Welcome back to the twenty-second episode of the Financial Advisor Success podcast.
This week’s guest is Jude Boudreaux. Jude is the founder of Upperline Financial, a financial planning firm in New Orleans that works primarily with Gen X professionals in their 30s and 40s.
What’s fascinating about Jude’s practice is not only that he works with a much younger clientele than the typical financial advisor, but his unique pricing model – an annual retainer fee that’s calculated as 1% of the client’s income, plus half a percent of the client’s net worth. Which makes it feasible for him to work with that younger clientele, and deliver holistic financial planning, even if they don’t have any assets to manage. And thanks to his unique model, that’s so well aligned to his target clientele, Jude has managed to grow his practice to capacity, at more than 150 clients and $400,000 of annual revenue, in only 6 years.
In this episode, Jude shares not only the details of his unique business model – including how he handles billing when there’s no portfolio to bill from – but also his highly structured process for meeting with clients on a rotating basis three times per year, the kinds of financial planning issues he covers in those meetings to validate his fee structure, and what he did to fill in the income gaps while he was still growing to the point that he could replace his prior salary.
Jude also shares the exact marketing strategy he executed to get his 150 clients – by using blogging, Twitter, and media interviews to get him up to the #1 ranking Google result for “fee only financial planner in New Orleans”. (Try the search yourself – you’ll see!) And now thanks to his successful local SEO strategy, all of his prospective local clients find their way to him. Even though, ironically, his own staff are all virtual and not in the New Orleans area!
And be certain to listen to the end, where Jude shares why it is that, even though he’s successfully built a solo advisory practice to be very profitable, he’s now looking to merge his firm into a larger advisory business, by taking a hard look at his personal strengths and where he wants to focus his energy in the future.
So whether you’ve been wondering how to structure a business model that lets you work with younger clients, or want to better systematize your own financial planning meeting process, or have been curious to hear how digital marketing is done by someone who dominated his local business opportunities, I hope you enjoy this latest episode of the Financial Advisor Success podcast!
What You’ll Learn In This Podcast Episode
- How Jude built a firm serving Gen X clientele, who many claimed couldn’t be profitably served, in just six years. [2:40]
- The highly tailored net-worth-plus-income retainer fee structure that allows him to scale prices for younger upwardly-mobile clients. [6:22]
- How the Upperline team implements George Kinder’s 3 questions to help craft a financial vision for their (young) clients. [19:23]
- Where Jude found his 150 clients, and how he grew his business by engaging in a local SEO digital marketing. [28:23]
- Why a slower growth process was right for Upperline as a firm. [38:28]
- The critical income gap that you must cover when starting your own RIA, and how Jude made sure he wasn’t overcome with personal expenses while starting his business. [40:29]
- How Jude made the transition from starting out in the mutual fund industry, to encountering and then fully switching gears to holistic financial planning. [43:33]
- Why Jude and his wife decided he should (still) take the leap to start his firm, even as they were having their first child. [43:33]
- The remote and office structure of Jude’s RIA, that allows him to work with local clients, yet be supported by staff who are not in the New Orleans area! [53:15]
- Why Jude is considering a merger, even though his practice is already successful, because he wants to focus on what he loves about financial planning, and let go of some other business-management responsibilities. [58:07]
- Jude’s advice for starting your own firm, and why it’s critical to have good partners along the way. [1:08:32]
Resources Featured In This Episode:
- Jude Boudreaux – Upperline Financial
- FPA NexGen Community
- George Kinder
- Dennis Moseley-Williams Consulting
- Setting Up An RIA And Starting A New Financial Planning Practice On Less Than $10,000 from the Nerd’s Eye View blog
- Filling The Income Gap When Starting A New Advisory Firm from the Nerd’s Eye View blog
- Dalton Education
- Mark Tibergien
- The Planning Center
- First Step Cash Management
- FAS 002: Love-Affair Marketing and Amplifying Your Successful Business with Ron Carson
- FAS 004: Deb Wetherby On Building The Team Of A $4.5B RIA Serving HNW Clientele
- FAS 015: Why Life Planning Is Simply Financial Planning Done Right With George Kinder
- FAS 017: Using Social Media and Blogging to Drive Business Growth As A Reformed Broker with Josh Brown
Full Transcript: Serving Gen X Professionals With A Net-Worth-Plus-Income Retainer Fee Model
Michael: Welcome everyone. Welcome to the 22nd episode of the Financial Advisor Success podcast. My guest on today’s podcast is Jude Boudreaux. Jude is the Founder of Upperline Financial, a financial planning firm in New Orleans that works primarily with Gen X professionals in their 30s and 40s. What’s fascinating about Jude’s practice is not only that he works with a much younger clientele than the typical financial advisor, but his unique pricing model. An annual retainer fee that’s calculated as 1% of the client’s income plus half a percent of the client’s net worth, which makes it feasible for him to work with those younger clients and deliver a holistic financial planning, even though they don’t have many assets to manage and he’s operating as a fee-only financial planner. And thanks to his unique model that’s so aligned to his target clientele, Jude has managed to grow his practice to capacity at more than 150 clients and $400,000 of annual revenue in only six years.
In this episode, Jude shares not only the details of his unique business model, including how he handles billing when there’s often no portfolio to bill from, but also his highly structured process for meeting with clients on a rotating basis three times a year, the kinds of planning issues he covers in those meetings to validate his fee structure, and what he did to fill the income gap while he was still growing his practice to the point that he could replace his prior salary. Jude also shares the exact marketing strategy he executed to get his 150 clients, built around using blogging, Twitter, and media interviews to get him up to the number one ranking Google result for “fee-only financial planner in New Orleans.” And now all of his prospective clients find their way to him online. And be certain to listen to the end where Jude shares why it is that even though he’s successfully built a solo advisory practice to be very profitable, he’s now looking to merge his firm into a larger advisory business by taking a hard look at his personal strengths and where he wants to focus his own energies in the future. And so with that introduction, I hope you enjoy this episode of the Financial Advisor Success podcast with Jude Boudreaux.
Welcome, Jude Boudreaux to the Financial Advisor Success podcast.
Jude: Thanks so much, Michael. I’m really looking forward to the conversation.
Michael: I’ve been looking forward to this episode because, you know, we’ve known each other going back a ways and I think upwards of 10 years. From the early days of FPA NexGen, back when it wasn’t even FPA NexGen, it was kind of NexGen. And we had done it on its own, and we were out at some of the early conferences. And I think at that time both of us were kind of going through dynamics of being employees in advisory firms, trying to decide whether we might go out on our own at some point and what it would look like. And so I thought it’d be really cool now that you’re well into this journey for quite a few years to come and have you on the podcast and just share like what you do and what that path has been like. Yours was similar to mine. You spent some time in an insurance agency and the independent broker-dealer environment before you landed in an RIA. And so I’m excited just to have you on and tell some of that story and that journey that you’ve been through.
Jude: Well, I’m glad to share and talk about all of those parts. It’s been an interesting from, you know, mutual funds, to insurance, to being duly registered and starting your own deal. So it’s been a long road but it’s been an interesting one.
How Jude Built His Firm With Clientele Many Claimed Couldn’t Be Profitably Served [2:40]
Michael: So maybe to start off, can you just talk to us a little bit about your advisory firm as it exists today? Like what does that business look like? What do you do, and who do you serve, and where are you now?
Jude: So I own Upperline Financial Planning. We’re a fee-only firm based in New Orleans. We price on an income and net worth retainer, so it’s a flat fee structure that we work under. I have a full-time financial planning resident who’s a really great young planner, who just passed CFP exam and did the courses through SMU and will be a fully certified financial planner before too long here. And I have two staff members who both are our clients, interestingly enough. One is our office manager who’s a mom working to transition back into the workforce since her kid started school again. Another one was a client who kind of followed their partner to New Orleans. Her partner was going to medical school and was trying to figure out what her next pathway was going to be and ended up working with us, ended up being part of that journey for her.
Michael: Very, very interesting transition. How many like clients do you serve, or how do you look at it from that angle? Obviously, we often talk about AUM but you run a net worth and income retainer model, which I want to ask more about in a moment, but how many clients are there, or how do you measure the size of the firm?
