Welcome, everyone! Welcome to the 74th episode of the Financial Advisor Success Podcast!
My guest on today’s podcast is Diane MacPhee. Diane is the founder of DMAC Consulting, a financial advisor coaching and practice management consulting firm that specializes in solo and emerging ensemble advisory firms.
What’s unique about Diane, though, is that before she was a coach for financial advisors, she was a fee-only financial planner herself for 16 years, and as a result brings a unique perspective with both the experience of a financial advisor and the training of being a professional certified coach.
In this episode, we talk in depth about the challenges of being a successful solo financial advisor, the self-limiting beliefs we sometimes inflict on ourselves that prevents us from growing and being as successful as we could be, why it’s so hard to set the “right” fee for clients (and especially to raise fees when we should), and why the #1 element to success as an advisor is to really find and get control of your own self-confidence, so you can confidently articulate your value to clients and prospects.
We also talk about strategies to break through when you hit “The Wall” in your practice – that point where you’re at capacity with the number of clients you serve, and you can start to feel tired, or overwhelmed, or outright drowning in your own practice – and why eventually, the key to continued success is not about figuring out how to hire more staff or use technology more efficiently or new marketing ideas to grow and add more clients, but how to transition to the right clients for you… even if that means it’s time for an “amicable termination” from some of your existing clients.
And be certain to listen to the end, where we talk about the key transition to make if you do want to grow into an ensemble practice beyond yourself… which is all about hiring people you can trust, and learning to let go and not be the bottleneck in your own advisory firm. Which, unfortunately, is much easier said than done.
So whether you are interested in learning more about the challenges of being a successful solo financial advisor, are interested in how to identify the right clients for you, or are wondering how you can build a true ensemble firm that extends beyond yourself, I hope you enjoy this episode of the Financial Advisor Success podcast!
What You’ll Learn In This Podcast Episode
- Common designations for coaches. [5:07]
- The difference between coaching and consulting. [8:01]
- Diane’s coaching firm as it exists today. [13:00]
- Self-esteem challenges that financial advisors face. [20:27]
- Common challenges that Diane sees advisors facing in her practice. [36:14]
- What advisors can do when they feel overwhelmed in their current practice. [39:53]
- Why it’s important to segment your clients. [46:57]
- Why advisors should “adjust” their fees instead of “increasing” them. [1:03:19]
- Diane’s two key questions for prospects. [1:12:53]
- How to politely turn away prospects who do not meet your minimums. [1:12:53]
- Why associate advisor is a better title than a junior advisor. [1:20:47]
- What Diane sees now as a coach that she didn’t see as an advisor. [1:37:32]
- The process of hiring a financial advisor coach. [1:42:29]
- How Diane defines success. [1:49:20]
Resources Featured In This Episode:
- Diane MacPhee – DMAC Consulting Services
- Nerd’s Eye View: How to Gracefully Let Go Of (“Fire”) Small Clients as a Financial Advisor
- Diane’s Client Segmentation Form
- Diane’s Ten Tips To A Successful Practice
- Diane’s Weekly Accountability Form
- Never Eat Alone by Keith Ferrazzi and Tahl Raz
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Full Transcript: Why Solo Financial Advisor Success Is All About Self-Confidence In Your Own Value with Diane MacPhee
Michael: Welcome, everyone. Welcome to the 74th episode of the “Financial Advisor Success” podcast. My guest on today’s podcast is Diane MacPhee. Diane is the founder of DMAC Consulting, a financial advisor coaching and practice management consulting firm that specializes in solo and emerging and ensemble advisory firms.
What’s unique about Diane, though, is that before she was a coach for financial advisors, she was a fee-only financial planner herself for 16 years, and as a result brings a unique perspective with both the experience of a financial advisor and the training of being a professional certified coach.
In this episode, we talk in depth about the challenges of being a successful solo financial advisor, the self-limiting beliefs we sometimes inflict on ourselves that prevent us from growing and being as successful as we could be, why it’s so hard to set the right fee for clients, and especially to raise fees when we should, and why the number one element to success as an advisor, in Diane’s view, is to really find and get control of your own self-confidence so that you can confidently articulate your value to clients and prospects.
We also talk about strategies to break through when you hit the wall in your practice, that point where you’re at capacity with the number of clients you serve and you can start to feel tired or overwhelmed, or outright drowning in your own practice, and why eventually the key to continued success is not about figuring out how to hire more staff or use technology more efficiently, or new marketing ideas to grow and add more clients, but how to transition to the right clients for you, even if that means it’s time for an amicable termination from some of your existing clients.
And be certain to listen to the end, where we talk about the key transition to make if you do want to grow into an ensemble practice beyond yourself, which is all about hiring people you can trust, and learning to let go and not be the bottleneck in your own advisory firm, which unfortunately is much easier said than done.
And so with that introduction, I hope you enjoy this episode of the “Financial Advisor Success” podcast with Diane MacPhee.
Welcome, Diane MacPhee, to the “Financial Advisor Success” podcast.
Diane: Thank you, Michael. I’m really happy to be here.
Michael: I’m excited to have you on the podcast because you I think come to our world from a different perspective. You know, you run a coaching business for advisors, which, you know, we’re going to talk a lot about today, but you come to a coaching business for advisors having been an advisor for 16 years.
And it’s an interesting split to me because there are a number of coaches in the advisor business these days, you know, I’m seeing, I feel like, more and more every year, but relatively few that actually have a background doing advising and being an advisor and, like, actually sitting across from a client and dealing with all the challenges that come up as you start growing your business. And I think it’s really neat to have someone that comes at it having seen both sides of the perspective as you were 15-plus years on the advising side and now 10-plus years on the coaching side, and get this understanding of what it looks like from either side of the divide.
Diane: Yeah. Thank you for the comment. It’s very unique in terms of when people say to me, you know, “What is a differentiating factor? There are so many coaches out there.” I think there’s a precious few in the country that are both Certified Financial Planners and Professional Certified Coach. I went through Coach University program, which was a 2-year program, and their faculty is stellar, you know, Ph.D., Fortune 500 consultants, which was wonderful for me because I had this 15 years of financial advisory world that I knew really well, and I was a Certified Financial Planner. And I’ve always had a desire to help people, as many in our profession do, yet I wanted, you know, a higher level than that. I wanted a direction. And we’ll talk about this later, too, but then I was able to appreciate the distinction between coaching and consulting.
I do have a number of my clients that will say to me, “Diane, I want to hire you because, you know, you were a financial advisor. You sat in my chair, you handled the difficult conversations, and you know what I’m talking about.” And many times I’ll say in a coaching session, “Trust me, I know what you’re telling me. I’ve been there. I know what you’re talking about. So, you know, where is your issue? Where’s your challenge?” Because I can bring myself right back to the moment, and yet I want to make sure that I stay with that client. I’m with that client on their perspective, you know, what they are going through. But yes, I loved being a financial advisor, and I love, love being a coach. I really do.
Common Coaching Designations [5:07]
Michael: So you mentioned, you know, actually you’ve gone through coaching certification as well, Professional Certified Coach, so help us understand, you know, most of us don’t come with any context or background for the coaching world. So is there, like, a designation wars thing in the coaching world like we have here in financial planning world? You know, for years it was, like, CFP versus ChFC, and we have our 184 designations or whatever it is on the official FINRA list now. Like, can you help us understand the landscape of what do coaching certifications look like in the first place? Like, how do we be diligent shoppers of coaches if we’re trying to find someone in that space?
Diane: Yeah, great question. The coaching world is, you know, far younger, I believe, in many respects than the financial advisory profession, which is also a young profession. The PCC is Professional Certified Coach, and then the level above me is MCC, Mastered Certified Coach. Those are the two designations, unlike our alphabet soup of financial planning designations which no wonder the public is confused in our profession.
Michael: Yeah, no kidding, so.
Diane: Yeah, exactly. But the Coach University program, the reason why I chose it, this is really interesting, Michael, in the early ’90s, Thomas Leonard, he launched, I believe it wasn’t even called Coach University at that time, it was something else, but he was a Certified Financial Planner, and really he’s the only other person that I knew of in the history of the Coach University that was a CFP.
So I checked out their program, and I wanted something that wasn’t fluffy because there’s a lot of, you know, people that make jokes on television, you know, life coaching, and they’ll treat it as a fluffy profession. And many people will say, you know, “I don’t need a certification to be a good coach.” And that’s true. That’s true. There are many great coaches and consultants out there that are not certified. That is certainly true. The reason why I did it was because I saw the faculty Ph.D., my mentor coach, her name is Lyn Allen, she is an MCC, which means several hundred hours of coaching. Which I actually qualify on the hours, but I would have to go back and go through a number of levels, which I will. I don’t know when I’ll do that, but off-track there.
Anyway, the faculty is so varied. The conference that they just held in Washington, D.C., by the way, your XY Planning Network, Arlene Moss, she was at that conference. It was really nice to see her. Yeah, that was pretty cool. There were 167 countries represented and over 1,000 coaches. And there are so many, it’s not so much designations, there are so many disciplines to how people approach coaching. And here I somewhat make it a little different. I pride myself on, I am not only a coach, I am also a consultant. There is a distinction, and I’m very happy and comfortable to live in both worlds.
The Difference Between Coaching and Consulting [8:01]
Michael: So help us understand that distinction when you say, “I’m a coach and a consultant.” Like, how do you define those terms? I think a lot of people would use them fairly interchangeably. And that was clearly, like, a distinction for you, “I’m a coach and a consultant.”
Diane: Yes. Yeah. In fact, I can remember at T3 conference, Marie Swift was doing a video interview of me, and I was covering this point, and she said, “So you’re a coachsultant.” And I was like, “Oh, wow, I like that, coachsultant.”
Michael: A coachsultant. All right.
Diane: Yeah, there you go.
Michael: I like that. You may have to run that on your website now.
Diane: Yeah. There you go. So the textbook definition from Coach University is they like to explain it in three ways that with coaching, you have therapy, you have coaching, and you have consulting. And therapy, if we use an example of somebody who wants to, say, learn to ride a bicycle, the therapist will approach the situation and say, “All right, talk to me, have you tried this before? Were there times in your life that you had some trauma around this? You know, talk to me about your fears around it. You know, what are your issues with riding the bicycle?” And they, you know, will tend to look backwards, “What was your childhood? What was the past experiences of your life that brought you to this moment?” That’s the therapist approach.
The consulting approach says, “Okay, we’re going to move over to the bicycle here, and we want you to straddle the bicycle. We want you to place your hands right here and here on the handlebars. I want you to position yourself. I’m going to show you how to pedal.” And it’s all about specifically, “How do I do this?”
Coaching is a more open-ended, “We’re going to explore your vision of how you want to accomplish this goal of riding the bicycle. So talk to me about why is it important for you to ride the bicycle? You know, what is possible for you here? What were you thinking? And where can I partner with you? I’m not going to tell you how to do it, I’m going to collaborate and partner with you, and we’re going to go through this together.” And in so doing, the client feels comfortable because as a coach, you want to encourage as much as possible, “Hey, you’re going to do this. I will help you, I will facilitate, but you are going to do the heavy lifting. You know, I’m not going to spoon-feed you.”
And my clients know that. I do not coddle them. And yet, you know, as much as I can say that, I’m very gentle. We have fun. I want to make sure the process is fun, but I really believe that… You know, sometimes I have clients, they say, “Well, could you take notes and send me the notes of our coaching session?” I’m like, “Yeah, that’s not going to happen. You’re going to take the notes, and later on,” which a number of my coaching clients do, which is awesome, they take their own notes, which is so more important, the physical act, and then they will review it while it’s still fresh. And that is someone who’s using the coaching relationship in a great manner because they’re going to apply it. They’re going to actually apply it because they’ve done that extra mile.
