Welcome, everyone! Welcome to the 75th episode of the Financial Advisor Success Podcast!
My guest on today’s podcast is Kathy Longo. Kathy is the President and Founder of Flourish Wealth Management, a wealth management firm in the Minneapolis area that oversees nearly $130M of assets under management for 61 affluent clients.
What’s unique about Kathy, though, is that she had already successfully climbed the partnership track ladder at a billion dollar independent RIA, to become one of their “next generation” successor owners, yet ultimately decided to sell her shares and walk away from that business to start a new one in order to scratch her entrepreneurial itch.
In this episode, we talk in depth about how Kathy has structured and built the staffing of her firm, launching initially by using a third-party TAMP provider, then transitioning to do the investment management internally as the firm grew by having her husband take over as the Director of Investments, the “culture snapshot” document she created to screen potential new employees to ensure they’re likely a good fit, and why it’s so crucial as a small business owner to embrace the philosophy of “slow to hire, fast to fire” with new employees.
We also talk about the value of having a study or mastermind group, why Kathy decided to join two different study groups – one that is comprised of all women financial planners in the industry from the Minneapolis area, and the other that is comprised of all women business owners outside the industry through the Women’s Presidents Organization or WPO, and why having a study group of peers and colleagues you can commiserate with and get advice from is so essential to running your advisory business… especially when you’re launching a firm and hit the inevitable challenges and emotional rollercoaster that comes with building your business from scratch.
And be certain to listen to the end, where Kathy talks about why she decided to write a book to further propel the growth of her advisory firm, and why and how she decided to invest in hiring an outside firm to help with the writing and book creation process.
So whether you are interested in figuring out how to structure the investment management component of a financial planning firm, how to create a strong culture for growing your team, or are wondering about the benefits of participating in a study group, I hope you enjoy this episode of the Financial Advisor Success podcast!
What You’ll Learn In This Podcast Episode
- Why having a study group of peers and colleagues is essential [9:21]
- The benefits of women-only study groups vs. broader study groups [14:37]
- Tips for starting a study group if you can’t find one in your area [17:20]
- Flourish Wealth Management’s fee structure [24:58]
- What Kathy says is one of the hardest parts of being a business owner [28:30]
- The crucial philosophy that small business owners should embrace [31:42]
- How she structured and built the staffing of her own firm [33:15]
- Why she created a “culture snapshot” and how she uses it to screen prospective employees [43:37]
- How she handles having her spouse as part of her business [51:12]
- What made Kathy decide to leave an independent RIA worth over $1 billion—after successfully climbing the partnership track ladder [1:01:40]
- Her plans for the future of Flourish [1:30:58]
- What made Kathy decide to write a book to further propel the growth of her firm [1:32:38]
Resources Featured In This Episode:
- Kathy Longo – Flourish Wealth Management
- Flourish Wealth Management Core Values & Culture Document
- Women’s Presidents Organization (WPO)
- Dimension Funds Advisors (DFA)
- BAM Alliance
- Money Quotient
- Financial Advisor Success Ep 059: Systematizing The Financial Life Planning Process To Increase Your Money Quotient with Carol Anderson
- Jennifer Goldman Consulting
- Traction: Get a Grip on Your Business by Gino Wickman
- EOS – Entrepreneurial Operating System for Small Businesses
- AES Virtual Marketing
- Advantage Media
Full Transcript:Walking Away From RIA Partnership To Scratch Your Own Entrepreneurial Itch with Kathy Longo
Michael: Welcome, everyone. Welcome to the 75th episode of the “Financial Advisor Success” podcast.
My guest on today’s podcast is Kathy Longo. Kathy is the president and founder of Flourish Wealth Management, an advisory firm in the Minneapolis area that oversees nearly $130 million of assets under management for 61 affluent clients. What’s unique about Kathy, though, is that she had already successfully climbed the partnership track ladder at a $1 billion-plus independent RIA to become one of their next generation successor-owners, yet ultimately decided to sell her shares and walk away from that business to start a new one in order to scratch her entrepreneurial itch.
In this episode, we talk in depth about how Kathy structured and built the staffing of her firm, launching initially by using a third-party TAMP provider then transitioning to do the investment management internally as the firm grew by having her husband take over as the director of investments, the culture snapshot document that she created to screen potential new employees and ensure they’re likely a good fit, and why it’s so crucial as a small business owner to embrace the philosophy of “slow to hire, fast to fire” with new employees.
We also talk about the value of having a study or mastermind group. Why Kathy decided to join two different study groups, one that’s comprised of all women financial planners in the industry from the Minneapolis area, and the other that’s comprised of all women business owners outside the industry through the Women Presidents’ Organization or WPO, and why having a study group of peers and colleagues you can commiserate with and get advice from is so essential to running your advisory business, especially when you’re launching a firm and hit the inevitable challenges and emotional roller coaster that comes with building your business from scratch.
And be certain to listen to the end, where Kathy talks about why she decided to write a book to further propel the growth of her advisory firm, and why and how she decided to invest in hiring an outside firm to help with the writing and book creation process.
And so with that introduction, I hope you enjoy this episode of the “Financial Advisor Success” podcast with Kathy Longo.
Welcome, Kathy Longo, to the “Financial Advisor Success” podcast.
Kathy: Thank you, Michael. It’s great to be here.
Michael: I’ve been looking forward to this podcast because, you know, I was trying to remember, you and I go back to, you know, something like 12 or 13 years ago. I was trying to remember the first time we crossed paths and I think it was when you were involved with the national board for the Financial Planning Association back in the mid-2000s, and I was doing chapter leadership at the time and so I was off at that annual chapter leadership conference that the FPA does in Denver every year.
And I remember being at the event and seeing you and, this is a terrible thing so I’m sorry for a moment to our FPA world, but our FPA world has a lot of, shall we say, older gentlemen. It’s kind of the age demographic. And here you are, this woman in your 30s when everybody else is in their 50s, I’m like, “Oh, so this is cool, so there are actually other young people in FPA world,” because I wasn’t sure for a while.
Kathy: Oh, that’s funny.
Michael: Like, “Oh, this is so exciting. There actually are younger people in leadership in our financial planning world. This is a promising sign.” You know, we have a little bit more of that now. There’s been, I think, a big surge in next-gen engagement and activity in both chapter level and increasingly at the national level, but 10-plus years ago, there was very, very little of that. And so I remember being really excited saying like, “Okay, we do have, like, young blood focused on the future of the profession here. This is awesome.” And I still remember meeting you for the first time at that event.
Kathy: Yeah. I remember meeting you too. And we were sitting around that fireplace and just chatting, and I’m like, “Oh my gosh, this Michael is so impressive and so smart,” and then just following you through your career. So it’s been fun to think back on, “Oh, that’s where I met Michael, like, early in the days.”
Michael: We’ve come a long way. It’s hard to reflect back, like, it was about 12 years ago or so? When were you in your FPA national board cycle? Was it, like, 2007, 2008, 2009?
Michael: 2006, 2007, 2008?
Kathy: Yeah, 2006 and 2007.
Michael: Okay. Yeah, so just coming off FPA’s lawsuit with the SEC and all sorts of dramatic stuff going on at the time.
Kathy: Yeah, exactly. No, that was good. I mean, that was one of those powerful moments being on the board and being part of that decision. I remember it was a telephone call in. Those were great times, both not only serving locally on the Minnesota board and then going to the national board.
Michael: Yeah, it was a fascinating thing to me to see. You know it’s been enough years out now that I not a lot people even realize… So, you know, we’re kind of coming to the close of this last round of fighting about the Department of Labor’s fiduciary rule and having the rule vacated in court and kind of going back to the way that things were. And, you know, for a lot of us on the side of fiduciary advocacy, this is a very unfortunate loss. Even though the DoL rule wasn’t perfect, it was, I think, advancing the ball down the field.
