Welcome back to the 209th episode of the Financial Advisor Success Podcast!
My guest on today’s podcast is Forrest Baumhover. Forrest is a financial advisor and partner with Lawrence Financial Planning, an independent RIA based in Tampa, Florida that oversees more than 100 million of assets under management for 70 affluent clients. What’s unique about Forrest, though, was his path to partnership as a financial advisor, having launched as a career changer coming out of the military with the niche of serving other military veterans in transition, only to find that his options and opportunities to become a partner in an existing advisory firm grew even more quickly than the niche that he had started out building on his own.
In this episode, we talk in-depth about how Forrest set the stage for his career-changing transition from the Navy into financial planning, why Forrest chose to complete his CFP education, his Enrolled Agent license, his Series 65, and even the creation of his RIA entity all before he even finished his military service and reached his transition date. How Forrest further set the groundwork for his initial stages of business development by setting up a blog and beginning to write articles in his prospective niche, and the organizations that Forrest joined early on, from Toastmasters to the Alliance of Comprehensive Planners and his local Chamber of Commerce, all to begin the networking that he would need to do to be successful when he launched his firm.
We also talked about what led Forrest towards a path of merging his advisory firm into a larger one just as his niche was starting to gain traction, how he weighed the decision of whether to stick with his current independent practice or walk away from it in order to be a part of something even larger instead. The way that the work that Forrest had done in preparing for and then building his own firm ended out accelerating the trust curve when he decided to merge and how Forrest structured the partnership buy-in with his current firm to become a partner.
And be certain to listen to the end where Forrest shares his thoughts on the challenges of launching an advisory firm from scratch, even when you think you’re prepared and still have to adjust when reality hits, the importance of having a plan and sticking to it but also being prepared to pivot if a new opportunity comes along. And his philosophy that in the end, it’s not about whether your firm ends out being exactly what you’d envisioned from the start, but simply whether you finish in the general ballpark of where you were trying to get in the first place.
So whether you’re interested in learning about why Forrest decided to pursue a career in financial planning after leaving the military, how he started writing articles in his niche that eventually led him to publish a book, or how he pivoted from firm owner to partner, then we hope you enjoy this episode of the Financial Advisor Success podcast.
What You’ll Learn In This Podcast Episode
- Forrest’s Journey To Becoming A Financial Advisor [04:20]
- The Preparation Process Forrest Used To Get Ready For His Career Transition And The Financial Planning Education He Pursued [18:55]
- Why Forrest Decided To Create His RIA Entity Before Leaving The Military And How He Got Started Writing Financial Planning Articles For His Military Niche [29:38]
- The Business Model That Forrest Envisioned For His Firm, His Actual Transition Experience, And How His Writing Led Him To Publish A Book [37:27]
- Forrest’s First Client And His Firm’s Growth In The First Year [46:49]
- The Pivot Point That Changed Forrest’s Career Path [54:56]
- How Forrest’s Affiliation With Lawrence Financial Planning Was Structured [01:10:36]
- How Forrest Views His Decision To Close His Firm And Partner With Julie, What Lawrence Financial Planning Looks Like Today, And What Surprised Forrest The Most About Building His Advisory Business [01:24:54]
- The Low Point For Forrest On His Journey [01:29:50]
- The Advice That Forrest Would Give His Younger Self And How He Defines Success For Himself [01:38:08]
Resources Featured In This Episode:
- Forrest Baumhover
- Lawrence Financial Planning
- Military In Transition’s Guide to the Survivor Benefit Plan
- The Military Wallet
- Alliance of Comprehensive Planners
- XY Planning Network
- FP Transitions
- Diane MacPhee Advisor Coaching
- Oak Street Funding
- Mr. Money Mustache
- FAS #119: Career-Changing Into Financial Planning By Creating A Niche Serving Your Former Profession, with Kenneth Robinson
- College for Financial Planning
- Ryan Guina, The Military Wallet
- Doug Nordman, The Military Guide
- Kate Horrell
- New Planner Recruiting
- Filling The Income Gap When Starting A New Financial Planning Firm
Michael: Welcome, Forrest Baumhover, to the “Financial Advisor Success Podcast.”
Forrest: Thank you very much, Michael, I’m glad to be here.
Michael: I’m really looking forward to the discussion today of career transitions into financial planning and coming from the military. I’ve long been fascinated by how many people come to financial services and the world of financial advisors from the military. Kind of, on the one hand, I get it. Like it takes a lot of discipline and focus to build a practice and become an advisor, particularly for just how grueling the early years can be, and certainly, everyone who has been in service to our country has done a lot of that kind of work and discipline and focus, so I can appreciate that.
At the other end of the spectrum, the military is, aside from the hazards of war and military itself, a rather stable environment, and building a business as an advisor and entrepreneurship is anything but stable, so it’s sort of the opposite extreme to me. So, I’m fascinated, even just in your perspective, as we jump into the conversation of what draws someone like you from the military to the world of financial advisors and why do you think we see so many people that come from the military into the world of financial advising in particular?
Forrest’s Journey To Becoming A Financial Advisor [04:20]
Forrest: Michael, that’s an interesting question. I can tell you my story, but I’m not sure how it applies to other people. And so, I think that at least some of the people that I’ve seen, they get marketed to by some of the big firms like USAA and First Command, and certainly, when there are career fairs for people that are making the transition, you see a lot of financial services industry people at those job fairs. So, that might be a reason, but I can’t really put my finger on it.
Michael: So, just big financial institutions, I guess by their own means, have found working with the military are good people that come into their companies. Obviously, folks like USAA and First Command have a particular focus on that, in serving the military as well, so they like to hire from the military to serve the military, so, of course, they’re recruiting at the military, which means they build awareness of financial advising as a career path while people are still in the military.
Forrest: Right. I mean, I think it depends on which segment of the military you’re talking about. So, when I was enlisted, certainly, the people who were doing their initial enlistment and looking to get out, they’re probably more positioned to go to school right away and finish their degree. If they’re further along in an enlisted career, they might be looking for opportunities related to their technical trade. For junior officers who might be getting out after the four- to six-year point, junior military officers, they get targeted pretty heavily by headhunters who focus on either leadership or sales and marketing type positions, and certainly, you can position financial services under something related to do with sales.
And then for the career-oriented officers, people who are retiring at the 20-year point, there’s an opportunity to possibly reinvent yourself. And so, certainly, that was kind of what I was looking to do, mainly because I was retiring in my early 40s and knew that I had the potential for 20-plus years of earning potential somewhere that did not need to depend on my government experience. And so, I probably backed into financial planning, not in the traditional go-to-a-job-fair-and-get-marketed-by-headhunters and things of that nature, I kind of found my own path towards that.
Michael: And I guess part of the path I’m presuming that comes with you serving that long in the military and then coming out and making the transition is that you come out with some sizable level of military pension that just helps to actually make the financial transition from military to…well, I guess, I was going to say financial advising, but military to whatever it is that comes next, but financial advising being one that’s challenging for a lot of people because the income is very meager in the early years. If you get to transition coming out with a military pension, does that help facilitate that kind of shift?
Forrest: It kind of does. And certainly, there’s probably a new generation of people that would be less risk-averse, right? If you follow Mr. Money Mustache or one of the ‘save significantly more than you can earn’ type blogs, then you’d be better positioned for something like that. But we found that there’s still kind of a little bit of a gasp factor when you get that last active duty paycheck and recognize that next month, you’re going to get a check on the 1st of the month but not on the 15th.
And so, there’s still an adjustment and we can talk through all of the things that I tried to do mentally, but until you make that transition, there’s still kind of an adjustment. And the longer that you have a career in the military, for people that retire at the 20-year mark, it’s a little bit different than if you retire as a more senior person, 25, 30-plus years. And so, there’s an adjustment that you still have to make.
Michael: So, if you weren’t getting drawn to this from the USAA and First Command, like large firm style financial services recruiting at the recruiting fair, what did lead you to say like, “This is the thing that I want to do after I finish my service in the military?”
Forrest: There’s a point, probably in the middle of my career, when I was a department head on the USS Cole, a destroyer out of Norfolk, Virginia. And I was responsible for managing about 50 people on that ship and a lot of my job was doing all this stuff that fell through the cracks, but a lot of my job was also just helping my sailors with personal challenges, either helping them find resources or trying to basically remove excuses on why they couldn’t come to work and do a full day’s work and a lot of those challenges happen to be financial.