Michael: I feel like there’s a lot of what you’re saying there about the differences in consulting and coaching that frankly feel fairly similar to, I don’t know, I guess, like, differences between different types of advisors. Like on our advising end, right, there are some that, I think, take more of a consulting approach, you know, “Come in and tell me about your hopes, dreams, goals, and wishes, and your problems, and your situation and I’ll do the analyzing, and I’ll figure out exactly what we need to do to get you to your goals.” And others take what I think your position here is, much more of this coaching style approach, “You’re going to do this. I’m going to try to help facilitate you getting to your goals and down your track, but you’ve got to do this stuff if you want to take control of your financial life.”
Diane: Yeah. Yeah, Michael. And I suppose I’m so comfortable with the transition from financial advisor to coach because it is so…the two professions are very, very close. And mind you, I want to make sure I represent myself correctly, there are times where an advisor will say to me, “You know, Diane, you know, I’ve done a lot of work in therapy, I’ve done a lot of work on myself, you know, I need somebody who’s going to give me nuts and bolts. I need somebody who’s going to share best practices. I need somebody who’s going to tell me, you know, I’m at $600,000, if I hire staff, what does that look like?”
And I will jump right in because of the work that I’ve done for the last 11 years, and because of all the wonderful people in both FPA and NAPFA, I have relationships across the country that I have the privilege to call everybody up and say something like, “You know, I have a situation, what would you do?” And that’s a consulting leaning in and saying, “Yes, I appreciate you do not know what your next step is, so let me share what I’ve seen other firms do.”
Diane’s Coaching Firm As It Exists Today [13:00]
Michael: So can you tell us a little bit more, then, about your coaching firm as it exists today and, like, who it is you serve? I mean, I get advisors, but that’s a pretty broad label. So is there a particular type of advisor or stage of advisor, or certain problem types of advisors that are common for who you work with in particular?
Diane: Yes, yes, most definitely. I work with 50% solo practitioners and 50% emerging ensemble. I’m the coach and consultant that wants to work with either solos, or I’m the coach and consultant that wants to work with somebody who says, “Diane, I’m going to merge with a partner, together we’re bringing six people, you know, joining two staffs together. We will be two owners with six staff.” That’s my world. I love that, you know, background of firms to work with.
These solos are anywhere from, say, 5 years of experience to 20 years in the profession. Typically somebody first starting out, it’s not…I’m not sure that some are ready for coaching yet or they understand. I tend to work best with, you know, three, four, five years in the profession if they’re a solo. And I have a number of clients who are north of 15 years in the profession. Their revenues may range from, say, you know, on a low end of $300,000 a year and on a high end as a solo of, say, $800,000.
Now, the emerging ensembles, they might be 1 to 3 principals, and they may have, say, 3 to 8 staff, in addition to themselves, and their revenues may range from, say, $800,000 to $2 million.
Michael: Yeah, it makes sense to me, like, there’s a point early on in those first few years where…I mean, I guess you can frame the value of coaching, but, like, coaching when you’re in your first few years frankly really just comes down to, what are you doing to grow more revenue in the practice? Like, there’s only so many operational challenges and other issues that come up. You can get some as you start getting clients and volume, but so much of that in the first few years is just the race to get enough revenue in to be able to survive at the practice, to put food on your table, to get positive cash flow out of your business.
And for most advisors, you know, even that have a really good start out of the gate, you know, they may engage a coach just to keep focused on business development and maybe keep some sanity, because it’s a tough roller coaster I think for almost anybody in those early years. But getting to sort of the what’s next questions, like, you don’t really get to the what’s next sort of coaching questions until you hit that initial capacity wall.
Diane: Very, very true. In fact, I remember what it was like in my early years as an advisor, and I struggled. I mean, I’m one of seven children, you know, loving, caring upbringing, but definitely no extra money. And we went to Catholic school, so there was…I think my first color TV was junior year of high school. But with that background, I was terrified. And then you put advisors who are struggling financially, there are so many balls in the air and they’re trying to manage so much, and they’re trying to keep their confidence up and think about sitting across the desk from someone who has $1 million. And, you know, you’re lucky if you have your $20,000 in your savings account. But you went through school, and you have a CFP. So it’s really, when you think about it, quite ironic.
Michael: Yeah, I’ll admit it’s one of those things that, I don’t know, when I was young, there was a lot of like, “Damn, and I’ve got my CFP marks, and I’m a knowledgeable financial planner person and, like, people should want to hire me.” And while all that knowledge was useful and valuable, and I did I think build a lot of client value and some business success from it, I’ll admit there’s a different perspective just now having hit those further life stages a little bit further along in my career of just going like, “Oh yeah, you know, I’ve talked to clients about the importance of, like, building emergency reserves before you go and launch your own business,” then I went and launched my own business. Like, “Oh, this was a little bit more emotional than just like, “Oh, yeah, you’ve got enough money in your banking accounts. Like, you’re good. You’ve got some padding.”
And, you know, family and kids and all the challenges that come there as you’re making life decisions that just… You know, it’s not that the book learning isn’t valuable or doesn’t matter, because if you don’t know what the technically correct advice is, you also can’t really give very good advice. But I didn’t quite appreciate how much sort of just the worldly and life experience matters. Just have better perspective on what else is going on in a client’s head beyond just answering this, you know, technical planning strategy question thing that might be coming up, whether it’s, you know, college saving strategies or retirement strategies or whatever it is. I had to get further in to appreciate what else goes into that.
Diane: Yeah. Okay. And that’s actually a little different than my early years as an advisor. I was more the softer skills. You know, I wasn’t the life planning where I delved into that or said, “Oh, yeah, I resonate with this.” I was kind of maybe middle of the field, where I was comfortable with people, very comfortable talking. I spoke at Rutgers University and got a ton of divorced women and widows as potential clients, which really helped launch my practice, which was great. But my self-esteem issues were the opposite of you, Michael. I was more worried about, “Are my technical skills strong enough? Do I know enough?” And I felt as if…you know, “I didn’t I grow up with money, you know, who am I to be telling these people what they should do with their money?” So I had to get over that.
In fact, when I first did the CFP, I was 28 years old. I saw the advertisement in “Money” magazine for the CFP ad, and I paid the fee in my local university in New Jersey to take the courses, never knowing that there was also a $3,000 tuition bill with the College of Financial Planning. So at the time, I was working at Liberty Mutual.
Diane: Yeah. And $3,000 could have been $30,000 to me at that time.
Michael: Yeah, it’s a big number now. That was a bigger number then.
Diane: Yeah, exactly. And I was so happy with myself. I was working at Liberty Mutual, and I had passed the property and casualty, I’d passed the life and health. And I was working in their commercial insurance, working with large companies, being paid very well, and Liberty Mutual acquired Stein Roe Mutual Funds. So I persuaded my district manager to see that the CFP program was related curriculum to the fact that Liberty Mutual just purchased a mutual fund company. So he agreed, and I had 50% of my tuition bill covered. I’m like, “Oh, this is great.” So that was the early years. That was the early years. Yeah.
Self-Esteem Challenges For Financial Advisors [20:27]
Michael: So I am curious then, you know, when you talk about, like, the self-esteem challenges that come up for us early on when we’re trying to just get comfortable with clients and validate like, “Yes, I am worth these advisory fees,” and, you know, as you said, like, having not grown up with money, having that fear of, “Who am I to tell people what to do with their money,” how did you get past it?
Diane: Yeah. I’ll tell you, I have a very favorite quote. It’s, “Lack of confidence is bred in lack of preparation.” And I told myself that if I prepared for prospect meetings well and I prepared where…you know, I did the research, and I put in the homework, and I learned as much as I could, that I would start feeling better and better. And I’ve told a number of my coaching clients, “I don’t mean to diminish a prospect or client coming in your office, but, you know, trust me when I tell you this, you do know more than they know. I will bet the firm that you do know more than they know. You may not feel that, but you don’t have to be concerned that you must know everything and you must give yourself credit for how far you’ve taken yourself if in fact you have.”
And I do feel the number one element, the number one element most important for advisor clients to succeed is to get a great handle on their self-confidence. You know, it’s rare that a business owner will examine this issue thoroughly, yet it’s crucial for their success, because the tough stuff, the dark hours of building a business, it’s most definitely in the early years where you’re scared financially and you’re worried. And some people borrow…I borrowed money privately, and I paid back every penny with interest, and I said to myself, “I am going to make this money back 10 times over.” So, you know, you don’t have the luxury of stepping back and saying, “Oh, you know, what do I do if I don’t succeed?” I never told myself that. I just, you know, said, “You’ve got to build up your self-confidence. You can’t fake this. You either put in the time and effort.” And I’m on that page, Michael. I’m on putting the time and effort, put in the hard work.
Sometimes when my coaching clients say, “You know, Diane, I feel like all I ever hear about is investment performance”, and they get all irritated with their clients. So I listen very gently and then I say, “Well, that’s why you’re getting the big bucks. That’s why you’re getting the big bucks.” Because it’s so easy to collect quarterly fees, retainers, or AUM or whatever and just not realize that sometimes you are going to have to step up to the plate when things are a little tough, you know.
Michael: Yeah, I feel like it’s the epitome of our perfect client. Like, the perfect client is the ultimate delegator. They give me all their life savings, and then they never call and ask for anything.
Michael: It’s a great theory. And, you know, if you do this long enough, like, at some point you’ll probably end out with a handful of clients like that. And, you know, they’re very easy to manage since they give you their life savings and they don’t call and ask for anything. But, like, that’s not reality for most advisors or most clients. Like most clients from time to time, they kind of want some things, so you’ve got to do the work and demonstrate your value proposition from time to time. That’s part of the gig when they pay you.
Diane: Exactly. And to that point, you know, later on, we could talk a little bit about, I feel for advisors. They read 100 articles, blogs, whatever on, “Articulate your value, articulate your value,” and they still struggle in this area. And they need to work on it because I feel like it’s the number one….you know, well, I’m sorry, self-confidence is number one. So the number two thing to focus on is, when you articulate your value, you have a little passion underneath it. You have a belief that, “This why you need to hire me. You need to hire me because this is what I see, and this is how I can help you.”
And again, I am not a fan of advisors discounting fees. Anybody who works with me knows that. I have a funny story. One of my clients said, “So basically, Diane, you’re telling me to raise my fees,” because we were having this conversation. I didn’t tell her. I mean, she obviously brought the issue to me first. “You’re telling me to raise my fees and cut back on the number of office meetings.” So I said, “Yes.” And that’s all I said. So she said, “That’s it? Yes?” So I said, “Yes. Now, I want you to tell me why you think it’s a good idea to raise the fees and cut back on the meetings.” And we got into it, and we were off to the races, and she was really well prepared for her client appointments.
Michael: I’ve been fascinated with kind of this self-confidence phenomenon. And I love your quote, “Lack of confidence is bred in lack of preparation.” You know, for me, that was…I don’t think I realized it at the time, but as I look back, that for me was the driver in going out and getting basically the alphabet soup of degrees and designations and stuff that I have now. Like, I was acutely aware, my own version of this like, “Who am I to tell people what to do with their money,” I was just really self-conscious when I first started out as an advisor because I came straight out of college. I was a psych major and theater minor. I didn’t know anything about money stuff, and I knew I didn’t know anything about money stuff. And it freaked me out. Like, “I don’t even know how to ask people to buy my products and services or take my recommendations, why would they if they ask the most basic due diligence questions, they’ll figure out I know nothing about anything, and this isn’t going to go very well.”