But, you know, 12 years ago or so, we had the same thing but it was from the other side. It was the SEC had granted an exemption that was allowing broker-dealers to do fee-based accounts as though they were RIAs basically but without registering as RIAs and being subject to a fiduciary duty. And so it was viewed as this, like, giant loophole exception around the fiduciary rule. And the Financial Planning Association, like, the national FPA sued the SEC and won and had that rule vacated, which at the time was this massive David and Goliath fight that nobody thought the FPA could win.
You know, the organization actually had to, because it was so controversial to the brokerage firms that were in the FPA, the FPA had actually spun off the broker-dealer portion of the organization into what we now know as FSI, Financial Services Institute, just to separate out the broker-dealer so that they could move forward and sue the SEC over the fiduciary rule. I don’t know, just, like, getting an organization to the point that it’s willing to make that kind of leap and lawsuit jump, I can only imagine what the conversations were like in the room at the time as everybody is doing the gut check of, “Do you really want to risk, like, the reputation and the unintended consequences for this multimillion-dollar organization by suing a regulator?”
Kathy: Yeah. No, it was a big decision and just powerful too. I just remember being on that final call end with the vote of moving forward and just that feeling deep inside that this was what was right to do.
Michael: Yeah. How did it feel from your end to find out when the ruling came down and you guys won? Was it like, “Oh, my God, I can’t believe we won,” or like, “Oh, no, we knew we had this, like, we were good, courts saw it our way?”
Kathy: Well, you hope and believe that it’ll be seen that way but then, I mean, it was a massive undertaking. And so, you know, just that standing up what’s right for the profession and challenging, like, a big organization. So it was rewarding. I really look back on my time on both the local FPA Minnesota and the national board, that piece of where you need to give back to your profession and yet you have that same rewarding piece that comes back to you. And everything that you give you get back and 20 times fold.
Michael: Yeah, I mean, I still look back, like, a lot of the businesses I’m involved in today are all people I met in the first 5 years or so that I was volunteering at FPA 15 years ago. You know, it’s amazing where those relationships go and how they evolve over time. Like, it’s still the primary reason that I pound the table for anybody who is younger and, like younger relatively speaking, if you’re in your 20s or 30s or just the first 5 to 10 years of your career you’re nuts if you’re not spending some time getting involved in one of the professional associations and spending some time there. Not just because it’s good to give back to the profession, and, you know, frankly in your early years you have a little bit more time flexibility because there aren’t as many clients and staff and other things to manage yet, but also because we throw around the term generically of, like, “I’m networking.”
You know, I didn’t go at the time to network, I just did it to get involved. But now as I look back, like, I was networking, or at least I networked with a whole bunch of other people, some of whom now I have businesses with and I’m doing some stuff that’s really exciting for me, driven entirely off of just early relationships that formed and people that I stayed in touch with over the years.
Why having a study group of peers and colleagues is essential [9:21]
Kathy: Yeah. No, I agree. You know, from a relationship standpoint, you know, like, the ability to reach out to some of, like, different connections nationally or even locally. Like early on when I joined FPA, I met some other group of women financial planners that we have a local study group. And gosh, that must be, oh, so my oldest is 21, so she was a kindergartner at that time. So we’ve been together quite a long time. I don’t know, like, Janet Stanzak is in there. So we call ourselves…I didn’t name the organization but I happily accept the title, the Goddesses of Financial Planning.
Michael: The Goddesses of Financial Planning. Excellent.
Kathy: Yeah. I came a little bit later into the group. I guess that they had little tiaras early on, but I’m still waiting for my tiara.
Michael: You wait I’ll have to send Janet an email. Or maybe she’ll be listening to this podcast. Janet, you have to get Kathy her tiara. She really wants her tiara now.
Kathy: I know. So being a part of that group where there’s been support. You know, when I first joined, I know we’ll talk about this later, I was a partner at a larger RIA in town, and then to starting my own firm, and also being, like, a large firm to being the, “Oh my gosh, I’m just starting a firm,” it’s been just a great support network. So not only locally but just all of the national connections. I can’t imagine life without FPA and all the community that I’ve built through that organization.
Michael: So did the study group come through FPA or just people you happen to meet from FPA or just a separate, like, a bunch of women advisors in the Minneapolis area said, “Hey, let’s form a study group” and you got plugged in?
Kathy: Yeah. So they started I think four or five years before I was invited to join. And there was a couple of us that they asked to join the group that we saw each other at one of the conferences. But the group is very FPA-centric. So, you know, attends our local symposium and our local meetings. So it definitely is really rooted in the FPA.
Michael: Okay. And what do you guys do? Study groups are all over the place. Some are online and some are in person, and some meet once a year and some meet weekly, and just full gamut. So what does study group mean to you? Like, what do the Goddesses of Financial Planning do together?
Kathy: So we meet monthly, although we take a month or two off in the summer and sometimes do something socially during that time. We happen to meet in the office building where my office is at. So there’s three of us, no, actually, there’s four of us that are in the same office building, all on different floors. But we meet once a month for, like, two and a half hours, and we’ll kind of build our agenda kind of in a shared format of like what’s on people’s minds. So it’s a little loose format. So sometimes it’s about, oh, like recently we were talking about bringing in that next generation of owner and what are people’s ideas there. And we’ll often talk about what we’ve learned from various conferences and bring that back to the group, so kind of building our topics together. Sometimes we’ll bring in an outside speaker, but there’s just such a wealth of knowledge to be shared with the different members that, you know, we usually have no trouble filling our time together.
And then I would say too that it’s been a great resource in between meetings. So, you know, question comes up or you’re just, you know, “What resource are you using for this marketing initiative?” We shoot each other emails and, you know, immediately you get a response from, “Hey, connect with this individual,” or, you know, whatever it might be. And especially in the early days of starting Flourish, you know, before I really had more of a team, it was just great to have, like, all of these other access to firms, which, you know, more knowledge for me.
Michael: And how many women are involved? Like, how many come to meetings or are part of this?
Kathy: Oh, let’s see, about 10 of us. There’s about 10 of us. And I actually have two study groups because I really believe in the value of study groups. So this is my planning study group, but I also have another group called WPO, Women Presidents’ Organization. We meet monthly, too. It’s actually a little bit longer of a meeting. It’s about four hours of a meeting. And Women Presidents’ Organization is built around women business owners. So like in my chapter, my study group, we have about 20 women, all different business types, so we don’t compete against each other. But that’s the group that I used for learning more about running the business and building the firm. And I’ve been involved with that group now for, oh, probably about 14 years. So those are my two primary study groups.
Michael: And both are locally based.
Kathy: Both are locally based. Yeah.
Michael: Although I guess, so like, WPO, like, Financial Planning Association so it’s a national organization with local chapters. Is that correct?
Kathy: Yeah. It’s actually international organization, WPO is, and we have local chapters. So we have, my gosh, is it six or seven chapters? We have more chapters than New York does, so we have a really strong women business owner community here. So yeah, that’s how they organize chapters within the community.
The benefits of women-only study groups vs. broader study groups [14:37]
Michael: So help me understand, like, this is a conversation I feel like I’m seeing more and more in the industry these days, the discussion of women-only groups, like, women-only study groups. Because I know both of the ones you mentioned are women-only financial planners then women-only business owners. So, like, for someone that’s trying to make this decision or perhaps, like, a young woman or a career changer coming in and trying to make this decision, like, how do you evaluate women-only study groups versus broader study groups? How do we think about this?
Kathy: So for me…so I’ll tell a little story. So there was, and this is more related to WPO. So I would say my WPO group is a combination of both professional and have become personal friends too. And my husband was driving me to the airport, where I was going to meet up with three of my WPO study mates, whatever we want to call ourselves, and my husband was saying, you know, “I’m so glad that you finally have friends.” And I’m like, “What? I have friends.” And he’s like, “No, like, people that really get you on a level of being a woman business owner, being a mom and what that means. You know, being involved in her community and just having all of kind of similar kind of dimensions to their lives.”