And so, I would sit down with people and kind of work through their cash flow or come up with a plan to pay off their credit card. The story that sticks in my mind is a sailor that worked for me and he missed the ship’s movement, so we got underway but he wasn’t on the ship. And we were out for about a week and we came back, and in the Navy, that’s kind of a big deal if you can’t join the work for a week.
Michael: Well, I would think in particular, when it’s the Navy and you missed the ship, then it doesn’t really matter what you mean.
Forrest: So, we had the “why did you miss the ship’s movement” kind of meeting. And so, it was him and I, and I sat down with him and I said, “Okay, well, why did you miss the ship’s movement?” And he said, “Well, I overslept.” I said, “Well, why did you oversleep?” And he said, “Well, because I was up all night working,” and I said, “Well, I let you guys go pretty early to get everything situated,” definitely before 5:00 or 1700 for military types. And he said, “Well, I have a second job,” and I said, “Well, I didn’t know that, aren’t you supposed to get permission from your chain of command before you go out and get outside employment?”
He said, “I know, I should have done that, but I was up until about midnight.” And I said, “Well, why did you take the second job?” And he said, “Well, I have to pay off this car loan.” And we dug further into the details and it turned out that he was suckered into a very exorbitant car loan for, basically, a lemon lot deal. So, we calculated the interest rate, and it was something ridiculous like 68% and I remember writing…this really upset me to the point where I wrote a letter to my congressman about it. And he wrote a response back, saying that they were doing a revision to the Servicemembers Civil Relief Act that would cap the interest rate on payday loans and things of that nature at 36% while on active duty.
While that experience left a taste in my mouth, I thought to myself, “If I choose to part ways with the military or just as importantly, if the Navy chooses to part ways with me, then this is along the lines of what I would like to do, but I don’t want to feel like a social worker.” Like, just going through, creating plans, seeing people kind of fall on their sword when they kind of go back to bad habits, I wanted to see if there’s a way to help people do this but, actually, for people that appreciated it. And that was just a thought that kind of stuck in my mind. It didn’t really go anywhere, but of all the things that I thought about, “What am I going to do when I leave the military?” That just kind of kept on top of the surface.
And so, about five, six years later, at that point, I was about five years out from retirement. And I went to night school when I was a junior officer to get my MBA, so kind of the MBA in me, I said, “Well, all right, if you’re going to be a financial planner or whatever this is…” At that point, I did a little bit more research and I found out about things like the CFP designation, and I knew that there were people that did this for a living, and it seemed like they were doing pretty well for themselves. But I took a little bit of time to kind of sit down and write out what a business plan might look like and I kind of sat down and said, “Well, what education should I obtain?”
And that’s kind of where I said, “Okay, the CFP, that seems to be the gold standard, that’s the bar that I’ll be reaching for,” and then I looked and saw how many thousands of CFPs there were back then. Not nearly as many as now but certainly a lot, and I thought, “Well, if these people have both the CFP designation and possibly 20 years of experience on me, I probably should be looking to bring something else to the table.” And so, I wrote down all the things that people hate to do when it comes to their finances and I kept going back to taxes and I thought, “Well, all right, is there something to do with taxes that I can possibly do?”
And I found out about the Enrolled Agent designation and I thought, “Well, okay, that’s something I could possibly hang my hat on.” So, I wrote a plan that said, “Okay, here’s what I can do now and then if my career in the military goes another 10 years, I can at least do something, put it on the shelf, and then when I get down to my last couple of years, I can take it off the shelf, dust it off, see what needs to be updated, and then move accordingly.”
Michael: So, you were starting to eye this path long before you were actually taking the leap. You were just framing this as like, “Hey, 10 years from now when I may be coming out of the military,” so we’re talking all the way back in mid to late-2000s or early twenty-teens or something that you’re thinking through this game plan, knowing that you might not actually be out until late twenty-teens?
Forrest: Yes. And actually, the other thing that I did was I was trying to absorb as much publicly available knowledge as I could. And certainly, back then I was doing a decent amount of commuting. I’ve always tried to live not much more than an hour away from wherever I worked, but I would still listen to podcasts in the car and I tried to absorb anything and everything. And back then, I think Joe Rogan was probably the only podcast that was out there, but I stumbled upon the precursor to the Alliance of Comprehensive Planners, back then it was known as the Alliance of Cambridge Advisors.
And I don’t even think those podcasts exist anymore, but there were a series of interviews that Arlene Moss did with people like Bert Whitehead and Kenneth Robinson – I think you’ve had Kenneth on your show before. And I thought, “Okay, well, these people seem to have been able to do what I want to do, and it seems like they’ve been able to do it in a way that is profitable, so let me do some research, let me reach out to some of these folks, let me call them and ask them how they did it.” And I probably talked to about 25 or 30 of these folks and kind of figured that, “Okay, there’s a template, there’s kind of proof that this is a viable course of action and that when I’m ready to take the plunge, this is along the lines of what I’d like to do.”
Michael: Interesting, interesting. And so, the kind of framework that organizations like ACP put forth, that really give a template of, “Here’s how you can structure your firm, here’s how you can structure your business model, here’s how you start going out with your marketing,” like they teach and train on a lot of that, which is a key part of their value proposition. That was, I guess, a connecting point to you of just, “Okay, when I’m ready to do this, there are some guideposts and templates out there about how to how to do this.”
Forrest: Right. I mean, certainly, the landscape has evolved a lot since then, but back then, I just needed a couple of people who had done it before me. One of the things that ACP focused on was career changers, people that before used to be lawyers and now want to go into financial planning or used to have a completely different career. And certainly, that resonated a little bit with me because a lot of the people that I was talking to were in their 30s and 40s when they made that career transition.
Michael: So, as you were eyeing this build-up very far in advance, what did you end up actually, I guess, doing to get ready for this launch? When you make the decision, “This is the thing I’m going to do,” what did you actually do in the preparation then? When did this go from research to actually starting to do things to get ready for your transition?
The Preparation Process Forrest Used To Get Ready For His Career Transition And The Financial Planning Education He Pursued [18:55]
Forrest: Right, so there were two parts to this. The first part was I researched and saw that I could get my CFP education, put it on the shelf, write out the business plan of all the things that I would do, put that on the shelf. And so, it actually ended up being the tour before my retirement, the tour in Tampa. So, I was living in Philadelphia at the time and because it’s so close to Philadelphia, the American College, I tried to look at that curriculum. It didn’t quite fit what I thought I needed, so I ended up doing the correspondence work through the College for Financial Planning, put that on the shelf, got my certificate, and then everything else was just written out, ready to go.
Michael: And just curious, what led you to College for Financial Planning versus American College? It’s just I know there are a lot of people out there that are looking for education and trying to decide between them and I think for people outside the industry, they kind of look similar, you can do it at a distance, and they’ve got a whole bunch of designations including the CFP. What actually led you to choose the College for Financial Planning versus American College in Pennsylvania?
Forrest: So, I was turned on to the American College because I had been present at a speech where they unveiled a scholarship for veterans and active-duty military that were transitioning and I thought, “Hey, if I could do this for free, great.” I kind of passed my first self-initiated test of my financial planning acumen, which would be to get whatever I wanted for less money than retail.
Michael: Seems financially sound, sure.
Forrest: But when I did the interview with them, I think they were looking…I can’t put my finger on it, it’s just…well, first of all, the scholarship was sponsored by Penn Mutual and so it seemed like a little insurance kind of oriented and I thought, “Well, isn’t there more to the curriculum than just insurance? I mean, taxes and all the other financial planning stuff?” So, I looked at that and I thought, “Well, what other places?”
Obviously, I was looking for something that I could do remote learning, and I know that you create businesses with practical sounding names, I kind of have taken a similar path but in reverse. So, the paths that I’ve taken usually kind of end up making common sense and I thought, “Well, if there’s a college for financial planning and I want to be a financial planner, then they’re probably not going to be too far off the mark of the education I wanted to get.”
Michael: Makes sense to me and that is quite literally their origin story, so they’ve been doing that for 30-odd years now, I guess, closing on 35 or so.