Jude: For the longest time, people would ask me that question at conferences and I would say, “I don’t know. It’s not my money, so it doesn’t matter.” We have 150, 160 or so clients that’s if you can circle on the average, that family is young, professional family. They’re mid-30s, early 40s, good incomes and maybe children but a lot of moving parts. And so we work with them on a really broad flat fee that covers our work with them on…you know, there’s cash flow planning, getting through about their vision using George Kinder’s three questions, all the way through their retirement projections, talking about the investments and estate planning, education planning, all the things that you would normally think of within the box of financial planning.
Michel: But essentially it’s kind of a largely Gen X young professional clientele.
Jude: Yeah. I think that’s fair to say. And I know people always look for that AUM number. I don’t really have that. I’ll say like our gross revenue this year should be about $400,000 on that 160 or so clients. Our average client is about $3,500 a year range on just a flat fee. Smallest one is a thousand and our biggest one is about $14,000.
Upperline Financial’s Fee Structure [6:22]
Michael: So talk to us about that fee structure. So you said net worth and income retainer, so what does that look like? Like how do you set that fee? How do you calculate that fee?
Jude: We kind of wrap it in simply based on a client’s previous year’s income and based on a ballpark figure on their net worth. And I always say it’s net worth excluding the value of any business interests that they have. So if you own a small shop or a consulting practice, we’re not billing you based on the value of that business, or real estate, as a lot of New Orleans is rental properties, because we are not advising about the business. If we are, that’s a different engagements and we have a separate planning engagement for that. But really we’re just planning on the income that those businesses generate, and using that income to plan the rest of their lives. So we exclude that in the calculation, but otherwise, everything else is included, from home equity to liquid assets, and kind of all those other pieces.
Michael: Do you do this formulaically? Like, “I’m going to charge you a certain percentage of your income and net worth,” or do you just look at a client situation and try to judge kind of the rough estimate of the income and net worth and just say like, “Okay, your fee is $4,000,” and you just give her a number? Like just, “Your fee is $4,000. I’ve assessed your situation and here’s what I charge.”
Jude: So what we tell people is the fee is roughly 1% of a client’s income plus one-half percent of their net worth, excluding the value of any businesses that they own. And I often say like we’re not trying to get this down to the penny. “My goal is to get a number that is reasonable for you in terms of the cost, you know, what you’re going to spend, and for us in terms of what we need to do to work with you, and also is reflective of the value that you’re going to receive working with us.” So that’s…you know, so one plus a half percent is the guideline. And we’ve revised it down at times. Sometimes we revise it up because clients have a very complex situation, but it becomes our guideline for opening that conversation.
And the big thing I believe about it is that it takes away the assets under management kind of conversation. So we’re not saying, “Okay, you’ve got to have a quarter of a million dollars for us to be able to bill on this and make it a profitable plan,” or something like that. Our position is to make $400,000 a year and grow to $500,000 in seven months. And so we bill them a flat fee of about $4,000 a year and help them save some money and set some money aside, but mostly, we’re talking about student loan planning, so in paying off debts. And so it allows us to not…I believe we sell a process and not a product, so we don’t have any preconceived solutions when we come into the conversation. “You want to talk about building a real estate portfolio? Great. Here’s what you should think about going into that conversation. You really want to be debt-free? All right, here’s the process and minuses to that.” So we just meet clients where they are, talk about what’s happening, and then how do we think we can get them better reality.
Michael: And so the fee then evolves over time because presumably their income is growing over time, particularly if they’re Gen Xers and so operable mobile and their net worth is growing over time because hopefully they’re saving and building net worth somehow with it, or they’re buying real estate, they’re investing in their portfolio, or they’re putting in a 401(k), or whatever it is, and so the fee would, in theory at least, kind of drift higher over time as they’re accumulating wealth and income?
Jude: Yeah, that’s the goal. And I often tell clients, “Outside of something drastic happening, we leave the fee level for three years and then we re-evaluate it.” We’re not too worried about, you know, how down to the penny that is. But I was saying if there’s something major that happens then we need to have a conversation, because I’ve had clients…I had a client, very young client who was diagnosed with stomach cancer and so we stopped their billing immediately and continued to work with them to get through this very difficult stage in their life. We’ve got other clients who inherited large amounts of money and they need to just kind of open up the conversation. Say, “All right, so now this is what the fee would be based on what we’re now doing for you.”
Michael: Yeah. You have a liquidity event, you lump-sum a whole bunch of net worth…the net worth income all at once. You’ve got these weird income distortions.
Jude: Yeah. So that’s not…I mean, that’s real but it’s not going to be each and every year. Just like I met somebody once who lost a couple of million dollars in a mine, and so he had all these active loss pass-throughs, and so he was like, “Well, my income has been zero for the last three years.” Like, “Yeah, not really. Like it’s still really $200,000 but you’re not paying any taxes on it because you had this big loss” So that’s our guideline.
Michael: Do you get clients that like…Well, I guess two questions. Do you explain to clients that that’s the formula? Like is it a guideline you explain to them or is it just a guideline that you use for yourself but you still ultimately just tell them like, “Your fee is two grand,” or “Your fee is four grand,” or whatever the number is? Like do they know this is the guideline formula?
Jude: We do tell them that, “You know here’s roughly how we’re calculating this.” And I always kind of open that conversation with, “Here’s why we bill this way.” Fee-only firms, we didn’t…a lot of them bill either hourly or based on assets under management, and we didn’t want to do that, you know, and here’s why. Hourly, we think creates a conflict directly between us and clients because they don’t call with certain kinds of questions. Well, this works better. As you know we can have these little pieces that can move, but if we talk about it, there’s a big impact that that can have. So we want to be part of those conversations. So we don’t want there to be a barrier between us in talking.
And assets under management is fine but it creates a different kind of conflict where you want to go and start a business, or buy a condo on the beach, and you’re going to take money out of your portfolio to do that. That’s great, but if we’re billing just based on your assets, we’d have to say, “By the way, our fee is going to go down by X if you decide to make this decision.” So there’s no perfect model. I don’t believe there’s anything that is conflict-free, but for us, it was a way that was not based on assets and it wasn’t based on hours, because I often had that that too. We’re not good at tracking our time. So it’s not the way we’re built, we’re not structured that way, so we’re going to do a bunch of stuff. We’re not going to bill you for it. And that’s not a good way to run a business either.
Michael: And so do you get clients that like haggle with you about this? I mean, I’m sort of imagining once you’ve got this formula, particularly when there are ways that maybe you have to adjust income up or down, right? Like, “Hey, my income last year was exceptionally high because of blank, but that’s not normal,” or you have to point out, “Your income was exceptionally low last year but that’s not normal because you’re writing off or carry forward loss” or something? Do you get to points where you find yourself haggling on price trying to set this, compared to…I mean there is at least a certain simplicity to AUM. Like, I manage it or I don’t, and, you know, there’s a printed statement with a clear account balance. Like do you find that’s a challenge, or no, or like it is but it’s just manageable and you have the conversation and you move on?
Jude: Yeah. I tell clients all the time like, “We need…we’re going to talk about important things in this space, so we’re going to have to trust you and you’re going to have to trust us if we talk about some of these things. So if you tell me this is worth X, I’m not going to go and get an appraisal, I’m just going to take your word for it, right?” And so it does come up at times where people want to, you know, make a case for a different kind of a theme. But I want to say it doesn’t happen that often. Mostly, it’s either just something that is…you know, make sense for them and they’re comfortable with, or it’s not. And then that’s fine. It’s not the right fit for us.
I often talk about this with other people who are thinking about the retainer model. The biggest problem with it is that it’s really discreet. Like, it’s really clear what people are paying for you. And it’s kind of ironic that that’s a problem, but it just…it’s been hidden and tucked into all sorts of other places before. But chances are it’s less and, you know…So I’ll often ask that on the larger end you throw out a number to somebody and I’ll say, “Oh, that’s a big number.” Say, “Good. Well, you know, I tell you what? If you put another hour into this, I will too. Give me your statements and let’s just…let’s look at what you’ve been paying and let’s compare it. But I’m willing to bet you that mine is less.” But the problem with it is that you know, no matter how much internally we know that a ton of feathers and a ton of bricks weigh the same, a ton of bricks always feels heavier, right? So same thing. If I know that 1% of a million dollars is $10,000, or I can write a check for $10,000, writing a check for $10,000 feels a lot heavier. So we just have to put it on the table and acknowledge that and take it for what it’s worth.
