect it to stink. Two to three, I would say, two to three and a half, two to four, that’s where you sort of have to have a lot of faith and focus to hope that you’re going to get to where you want to be for the long run. And I think that’s across the board. I feel like whenever you talk to any other advisor, they do say the same thing about those years, and we just had a lot of other factors going on to only make it that much harder, so.
Michael: Yeah, I see that a lot. The launch year is rough for everyone, and it just always is. That’s kind of the reality. But then you grind away, you get hopefully a couple of clients, there’s at least a little bit of revenue by the end of the year. And then you go into year two, and it’s basically just as bad as year one, because no one really knows you well enough yet to start referring. Your clients are too new to really give you much volume or referrals. All the people that you were going to ask that were like low hanging fruit, you asked them last year so they’re already on board. And year two often ends up being just as grindy as year one, and it’s often not until three-plus that at least a little bit of momentum starts to build.
Danna: Yeah, I think there was just a little lag for us there in that specific window, but that’s pretty much what happened with us too.
Michael: How long did it take you to get back to the income that you’d walked away from in the first place?
Danna: Probably year five.
Michael: And how do you look at that now going back and saying, “Well, if I just stayed where I was for those five years, five more years of salaries, five more years of additional savings,” do you look at it that way?
Danna: No, it’s not even a thought. No, I didn’t even consider it. Because, and again, I remind you I had two babies during this window, on top of everything else, which I wouldn’t even have been able to have… I mean, when I was working midtown, I was on the 6:18 train out of m town every morning. And granted I was going to school at 9:00 and stuff like that, I’d take the 9:51 train back two nights a week, but otherwise, I still wasn’t at home till 7:38. And yes, you have a maternity leave, but I just couldn’t fathom what that looked like for me introducing myself to motherhood with just that kind of schedule and that kind of demand. And it’s definitely a different story for Rob, but I think he was also at a different earning level, because I was further in my career, and things like that had happened. So for me, it’s just not even a conversation because there were so much else that we got out of this family business in these critical years for me, with such young children, that I happily will trade off that additional value. And then I think, also, from a business standpoint, I think we got really lucky with timing. And I think starting the launching when we did over six years ago was awesome in terms of what our business potential is and will be moving forward because we were sort of at the front of a movement. And I wouldn’t trade that for anything either.
So between the family value experience and being able to be an active participant in what we view to be a really awesome early movement, I think that really helps. And I don’t even have to justify it. Like I said, it’s not even a conversation in my head. But if I had to, that would definitely outweigh the additional few years of income that I would have gotten if I stayed a little bit longer. And my boss said to me, “You’ll make more money staying here.” I said, for a few years, absolutely. I said, “But that’s not…I’m looking for the long run and I’m making a plan for myself and for my family and for my future that working a traditional corporate lifestyle just wasn’t going to meet.” And I knew that. I know I like to work hard, but I knew I needed to do it in a way that was more aligned with my core values. And so, yeah, we work late at night and we have virtual meetings almost every night at 7:30. My 5-year-old still has a 7:00 bedtime because I need to take virtual meetings almost every night at 7:30. So there’s definitely…and he can definitely have an 8:00 bedtime, and if I don’t have a meeting, I’ll let him stay up late. I know I don’t mind working hard and I don’t mind finding this balance between family and work, but I need to have that as an option. Whereas if I was working corporate, I wouldn’t have seen my kids. Babies have early bedtimes. I just don’t know how that would have worked in a way that was…I see women do it all the time. I looked up at them and I admire them for it, and I just say, “I don’t know that I would be happy with that.”
Michael: I am struck though that, frankly, I know a number of female advisors in particular that have kind of gone the almost exact opposite view, which was that they were afraid to launch their own firms because they want to just start a family in the next couple of years and were concerned about the impact of launching a firm and having babies in the first few years. Is it better to stay where I am and do the traditional maternity leave thing there, and then I’ll go out later when my kids are young but at least through the pregnancy phases? Was that a factor for you or you just don’t look at it that way? You wanted freedom in the first place.
Danna: Yeah. It’s harder to juggle. I was definitely taking client calls or even virtual meetings and nursing my baby, and people didn’t see it because it was faced up.
Michael: Yep, out of frame, doesn’t count.
Danna: I was definitely taking client meetings and I had them in this little rocker at my feet, and I was bouncing him with my one foot and taking my client meeting. So it was a lot to juggle in those moments. I was sometimes doing full financial plans with one hand, sort of like with the call, then you use your forefinger the way old people do to hit all the different letters.
Michael: Oh, yeah, like finger pecking.
Danna: Finger pecking, yeah, through a full financial plan because I had a sleeping baby on my arm for three hours. I wouldn’t say it was easy for a second, but I didn’t mind hard and I wanted options and I wanted flexibility, and that’s why I placed value. Whereas I didn’t work, I worked about an hour from home. Otherwise, I knew I had to be in place. Some people have more six-month maternity leave, for example, or have a lot more ability to work from home and stuff like that. I knew that where I was, and I was exploring other options at the firm in case we didn’t decide to move forward with the business. That would afford me more flexibility, and some people have that. So if they have that, then that may make a lot more sense because it’s not easy juggling the two by any means. But I just knew I wanted that as an option, and I didn’t see another good option right in front of me, and then I also had this commitment to this family business and sort of broader vision for family businesses that I wanted to launch with my brother, and I just knew that that would be the time and I wouldn’t but the constraint to be me wanting to have kids.
