Welcome back to the 135th episode of Financial Advisor Success Podcast!
My guest on today's podcast is Kathryn Brown. Kathryn is the co-founder of Morton Brown Family Wealth, an independent RIA in Allentown, Pennsylvania that oversees nearly 110 million of assets under her management for 85 affluent households. What's unique about Katie, though, is the way they position their firm for the potential for 10X growth in the coming years, systematizing everything from their business development to their financial planning processes and even hiring a Data Geek Chief of Staff as just their third hire to ensure the firm stays focused on the metrics that matter the most.
In this episode, we talk in-depth about the playbooks that Katie and her partner have developed for the firm, from a business development playbook that articulates exactly what the firm does to nurture a potential new clients in each stage from being a source name to a lead to a prospect and eventually onboarding as a client, to their client experience playbook that tracks a financial planning heat map where clients are between the planning and process phase, implementation phase, maintenance phase, update phase, and no plan phase. And the way the partners of the firm have surrender control of their own calendars to a team member whose job is to ensure that they keep their own time focused on where they need to spend the time to positively impact the business the most with each day of the week set with specific tasks to focus on that day.
We also talked about Katie's own path through the planning business from starting out in an administrative roles straight out of school, then moving into an operations role and then into a client-facing financial planning role before eventually forcing herself to learn business development and then eventually deciding that it was time to launch her own firm with a partner after nearly 15 years in the business, building on the foundation of skills and confidence that she had developed in each step along the way.
And be certain to listen to the end where Katie talks about the way she made the successful transition to breaking away from her prior firm. How keeping the split amicable made for an exponentially easier process of being able to use the negative consent letters instead of fully repaid to bring all her clients, the challenges she faced along the way with certain outsourcers that didn't always deliver, and how she persevered through the leap to independence despite learning that she had breast cancer and going through three surgeries while preparing for the transition to break away.
So whether you're interested in learning about why Kathryn hired a "data geek", the process she went through when learning how to build a business with intent, or how she's developed systematic processes for business development and the financial planning process, then we hope you enjoy this episode of the Financial Advisor Success podcast.
What You’ll Learn In This Podcast Episode
- How "Data Geeks" Fit Into An Advisory Business [04:28]
- How Kathryn Developed And Uses A Business Development Playbook [13:40]
- Tactics Kathryn's Firm Uses To Move Potential Clients Through Their Funnel [18:42]
- What Marketing Tools Her Firm Uses [24:57]
- The Process Kathyrn's Firm Went Through When Hiring A Marketing Firm [28:43]
- How She's Developed Her Mindset Around Building Her Business With Intent [39:29]
- How Kathryn's "Data Geek" Helps Her Manage Her Time [42:34]
- Kathryn's Career Journey In The Industry [51:25]
- How She Went About Learning Business Development [1:06:03]
- What Led Her To Start Her Own Firm [1:09:14]
- What Surprised Her About Starting Her Own Business [1:17:09]
- What A Typical Week Looks Like For Kathryn [1:25:29]
- The Low Point In Her Career [1:29:15]
- Kathryn's Advice For Those Looking To Become A Financial Advisor [1:40:09]
Resources Featured In This Episode:
- Kathryn Brown
- Morton Brown Family Wealth
- Kathryn Brown 40 Under 40
- Why our firm hired a data geek instead of another financial adviser
- How Life Took Me By Surprise
- Redtail CRM
- The Pocket Guide to Sales for Financial Advisors
- Klunk & Milan
- Steve Sanduski
- Dynasty Financial Partners
- The Four Skill Domains For Financial Advisor Mastery
- Between Now And Success Podcast with Steve Sanduski
Michael: Welcome, Kathryn Brown to the Financial Advisor Success podcast.
Kathryn: Thank you, Michael, this is going to be fun.
Michael: I'm looking forward to it because I have to admit, you create your firm...I guess you and your firm created a special connection to me because you wrote an article a month or two ago back in "InvestmentNews" about...they just titled something to the effect of "Why our firm hired a data geek instead of an advisor." And of course, being a data nerd myself, I feel an instant affinity for anybody who has such a clear appreciation of the tremendous value of data in business and it led...I admit it, it led me down a little bit of a rabbit trail of, "Hey, what's going on over here because you really don't see a lot of advisory firms hiring those types of positions."
And I'm sure there's some mega firms with ten of billions of dollars who hire data analysts to do business analysts things in their firms but you're a newer firm that launched relatively recently and is just growing and scaling up and is hiring this data geek position to support the principles of the firm. And just maybe really curious what's going on there and why someone hires a data geek early in the business and what they're looking at? And so, I know you guys have had a couple of interesting things in growing the business that we're going to talk about today but as a starting point, I just got to talk about data geeks in an advisory business and what's going on there.
How "Data Geeks" Fit Into An Advisory Business [04:28]
Kathryn: Sure, sure. So you're right, we are a newer firm, we launched a little over a year ago but it's funny because we consider ourselves to be an established startup. Coming from a previous RIA firm and then being owners of the previous firm and really helping to run it, we already came with a great appreciation and knowledge of how a firm could be structured, how it could run, we are also able to transition our clients with us so we had an established client base. And so we knew how things could be structured and should be structured but what we really wanted to understand is we wanted the data to drive decision making and so when we launched the firm, our first step was to get up and running, our second step was to build the platform.
And we really needed the data to help build the platform and we really wanted to understand how are we servicing our clients? What's valuable? How are we developing business? What are the different stages of that development and the different stages of service and how do we implement strategies? And so we really started to track that information and thought we need a dedicated person to help us with this, we need a dedicated person to hold us accountable to our calendars and our activities so that we have a better understanding of where our stress points are and where we need to build in the future hires or look to see is there a service that we should be outsourcing via technology or another provider. So, it was really just in our yearning to understand what was going on so that we can make good decisions.
Michael: So set a little bit more context for us of just what the firm looks like, I guess, a year ago as you're making this transition and starting to think about and gearing up for this hire... what are the firm look like at that point? How many clients, I guess, came with you, or what was the client base or asset base or revenue base, however you measure and look at it? What did that firm look like as you're starting to think, "Hey, I need a data geek to help us evaluate the building of the platform?"
Kathryn: Sure, so when we transitioned, we had 97% retention of our clients. We brought over about 85 families and a total of about $110 million or so of assets. My partner, Dennis Martin, and I, and myself were lead advisors and then we had one assistant for the first several months of the firm. And then we brought on...we kind of started to do some interviewing of a couple different positions simultaneously so we knew that we needed more assistance for our clients and more assistance on the financial planning side. And so we hired another individual to focus on financial planning so we had somebody to focus on...we use the Schwab platform, so we had somebody that...we were able to bring in a wonderful woman that had been supporting financial advisors on the Schwab platform for 20 years so she knew just everything inside and out from paperwork to technology.
That's Pat here in our office, she's great. And so we had her and so we were covering what needed to be done for the existing clients but as I mentioned, we wanted to build a platform for growth. And so that's where we said, "All right, if we're going to go beyond this and if we're eventually going to bring in other advisors, we want to make sure that we have the systems in place and that we have a good understanding of where we need to fill the positions." And so that's where we started look closer at the data, what do we need to do here and we need somebody dedicated to that. And so we were at four people at the time and as I mentioned, brought 85 families, we've since grown but that was the starting point.
Michael: So that's an interesting piece to me even down to these decisions of as you start growing the business, what staff do you hire first to begin with? So I guess, it was you and Dennis, you started with an assistant as kind of first full-time employee who was, I'm presuming, just kind of classic administrative assistant, just 85 families and 110 million of AUM is a lot of just meetings and appointments and correspondence and, "Hey, what's the status of this form and paperwork?" And your first person would just taking that administrative load off of you? Is that a fair characterization?
Michael: Okay. And so then the second was, "All right, well, we want to grow which means we're going to be adding more clients so we're going to have more paperwork moving around, particularly new account forms and transfers and getting clients allocated and then we got to deal with this growing base as well." So hire number two was someone that can help us manage all of the Schwab platform because that's where you're building the business with this AUM base.
Kathryn: Actually, so the Schwab platform person and the administrative person, they are now one and the same, so that's an individual. The next one, though, the next thing we looked at...so we are very much a financial planning focused firm and so the vast majority of our clients, we actively put together comprehensive financial plans and, of course, continually update them and there's a lot of work that's put into financial planning. And so our next hire was an individual to come in and help with, we call it the 0% to 50% front end of the financial planning, to help with the organization and the data entry and get all of that together so once again, we could be a little bit more outward focused.
Michael: Kind of a paraplanner, associate planner style role to just take all of that new plan construction, the support plan work, all the one-off question client stuff that is not that bad individually but really heads up in the aggregate with the amount of service requests for planning issues, so you got a person just to help with all that stuff?
Kathryn: Correct, correct. And then beyond that, we said, "How do we grow beyond that?"
Michael: Okay. And so when the question started to come up to "How do we grow beyond that?" that's when you're starting to look at "Maybe we want to hire a data geek person that helps us figure this out?"
Kathryn: Correct, correct.
Michael: So talk to us a little bit more about just what was the vision for this person? What, practically speaking, is that person going to do? I'm going to imagine there's only so much data to look at, I'm having trouble imagining someone whose literal full-time job is to just tear apart all of the data in our firm, they're going to get through all the data points and then they're going to be sitting around waiting for more data to come in as the firm executes its business. So what was the vision of what this person would be doing from a day to day, week to week ongoing basis?