Michael: Now, what if the client actually does have assets? Like will you also manage them and charge them for it or it’s just bundled on the fee so you’ll manage it but you’re not going to charge them because you already charged them on income and net worth?
Jude: Yeah. So our fee is inclusive, so we don’t add on an extra asset management fee. You know, if we end up with going to some kind of specialty portfolio manager and that manager charges an extra 35 basis points to do a muni bond portfolio or something like that, then that’s just an add-on. But we don’t charge more if it’s through us, or at Vanguard, or in their 401(k) plan. We’re very agnostic about where the money is, which I think is part of the…one of the good things about our model is it doesn’t require you to transfer assets. You want to keep it at E-Trade? Great. Here’s what we think the portfolio should be.
Michael: Okay. And then how do you actually bill this? Like do you invoice them once a year? Do they cut a check? Do you like pull it from investment accounts if they have investment accounts? What does the billing process look like, particularly since like 150 or 160 clients? Like that’s a…it is a lot of bills, it’s a lot of retainer bills to calculate, and track, and collect, and just cash the checks and deposit them. So what does the billing process look like in this kind of model?
Jude: So a number of clients pay us monthly. So that is just we take the annual fee divided by 12 and it gets billed monthly to them. Some clients prefer to pay in advance, and if we do that then…
Michael: Sorry, just really fast. If they do that monthly, like how do you process monthly fees? Like they just set up an automatic bill pay from their bank and they just send you a check every month?
Jude: Yeah. So I have five or six clients who do it that way. We use FreshBooks, and it will generate invoice and accept credit card payments. So a number of people simply pay by credit card online automatically. Some people like to handwrite a check and mail it to us. But for the most part, it’s automatic payments by credit cards. There are a few people where we do…they have a large enough portfolio and we’re doing the management of it. We can take our flat fee, say it’s $5,000 and just convert it to an approximate percentage and bill that against the portfolio on a quarterly basis, much like asset under management firms do. But our fee is discreet and it’s billed separately, so it’s kind of very distinct on what that is. And then some people prefer to just pay us annually. So they just write us a check and we take those as they come.
Michael: Interesting. And so like do you do this all at once at the end of the year if you’re in an annual process or is it kind of a rolling process? Like if you start with me in March then I’m going to bill you every March kind of structure, so there’s always someone who’s coming up for renewal every month.
Jude: Right. It’s the later. So it’s kind of when you sign up, we say, “Great. Here’s the planning agreement, here’s your invoice,” and Lisa, who handles our billing, will invoice them every year on the anniversary. So that’s how we do it. And it’s like because we’re not having these big quarterly payments come through each and every quarter like an AUM firm, it helps to normalize the revenue a little bit. It’s pretty straight out.
Michael: Okay. So just like you’ve got a process every month that you pull up some lists and it’s like, “Okay, here’s the 27 clients that we’re going to be invoicing and billing this month.” And then you proceed through the month and then you’ve got another round of them next month.
Jude: Yeah. So Lisa sets them up as automatically-recurring bills in FreshBooks to her email address, so it actually just emails her an invoice. So she then will take a PDF version of that invoice and send it to me and the clients, and copy to them a link for them to pay online, or if they want to send us a check, they’ll just print it off and send us a check.
How Upperline Financial Uses George Kinder’s Three Questions [19:23]
Michael: Okay. That’s pretty straightforward. So if you’re doing this kind of planning work for young professionals, what do you use for planning so far? I guess even more broadly like what do you do for them? And I feel like there’s always this question any time we talk about planning for younger clients. And Gen X is not that young maybe in the grand scheme of things but relative to most advisors, I mean, baby boomers, professionals in their mid-30s and 40s are young folks. So what are you doing for them, particularly if they may have no assets with you at all? What are you doing for them to earn, you know, $3,500 average fees?
Jude: So we begin with a vision process using George Kinder’s three questions. That’s kind of bedrock of the work that we do. We don’t work with clients if we don’t know what success means. And for us, that comes out of that vision conversation. So we always begin there. From there, we talk about cash flow, which is a very big part of what we do. We use First Step Cash Management to get that kind of cash flow paradigm going for clients and help them really start to understand their money and the way it’s working for them. We’ll do other things like track their net worth. Lisa updates what we refer to as a “family map.” Actually, it’s a large mind map that has all their financial components onto it. So we keep that up to date so they know where everything is, all on one big page.
We will do retirement projections for them. We talk about debt management strategies for cars, homes, educations, whatever is going on. We’ll talk about planning from that standpoint. All the insurance components, life, health, disability, auto. Is the coverage appropriate? Does the deductible make sense? Is it titled correctly? Look at education planning for their kids, and all through…all the way through kind of estate planning for them. What happens if something happens to you? Either of you or both of you, well what do want to have happen? So that’s kind of the broad range of what we do.
And we meet every four months with our clients to kind of continue on with that process. And we have…in each of those four months, we have a distinct kind of set of what it is we’re working on with clients, what we want to update. Whether it’s all the insurance policies before hurricane season in New Orleans, or it’s the estate plan at the end of the year, or the New Year’s goals, right? So we have to work it out into calendar. So we tend for, you know, kind of for three months to be meeting with people and talking about the same types of things while they’re on their cycle.
Michael: Okay. So like the whole business basically has a cycle. “You know, the first three months of the year we’re just going to be talking about tax planning with all of our clients, the next three months we’re just going to be talking about, you know, insurance reviews with all of our clients,” etc. Like that kind of structure all the way across the practice?
Jude: That’s exactly right. And it’s broken down even by kind of client types. So we try to meet with say all of our entrepreneurs on what we call “cycle two.” So it’s February, July, and October. So by February, maybe they’ve finally got the business financials done so we know where they stand. In October, maybe the taxes are finally done for the previous year, so we could talk about that. We meet with all of our retired clients in November to make sure all of the R&Ds are set up, and if there’s any Roth conversions that all happens at the same time. So it creates this kind of nice seasonality for our business, and it creates these other times where outside of new clients we’re hopefully not too, too busy and we can work on special projects. So, you know, we typically meet with clients January, February, and March, and April would be one of those kind of off-months. So for us, it’s April, August, and December. So in April it’s kind of spring time, we usually get FPA retreats, August is the most miserable month in New Orleans, it’s an opportunity to get somewhere else, and then in December…outside of Thanksgiving to Christmas, unless there’s some major tax thing that we haven’t been planning for, clients are…they’re busy with other stuff, right? They’re not calling all the time to do things. So it’s just nice to have a little bit more capacity on the calendar there when the kids are out of school and other things are going on.
Michael: Such an interesting like very structured format. So I guess like roughly it’s like 150 clients or so, so roughly 50 clients each of three cycles? Like cycle one meets, I guess wherever that comes out to be, January, May, and then in the fall, and cycle two is February, and June, and October. And so just if you’re in cycle one like that’s the deal. Everybody gets scheduled in January, everybody gets scheduled in May, everybody gets scheduled in September and they know their deal.
Jude: Yeah. Dennis Moseley-Williams was a guy I always loved to hear talk about planning. He always talked about, “You need to run it like a dentist practice.” And, you know, you leave the dentist’s office and you’ve got your appointment card for your next meeting. So we set those meetings four months in advance so they know when they want to come…if they get the day and time that they like to come in for meetings, and it’s on the calendar, it’s on my calendar, it’s on their calendar, and if we need to move it we can, but otherwise we at least know, barely everything else, in four months we’re going to get back together and we’re going to talk about them.
Michael: And do you literally schedule like the dentist practice? You know, you set the next meeting for four months out before they leave the current one?
Jude: Absolutely. That’s the last item on every agenda, schedule the next meeting. So we’ll book, you know, they’d like to meet at 8 a.m. on Tuesday or Thursday. And which we’ve asked them their preferences, so it’s all in their family map so we know what their preferences are. So we can say, “All right, great. So it’s February, our next meeting will be in June. So here’s Tuesdays and Thursday mornings, we can meet at 8 a.m., what would you like to do?” And we just put it down there.
Michael: So what happens if they’ve got stuff they want to talk about and it’s March and they’re a cycle one so they get, you know, January and May, but it’s March?