And that’s what really struck me as that it was this, like, holistic way to…people who understood me as a woman business owner and as a mom and as a friend. And it really just was this, oh, safe place to be. Like, you know, so some of the things…you know, and I know that I’ve heard you talk about this, too, like, this imposter syndrome. Like, how do you really show up and create this vulnerability with other people? And for me, like, I’ve felt just it’s a lot easier for me to do with other women. It’s also, like, part of my story as I started Flourish with women who truly got me and challenged me to, you know, maybe set a different path for myself than I was headed down before at my prior firm. So it’s been that right type of community that I feel like being with other women it has been about empowering and lifting each other up and also challenging us. Challenging each other when we can be held up to a higher standard.
Michael: So for women that do want to find a local study group, like, how do you advocate for them to do it? I mean, I guess, well, you can literally look for your local chapters of WPO if you want sort of women business owners, but women financial planners, like, are the goddesses going to make goddess chapters in locations across the country? How do you make this happen if it doesn’t already exist where you are?
Tips for starting a study group if you can’t find one in your area [17:20]
Kathy: Well, so if it doesn’t already exist, I think you can pull together your own study group of, like, like-minded people, you know, not always like-minded but, like, people that you have some shared interest with, it’s good to bring the different perspectives there. But FPA, like, so, I mean, there’s even a younger woman study group that meets in our building too, that kind of came through FPA too. So FPA is a great place to try to build a study group or see which ones are already in existence that are taking on new members. And then if that’s not the case then you can create your own community, whether…you have to come together with some kind of shared purpose. You want to be a better business person, you want to, you know, focus on marketing.
Actually, I’m in another study group that I just thought of. It’s a newer one. We don’t meet as frequently but, like, Dimensional Fund is a fund provider that we work with. And they recently started a study group with people that are focused on marketing and media initiatives. And so, again, we’re coming together around that shared purpose. So I think it’s being open, looking to see what’s your interest and what you’d want to form it around, and then organizing around that purpose.
Michael: And do you worry, you know, you mentioned, like, part of WPO structure is that they’re women in complementary businesses as opposed to ones that would potentially compete to sort of reduce that competitiveness aspect or fear. Your Goddesses of Financial Planning group, like, they’re all local advisory firms. You are in the same market together. Granted it’s a pretty big market because Minneapolis is a large metropolitan area, but do you worry about things like local competition against each other? Is that an issue or a discussion?
Kathy: No. You know, it’s never really been an issue, or at least I’ve not worried about it. There’s been times where, like, a prospect has come and they’re interviewing another firm, but I think there are so many individuals and couples that need good financial planning, that if somebody else is the right fit for them then I’d say, you know, that’s just the way it needs to be.
But we have really open conversations about whether it’s struggles or, you know, like where we’re seeing challenges like in growing the firm. And so you have to go into it with a sense of confidentiality in terms of we’re all trying to do better and build our firms. And I think that there’s so much to gain too in, like, people who are in similar type experiences, just as there is to gain from people in different types of businesses to be able to put another lens on it. That if you can look for that positive of, “Okay, it’s all about growth and helping one another,” then you can get past competing against one another. So it really doesn’t come up in terms of…it doesn’t hold us back.
Michael: Yeah. Well, and I guess at the end of the day, like, I always see a lot of discussions are on the fears of competition and study groups, but, I mean, I don’t know the exact populations but I think, like, Minneapolis–Saint Paul metropolitan area has got to be a couple million people. Most of us have successful businesses with dozens of clients, maybe a few hundred if we go large, so, like, at the end of the day 10 fellow firm owners that are all in the room together, like, you’re going to collectively serve 1,000 clients out of millions of people.
Kathy: Yeah, that’s a good way to think of it.
Michael: There’s, like, kind of enough clients to go around.
Kathy: Yeah. Yeah, right.
Michael: So you mentioned a few times that the study groups were kind of a big factor for you in supporting the launch of your firm, so maybe just to get us oriented, like, what is Flourish Wealth Management as it exists today? Like, can you just tell us a little bit about the firm, the size, what you do, who you do it for?
Kathy: Yeah. So Flourish Wealth Management, we just celebrated our four-year birthday or anniversary. So I started Flourish four years ago. Right now we have about 61 households or family relationships. We will kind of combine if we’re working maybe with a kid in there that’s just part of the household where we’re not doing full financial planning for them, so 61 households. Our assets right now are $136 million, and our client base, about 40% of our clients are women that have come to us via transition like divorce, death, or inheritance or are planning for some transition. Like I mentioned, with my WPO community I’ve attracted a lot of women business owners too as they’re anticipating transition.
The mix of client base is it’s about 50% in accumulation phase, kind of still building their wealth, and then 44% in spend down, and the rest, like, 8% is just kind of in preservation, they’re not necessarily using their assets but not adding to it.
Right now in terms of a team, there’s four of us. So I, the president, and then a primary relationship manager with our clients. We work as a team, so I’ll bring in another wealth manager. So Michele Lenz is one of our wealth managers who joined our firm in December. We’ve had a little bit of transition, which we can talk about that a little later, too. And then we have a new individual who is our client services manager. And she takes care of everything, from running some of the office, our coordination with Charles Schwab, all of the paperwork.
And then we have Jay, who is also my husband, who is leading our director of investments and handling a lot of our investment operations. And then he also does a lot with me on the marketing, and he’s really a great communicator and can somehow take my random thoughts and put them into, you know, really great content or take a second look at my material. So that’s been great. Especially because I’m working on a book right now that we’re in our final edit, some other parts that we can talk about. And then we’re looking for one other, like, associate wealth manager to join the team and then I think we should be good to go. But that’s Flourish as we stand today.
Michael: So just kind of thinking through the math here on sizing, so $136 million under management and 61 households, so your typical client is $2 million or so of assets under management. So a fairly affluent level for most advisors, although not, like, super ultra-high-net-worth tens of millions of dollars sorts of folks.
Kathy: Yeah, that’s true.
Michael: And services that you provide them, like, you’ve mentioned AUM, so you’re doing investment management, are you doing planning work as well? Do you do, you know, some each, both for all? Like, what does the service model look like for clients?
Kathy: So both for all. So we charge one wealth management fee, but it includes all of the planning work that we do. So, you know, it is everything from, you know, looking at their estate plan, like, the whole gamut and that financial umbrella of understanding their income, expenses, helping them with their charitable giving. The investment management is all part of that. But most of our clients…we have one new client that does not want us to take on the investment management. That’s pretty rare. But we won’t take on a client only for investments, we really want to get into the nitty-gritty of their life and tackle the financial planning with them.
Michael: And your fee structure for all of this, are you charging assets under management? Do you do planning fees instead or some blend of both?
Flourish Wealth Management’s fee structure [24:58]
Kathy: Again, there’s that whole conversation, like, what is that perfect formula? But we are really still on the assets under management. So the first $1 million we charge 1%, and then it drops to 80 basis points in the next $4 million and then drops to 60 basis points after that. We will sometimes take on a client where maybe they’re still in that accumulation, we’ll set a flat fee until their assets build, you know, based on complexity either between $5,000 and $7,500. So somebody who has a lot of future potential for growth as a client we will set that fee and work with them that way even though their investments aren’t at that level.
Michael: So do you nominally have, like, a half million or $750,000 minimum to kind of get clients to those levels on an AUM fee if they’re otherwise going to do asset business with you?
Kathy: You know, we target $1 million, but if there’s somebody that is younger and has that potential to build towards a larger, we’ll consider working with them. The other piece too that I really want to try to have a balance of clients that are still accumulating, that we can grow with, and then also clients that are, you know, in more of that spend down phase.
Michael: Just as like a diversification effect for the business? Like, we want some accumulators if we’re going to have some decumulators as a deliberate strategy?
Kathy: Yeah, yeah, it’s a deliberate strategy.