Forrest: That was just me being an industry outsider, trying to figure out what my education should look like. And so, I used the Navy’s tuition assistance to pay for my education. It was pretty simple, some paperwork. My boss signed off on it, so I probably tipped my hand and kind of at least sent a signal that down the line, he, at least, knew what I wanted to be when I grew up.
Michael: So, you came into this and then you’re just like, “I’m going to do my CFP coursework, I still won’t be able to use the marks,” because you’re not necessarily getting experience yet, but that was fine with you or still the goal was, “I at least want to check off the education box?”
Forrest: Right, I wanted to check that off because there’s one less to-do list for when Tanya and I decided that the time was right. And so, after my first couple of tours, there were some times when I thought I was just going to leave much earlier in my career. But Tanya and I would look at each other and at some point during the tour, we would say…we would just kind of have the conversation of, “Are we still having fun in the Navy? Are we still enjoying life in the Navy?” And then, two, “Is this the place that we would look to retire if we were to retire from the Navy?”
And one thought that I’ve always had in my mind…and I share this with people in the military because I think here’s a way that might work, which is if you have the opportunity to retire at the area of your last duty station, two to three years of being able to take some time and develop some community relationships and do some local networking, there’s an opportunity there that doesn’t necessarily exist if you retire and then ‘pull chocks’ as a lot of military folks might say, and move to a completely new location where you have to start from scratch.
And so, Tanya and I always kind of had that in our minds, and we thought that if we got to the point where we were ready to plant roots and retire, we would probably know it, and I would probably use as much of that two- to three-year tour to do work on the side. Not at the expense of my day-to-day job, but on the side, I would do nights and weekends kind of work so that I could get as much out of the way as possible. And that was kind of what my plan was designed for, taking a little bit of time mid-career to get the education out of the way, knowing that there’s no real expiration, but then knowing that there’s a lot that I wouldn’t be able to do until the time was right.
Michael: So, what else were you doing in the build-up? Got your CFP education done, you were writing out, I guess, a business plan, you were starting to gear up for some local networking to be able to get going for the final duty station that you were at. What did some of that look like as you said like, “Okay, I’ve got to start planting some seeds here?”
Forrest: Right. So, the vast majority of that was really…so if I was stationed in Philadelphia, the very next tour was the tour that Tanya and I decided to retire from. And so, the Navy moved me from Philadelphia down to Tampa, Florida, and I worked at MacDill Air Force Base and, ironically, it’s about an hour away from where I grew up, so there were a lot of reasons why Tanya and I decided that this was the place that we would retire. And because we’d made that decision pretty early in the tour, that was really where most of my leg work began.
So, we moved down here in 2014, and in 2015, I took the CFP exam, the three Enrolled Agent exams, the Series 65 exam, registered an RIA, created the S corporation, and started writing articles, all kind of as part of my plan. And my day job involved a lot of overseas travel, so I was kind of doing that while I would…I think that year, I flew about 150,000 miles. So, all of that was kind of in 2015, and in 2016, I got most of the mechanics out of the way and was trying to create more of an online presence. But there was still some stuff that I wasn’t going to be able to actually do until I didn’t have that full-time job blocking up my calendar.
Michael: Interesting, so in 2015, not only did you get CFP education exam done, you did your EA as well, which I guess just means you’re done on that because there’s not a separate three years of experience requirement. You got your Series 65 and actually registered an RIA, so you are still working in the military at this point, this is essentially like you’ve created your RIA entity, I suppose, like a ‘side hustle’, but it’s not like you have…you were not waiting until you turned in your papers to retire from the military and then went out and started the RIA entity, you actually created it while you were still working.
Forrest: Correct. My leadership knew about that. I had a letter on file that said, “This isn’t going to affect my day-to-day job.” I mean, certainly, there are ways that you can position yourself in it. When I talked with other people that left the military, they felt like they needed to kind of keep a low profile on it. I tried to strive for a better balance so that people knew what I was doing as a side hustle but also knew upfront that this was in no way violating any ethics regulations, that this was completely separate, that it didn’t interfere with my job duties. And, certainly, I think that enough people knew about what I was doing that if I was straying off the reservation, I probably would have been told about it.
Michael: Okay. And the idea of…I mean I get why you were getting your CFP education and your EA license and such in place, right? That’s just sort of all this educational foundation knowledge so you can hit the ground running when you make the transition. What led you to actually create the RIA entity? Was the idea that you actually wanted to start getting clients doing some advice work and getting paid just on a limited part-time scale because you weren’t ready to make the transition yet? Or was this also kind of a “I’m creating it, but it’s really still on the shelf?”
Why Forrest Decided To Create His RIA Entity Before Leaving The Military And How He Got Started Writing Financial Planning Articles For His Military Niche [29:38]
Forrest: So, I reverse engineer…I mean, I really tried to plan to optimize as much time as possible. And so, starting with my retirement date, the earliest date that I could retire, I think I was off by about a month that was just due to military calculations. But I went back, and I said, “Well, if my retirement date is this date in 2017, then the maximum amount of leave I can carry forward is this many days, I’m entitled to this many days.” I had everything mapped out and my entire purpose was to get as much time as I could still be on leave – vacation – that I would be actually out and about, meeting people, networking, doing all of the grow-your-business type stuff.
So, one of my ACP mentors told me affectionately that, “Your job as a financial planner, until you have at least 10 clients, is to go out and find 10 clients.” And so, I did not want to spend my terminal leave, as they say in the military, doing any of this blocking and tackling kind of stuff. I wanted that to be a maximum effort, just cups of coffee and Chamber of Commerce meetings and everything that I could do to support that client acquisition goal.
Forrest: And so, everything else just happened to be an afterthought where if I didn’t have to do it after I’d left the office and was on leave, then I was putting it into something that I could do nights and weekends on the side. So, RIA registration just happened to be something that I could do, and it was just one less thing that would occupy my time when I should be out getting clients.
Michael: Interesting. Okay, so it really wasn’t necessarily about starting and building your client base in an extended lead-in while you were still in the military, but just getting to the point where everything is in place so that the moment you hit that transition, or I guess the terminal leave leading up to the transition, you can be full time and energy towards, “I’m going to go find my first 10 clients.”
Michael: Okay. So, anything else that you were doing in the transition lead-up before we get to the actual transition where you took the leap?
Forrest: Well, I think this is where I started listening to a lot more material that was out there, and certainly, I think it was before you started your podcast, but there were still a lot of discussions about trying to find your niche. And I thought, “Well, I’m a career military officer who’s spending my last couple of years trying to map out what my retirement plan looks like,” and I thought, “Well, if I’m going to write articles and learn about how to build an online presence, I probably should start with some sort of military niche.”
And so, I created a website that…I think just watching my kids grow up, sometimes you hear these teen and preteen conversations that don’t make any sense and you realize that they’re just still learning how to talk, where we’ve been doing it for 40-plus years. And so, when you start writing articles, you spend a lot of time just learning how to write articles, and certainly, that’s where a lot of my kind of just growing pains came out of. But along the way, I found a niche of military-focused personal finance bloggers that I really connected with. So, there’s a little community, almost a subset of the FinCon larger community of military-focused bloggers.
Michael: Folks like Doug Nordman.
Forrest: Right, and Ryan Guina and Kate Horrell, who have done very well for themselves in educating a military audience, and Doug, for example, kind of led a pretty good example of what people can do if they want to retire from the military and never take another paid job again. And so he wrote a blog, created a book out of it, and he’s kind of a standard at FinCon and a lot of other financial kinds of things on the circuit. And Ryan, he’s created two very successful blogs in his own right and that’s his full-time job, he’s also an officer in the Air National Guard, and a lot of other military folks that have been able to create their own businesses and do kind of what I was aspiring to do.
Michael: I guess they did it primarily in the blogging online media context, but you were coming in with a view of, “I actually want to get to the point of one-on-one advising for individual clients.”
Forrest: Right, and that was the intent. That was definitely a focus for me. And they recognized that. They accepted it. They said, “Hey, he’s one of the good guys, he’s not someone who’s going to sell you weird products.” Everyone kind of has their horror stories about certain companies that sell products and take advantage or do things that create horror stories, so they at least knew that I was trying to do this in a different manner.