And so that for me was the big drive up front to say, “Then I’m going to learn enough that I actually do know what the heck I’m talking about. And that if someone starts asking questions, I can answer them, and I can answer them with knowledge, which I guess in retrospect means that I can answer them with confidence, because I would be well prepared for any question that came along, because I really would know well more than any of the clients that I’m going to be sitting across from.” And that was what brought the confidence for me. And it probably took a couple of years I think, just as I look back, to get to that self-confidence point.
Diane: Yeah. Kudos to you, Michael, because at that young age you said to yourself, “Okay, I’m acutely aware of my deficits at the moment, so I better, you know, start gaining some knowledge.” And you did, and you likely did it with a very serious commitment and intent. And then the last thing you said was very important, self-confidence does not happen tomorrow morning or next week, it is transformative, it’s a shift. You’ll feel it, the people around you will feel it, your staff. Your clients will notice because you’re just more relaxed. You know, all of those things.
There’s an Indian fable I wanted to make sure…it’s very short and I wanted to make sure I got it in the podcast. And it’s, “So one evening an elder Cherokee told his grandson about a battle that goes on inside all people. He said, “My son, the battle is between two wolves inside us. One is fear. It carries anxiety, concern, uncertainty, hesitancy, indecision, and inaction. The other is faith. It brings calm, conviction, confidence, enthusiasm, decisiveness, excitement, and action.” The grandson thought about it for a moment and then meekly asked his grandfather, “Which wolf wins?” The old Cherokee replied, “The one you feed.”
Michael: I like that.
Diane: Yeah. If you live in a place of not confident, you’re giving off a vibe. If you live in a place of genuine confidence, you’re giving off a vibe. I mean, you don’t want to be arrogant. You know, hubris does not go over well.
Michael: You know, it’s a funny thing because I remember this even amongst, like, the class of other young advisors that I started when I did. So I feel like you can break people into two categories, you know, in the context of your fable there. Like, there was the group that I think had the experience that I did. Like, the fear wolf was the hungry wolf. I was constantly worried that someone was going to realize I didn’t know what the hell I was actually talking about. And so some of my, you know, class cohorts that got started around that same time couldn’t figure out how to get over that, were supremely not confident, it communicated to their clients, their clients didn’t hire them. Or communicated to prospects, the prospects didn’t hire them to become clients, and they were gone in a year or two.
I at least went the other route and said, “All right, like, if this is my demon, like, this is the thing I’m going to conquer. So I’m going to go learn my stuff and get my CFP marks.” And I did more courses after that. And like, “I’m going to get to the point where, you know, if I have to be the young guy in the room,” because, you know, I started young, so that was a pain point as well, like, if I have to be the young guy in the room, I’m going to be the young guy in the room where everyone goes, “Wow, that’s a damn smart, young guy,” and make that an asset for me. Rather than being stuck in, “That guy looks really young, and I’m sitting here wondering if he even knows anything because he’s so young,” which was what hounded me.
But at the same time, like, there was a second group in our class who frankly had more success out of the gate. They were the ones that actually know how to do the whole “fake it till you make it” thing. Because there was a confidence in…like, there’s a natural confidence in “fake it till you make it,” and hopefully don’t actually do anything really bad to clients along the way while you’re figuring out, “How do I do it properly?” But they didn’t have the self-confidence problem. They could carry the “fake it till you make it” effect and then backfilled around them.
And, I mean, I guess, like, it speaks very much just to your fable and those two pieces that, you know, they had supreme faith in themselves to the point that they were comfortable to do a “fake it till you make it” thing. And while they had some other challenges, like, self-confidence was not one, or at least not one that was slowing them down. And then there were folks on the other side like me that the only way to get over the hump was to figure out whatever it was going to take to build self-confidence. So for me, it was, “I’m going to have to nerd out on all this education stuff until I can figure out how to not be freaked out that people don’t know that I don’t know anything about money.”
Diane: Yeah, yeah. Yeah, I am a believer in “fake it till you make it” because you can fake it till you make it with the 90 minutes that you might be with a prospect, and then if they call you and say, “Yes, we’d like to hire you, we want your firm to take care of our financial planning,” then, you know, you’re going to get your butt in gear and you’re going to figure out, “Oh, wow, I better start backing up what I told them I know.”
Michael: Yeah, yeah. At least now there’s a very specific client situation you know you need to study for. That’s amazing.
Diane: Exactly, trial by fire. And I said, “Yeah, there’s nothing wrong with that. There is nothing wrong with that.” And coaching sessions I’ll say, “Listen, the jump, or the “I must know this” or, “I don’t want to say why I have to research that,” there’s other ways to just comfortably handle the situation at the moment by saying, “You raise a great point, here’s what I’m hearing at the moment. Yet this second piece of it, it will require more analysis because it would be remiss of me to give you an answer when really I would need to just fully check it out for you.” That completely wins respect. So again, that “fake it till you make it,” that’s self-confidence.
And you know, Michael, while you were talking I was thinking too, there’s a label people put on themselves whether they’re an introvert or an extrovert. And I’ve had a number of my coaching clients, they’ll say to me, because they know, you know, I’m fun, I’ve got high energy, and they immediately say, “Oh, you’re an extrovert,” which I am until about, oh, I don’t know, 06:00 at a conference and I need to go back to my room and decompress and watch a baseball game just by myself because it’s a lot. So I believe people are on the continuum of introvert/ extrovert. So for you, you know, you’re this younger person who went out and got the knowledge which gave you comfort, and I don’t know what you would label yourself, but I don’t think that any of us are 100%, you know, introvert or extrovert. I think we’re on the continuum. And I believe that we move along that continuum, where some days we are more of an introvert.
The reason why I raise the issue is because in my coaching sessions, I will have clients say, “Well, yes, Diane, I can appreciate what you’re sharing, but that I just could never do. I’m an introvert.” So there you have this classic self-limiting belief. And it’s instead of saying to them, “Well, gee, that’s a self-limiting belief,” you don’t do that. You say, “Well, I’m curious, what’s underneath you terming yourself an introvert? Tell me a little more about that.” And that’s where you get people to start to open up about seeing a possibility where I just share with them, “Do you know how many wildly successful advisors or sometimes shy, sometimes introverted and maybe three months later they’re, you know, having a great time in the office and they’re very…? It’s not about, you know, this outer extrovert or introvert. It’s not.”
Michael: Yeah, that resonates with me because I’m actually an introvert as well. And, you know, I get that as, like, there’s a surprised look from a lot of people to make that point. Like, I’m an introvert that does a lot of work as a professional speaker, you know, standing up on podiums in front of large audiences of people.
But even for that, it’s the same phenomenon for me. That, you know, give me a crowd where I’m speaking on a thing that I’ve already studied the heck out of and I know I know, and I know I know it cold, and the self-confidence kind of carries me through that and I’m fine. But, you know, put me in a cocktail party where I don’t get to talk about my areas of expertise, and, like, I will be the one in the corner, furthest from the music and the noise, just, like, sipping a drink like a wallflower, because I can’t function in any other way. Like, I’m still very much in that introverted realm for which I just occasionally manage to come out of the shell in areas where I feel like I’ve got competency and self-confidence.
Diane: Yeah. So many of these issues pop up in a coaching call, and, you know, I always say, you know “Take a deep breath when you’re in a cocktail hour and just think about, “What’s something easy?” And I always go to either movies or sports or weather where I’ll say, “Has anybody seen a movie lately?” And I’ve gone up to people, and, I mean, people would describe me as an extrovert, but it doesn’t make me comfortable. I can remember once being at a Charles Schwab conference and it was overwhelming. It was, like, 1,000 people, and I was like, “Oh my gosh, this is just overwhelming to me.” And it was something…it taught me about, you know, “What do you do in these instances when you’re uncomfortable?” So, yeah, yeah, it’s a whole area that we all struggle with. Yep.
Common Challenges Diane Sees Advisors Facing In Their Practice [36:14]
Michael: So beyond this theme of kind of self-confidence, and I think I feel like particularly for those of us who are introverts, like, the burdens we put on ourselves saying, “I’m an introvert, I can’t do this,” rather than saying, “I’m an introvert, I’m going to do this differently than others,” like, are there other…as someone that’s now been doing this 10 years-plus with advisors are there other common themes that you see that crop up that are challenges or blocking points for us as advisors beyond the self-confidence issue?
Diane: Sure. Sure, Michael. You know, the one you’ll hear pretty early on with most people when I’m interviewing them for the coaching, the, “I’m drowning. I’m overwhelmed. I am so tired. I am so discouraged. You know, what the heck happened to my original dream?” That’s a biggie. That’s a biggie, that one.
There’s another one which is right up there, anxiety over raising fees. Though they readily admit raising fees in their particular situation, they will readily admit to me is long overdue. And I just have this, you know, passion about fee-only, independent RIA advisors, they need to charge what they’re worth. It needs to come from them. They need to realize that there is so much that they offer, and, you know, there’s so much that people give away. So, you know, we’ll talk later about fees and raising fees and all of that. But that’s a big one.
There’s another one that…there’s this misguided belief that other advisors know better. You know, whether it’s technology, or a fee method, or a service model. They’re always second-guessing their capability as a business owner and a financial advisor. You know, “Diane, I do it this way, but I think other people, I don’t know, they just seem like they have their act together better than I do.” You know, that’s a big one.
Another one similar to overwhelmed is, “There’s a backlog of work. I delegate the work. My piece comes back to me because I’m the advisor and there’s certain things that need to come back to me due to my expertise, and then it sits on my desk, or worse yet, on my floor, and I become the bottleneck in the firm.” You know, that’s another one.
Those 4 are 4 of 16. I mean, I can quickly…there’s lack of confidence, there’s disappointing employees and underperforming employees. Another popular one, “We don’t have a process,” you know, there’s a lack of process. CRMs are less than ideal. Workflows, they’re okay but they’re not great. So there’s a lot of time spent spinning wheels on the lack of process. Compliance obviously is a big one, we all know. Technology decisions, they seem to be growing as an area of stress because of the level of sophistication.
Here’s another one, emerging ensembles and established ensembles, there are vague career tracks or complete lack thereof. You know, employees will say to me on coaching calls, I have a number of owners that say, “Can I use some of my coaching sessions with my staff?” And I’m like, “Of course, absolutely.” And, you know, I’ll have a great coaching session with the employee, and they’ll say to me, “I am honest in telling you I am not really clear what my track in this firm is. What my role is.” And so role clarification is a huge issue. I mean, everyone tosses the term around, but when rubber meets the road, I don’t know how many people are doing a really good job of it.
What Advisors Can Do When They Feel Overwhelmed In Their Current Practice [39:53]
Michael: So I want to go back and talk about the first of those situations that you mentioned. Like, “I’m drowning. I’m overwhelmed. I’m tired. I’m discouraged,” sort of phenomenon. I feel like I see this a lot in our advisor world. You know, you start out in the first few years, and it’s all about just, get clients, get revenue, try to be able to pay your bills, hopefully across to the point you can take a little bit of money out.
Then you get past that point. It feels really good for a while because all the new revenue and growth, like, just you’re making more money, this business feels successful. It feels really good, and then you hit a wall that’s usually literally like a capacity wall. You can only handle so many clients because now all of a sudden you’ve got 50 or 60 or 70 or 100 clients and all these service requests are coming in, and all these kind of ad-hoc questions that are coming in, that’s not bad from any one client until you got, like, 75 to 100 at once and you’re just drowning in emails and stuff to deal with. And then some advisors hire a staff member or two to help. And then that helps for a little while. And then a year or 2 later you’re drowning in 100 clients and 2 staff members to manage. And it doesn’t feel good anymore. Like, the fun goes away.
And so I guess I’m curious, like, how you handle these situations. Is it all like, “All right, let’s sit down and prioritize and try to get a handle on time management and get you more efficient in this,” or do you come at it from another angle?