What Surprised Her The Most About Starting An Advisory Business [1:28:42]
Michael: As you’re now six, going into seven years on building the business, what surprised you the most about building an advisory business?
Danna: That’s a really good question. I’m not prepared for that. Honestly, even though I have my brother, probably just that it can be lonely. We have our study group, we have each other, but I was always in, before this, I was in school and stuff, but then I was working on a desk with hundreds of people surrounding you and running this business. Yeah, I’m on the phone and I have other people I could turn to, but a lot of the day, you are sort of in your own space. We also have coworking offices we go to. But again, I only go a few days a week. So a lot of it, I love the flexibility to be independent, but that can sometimes be just a little lonely.
Michael: That phenomenon has always struck me. It was part of why I was involved in founding next-gen early on of just the isolating experience of being an advisor, even within a larger firm, because you can get stuck in your own firm, your own four walls of your cubicle or office and sort of lose perspective of what happens to the rest of the advisor world outside of your firm. And it was one of the drivers for Alan and I when we were looking at doing XY Planning Network as well, that same sort of phenomenon of, yeah, we jokingly call it now, you can be independent but not alone if you create some community or join some community. Obviously, that’s what we’re trying to build, because it just gets so isolating, and I think that was even the origin of a lot of the membership association growth in the early days of groups like NAPFA, and especially FPA. FPA grew when the advisor world went independent broker-dealer, because everybody became independent and then became really isolated and wanted community and camaraderie and gather it around these association groups based on whatever their value, focus was, that’s where they landed. So IMCA bill and NAPFA bill and FPA bill as the independent movements grew, because otherwise, it gets lonely.
Danna: Yeah. And I think that’s really…you’re lonely and you’re really responsible for what you do in that lonely window on the whole business operation, like what’s happening with everything. It’s different than when you’re just like a cog in a greater wheel. But when you know that so much is resting on your shoulders and you sort of feel… And honestly, you don’t feel alone, because I know I have people I can turn to in a heartbeat, and I group text messages with different study groups I have been in over the years and people that I know I can turn, and that’s all thanks to XY, right. So it’s not like I’m not alone. I have people I can turn to, but still, most of your day, you might feel lonely, depending on what’s going on any given day. And so that was, I think, something that was worth managing and then sort of surprised me.
Michael: What was the low point of the journey?
Danna: Honestly, probably conflict with Rob. If he and I were at each other for whatever reason, that crushes me. That crushes me. And there’s been a few spats over the years, and it’s going to happen, it’s going to continue to happen. But because we’re business owners, it does open the window for more conflict. Given that we’ve only had a few good fights over six-plus years, I say we’re actually doing pretty good. I’m good with that. But when that happens, yeah, that I think I can actually very can confidently say that that would be my low point.
Michael: Interesting. And what works through them then?
Danna: Time, reaffirming our core values, both in our sibling relationship as well as our professional relationship, and then just sort of proving to one another that we are committed by just sort of doing the work. By him doing his job and me doing my job, I think, like that alone also just communicates like, “I’m in this with you. We’re committed. We’re going to do this. We have the same goals and visions. And at the end of the day, we’re siblings and we love each other and we trust each other, and that’s what matters. That’s what matters most.” So I think it’s like a little…and that’s where the time component helps, not because it puts the incident further away, but because with every action we take in between the incident and where we are today, it’s been a step to reaffirm all that messaging, I guess.
Michael: Then what comes next from here for the business?
Danna: Hiring, more hiring, so we can continue to scale up. And then I think I want to get a little bit more involved with just creating some more content out there, again, for both businesses, and I have sort of more internal goals on investment recommendations and continuing to streamline operations, things like that. But I don’t know that we have… We have an app that we sort of worked on that we need to revisit and see what we could do with that. So we have lots of stuff that’s in the purview, but I wouldn’t say anything…there’s not one big thing that we’re like, “This is our next goal for the year.” It’s lots of things that we sort of have in motion that we’re going to continue to develop and build out and make scalable. We’re trying to manage the growth, that’s very much the phase we’re in right now is managing the growth.