Michael: And have you experimented with other fee schedules or other structures as well or just you’re using AUM, you’re happy with it, it’s working for the business?
Kathy: I have not experimented with any other fee structures. Some of when I left my prior firm and I did have some clients that followed me, you know, it was hard to…although I lowered the fee schedule, but I did that and comparing a dozen different financial planning firms in town to see where they were setting their assets under management fee, but I did lower the fee. It was hard to switch to a completely new model, or at least I hadn’t figured out and still haven’t figured out what that right solution is. I think that there is probably a better model, but it’s not one that I’ve figured out yet.
Michael: Yeah, it’s a collective discussion for the whole industry these days.
Michael: So you said you brought on Michele as a wealth manager and that you’re hiring for another associate as well, so if anybody is listening and looking, we’ll have a link in the show notes to Kathy’s firm. So if you decide once you hear here, go ahead and reach out to her and give her a call. This is episode 75, so kitces.com/75, and we’ll have links to Kathy’s firm in the show notes.
Kathy: Okay, perfect. And post it quickly too.
Michael: Who knows, right? We’ll just turn “Financial Advisor Success” into a hiring podcast.
But I’m just wondering, so from the business end, that’s a lot of transition to go from what I guess was, you know, six or nine months ago it was Kathy and Jay and the client services manager and now suddenly there’s a wealth manager and an associate that’s coming on board. So I’m just curious, what’s driving all that hiring and shift? Is that just you’re finding you’re approaching your own capacity at 61 households and $130 million under management or do you come at it from a different perspective?
What Kathy says is one of the hardest parts of being a business owner [28:30]
Kathy: Yeah, more from a growth perspective. And then if I step back a little bit, and this has probably been one of the harder parts as a business owner is to get that hiring decision right. And so when I started Flourish, I worked with a TAMP. So I worked with BAM, which was part of BAM…
Michael: Yeah, BAM Alliance, Buckingham. Okay.
Kathy: Yeah. I know you had Adam on recently. So that’s where I started. And I was with them for about three years, and they were a great community and offered me so many resources so that I could launch Flourish and be Kathy and day one and yet have a huge team behind me. But then as I was building the firm, I was realizing that I was creating…using different offerings, whether it’s technology, or I had my vision on how financial planning worked with clients and how I wanted to build that. So I originally had one team member that joined me early on as an associate wealth manager. Well, she left in November and went to another position and also was at the point of starting her family. She just had a baby at the end of last month. But yeah, so she has moved on. So I lost her, which she was great and really grew with the firm.
And then I had another individual who was coming on in more of an investment role, taking on, like, that CFA role. And as we were transitioning from BAM, he was really helpful and, you know, maybe too handsome at that role. I don’t think that he was necessarily a fit for a smaller firm. This has been, like, my challenge in hiring. And so both of those two individuals gave me notice within two weeks of each other.
Michael: Right. So just to be clear. So, like, was Jay involved at the time as well or just, like, there were four of you, you, your client service manager, this CFA investment person and your associate wealth manager and half your staff gave you notice in two weeks?
Kathy: Oh, half the staff. So I didn’t have the client services manager at that point. So then it was down to Jay and me. No, that was some hard moments at the end of last year in terms of, “Oh my goodness.” Like, I think the piece that I realized is we didn’t have as much cross-training. How could you with, like, being small. And I think that is some of the challenges of being small is, you know, as you’re building having to wear multiple hats. And not everyone loves that idea. Like, I love being able to jump in and, you know, help when I can, and yet others, you know, they think like, “Please keep me in my defined role and, you know, if I see something that needs to be done. I just want to keep doing what my job is doing.”
So we were at the end of last year before I had noticed, we were in the process of, like, kind of bringing on more of a client service manager so that we can move up the role of the associate wealth manager. So take off paperwork from them and also bring in a little bit of more admin responsibility for me. So we were looking for that person, and then both of those individuals gave notice. And so it was really hard, but it was also an opportunity to kind of step more into the nitty-gritty of the business for a period of time. I feel like I’m kind of coming out from that period of like, oh, rethinking our processes, what’s efficient? How are we working? How do we maximize some of our technology?
The crucial philosophy that small business owners should embrace [31:42]
But it was, like, a crazy time too, which came at the time where I had already committed to writing my book and had a publishing company with deadlines. I already signed the contract. So it was, like, we were moving forward on that front. Oh, we did a home remodel that was, like, kind of coming a little one, but it was crazy on all fronts and then trying to find those right team players. So we were hiring three. And I hired one individual that did not work out after seven weeks. I am learning from my, like, WPO sisters who say, like, “Hire slowly, fire quickly.” And so this one individual just really didn’t have that detail that we needed. You know, being somebody that’s moving money. So I made that decision pretty quickly.
And so my other two team members, the client service manager and then a wealth manager, both named Michelle. I did debate like, “Okay, can you not hire a person because they have the same name as the other person you already hired?”
Michael: I just flicked on your website, they’re totally different because one spells Michele with one L, and the other one spells Michelle with two Ls.
Kathy: Yeah. And the plus is that when you yell Michelle you’ll get, like, two different that respond to you.
Michael: It’s very good as a business owner that just we entrepreneurs want our, like, immediate response, so you doubled the odds that you will get a problem solved immediately.
Kathy: Yeah. So I think that’s good, though one of the Michelles, Michelle White said to one of our clients just like, “Oh, we’re just trying to make it easier on the clients so that they don’t have to remember a new name.”
How she structured and built the staffing of her own firm [33:15]
So the first Michele came, with the one L, in December, and her background is in financial planning. She was a financial planning major at Madison, Wisconsin, and then she went to a small firm in town, and then she was at U.S. Bank in their trust and estates group. So one of the things that I really appreciated is she knew what it meant to work in a small firm and that she liked it and missed it, because that has been a challenge for me and figuring out that right fit for the company. And then the other Michelle came in and had worked with an advisory firm in Atlanta for many years and she had moved up here for her husband’s position. And that firm kind of closed. And so she had a great background in both compliance and understanding the industry. And so she hasn’t been with me that long, like five weeks but is really doing well and so appreciative of her industry knowledge.
And then back to kind of Jay. So what was Jay doing before all of these changes? Jay was focused on building more of our retirement services offering. And the thought there and we have a couple of retirement plans. And for our retirement plans, we still coordinate with BAM and we use their retirement platform, which is a great way too because there’s just so much knowledge and information that you have to have there. So we are still working with BAM on that front. But Jay was building out the retirement business. And kind of going back to Jay and I, Jay and I actually met at an investment class.
Michael: You actually, like, you met through the industry, okay?
Kathy: Yeah, we did. I joke that, so my boyfriend sends me economic news, not flowers or chocolates but I get economic news. He’s done better. So he brought some flowers for Mother’s Day, but he’s definitely improved since then. But we met at an investment conference. And he has worked in different industries and…not different industries, I should say in different firms, more so on the institutional side, working with clients. And so as he was looking to go more into the retirement planning world, he was, you know, starting to talk to firms that would be competitors of Flourish. And so we thought, “Well, why don’t we bring Jay into Flourish and develop that role here.” With some of our changes as we kind of continue to refine the roles, he’s taking a little more lead on the investment process and leading that initiative. So that’s been the challenging part of the transitions that I’ve experienced in the last few months.
Michael: So Jay originally was going to work on building this retirement services side of things because you were using BAM as a TAMP to do the outsourced investment management and then with all the rest of the change you decided to bring Jay internal to the portfolio management side and wind down the BAM relationship? Like, was that part of this transition?
Kathy: We had ended our BAM relationship last March or April. So that happened before, like, the transitions of the individual who left Flourish to go to a larger firm.