Jude: No. So we tell them that, “It’s not to say that we can’t talk until this point, it’s more to make sure that we’re actually going to get together and talk.” We tell clients all the time. Like, “We price this way so you will call us, and you will email us, and you will let us know what’s going on in your life so that we can be helpful, we can be a part of supporting you in living your life.” We meet as often as is necessary. I had a client, who was the sole heir of his aunt’s estate, and it was really complicated, and for them, we met every two weeks for several weeks to just make sure we continue to go through and help them with those things. I have other clients who are retirees and not much changes and we kind of drag them in every four months. Again, it’s not so to make sure that we are not saying you can’t come and have a conversation, we just want to make sure there is a way for us to have a scheduled conversation already set in advance. And if anything comes up, we want to be a part of that. We want you to call us.
Michael: And so how many…I’m curious how many clients you think you can service this way? Like do you hit some limit here, or does it just matter like, “As long as I can keep scheduling more client meetings every four-month schedules, we can just keep adding clients,” or like do you feel like you’re close to a wall? Because I think for a lot of advisors, like even with some staff support, 150 or 160 clients is still a lot of clients.
Jude: Yeah. We’re pretty much at capacity right now. I couldn’t imagine adding another 10 to what we’re doing, which is always kind of the interesting thing about growing a practice. So you’re kind of begging for people to call and one or two becoming a client for a very long…you know, in the early years of your practice, and then you get to this point where it’s finally big enough to generate that many referrals, and it kind of like, “Okay great, well we can meet with you in two and a half months, and maybe we’ll have an opportunity there.” It’s an interesting…it’s a transition for that space of where we’re approaching being full and there’s not a lot more that we can really add on.
Michael: So you did mention that you’ve got a financial planning like associate support person that you called a financial planning resident. So is that someone that can take over clients over time and become an additional person to support if you want to continue to grow?
Jude: Yeah, absolutely. I’m very fortunate that I’ve got very lucky in the hiring process. I got referred to a wonderful career-changer, a very…I mean, she’s 26 so a very young career-changer, but somebody who took CFP courses on their own and really became interested in the industry and has so much capacity and potential. And so as much as she’s able to bring in new people on her own to be able to do that and can either be kind of enough to grow her own broker business, I hate that term by the way, but to build her own client base or to bring in somebody else who’s another advisor who, you know, looking to start…grow their own or change careers, or something else. And we can absolutely downline to fill up somebody else. So if they started with us and have kind of a similar growth…a similar client base over another five or six years.
How Jude Found His 150 Clients [28:23]
Michael: So that also makes me curious. So like where did 150 clients come from? Again, like that’s a…it’s a good-sized number. A lot of people spend a very long time trying to get there. We’ve known each other for more than 10 years, you were not running Upperline when I knew you first, so you’ve gotten to 150 clients in a fairly finite time period. So like what do you do to market and get clients like these?
Jude: You know, Upperline has been around for six and a half years, so that’s so long. And we didn’t leave with a bunch of clients. You know, I was director of planning for a small wealth management firm, and what I wanted to do was different but I also didn’t feel like it was the way to honor the people that I’d worked with for many years that to go and attack that client base. So I left with one client. And it was somebody that they wanted to fire anyway. So I left with them and started with one client, and everybody else has been incoming traffic. So we never called… I hated at MassMutual asking for referrals and calling people to come in and have meetings, and try to…you know, try to jump out of the bushes with somebody and convince them maybe they need to talk about their financial life.
So I decided that we wouldn’t market that way. We would market based on our intellectual, like our ability and try to market our knowledge. So I started writing, and I started a blog with the website and published Tuesday, Thursday and Saturday for quite a while, at the beginning of the practice, which I could never keep up that schedule now but, you know, I had five or six clients. So it was just plenty of time to write and there was not so many people to serve. And that’s helped to grow our…Again, and something people could share on their social media profile. Something people could come and learn about us without having to commit to anything. And ultimately that grew along with getting some, you know, press quotations and things to help get links back to the website so that when people were searching for a financial planner, or a fee-only financial planner, like we were, that they would find us. And if they came to website then they could learn more about us and make a decision if they thought we might be a good fit or not. And that’s where everybody’s come from.
Michael: Interesting. So, I mean, like you blogged, you got backlinks, backlinks helped your SEO. People type “financial planner New Orleans” and you come up and that’s where your clients came from.
Jude: Yeah, that’s it. The goal at first was to be the number one result for the search “fee-only financial planner in New Orleans,” which is a very specific search term. But it helps to be really specific at the beginning. So creating enough content to be found, and then getting enough links back to the website to such a rise in the search rankings led to us being in that place. And then getting some other press has led to us kind of having a very solid place in that space now.
Michael: So when you were blogging three times a week on Tuesday, Thursday, Saturday, like what are you writing about? What do you write that gets clients or gets media to contact you so you get clients? Like what were you writing about?
Jude: Yeah. I’ve talked with Autumn, our planning resident about this. And quite literally, it was about anything. It was not…you don’t…you have to get past at the beginning, I think, this idea that what you’re writing is some big…you know, we’re really going to clear up for people what a backdoor Roth IRA means. That’s not the objective here. We want something that is adjustable and easy to understand, and if we’re lucky, it includes some favorable search words for us too. So that was the goal at the beginning. It was just to start to develop content. And the thing about doing it is that you never know what’s going to be really liked and shared, and it’s probably not what you thought was going to be. So I’ve had a throwaway piece once about something very simple, and it got liked and shared more than anything I’ve ever written. And it was something that I published like 11:50 at night because I didn’t want to not publish something on Thursday. So you don’t know. You just have to keep putting things out there and you have to be willing to be committed to the process to see what works out there.
I think one important thing if writing is part of your strategy is to separate thinking and doing. You don’t want to sit down with this really broad thing of, “Okay, what am I going to write about today?” Because unless there’s something in the news, you’re kind of screwed at that point. You need to have different times where you’re just brainstorming, “What are things that I would want to write about?” And kind of along the lines of our local thing. I think the more local, the better. If there’s things going around about local property taxes, write about that, even if it’s very simple. Explain to people what a mill is and they’d be really grateful for it. You know, so start with those kinds of things and get a list of things that you might want to write about so that when it’s time to sit down and write something, it’s not, “What do I write about?” It’s, “Here’s a list, pick one and then write about it,” because you’re operating a very different part of your brain at that point. So I think you really need to be deliberate about how you go about doing that.
I did a series early on about financial rules of thumb, and it was every financial rule of thumb I could think of, and it kind of built that financial rules of thumb page and then started to write about each one of those. Yeah, about 100 miniature age for stocks, or, you know, 10 times your income for life insurance, all those kinds of things. And just kind of gave my perspective on that. “I think this works, I think this doesn’t. Here’s my criticism of it, etc.” And it was a great way…There’s still some on there, on that list that I haven’t written about, so if I ever needed to go to write a blog post, I can always go grab one of those and write about it and have a new thing done.
Michael: Yeah. I actually do something very similar in that…I love the way you put it. Like separating the thinking part from the doing part when you’re thinking about creating content or when you’re working towards creating content. So I keep a list of article ideas as well. It’s simple, I keep it in Evernote so that I can pull it up wherever I am on whatever device I’ve got handy. And so if I’m out and about, or doing something, or, you know, for me a lot like I’m out at a conference and I’m in a conversation with someone, I’m like, “Actually, I should write something about this.” Like, “This is an interesting discussion, I should write about it.” I’ll pull out my phone, I’ll open up the Evernote note, I’ll jot down a little note of, “Hey, at some point write an article about such and such.”
And what the means is whenever it is I actually need to do some writing, because I marked up a day and so okay today is the day I’m going to get some writing done, I sit down on my computer, I open up Evernote, it automatically syncs, I look at my list of blog ideas, and I’ve got a giant list of blog ideas because I’ve been scribbling them down in the proverbial margins for the past couple of days and weeks. And so I have a…even as much as I write, I still have an article list that is literally well over 200 topic ideas long of just almost all of it is things that come up in conversation that if I ever have the conversation more than once, I’m like, “Okay, either it’s probably something someone wants to hear about.” If I have the same conversation with someone five times or five different people, then I escalate the likelihood that I’m going to write about it because it means a lot of people are asking about it.’ And it’s that whole separation of thinking about ideas which don’t necessarily come to you at the moment you’re sitting in front of the computer. So don’t burden yourself with trying to come up with the idea when you sit down to write. Jot down the ideas when they come to you, write them when it’s time, and you’ll have a list ready and waiting for you.