Michael: And so, what was the niche, I guess, you expected to be or become? Just anybody that was military or that was former military or that was transitioning in and out of the military, which I think is where Doug spent a lot of his time? Was there something that you were framing up to the niche beyond simply the military?
Forrest: I was really trying to focus on people who were career military but who were transitioning to civilian life, right? So, whether it’s someone that was retiring and just going through a lot of the same hurdles and challenges that I was going through, trying to get their arms around different military programs that you don’t really know about while you’re on active duty. For example, the Survivor Benefit Plan, which is kind of the military’s pension protection program for spouses that out-survive their military service member counterparts.
And so, just trying to get my arms around this for myself, I thought, “Well, here I am, an aspiring financial planner and I’m really trying to make sense of all this, I’m sure people that haven’t even put any thought into this must be pretty overwhelmed and maybe there was an opportunity to help those folks out.” And that was my niche, that’s what I wanted to do.
Michael: And so, what was the business model going to be? Were you going to charge them a standalone piece for financial plans? Did you want to do hourly planning? Were you also going to manage portfolios and do this on an asset or management basis? What was the business model that you were envisioning as you were gearing up for this launch?
The Business Model That Forrest Envisioned For His Firm, His Actual Transition Experience, And How His Writing Led Him To Publish A Book [37:27]
Forrest: So, at this point, I had joined – then it was called the Alliance of Comprehensive Planners, and they have the retainer model similar to XY Planning Network. And during the training, they kind of coach you on how to schedule the meetings where you sit down and you need to tackle, probably first and foremost, the big problems, the challenges that bring the client in the door, and then along the way, you’re uncovering the tax planning opportunities or laying out the retirement plan projections.
And so, my goal was to build my practice based on that, and then, of course, if people wanted to hire me for a one-time engagement, of course, I would be doing that as well and that worked a little bit. I didn’t get that much business while I was on active duty primarily because I was still traveling a lot, but I did have some client work and some clients kind of waiting in the wings for when I made the transition and was able to actually start working with people during the week.
Michael: So, then, tell us about the transition. You’re building up. You’re putting all these pieces in place. You’re getting your education. The entity is out there. You’re starting to network around the military personal blogger community. You’re at least dabbling out there to some people that you’re doing this on the side and it’s going to be a full-time thing soon. There are hopefully a few clients waiting in the wings who are going to join when you’re ready to go. So, what did the actual transition launch plan look like?
Forrest: So, my retirement date was sometime in April 2017, and from then until the first of September, I was basically on paid leave. And the Monday after, I had my schedule of, “Here are my local contacts in the community,” At that point, I had a few dozen articles out there and had started a Facebook group and done some things online so that my website was getting some traffic, but I’ll tell you, I still came to the realization, probably after about a month of activity, that I just hit a wall. So, all the work that I could have done, everything, about a month into it, I thought, “This was going to be a really tough three years.”
Michael: You finally got the full time to do this, so you built up this list of prospects to talk to and people to network with and relationships to explore, and you finally made the transition; you can do this full time. And it takes you about 30 days to call and meet with every single one of those people and it’s like, “Now what? I’ve met with all of them, I’ve talked with all of them, and I can’t call them back now because we just talked like a week or two ago.”
Forrest: Well, so there was that. So, I joined the local Chamber of Commerce. I went to a local Toastmasters mainly because I had joined Toastmasters a few tours prior, and I liked the fact that it helped me really overcome my fear of public speaking and I thought that that would be a good way to get back into it, have some things to do. But then if someone ever said, “Hey, Forrest, we’d like you to give a presentation,” I, at least, would be a little bit more comfortable with that setting. I also joined a local realtors group, basically on the recognition of a friend of mine.
But all of those things were kind of activities that – they were going to be things I knew I needed to do where the payoff wasn’t immediate. And so, building the relationships, getting more deeply involved in each of those, those are things I could put on the calendar, and then every once in a while, I get the, “Hey, let’s meet for a cup of coffee and talk about business,” thing.
Michael: Right, I guess it was like, “I’m totally ready to get involved with Chamber of Commerce and really get active but they literally only meet once a month,” and there’s only so much else you can do.
Forrest: Yeah, they had a couple…I mean, ours was a little bit more active but, yeah, even then, you’re only doing so many things, but one thing that I realized that there was never a limit on was how much I could write. So, even when someone canceled a meeting and I was sitting in the Starbucks, I would take the time and write an article and think a little bit more about something that I might have just read. I always try to have something, consistently, that I can put online that would at least complement anything that I can do in person.
Michael: I’m fascinated by sort of this balance that you had of trying to write and put out articles. So, what were you writing about and where did you put them out? When you said you were putting out articles, what are you writing about and where are you putting them out to?
Forrest: So, I started a website, and it was called “Military in Transition.” At one point, it probably had over 100 articles in it or maybe about 150 articles, but I was writing a lot about questions that I had when I was going through the process. And so, I wrote a significant amount about the military’s Survivor Benefit Plan and at one point, Doug or Ryan or one of the military folks, they said, “You’ve got several pretty decent articles on this, why don’t you just put them together and create an e-book?” And I thought, “Okay,” so I did that, and I self-edited it, did the CreateSpace, and put it on Amazon and I thought, “Well, this isn’t going to substitute any kind of occupation,” I knew that.
Michael: Meaning you’re not going to be retiring off of Amazon book sales at a couple of dollars apiece.
Forrest: But it’s interesting because there’s a place on Amazon for someone who wants to learn about the Survivor Benefit Plan. I think before, there was like a term paper that someone wrote and there really wasn’t anything. So, what I wrote on wasn’t the nuts and bolts because you can go to the government websites and learn that information, but it was really more about kind of how the Survivor Benefit Plan was built on the heels of World War II to support spouses and back then, primarily female spouses, that were dependent on pension income from their husbands and what would happen.
And so, in my grandmother’s case, my grandfather was an army colonel, retired, died about five years later. She lived for another 28 years and greatly benefited from the Survivor Benefit Plan. But in today’s day and age, there are some other considerations that probably didn’t exist when my grandmother and grandfather were in the military. What happens to the longevity risk when the career military person is a female, right? What are the other considerations that you might be thinking about when you’re making that decision on whether to participate or not participate?
And certainly, I got a lot of questions based on that. I think my thoughts have matured about that topic since then, but a lot of people ask me and say, “Hey, what should I do here?” And so, there’s that, there’s the Thrift Savings Plan. There are a lot of military programs or things that I didn’t find a lot about online, so I just kind of started answering my own questions.
Michael: Researching and answering your own questions, since the people you were trying to serve were people like you. If it was a question you had, it was probably a question that the people you’re trying to work with have and if you get the answer for you, you get the answer for them, and if it’s out on the internet, then they can find it, which means they can find you.
Forrest: Right, absolutely. And we’ll get to that kind of a little bit down the line in this conversation, but some of that content is still out there, although as I transitioned away, I tried to find a good home for articles that I thought would be appropriate to keep online but weren’t going to be a part of my niche going forward.
Michael: So, you’re putting all these things out there in 2017 as you’re getting going, you’re networking in the Chamber of Commerce and Toastmasters and local realtors group and you’re writing articles and putting your book out. So, what was working for you? What got traction?
Forrest’s First Client And His Firm’s Growth In The First Year [46:49]
Forrest: To be honest, my first actual retainer client, I thought it was a spam email, and I always check my spam. It didn’t go through my spam filter, but it’s a very weird Eastern European sounding first name and a weird last name, and I just thought, “What is this? This sounds like some sort of scheme.” So, I looked at the email, and it turned out to be someone that just needed help with a significant amount of tax debt. And so, my first client was someone who needed help navigating…the husband was a very highly compensated doctor, and at one point, they opened their own practice, kind of ran it, but didn’t know all the tax rules so they weren’t paying taxes as they went along.
They got behind on several years’ worth of taxes and at this point when I met them, they had just liquidated his retirement account to get their back taxes down below $100,000. And then their CPA prepared their tax return and said, “My recommendation is to pay this tax,” and, of course, at this point, they had no assets and once that tax return was filed, it was about $140,000 of tax debt plus penalties and interest and they said, “Can you help me?” I said, “Well, I can see why no one else would want to help you because you don’t have any investment assets to manage,” but here, I calculated a fee, and I said, “We’ll walk through this together.”