Michael: I’m just curious, what sort of drives that transition. Because I feel like, you know, TAMPs are one of those things that…because there’s just a lot of discussion these days of, you know, “Is it worth still doing it internally at the firm? Is it just easier and better to outsource it?” As you said, like, there’s a lot of appeal when you’re getting started just so you don’t have to hire all the staff and infrastructure to do this stuff, you can let a TAMP do it, but obviously, you grew pretty quickly. So it’s one thing to do that when you’re just trying to get your first couple clients and the first couple million dollars in the door. When you’re north of $100 million and there’s $1 million of gross revenue, like, you’ve got some dollars to hire staff and do this internally if you want. So, like, was it a dollars and cents kind of business decision to you, “Here’s what I’m paying BAM and I think I can just do it more on my own at this size so I’m going to hire someone or work with Jay and have him do this,” or was it something else that drove the decision about using a TAMP and then not using a TAMP?
Kathy: The decision to use, actually I didn’t even know what a TAMP was when I was, like, looking for, “How do I build Flourish and what are those offerings? Like, how do I put this all together?” And so discovering the TAMP model and BAM, in particular, they were, like, so helpful in getting started and having, like, all the technology and the contracts and a community of individuals, they’re really a great community. So I am so appreciative of, like, starting with them.
But one of the things I really loved about starting Flourish was, like, a redo, the chance to redo, like, all technology. It’s really hard to, like, change a CRM, you know, when you’re in a large firm, or to, like, find, like, what’s the latest, greatest. Even though it might be appealing to you, you don’t necessarily want to take the pain to go through it. So it was, like, so fun to, like, start everything from scratch. But I felt like I was using different planning software than the BAM community. Or, they’ve since gone to Orion, but they weren’t on Orion when I first started. And I’m like, “You know, I want to have client portals and I want all of these resources.” So I started to build my own offering and use my own technology.
So then it was just a values piece. Like, I wasn’t using a lot of their resources to justify the price. You know, I’d been a part of a wealth management firm so I knew how to build a firm and think about direction. And then you start to scale and you have more clients and your fixed costs are covered, you know, via that technology. So that was just kind of mine. It was a hard decision too. And we could go directly to the, like, you know, whether if we’re wanting more research and help from Dimensional Fund we could work directly with them. And we had more mass. Like we could be on the Charles Schwab platform. You know day one I didn’t have any assets.
Michael: Yeah, you don’t get a lot of choices at that point, so you work with who you can work with.
Kathy: Yeah. And, you know, you don’t know, like, when will they come? I don’t know. You know, I have a no-solicit. Good question, but, yeah. So I think it was more just about growth, and we did grow fast enough. And, you know, as we continued to grow and invest in the company that we just weren’t utilizing their services the same way.
Michael: So do you have a vision ultimately of, like, do you want to build a big firm and grow and scale to a large size or do you just want to get to a certain size that’s comfortable and then say, “Okay, we’re good here?” Because, you know, particularly when you go through setbacks like half our team walked away in two weeks, I’ve got to imagine at some point there’s like, “You know, or we could just, like, work with 30 of our best clients and Jay and I can just do that and we’ll have Michelle as an operations manager and just that’ll be that, and we’ll have a very comfortable, happy, lower stress business than going through all this growth and hiring and turnover of staff.”
Kathy: You know, that’s a good thought now. No, I’m just teasing. I never thought that way.
Michael: One of your study group people didn’t say like, “Hey, just hunker down with half your clients and sit back and just work with your top set of clients?”
Kathy: Yeah. So that didn’t come to mind as an option. But I think it’s because I do want to grow a large firm. I love working both on the business and being a business owner and, like, using my entrepreneurial skills. And I love working with clients. I know that, like, down the road, like, I can’t work with every single client, but I hope to develop other team members that will…they will take on new clients. You know, I continue to work with my existing clients because I definitely want to always have some aspect of working with clients and being involved in their lives.
And I also love building the firm and seeing what we can create. And I think that, you know, we talked about that untapped client potential. There are so many people that need good financial planning out there. It’s a goal to change their lives and their attitudes towards money and open up new possibilities. And so that’s really what drives me, is about being able to reach more people.
And then to create career paths too. So I think that with a firm, like, I want to have an opportunity where both Michelles, you know, want to grow. And Michelle White, as the client service manager, you know, talks about wanting to take on some more planning responsibility, you know, as we go forward. And the other one wants to grow in her career. I want to have those career options. So I didn’t think about slowing down at that point. But it’s funny, like, how that thought never came to my mind.
Michael: No, I guess that’s sort of the nature of entrepreneurship when you really have a vision for a larger business, that it’s just sort of natural. Of course, we’re just going to have to deal with what we’ve got to deal with and go hire two more people to replace the two people that we lost.
You know, it is a tough challenge point, though, that, like, that moment in particular for most firms, you know, the only harder thing than hiring your first staff member or two is losing your first staff member or two. Because once you grow to that point and you start delegating stuff down, like, it’s really hard to go backwards? Like, you can’t. The business now does more than what you can do alone, that’s why you had other people. So you get to this point of, right, well, if you’ve hired one or two and made that leap, like, the only way you go backwards is you have to start letting go of clients and deliberately run a small business if you’re going to go backwards. Otherwise, you always have to keep rehiring and replacing and trying to move forward.
Kathy: Yeah, that is…like, I hadn’t thought about that until you said. But that was a really hard part about losing team and then… And also not taking it personally. Like, “What did I do?” or, “What does it say about Flourish?” And recognizing that there’s, like, key transitions in people’s lives and not taking it personally maybe, and yet…but also taking it personally will reflect on, like, the firm and, you know, “Are we being true to our values?” We have this one document, which is our core values, and it talks about…which our core values are, being excellent and hard in everything we do, make a difference, grow and share our experience and insights, take initiative and be resourceful, and then appreciate and celebrate is all kind of one together.
Why she created a “culture snapshot” and how she uses it to screen prospective employees [43:37]
But then we have this culture snapshot of, like, what works at Flourish and what doesn’t work. You know, so, like, one of them there like keep your promises and over-deliver on projects and deadlines. The counter or two of, like, what doesn’t work is letting others down. If you can’t make a date tell us early and often plan B well prepared is better strategy than hope. So it has got, like, 15 different, like, describing our culture and giving examples, but it is being true to like, “Okay, our culture is one where we are going to have growth. We want people that come energized, that they are resourceful.” And trying to build the team around that, and yet knowing that that’s not going to be what every person wants. So how do I continue to be better at finding those right people?
Michael: So I’m fascinated at this idea of a culture snapshot. Like, I’ve heard core values before, we spend time on them for some of our businesses as well, but I haven’t heard culture snapshot before. So can you talk a little bit more, like, where did that come from and what it that?
Kathy: Well, it came from one of my WPO sisters. She used it in her firm, which is, she did a fashion solutions. And so, you know, I think I was talking a lot about, like, “How do you think about culture in your firm?” And most people have core values, but, like, really what does that mean? Like, go into the nitty-gritty of describing it. Because people relate more to, like, those little snippets of meaning around it. Like, one of the other things is like, what works? Hard humor, fun and can laugh at yourself, versus what doesn’t, self-centered, guarded, easily offended and overly sensitive. And I’m willing to share this and you could put it out in your link if you find it interesting.
Michael: Yeah, if you could. Like, I’d love to share it out. So for anybody who’s interested, you know, again, this is episode 75, so you can go to kitces.com/75, and I guess we’ll put a copy of Kathy’s culture snapshot document. So it’s a document? Like, it’s a multi-page thing that you hand to employees or hand to prospective employees to say, you know, “Here what life is like here?”
Kathy: Yeah. So it’s a one-page document. So it’s all on one page. And I use it in the interviewing process to really, like, talk through and just be as upfront as I can about, like, who we are as a culture and be really deliberate. And then we use it in terms of, like, our reviews that we do for our employees, like measuring them to these standards, to looking for ways to intersperse it in, like, recognition of like, “Hey, that is, like, so on in terms of, you know, our culture.” So it’s just a great way to talk about the firm for prospective employees, for existing team members and to keep that front and center.