Jude: In Evernote, I actually have a…I have a Evernote notebook called blog thoughter. And so I email myself things from there, or I clip articles from the web that are there. So now when it’s time to write, I go look at that and pick out what’s got my interest today, and I start to work on something.
Michael: So when you were doing your writing early on, were you getting prospects from the articles? Like, you know, you wrote and explained something about local property tax dynamics in New Orleans and you got clients off of that, or was the idea just, “I want to keep a steady flow of content so my website is live and active, but at the end of the day I’m pretty much going for “fee-only financial planner in New Orleans” as the primary way that I get people in. Because even if there’s only 50 people a year who type that, if I close half of them, I’m going to get two clients a month all year long just off of that one keyword?”
Jude: You kind of broke down the numbers there. Pretty approximately right. That was the goal. It was just to get that search term. And part of it was having enough content on the sites to be found. So that’s where the discipline of writing came in for me. So I would write about anything that came up, that caught my interests. And sure, I would try to share them through social channels, and I was really active on Twitter. Still, I am to a certain extent, but it was great for meeting press and getting quotes. I’ve gotten one client from Twitter, so it wasn’t great for finding clients. But, again, I still believe in getting those things, sharing them and ultimately trying to get links back to your sites through the social channels. But yeah, the idea was if enough people were searching for a fee-only planner and if I can meet with three of them a month, then one of them would decide to become a client, and if I get 12 clients a year, I can build out my business over the course of 10 years.
And so that was the framework. I took six years to do it. So it happened a lot faster than I thought because I think it was ultimately kind of a compounding effect of referrals that happens as your client base grows to a certain extent. You know, if you get 20% of your clients giving you a referral and you have 20 clients, it’s still 4 people per year. So you’ve got to have more than four conversations a year. And now that we’re at 150, if I get 30 of those, that would be way more than enough to grow the business. I just can’t possibly serve another 15 new clients, so now you’ve got to figure out that challenge.
Why A Slower Growth Process Was Right For Upperline Financial [38:28]
Michael: That’s actually an interesting point that you made about like a plan to get one client a month for…through the year, and you get 12 clients a year, and if you do that for 10 years, you get to your 120-plus clients and the income adds up pretty well. And I kind of get the math for that except I feel like for a lot of people like a 10-year build is a long build. I mean, even a six-year build is a long build. Like if you’re coming out of the gate saying, “Okay, you know, I’m hoping,” because, you know, who knows when you’re going to get started, like, “Okay, I’m hoping I’m going to get a couple of thousand dollars clients per client, and I’m only going to get one client a month, so like if this goes well, I’ll have 30-something thousand dollars of gross revenue in year one. I won’t even get to $100,000 of gross revenue until year three. And then I’ve got business expenses on top of that.” And it takes even longer to get to, you know, net numbers that are up at that level. So was that okay with you? Was that the plan? Did that scare you? Was that like a hurdle goal to beat? Like how do you look at that kind of slow long-term building process to get back to a number, an income level from…particularly given what you could earn as a salary by just working in an advisory firm?
Jude: It is a longer path, it is terrifying. Even if you think you know the numbers, it takes longer than you think. I was told by Randy, a friend of mine who’s one of the very early fee-only planners who build on a flat fee, and he told me…he was like, “Yeah, it’ll take you three years to make what you made before you left your job.” And I remember telling him, “But Randy, I’ve run the numbers. Like there’s no way it’s going to take me three years to make that much.” He was like, “Yeah, it’s going to take you three years.” And sure enough, it did. It took me about three years to get back to my previous salary at the wealth management firm. So it’s, you know, you either embrace it or fight against it. But you need to have a plan to get to that point. Some of it the university will help with. I stumbled into a job teaching part-time at Loyola University in New Orleans.
How Jude Filled His “Income Gap” While Growing His Business [40:29]
Michael: I’ve seen a similar phenomenon. We actually did an article on the site a couple of years ago, because I just…I watched that dynamic unfold for a bunch of advisors one after another, that it takes three years. I literally just called it “the income gap.” And the income gap is a gap between when you start your firm and when you actually…It’s like the salary earn before you start your firm, and when you get back to the point where you make as much as you did before you walked away from that salary. And I find for so many advisors it seems to come in right around three years. That seems to be the number.
And the important part to remember from that is like for better or worse, it’s not about the cost of starting an advisory firm that gets most people in trouble because relative to most industries, it’s actually pretty cheap to start an advisory firm. I mean, I know a lot of people that have done it on less than $10,000. We actually have an article on the site about it, some advisors that have done that. What buries you is your personal bills and your ability to pay your own expenses because you’re used to that salary lifestyle and you’ve got to build back to it. Which means, either A, you know, you need to build up some cash reserves for yourself, or B, you need to find some filler income stream. So, you know, the invoke term now seems to be a side hustle. You need to have some hustle you do on the side to pick up some extra dollars to try to fill in the income gap until you eventually accumulate enough clients that the recurring revenue gets you back to the place that you were originally.
Jude: I love the way you frame that because I think it’s absolutely that case. For me, I stumbled into an opportunity to teach part-time at my local university. They needed someone to teach a music finance class and I had a background in the music industry a little bit. So quickly studied up on it and went in and kind of dove in and made a few thousand dollars a year, or a semester teaching that class. And then they asked me to do it again, and then the College of Business asked me to teach personal finance. So there were…that was a semester. I was teaching three classes, and so, you know, that adds up. Now, it takes time, which is at your sacrificing, but, again, if you only have a limited number of clients, there’s only so much time you can possibly spend servicing those people, so you’re going to have to find a way to blend in your time there at some point.
But that made a difference, as well as my wife, had a really great job. Karen had a really well-paying job that can cover our living expenses just on her income. So as long as that was the case, there wasn’t a lot of pressure early on for me to generate like a financial return off of my practice. We knew it was a longer-term build and that was what we had together made that decision. That was what we were working on, and that was where we were headed. And thankfully, that grew enough to where she then, you know, two years ago…We have Charlie, our son, and she was able to leave her job and have our child and be a stay-at-home mom, and kind of rebuild her career, because we now have enough income on my side of the ledger to make up for that difference.
How Jude Got Into The Financial Planning Industry [43:33]
Michael: Very cool. So I’m curious, and take us back, like how did you get started down this whole path in the first place? I mean, did you come from a family of financial advisors and like this was destiny for you to come into the financial services business? What was your path?
Jude: So I grew up in a little town about an hour south of New Orleans. A very small town, about 2,000 people, called Lockport. It’s often said, “it’s not the end of the world, but you can see it.” It was a lovely place to grow up and I’m very proud of being a Louisianan most of the time. But it wasn’t…there wasn’t affluence around me. You know, growing up my dad sold cars, my mom cleaned houses. And I saw the way they struggled to get through to be able to do the things that they did for us as a family. So going to college, I was very fortunate, I had a full scholarship to Loyola University in New Orleans. And so going to college, I went to learn about…I wanted to learn about money. I didn’t want it to be that difficult. I didn’t have like this big aspiration of what it was I wanted to do. Like I never wanted to be an astronaut or a baseball player, or something like that, I just wanted to be successful. I wanted to have enough financial ability to not struggle the way my family had.
So, that led to starting a career in business school and then ultimately to the finance courses. And while I was there, I took a course called Personal Financial Planning for Professional Planners that was taught by Dr. Dalton who wrote the Dalton Publications, The Dalton Review, essentially the CFP prep book. So he was one of the very early people who created those kind of prep materials. So I was able to take this class from Dr. Dalton and it was a revelation. It was great. “I can work with people and do this numbers thing that I like and get paid well. Like this is amazing. I can’t wait to do this.” So that was when I knew what I wanted to do, but I was also pretty sure that I couldn’t do it right out of college, so I had heard…I always wanted to move to Colorado. Heard great things about Janus Mutual Funds, and so moved to Colorado and kind of bombarded the recruiting folks there. So when I had my first interview at Janus, I sat down with the recruiting manager and she’s like, “Why do I have so many copies of your resume?” Like, I’m coming by here and I’ll drop off one and see if I can have a conversation. And I would email the recruiting boss, and this is where I want to work. So I was able to break in that way and get into…get in there.