Diane: Yeah. Great question, of course, because it’s probably one of the biggest issues with advisors is the overwhelm. And I feel sad for the discouragement part because they started with a lot of enthusiasm to open their firms, and clearly, they want to have fun and grow the business. So I look at it as bottom-up and top-down. Sometimes it’s soothing to advisors to go bottom up on the coaching calls first by saying, “Okay, if we were to just look at this from ground level, we have to look at, what’s in your face? What’s immediate? What do you need to do?” And, again, I’m not a fan of high, medium, low. Prioritize things in your CRM as one, two, three: high, medium, low. Because a lot of priorities end up either high, or they end up medium, and so few end up in low.
Michael: Yeah. Right, right. So, like, prioritization doesn’t work when everything is a priority.
Diane: Yeah. I can remember one time an FPA dinner when I was in my early 30s and this person was pontificating to me. And they said, “Well, you know, Diane, it sounds like you need to prioritize.” And I said, “Yeah. Well, it gets a little difficult when there’s multiple, multiple, multiple priorities.” So that’s the frustration level.
So instead of that, I go with a time context. And I coach my clients by saying, “Let’s look at this from a time context. Forget high, medium, low, let’s look at immediate being by this Friday, and obviously if it’s a Thursday or Friday it’s by the following Friday, and then soon would be the next two weeks. What do you need to do?” And that gives a little bit level of control for them. And then I’ll say, “Whenever is saved for the much more important, larger issues. Do you need to revamp your website? Do you need to make some significant technology platform choices? You know, what’s up there in terms of not tomorrow but certainly important to our business?” So immediate, soon, whenever at least provides some structure and order.
Then I say, “Okay, that’s bottom up, let me talk to you about top-down. How often are you meeting?” And this is what I’ll get, Michael. “Well, we were supposed to have the Monday staff meetings but sometimes we do blow it off. We just can’t keep them going.”
Michael: When you get busy enough, like, it’s hard sometimes to find the time for the Monday staff meetings to try to figure out the stuff for the rest of the week. Like, right? That’s why I called you because I’m drowning and I’m overwhelmed and I’m tired.
Diane: Exactly, exactly. And I will cut some slack on the unhappiness with the staff meetings if there’s what I call toe-tapping. Toe tapping is meetings that are going way too long, and there’s probably maybe a third in the room that don’t need to be sitting and listening to things that will never affect them. So that’s kind of unfortunate. So I try to go with 30-minute, 45-minute max weekly staff meeting. We take a quick look at last week. We look at what’s up this week. Everyone around that table should know if there was an upset client who was very upset last week, and they’re going to be coming in this Wednesday. These are the things that need to get discussed as a group because there’s never a time to get everybody together. Yet, I don’t believe the meeting should run past an hour.
If it looks like it’s running past an hour or it could run past an hour, or a topic gets raised with 10 minutes to go, you schedule what I call the auxiliary meeting with just the people that are affected. So it gives an out for somebody to say, “Well, I think this is really important.” And you can honor that staff person, say, “You’re absolutely right, it’s important, it’s not going to be in today’s agenda. We’ll set up an auxiliary meeting. And oh, by the way, Bill, John, and Sue do not need to be in on that. Yet you can tell us at the next Monday meeting what’s going on with that issue.” So the Monday meeting is pretty much, look at last week, look at this current week, what items do we need to cover immediately? The auxiliary meetings could be side meetings for people that are… You know, that’s bottom-up.
Top-down would be, my suggestion, get everybody out of the office. Go somewhere out of the office away from the phones, away from the email, and have a strategic planning day. In my coaching what I do is a number of my clients will hire me for both the phone sessions as well as an on-site. And I go out to the office and we do a strategic planning day where the foundation is laid in the morning. Vision, what does the firm look like? What will it look like this year in 2018, December 31st, it’s New Year’s Eve, you’re looking back, are you happy with your year? 2019, one-year vision, what do you have planned for next year? And then three-year vision.
And I like to hit home with the, “It’s New Year’s Eve, you’re looking back, are you regretful? Are you happy? Did you accomplish what you wanted to? Get everybody on board?” The word vision means look, eyesight, vision, eyesight. So I say, “What does it look like?” And that is a separate and distinct element from core purpose, which I choose not to say mission statement. I like core purpose. Core purpose is, “What do we do, for whom, and why?”
So, therefore, everyone around the table starts talking about, “All right, as a firm, let’s all understand and agree what is it that we do? For whom? The client. And why?” Well, it’s not just the client, it’s a good springboard for, “Who is the target market? Who is the ideal client?” Which is another opening to another whole conversation about, “Do we have unsuitable clients?” Because, you may chuckle at this, Michael, but I have a term that I used when I had my own practice. I called it amicable termination.
Why It’s Important To Segment Your Clients [46:57]
Michael: An amicable termination. Well, that’s better than an unamicable termination, because that probably usually involves lawyers.
Diane: Yes. Amicable termination is, I have a group of unsuitable clients. Now, personally, I’m a kind, compassionate person. Do I take clients and say, “You know what? You’re just not a fit anymore?” That is not kind, nor is it compassionate, nor is it respectful.
So the first thing that the advisor needs to do if they want to tackle overwhelm is to find advisors that are either in their area, ideally or not because I did see one of your blogs where you raised a great point, it doesn’t have to be geographical. You can have an advisor, and this would be a conversation with your client, where the amicable termination would be an explanation of why we are no longer a fit for you. “We’re doing this sort of work. However, we are going to help you. We are going to make sure we take care of you, and we’re going to make sure that you’re settled in with an advisor that you like.”
Now, when I do these coaching sessions I’ll explain to them, “Look, the amicable termination call, it’s a whole another call, but I need you to hear that overwhelm must be addressed on a number of fronts. So your strategic planning day, when you are talking about, you know, “What do we do, for whom, and why,” we’re going to define the clients.” And by the way, for your show notes, I’m going to offer a client segmentation form that I have used, yeah, yeah, with my clients. I’ll say to them, “It’s a really easy Excel spreadsheet.” Many advisors out there have their own version. This could just be something helpful for those that don’t, or it could be…I’m very big on “keep it very simple and very clear.” So I’ll make sure that you have that for the showcase notes. But part of the strategic planning day is client segmentation.
Michael: You know, we’ll make sure we get it linked up in the show notes. So for those who are listening, this is episode 74, so if you go to kitces.com/74, we’ll have the segmentation form there for carving up clients.
You know, the blocking point to me I think that you have to deal with when you hit this wall is…and you start getting at it when you do things like, “Are we going to do amicable terminations with unsuitable clients and just segmenting clients and figure out who we’re serving?” It’s just this recognition that if you’re running an advisory practice and it’s you, you will only ever serve so many clients. There’s only so much capacity. Yes, you can have an admin staff or two and some technology that maybe helps you get a few more and a little more capacity, you know, maybe you’ll cap out at 50 clients on your own and 75 with great tech, and 90 with an assistant, and110 with a paraplanner. Like, the number gets up a little.
But, you know, it’s like you’re driving a bus, and there’s only a limited number of seats on the bus. And you can’t change the bus. It’s a bus. So you know, you can try to cram more people onto the bus, but then you’re just stacking people on top of the seats and you’re driving a really rowdy bus. And I think that’s where a lot of advisory firms get to. And, you know, the solution is they try to figure out, like, how to make everybody sit nicely in the bus and cram more people in there and try to bring more order to the bus. And at some point, the only solution is you have to ask some people to get off the bus.
Michael: Either you have to ask some people to get off the bus, or you need to go find another advisor as a partner and start driving a second bus that can go next to yours. You know, the two of you can drive more people. But, you know, your bus is a fixed vessel. There’s only so many people. There’s only so many clients that can get on with you. And, you know, when we start driving the bus and there’s no clients, it’s really exciting when the first one gets on, and the first few get on, and then you’re, like, filling the bus and you’re getting clients and it feels really good. And I think for so many of us we just…it feels so good when you’re growing clients and getting them on board with the firm, it’s a really, really abrupt, awkward challenge when suddenly you have to not add more clients.
Diane: Yes, yes. In fact, the concept of a waiting list is very challenging to a number of advisors. And I’ll say to them, similar to your bus analogy I’ll say, “If there’s so many chairs in the room, don’t you want the people sitting in those chairs to be great clients going forward? And every time you put somebody else in that chair, they’re not going anywhere because you just took them on as a client. So they’re going to stay with you.” So people are so scarcity-based, you know, “No, I better get this now. We need the revenue. We need the revenue.” And there needs to be a leap of faith that if they were to step back, perhaps put a waiting list in, which I have a number of my advisors now doing and they are so grateful for, “Gosh, Diane, that was one of the best things we did.”
The other issue with overwhelm and bringing everybody in, etc., for a quick left turn here, is personal care. You begin to start to sound in irritated on the phone. You are beginning to have a level of irritation in your voice. That is not good, you know, on client calls. And in some cases, it’s not even noticed, you know. So there’s this step back, top-down, if I were to throw the entire firm up in the air and started again, what would I want it to look like and where do I need to make changes to get closer to that?
Michael: And the good news, like, if you’re at that point with a healthy and full client base, like, you don’t have to literally walk away from the firm, start from scratch, build it over again and say like, “I’m going to do this better the second time,” you can keep the clients and keep the revenue, but you have to at least get to the point of saying, “If I’m going to regain control of my bus, some people have to get off the bus. And frankly, not only do a few people have to get off the bus but ideally, then a few more people have to get off the bus so I can add a few onto the bus that are better to work with, that I would like to work with. That I would be happier working with.” I mean, I think it’s hard for a lot of us, like, you have to recognize that’s a fixed vessel, that there’s just only so much space, and that once you get past the point of just, “I’m adding clients, I’m adding clients, I’m adding clients,” you have to deal with this capacity issue.
Diane: You do, Michael. And, you know, there’s a lot of guilt, because we can talk about, you know, the tactical of doing this, and then there’s the emotional. So I feel as if the guilt can get addressed if you do your job. And this is what I say. I’m like, “Okay, so I hear you. You don’t want to hurt anybody. You don’t feel good as a person. So call 5 or 10 advisors. They don’t all have to be in your state. Call 5 or 10 people that would be a perfect referral source for you to send clients who are no longer going forward going to be a fit, and then have the respect to have your client come in, have the meeting with them in person, ideally, and say to them, “I wanted to have a conversation with you because we’re moving in a direction where we’re doing work in this area, and we are not going to do our best job for you. But I took the time before having you come in here, I’d like to introduce the concept, and I’ll go over these people with you. And then if you’re good with this, call them and certainly, certainly know that you can call me if you want to run anything by me or if you…” And Michael, 80% of the time, the people are fine, the clients are fine.
Michael: Well, I think most of us are worried about the other 20%, though.
Diane: Yeah, yeah. I actually, when I went fee-only, because when I first started I didn’t even know fee-only existed, and I was being commissioned for a little bit. And I had a gentleman named Angelo, and I went from 125 clients deliberately down to 85, deliberately down to 63 to get my practice to a place where I could have a fee-only practice that I wanted. And he said to me…out of, like, that huge number drop, everybody was good. I took care of everybody really well. I tried my best. He called me up and he said, “Are you firing me? Are you firing me?” And I said, “Well, now, Angelo, that’s one perspective to look at it this way.” I was like, “Ta-ta-ta-ta-ta.” And again, it’s not easy being a financial advisor. It’s not always going to go your way, but at least be prepared to handle all situations with as much grace and as much respect for the client as possible.
Michael: The truth that goes with it as well, and I remember, like, when I was getting started, this was one of my sort of revelation. So I got started on the insurance side of the industry back 18 years ago. And the big thing at the time was bringing in new insurance agents and having them call on, like, all the old existing clients of the old dog insurance agents, some of whom had, like, 1,000 clients or more, 850 of which had probably not been contacted in the past 3 to 5 years. Like, just because they were really, really good at sales and doing other things, like, they just had gone out and met a bajillion people over the years and done a whole lot of business. And so there were all these people that were, you know, “clients” of the advisor but were not getting serviced. And no one was doing anything.