And a couple of things that they had to their benefit was that he had significant cash flow because he was a highly paid doctor and he actually had a side gig where he would do 24-hour shifts at a different hospital. His side gig was more than I had ever made. So, they had the earning power, and we kind of walked through the IRS process, “So, this is how we resolve the tax debt.” First, we went to the local office, and they said, “We can’t help you because you’re over $100,000, so everything goes to the centralized system where you have to go through the phone tree,” and I’m thinking, “Great, they’re in Wesley Snipes territory in terms of tax trouble.”
Michael: I was going to say it’s not going to be like, “Oh, you have this much tax debt? There’s this special phone number for you.”
Forrest: So, there was a lot of time we spent on hold, just kind of hand-holding, and what we ended up doing was they had enough equity in their house to where I was able to find a mortgage broker that would do a specialized home equity line that would allow them to take more than the standard amount out of their equity, pay that as a down payment to the IRS so that they could get down below the $50,000 level where then they could do their IRS tax payment plan without having a lien placed on their house. And so, we kind of walked through all that.
We did a cash flow analysis; they cut expenses where they could – kind of the traditional financial planner – it’s a big sacrifice for them. It’s not as much as I would like to see. It’s definitely nowhere close to what the IRS would insist on if they were involved in this process. And so, we kind of walked our way through it and the success story was that they eventually paid everything off and that was my first client. It had nothing to do with the military.
Michael: So, where did it go from there? Did you find military clients start coming along? Did you end up continuing to get more of these other tax-related clients and strange tax situations? Where did the business begin to come from as you tried to build some momentum?
Forrest: I would say that I’ve gotten clients because of military affiliation, but the clients that I was getting during that time, during that first year, really, they were mostly people that just wanted a one-time plan, kind of an analysis, and then they said, “Okay, I’m comfortable with checklists. Give me a checklist of all the things that I need to do, and I can go take care of it myself.” And I learned that for military people and for people who might be looking to serve military, a lot of military folks are really so used to doing things on their own that they’re looking for a checklist-type situation, a lot of folks are. So, that sounded a little bit more like what a Garrett planner would be…
Michael: Right, sort of like the hourly fee for service, “I’ll hear your question and I’ll answer your questions.”
Forrest: And certainly, with people trying to navigate a transition where they’ve got so many checklists that they don’t know what to do with, they’re probably not going to be inclined in their last year in the military to do a monthly or even a quarterly check-in just to see how things are going. I mean, military folks, by nature, are action-oriented, “Tell me what I need to get done; we don’t need to look at each other once a quarter,” “If we’re going to meet twice a year, it better be worth my while,” kind of thing.
And so, I started thinking like, “All right, well, if the military focus is going to take longer than I expected…” And certainly, I’ll back up with a couple of thoughts. One, Doug Nordman, as much as he tried to kind of tell people that I was a planner that was focusing on the military, they kept coming back to him because he basically did everything that I would do for free, and if you go to his website, The Military Guide, his bio actually says that, “I help people with their stuff for free.”
And I thought, “Well, how do I compete with a free business model?” And the answer is you really have to focus on something that the free business model doesn’t take care of. And in my mind, that demographic would be probably more suited to delegators, perhaps people that are a little bit more senior military that are making a transition to an executive world where now they’re dealing with a whole slew of things that they have no experience in like stock options or executive compensation and they simply don’t have the time.
Michael: You go up a step in the complexity scale and you start getting away from the stuff that you’re going to answer just from reading it on the internet.
Forrest: Right. And so, I’ll say that that was kind of the thinking that if I stick around long enough and then did an analysis of what my first 20 to 30 clients would be like, I would have guessed that probably 80% to 90% of them would have been the people that said, “Yeah, but I need you to do X, Y, and Z.” And so, I think that this is the point where I was struggling to figure out what my business model was going to look like, and I didn’t get that far because I guess that’s where serendipity kind of stepped in and completely revised my business plan.
The Pivot Point That Changed Forrest’s Career Path [54:56]
Forrest: So, this is where I met Julie…I mean, Julie Lawrence is now my business partner, but back then…this would be probably the fall of 2017 – she and I had checked in a couple of times; she’s an ACP member as well. Certainly, when I was on active duty before I started making this transition, I met her in her office, and she kind of offered assistance as a mentor as I was getting closer, and I would check in maybe a couple of times a year just to get some advice or things like that.
And she asked me about my business plan, and I said, “Oh, my plan is I’m going to do the typical ACP, build 40 clients.” In ACP, 40 clients is kind of like the goal of, “I can do it myself,” and then at that point, you kind of have a decision on whether or not you would want to consider starting hiring part-time assistants or bringing staff.
Michael: You get beyond 40 or 50 clients, and it starts getting harder if you don’t at least have some administrative help.
Forrest: And so, my goal was just, “Hey, let me see where I’m at at 40 clients.” So, we went to lunch one day, and I had kept track of her because she had a business that evolved into a two-planner practice but…she hired a planner through New Planner Recruiting and then that planner ended up getting married and relocating out of state. So, then she kind of went through…and I’ll say that Jim, your deputy editor, and I were talking and he’s actually local to the area too, right, in Tampa. So, he was involved in these conversations and I think if it had not been for you, then I probably wouldn’t have been having this conversation with Julie because there was a very strong consideration of them working together. Irony, but because of your timely hire, I guess, and serendipity in that manner.
Michael: So, we unwittingly pulled Jim away from working with Julie to work with the Kitces platform, which meant Julie was still looking to hire.
Forrest: Correct. And so, we started working together the following summer; she brought me in to kind of help just run through tax projections and just run these numbers, turn out the tax report, put it into her recommendations, and just get that work off of her plate. And that was the summer of 2018 and then during our lunch, we kind of were feeling ourselves out saying, “Well, if this works, then maybe we could eventually…” I could work for Julie as an employee and then possibly become a partner.
And I’ll say that I was pretty excited because at this point, Tanya and I, we were…I won’t say that we were feeling the pain; we had definitely budgeted for that. But there’s a different sense of discomfort when you realize that your highest earnings were in the past and even though you expect to get there in the future, you’re in that kind of dip point where your earnings are not where they were before.
Michael: That income valley is not a pleasant place for anyone. Our mental mindset, it does not feel good to spend a period of time below your high watermark.
Forrest: And no matter how frugal you are, unless it’s a deliberate part of your plan, and I even sense this with some of our retiree clients that aren’t that far away from their working career, there’s kind of that sense of anxiety. And so, having the opportunity to stabilize our income was appealing to me and I believe that it also helped Julie because she was running basically a two-planner practice at that point with one planner, so she was looking forward to not spending nights and weekends at her desk at work and being able to get some of her time back.
And so, in October of 2018, we kind of took the next step. And all of this was on a handshake, but we kind of thought that a year would be an appropriate amount of time to make sure that this was a good fit for me, that I worked well with Julie’s staff, that I worked well with the clients. And then if things were looking promising a year from then, then we would start talking about a partnership. Probably the tough part of all of that is when I brought all of that home to Tanya and we discussed it and…all of this journey so far, we talked a lot about me and what I did.
But behind the scenes, Tanya did all the marketing, she did everything with the website, and when I wrote an article, she was the one that edited it and put it on the website and made sure that…she did all of our social media. And so, for her, even though she wasn’t the financial planner, she had a lot of emotional investment in this. And so, when I brought this home and said, “Wow, we’re going to start getting paid again,” she saw it in a different manner, which was she saw it as closing the door on what could have been and that was kind of tough.
I said, “Well, if it doesn’t work out, we’ll just keep this on the side, that’s part of what Julie has promised.” And she’s like, “But that’s not your goal, if you get your goal, and you always get your goal for us because that’s what you strive for, then we’re basically closing our door on a lot of work that we did, something that we created.” And it made me think a lot more about taking Julie up on that. And I think Julie, even though at this point she had never talked to Tanya, was probably thinking about a lot of the same things.
Because she told me later on that she was very reluctant to even offer that to me, simply because she kind of knew where I wanted to go and knew that I was doing a lot of the things that they say you should be doing to get there and that if I kept sticking with it, that I would eventually get to where I wanted to be. So, it was definitely tough for Tanya; it was tough for Julie to ask me to do something like this. Emotionally, it was tough for me, but I think looking back now, it’s an okay decision.