Kathryn: Sure. And actually, it's probably fair to say data/marketing also. So a large portion of the time was really being the owners of our calendars and making sure that we were staying focused where we need to stay focused. We had put together...and we might maybe discuss this a little bit further on but we have put together playbooks, so we have a business development playbook which helps to lead the process all the way from a source name, so we hear of somebody...a client says, "My friends, so and so," haven't met them, no connection.
So to help bring them to the process of becoming a source name to a lead, so maybe now we've made a connection, and then from a lead into a prospect, so at this point we've identified there's some place where we could potentially bring value, they may be a good fit for our firm, and then eventually to a client. And when we've created a number of steps all along the way from communication, from whether it's personal outreach, content delivery, event planning kind of in there, but a number of steps along the way to migrate individuals through the process and we have workflows in place within our CRM to help support each of those steps.
And then we have a scorecard that we maintain that tracks all of that so every week, we look at the track...or we look at the scorecard and say, "Okay, who has migrated? Where are we at? Where should we be focused and who should we be reaching out to and now, how do we schedule our calendars going forward?" And so, having an individual that really kind of owned all of that process, so that's on the business development side.
How Kathryn Developed And Uses A Business Development Playbook [13:40]
Michael: Interesting. So, yeah, you had a lot of really striking things there. So, first, what jumps out at me that I don't actually hear in practice from a lot of firms is this articulation of the path that people go through when they're...as you said, from when they're sourced. So you meet a name or someone mentions a name so it was like, "Okay, there's a human body with a name who may or may not someday have any relationship to our firm and I need to figure out how to get them from I know a name and maybe have shaken a hand to get them to a client."
And so you have, I guess, essentially a four-tier progression, first, they're a source so there's a name, then they were a lead because you did or did not make an actual connection with them, right? We've all gotten the "Hey, yeah, you should call Jim, he'd be interested in your services," and then you call Jim and Jim never calls you back, so not really a lead because you never actually made a connection. But you track so how many people's names get sourced, how many of them turn into leads, how many of the leads turned into prospects, which sounds like it's essentially is the lead someone who is actually qualified to do business with us in the first place and has some kind of interest in doing so?
Kathryn: Right, right. Yeah, that's when they kind of go to the prospect stage.
Michael: And then to a client. And so it struck me, so once you think about them in that stage, source name, lead, prospect, client, then you can actually start articulating like, "Well, how do you get someone from source to lead status?" Okay, well, we can call them, we can email them, we could run an event and invite them and see if they show up. And so it sounds like you've got a playbook of so here are all the different things we might do to get a source to a lead, here's some additional things we might do to take the engagement deeper to try to get them from a lead to a prospect, and then here's what we do in the sales process to try to get them from a prospect to a client.
Is that fair characterization of kind of what this business development playbook looks like? And so, yeah, that even makes me wonder a few more things so I guess, let me start with how do you track all of this? You mentioned we've got workflows to handle these steps in your CRM, so what's the CRM and what are you doing in the CRM to actually track all of this stuff?
Kathryn: Sure. So we use Redtail presently for our CRM and as I mentioned, we have different workflows for each stage and so we will review the active workflows, but then we have someone that will pull that information out. Unfortunately, there's kind of a manual process to get it from out of the CRM, a little bit of a manual process, they kind of dump it in Access and then we can sort it from there and then populate it into our scorecard and our scorecard, it's just a summary of all the details so we can sit down and see, "Okay, we..."
And the scorecard, it has two pieces to it so we have target numbers for how many names that we would like to source? How many lead meetings we would like to have? How many prospect meetings we would like to have? And so then we take the information from Redtail to see, "All right, did we hit some of those metrics? If not, why, and does something need to be tweaked somewhere?" And then how is that...and it starts to build this history of, okay, if you do these activities, then it leads to this and we can start to pinpoint a little bit more clearly what's working and what's not working.
Michael: And so every...I was going to say every prospect in Redtail but I guess prospect is not the right word, every person whose name you have but is not yet a client, so there's somewhere in the source-lead-prospect status, I guess, literally gets tagged in Redtail like, "This person is a lead, this person is a prospect, we have 72 leads and 47 active prospects," and those numbers get tracked on the scorecard that you're looking at every week?
Kathryn: Yes, yes. The scorecard will track how many we would like to...how many individuals we'd like to get in front of in those various areas. We're looking at the workflows each week but the scorecard actually tracks it on a monthly basis, so we're diving into the workflows each week to see how many people are in each of those categories. And you're right, everybody in our system is tagged one way or another, whether they're our clients and then we have our clients tiered as well or if they are a source name, if they're a lead, if they're a prospect, and we'll even differentiate between kind of cold or warm for primarily the lead and the prospect area and that will drive, then, our communication strategy.
Tactics Kathryn's Firm Uses To Move Potential Clients Through Their Funnel [18:42]
Michael: Okay. So can you talk a little bit about the kinds of things that you're doing that you find works to move people through this funnel from source to lead to prospect to client? What kinds of things are you actually doing in each stage that have formulated this playbook structure?
Kathryn: Yeah. So much of it is just really follow up and I think consciously going in with a mindset of "How can I bring value to them? If I'm going to reach out, how is it going to be valuable to them?" So, really, maybe going through their LinkedIn profile and seeing what they're supporting or what they're doing and trying to reach out to acknowledge that, so acknowledge something that they have really cool going on in their lives or maybe there's a piece of content that we wrote that might fit in nicely to a conversation that we had, so a lot of it is just that continual drip.
And it's also finding ways to connect with individuals in different areas, so there might be a professional connection, there might be a personal connection, maybe there's somebody we know in common that we can ask for an outside introduction or ask for to see if the three of us can get together for whatever the case may be. And so I think it's a couple of those different things but more than anything, it's the follow up with value.
Michael: Interesting, and just kind of just dripping it as you were, just continuing to do the follow up. If you keep doing the follow up in a way that puts some kind of value on the table for the person and that it's hopefully and usually not annoying follow up, it's a, "Hey, here's another thing that might be useful to you." "Oh, yeah, that actually is." Okay, now we're continuing to communicate and converse and continuing to build that relationship to hopefully get to a point where you come in and you meet with us or you're ready to become a client and do business with us.
Michael: Interesting. It's a striking thing to me that...there was a book that I had read a couple of years ago called "Pocket Guide to Sales for Financial Advisors," it's a book that Flaxington wrote, he was a coach and consultant in the advisor space. And I had grown up in the world of sales is icky and yucky and bad because I started out in a life insurance agency where it was pretty icky and bad and lots of cold calling and all that unpleasant stuff.
And it was kind of a crystallization moment for me that Bev has an interesting way of reframing sales to just acknowledge, "Look, there's a whole bunch of people out there who don't really want to do business with you and if you keep pushing and trying to sell them and close them, you may end up getting a few but it's not very pleasant for them, it's not very pleasant for you and that's why no one likes sales because that's the unpleasant part where a lot of people focus." But even for people out there who are a wonderful fit and completely want to do business with you, not everyone is so perfectly motivated and focused that the moment they meet you, they are like, "Oh yes, I absolutely need to work with you, I'm going to drop everything else in my life to get this done and work with you right now."
A lot of the time, they still need some help, they still need some nudges, they still need to be reminded that you're here and you can do some valuable things for them and when they're at that point in their lives where they're ready to actually take a few minutes to deal with this financial stuff, you're here and ready for them. And to me, it really kind of transformed in my own head what happens in the sales process and that you don't have to view it as icky or pushy or anything like that, that a lot of it, it really just comes down to trying to continue to show the value that you can create, trying to continue to just be present, and help them get to the point that they need you and you know they need you and they know they need you.
Everybody knows this but sometimes they still just need a little bit of extra help and nudging to get across the finish line to the end and then that's the point of what a sales process should look like. And so it's much more around, as you so well-articulated, just doing the follow up and just doing the follow up in constructive ways and if someone really isn't interested, they'll usually let you know so you can take them off your workflow and spare your time and go on to someone else who might be more interested. And when you track all of it, it gets pretty easy to see who's moving through the pipeline or showing interest and who's not where you can just cut bait and move on to the next.
Kathryn: Yes, I agree completely. And you're exactly right, sometimes it's just a timing thing. We like to say, "Pain equals pace," if there's a pain point that somebody is dealing with...
Michael: Pain equals pace, that's such a good way to frame it, that even if they need your help, the more pain they have, the more likely they are to actually pick up the pace and do something with you sooner rather than later. And if they're not in a lot of pain, even if you're a good fit, they just don't have much pace, they don't have much momentum, there's not much motivation for them to actually take the time and trouble to go through vetting you and evaluating you and deciding to work with you.
Kathryn: Right, right. And that's okay, that's all right and I think you even mentioned there too, just constantly stay on top of somebody, that eventually...you're right, that does get uncomfortable for everybody. And so the other side of it, the other piece of it is we like to look on the back end too so we distribute content and we like to look and see, okay, who is engaging? Who is raising their hand? And who is not engaging and do we have somebody maybe on our weekly blast that has not raised their hand in a really long time? Maybe we should back them up to a monthly blast and just give them some breathing room. They might not have unsubscribed but if there has not been any engagement for several months in a row, let's back off for a little bit and then try to re-engage later because we do want to be respectful of people's inboxes and their time and where they're at in their lives.