And so, you know, my job early on was to, like, call these old clients of the senior advisors who hadn’t been contacted over time. And, you know, the advisors for a lot of the firms were always really squeamish about this. Like, “No, no, this is my client. Like, who is this person calling on them?” And it took a while to kind of gently push the point through to them that I was coming at it from my end as, like, the junior advisor who was hungry to get anybody to call that wasn’t a cold call, was like, “You’re not servicing them that well anyways.” Like, it was hard to say it to them directly because, you know, they’ve been doing this for 30 years and I was not yet 30 years old. It was like, “They’re not even a good client for you. Like, just admit it to yourself, they’re not a good client for you, but they’re a great client for me. Like, I will service the heck out of them because your small client is my A client.”
And just recognizing that distinction for us that unless you’re truly, like, the first year or two out of the gate, you know, as you said, like, you can segment clients. All of us can segment clients. We can go through and figure out who are A, B, and C clients and try to adjust them accordingly for what we do with them, but at the end of the day, your C client is someone else’s A client. And if you’re out of room on the bus anyways, do both yourself a favor and the client a favor by moving them so they’re not your C, they’re someone else’s A. Like, it’s a good thing for the client. It will feel a little awkward in the moment, but for a lot of those clients, you know, the truth is, like, they usually know they’re a small client.
I mean, I guess there’s two groups. There’s the small clients you need to let go of, and they usually know they’re small clients and they’re often fine with the transition, particularly if you’re going to literally hand them to someone for whom they’ll be an A client and will be better, and then there’s the small subset of clients apparently like Angelo that you just want to let go of because they’re not necessarily pleasant people to work with, and you just kind of have to be prepared that’s not going to be a pleasant conversation. But then it’ll be over and you never have to talk to Angelo again. So just bite the bullet once and you’ll be amazed how much stress lifts off your shoulders when you don’t have to deal with an unpleasant client anymore.
Diane: Yeah. And you’re bringing up the point about treating the person with dignity because they deserve the better advisor for them. That is the point yet, you, you know, position it in a very gentle way. Secondly, the other issue with that would be for instance within firms, Michael, you have your…some firms have this investment-only and they have full boat, you know, retainer, comprehensive planning client, but they have a contingent of clients that are investment-only. Well, here’s an unfair situation. The investment management-only client calls and calls and calls the firm, and keeps kicking the barn door open to get about 80% of the planning services. And many advisors buckle. They buckle and they say, “Well…”
Michael: Yeah, how do you not…this is one of the reasons I’ve always been negative on planning firms doing investment-only services. Like, not that it’s a bad thing to try to do it and segment your clients that way, but when you’re wired as a planner, you don’t know how to not answer those questions when they come in. You feel guilty. You answer them anyways and then you’re giving away the service and not charging for it.
Diane: And here’s why I think you should feel guilty. Here’s my argument against it. I say to them, “Okay, so they’re paying about a quarter of your full boat clients and they’re getting about 80% of the service of your full boat clients. So how is that fair to your retainer, ongoing, comprehensive clients who are loyal to you?” So they sit and I get total silence on the other end of the call. So I say, “I need you to consider the whole perspective here of, what client do you want to work with? Who do you want to be most fair with?”
The second issue is, I was never crazy about, you know, A, B, C service tears and, you know, C gets okay, decent service, A gets, “Let’s take them out to dinner four times a year.” I don’t do well with that. I always say, you know, “Talk to me. What kind of practice would you like, and how would you like to match the service model to your fee schedule? And then take a look and cast that against your client segmentation.” And when I say client segmentation, Michael, I mean by fees only. Like, you’ll see when I give the handout for the show notes it’s basically, find out who is your top 20%, your 30%, 30%, 30% and then your 10%, whatever. I forgot how I actually broke it out. It’s on the sheet. But my point being, look at who you are not servicing well because of the, you know, “Gee, they only pay me $3,000 a year.” And it’s awful for a client to say, “I know I’m not a big fish.” That’s an awful, awful, awful situation and it needs to get corrected. It does.
Michael: Well, and again to me, it just gets back to the, like, “Well, I don’t have very many people on my bus. I’m so happy when anybody is willing to get on the bus that we just take anyone…we take anyone we can get. Like, if you’re willing to pay anything, maybe like a really nominal minimal fee, like, you’ll do any business with me, I’ll take you as a client,” because that’s what you have to do in the first few years just to get revenue in the door so that you can pay your bills and survive as a business.
Like, it’s the proverbial boiling frog effect. Like, then you get another client or two, and another client or two, and another client or two, and at some point, you can’t actually do that anymore because you’re running out of room on the bus or you’re completely out of room on the bus. And we just keep adding clients and can’t get comfortable saying no, or, “This isn’t a good fit,” or, “This is a not good enough fit that I’m going to keep this seat on the bus open for someone who’s a better fit and I’m going to refer this person to another advisor for whom it would actually be an A client on their bus because they don’t need to be a C client on my bus.”
Diane: Yes. And you know, Michael, don’t forget that the C client of yours is the A client for, let’s call him John. Well, John may run across a client that’s over his head. And he knows it. You know, stock option analysis, $3 million. Oh my gosh, there’s four trusts. Who is he going to refer to? Your firm, as he should, as he should. So it could go both ways. Does it happen very often? Maybe not, but it doesn’t really matter. What matters is if we’re going to do the right thing, it’s find the right home for the client. Treat the client with dignity and respect. And oh, by the way, let’s align all of this with the strategic planning day that we’re having.
Why It Is Important To “Adjust” Your Fees Instead Of “Increasing” Them [1:03:19]
Michael: And I know you’d mentioned earlier as well but, you know, then you get what to me is basically the other way that you start solving this problem. Like, option one is, “I’m going to go through my client list and I’m going to figure out who’s not a good fit, and I’m going to do some, as you put, it amicable terminations. Option two is, or you just get comfortable that you’re providing some good value and raise your fees, and let them sort it out for themselves.
Diane: Very true. Do you know how many times… And, you know, I sit here in New Jersey sometimes and I hold my breath because I say to my coaching clients, “I promise you that this conversation will go well. You will not lose your clients.” So for instance, I have a specific example, no names obviously. So a person buys an older planner’s practice because the person who’s older is really…is, like, late 60s, early 70s, waited way too long. When the younger person buys the firm, guess what? They find out the fees are way low. I mean, really low, like $1,200 a year, $2,000 a year, and some of these people have assets north of $1 million.
So in instances like that, it’s a monumental challenge. However, you sit down, and this is the part about where you get extremely good about articulating your value. So the first thing you do is, you know, obviously you’re meeting the client, etc., and you’re talking to them because they’re brand-new to you, and then what you say is, “I want to address…” Well, first of all, you start off with, “Here’s what we’re going to be doing as we work together,” you know, blah, blah, blah, articulate the value.
Then you move gently into, “I’d like to discuss the fee for your situation.” Now, what I think advisors get nervous about is they’re going to lose people. They’re like, “Diane, I know I’ve got this guaranteed revenue, I know the fees are too low.” Or let’s say it’s an established advisor. It’s not that they acquired a practice. It’s just their own practice, “I know the fees are low but at least I’ve got these fees.” They have to get out of that mindset because I want to say to them, “Well, are these the fees that you want to work for? Do you think that you should work at this fee level?” “No.”
So I said, “All right, would you agree to something for me?” And they were like, “What?” I said, “Let’s talk about maybe having two or three conversations. Let’s start with some easy clients and let’s work our way up. And I promise you,” and this is where I hold my breath, “I promise you that if you start with articulating the value, not for 90 minutes, just for about 5 or 10 minutes on, “Let me go over what we’ve done for you so far. I wanted to share the history of your account,” blah, blah, blah, articulate value. You move into, “I’d like to discuss the fee for your situation. We are adjusting the fees across the board. For a level playing field, for all clients, it is requiring us to adjust the fees.”
Now, I don’t want this to sound like gamesmanship, Michael, and I don’t from my heart believe it is, but I do not tell my advisors to use the word “increase” or “raise.” Do not say, “We will be increasing your fees, we’ll be raising your fees.” The brain hears what the brain hears. So I coach my advisors to say, “We will be adjusting fees across the board. Your fee is also adjusted, and analyzing your situation the fee is…” You don’t say, “The fee now,” you don’t say, “You used to pay,” you don’t say any of that. You keep it very specific, very calm, and then you allow the person to react. And typically, you know, I always say, “Let’s go worst-case scenario. Diane, are you out of your mind? You’re tripling my fee.”
So let’s say worst-case scenario. So you say, “Well, I appreciate your reaction. You’re absolutely right. This fee has been low for so long, I take responsibility for that.” Like, let’s say it’s not the acquiring, let’s say it’s a practice that I have for years. “I take responsibility for the fact that I did not adjust the fee sooner or more gradually. I don’t think it’s fair that I should raise your fee.” And I usually…Michael, I’ll tell advisors if the fee increase is over…and I can say increase to you and to my advisors, I just don’t want them to say it to the client. So if the fee increase is over 30%, first you just let them react because some of them will say…believe it or not, honest-to-God I’ve had advisors say, “Diane, you’re not going to believe this, my client said to me, “Well, don’t yell at me, you’re the one who set the fee.” So I say, “Well, that’s a great reaction.”
Michael: And I know a few advisors that have been through this and, you know, the first reaction from clients is something to the effect of, “Yeah, I really felt like your fees were way too low for a long time.”
Diane: Right? And number one, the great…
Michael: But, you know, they were getting a good deal, so who argues with that? You pay a lower fee as long as you can.
Diane: Yeah. Who’s going to volunteer, “Gee, raise my fee.” So those are great reactions. And I talk about them with my clients as well. But I say to them, “If you do not get a great reaction, if you get a…or if they don’t say anything you want and they say, “Well, I understand, Diane. I do understand you need to…” You know, I tell my advisors, “Please do not say, “Well, I have staff to pay and I’ve got to turn on the lights, and I have this technology that cost so much.” Do not do that. Do not moan as a business owner. Do not dump your business owner problems in their lap. Do not do any of that. Just say, “Well, I appreciate that you understand.”
Now, if someone says, “Are you crazy?” or whatever, say, “I can appreciate that I’m raising the…” I’m sorry, “I’m adjusting the fee 50%, so here’s what I’d like to do.” And Michael, never, ever, ever discount. It’s always, “We’re going to do this in a two-step manner.” You never discount the fee. It’s a horrible message to give, especially when you’re trying to raise the fee. So what you say instead is, “I certainly can appreciate this is a little bit of sticker shock. We’re taking you from $5,000 to $7,500. So let’s do this, let’s do $5,000 to $6,250, and, then in year 2 we’ll bring the $6,250 up to $7,500. Does that seem fair to you?” And typically they will say.
And one of the other things I teach my advisors is to say, “Listen, I’m doing this. I went through a really, you know, exhaustive analysis to come up with a fee schedule that was fair to you and fair to me.” And I say to my advisors, “Do not be afraid to say, “Fair to me.” They need to respect that you deserve the fee for what you do.”
Michael: Yeah. And then I always look at it and say, you know, I mean, if you really want to come back to the worst-case scenario, like, you raise your fees by 30% and a third of your clients freak out and leave. If a third of your clients leave but you charge the rest 30% more, you basically still make the same money, and you just have to do a third less work because a third of your clients left. So, like, it’s not the worst-case scenario, you’ll make the same money with less work.