Michael: Because it was going to involve moving away from this niche you’d been building towards, this expertise you’d been building, and literally this kind of practice you’d been building for yourselves and into a world of, “I’m going to be in a partnership with someone else, and I’m going to be in a partnership in an established business, which means we’re going to be focusing on Julie’s clients and Julie’s target market, not necessarily my target market of the past.”
Forrest: Well, actually, even just to take it a step further, it was really folding my fledgling practice. At that point, I had about maybe half a dozen retainer clients at that point, folding my fledgling practice into Julie’s and hoping that a year from now, she doesn’t pull the rug out from under me and saying, “Well, let’s revisit this in another year,” right? Like the typical three-year partnership path that takes seven years or whatever.
Michael: Yes, yes, but after seven years, we’re really on the three-year plan now, so we’re totally keeping you on track.
Forrest: So, the good news, and I cannot thank Julie enough, is that everything she’d said to me ended up being her word. So, a year later, we started kind of walking through the process of what that partnership transition would look like.
Michael: Interesting. And so, what was the promise? What was the offer? What was it that she put on the table that made you say like, “I’m willing to fold the thing that I was building that was doing the right things and probably going to get there eventually,” but the early years are sucky for everyone as we often say. What was it that she was putting on the table that made you say, “Okay, I think I’d rather go down this path than keep building the thing that I’ve been creating, and I own, and I control, and I built?”
Forrest: So, I think you go back to the old Mike Tyson adage that, “Everyone has a plan until they get punched in the mouth,” and certainly, I had been working my way through it and just realizing, “Here’s an opportunity to, not take advantage of Julie, but to…” I mean, Julie needed me, or she’s at least told me that she needed me about as much as I needed the income stability, whatever that might look like, but she needed a second planner. And the planners that she had worked with before weren’t…there was another person that came in and then left shortly after and she really needed stability on her end and her staff was really…they wanted someone.
So, I think this was a mutual benefit, it’s not like I would have expected anyone to just say, “Here is something for no expectation.” There was a benefit to Julie and her company because she was at a point where she had to turn down prospective future clients, even though she had a staff, because she was so stretched then, just trying to service the clients that she had. When I came in, I’ve always just had the mentality of whoever my boss is, “How can I take work off of their plate?” and I would just keep going and not just wait for tasks but really try to engage Julie and tell her what I could do.
And certainly, she told me that her trust curve of me was a little accelerated because of all the work that I had put in. So, I was a CFP, an enrolled agent, I started my own practice, so all those things were things where she kind of trusted me a little bit faster than she would have had I just been the third new hire that came in the door.
Michael: There’s an irony to me and I’ve seen this for a number of advisors over the years in kind of those first few years of practice that…even for some of those that didn’t necessarily want to learn something on their own the way that you did but sometimes end up feeling like they’re forced into it because they just can’t find a job or can’t find a good job or can’t find a good job at a good firm in the area where they are and have geographic or other constraints.
That I’ve seen an astonishing number of advisors that could not find a firm to work at, went and hung their own shingle, did it for 12 to 24 months, and then started getting called and meeting a whole bunch of firms in the area who totally wanted to hire them for an advisor because there are some strange effects that happen that are like, “Well, I don’t know if I want to hire you but once you showed you can do it on your own, now I really want to hire you.” Which, on the one hand, as I think you noted in the conversations with Tanya, it’s kind of frustrating because you’re like, “No, you didn’t want me before, now I’m actually getting my own thing going.”
But on the other hand, sometimes it opens cool doors to cool opportunities because a lot of firm owners and practice look at prospective hires very differently if you have had any taste of running your own practice, doing your own thing, getting your own clients, particularly since you really invested into your expertise as well, that it does change, as you put it, the trust curve.
Forrest: Right. I mean, I think there’s something to be said for initiative and certainly, that’s a highly complimented trait in the military, just seeing stuff that needs to get done and doing it without anyone asking you. It’s funny because when I was a kid, initiative was not even in my vocabulary but as I kind of went through the military and kind of grew up in the military, so to speak, I realize that initiative can open a lot of doors. And I think when you’re hiring someone, and you see that someone’s had an initiative to take risks, to do things that you wouldn’t have expected, the downside is that you might spend a little extra time kind of maybe adjusting their course of action or making minor adjustments.
But you’re probably not going to spend a lot of time training them, you just give them kind of barriers drop right within and then you open those kind of left limits and right limits of things that they can do as you see their potential. And it’s a lot different from an employee where you bring them on and then you have to train them to do every single thing and then they kind of just wait for work to come to them.
Michael: Even though the frustrating part is…now, granted, not in your situation but in some, it’s like, “I was taking the initiative to try to apply to your firm to get a job in the first place, you didn’t want me until I showed my initiative to do something else.” And it’s like, “Oh, well, you went and made your own thing, now you can totally come work with us.”
Forrest: Absolutely, I think that just represents a different level of commitment. We go through a couple of applications a month or people that submit a question on our website looking for a job, that’s pretty low risk but to actually file an ADV… there’s a little bit of a more tone of seriousness that they are presenting when you do that.
Michael: So, what was the nature of the role and the structure? What was the transition going to be when you sat with Julie in October 2018, “We’re going to try this thing?” Did you become an employee of her firm? Did your firm go away? Did you kind of keep yours on the side and have two RIAs at once? Did you fold yours in, but you kept your clients? Just how did this work, particularly since as you said this is still a test-out phase for a year, so everybody is kind of figuring out what their Plan B is in case this doesn’t work out?
How Forrest’s Affiliation With Lawrence Financial Planning Was Structured [01:10:36]
Forrest: So, what we agreed to was that I would keep my registration on the side, and we probably both demonstrated shows of good faith, right? So, now I know a little bit about behind the scenes, Julie kind of took a little bit more risk and gave me a pay raise probably earlier than what the employee manual would have instructed just based on how things were going. But I took a risk because even though I kept my registration, I basically said, “Forrest isn’t taking new clients under Westchase Financial Planning, if you want to work with Forrest, you’ll have to go to Lawrence Financial Planning,” and I was dually registered and updated the ADVs accordingly.
Michael: So, you essentially became an IAR under your RIA and under Julie’s RIA?
Forrest: Correct. And the irony is that that’s when momentum actually started picking up, so I think there’s a timeframe where, I don’t know, four out of five new clients were people that either I did an initial plan for and they said, “Okay, I want to hire you.” Some of those were military.
Michael: At this point, you’re kind of wrapping up your second year in the business and start heading into the third year, which is when a lot of people start seeing traction.
Forrest: And so, I look back and I think, “Well, would life have been any better for me just because the marketing part was picking up?” And I have to answer pretty honestly that, no, and the reason why is because Julie’s had this…she’s been a planner for 15 years. She was a career changer like me, she came from corporate America, and she actually kind of had Kathleen Rehl as her mentor under ACP. So, along the way, she did a lot of other stuff, like she had a staff that did a lot of stuff that she didn’t need to be doing, and I could definitely take advantage of that. She also had a trading platform and a relationship with Schwab. The first time that a client wanted me to invest their money, I was like, “What do I do with this?”
I had to figure out the…I was so focused on marketing and churning out financial plans that I never stopped to really kind of put together the plan of what happens about investing client money. But she had that taken care of and there was a process for that, and we have custodial relationships with Schwab and working with Julie, I never had to worry about that. But those are all questions that I would have eventually had to fumble through while I’m trying to still grow a profitable business, and I almost feel like I ‘hacked’ a big amount of the learning curve, as my younger son would say, just by being able to kind of take advantage of this opportunity.
Michael: So, you joined Julie’s firm in an employee role initially, just taking a salary? I’m assuming sort of the classic percentage-of-revenue type model didn’t really work because you didn’t have clients yet because you’re coming in to service the clients of the firm that she’s already got. So, was this just like a straight salary transition?
Forrest: Pretty much. The amount of revenue of the clients that I brought in, it was something, it would have been enough to make my standalone self pretty happy, but it really wasn’t a significant factor when compared to the firm’s revenues, so we just decided on a simple salary structure.
Michael: So then, what happened after a year? The idea was, “We’re going to try this for a year, and then we’re going to evaluate,” so what happened after a year?