What Marketing Tools Her Firm Uses [24:57]
Michael: And so then that leads to a couple of follow up questions, how are you...what content are you creating? How are you distributing it to them? What are you using to do this stuff and get this data of who exactly is opening and who's not?
Kathryn: So I'm going to say we're still a little bit in the infancy stage of a marketing strategy, it's something that neither Dennis and I have really done in our career prior to launching Morton Brown, so we're still figuring it out a little bit. We have for the past several months now been sending out a weekly blog and we have a blog on our website, we're both active...go ahead.
Michael: Do you write those? Are you writing articles every week or is Dennis, or do you tag team, he does the first and third week of the month and you did the second and fourth weeks of the month?
Kathryn: Dennis is writing the vast majority of them. He is a very talented writer and he has just a great way of kind of weaving in stories, it's something that is just a passion for him individually. Even if we weren't sending it out, he would still be writing.
Michael: Yeah, so you may as well put it on your business website and get a little traction from it.
Kathryn: So we've been consistently sending those out at least weekly.
Michael: And how do you send those out? Do you have an email list in Redtail? Are you using from some third party system like Constant Contact?
Kathryn: We have a third party system which I believe is proprietary to the marketing firm that we use and it allows us to have different distribution lists on there and, obviously, put in all of our content, track all of our content, see who's engaging, how many clicks we're getting, whether or not it's being shared out and then we can take all of that and compare the different pieces to one another and as I mentioned, kind of see who's raising their hand in some way or another.
Michael: Well, I'm struck, so that means you hired a marketing firm?
Kathryn: Yes, we have a marketing firm that we work with and they help us put together our content calendar beyond what we're writing. So we have our internal blog but then we also have...we'll write articles periodically for some local publications or a couple of national publications and they help us map all of that out, so marketing/PR.
Michael: Okay, okay. And is that a marketing firm specific to the industry, someone that niches in our space or simply a marketing firm you found locally that you want to work with and marketing is marketing, regardless of financial services?
Kathryn: So they're a broad firm... they work with a number of different industries, somebody here locally that we really respect and appreciate and it's just been a good relationship. Like I said it, there's still a little bit of a learning curve for us, we're still trying to figure out what all is working and where we want to focus and then we have, as I mentioned, an internal person that helps to run it on our side to make sure that if we have initiatives on the marketing side that they're being...that all the steps are being taken to follow through on the process.
Michael: And if you're willing to recommend them, can I ask who the marketing firm is if anyone else is curious to check them out?
Kathryn: Oh, sure. It's Klunk & Millan.
Michael: Klunk & Millan.
Kathryn: Yeah, run by Jim Klunk.
Michael: We'll put a reference out to that in the show notes. For folks who are listening, this is Episode 135 so if you go to kitces.com/135, we'll have a link out to the Klunk & Millan website for anyone who's curious to check out and explore further.
Kathryn: Fabulous. Yeah, they're wonderful.
Michael: So how do you evaluate things like hiring a marketing firm in the first place? Because I feel like this is a challenge for a lot of advisory firms because marketing, in general, is hard, a lot of us are not necessarily trained in marketing. We may be trained in sales, like put me across from a person and I know what to do with them but filling my meeting list to sort out the marketing end is a weaker point for a lot of advisory firms. And there's certainly a lot of marketing firms out there that seem to have lots of promises and not a lot of results. So how do you figure out if...I guess, what brought you to hiring a marketing firm? How did you decide this marketing firm? How do you figure out if you're getting value out of your marketing firm?
Kathryn: So I think that goes a little bit back toward our thought process and philosophies when we put the firm together. We really broke out a number of the different functions of the firm and said, "What do we want to hire in-house and what do we want to outsource? Do we have the capacity or experienced talent in order to be able to do it ourselves and where do we get the best cost efficiency?" And so there are a number of items that we outsource here at the firm but marketing was one of them that we looked at and said, "We think we have the ability to create content, we think we have a good story to tell, we just don't think that we know ourselves how to package it, how to get it out there, and how to promote it."
And so that's really what led us toward, "Let's look at some marketing firms and see what type of services they have to offer and if it's something that would make sense for us to use." And we wanted to wade into it a little bit because once again, marketing was never...it was not a huge focus for us previously. And so we weren't sure exactly how or where to go with it and so we thought that by bringing in a firm, we would have the ability to wade into it and figure out what's working and where do we need to expand and grow. So, that's a lot of what led us to that.
The How Kathryn's Firm Systematically Plans For Growth [30:51]
Michael: So, I'm struck by just this whole holistic view of, like you said, you made a list of all the different things that for me, I'm kind of imagining like an org chart, "Here's where we eventually want to be in all the different stuff that we have to do. Okay, now, which things are we going to do now? Which things are we going to do later? And which things do we need to do now but we're not very good at so we got to outsource it to someone else who's going to do those things until we can get the expertise or get the team to bring it internally?"
Kathryn: Right. And you know what? It's funny you mentioned that because we do have an org chart which is built up for probably the next 10 years, I think it brings us up to somewhere around 20 employees but we also have kind of written down the progression or at least an idea of what the progression might be. So Dennis and I wrote down and said, "Okay, I take the lead on this responsibility, you take the lead on that responsibility and eventually some of these things we'll hire out but in the meantime, all these things need to get done so who's going to be the one in charge to cover down on that?" And so we do have kind of a progression org chart that's built out for one day in the future.
Michael: Interesting, but it's a striking thing that what happens for advisory businesses when you...or I mean really any business, when you do that, when you say, "Okay, if we look out to when we're much, much larger, we're 5X or 10X the size and what does that organizational chart look like? How many clients do we have and how many staff do we need to service them? And then what are all the things that needs to be done in an organization of that size and what would the roles be?" So that you really get a sense of like, "Okay, here are all the different competencies we're going to have," and not that we need to do all these things ourselves literally as the owners or founders or creators.
You run your org chart down and it's like, "Okay, you will have 10-20 people by then to allocate," but that's like a harsh word for people but as a business manager, you will have 20 people to allocate into all these different roles and needs and demands of the business. Now, which ones would you have when you've got all these choices? And then when you get a vision of where you're going, then you can decide, "Okay, well, we obviously can't do all of that stuff yet nor do we need to because we don't have that many clients yet." But which things do you want to do now and what's the sequence that you want to build them from here to there?
We ended out actually with a very similar process as we've been scaling up XY Planning Network that every year, we sit down and do an org chart of what the business looks like three to five years out when it's many times the size and then start working backwards to have a giant list of, "Okay, here are all the next hires that we're going to do and the sequence that we think we need to do them based on what we need right now and what we're trying to get to later," and we just keep updating the chart and then that updates the list.
Kathryn: Yes, I love that.
Michael: And so you've got a vision of a much bigger thing then if you're at four or five people and drawing org charts of what it looks like with 20-plus.
Kathryn: Yeah, and then we might...who knows exactly but the goal is to build an engine, an engine that can grow and that can be...we want to build something where if we have younger advisors coming into the firm, for instance, that we can say, "We have tools for you, we have processes in place," we've been testing this and we want people that are going to connect, of course, on the cultural level and really have the desire to service the clients and we want to make sure that we give them the tools and the abilities to do that. From kind of day one, once again, we wanted to make sure that we were building...we didn't want to look up one day and realize that we had a siloed practice with a handful of advisors.
We really want to have a platform and a process for how things are done, which can be (and is already) continually tweaked. And as much input as we can get from the staff and even from our clients, we're trying to factor that in and we're trying to build that in and maintain that flexibility. So it's not just Dennis and I saying, "This is the way and the only way," we want to bring it all in but we want to make sure that there's consistency because that brings consistency to the relationships with the clients and to the staff and everything else.
Michael: And I'm struck by, I don't know, some of the thinking that comes from that, that most of us I think tend to run our businesses by just saying, "Okay, well, we're running it, I want to grow by X dollars or percent next year," you got a 5% goal or 15% goal or 25% goal or whatever it is. And then when you look at it and say like, "Okay, well, if we really grow that much, my client list is going to be getting pretty heavy, I'm going to get a little stressed so I probably have to hire a paraplanner over the next couple of months so that I don't drown by the end of the year."
And so we look at the end incremental growth and we decide on the incremental hires and that's a fine thing if you have to do that to run the business. But the interesting effect that happens when you start looking at the business the way that you and Dennis do, where you're looking and saying, "We see this thing 10 years out where there's 20-plus people and exponentially more clients than there are today," and you can't incrementally grow there. You can't say, "Well, if we get one more admin assistant, I can take like another 20 or 30 clients and I'll get a paraplanner, maybe I can do another 30 or 40 on top of that."
By the time you're getting to 5X or 10X the growth, you cannot get them there incrementally, everything will break. You have to start doing things materially differently and that's one of the things I've always been a fan of around looking at a business not on a continuous basis but at least periodically to say if you really growth-oriented, if that's really what you want to do, try actually imagine your business literally 10X the size and all the things that would have to be materially different because I guarantee you, if you are going to be 10X the size, everything is going to be really different. You can grow 20% or 50%, maybe you can get 100% because you leverage yourself up with a few team members to support but you will not 5X to 10X your business without drastically changing the structure and your role and relationship in the business because you just will never handle that many clients. You have to start dealing with it differently.
Kathryn: We very much buy into that philosophy. We actually have a folder in our strategy file of 10X.