Michael: Yeah, I look at this, there’s a lot of firms get started and grow and go through their lifecycles, and I find there’s sort of this consistent process. First out the gauge, like it’s just the early growth phase, the only thing that matters is getting some clients and revenue in so that you survive in this thing. It doesn’t really matter what tools and technology, anything else you use, because if you don’t stick around long enough for that stuff to get used, it doesn’t matter. You just have to get clients. Then you get your first few. Then you go into what I usually call the refinement phase like, “Okay, we’re getting some clients, but our process could probably be a little better. And we’re doing some plans, but I think I want to tweak how we do our planning.” And you start refining the stuff that you do, because people are showing up and are paying you, but you realize there’s ways that you can do some of it much better. And then at some point, you get pretty comfortable with what you’re doing and that you’re growing and where the growth is coming from. And you can always make incremental tweaks, but you really just hit this managed growth scaling phase of, “Okay, now we just have to figure out how to do what we’re doing for a whole lot more people with a whole lot more repeatable systems, because there’s going to have to be more staff that do it if we’re going to expand the range.”
Danna: Yep, and that’s 100% been our journey and where we are right now.
Danna’s Advice For Advisors Looking To Launch Their Own Practice [1:35:42]
Michael: So for advisors who are maybe looking at getting started or taking the leap that you did seven years ago, what advice would you give advisors looking today to make that leap from, “I’ve been in the business for a while and I’ve got some experience, but I kind of want to go out on my own and do this independent firm thing myself,” what advice would you give to someone looking to make that leap today?
Danna: I would say, first, be your own first client, which is a little tough. And if you have a spouse, walk them through it. I am the worst planner for my spouse, I got to tell you. Everyone keeps saying it, but I need to get another financial planner. He walked at the door one day, and I was reviewing the monthly reporting. He’s like, “What’s that?” I’m like, “Oh, this is what I send out to all the clients.” He’s like, “I would like to get that.” I’m like, “Oh, I can do one for us.” And that didn’t even cross my mind. So it’s that kind of thing where make sure you have your own house in order. Do not expect income from the business that first year, because if there is any, you probably need to be investing it into the products you couldn’t afford or the software you couldn’t afford in the very beginning or getting an office space or whatever the case may be, some marketing content. Make sure that you can position yourself for that for year zero through one. And really walk through the process and see what you think that would look like. And then I would just say put your ducks in order, obviously, put a business plan in place, but then be you when you first position yourself.
When Rob and I started this firm, we felt super young. We were 27 and 24, I think, and we were doing something very different, and we were siblings, and so we sort of hid that on our first website. We didn’t come out and say that we’re siblings. We didn’t 100% embrace our story because we were almost afraid and we almost wanted to look like all the other financial advisors, even though we knew we were doing something different. And as we’ve evolved, we’ve really learned to embrace our story, who we are, where we are. And you’d be amazed as to how wonderful the reception is from the candor. People are trusting you with so much personal information and content in this specific field that the more sincere and honest and genuine you can be and embrace your own story and put it out there to the world, the better reception I think you will get.
Michael: And it’s so true. We ask clients to be so vulnerable in sharing what is the ultimate taboo subject right now, “Tell me about your money, what are you making, where your dollars go.” So a lot to be said for being willing to make ourselves a little bit vulnerable first.
Danna: So we definitely learned that early on, and then we sort of redid our whole website. And we have the back-to-back sibling pose on it and all that kind of stuff. So super cheesy, check it out.
How Danna Defines Success [1:38:48]
Michael: And we’ll make sure we include links out in the show notes for people who want to take a look. This is episode 133. So if you go to kitces.com/133, we’ll have links out to Danna’s website and the sibling pose. So as we wrap up this podcast around success, and one of the themes that always comes up is just literally that word success means different things to different people. And so you’re building this successful business and getting traction, but I’m wondering, how do you define success for yourself?
Danna: That’s a really good question, and that answer has changed a lot since I’ve become both a mom and a business owner all sort of at the same time, because I think I used to associate success with getting through my tasks for the day and just feeling like I’m checking the right boxes. And then as a business owner, things come up left and right, and again, as a mom, you get a sick kid. My little guy had seven ear infections this winter, it was just like, yeah. And we moved, and my big guy had the flu twice. And so it was just a rough winter for us. So I think that had to certainly become redefined into just choosing your moments. Like in your moment, are you applying yourself in the best way that you can to drive what’s most important? And so I definitely fall prey to responding to the more, quick, but what’s the different categories, I’m misplacing it right now, but there’s the time-sensitive and then there’s the big picture higher priority stuff that’s not time-sensitive, and I’m really good at doing just the time-sensitive stuff but not the bigger picture priority stuff. Like, put the big rocks in the thing first, not the little pebbles.
Michael: Yeah. We get to the important and urgent stuff, but then we never get to the important but not currently urgent stuff.
Danna: A hundred percent, that was big for me. So then, making sure I put a plan in place to prioritize these important non-urgent things and then just make it daily tasks kind of thing. So then, even if it doesn’t get done today, it’ll get done in the next few days. I’m always a little behind. So knowing those things aren’t just being buried anymore and that they’re being addressed, that to me feels like I’m working towards success. It’s hard to ever say it’s been, you know, that you’re there. But that’s how I would say I’m achieving success, is knowing that I’m working towards the things that are the important, even the non-urgent bigger picture things in my life.
Michael: I love it. I love it. And thank you for just joining us and sharing some of the story and the journey on “Financial Advisor Success” podcast.
Danna: Thank you so much for having me.