Forrest: So, I’ll take a step back and kind of say that as the traditional good employee – show up to work on time, and all that stuff – one thing that was always going through my mind was, “What if I become a partner?” And so, some of the challenges that I had to make sure that I felt comfortable in addressing were making sure that I was a good fit for the firm, not just because this is going to benefit us, but making sure that I was adding value. So, I could see that I was adding value to Julie and kind of allowing her to recapture her nights and weekends, but I wanted to make sure – Julie has a staff, and she has clients, so I wanted to make sure…
And by the way, I’m the only male member of this firm, so I felt like I needed to be a little…make sure I put a little bit of extra effort to try and make sure that I kind of incorporate myself into the firm’s culture, which I probably thought a lot about this more than maybe other people, but it was something that I didn’t take lightly. I wanted to make sure that I was also providing a benefit to clients. So, those are things that Julia was probably acknowledging as kind of, “Yep, Forrest is doing that. Forrest is getting along.”
For me, it was a lot more, I guess, real estate in my head, like, “How do I do this? How do I make sure that I’m doing all of this so that if one day everyone wakes up and knows that I’m a partner, they look back and say, ‘Okay, that makes sense, this is a good decision’”? So, it was a year of just me making sure that I was presenting the best of myself, and hopefully, I did. But a year later, we sat down and said, “Okay, well, what’s the plan?” And what we hashed out was that Julie wanted to get an end-of-year valuation, this would be for 2019.
And so, she hired FP Transitions to do a valuation of the firm based on 2019 numbers and then we thought about having FP transitions help kind of negotiate the transaction, but the more we looked at it, the more we really wanted to kind of just keep things simple. And so, we just worked through Julie’s business coach, now our firm’s business coach, Diane MacPhee, who I think has been on your podcast before. And we kind of worked through a lot of maybe the negotiating points, either Julie or me or both of us, and kind of used that as a way to kind of get through the finer points.
Some of the things that we felt pretty confident about, that we were on the same side of the discussion, was that Julie wanted to be 50/50 partners from the onset. We thought that an incremental partnership was probably not…I’m still in the position that until the paperwork is signed and the loan has been disbursed, I’m kind of respecting all of the terms and conditions that she wants to put out. But that was something that I didn’t really have to worry much about because she wanted clients to know that we were partners and not just pat Forrest on the head because he’s got a 5% partnership stake, but I’m still making all the decisions. We wanted to make sure that when we entered this partnership that we were speaking with equal voices.
Michael: And so, that’s the ‘why’ on not doing it incrementally is Julie really wanted to convey it as a, “We’re really going to a full-scale partnership here; I want all of you as clients to view Forrest as a full partner at the table, so I want to do this equity transition to 50% all at once so that we can put that stake in the ground and show it.”
Forrest: Yes. And there are some challenges behind that. Certainly, when you start talking about the kind of deal that requires kind of a little bit more…the bigger the percentage, the bigger the dollar amounts, but that was, I think, a significant commitment on all sides on that, right? So, we ended up working with Oak Street to come up with a loan and what they offered us was that I would put 10% of the purchase price, the bank would loan for 50%, and then Julie would seller finance the other 40%.
Michael: Interesting. I’m just curious. Why that structure? I sort of get a portion down and then a portion financed, but what leads you to say, “Let’s do part bank financing and part seller financing?” Is that just some of the limitations of banks, they will only lend so much so Julie needed to do some seller financing, or was there a vision or intention behind saying, “Let’s split how the financing works?”
Forrest: So, we worked with a great loan officer, her name is Susie McEwen, and she basically said, “Look, we want to make sure that…obviously, Forrest is putting down 10%, we can go through the books and make sure that the revenue and the earnings are there, and he will guarantee that he’s not going to run off. But what is there to guarantee that Julie doesn’t…or the selling partner, in any case, doesn’t just take off with a decent amount of money and go to the Cayman Islands?”
Michael: Keep a little skin in the game, you don’t exactly want to tank the firm after you sell it if you have seller financed part of it because then you will not get your own money.
Forrest: Yeah, maybe you’re just taking an extreme discount so you can get out of dodge for some reason. So, that was kind of the bank’s insistence. We worked within those parameters, and I think that we came to terms that were acceptable to everyone. I will say, at this point, this kind of negotiation was going on during the beginning of the coronavirus pandemic when it started breaking out. And probably an unanticipated benefit was that when PPP loans became available, they were very hard to come by and you had to have a banking relationship to even get the paperwork in there.
Well, the bank that Lawrence Financial Planning normally uses was not doing PPP loans, they said, “We’re not doing it, sorry, go somewhere else.” And, of course, everyone else wouldn’t accept you unless you already had a banking relationship. So, even though the loan hadn’t been issued yet, we were able to use the loan application as kind of the “banking relationship” that allowed us to qualify for a PPP loan.
Michael: Interesting, interesting. So, ironic how these things sometimes fortuitously turn out and I guess, comforting from your end of, yeah, it’s a heck of a time to be putting in a giant down payment and buying in at 2019 valuation while the world is in turmoil in March-April of 2020 that in the truest sense, it’s like a lot of uncertainty about the forward health of the business in this transition in a pandemic. Yeah, that’s what the PPP loans were being built for.
Forrest: Exactly. And I think, looking back on how everything transpired, I’m not sure if the coronavirus pandemic really affected that transaction but it was just nice knowing that we were working with a banking partner that was…from their perspective, certainly, any financial stability that the PPP loan provides and the loan forgiveness provisions and all of that stuff makes this a better loan to underwrite. So, certainly, the bank was thinking that as well.
Michael: So, as you look back on this, now that you’re another year into this and the partnership is in place, how do you look back at this crossroads that you are at now with the business was painfully slow to launch on your own but were starting to gain momentum and seems to have…maybe been gaining momentum as you did this transition. But now you’re in a good role here, and the partnership transition that was a hope in October 2018 actually became a reality in 2019 into 2020.
So, I guess I’m just wondering how do you look back now at that crossroads decision of could have kept where you were? It was gaining momentum, it would presumably be bigger now than it was then, maybe not as big as what you have now but you don’t know all of that, but you’re a partner in this. So, there’s a lot of different trade-offs and pros and cons. I’m just curious how you look away at that decision now and how Tanya looks away at that decision now?
How Forrest Views His Decision To Close His Firm And Partner With Julie, What Lawrence Financial Planning Looks Like Today, And What Surprised Forrest The Most About Building His Advisory Business [01:24:54]
Forrest: So, I have to admit; I think about it every day, and the reason why is because when I go into my closet to pull out the shirt that I’m wearing, I usually set aside three polo shirts that Tanya had made that have Westchase Financial Planning embroidered on them. And so, just by default, I’m looking at those things, “Well, that’s what it could have been.” But I think that now that we’re kind of through a lot of this stuff. Tania is our office manager. We work with a great staff.
We have two outstanding associate advisors and paraplanners, Bria and Christina, and Kyle works with us on a part-time basis. She screens all of our prospective clients and schedules all of our client meetings. So, we have a great staff; we have a great group of clients, and I don’t look back and wish for the days where I felt like a starving artist at all. So, I think as time goes by, I’m probably less, I guess, wistful about the days of that, mainly because I strongly believe in just trying to fall forward, so if my initial plan didn’t work out, then I’m somewhere in the ballpark of where I should have been, anyway.
Michael: Yeah. I like how you frame it: the benefits of trying to fall forward. Maybe it didn’t turn out exactly as anticipated, but you’re still in the ballpark of being in a good place doing financial advising, helping people, making a good income, it’s landed in a good ballpark.
Forrest: Right, and certainly, the less time I have to worry about my own financial stability is time that I can spend actually helping other clients
Michael: And so, just to paint a picture for us, you talked about the team, but what’s the size of the firm’s client base at this point? I don’t know if you measure the number of clients or AUM or revenue or other metrics, but what’s the overall size of the practice at this point?
Forrest: So, we have about 70 client households that we serve on a full-time basis. We probably have about 8 or 10 clients that we might meet once a year or every other year to review or to update their investments. We have about…actually, I have it written down on a note, about $108 million in assets under management.
Michael: So, as you look back on this journey, what surprised you the most about trying to build your own advisory business?