Michael: Of 10X?
Kathryn: Yeah, yeah.
Michael: Well, I know there's a whole domain out there of 10X thinking and just what it looks like when you start looking at your business through a 10X lens. But again, I think what's striking for you, it's not as though you're living in like Silicon Valley startup world where you're doing all this 10X thinking stuff because you're going to go raise $30 million in venture capital and try to 10X your business in the next 12 months.
It's not that environment but even in advisory business context...and I don't mean that to sound pejorative or anything, even in advisory business context where we don't go raise a bajillion dollars of venture capital and try to go viral and get 10X growth in short term time periods, the thinking philosophy of try to just actually taking half a day to just sit down on your own, imagine your business at 10X the size, 10 times the clients, 10 times the revenue, roughly 10 times the staff and draw that org chart of what you do and then start thinking about how different that is from where you are today and what you're going to do to have to get from here to there and you start taking a completely different look at your business.
Kathryn: The thing that I love about this and you're kind of going down that path to is it's that building with intention and being purposeful on the steps that you're taking now with that mindset going forward. I think one of the greatest compliments that we get is if somebody after a meeting or somebody is looking at our website or something and they come back to us and they say, "We can see you put the work into that, that looked very intentional." We're like, "Yes, intention, we love it."
How She's Developed Her Mindset Around Building Her Business With Intent [39:29]
Michael: I love it. So I've got to ask then, how did you get to the point where you're thinking and planning for the business this way? Are you and Dennis naturally wired this way? Are you using outside coaches and systems because a lot of this sounds very similar to what Traction and EOS teaches? So where did this come from, of doing org charts with 20-plus people when you're at four and this kind of build with intention philosophy right down to having scorecards of how everything is going?
Kathryn: Yes. Well, yes and yes, I think Dennis and I are both built a little bit this way, to have processes and to understand how things work is very much both of our mindsets. I think the thing that when Dennis and I look at the two of us together, I think we complement each other well because he's very much of a strategic thinker and he likes to understand kind of the process whereas I'm very much of a problem solver so he might say, "We're going there," and I'll say, "Okay, we need to take A-B-C steps to get there." And we can buy into that very well together because we have to understand how it works and how to get there.
So part of it is our makeup but then we do also work with a coach, so we work with Steve Sanduski over at Belay Advisors and he has been just hugely instrumental in a lot of the things that we're doing right now. Some of the stuff, I'm proud to say, we started even before working with him but we've been working with him...gosh, we were talking with different business coaches and trying to find a good fit I would say a month after our launch. It was something that we knew from the very beginning, we wanted an outside voice at the table, we wanted somebody who knew the industry inside and out.
Both Dennis and I had built a nice roster of individuals that we know within the industry that are supporting or providing services, etc., so we had a number of resources to pull on when we launched the firm but we wanted a consistent outside voice at the table and somebody to help hold us accountable and Steve absolutely does that, so that's been a really good relationship. I might say those are the two primary drivers and then outside of that, the firm that we came from, I would say, for the first several years did grow or did evolve kind of over time as you had described, we would hire as we needed. Some of that started to transition before we had left and it became much more intentional but we saw some of the challenges in adding bodies as you're growing, adding staff. That's kind of a horrible way to put it, but we saw some of the challenges of just evolving rather than intentionally building.
How Kathryn's "Data Geek" Helps Her Manage Her Time [42:34]
Michael: It's a good way to frame it up of the difference between evolving and intentionally building. Take me back a moment then to...I want to come back once more to this data geek role and not so much from the perspective of tracking the data and the marketing which I get a bit more now. You've got this business development playbook with a lot of structure of we track sources and leads and prospects to clients and there are things that we do for them in each stage and so once you're doing that and you codify it in Redtail, now you just start pulling reports, look at what's working, see where people are in the stages, do you manage and nurture them through?
But you said something in there that was really striking to me, which is that your data geek person is the owner of your calendars to stay focused. As you put it, I think just to ensure you're staying focused on where you need to stay focused and your calendars and time management is I think a challenge in and of itself for a lot of us as advisors, particularly with the demands on our schedule and growing teams and all the rest. And so talk to us a little bit more about this decision, I guess, to surrender your calendars to someone else who's supposed to own them and steer where you're spending your time.
Kathryn: Yeah, you're exactly right, to keep a structured calendar can be very challenging. I was very happy to say, "Just tell me where I need to go and when I need to be there." I was very happy to hand a lot of that off. I think in a lot of respects, Dennis probably has the same mindset. And it's nice to have somebody else looking at where we're spending our time and also looking at where we need to be spending our time. As I mentioned, we have kind of the business development playbook, we also have a client experience playbook and so we want to make sure that we are touching base with clients on a regular basis according to, in a lot of respects, their preferences for how often they like to communicate as well.
But just making sure that we are reaching out, whether it's a phone call or we're following up on whatever is going on in their lives. We have a...we call it our financial planning heat map, so we keep track of all of the active financial plans that are in process, we keep track of the implementation, which of our clients are in the implementation phase, which of our clients are in a maintenance phase, maybe there's not anything that really needs to go on right now and which of them were our clients that are...that were in the pipeline to update shortly so we know that's going to be right around the corner.
And then we have a handful of clients that they don't need active financial planning at all at this stage of their life, so they're kind of in a "no plan" phase. And we want to make sure that as we're building out our meeting calendars, that we are helping the clients to migrate where they should be on that heat map and that we're moving them along and that nobody is slipping through the cracks. That's our biggest thing, we just want to make sure that we're staying front and center for all of our clients and that we're available as they need us and this helps us to do that.
Michael: So I'm just struck once again that I can hear this staging structure, you have it on the business development playbook, "So we have sources and leads and prospects until they're clients and then here are the things we do for sources to move them along, here the things we do for leads to move them along, here the things we do for prospects to move them along." And it sounds like your financial planning heat map structure has the same kind of multiple phases, like different things that you'll tag clients for where they are, you've got people who are in process with planning, you have people who are in implementation phase, a maintenance phase, an upcoming update phase, and a no plan phase.
And then I'm presuming you have a bunch of workflows or focus areas or things you do for each of those, so maintenance clients need one kind of check-ins about what they're working on, upcoming update clients need a different sort of check-in because you got to prepare them for an update. No plan phase clients basically just need a light touch of "Hey, anything changes that we should be doing some planning? Because otherwise, you don't need much so we're not going to push it out to you if you don't want it or need it but just checking in if you do."
And so every client...similarly, all the clients end up tagged in their phases, you've got workflows of things you do for clients in each of these phases and some kind of scorecard or tracking of who's in which phase and are they all getting the things they need in the phases that they're in? I just got to ask, where does it come from in your heads to build that all clients into all these different phases? I just don't see this very often. Is this just another one of those this is how you and Dennis are wired? Was there some experience at the prior firm that said, "Hey, I want to do it this way next time if we ever start our own thing?" How do you get to looking at everybody in phases this way?
Kathryn: I don't know, I guess part of it is probably the wiring. I think it's just also really wanting to make sure that nobody is falling through the cracks and that we have an awareness of where everyone's at and where we think the next step is for them. And also, it helps them with the roles in the office. By building out the workflows, it makes sure...once again, it builds the platform so that if we have another advisor that comes in or if we're working on a plan, the staff knows where and how they can support us because they know exactly where we're at and what needs to be done. And so it really gives freedom, I think, to all of us and it allows us to delegate more cleanly and clearly.
Michael: Yeah, I get it, once you've got that level of structure, now you can get really specific into, "Okay, well, here's exactly how many plans we expect we're going to do in the next year because we know who's already in process, who's just in maintenance mode, who's going to have an upcoming update, how many are in no plan phase so we don't have to do many of those unless they're live switch." And then you know exactly which tasks you're doing for them in each phase, we know exactly how many maintenance meetings we're going to have in 12 months and how many update meetings we're going to have in the next 3 months. And I get it, once you put that structure in place, you get really clear about exactly what work needs to be done, how much of it needs to be done, who's going to be responsible for it so that you can do it.
Kathryn: Right. And then the other piece of it, and this is so tricky, I think, is tracking our time. So we're not entirely proficient there yet but we're getting there but tracking our time, so how much time do each of those steps on average take?
Michael: Oh, so you don't mean tracking your time? You mean like tracking the time of the stuff that needs to be done?
Kathryn: Yes, yes. And then we can determine too, from a client perspective, where are we spending the most amount of our time with individual clients or in individual stages for the client.
Michael: Well, and just from the pure business process and if you go through and realize like, "Jeez, it takes us like four hours to do all the things for an upcoming update and we've actually got 27 of them in the next six months," that's a big chunk of time, it's probably worth putting a little bit of energy into how could we refine or improve or use a piece of technology or do something else for this particular part of the process for this particular segment of clients. Because we know it's a pain point in the business, it's going to be a squeeze that's coming up, this is a good opportunity for us to put some resources into making this thing better.
Kathryn: And I think on the positive fun side too, is that we can look back and say, "Look at what we accomplished, look at all these plans we delivered, look at how many clients we met with, look at how many new families we brought into the firm that hopefully we can deliver this high level of value to." So, it gives us some things to celebrate too.