Diane: That is so true, Michael. Well, I can say in the 11 years that I’ve been coaching, the worst hit that my advisor got in revenue was a 10% loss. The worst hit. And I’ll tell you, I make my advisors laugh, I say to them, “They don’t want to leave you. They do not want to leave you. And part of it is inertia. It has nothing to do with how good you are. They say to themselves, “I really don’t want to fill out custodial…” And so my clients are like, “Oh my gosh, Diane, you’re, like, totally insulting me.” And this is the fun part of the calls. I say to them, “We have to have some fun with this. You have to relax.”
But honestly, in 11 years, and I am not kidding when I say I hold my breath because I’m scared for my advisors. I don’t want them to lose revenue. And I say to them, “Look, I know that this is scary, but I’m going to tell you from experience, I’m not guaranteeing that you won’t lose more than 10%, but I’m telling you over dozens and dozens of firms, most of the clients have stayed, and the worst hit was a 10% loss.” And in your case what you’re saying Michael is not only is it breakeven, but it’s usually ahead. But here’s the emotional boost, tons of less work. And maybe some of them were very not happy people. And, you know, just a really good change.
Michael: I mean, even, the advisor who had a 10% revenue decline, like, I’m going to bet that’s ironically only because they lost more than 10% of their clients since other ones stayed and paid a higher fee. So even when your revenue declines by 10%, that person’s workload may have declined by 20% or 30%, like, you’re still more productive and doing better and breathing a little better. You know, maybe you just took a small income step back to take a bigger step back in how buried and drowning you feel in your practice, which for most people that are at that point, like, that is still a win. A little bit less revenue and a lot more time to breathe is a win.
Diane: Oh yeah. I had a person go from hourly to retainer, a solo practitioner on the East Coast here, and he amicably, and maybe he didn’t think some were leaving, 27 clients, which represented $15,000. And now he’s rocking and rolling because his minimum annual fee is $6,000 a year, and he’s like, “I feel lighter.” And I said, “Yeah, it’s the hardest thing to do. And I want to do everything I can to help people get through this.” And I hold my breath, but I say to them, “Please, just please do this because if you choose not to do anything at all, you will just be in this situation next year and the year after. Do you really want that?”
Diane’s Two Key Questions For Prospects [1:12:53]
Michael: So, you know, you had let a lot of this up with, there’s also just the discussion of articulating your value first. And it strikes me, I mean, you know, all of these discussions basically come back to this combination of having self-confidence, just kind of confidence or value, and just figuring out how to articulate it well, or reasonably.
Diane: Yes, yes. And Michael, so many linear, cerebral investment folks, they talk too much. Instead of articulate value, they go to the comfort zone of, “I will talk about the investments. I will talk about the markets. I will talk about what I think they need to hear.” That is not going to work because the person sitting across from you is not really hearing why they want to work with you. So when I say articulate the value, like for instance if it’s an established client and you have to raise the fee, you would say to them, “I’d like to walk through the history of your account, and I just want to spend a moment and share with you these 12…” You know, you don’t say 12. I’m saying it to you, “These 12 things that…” And the person goes, “Oh, I totally forgot you helped me with the refinance of my mortgage.” So that’s an articulation of value because it was very specific.
When you have a prospect, what you want to do is ask questions first. And my two grand slam questions, whether you’re on the phone with somebody brand-new or whether you’re with them in person, you don’t know how much money they have. And people say, “Diane, I don’t know how to do this. I have a minimum. How do you just flat out ask somebody, “So, what are your assets? What are your investments?”
So the first thing you do is you say, “May I ask you, what’s your greatest financial concern?” And when they answer that question, listen carefully because as they’re telling you and they’re pouring their heart out what their…you know, “I have elderly parents. I’ve got college coming up on me. You know, should I touch my 401(k) for college?” you know, all of that, you listen, you listen, you listen, because you’re listening to, “Where can I match this up later to say to them, “This is what I heard, and this is what I’ll do?” That’s the question number one. You know, where you match your value later to what you heard.
The second question, because you have no idea if in fact you are a firm with minimums and you want to treat the person with dignity. And let’s say it’s on the phone, which I tell many people, “Do this on the phone. When there’s an incoming call or if it’s a online whatever, have a phone call first just to make sure no one’s time is being wasted.” So the second question you ask them is, “To gain a full scope of your situation, would you please share with me what have you saved thus far?” Now, that’s a classy way to ask. And they might be a little confused.
Michael: I like that. “To gain full scope of your situation, would you please share with me what you have saved thus far?” That’s a really nice way of saying, “How much have you got?”
Diane: Yeah, “How much have you got?” Right. So now I tell my advisors, “Now, be prepared, they might not understand or they might say, “Well, I don’t know what you’re asking me. Is it 401(k)? Is it my checking account?”
Michael: “Well, you know, just all of it, all of it. Just what does it add up to,” right? “Why don’t you just list to me all your accounts and we’ll do it that way? Like, how’s that?”
Diane: No. What you say is “Well, yeah, let’s start with the retirement.” And then you always treat with respect. If somebody’s total, total assets are $200,000 and your minimum is $1 million, you don’t say, “Oh, okay. Well, our firm has $1 million…” You don’t do that. What you do is you first applaud them for the fact that they saved money, and then you say to them, “All right, here’s what I heard about your situation.” And you repeat one or two things to show that you listened to the whole situation, and you say to them, “The type of work we do with our clients in our firm, we are not a match for you. But this is not the first time this has happened when people call our firm. So we feel at our firm,” which makes you guys look fantastic, “We feel at our firm that we’re going to go the extra mile here and see if we can line you up with a person who would be perfect for your situation.” Now, do I feel helped as a prospect? I do. Do I feel respected? I do.
Michael: And you know who’s a fit.
Diane: Yep. And then obviously if they say, “Well, I have $5 million in the 401(k).” Now 14 CD books in our kitchen drawer. So you’re like, “We’ve got a big fish here.”
Michael: Yeah, all right.
Diane: So then my next thing is you say, “Well, you know what? We should continue the conversation. Let’s get a date on the calendar.” And I tell people, “Stop being so nervous. Just be normal and say, “Let’s get a date on the calendar, you know, where we can discuss this further.” So that helps.
Michael: So the other blocking point you mentioned as well was kind of the backlog of work that becomes the bottleneck for the advisor.
Diane: Yeah. Yes.
Michael: You know, I’ll admit, like, I’ve been guilty of this in my business for a long time now. Like, you know, hire more staff, delegate more things, still like to review them before they go out the door, and then I end out being the bottleneck on all the things that I want to review. So, like, the good news is that I’m delegating work things to others, but then I still end out being the bottleneck on reviewing stuff before it goes out the door.
Diane: Yes, Michael, really important for two reasons. One is, you hire the staff, and here’s where my heart goes out to advisors. Their end of the deal sometimes is much quicker. What they need to do will take less time. So they do it, and they’re turning it around, and boom, it’s right down the hall back in your office. But you are an advisor maybe knee-deep in, like, deep thinking financial plan issue, your work takes longer, and it takes a concentration level that takes longer. So therefore they finished, they give it to you, you’re not reviewing it because you’re doing other things, and then it sits, which is not good, either, like, crisscrossed on your floor or on your desk, and your staff begins to feel a lack of respect. They feel a lack of respect. They did what you asked them to do, and they notice that it hasn’t even been looked at, and it’s three or four days later. Not okay.
Michael: Or five or six, or a week or two.
Diane: Or five or six, exactly. So one of the things that I think is helpful… You’re so honest, and you’re not the only one.
Michael: I’ll admit it’s happened. It’s happened.
Diane: Yeah, sure. And, you know, especially a staff person if they’re excited or they thought they did a great job. The advisor, through no fault of their own, they’ve got tons of stuff in their office. They are oblivious to the fact that the person is waiting to hear some feedback. So do I say drop everything? No. Of course not. You have to set realistic expectation on their part to say, “Thank you so much for doing this so quickly. It’s going in my office. I’m going to tell you that there’s 114 things in my office,” and you make a joke. Use humor or whatever. And then you say, “I’m going to get to this. If I do not review it and get it back to you by Thursday or Friday, come nudge me.” Now, you’ve given them permission to do that. They’ll never do it on their own. They’re not going to walk up to you and say, “Michael, I gave this to you on Monday, it’s Thursday.”
So if you say, “Come nudge me on Thursday,” then when they knock gently on your door, you say, “You’re right. I remember you’re the Martin work. The work you did for the Martins. I remember. Can we scrab 20 minutes tomorrow morning?” And you make sure when they come back to nudge that you set aside, you know, the 20 minutes to…and maybe you’re reviewing it in front of them, and that wouldn’t be a terrible thing because…if it’s too long of a review that’s a bad idea. If it’s a quick review, which typically it is when the work is done well, it’s nice to share that moment with them because they learn.
Why Associate Advisor Is A Better Title Than Junior Advisor [1:20:47]
Michael: Well, and I’ll admit, for me, like, you know, I spend a lot of time dealing with challenges like this and trying to get better at delegating and putting better task management systems in place to make sure that the stuff wasn’t slipping through. And the real problem of it was never actually a, like, time management prioritization problem, it was too many people on the bus. And, like, there was never ever going to be enough time in the day to do all the bottlenecky things that were happening around me. Like, I had to work with fewer people.
Diane: Yes. Yeah. And someone in your position as well as many advisors, I have owners that are building ensemble firms, and by the way, I’m glad I’m on…people will hear this, I don’t like the term junior advisor. I think it’s very demeaning. You know, say support advisor or associate advisor. And you…
Michael: Yeah, I’d say associate. I hate the junior advisor label. Like, if your junior advisor happens to be 50, it’s just a fine way to describe, like, junior in a hierarchy, but when your junior advisor is a 20-something, it sounds age pejorative. Even if it wasn’t intended, to me, like, it’s just a status ranking thing, not an age thing. When you’re the young person trying to get your credibility, it comes across as an age thing. So yeah, I’m a strong advocate. Like, associate advisor is fine, junior advisor is not fine.
Diane: Exactly. And let me be clear, you did not say that. I don’t want people thinking I heard you say that because you didn’t. But yes, associate advisor. And even if the person is 50, I still think there might be a hit to their credibility as well, so I would like everybody to just try to…you know, because language, by the way, language is really, really important when you’re…even with staff, clients or anything, you want to be able to say, you know, associate advisor.
But to your point, owners in ensemble firms, they’ll say to me, “Diane, how do I…?” And, you know, many times people say handoff. Internally in coaching conversations, they’ll say, “How do I hand off my client to my associate advisor?” And that is very, very analogous to somebody is selling their firm, and the new buyer is new to that client. The two situations are very similar when it comes to the conversation, whether it’s an owner handing off or whether it’s, “Hey, everybody, I am selling my firm and here’s the new person.” So that conversation is with the client, and the strength of the conversation is with the person that they know, which at the moment is the owner.
So let’s say you. You’ve finally decided, “Okay, I need to…there’s five clients I’ve identified. I need to definitely transfer them to somebody else.” So Michael starts the meeting with the other associate advisor in the meeting, and you’ve let the client know, “John is going to be sitting in. He’s going to be covering actually a few of the items on your account because he did most of the work in this area. So when we get to that part of the meeting, I’m going to turn it over to John.” So when you hand off clients, you cannot do it in one meeting. It is a minimum of two meetings. You know, it doesn’t have to be three, depending on how well it’s going, but the credibility factor is maybe Michael runs the meeting 70/30 or 60/40, and John runs it, you know, the remaining time. And by the way, in that meeting, you turn to John and say, “John, you know what? Take the ball and run with it because you did the work on their investment portfolio.” So now the client is saying, “Oh, okay.”