Had a not so glamorous shop at all on the phones there but it was a start. And I got a couple of securities licenses and I got way into the business. Which was right…it was in September of 2000, so like right as the tech bubble was starting to really burst around all of us. I had started at a high-growth tech mutual fund family. I had great experience, learned a lot from it, and ultimately the securities licenses are what got me a job when I moved back to New Orleans. The local MassMutual office had been sold. They needed to hire a compliance officer, and so they were looking for somebody who had some securities industry experience and who wanted to work in the compliance. So I had a couple of licenses, and they liked me so I got my Series 7 and Series 24, in addition to the 6 and 63 I had at Janus, and started to work there.
I really I’m not suited for doing compliance work, I’m not…it’s not a good fit for who I am, but it was a wonderful window into a bunch of other planners practices on how they went about doing things. And so I got to really see for a while how certain people did things and can say, “Oh, I like that. I would want to do that,” or “I would never want to do it that way.” The office ended up being low on their recruiting numbers so they pushed me to become a producer. So I was a producer for six or seven months, as I failed miserably at that whole business. The general agent kind of took pity on me and said, “Look, I like you, I know you’re smart. If you run the training classes on Monday and Friday mornings, I’ll pay you $1,000 a month.” I said, “Okay. I’ll take it.”
And so there was…during that time, MassMutual had rolled out too. They said, “Look, we’ll pay now for staff. If they want to go get a professional designation, we’ll pay for the staff to do it too.” So I fell under that program. So they would reimburse me for my CFP materials, and so I found the next CFP exam was seven months out. So backing out to that date, I had five and a half months to go through the courses. So I did one course every month with the American College self-study. And I’d do a course, get reimbursed, send in my reimbursement, file the next materials, have three weeks to study, take the next exam and go through it. I did that, passed the comprehensive exam and kept on in different kind of staff positions a MassMutual for a while. That was really short and condensed. I wouldn’t necessarily recommend that as a way for anybody to go about doing that. But I did get through it pretty quickly. Ended up as…They fired the general agents at…who was there at the time later on in my career, brought in somebody else who promptly became very ill unexpectedly, and so MassMutual came to me and said, “All right, this isn’t what we wanted to have happen but you have the licenses, can you be the agency supervisory officer while we figure on what’s going on?” And I said, “Okay? That wasn’t really what I…that’s not what I was set out here to do but I need to pay for my wedding, so I’ll do it.”
So I did that for almost a year. You know, it was not my favorite part of my career by any stretch, but yeah. And one of the MassMutual reps was leaving to start his own thing, and he was going to another broker-dealer. He said, “I want to try this wealth management thing, do you want to come and be in-house and I’ll pay you a salary?” So I did that, and for five years I was kind of director of financial planning for this wealth management firm that he and I created. So that was built on kind of this assets under management model. You know, we bill 1% and we get to $100 million and everything will be great. So that was what we tried to do. He converted his client base and ultimately the idea was, “One day this will be yours.” He was 30 years older than I was. But the longer we did it the more it became apparent that I didn’t really believe in billing everybody just based on assets. I wanted to be fee-only and that was never going to happen.
And the second thing was that he wasn’t ready for his own retirement, so no matter how much I ultimately paid for that business, he was never going to be financially be able to retire on that number. So I had already started the thinking process, “I probably need to do my own thing.” So I looked into what does it take to file an RIA, do everything along those lines. And you know, I was just about ready to do that when we found out that we were pregnant for our first child. So Karen and I had a conversation, we kind of backed it up and said, “Okay, well let’s wait until we get closer to…our child’s born and then you’ll kind of be a stay-at-home dad for a while.” So for the first 13 months of Lucy’s life, I was a stay-at-home dad along with starting the RIA and writing, and everything else. So it was a way for us to save on expenses and make it all work. And I’m so thankful for that time. I have a relationship with her and that we really understand each other in this wonderful way. And I think it’s because we had that time together early on that still carries with us to this day. And without starting my business, I would never have had that opportunity to do that.
But, I started Upperline, you know, working…meeting people at their homes, at coffee shops, ultimately at co-working space. And then at Loyola where I was teaching, there was kind of an adjunct faculty office, so I started using that as my office space. And eventually, you know, opened my own space a few years ago, which was a big financial leap but it’s made a ton of difference. So it was the right place at the right time. It’s right in my neighborhood, so it’s four block walk from my house to my office. It’s been perfect. So clients don’t drive downtown to go and park in the high-rise building, they come down to our office in the neighborhood and it’s very easy to get around. And there’s a coffee shop in the building, and it’s just a nice environment. And I feel very fortunate for how it’s all come together and how it’s worked out. There were a lot of places that could have gone off the rails and it’s just worked just right.
Michael: I think it’s striking that for so many people, they try to figure out when to make the transition, and you know I always feel like you virtually never really find a good time. Like there’s rarely ever a good time to say like, “I think next week I’m going to start getting my salary. That would be awesome. And I need to go out on my own and have an income of zero.” Like there’s never really a good time. And it strikes me that your transition kind of epitomized it. Like, “Yeah, we found out we’re pregnant so hey, let’s make lemons into lemonade. So at least while I’m changing and have no salary and no job duties, I’ll have time to be with my newborn and grow the business, so let’s go.” Like I just…that’s really cool transition way to handle what I think for a lot of people would have been a very hard transition or like a reason not to make the leap knowing that a new baby was coming.
Jude: Yeah, I mean, there were a lot of times where it just seemed like this is a really dumb idea, right? So you just have to believe in what you’re doing, manage…watch your cash flow really well and do everything you can to make sure that it works. And you can do everything right and have it not work. I often tell that to clients. I think that’s the tragic thing of financial planning is you can make all of the right decisions and still have this not work out for you. And that’s the same thing with starting a business. There are no guarantees in this life, so you’ve got to do everything you can to make it work, and be willing to take your shot and realize when you’re going to be willing to place your bet and go for it.
Upperline Financial’s Office Structure [53:15]
Michael: So, you know, you mentioned the office setup that you have now. So is all of your team there with you in the office and like clients come in to see all of you, or what does it look like for how you work with you your team and how your clients work with your team?
Jude: I often refer to our office as our home office. It’s set up much more like a home than what you would think of as kind of a financial planning office. The main place we meet with people is it’s a sofa, two chairs, a coffee table and there’s a TV kind of mounted on the screen with an Apple TV attached to it so I can bounce my laptop screen over there if we need to. But I wanted our office to be a place where we have people come to a comfortable environment to have important conversation and not a place that we build barriers between us and the clients with marble tables and fancy things. So we…that’s where we started from. So clients come into the office and with myself, Amanda, who runs our office, and Autumn who is our planning resident. Lisa was in New Orleans and she moved with her husband when he finished medical school to Michigan, and she works for us from Oakley, from Michigan. But we all have the ability to work wherever we are. And, you know, for…I work in Chicago for about a week a month, and Autumn’s husband is in Tulsa now, so over the last week, we’ve had 14 members in four different states, but we can still collaborate and do all the things that we would normally do to have web meetings with clients, to collaborate between the group of us, and to do the things that we need to do.
I think part of that is having good staff and knowing that I can empower them to say, “Here’s what I need to get done,” or “I need you to do,” and let them go and do it. I think it’s also one of the benefits of being kind of a Kolbe Quick Start personality that I don’t…I’m not a micromanager, and so if we’ve got a client event coming up and I tell Amanda like, “You know, let’s choose what I think is important, everything else you decide.” And she’ll often try to come back to me and like, “Do you want to talk about menus or this thing?” I’m like, “No, I don’t.” It’s not really my interest. I don’t think I’m going to make any better decisions than you will so you go decide what it is, and you go for it.”
So that flexibility and ability I think is…hopefully generates some loyalty within the team, but I think it just…if we’re working with clients to live the lives that we want…help support them live the life they want to live, we should be really diligent about making sure we do that with our team members too. So, however, we can work to facilitate that is only smart and should only provide us financial dividends and returns in the long run with satisfied clients and happy employees. So I’m a big, big believer that…Karen, my wife’s background is in oral development talent management, and one of her big things that she would say is that you can’t motivate employees, you can only demotivate them. So we just do our best to stay out of the way. And if it’s not important, we don’t make a big deal out of it. “Here’s what’s important, here’s what you’ve got to do. You figure out how to make it work.” As long as those things happen, everybody is good.