Michael: Yeah, absolutely, as you see the progress you're making through the items, you can...I imagine eventually you're going to get right down to, "Hey, remember in the old dark days when it took us four hours for an average upcoming update and now thanks to all these systems we're investing, it only takes us an hour and a half because of all the things we did to refine it. Look at how much we've accomplished, how much more of that process improved, and how many more clients we can serve now because we refined the systems."
Kathryn's Career Journey In The Industry [51:25]
So talk to us a little bit about the path that led you to this point where you're launching this firm and instituting all these systems. I know you had a long career in the prior firm before you came here, so I guess you went out on your own and launched. So talk to us about the beginning of the career, were you doing this straight out of college? Did you come to financial advising over time? What's the journey been to get here?
Kathryn: Yeah, I consider myself to be extremely fortunate because I have been doing this right out of college. I was introduced to kind of comprehensive financial planning as an intern in my last semester of school and coincidentally, for good or bad, my very first week on the job was 9/11. So it was...
Michael: Oh, nice timing to start a job.
Kathryn: Yeah, in this industry so it was very interesting but also, it helped to validate a lot of the work that we were doing and I just from...I just fell in love with the whole idea of financial planning, the problem solving that goes into it and how intertwined all the different facets of the person's financial life can be.
Michael: And so were you going to school for financial planning in the first place?
Kathryn: My degrees actually in finance and economics and I was not entirely sure as I was kind of completing things where I would land within the industry. And so the internship was at an independent LPL office and they're really focused on financial planning and as I mentioned, it just clicked. The internship was great because I got to spend time in different areas, so I just spent some time kind of focused on the portfolio, focused on insurance, supporting financial planning in different areas and it was bringing it all together, which I really enjoyed.
And so I was fortunate enough to be hired by that firm coming right out of college and I worked there for about a year or so, I got all of my licenses, my 7, my 66, my life insurance license. My role at the time was primarily administrative support, I learned LPL systems inside and out and the paperwork inside and out. But then my soon to be husband lived about two hours north of where I was living at the time and so I followed him up to Allentown, Pennsylvania, it's where we live. So I left that firm but it had given me a clear vision of where I wanted to go and what I wanted to do.
And so when I came out to the Lehigh Valley, Pennsylvania, I didn't even look for job postings. I just went in and said, "Okay, I know LPL, so let me find all the LPL firms who note in their services comprehensive financial planning and those are the only places that I'm going to apply." And so I sent out blind resumes and cover letters and was fortunate enough to be hired into a small firm who was at the...they were right at the front end of finalizing a partnership. The partnership would require the transition of about 80 to 100 accounts from First Global, I don't know if you remember them, from First Global over to LPL. And so, since I knew the LPL systems and the paperwork, I think that's really what won me over because they looked up at that...
Michael: So like, "We have a giant project, we need to hire someone who can hit the ground running to pick all these things up. Oh, look, Katie knows exactly how to do this, that's who we're going to hire."
Kathryn: Yes. Yeah, so it just worked out timing wise which was an awesome thing for me as well for my career. And I'd like to think that I was smart enough that even in that interview process, I made it very clear that my real intention was to eventually become a financial planner and I wanted to start the CFP coursework as soon as possible and by the way, I wanted them to pay for it which they were nice enough to do and that's what I did. So I think early on, I had the mindset of, "I know I don't have the experience, I'm definitely a minority, being a female in the industry. I need to figure out a way to bring credibility to the table." And so I really dove into the education piece of it and I think I had my CFP marks by the time I was 25.
Michael: Interesting. I love just the path of how you went, I'll admit it, it resonates with me because it was somewhat similar to my own journey that early on, I took a role in a paraplanner and operations support role. I didn't do it for a long time but...I didn't stay on that side for my career but I was in it for a year or two and just you learn the guts of the business and how all this stuff works and how all the systems work and how the technology works. And it's hugely valuable as a foundation for building your career on and accumulating some experience and then realize I wanted to do more stuff for clients and I didn't know anything about anything and I wasn't credible. And so, same way, I went back and started getting my education and designations so that I could feel like I was going to be credible as a young advisor in particular.
Kathryn: Yeah, so I ended up staying with that firm for 15 years and really growing and developing and it was just...I was given so many incredible opportunities. I think you're right, learning the business, so it was a small...it's interesting, the firm itself, gosh, for a number of years, for the first few years, there were only three or four of us in the firm. There was a partnership that had just been put in place but a little bit of background on that partnership. There's a large local accounting firm here and they had created their own in-house wealth management division because they wanted to bring those services to their clients but a few years into it, determined that the best use of their time and talent was really focusing on the accounting piece.
And so they had approached the firm that I was at and they put together...I don't know the initial conversations, I wasn't privy to the initial conversations but they had decided to put together a partnership where a number of the CPA will be passive partners in the entity but all of the wealth management will be run by this firm. And so we had a great relationship and great connection with the accounting firm but we were still a very small firm by number of people. And I think, as you mentioned, I didn't even realize at the time how valuable those experiences were because you have to wear a lot of different hats.
And so I continued to grow and expand within my roles and I was running a lot of the operations, I was running a lot of the technology. I eventually became...I eventually got my Series 24 and became the branch manager to run the compliance and I was still doing a lot of financial planning and so, you learn all these different facets of the business. And then at the age of 28, I was given the opportunity to buy into the partnership, so they invited me to join them at the table which was just an incredible opportunity and it was so...there was just so much to be learned on the back end of the business as well, which I value incredibly or value a lot.
But it was funny because early on, I'm this 28-year-old female and I go to these partnership meetings and we'd be at a huge boardroom table at the accounting firm and it's me and a dozen men anywhere from 45 to 65. And I think for a while...initially, I didn't really dare to say anything but after a while, I realized, "You know what, I'm learning a ton and I just really like to observe and kind of soak it all in." I became more vocal later on but early on, it was just a good way to, I guess, learn the back end of the business.
Michael: Interesting. So I love the journey of this of, "I started out and I kind of learned the administrative and operations side of the business and then I got more responsibility and learned about running operations and technology and I got my CFP certification and start learning the client side and then I got to buy in as a partner and started learning the business side," and just this progression over, I guess, a decade-plus of your career of just incrementally adding more experience and evolving your role and moving up in responsibility and getting sort of the opportunities to experience that come along with that.
Kathryn: Yes. Yeah, yeah, it was good. I will say, though, a few years ago, I started to plateau a little bit. At that point, we had...back in 2011, we had transitioned the firm from the LPL platform to an RIA and that was just a great move for the firm and then a few years ago, we really started to, as I mentioned, kind of more professionalize the business a little bit. That's where I think we started to make the transition from the evolution to kind of being a little bit more intentional and we had expanded, we had a larger staff, we were outsourcing some services, and a number of the roles that I had been doing whether on the operational front or some of the technology responsibilities were shifted to others, which was the absolute right move for the firm and made perfect sense.
But the problem was I was still running compliance which, thankfully, was not as demanding or as exciting as I would have liked it to be and I think I was a little bit underutilized on the financial planning front. And up until this point, I had not been developing business myself, I was supporting some of the other advisors in the firm, and so I kind of looked up and said, "All right, I'm going to have to make a move." I always thought at some point I would start developing business, but that whole sales mentality definitely held me back, the idea of...I was intimidated by the idea of "selling." I didn't want to change or elevate the conversations that I was having on my personal connections and I didn't want to be perceived as someone that was out there to give a pitch at every opportunity.
But I think the turning point for me was really assessing the work that we were doing for the clients and looking at where they had come from, whether they were struggling to do it themselves or if they were working with other advisors that maybe weren't fully servicing them for one reason or another and recognizing that we were really truly delivering value and that's what I would be doing, delivering value, not selling. And I think once I came to that, that realization became more clear in my eyes that I would be helping and not pulling away, then it became the next great step for me was to kind of move into that realm.
Michael: I love that framing or that mindset shift from the idea that I'm going to be selling for the sake of selling or trying to pull them away from wherever they are or just trying to convince them of the features and benefits and the thing that you're offering to this reflection of saying, "No, wait a minute, what we do is really valuable. I know it's valuable, I live it, I see it, I know our clients are being helped. If I believe in it that strongly, why wouldn't I want to try to share that with people I know who have pain points and aren't being served as well as I know we can serve them?" It's a different kind of mentality when, I guess, in essence, you have that level of confidence in your own value that it's no longer a selling discussion, it's just a, "Hey, I just like to share how I help people like you and if you think this is interesting, I'd love to talk to you more about it."
Kathryn: Yeah, you're exactly right, it's sharing and it's helping.
Michael: And so what led to this impetus and push to say, "All right, I've conquered these other things, I want to figure out this business development thing?" Was it like a career track vision for you? "Hey, if I want to go to a certain level or a different place, I need to learn this stuff," or did it start more from the other end like, "I've been doing this for 10 years and I know I'm really good at it and more valuable," and like, "Wait, why don't I tell more people to go to this and how we provide value?" Where did the genesis for this shift come from? Because I find for a lot of advisors, even some very good ones who are really good at serving clients and have come up at a firm where they had opportunities to serve clients, they never make this leap or shift into saying, "Now I'm ready to learn business development," or, "I want to tackle and conquer this."
Kathryn: So once again, I think it was a little bit of both. I think I was feeling a little stagnant with where I was at, I wasn't feeling entirely challenged and I wasn't feeling...there were some challenges but I think I really wanted to be in the process from day one. I was in a position where, as I mentioned, most of the clients were developed by another advisor and then I was brought to the table kind of after most of the sales have been done and I couldn't necessarily hear from the client in day one, what's important? What are they looking for? What do they value? And I really wanted to understand some of those pieces that I wasn't getting. So, it was partially that and it was just I think me looking up and saying, "Okay, it's time for something a little different and a new challenge and the next step."