Michael: Interesting, interesting. And so you use that alongside of core values and a statement of just, “Here’s what it’s like here, you know, does this connect with you” when you’re going through that hiring process?
Kathy: Right. Yeah. One of the snapshots is, like, direct communication with each other, openness, transparency, and above all honesty. So, like, I can think of, like, example in the past where, you know, this idea of not creating triangles. So, you know, if there is something going on, being direct and, you know, saying, “Hey, let’s kind of think about how this works in our culture, and here’s kind of an example of, you know, not going around to another team member when you’re bothered by probably me, bothered by me. So, like, how can we work to be direct? What do I have to do to create a more open environment, or, you know, what’s getting in the way of that?” So, you know, just using it in conversations, it’s just nice to put an example to go back to open up that conversation.
Michael: Interesting, interesting. And I guess, unfortunately, you’ve had a lot of occasions to use this over the past six months as you’ve had to go through a hiring process to replace a few people.
Kathy: Yeah, exactly.
Michael: So any other lessons learned? Like, were you using this with the original people who didn’t fit or you created this after they didn’t fit to try to figure out how to, you know, not have bad fits next time? Like, I’m just wondering where this came in the progression of having some staff turnover, or, like, lessons learned as you reflect back now on what your prior hiring process was.
Kathy: Well, we hadn’t had any hires for about that 18-month period. So the one individual who went for a larger firm was with me about 18 months. So it was created somewhere along those lines. The piece I know that I can do better as a business owner, and I think in, like, that one quick hire I had first, like, seven weeks of just calling it earlier is, you know, I have to hold myself really accountable to having the hard conversations and recognizing, you know…so the individual who went to the large firm was probably not a good fit early on. And I had seen signs of it and know our values and what our culture is like and yet because I knew there would be pain in transition, didn’t deal with it right away. And so it all worked out in a different way.
But that’s one of those things that in reflection, it is hard to let go of any person, whether they leave you or you leave them. I think I can do a better job of just really making sure that that person is the right fit, because that energy that it creates for the team or when it pulls away from the energy for the team is just so important. I think in a small team and a big team, like, all teams, like, anyone who’s not bringing that right energy is going to influence others.
Michael: Yeah, it’s truly one of those things that, like, I had to live it for a while in my own businesses to really appreciate that whole “slow to hire, fast to fire” phenomenon. That, you know, just it’s hard to fire people. It feels absolutely awful. I’ve only really had to do that very few times through my career and every one just feels horrible. And every single time it’s happened, like, within days afterwards, it was amazing how much better I felt, because I underestimated how much just, like, the negativity or the problems of the team member that wasn’t a good fit was dragging me down and dragging the business down.
And at least for me, like, I couldn’t think about the next hire and how we could get someone better until I actually made the termination and let the prior one go, because as long as the person was there, my brain was still in like, “Figure out how to fix this. Figure out how to improve the situation,” instead of just, “Okay, now the slate is clean, who would you hire for this position in an ideal world?” It’s like, “Oh, I’m kind of excited about this now. Like, now that we’re past the old person, like, let’s figure out someone who would be awesome for this.” And it’s just, I don’t know, like, same thing, it’s so hard in the moment to pull back and say like, “You know this deep down, this isn’t working out and you really need to terminate this person.” And the longer that it takes, the more unpleasant it is for the business and the more you risk dragging down other team members along with them, because, you know, your team usually knows that someone isn’t carrying their weight sometimes before you know as the business owner.
Kathy: Yeah. No, that’s so true.
Michael: The other thing I’ve got to ask about is, so your spouse in the business. So how’s that going?
How she handles having her spouse as part of her business [51:12]
Kathy: You know, it goes well most days. It was a decision that I didn’t take lightly. It’s really great because you have somebody or I have somebody that I can trust, like, 100%. Like, they’re always in my corner. They’re going to do what’s right for the firm. That is really, like, key for that decision. And I didn’t take it lightly. I actually reached out to a couple other people that I know that worked with their spouse to just, you know, see what I might be missing here. And, you know, some of the things that I’m cognizant of of, like, not creating, like, a one person says this and the other person says this, or, what if a team member has some feedback for me or feedback about Jay as a partner. So really trying to keep everything very professional and open in the communications. It was a little easier when Jay was simply doing, not simply but focused solely in retirement plans because it was enough of a movement or enough of a silo away from what I do in terms of the wealth management.
Michael: It was more compartmentalized? Like, he had a business line in his own world under the Flourish umbrella as opposed to being immersed as a key employee in Flourish?
Kathy: Yeah, exactly. But then as the firm’s needs changed, recognizing that he had the skill set, meaning he has that investment knowledge and was able to kind of fill in in this offering there. But also making sure that we’re not creating a job description solely around what Jay’s abilities are but what the firm needs. And so, you know, just as you would do for, like, any teammate, making sure that it makes sense. So we continue to refine the role as we’ve been in this transition.
But I think some of the challenges too, like, so Jay and I had, like, a major argument over one of our kids, who did something he wasn’t supposed to do, our seventh grader. And Jay could have prevented the situation had he, like, turned off the code for Xbox Live so our son wouldn’t start buying video games and click on our credit card. I mean, this was the second time, and so I was just really mad because that’s our only incentive for our son to get him to do homework is like, “And then you can have some video game times.” But how do you give a kid who just stole from you twice?
Michael: More video game time.
Kathy: Video games.
Michael: Well, now he’s got new games to play because he just bought some.
Kathy: I know. But I have the code in my purse right now, so he can’t get on it because… Anyway. So I was just kind of mad with Jay, but it’s, like, okay, you have to, like, leave that at the door at home and then show up in a professional way with each other today. And so we really try to be professional with one another. And definitely work kind of comes into the home, like, in our conversations, but I don’t really let the personal other than, you know, what we’re up to, any personal dynamics come into the workplace.
Michael: I guess it’s an interesting challenge that you have it both ways. Like, the challenge of work coming home with you and the challenge of home coming to work with you.
Michael: So is there other, like, structure or things that you put in place or you’re just a couple that’s both pretty good at making those lines and honoring those lines and so the lines just kind of work for you?
Kathy: So we sometimes have to create lines. So like when we were having challenges with the one individual that we ended up letting go, like, “Okay, we only have, yeah, five minutes to talk about this and then the conversation is done.” Just because, you know, it’s just not healthy to talk about it continuously. And so, like, work, personal and professional have kind of always flowed back and forth. Like Jay and I even, like with this fundraiser that I was chairing an event for YWCA Minneapolis last week, like, he was chairing or doing like a sub-chair in it to get more men involved with this organization. So we really share a lot of our, like, professional and personal. And for us, it works.
Yeah, I actually asked Jay a little bit more like, “Any advice?” And, you know, he didn’t have any advice. But I think that he’s always just been such a great supporter of me personally and professionally. You know, our interests are just so aligned, and he cares about the work we’re doing and building the firm and reaching more clients.
Michael: And out of curiosity, like, structurally is, you started the firm, he came in later. So, like, is it a partnership with the two of you as a couple or functionally, like, you are the owner of the business, he is a key employee of the business as a spouse in the business?
Kathy: Yeah, it’s the latter. So I am 100% owner of Flourish.
Michael: Obviously the whole household is kind of relying on this to work, so, you know, dollars all flow to the same household at the end of the day, but…
Kathy: Yeah. You know, we’ve talked about it. And Jay is, like, any success I have, like, he feels right a part of that. And so he’s never been one…like we’ve talked about, “Oh, do we change that at all?” And he’s not necessarily interested in changing the ownership because the success all comes back to both of us.
Michael: Interesting. And so are you still, like, happy with the structure going forward? Like, this is the direction for the foreseeable future, or do you view this as a, you know, Jay is doing stuff because we’re in a small business that, you know, need some family support at the time but ultimately the goal is you want to hire a non-family staff to grow away from a family business and Jay will go do another thing at some point down the road?