The second time they come in they now know they’re meeting with John and Michael again. And this time we’re going to flip it. It’s 70% John talks, Michael talks 30%. And then you either held the conversation at that point saying, “Listen, we’d like you to be comfortable. We use a team concept. We will always have a lead advisor. And, of course, I touch your file as well as a number of people in this firm. But we feel at this point you’re pretty comfortable with John, so I want you to know for our next meeting, John will be conducting the meeting and I will not be here in the meeting. And I wanted to make sure you are comfortable with that.”
Now, the one awkward thing, Michael, is they won’t say, “No, I’m not” in front of John. They might call you later and say, “No, no, not happening,” and then you have another conversation to worry about. But I have to say when done well, two meetings, if it’s still a challenge, three meetings, but then it’s done.
Michael: You know, this was…like, this kind of phenomenon was really hard for me when I went to the…so my current role, like, I don’t take clients directly at this point, with all the businesses and all the stuff that I juggle. I wouldn’t have the capacity to serve clients to the standards that I expect. So, fortunately, we have a sizable firm, I have many partners, so, you know, if someone comes in and says, “You know, Michael, I follow your stuff and I’d really like to work with you,” I say, “You know, great, we would love to work with you. Have you met Jeff?” And try to bring another partner in.
And I’ll admit, the struggle point for me on this when I started going down this road is, the only way it works in handing off a client is, you know, like, when you were the primary that they wanted to work with in the first place either as a prospective client or as an existing client, the only way this works is, you have to make the other person look better than you. Right? Like, “You don’t want me. I travel all the time and I’m going to be bad at giving you timely feedback. And, you know, my expertise infuses the rest of the firm anyways. But, like, Jeff is awesome and his sole role is to be here and give great financial planning service to our clients. And you will be so well taken care of.”
And it’s hard because, like, as the person on the other end of that, it’s basically about taking yourself down a notch and trying to lift the other advisor up a notch, your associate or your partner, whoever it is. And it’s a hard thing. Like, I kind of got comfortable doing it sort of, you know, a fun, self-deprecating humor like, “Oh, you won’t be able to reach me anyways. I’ll be at a plane at 36,000 feet when you’ve got a problem. So you’re going to call Jeff.” But, like, that phenomenal, like, it feels uncomfortable. Like, you’re losing, you know, some control or some status when you have to start taking yourself down in order to make the other advisor look better because it’s the only way the client will actually bind to them. But it took me a while. It’s an ego check kind of moment. Like, “This is really awesome. I brought in a good client and now I have to make myself sound not appealing.”
Diane: Well, Michael, here’s my challenge to your use of that. I’m your client and I love you, and you say, “Oh, no, no, you don’t want me,” and I come right to your defense.
Michel: No, you make it worse. Like, no, no.
Diane: No, no, Michael. You make it worse. I am not a fan of, “Jeff is better.” I’m not. I respectfully disagree. I do.
Michael: I’m here for the lesson. Tell me how to do this better because it’s still hard for me.
Diane: You know how I would do it? I don’t like, “They are better. I am not. This is good. This is bad.” No, it’s going to be, the word you use, I just want to say, “Will it be different having Jeff?” And you paint the picture. “Will it be different having Jeff as your lead advisor? Yes, it will. We’ve had a great run you and I, I am not going to be anywhere near as accessible. And truth be told, Jeff…” And you keep building Jeff’s credibility. “Jeff has done the lion’s share of the work in your situation for over a year now. So I know that I’m fully comfortable, you know, leaving you in good hands. It will be different. I appreciate that. Of course, I’m here if you want to call me for 10 minutes to say hello, or certainly when you come in please say hello if I’m here. But this would not be happening if I personally didn’t think it was better for your situation?” That’s what I would do.
Michael: You’re in the same camp of, like, I’ve got to build Jeff up for this to work but just be careful about trying to throw yourself under the bus or you may actually make the client sympathize and, like, want to work with you more because you’re throwing yourself under the bus. It’s like, “No, no, no, no. No, I like working with you. No, I want to hold on.” It’s like, “No, no, I’m really trying to let go.” “No, no, I want to hold on.” “No, I’m really trying to let you go.”
Diane: And worse than that, Michael, it’s one step further. They’re going to come to your defense. They’re not going to let you knock yourself. They’re going to say, “No, Michael, that is not true. You’ve been great.” And then you’re like, “Oh, this is a hole that’s getting deeper by the second.” So I always say yeah.
Michael: Yeah. Well, I’ll admit, I’ve had one or two of those, like, now as I’m reflecting back at them, that’s the whole like, “You know, “I’m not a good fit for you because I’m traveling a lot and I’m not always accessible. Jeff is really accessible for you.” And they’re like, “Oh, no, no, no, I’ll just wait until you’re back.” I’m like, “No, you’re not getting the message I’m trying to convey here.”
Diane: Yeah. And it’s such a gentle message because I say to my advisors, you know, whether it’s the fee adjustment or whether it’s you’re handing off to another, the whole premise of your presentation is very calm, but there is a firmness to it. There’s a message being sent that, “No, no, really we are not backing off of this idea.” You know, because clients can be so funny, Michael. They’re like, “No. Yeah, no, no, we’re not going to do that.” And it’s not their call. You’re trying to tell them, “Well, excuse me, but it is our call.” So you can’t say that to them. So what you say is, “Well, I appreciate, I so appreciate it, but…” And again, I try to say… You know, I’m such a language person, instead of saying “but” try to say “yet.” You know, but is something they hear and they’re going to fight back. Yet is, “Yet I must reassert Jeff.”
And then worst-case scenario I would say, “Well, let’s do this, let’s run with Jeff as lead the advisor. You know I’m here in the firm. I work on your stuff in the background. Many times, many days a year I’m not even here. Let’s run with this and you tell me in six months or a year how it’s working out.” They will likely say yes and then they will be fine.
Michael: Yeah. Just it was the…the struggle for me was just the need to let go of it in the first place. You know, hitting, you know, my equivalent of the number of seats in the bus. And my seats got crowded for me personally because it’s not even just client load-related issues or firm management-related issues, but, you know, I kind of have fun doing this podcast, and I write some stuff, and I travel for some speaking. You know, what you feel the seats on your bus with are a little bit different from one to the next. I know I’m not quite the same as a lot of other advisors but the capacity phenomenon is the same. And the outcome is still the same, which is at some point, you know, if you’re good at bringing in clients, you have to not work with them. Either you have to not work with the ones you bring in, or everyone you bring in, one has to leave because the seats on the bus don’t change.
Diane: That’s exactly right.
Michael: And you still, once you get to the capacity wall, you have to figure out how to start doing the shift. And again, I’ll admit, like, it impacted me from the ego end more than I realized. Like, you know, it’s just been, at least for me, like, I started young. I was 22 when I came into the business. So the first 10 years of my career was basically a continuous fight for credibility, particularly because our average client at the firm is 60-something years old. So, like, I spent the first 10 years of my career trying to prove why I’m more competent than their grandchildren, which was how they viewed me, and then all of a sudden there was a shift when it’s like, “No, no, I have to prove why the other person is better.”
And I kept self-sabotaging myself because, like, I would try to build up Jeff, but then I had to throw something in that was good for me as well. Like, it slipped in. I couldn’t help myself. Like, you can only bash yourself so far before…even when you’re doing it for fun, at some point, like, I had to throw something good in there as well.
And then as you said, like, and then they would grab onto the thing that I just threw out there to make myself feel better, and then they were coming back to my defense. Like, “No, no, no, no, you were supposed to be going to Jeff. No, no. Like, don’t grab onto that.” It caught me by surprise of realizing how hard it is when you get used to succeeding in a lead position to push yourself down to a second chair position because you have to make the other person look better if you’re going to make this transition work.
Diane: Yes. And listening to you, I want to say your honest insight with the attachment to ego is going to serve you well as you, you know, say, “Hey, this is hard for me, I’m taking a hit to my ego.” And yet, Michael, because you have less clients, you get to feed your soul by doing the variety of work that gets you away from doing same old, same old, same old work.
And I tell my business owners, emerging ensemble, “Your role is going to change from being the solo advisor who did all the work to, now you’re going to sit down and develop staff.” And that’s a whole podcast in itself, is like, “How do I go from this to this? And how do I do it well? I’m not a natural leader.” And so for you to say…if there’s anything I heard which is important is you said more than once “better” and I say, “I’d go with the alternative,” you know. And again, maybe that’s a little gamesmanship and me trying to protect you, perhaps, but really what’s most important is, what did the client hear, and were you able to get them to a place where they would say yes?
Michael: Yeah. Well, and as you said, from the advisor end, like, if you are going to keep growing a business, at some point you hit the crossroads that everyone who’s growing an advisory business hits, where either you’re going to continue to be an advisor first and you reach capacity, or you want to grow an advisory business and you have to start handing clients to other advisors, or the next new clients have to go to other advisors. Like, you just literally can’t grow it bigger unless it grows beyond you. And then once you get there, all the things you’ve got to do start changing because now it’s about finding people and developing people and all about building those people up. Because it’s not you anymore once the business grows beyond you.
Diane: Yeah, yeah. And, you know, there is that distinction. And you’ve written about it in your blogs, the practice versus business. And there was a time period, I think it’s lessened, where the practices were not being respected, and, you know, all solo practices were being considered as lifestyle, where people were working three days a week. And that is so not true. I mean, I’ve got one gentleman. He went from $250,000 of revenue to $900,000. And he’s actually taking it back down to $750,000 because he wants to travel. And he has no interest, you know, hiring staff, etc., etc. It’s all him. Not even a admin. He does the technology. You know, he travels about a third of the year, etc. And I know you’ve had Matthew Jarvis as well, same kind of…
Michael: Yep, he’s got a similar kind of thing, 1 or 2 staff and $1 million of revenue. Yep.
Diane: Yeah. And then you’ve got, you know, people say, “No. You know what? I’d like to merge with a partner. I’d like to share this burden of management and growth.” And by saying burden I mean that. I mean the angst, the worry, the, “Oh my God, I need somebody to sit next to me and say, “Wow, we’re doing this together, at least.” Because sometimes when a person grows way too fast, they’re looking at, “Okay, “I should hire staff. I should borrow money. I should get another office.”
And quite honestly really quickly, when I transitioned and sold, I was 49 years old, it was because I was doing workshops across the country for fee-only, and I loved, loved the business development work with advisors during these workshops. We were supposed to just talk about transition to fee-only and fee-only being a compensation method, and I called NAPFA and said, “You know, we should expand this. We should start telling these…,” because it was broker. It was Merrill Lynch and UBS, “Start telling them what it’s like to have your own shop and be your own RIA and don’t have anybody tell you, you know, what you can pick for your investment portfolios, etc., etc.”
So I could have made the decision, which I would have had to do, borrow more money, get a bigger office and start hiring. I have some emerging ensembles that are thrilled and happy they’re doing it, and I have other ones that are saying, “Wow, I’m not so sure that I want to continue on this path.”
What Diane Sees Now As A Coach That She Didn’t See As An Advisor [1:37:32]
Michael: So I’ve got to ask then, in that vein as you did that transition, like, what do you see now as a coach for advisors that you didn’t see when you were an advisor?
Diane: I don’t understand the question. What do you mean?
Michael: Like, from the coach’s perspective are there things that you look as…when you coach with advisors now, you know, problems or challenges that you see that when you were an advisor would have just blindsided you? Like, just things you never noticed until you were on the other side.
Diane: Oh, gosh, yes, definitely. Well, there’s my personal favorite, compliance. I’m not a fan of compliance but, you know, certainly I see the need for it. But, you know, I don’t know, Michael, I always think about, “Why don’t they take a phone book of the people who are advertising as financial planners that aren’t registered?” Now, that would be a good audience for audits, right? So all of our Registered Investment Advisors, all of our RIAs jump through 1 million hoops and go through angst. So compliance is one that I think I probably would have had a nervous breakdown if I still had a practice today. That’s a biggie for me. It really is.