How She Went About Learning Business Development [1:06:03]
Michael: So how did you go about learning this and figuring this out? You seem to often go down the path of hiring outside coaches and consultants and expertise, so did you go and find a coach or a sales training program? Or did you mentor yourself under someone else in the firm? Or did you just take the leap and start figure it out as you went?
Kathryn: No, there was definitely some help there. The previous firm that I was at had started using Dynasty Financial Partners in 2014, 2015, I'm trying to remember exactly, somewhere around there. And so they provide a lot of coaching and support and then it was also speaking with the other advisors in the office to kind of picking their brains and building out my network, getting out into the community more and building out... I had a number of good relationships with other COIs, accountants, attorneys, etc., but it was kind of getting the word out that I am now seeking families to work with that may find our services valuable and just really starting to change the conversation a little bit with other professionals that I respect in the area as well.
Michael: And so it was kind of a gentle of just, "I'm going to start getting the word out and seeing if some people begin to nibble?"
Kathryn: Yeah, yeah. I would say it was...I didn't entirely stop doing something and then focus 100% on this, it was definitely something that I worked into the flow of all the...I was still doing a number of other functions, as I mentioned, I was still the CCO for the firm, I was still doing a lot of the financial planning and supporting other advisors and I had some other functions in the firm, so it was not 100% dive in.
Michael: But you started shifting and migrating in that way, as it were?
Kathryn: Yes, yes.
Michael: And so, how did that go? How was that?
Kathryn: Good, good. I mean, it's...
Michael: Less scary in theory than in practice or still as scary as feared?
Kathryn: No, I think definitely less scary. I think the first couple of clients that I brought on, I was almost kind of surprised myself like, "Oh, yeah, great, you're going to work with me, I love this, I'm so excited."
Michael: "Wait, they said yes? Oh, okay, I'll get your paperwork. Okay."
Kathryn: Yeah, yeah. But then the excitement hits and I still get this, whenever a client signs on, my mind immediately starts turning and I think through all the conversations we had and I think through the risk and the opportunities that they have and I start to kind of organize it all and I truly get excited to take the next step then to learn more and figure out where we're going.
Michael: Yeah, that dopamine reward in the brain when someone says yes is a very powerful thing. Once you get it, you want more of it.
Kathryn: Yeah. So I would say it was not as scary as I think I had thought it was for a number of years.
What Led Her To Start Her Own Firm [1:09:14]
Michael: So does this ironically mean, though, that was the fact that you got comfortable with business development, which I feel like was sort of the last piece of the puzzle for you, like you've done the administrative side, you've done the compliance side, you've done the operation side, you've done the planning side. You were learning the business management side when you became a partner and the last box to check in this was the business development side and Katie is now a fully trained independent business owner.
Kathryn: Yeah, it wasn't quite that quick, I guess, maybe. Another transition that we had around the similar timeframe was for a long time, I was supporting the founding partner of the firm and the client base that he was the lead on was very geographically diverse, the majority of the clients were outside of the Lehigh Valley where we live. And we had reorganized kind of our service models and so I transitioned from being his primary...being the primary for financial planning for that client base and switching over to really working closely with Dennis Morton and his clients.
He had developed a nice base of clients which were predominantly within, call it 50 miles of the Lehigh Valley and he was also a partner at the firm as well and we'd worked together for a number of years but we hadn't really worked with clients together. And so I transitioned over more to his team where I was supporting him, he was starting to kind of reach capacity with his services and it made sense, because I was developing business in this area, it made sense that we would pair up and work in this area. And then I'm going to have to...one of the challenges with supporting the other advisor is that I would occasionally have to travel, not a ton, but more than I wanted to with young kids and so it made sense.
And I think as we continue to kind of...and Dennis and I realized that we collaborated really well and that we had similar thought processes around our vision and how we would build things and how we wanted to service clients, etc., and we kind of recognize that, that our vision for the business was a little different from the founding partners' vision for the business. And the three of us kind of all talked about it and decided together that we are going to amicably separate and so that's when Dennis and I decided to launch, to kind of break away and launch our own firm.
Michael: Okay. And so was there a...I don't know, was there a catalyst event? Was there a driver? Was there something when you're already building together and growing your client base and presumably, you have some compensation tied to that client base that you were building where you were, why make the leap and not just make adjustments and shore up what you're doing, the two of you, under the platform that you were at?
Kathryn: No, as I mentioned, we were working with Dynasty and there were a lot of great benefits of working with them. But during that time, we were spending a lot of time on the business, so we were spending a lot of time in discovery of who we are, how we want to be portrayed, how we want to deliver our services, where we want to focus, where we want to put our energy and our resources. And I'd say, more so than any other time up until that point, we were really trying to hone our messaging and hone everything to be a true reflection of what we were doing.
Michael: Which is not an uncommon strategic planning process or maybe like strategic refinements that established firms go through, like, "Hey, we built this thing but we built it in the evolutionary incremental way. Now there's kind of a lot of people doing a lot of different things, so let's all sit down and try to get on the same page and aligned about what is our business strategy and what exactly are we messaging and what's our value proposition and how are we going to get more on the same page around it." I mean, it sounds like that was the process they were going through or maybe even that Dynasty was nudging them towards, "Here's how you get everyone on the same page to get to the next level?"
Kathryn: Right, right. But I think what ended up happening is it brought clarity to how we are different in our thinking and for a little while, there was a little bit of stress in there because we weren't seeing eye to eye, we weren't entirely on the same page and not that anyone was right or wrong but...
Michael: Just different visions of what you...different vision on what you want to build towards. The bad news about clarifying your vision and creating alignment is sometimes, you actually discover some people are not aligned.
Kathryn: Yeah, and I think in a lot of respects, once we came to that determination, it was actually very freeing and we all kind of said, "Okay, we can be better versions of ourselves if we go in different directions." And I think that it was a...it could not have been a more smooth separation, I think we're all very fortunate in that respect.
Michael: So out of curiosity, what were the breaking points or the schism points between you? Is it like they wanted to be huge and you don't want to be huge or they wanted to be more investment-oriented, you want to be more planning-oriented or something else? As you said, no right answers or wrong answers, it's just different visions about the direction of the business, so do you know or at least looking back, where were these splits or fracture lines that ultimately made you all come to the agreement of "Maybe we should just part ways?"
Kathryn: I think there were some incremental things. I think they do a lot of financial planning in the firm, I think our desire to make that first and foremost in our minds is maybe a little bit stronger, so I think that might have been a little bit of it. As I mentioned, the client base is geographically different and so coming up with a strategy for outreach, we were kind of fighting for resources a little bit.
Michael: You were like, "We want to do more local events because our clients are here," and they were saying, "Well, but our clients don't participate in local events because our clients are dispersed," and now you have to fight over resources about who gets what?
Kathryn: Yes, I think that was probably one of the challenges. And then also, as I've probably hammered home, Dennis and I are very process-oriented, the founding partner is not as process-oriented which isn't a bad thing. He wanted to maintain as much flexibility and nimbleness as possible for his clients in how he was servicing them but from...and as we do too, but the way of getting there was just different. And so I think that's where we would start to say, "Okay, there's a little bit of stress here, there's a crack."
Michael: Right, or when you get down there, "Well, do you want to standardize this stuff or not?" and someone says yes and someone says no and that starts creating friction. It's just different visions of how you want to build or the way you want to serve the clients.
What Surprised Her About Starting Her Own Business [1:17:09]
So as you took this leap, you'd been in a role of running systems and processes and operations and had done business development and had some management roles. What surprised you the most about actually trying to build your own advisory business once you were out on your own compared to what you expected or what it was like under the umbrella of a larger firm?
Kathryn: I'd say on the positive plus side, the freedom of creativity. Obviously, we could bring ideas to the table before but I think we underestimated how exciting it would be to really think fresh and new about what we're doing and how we want to do it. I think we went in with a mindset of, "Once again, we're going to build this thing so we have to check these 100 boxes or however many it takes to check to start a firm and we're going to do that." And we did that but then we kind of arrived and said, "Wow, now we can do anything within reason, so how do we want to think about this? What are our philosophies around this and what are..."
So I think that was a little surprising how exciting the entrepreneurial side could be. I think surprising on maybe the tougher side and I don't know that it's necessarily surprising but, as I mentioned, we outsource a number of services and there have been some times when we had to acknowledge and remind ourselves that nobody outside of our firm is going to be quite as excited as we are about what we're doing and they are...so just staying on top of different service providers and making sure that we're clear in expectations. Same thing with our staff, making sure that we're very clear on our expectations and that we're all on the same page, I think we underestimated how important that is from day one.
Michael: And so is that even shifting your own attitude around the relative value of outsourcing versus insourcing?
Kathryn: No, not necessarily. I mean, I think for just about anything, really you kind of had to look at the pros and cons of either one of them. I think that there's still a great opportunity and still great benefits of outsourcing some functions.
Michael: I was going to say so it's not making you not want to outsource, it's just making you want to manage your outsourcers differently.