Kathy: You know, Jay still has interest in working a little more out of the retirement planning side. So that’s still a possibility. I think ultimately, I mean, I want to continue to grow with non-family members. Although I say that and I have a daughter who is majoring in financial planning at Wisconsin, Madison.
Michael: Excellent. So you may have another associate hire fill coming in another few years when she finishes.
Kathy: Yeah. Although I really want her to work elsewhere but she has…so this is coming from the girl when she was in high school said, “Your job is so boring, I would never do it.” And I’m like, “Oh, it’s so not boring, it’s so fun.” And then she took a psychology class and she’s like, “I love the psychology.” I’m like, “That’s most of what I do.” And then, you know, took an aptitude test and sure enough came back as financial planner. So she interned with us last summer and she, like, said like, “I love this profession. I love that it’s not cookie cutter. You have similar tools you use, but everybody is different.” And just loves being a part of their life story. So she has the right motivation.
Michael: Well, it is an interesting shift, though, of just, like, the industry and where we are that she took a psychology class and now she wants to come do this, right? Like, in the past you took, like, an econ-finance class and someone said, “Oh, you should be a financial advisor.” Now it’s a psychology class that’s cueing her up. I know that’s interesting to me about how the industry is shifting.
Kathy: Yeah, and recognizing that. And that’s been one of the things that I’ve really tried to implement, so we use Money Quotient too, is bringing in different tools that help us get more at the heart of the clients’ goals and their money history. And so trying to, like, bring that into the firm, that’s been a really great resource. And I know you’ve had Carol Anderson on too.
Michael: Yeah, if folks…you know, we’ll include a link out to the Money Quotient website as well. But if anyone is more curious about just the whole system of, well, I guess, like, systematizing your firm and your financial planning process and some of those softer questions, Carol’s interview is an interesting one. So it’s episode 59, so if anybody wants to go back and look at episode 59 with Carol Anderson, this talks about that Money Quotient and systematizing a life planning-centric process.
Kathy: Yeah. And I felt like for me personally, like, I have had that innate skill to work with people on that level and bring out that type of a conversation but yet I wanted to systematize it more for like up-and-coming planners in the firm so that we had a common language. And it’s really good. Like even, like, the initial questionnaires that you use, which is like a financial satisfaction survey and then life transitions, like, prospects come in telling me, “What are those key points of worry?” What are they experiencing? And it’s just a great way to get to know them right away.
Michael: Some of those interesting transition issues, like, when it’s just you, usually, like, systematizing a process is nice just so it’s a little…maybe you can make it a little bit more efficient and work out some kinks, but as soon as you start adding other advisors to the firm and then maybe stay up at night wondering like, “I wonder what they’re actually saying to clients when I’m not in the room.” Like just not, like, bad stuff but just like, “I wonder how good their advice is. Like, really I wonder how they handle those situations.” And all of a sudden the idea of systematizing your planning process takes on a whole new level when you start wondering like, “I wonder what their advice process looks like and whether it’s anything like what I’m doing for my clients, even though we’re all from the firm and in theory giving a consistent service from the firm.”
Kathy: And that coming from a larger firm, I really knew that I wanted to start creating systems and processes early on. So like even with Salesforce, we built out tons of processes to handle all aspects of the relationship. That was probably a year or two. And we continued to refine those, but it was to get the pieces out of my head. And yet it’s a lot easier to do it when you’re, you know, smaller firm growing than it is, you know, when you’re a large firm and, you know, having to standardize that across the entire firm.
Michael: So maybe that’s a good transition to talk about that transition. So, you know, as you said, you started Flourish four years ago, just past your anniversary, you’ve had a great start and growth path with it, but not where you started your career. You know, when I had first met you, you were at a much larger firm in the Minneapolis area as a partner their called Accredited Investors. And so can you talk to us a little bit about, I guess, like, take us one steps back. So what was your world at Accredited Investors as you were growing your career and business there?
What made Kathy decide to leave an independent RIA worth over $1 billion—after successfully climbing the partnership track ladder [1:01:40]
Kathy: So I was there about 13 years, and I think, like, maybe it was 2 years into being there I bought into the firm. So I was their first next generation of owners, and I was a 10% owner. So that was my partnership piece. And so I had been with them for a while. And kind of that combination of both, like, personal and professional reasons for wanting to create Flourish. And so about a year before I started Flourish, my mom was diagnosed with Hodgkin’s lymphoma. So she had cancer. She’s in remission now.
Michael: Oh, fantastic.
Kathy: Which is good. So she’s been in remission now for about six years. But during that time, she moved into…so they live in Wisconsin, more in a rural area where the quality of medical care just wasn’t there versus what we have in Minneapolis area, so we moved my mom and my dad into the house with me. It was kind of like…yeah, I worked through this entire time, but helping figure out my mom’s new medical team to figuring out what kind of cancer she did have and then just being with her during that time while she was, you know, getting treatment.
And so it was, like, that aha moment of like, “Okay, life is too short, and you should be really…you know, there could be a better way.” But during that time period, I didn’t really have a lot to really think about like, “Okay, how would I do this?” But I knew that there was something else that I wanted to do in life. I think that Accredited Investors is a great firm. I learned so much from them in terms of what I would create in business, how I would do things differently.
Michael: And can you give us some context, like, what did Accredited do? How big was Accredited? Like, we’ve talked about as it was a larger firm than where you are now. But for folks who aren’t familiar, like, can you give a little bit of background or context on Accredited?
Kathy: So size-wise when I left I think it was, like, $1.4 billion. And I don’t remember exactly how many clients we had. I know I managed about a third of the client base. Originally there were two partners that formed the firm together and then I was that first partner. And then in, like, 2012ish, they started to sell some more small, like, minority shares and, like, just a couple percent shares to people. And so there wasn’t really…I didn’t see the…you know, as I looked at it professionally, like, how the firm would transition. And I also had this idea to my head that, you know, I could…because I kind of thought, “Okay, I’ll stay here for 10 more years,” because my shares had real value at that time because I was an owner for a period of time.
Michael: Ten percent of a $1.4 billion AUM firm, like, that’s not a small dollar amount. Like, that’s a lot of wealth creation right there at a firm that was growing and moving forward.
Kathy: Yeah. And that was also the hard piece too because it was very financially lucrative too. Like, I had a good salary. I had good dividends. You know, 2008 was a hard year as we, like, put everything back in the business, and I think, like, just prior to that. So the way I did my buy-in, I did my first half, I used home equity to buy and paid that off. And Ross and Wil I owed the other half too and then I ended up paying that back to them, like, right…I took out another loan to pay them off. So it was on the outside now. And then we had the market correction. The firm, like, was, you know, past that 2008 period really strong financially. So that was hard to turn away.
Michael: So the sellers financed half, like, you bought a 10% slice all at once, but the sellers financed half and then you essentially self-financed the other half using home equity to bring the cash to the table?
Kathy: Correct. Yeah. And I just didn’t like that piece of owing them. So, like, when it came when I could do another, like, paid off the home equity side and do another loan and pay them off the rest of the loan, I did that.
Michael: I mean, a lot of folks I know tend to go the other way. Like, it’s hard to get traditional financing. They want sellers who will just seller-finance it for them because, you know, often the terms can be a little more flexible than the stringency of a bank. Like, I’m just wondering, like, what was the script in your head that was like, “I’m fine taking the money from the bank, but I don’t want to be on the hook to my partners?”
Kathy: Maybe feeling obligation that it just was…and it was the path that eventually I have to pay them off and now I could establish some outside financing via the bank versus, you know, I had tapped my home equity before to get the one-half. And so it’s just more of an obligation of like, okay, it felt to me like, “Don’t owe your partners money.” So no other pressure or any other reason that it just felt like the right timing to do that.
Michael: And how big was the…like, when did you actually buy in? Right at the beginning when you came or you were there for a few years and then you got an opportunity to buy in?