Michel: Yeah. Mark Tibergien has this fantastic saying that you can’t motivate… “Your job is not to motivate people, it’s to create an environment where motivated people will flourish.” And it’s kind of that recognition like you can’t force someone to be motivated, but you can either create an environment where a motivated person succeeds, or you can screw up their environment and demotivate them. It’s always been a powerful message to me and one that I still think about regularly in working with our team as well on my businesses of like, “I want to find good people,” and then you have to actually make sure you get out of the way and let them do what they’re good at. Which I’ll admit even as a business owner like that’s hard for me sometimes because I want to muck around in everything because that’s how I build my business, and just remembering like if you’ve got good people, get out of their way and let them be good. And if you don’t have good people then stop trying to remediate them, just find good people.
Jude: Yeah, absolutely. The time I spent with an entrepreneur’s organization, they…one of our speakers said something that really stuck with me. And he said, “I’ve never felt…I’ve never had a conversation with an employer where they fired somebody and they said, “Oh, we fired that person too soon.” Usually, it’s been, “Oh, we let that drag on for six months, and it’s not the right fit.” And honestly, we’re not helping that person either, right? We’re not helping them live their best life. We all know that this isn’t working on some level, so why do we keep going on like this? Why don’t we just acknowledge that and move forward? Thankfully I’ve never had to do that. We’ve been very fortunate in finding people who are good fits from the beginning, but I think that if we needed to let somebody go because we would want to help them find what works for them and make sure that…You know, I have a commitment to 150 families so I can’t have things that are not working really well.
Why Jude Is Considering A Merger, Even Though His Practice Is Already Successful [58:07]
Michael: Now you mentioned that you’re going back and forth to Chicago a week a month, so what’s driving that? Like did you in the process of “fee-only financial planner New Orleans” searches you unwittingly ended out with some Chicago clients as well, or how…what’s going on there?
Jude: I’ve often thought though based on how poor local search is with other firms like I should just build websites for other cities and then grow the ranking and then sell them to fee-only firms because I think there’s so much opportunity out there. But no, my wife is from the north side of Chicago, so we have family and kind of some clients there. But we’re also in the process of merging Upperline with The Planning Center, so we’ll be part of The Planning Center later this year. For us it was we’ve grown to a place where we’ve kind of hit that ceiling of complexity, and either I was going to need to borrow some money and hire a bunch of more stuff, and grow that local office to be able to try to do some other things and do more portfolio management, and maybe hire a CPA to do tax prep and do some other things, or I could merge in with people that I’ve known for years, that I really trust implicitly, and allow me to leverage off of their systems and focus back on what I really want to be doing, which is honestly I like being an owner and I like a lot of being an entrepreneur. And I don’t like running my business, and nor am I particularly good at it. So if I can have people who are doing portfolio management and trading as well as paying the bills and, you know, dealing with our health insurance, all those things that I’m not good at, then I can just focus my efforts in working with clients, then I think that’s a good situation for everybody.
So over the last 18 months, we’ve been exploring this merger with The Planning Center, and part of my role and responsibility there is I spend a week a month in Chicago, but we also do spend most of the summer in Chicago as well. We’ll be subletting a place north of Chicago for the summer and my wife and kids get to be near grandparents and cousins, and we get to get out of the summer kits in New Orleans. And so rather than being three weeks in New Orleans, one week in Chicago, over the summer it’s kind of the opposite. It’s three weeks in Chicago and one week in New Orleans. And with that, I’ll have responsibilities for The Planning Center office in Chicago as well.
Michael: So I’m curious how, you know, having spent six-plus years building independently on your own, like how do you cross the line to not be totally independent after you’ve done it for six years and it was working so well and growing so well?
Jude: That was kind of my wife’s question, too. I mean, we started talking about it and then she was like, “You know, you worked so hard to do this and you always wanted to be your own boss, and now you’re finally in a place where financially like it’s working and why are you going to go and merge now? Why do you want to do this?” So it was, I think in some way there’s a number of things that go into that calculus. Part of it is I think to a certain extent derisking the portfolio. You know, I can make more money on my own than I can as a partner of a bigger firm, but I get some additional backup if I’m part of a firm. So kind of like we talked about client’s reduced equity allocation, we reduce the downside and the upside, it’s kind of that trade-off for me. I get to lay off some of the things that I don’t like to do to really…to other people that do like to do those things. I think broadening the service model for my clients. The Planning Center does portfolio management in-house that we don’t do, so we get to do more of that for clients, and I think in a really effective way. They own a CPA firm so we get to do taxes in-house, which is the biggest thing I get asked for that I don’t do. So that we get to do that in-house I think is a really big plus for me.
And not just the ability to do taxes but to have a CPA on staff who we can have a conversation…you know and do tax projection for this client mid-year and see where do we stand, or what’s the tax consequences of this possible transaction? And to have that expertise on staff is a big…it’s a big advantage from a planning firm. So all those things plus to deal with people that I essentially copied their business model, so I am…you know, it’s a very seamless transition for our clients. I think it’s a better circumstance for our clients if I get run over by a bus than it was before because there are other people there that can help take care of them. And not to mention if I want to take a vacation, I could be a lot more offline than I could have been just on my own.
And, for me, you know, as much as I want to keep growing a business, I don’t want to really run my business. I don’t see myself as being that person. What gets me excited every day is working with my clients and not, you know, how are we going to optimize the cash flow? So I am…I’m very…I think it would be a very positive thing to offload some of those responsibilities, and then hopefully for the administrative things that I do end up doing there to be more of the things that I like to do around the marketing side, around the web and searching. If I can continue to grow that then we can see how it benefits everybody. And truly long-term it’s my vision. I’d love to see The Planning Center as a national…like a national brand. And can we take something, a process that looks enough, similar enough, with the same values across enough people and have offices around the country so that we can help with…do this more and do this in a more profitable, sequential way, but also, you know, help with some of the succession planning issue that is so prevalent within our industry of not…planners who haven’t necessarily planned for their own retirement?
So I think we can bring in some planners, work with them for a couple of years where they’ve got a really great talent base. “And now that you want to go live in, you know, XYZ place, well, great, here’s somebody who’s looking to retire, so you can roll that business into ours. You go and work for those clients and then we’re off and running.” And we keep the process going. So Marty Kurtz often talks about the vision of being, you know, 50 years from now, in my ideal situation we have new generations of planners talking to new generations of clients but ultimately it’s about the same money. And I want to see if we can make that happen.
Michael: We’ll make sure we put a link in the show notes out to The Planning Center so if anyone is listening and they’re running a net worth and retainer model and want to start in a new city we’ll give them an opportunity to get in touch and find their way. And a reminder for everyone, if you want show notes here, we’ll have links to Jude’s firm as well, if you want to see a little bit more of what he’s doing and some of the other businesses we’ve talked about here. That’s all at kitces.com/22 since this is episode 22. So, www.kitces.com/22.
So, I think it’s interesting and worth pointing out when we look at this merger that you’re going through. Like it is a merger, it’s not as though you’re selling and taking your check and dropping the mic, or selling and taking a check and then just leasing yourself back as an employee. I mean, I think you’d said you will be a partner and an owner in the new entity. It’s just kind of this difference being 100% owner in your business versus being a partial owner in a larger business. So like, it’s not as though you’re changing your business ownership nature, you’re just changing the fact that it’s not going to be solely you, and that you’re going to get some other people that bring some other resources to the table as part of the business? I mean is that how you would think about it? Is that how you look at it?
Michael: Yeah. It’s definitely, it’s…You know, I had offers from broker-dealers and stuff for seven-figure checks and those kinds of things, but it would have been compromising my values as what I believe is important in the planner-client relationship, and then I’m no longer an owner. And it’s important for me to have some control of my future destiny. It’s just coming out to the point where I believe what we can do together is bigger than what we can do apart. I think it’s that…you know, I think it’s that case for me and the other partners, I think it’s bigger for what the team can do like it gives them more opportunities. I think it’s bigger for our clients in terms of what we can do for them. So I really think it’s the right decision for all those different levels, so because that’s the case and we’re moving forward.
Michael: And so how did you find them in the first place? Like how do you make the decision to The Planning Center versus any number of other firms out there? I mean, do you, you know, put out like merger availability, bidders, enquire within, or how did you find or decide that you wanted to do this with The Planning Center in particular as opposed to any number of other advisory firms that would probably be interested in having someone like you involved with their firm?