Kathryn: And as I mentioned, even with staff, just to make sure that we're setting clear expectations too. I think just the benefit of staff is we have daily communication whereas if there's somebody that we're working with outside of our walls, we have to be more cognizant of it and we have to be more intentional.
Michael: Anything you wish you'd done differently then, looking back in launching the firm and making the transition?
Kathryn: I'm going to say no, I can't...I don't know if that answer is allowed. I'm not sure that I would do anything different.
Michael: I mean, as you said earlier, you did make your transition and keep 97% of your clients rotating through it which is a heck of a number. I mean, I got to presume of the 3%, at least 1% or 2% of them were like, "Oh, thank God they didn't say yes because I really didn't want them anyway." Right? We always have a few we don't really want, so a transition is a good opportunity to like, "Oh darn, they didn't re-sign possibly because I forgot to send them the paperwork."
I guess, I even just wondering how did you message and communicate this that you kept 97% when breaking out to your own firm away from a larger one? I mean, that's a scary transition process for anyone, there were certainly a subset of clients that kind of like the security of a slightly larger firm that sometimes get nervous when small firms are out there on your own and when you're getting started and they're wondering if it's even going to stick around. How did you announce and explain the news?
Kathryn: From day one, when clients were transitioning, how do we explain it to them?
Michael: Yeah, so that you got to hang on to 97% and they stuck around or, I guess, they came with you and stuck around.
Kathryn: So we were able to transition via negative consent for our clients, meaning that we stayed on the Schwab platform, we had been using Charles Schwab previously and we continue to stay on the Schwab platform. Since we had an amicable separation, the other firm basically signed off allowing us to bring our clients with us and reassigned the client agreements from the previous firm to our firm. And so the clients...
Michael: So I guess the client agreements had something that allowed them to be assignable in the first place?
Kathryn: Yeah, so all of the clients received a letter saying that they would be transitioning from the previous firm over to Morton Brown and unless they opted out, and they had 30 days to opt out but if they didn't opt out, then they would automatically transfer. And so that letter went out and the day that letter went out, we called up every single client and explain that we are launching Morton Brown and we value the relationship, we're really excited to work with them, here's how we're thinking about things, this is what we're building, there's not going to be any change to you because you're staying at Schwab.
Same accounts, same account numbers, all of your banking instructions, everything, if you have a link to your banking account, everything stays in place, no disruption and we launched our website at the same time. I would say we were very well prepared for the launch and I think that that came through in the conversations with the clients. It wasn't something we were throwing together last minute and we were able to kind of explain how smooth the transition would be and the benefits and how excited we are to work with them.
Michael: To me, there were two interesting takeaways on this. One, you can double-check your client agreements and whether they're assignable because not all of them are and they're not...call your lawyer because you might actually want to look at restructuring them because it makes business sales or splits like this a little easier when they're amicable in the first place. And the second to me is just it's striking how much easier some of this can be when you actually are able to separate amicably and you can do this as a transition that the old firm signs off on which makes it feasible to use negative consent letters tied to client agreements that can be reassigned and it gives you more opportunity to proactively and positively announce, "Hey, we're separating ways and here's what our portion of the new firm is going to look like and we're excited to have you on board."
As opposed to what happens for a lot of advisors and firms that have a split now, which is you quit at 4:30 pm on a Friday and then you start calling everybody over the weekend and you have to put a high pressure thing on the clients, not that you want to because the firm is going to call everybody on Monday and there are people that do that and do those breakaways and it goes okay for them and there's a bunch of them now that have gotten to the other side.
And never mind from the stress of the advisor end, from the client end, it certainly comes across a lot better when there's a proactive, positive message of just, "Hey, we're parting ways and here's the exciting new thing we're doing," as opposed to the phone call to the client on a Saturday morning to say, "Hey, just want to give you a heads up. I quit my job on Friday but I'm totally launching this awesome new thing and you're going to love it and I'll call you more about it in two weeks because I have to call my other 82 clients." It's just a hard message to sell.
Kathryn: Right, right. And it's interesting too because I really do feel for those breakaway firms because the clients don't understand necessarily how those have to occur. There are rules and you have to follow the rules. I mean, we had rules on our end too but we were very fortunate to working together to make it happen.
What A Typical Week Looks Like For Kathryn [1:25:29]
Michael: Yeah. So what is a typical week look like for you at this point in the business?
Kathryn: I would say a typical week is...we try to do all of our client engagements mostly...well, the vast majority of our client meetings Tuesday through Thursday and keep Mondays and Fridays primarily open for internal days. So Mondays, we have our staff meetings in the morning, I usually have a separate kind of check-in meeting with our financial planner to see where is everybody at in the process, where are the questions that are popping up, are there any plans that you've migrated to the point where now we're going to kind of strategize them together and so we'll spend time on that.
Mondays, we'll have also some of our kind of standardized quarterly calls or semiweekly calls depending on what it is so we might speak with a marketing firm, we might speak with our CFO, we might speak with our compliance firm, and just a lot of internal stuff on Mondays. And then prep, of course, for the week. Tuesdays through Thursdays then are vast majority of client meetings and client outreach, so we'll block time for just client calls and in that block time, we'll have kind of noted who we're going to reach out to and if there's anything outstanding for them.
And then on Fridays, it's kind of a recap, so we have all of our business development meetings on Fridays and we also have just preparation going forward, we'll go through our scorecard, kind of touch base on that and then any other work that needs to be done. I'd say the only other thing that I forgot to mention on Monday mornings, we usually do this on Tuesday mornings, we kind of backed it up to Monday mornings. Every week, Dennis and I meet off-site for about an hour and a half or so and that's our strategic time, so on the management level...
Michael: Every Monday every week?
Kathryn: Yep, every week, we made off-site to say, "Okay, what are the things that we have in the works? What are things that we need to do for our coaching calls? How should we be other new initiatives? How should we be thinking about things? How are we planning things?" And the topics will shift but that's our management strategy time.
Michael: Interesting, interesting. So, I got to ask for firms like yours that structure all your client meetings on Tuesdays through Thursdays, so what happens when a client says, "No, no, I want to meet on Monday."
Kathryn: Well, that's fine. We'll do our best to accommodate them if they're not available on the Tuesday through Thursday, that's fine.
Michael: So you'll let them do a meeting on Monday but you're not going to offer a meeting on Monday, they have to at least push back and say like, "Hey, all you gave me is Tuesdays and Thursdays. I can't do any of these, you got to give me a Monday."
Kathryn: Yes, yes, I would say we don't typically offer it but if they request it, then we'll do our best to accommodate.
Michael: Okay. Okay. And likewise, for business development meetings, it sounds like you try to do them on Fridays but I guess you don't dogmatically stick to these days, it's just what you offer and lead with, recognizing that most people just accept the offer on the table and do it on Fridays if you offer Fridays and do it on Tuesday or Thursday if you offer Tuesday or Thursday?
Kathryn: And actually, I'm sorry, what I meant business development, our internal business development meeting.
Michael: Okay, okay.
Kathryn: Yeah, to check and see kind of where we're at with the different workflows and then also go over the scorecard. We'll have meetings kind of sprinkled in for meeting with different centers of influence or other business development meetings. Typically, Tuesdays through...we'll often do Friday lunches or Friday afternoons for that too. That's pretty easy and fun way to end the week.
The Low Point In Her Career [1:29:15]
Michael: So as you've gone through this journey, what was the low point for you?
Kathryn: Low point professionally, I would...you know what?
Michael: Or just for the overall career journey?
Kathryn: Yeah, I would say maybe two spots. I guess, at that inflection point where before I started developing business where I just started to feel stagnant with where I was at and trying to figure out what I wanted to do, where I wanted to focus, and what I really enjoyed. That was kind of a tough time. I think the other low point was around the time when we decided to separate. I knew it was the best thing for all of us but I was very sad too. I mean, I was there for 15 years, I'd loved the staff, I really felt like I grew up in the business and so it was a very bittersweet transition for me. I was super excited to launch Morton Brown but it was bittersweet.
Michael: What I had seen from your blog and the site, you had other dynamics going on at the business transition as well because there were health issues on top of all the other stuff.
Kathryn: Yeah, so that kind of threw a wrench in the mix.
Michael: So can you fill people in for what happened? So, again, the context here, I guess, was it's fall of 2017, you're deciding that you're probably going to go out on your own. I don't know if you'd made the decision for certain yet or you're still in brainstorming phase but starting to gear up that you want to maybe do this thing separately with Dennis and form your own firm and then...
Kathryn: Yeah, yeah, yeah. So we definitely recognize we're at a crossroads at the firm and trying to figure out what we are going to do going forward, so we knew some things were up in the air. And then in October, shortly after attending a breast cancer event where I learned that one in eight women are diagnosed with breast cancer, the week after that I found a lump myself and did a number of different tests. I didn't think anything of it because I was young and there's no history of breast cancer in my family and I was...
Michael: And I know you're super healthy, athletic, you're a marathon runner.
Kathryn: Yeah, yeah, I take pretty good care of myself so it just never crossed my mind. But on October 27th, I was diagnosed with breast cancer and it was about an hour before I was to be at my daughter's Halloween parade where we had decorated the car for trunk-or-treat and she was in kindergarten. And so I remember getting the news...and I didn't even...and this is horrible, I didn't even...I was so confident that there was nothing wrong that my husband had offered to go to stop by the appointment and make his way over there, I was like, "No, it's fine." And so I left the appointment, I called my husband, I cried all the way to the Halloween parade and then wipe the tears and put on a smile and put on a costume and we celebrate the Halloween all weekend.