Forrest: I don’t think anything surprised me. There are certain times over the course of my military career where…I mean, it’s kind of like being prepared for the Ice Bucket Challenge, right? You know it’s coming, and it’s going to suck and there is no feeling like actually going through the experience. So, not any surprises but just how you feel in that moment is…you can’t anticipate it, it’s like trying to describe it to someone before they go through the experience and there’s just no substitute for the actual experience.
Michael: Yeah, putting it in terms of the Ice Bucket Challenge is an interesting way to frame it, but there is this challenging effect that I feel like this is forever the challenge of any parent with a child, anyone who’s tried to mentor or coach someone young that we talk about the value of experience and there’s so much that it’s just hard to really absorb what it’s like until you have the experience. And that doesn’t change the fact that none of us when we’re young want the experience and don’t want to have to do the whole putting in your dues thing and all the rest and there must be some way to accelerate this or shortcut this to the rest. But then when you get into it, it’s just like, no, no matter how you try to mentally psych yourself up, it’s not the same as what happens when you actually go through the experience and what you learn when you do.
Forrest: And I feel fortunate that fortune or good luck kind of…or Michael Kitces, crossed paths with me and really kind of presented an opportunity where I didn’t have to get the full ice bucket, maybe just a cup of cold water on my head, and then I was kind of in the position where I would have aspired to be at the 10-year point, basically, when I first put down my plan.
The Low Point For Forrest On His Journey [01:29:50]
Forrest: So, I’m going to take a little bit of liberty here because if I’m imagining a military person looking at this as a career, I think it’s important to recognize just how vital a role that a spouse plays in not only the military career but something that is as daunting as leaving the relative financial stability of a military career and jumping out into an uncertain earnings environment. So, I’ll tell my story, and then I’ll tell Tanya’s story with the understanding that this is a question that she and I discussed before this conversation.
And so, my story – I’ll try and keep it short – it was during my departmental tour and we were on deployment. And we had a normal deployment, but we had a pretty, I would say, challenging commanding officer, and at one point, he threatened to fire me over a misunderstanding during a poor visit. I had never been threatened to be fired, and I’ve never since had anyone threaten to fire me, but I thought, “Wow, this is the first time in my Navy career that anyone’s really said something that challenges the assumptions around my livelihood.”
And I knew in my heart of hearts that I didn’t do anything wrong. It was just kind of the way he led virtually everyone on the ship. But from that time on, my relationship with him really…it became probably the most dysfunctional relationship I’ve ever had with any person who I worked for. And that if there were any reporting requirements that the Navy has that would have me give information to the commanding officer, I wouldn’t go around those requirements, I would simply document them in a series of memos and I would put them in his inbox, he dutifully never really read anything, so I still met all the reporting requirements, but we never spoke.
And I continued to work for him for about a year until the next year, we had a change of command and he left the ship, and it was a very high-stress time, but I learned two things. One, at every challenging point in my life that I have encountered since then, I would look back on that experience and I’ve never had a point…even when I was trying to build this practice when Tanya and I were first starting out, I never had a point where it was as bad as that. And so, that gave me a sense of perspective that if I got through that experience, I can make it through just about anything that I could really imagine.
And then the second thing that I learned, Michael, was that we all have bosses and even if you own your own practice, you have bosses in the form of clients. And it’s important to recognize that…and what I did recognize is that anything that I ever wanted to achieve in my series of tours or jobs afterward, I had to sit down and really think about what my boss was struggling with or what the problems on my boss’s plate were. Because if there’s something in your responsibility that your boss is worried about, you can pretty much forget anything else you want to accomplish, and certainly, that’s true with clients.
If a client comes to you with the spear in their back and you see the world’s best tax planning opportunity, you’re never going to have that conversation until you figure out what that client came in for. And now we just have 70 bosses, and we have to really be specific to each of those people, what they value, what they don’t value, and making sure that the message we want to create respects those. So, with Tanya’s story, it was the very next tour and at this point, we were stationed in a Navy base in Sicily, in Italy. And I remember going to work one day…this was when my oldest son, Nicholas, was about three and my twins were not even a year old.
And so, I had already been kind of sent on various travel assignments for a variety of reasons and I remember going to work thinking, “This is a beautiful day in Sicily.” And then I came home that day and I said, “Tanya, I’m going to go to Africa for six months,” and she was completely floored. Her first response was, “How soon are you leaving?” And I said, “Well, I have about a month and I’m going to have to…” They gave me a list of things that I think I need to do, like get malaria medication and shots updated, find uniforms.
But she was stuck in this position where it was a short-notice deployment, and she was overseas, so she didn’t even have the opportunity to…a lot of folks might move back home with their parents so that they can help with the kids and things of that nature and being in Italy with less than a month’s notice, she really didn’t have that option. It was during that time that Tanya told me she really found the best of herself and just the limited resources that were at an overseas base, not having the traditional friends and family support structure that she would have had if we were back in the States, and raising three kids, all of whom were under the age of four.
She made it through that deployment the way I made it through the Cole deployment, and I look back on that experience with probably even more appreciation because I think, having gone through that, she’s the strongest person I’ve ever met. Both of those experiences really gave us perspective on bringing out the best of ourselves.
Michael: I like that it’s all about just her perspective, right? Just that whole dynamic. I even like how you framed it in your segment as well as how we go through these things in our lives, and not to belittle any of the challenges that we face, but it can pretty much always be worse, often there’s a time we can look back on our lives that’s worse. If there’s not, at least this will set the new low point and when we get through this, everything else will not be as bad as this and can be the moment that you look back with perspective. But there’s nothing like the accumulation of perspective that you get over time as you live through life’s challenges and get some tools to deal with the next ones.
Forrest: Yeah. And although I think that those were the most challenging points, I do want to kind of say that for anyone leaving the military, you might have very similar kind of points of reflection, but they’re going to be quite different from that moment…the month after you retire and it’s the 15th of the month and you realize that you’re not getting a paycheck and that your paychecks from the government now come once a month. There’s not quite anything that replaces that experience.
But to put it into perspective, if you’ve made it through challenging deployments and you’ve got a good plan, I believe…and I think a mentor had told me at one point that success lies at the crossroads of preparation and opportunity. And certainly, having faced that adversity during the course of your military career will help you find success along the way, even though the first year or three years might seem pretty challenging.
The Advice That Forrest Would Give His Younger Self And How He Defines Success For Himself [01:38:08]
Forrest: I’ve thought a little bit about that and I’m not sure that I would change anything about the plan, I think that I had a pretty good plan and there’s not really a whole lot I could have done to make that happen. I would probably say, “Just keep putting your feet forward and some opportunity will come by and be prepared to pivot.”
Michael: And be prepared to pivot. So, as we wrap up, this is a podcast around success and one of the themes is always that even just the word ‘success’ means different things to different people. And so, you’ve had your own journey, which is, as you’ve noted, had a pretty strong pivot to it to get to the great place that you’re at right now as a partner in a successful practice, but I’m wondering, how do you define success for yourself at this point?
Forrest: So, if you had asked me that at the beginning of my career, I probably would have just looked at the next pay grade above me and said, “I don’t know what success looks like, but I know that once I get to that next pay grade, I’ll be better off than I am now.” And at some point, I think most people in the military get to the point where they recognize that there’s kind of diminishing returns the further you go and that there are probably more and more cumulative sacrifices that are required as you go further. So, I think that at least I reached the point where the next incremental paygrade was not going to be as close to the definition of success to me as something else that at the time, I couldn’t put my finger on.
But I think being where I am now, we’re fortunate that we have good clients, great clients, we have a great staff; I have a great partner both in life and in the business, and I have the flexibility of time so that if there’s an opportunity to help in some way, that I’m able to kind of take some time and do that, whether it’s in a mentorship capacity, whether it’s just giving free advice to someone that I haven’t talked to in a while, or just helping someone on a pro bono basis. And I kind of think if you can live a life where you can’t measure everything that matters, that you’re able to take the time to actually enjoy some of those things that don’t have a dollar value, then you’re pretty close to success, at least that’s the way I look at it.
Michael: I like that, I like how you frame that, including if you can live a life where you can’t measure everything that matters; I think it’s really powerful. Well, thank you so much, Forrest, for joining us on the “Financial Advisor Success Podcast.”
Forrest: Thank you very much, Michael.