Jude: You know for me it’s just a matter of trust. I’ve known Eric Kies for years and he’s one of my very closest friends. And the night, you know, our daughter was very sick years ago, the night she was diagnosed, he’s literally the first person that I called in the middle of the night. So there’s very little to…you know a little bit you can do that I think can kind of offset that kind of level of trust going into a situation. That and then we’re committed to taking a very deliberate approach about this. And we’ve been talking about this and trying this on for 18 months. And it was nothing that, you know, came very quickly, it wasn’t any kind of a rushed decision. So that’s what it was. We didn’t go out necessarily seeking a merger partner, and kind of started to percolate for me when the local broker-dealer had, you know, kind of reached out to me through the channel about, “If this is your revenue then here’s the author kind of a thing.” So it did certainly get the idea going but then Eric had called with, he said, “Would you want to explore this too based on what we’re doing in Chicago and are you interested in Chicago too and you get clients there?” It just grew to saying, “Yeah, it seems like a good idea. Let’s see if it really does kind of come together, it fits together.” And it’s something I’m really pleased with how it’s worked out so far.
Jude’s Advice For Starting Your Own Firm [1:08:32]
Michael: So I’m curious as someone that’s gone through this. You started in the industry straight out of college, you’ve gone out and you’ve built you own advisory firm, what advice would you give to young advisors that are looking to become a financial planner today and start a firm, or maybe even someone that’s been in the industry for a while but is trying to decide like, “Is the kind of transition you made right for me as well?”
Jude: So, I think the first thing is make sure your numbers work. You know, with every new business, most of them fail because they were undercapitalized, right? So I think we all know enough about business and numbers to understand that to a certain extent. So don’t be in the business of deluding yourself to think that, “Oh well, this is going to work out better.” Make sure that you plan for a poor case scenario and that you can still survive on that. If it works out better, great, then you can project your cash flow and everything is wonderful. But know that it’s probably going to take a while. Just, I think going wide open and knowing that’s the case.
And rather another piece of advice that my friend Randy gave to me when at about, you know, 12 to 18 months in, and I was really kind of down about the business and the numbers, and where I was, he told me…He said, “You know, Jude, forget about the numbers and go and find a way to be of service.” And that was a really transformational thing for me because everybody I know who’s really great and exceptional in this industry, just the way they care about people and what they bring to those conversations. Not because they’re particularly brilliant or anything along those sides but it’s because people are what matters. And it’s easy to get lost to a side of that when you’re worried about your personal cash flow.
After he said that, there was a local newspaper that had…you know, was going through some changes and a bunch of people being laid off, and I happened to know the money reporter there. So I just emailed her and said, “Look, we’re doing pro bono plans for anybody that’s been laid off. If they have questions, if they just want to talk to a professional, we’ll be glad to do it. No charge, no expectation.” And so because of that, about 10 people came to talk to us, and a couple of those were really credit counseling to helping file for bankruptcy kind of situation. A few others were kind of more, “We’re going to land on our feet but we’ve got these questions and concerns.” And we helped those through. And then a few of those were people who were pretty close to retiring or thinking about retiring anyway, and so they have a significant portfolio in 401(k) and other things. And they became paying clients after the pro bono piece and are still clients till this day. That person has always stuck with me. It’s very easy early on, I think, to get down in the dumps about who is not calling or what’s not happening, but if you can go and find a way to make things happen and be…you know, serve your community, it’s a positive energy going for yourself. It’s some practice for yourself and good things will start to come out of that.
Michael: You know, I think that you know, the dynamic of just having a plan for the income gap is so crucial. You know, again, I’ve seen the same thing you mentioned. Like a lot of advisors that they probably would have been fine to make the jump, but they made the jump too quickly because they didn’t have enough cash reserves. Because they kind of fell in love with this wonderful notion that it’s not that capital-intensive to like literally start the business. It’s not like you’re buying a restaurant where you’ve got get a giant lease on a place and buy all the furniture, and buy the oven equipment and all the rest, like you just need a pile of cash to buy all the things that you have to buy. But the actual hard dollar startup cost to start your own independent advisory firm is pretty modest, but you get in trouble because you still have to pay your personal bills while you’re building your income. And it’s the personal overhead that often buries the businesses because people just don’t…they overestimate how quickly the revenue is going to come, and they underestimate how long it really takes, and they didn’t have enough cash to cover themselves in the meantime.
And, I mean, we’ve seen that over and over again for a lot of the other guests even that we’ve had on the podcast. So, you know, we’ll even…we’ll link back some of the prior episodes if people want to go see it in the show notes, so kitces.com/22 for episode 22. But, you know, Ron Carson, when he came on, he talked about how I think six years in, he still hadn’t broken $30,000 of gross dealer concessions. He hadn’t broken 30,000 GDC after his first six years, and like they were living on Hamburger Helper and his spouse’s nursing salary just to get by and, you know, now he’s got a $4 billion AUM firm. But six years of not getting the $30,000 gross revenue. And back then he was probably 1ucky to get 50% payout on that. And, you know, Deb Wetherby had credit card debt after three years just trying to get to cash flow break-even. And Josh Brown cold-called for 10 years in regional broker-dealers before he transitioned to an advisory firm.
And just I feel like all the time we lose that perspective that even some folks that have built some very successful firms and are earning some good dollars now, even the ones that do that well, it’s hard for everyone upfront. And I guess for some people that may scare you out of that. And if that scares you that much, then it probably isn’t a good leap for you. But for the rest who just kind of view it as a challenge to work through, you can do that but you’ve got to have a plan for not the business startup cost but how are you going to pay your bills, or what can you do to bring your bills, your personal overhead down so that you can afford to make that transition, or, you know, or you’re married and in a relationship where your spouse can be the primary breadwinner for a while and then maybe you can switch that role later, which you had said you guys went through as well for you and Karen.
Jude: Yeah, sure. It makes all the difference in the world to have that support. I mean, there’s no way I could have done this without Karen. Not just financially but that, you know, she believed in me in a way that I didn’t believe in myself. And, you know, to have a partner who is like that is really overwhelming, and makes all the difference in the world, you know. So finding the right partner in life is nothing I can really help you with but it’s importantly a tremendously important decision.
And then to, you know, be able to celebrate the wins along way is, I think, really important too because it’s not going to be, you know, “This is one day and then everything is right, and all the numbers are good.” How do you celebrate that along the journey? Because it’s going to take a while to get to where you want to go. And I’ll say really I’m not very good at that. When I think about…And you brought up GDC earlier, meaning that we would do, you know, we’ll do 400 or so in GDC, if you will, in broker-dealer terms this year just in planning fees, and how massive a number that would have been at…by MassMutual office? There’s nobody who is doing anywhere near that. And I can be like, “Well, it’s just me.” And then I just sit there and so it’s not a big deal. But sometimes I’d be like, “That’s a really freaking big deal.” That, you know, we built that out of nothing and got us to this point. And I can know that there is more work to do, but still feel really proud of that and acknowledge that and say, “Yeah, I’m…” You know, just give yourself that credit. It’s so worth.
Michael: So as we get to the end here, you know, this is the Financial Advisor Success podcast, and so we like to talk about success, but one of the things I’ve long observed through the podcast here is that just that whole word of success means very different things to different people. And I know you’re probably acutely aware of that having gone through George Kinder’s training. And we had George on for episode 15 as well. So I’m curious then from your perspective, as someone who’s built I think what most people would objectively call a very successful advisory business, how do you define success?
Jude: You know that it’s Upperline. Honestly, like if we can…if I can be together with my family and we can live together in a place that we’re content and safe, and everybody is healthy, that’s kind of enough. Now, I’ll openly admit to you that, especially if you ask my wife like that’s not every day for me. It’s very much a horizon more kind of a person, but, you know, after going through what we went through with my daughter, you have to kind of always bring yourself back to that. And, you know, that’s what’s important. And whatever else is happening out here will be fine. I really think that’s what it’s all about.
Michael: Awesome. Well, I love the story, I love what you’ve shared here so thank you very much for joining us on the Financial Advisor Success podcast.
Jude: Yeah, my pleasure, Michael. Thanks for having me, and look forward to seeing all the great things you’ll continue to do.
Michael: I’m trying to keep it interesting. Well, thank you very much.