Michael: The things we do for our children.
Kathryn: Yeah, yeah. So I was extremely fortunate to catch it very, very early. I had a mastectomy the week after Thanksgiving and I was fortunate in that I didn't need chemo, I didn't need the radiation. I didn't know that until after the mastectomy was done and the results came back but I took a little bit of time, a few weeks to recover and I was able to kind of get back to work.
Michael: All while you're brainstorming like, "Hey, let's make another life-changing shift and go out on our own after 15 years with this firm?"
Kathryn: Yes, yes, I actually still ended up having to have a couple more surgeries for the reconstruction and I had...previous to that, earlier that May, as you mentioned, I run marathons, handful of marathons, a lot of half marathons, but I had qualified for the Boston Marathon for the following April and that was just a huge dream of mine, I was very excited to be able to run the Boston Marathon. I remember on the day of my diagnosis and they were going through all the possibilities of treatment and everything else....
Michael: "Will I still be able to run the marathon?"
Kathryn: I don't even think I asked the question, I think I told them.
Michael: "We need to finish this by next April because that's when the Boston Marathon goes and I don't really feel like re-qualifying, so you guys got to make this happen."
Kathryn: It was somewhere along those lines where I said, "All right, this is on the calendar so if we can finish this, that's ideal but in either way, if we can just work around it, I really appreciate it." Amazingly enough, since I didn't need chemo and radiation, I think that would have been much more difficult, I was still able to train and to compete and complete the marathon.
Michael: Well, I know and shout out to you, I think you ran a sub-four marathon in Boston which is incredible.
Kathryn: Thank you. Thank you. I don't know if you're too familiar with the 2018 Boston Marathon but it was a rough one, it was just down-pouring.
Michael: It was raining bad weather, right?
Michael: So at least you stay cool while you run.
Kathryn: Well, so cool. Actually, it was the coldest start in 38 years.
Michael: Oh, my God, I didn't realize it was that cold. So it wasn't just rainy and gray, it was cold?
Kathryn: Yes, and it was windy, it was like consistent 20-25 mile per hour winds.
Michael: The rains one thing that keeps you cool, wind is not pleasant.
Kathryn: So actually, I started with a poncho. My intent was to throw it off after a mile just to kind of get warmed up but it was so cold and the poncho just kind of helped to keep my head a little bit warm and drier. I ran 25 miles with it on and then finally whisked it off because there was no way I was going across the finish line with the poncho on.
Michael: So you just drop it along the sideline to the very end?
Michael: Wow. Wow, incredible. And so clean bill of health, I take it? Things are good and in clear going forward?
Kathryn: Yep, I'm cancer-free and so far, so good.
Michael: And so I guess, I'm just trying to wrap my head around timing involved with this. You're thinking about breaking away with Dennis, then there's a cancer diagnosis, then there's a series of three surgeries, you're building up to the Boston Marathon in April and as memory serves, you launched Morton Brown in April.
Michael: So how exactly did all of these come together?
Kathryn: Yeah, so, let's see, the marathon was April 17th, I'm trying to remember. I think it was April 17th. We have our local half marathon here in the Lehigh Valley in April and it's just tradition to run it every year so I ran the Boston Marathon and then that next weekend, a few days later, I ran the half marathon here and then...because I was already trained, I might as well.
Michael: Yeah, yeah, that's a training run for you, it's probably not even a long training run for you.
Kathryn: Yeah. And then that next Tuesday, I think the 25th, I might have my dates wrong, the 25th I had my final surgery and then we launched the firm on the 28th. So I think I was...well, the 28th actually landed on a Saturday but that's just the way that the negative consent letters work so we opened business on Monday but technically, the first day of our firm, I think I was at home recovering from the surgery.
Michael: I guess, I just wondering what's running through your head as you're going through all of that at once? Did the cancer diagnosis and the need to put life on hold a little for surgery and the rest, did that give you second thoughts? Did it go in the other direction? When you work really hard as I'm sure you do, nothing like having a few weeks of downtime for surgery recovery to just get the brain completely going with all the ideas of this new thing you're creating along the way. Kind of having a health events occur right at the crossroads of a business career events, was it making you pause with second thoughts? Did it just accelerate the change instead? How did these overlap when they all hit at the same time?
Kathryn: I think it was definitely a little scary to maybe say or at least to think about, "Okay, I have this personal risk going on and I'm going to take on professional risk too, does it all still make sense?" There was some fear I think there but for the most part, it definitely validated the work that I was doing, it definitely validated how my appreciation for financial planning to help people be prepared for things like that because it really tested my husband and I personally and our own personal financial plan. We kind of looked around and said, "Okay, is the health coverage good? Is the disability coverage good? Is the life insurance good? Is everything where it needs to be and do we have emergency funds if we need to pull on them and how can we get to them and everything else?"
So it really validated the work and I think if anything, it just made my conviction that much higher in what we do so that never came into question. I think Dennis and, really, his whole family, they were just amazing through the process, they were such a great support system. And if I wavered at all, he never did, he never questioned continuing to move forward and launching the firm. He questioned from the standpoint of he wanted to be respectful of where I was at and how I would feel about things...
Michael: "Hey, just let you know, we're going to launch this firm, I don't care if it's three days after your surgery."
Kathryn: Yeah, not at all like that. He was very respectful of how I was feeling about things but never wavered or questioned, "Does it make sense for us to partner together?" Between him and then the support that I got through my husband and my family, it all came together and it worked out great.
Kathryn's Advice For Those Looking To Become A Financial Advisor [1:40:09]
Michael: So as you've gone through this journey and kind of mastered these different domains of what it means to be an advisor like the administrative stuff and the technical stuff and the client relationship stuff and the business development stuff and the management stuff and have gone through this journey to the point now of launching your own firm and looking at building and scaling it and 10X-ing it in the coming years, what advice would you give to young advisors looking to become an advisor today? The people who are starting from scratch where you were almost 20 years ago?
Kathryn: I think one of the huge advantages that they have...not that it wasn't necessarily there but it's harder to get to, was just the leaning on the experience of others, so whether it's...and actually, their access to information is just incredible. So, podcast, like you put out podcasts from other business coaches and other financial advisors and other people kind of...
Michael: Your coach, Steve Sanduski, has a great podcast.
Kathryn: Yeah, yeah. Yeah, and actually, that was kind of our introduction to Steve. We have been listening to his podcast for a long time and he had referenced that he was taking on new clients and so we kind of immediately called him up. So I think that there's a great access to other people's advice and their experience and what they have to offer. I think the other thing that's wonderful too is that there are more service providers supporting this industry than there were before too, so you can build something and be able to focus on what you want to focus on and help bring in support to cover down on other things. I think there's a lot to be learned from others and there are ton of resources.
Michael: So as we wrap up, this is a show about success and one of the themes that always comes up is even just the word success means different things to different people, sometimes different things to the same person as we go through stages of our own lives. So you've had this incredibly successful journey, already you well out and launched with a successful new business and a big vision to grow it from here but I'm just wondering how do you define success for yourself?
Kathryn: That's a good question. I think it's almost more of a state of mind. I think it's almost a feeling of like a freedom and a feeling of contentment but yet achievement, knowing I'm doing good work but I'm very happy with where things are at and I feel kind of free in that. I probably could have put something a little more succinct together but I don't think it's driven by numbers.
Michael: Yeah. It's driven by numbers for you?
Kathryn: No, no, I don't think...it's not driven by numbers, it's not driven by a specific milestone, it's an ongoing feeling.
Michael: Which I'm struck by because you manage your business by numbers, you have scorecards and you hire a data geek to manage them so to say it's not about the numbers, it's an interesting juxtaposition of what you do to run the business successfully but what feels fulfilling to you personally.
Kathryn: Right. You know what? It's funny, you're exactly right, we use a lot of numbers in the background to help drive a lot of the things that we're doing but when it comes to the forefront in what we're trying to do for our clients, we actually try to liken it to the feelings. So we say, "Okay, as we go through this stage, we want you to feel organized, we want you to feel aware, we want you to feel..." And eventually, get them to the point where they're feeling confident, so I think we have the engine driving in the background but it's to get to those feeling places.
Michael: I love that framing of clients of, "In this stage of the planning process, we want you to feel organized, in this stage of planning process, we want you to feel aware, eventually, we want you to feel peace of mind," I really like that framing.
Kathryn: Thank you.
Michael: Very cool. Well, I appreciate you so much, Katie, for being willing to join us and share your own story and kind of journey through, I guess, the different feelings you had along the way of going through these stages and transitions and incredibly excited to see where the business goes for you from here. I know you were on InvestmentNews' 40 Under 40 recently so the fact that you built so much in almost 20 years of your career and still have more than half the career to go to me is pretty cool to see, so I'm looking forward to having this conversation again and having you back on the podcast in 5 or 10 years with your 10X business and we can talk about what it looks like then.
Kathryn: Thank you, Michael, I really appreciate that. This has been really good, thank you so much for kind of picking my brain. It's been fun and it's been really fun to learn from you and all of your podcast and all of your output, so this is great and I really appreciate the opportunity.
Michael: Well, thank you, I appreciate it. Thank you for joining us on the Financial Advisor Success podcast.
Kathryn: Thank you.