In fact, I flew home from the West Coast and this kid was sitting next to me and he was drinking a lot. He was only 26. And I thought, “God, maybe he’s nervous,” you know. So he turns to me and he’s a little bit…three beers in and he said, no I said to him, “You’re okay?” And he goes, “Yeah, yeah.” So to be kind and I said, “What do you do for a living?” And he said, “I’m an SEC auditor.”
Michael: Oh my God.
Diane: Now, the plane is landing in Newark, New Jersey, and my practice is in Newark, New Jersey. So I’m like, “Oh, no.” So he says to me, “What do you do for a living?”
Michael: “You’re literally flying to my office?”
Diane: Right, exactly. So he says to me, “What do you do for a living?” And I said, “I’m a librarian.” And I looked up, I said, “God, forgive me. God, forgive me for lying, but I am not doing this tonight.”
Michael: And you just have to pray that it doesn’t turn out that he’s knocking on your door at 8:00 tomorrow morning.
Diane: Right, exactly. It never happened, thank God. But I burst out laughing because I figured, “That’s a non-starter.” Like, yeah. So anyway. So compliance is one.
Technology, oh, my, my, my, my, you know, it’s gotten so sophisticated. I see people moving more than once from portfolio management to system to portfolio management to system to portfolio management to system. So that’s wild.
Michael: PortfolioCenter to Orion, to Black Diamond, to Tamarac, all the different tools that are out there.
Diane: Exactly. You know, and then you’ve got the, “Well, gee, I need the CRM.” So technology is another big one that I see.
I see, for what would have blindsided me is that I think what’s fascinating in our profession, Michael, which is so interesting, is that we have an aging of advisors, and then we have…I’m going to say this was maybe the attitude 10 years ago. “Oh, those young whippersnappers, they’re going to walk in and they think they run the place.” And then the younger person walks in and goes, “Oh my gosh, we’ve got to… like, this is like dinosaur methods here, we’ve got to do something about it.” So you’ve got these two forces clashing. We’ve gotten past that, thank God, and each one has moved a little bit more towards the middle. Owners now realize that they can’t be, you know, demanding everything because people get unhappy and leave. And the employee force needs to be, I think, on a page where they are engaged and they want to be part of the firm.
So many times, like, I’ve done a path to ownership session for NAPFA, and it was a packed room, and it was great because we had about, I’m going to say 40% owners in the room, 40% staff people, and then maybe the rest were resource partners, whatever. So we had this great dialogue going on about, “Well, what’s going on?” And the biggest issues were the staff was not understanding criteria to become owner, the owners did not know how to pose the question of ownership, the staff, they weren’t going to be bold and ask because they thought it wasn’t their place.
So we had this whole thing going back and forth. And I said, “Well, there’s criteria on what you want a person to…to be an incoming owner to your firm, you as the owner and leader of the firm need to make it very clear what can they expect. You know, is there money down? You know, how do the responsibilities change? Do you go from being a buddy with your co-worker to now you’re managing the co-worker? All of that was not really as much I saw, you know, back when I had my practice. So we have this learning phase going on.
And, you know, there’s some people becoming disenchanted in terms of, you know, “I want more voice in the firm,” and the owner is like, “Well, slow that train down. You just got here,” You know, so there’s all of that that needs to be, I believe, honestly communicated. And it’s not because it’s a little uncomfortable. So that’s a fascinating phenomenon that’s going on in the background.
The Process Of Hiring A Financial Advisor Coach [1:42:29]
Michael: So for advisors who are listening who are interested in, you know, having a coach to help with all these various stuff that we’re talking about, can you help us understand just, like, how do coaches get hired? What should people expect? Like, what does the normal engagement look like? What does it cost? Like, how does coaching work?
Diane: Yeah. I can speak from, you know, what I do. So someone reaches out to me, “Hey, Diane, I heard about you from, you know, a number of people that work with you, etc. You know, what do we do next or how do I…?” So I schedule what I call a complimentary consult call. And during that call, my only objective is to hear about their current situation. I say to them, “There’s two things that are going to happen on this call. The first one is, which is most important, I want to learn about your current situation.” And it’s typically a 45-minute call or whatever. And during that call, they’ll explain their current situation. And I first figure out, “Okay, this is somebody that would be a good fit,” or whatever, or if not I would, you know, say to them, “Here’s what I heard. Here’s what might be helpful for you to do,” etc.
So let’s assume it’s a good fit and they’re a solo or…like if somebody calls me up and they’re, you know, I don’t know, $1 billion firm with 50 employees, I’m not their coach. I’m definitely not. I love solos. I love emerging ensembles. That’s who I love working with. If it’s, you know, a 25-person firm, it’s not going to be a firm that I will enjoy working as well. So I’ll, you know, say, “What’s your current situation?” And they say, “Well, you know, I’m in this eight years. I’m looking at, do I emerge with a partner? Do I hire my first associate advisor? Do I hire a second admin first and then… and to be honest, Diane, I’m so damn busy, I don’t have career tracks in place. I don’t have any of this.” You know, so they go on and on and on.
So then I say, “All right, you know, we’re going to determine together on this call whether you would benefit from coaching. And this is what coaching is about. We will form a partnership where we have a series of calls.” And in my case, I do 20 calls over a 1 year period of time for $6,000. When it’s paid in full I give a 10% discount. So that’s what I call the basic coaching package. It’s 20 calls.
Now, what I hold myself accountable, Michael, is I’ll say to myself, “You know, some of these people, they’re partying with $6,000, it’s a lot for them.” So internally, I want them to make that $6,000 back at minimum 3 times. So we’ll talk about their everything. You know, “Are you suffering? Do you need more revenue? What are you doing?” Blah, blah, blah. Because I want, like in the case with fee, my probably largest jump, one firm, it was a $157,000 jump in revenues based on $300,000 previous revenue, 50%. You know, it wasn’t all me and I’m wonderful. No. It was me coaching them to a place where they were able to be courageous and have the conversations to get the fees more in order.
So with that said, the benefit of coaching is the changes that can occur. The work of coaching and what it looks like is, and I tell people, “You don’t pay a fee for 20 phone sessions. That is not the picture. The picture is, we will hold 20 phone sessions, but my intent is to help move you forward. We’re going to talk about things that are important to you.” Sometimes very early on in the coaching process, I will have coaching clients very frustrated because they’re like, “Well, where are we going with this?” You know like, “Where is the tactics? Where is the process?” And really a five-step process is, discover, this is my five-step process, discover, then we explore options for you, then we start putting together some plans, which includes a strategic plan and a vision. Number four would be, implement the plan, and number five would be, evaluate. So that’s a five-step process: discover, explore, plan, implement, evaluate. That’s the structure.
Michael: Which sounds very familiar to the financial planning six-step process. Yep.
Diane: Right. No surprise, I was a CFP for 16 years. Exactly. So that’s the process.
Now, Michael, the beginning calls, they can be messy. You know, maybe people need to unload. And then they go…you know, they’ll say to themselves, “Wow, I’ve been on the phone with Diane, you know, two calls and we haven’t accomplished anything.” Well, I’ve been listening to their angst. And that’s good. That’s a good thing.
So I always say to my advisors, “Look, my clients are smart, they’re bright, and they’re capable, but the problem is they cannot move themselves forward.” So they want somebody to hold them accountable. They need a sounding board. They love best practices being brought to the call. These are all the things that hopefully move them forward, which is a huge home run for me because when I see it, like when I have an email that says at 06:00, “Diane, my $3 million client hired me,” I make them stand up and do the happy dance.
And I have a guy, Michael, he’s really conservative. He’s, like, 68 years old. And I said, “I need you to stand up.” And he was like, “What?” I said, “I want you to stand up, and I want you to put your two fists out in front of you, and I want you to churn butter.” He’s like, “Diane, I was, like, I’m not doing this.” I go, “Yeah, yeah, yeah, no, no, I want you to do that.” So I said, “Move your hips a little bit, move your knees and then start churning the butter.” I said, “That’s the happy dance.” So he starts laughing. Well, about six months later I get another email from him, “I got that person, Diane, and guess what? Before I left the office, I did the happy dance.” That’s a home run.
Michael: Excellent, excellent. Fantastic.
Diane: Yeah. So really the coaching should be fun. It should be moving forward. It should be a tolerance for a little bit of messy process because I’m just getting to know you, etc.
A number of my clients, they hire me for the middle package, which is 20 phone sessions is $6,000, and then to go out for the day is $4,000. So the medium package, $10,000, 20 phone sessions in a year, and I come out to your office for a full strategic planning day. And again, same thing $10,000, if it’s paid in full is 10% off. So those are the two most popular.
My third highest one is a premium service, which is $15,000. And that is a little bit different feel to it. It’s more like a Alan Weiss, value, open-ended, you know, “Can I call you? Can we have a call, you know, spot check 30-minute call?” etc. And again, it’s always based on my availability because I coach a lot of clients and I’m not always available. So I always warn people, I keep very, very few of those so that I’m available.
Michael: Interesting. And so 20 calls throughout the span of the year, so we’re, like, roughly every 3 weeks here?
Diane: That’s correct. And great point, Michael, because when it gets to be…my clients are like, “Diane, I’m really busy, it’s tax season.” I’m like, “No, no, no, no, no, no, no, we need to stay on track.” Now, of course, I cut some breaks here and there, but when a call goes four, five, six weeks out, you’re losing the continuity and the value of coaching. You are.
Michael: And the momentum.
Diane: Momentum. Exactly.
How Diane Defines Success [1:49:20]
Michael: So as we wrap up here, you know, this is a podcast about success, and one of the themes that always comes up is success itself means different things to different people and often different things to us at different stages of our lives and careers. And so, you know, you’ve done one round of this building an advisory firm and selling it and then another round building a successful coaching business. So I’m just curious, like, as you stand today and look forward, how do you define success for yourself?
Diane: Yeah. And being an avid listener of your podcast, I know this is how you wrap up. I do. So I have a brief part one and then the actual definition, which is rather short. Yeah, the part one is, we all have potential within us. So I want all of my clients, I want you, I want everyone listening to ask yourself periodically, you know, “Do I feel fulfilled yet? Have I given it my all? Will I be sad later on in life?”
And we teach our financial planning clients, you know, how to save and invest so that one day they can spend their money not only wisely but also happily. And money is not the only focus, you know, spending. Great coaches focus on time, energy, and money. You have a certain amount of time that you want to spend well with loved ones, with great clients, with your staff that hopefully, you love. You know, time is spent.
Energy is about, for me, personal fitness. Do you go into your office? When I go on and on, which we haven’t even touched on, when I go on and on about personal fitness with my clients, it’s not because I want them to lose weight and be on the cover of “Vanity Fair,” I want them to feel like they can go upstairs without taking a breath. You know, that they can feel vitalized going in the office. So time, energy, and money. And I tell everybody, Michael, “If you do it right, your last check will be to the undertaker, and it will bounce.” That’s, like, one of my favorite things I’ve ever…
Michael: …of the financial planning.
Diane: Yes, exactly. Now, in seriousness, my definition of success is very simple, that I have no regrets. You know, did I live with zest? Did I love deeply? Did I laugh often? And did I add value? And if I can check all of those boxes, you know, live with zest, love deeply, laugh often, and add value, then I know that when it’s my last farewell, I will have no regrets. And that’s my definition, no regrets.
Michael: Well, I love it. I love the whole…I love the philosophy. I love the saying. Did I live with zest, love deeply, laugh often, and add some value to the world?
Diane: Yep, yep.
Michael: Well, thank you for I think adding some good value to the podcast here and sharing with our listeners. I think this was a really powerful conversation today.