Kathy: I was there for two years. I was at another firm where I did have some clients that followed me over to that firm. So that was, like, a plus. And it was…I think it was about two years and then I actually bought into the firm.
Michael: So back in, like, 2003 or 2004 timeframe.
Kathy: I think it was in 2004, 2004.
Michael: Okay, okay.
Kathy: I’m good with numbers, not so much date, though. I was going to throw the decades off a little bit. But I think it was about 2004. So, I mean, I had value. At the same time, I saw a different path. Here was my thinking, I was thinking, “Okay, I’ll just stay with the firm for 10 more years.” I didn’t really know my two, the senior partners, like what their plan was when they were leaving. You know, nothing was ever really finalized. They still had timeframe, you know, where they were at in their career. But I thought, “I’ll stay 10 more years then I’ll just go do something like a nonprofit and work in, you know, something else, you know, just to be financially ready to do that.”
And then with my mom’s cancer, I just started maybe thinking about, like, life is too short. And, you know, I really did have that entrepreneurial spirit. I had lost confidence kind of being in that larger firm. And via my WPO connections, I was the monthly case study where I kind of talked about just the firm and the partnership and just where I was at. And, you know, I’d realized that I just didn’t have confidence in my ability, but yet talking to these women, they really challenged me to think about new possibilities. And I found I actually did have that confidence. It was hard, like, to know who to talk to during that time period because I felt like it’s such a small world and everybody…
Michael: Yeah. Unfortunately, like, yeah, our advisor industry is kind of a freakishly small world sometime. It feels like everybody knows everybody.
Kathy: Yeah. So it was, like, who to talk to. So I actually hired a woman, Jennifer Goldman. Do you know Jennifer?
Michael: Yeah, yeah. Absolutely. She does a lot of kind of operations, technology, business management consulting work.
Kathy: Yeah. So I hired her, and I said, “Okay, I want to hire you for a six-month engagement.” I said, “I don’t know how…I’m not sure what I will decide at the end here, but I want to know, like, how would I go about putting this firm together? Like, what’s the technology offering? Like, who are those strategic partners?” So she did a lot of legwork for me. And, like, coming back and saying, “Okay, here’s the three CRMs that you would look at.” And she’d get me, like, demos of them and she said, “The plus and minuses of this,” and help me narrow in on the choices. And she also kept me accountable for, like, moving forward, whether it was, like, the logo or, you know, getting the firm name. Like, all of those different components to putting together the firm. So that was incredibly helpful.
Michael: So she was your consultant as you were just putting together like, “Okay, what does my business actually look like? Like, I need to pick a CRM. I need to pick financial planning software. I need to pick portfolio accounting. I need a platform.” Like, just figuring that stuff out.
Kathy: Yeah. And, “This is, like, the hardware that you’ll need and, like, here’s the pros and cons between, like, office space and doing, like, where you rent the offices,” or what do you call that?
Michael: Yeah, yeah, yeah, like the leasing spaces like Regis and WeWork and all those.
Kathy: Yeah, exactly. And so she really helped me kind of think through, like, the components, which ones had to come first. And so that was incredibly helpful. I remember then and telling her, I’m like, “I told my partners that I’m leaving,” and she’s like, “I didn’t think you’d do it.” And yet I did.
I would say there was also another, like, driver in that decision, which was, so we had a buy-sell agreement that was written when it was just the two major partners and me, and it was kind of wishy-washy and it needed…it had some language that, you know, could be questioned how it could be interpreted. And so they were…as a firm we were working on a new buy-sell agreement. Well, this new buy-sell agreement was going to be really kind of that final straw. Like, you can’t…
Michael: Oh, because, like, this was all the provisions around, like, non-competes, non-solicits, what happens if you leave, that kind of stuff that was a little wishy-washy in the first one. But, of course, when you’re doing the update, you tend to tighten those things up a little bit more, and so that became, like, your moment of truth for, “Am I in or am I not?”
Kathy: Exactly. And we were tightening it up because we were bringing on some new, you know, small percentage partners and just it was the right time to clean it up. But it was also, for me, I was, like, the only minority partner who really had any value because my value had appreciated during that time.
And so the new agreement, and I don’t know that they actually went with this one, I think that they might have done a different agreement, was really restrictive. It was, like, I couldn’t sell my shares for a longer period of time. And so that was, like, the final like, “Okay, you have to tell them because you can’t sign this new agreement. And you can do it. You can create this firm and, you know, see your vision realized.” And so I still remember being in…we had a little library there and telling them. You know, it was hard, but, you know, I did a lot of research. I talked to a lot of people. I had a great support network. I even remember I called one of the consultants that we used to work with and talked to that person about like, “Okay, this is what I’m thinking, like, you know me, what do you think?” And I got the go-ahead there.
So I felt like I did my due diligence and research, which also helps me move forward in decisions and yet it was hard, because again, that buy-sell agreement had some inconsistencies, and so I didn’t know how it would be interpreted as I left. And so there was a legal negotiations, you know, for a couple of months after I left trying to figure out how to part ways.
Michael: Just try to figure out, like, are you allowed to take your clients or not? Do you have to buy them? Do you have to leave them behind? Can they follow you but then you can’t solicit them? Like, just all of that stuff?
Kathy: Yeah. Yeah. Like, “Do you pay for them? How do we pay you? What’s the solicit period?”
Michael: And so because the agreement was ambiguous, I mean, obviously you have your interpretation of how you would think you’ll want it to work. They may or may not have their own that could be different. So you had to make the leap before even knowing whether or how many of your clients would be able to come with you or what you would be able to do?
Kathy: Yeah. I knew I couldn’t solicit. I knew that would be a provision. I didn’t know what the discount, like, would I take certain discounts? Because there were some inconsistencies there in terms of discounts on my share price. And, you know, I didn’t know what they might do in terms of challenging, you know, the firm’s existence or the ability to move forward. And it was…I think the harder part was messaging. We never came up with any shared messaging. But leaving clients without being able to say goodbye, because, you know, I had been a part of their lives. And that was really hard because, you know, I obviously couldn’t reach out. Some people definitely did reach out to me, you know, once I left Flourish. Social media is really good for being able to find an individual.
Michael: And it works a lot better than the yellow pages used to be, right? Like, if you were going to put up your own firm, you had to get that yellow pages out in there as quick as possible and hope that someone would see it in a timely manner. Now they just google you and contact you the next day on LinkedIn or Facebook or Twitter.
Kathy: Yeah. And then the messaging, too. So, you know, Kathy is starting a single-person firm but yet it was me on day one but I had a huge resource being the BAM community with me.
Michael: Was that part of the appeal for BAM? Like, as a startup, just it helps giving more gravitas to say, “Well, you know, I’m me but I’m also part of this larger platform with tens of billions of dollars, so your assets will be well seen and you don’t have to worry that it’s just me?”
Kathy: Definitely, I used that in my messaging. And I also really believe that, too. Because here were all of these resources put together and available on day one, but yet it would be, you know, if the client reached out to me. And then I had that 12 months where I could solicit clients. And I did reach out to a few clients, but then, in the end, it just felt like, “Okay, like, Flourish is growing with just growth and other clients.” I missed some of the clients that I hadn’t been able to say goodbye to, just that kind of interaction with the prior firm. I just wanted to move forward and continue to build Flourish. If clients chose to reach out to me, that was great, but I didn’t go after all of, like, my prior clients.
Michael: So I can only imagine the pain of having these clients that you’ve worked with so long and not even just that you can’t solicit them, but literally that you can’t say goodbye.
Kathy: It was hard, you know, because you’d think back. Or, like I remember this one client who would drive a motorcycle, I’d see a motorcycle on the street and I’d think of that client, or, you know, you might see something via LinkedIn but you couldn’t reach out to, you know, even say congratulations. It’s hard. You’re there for those key moments like the birth of the baby or that heart attack or, you know, they’re the first one they call to tell you that the wife has cancer and they call you at home and you can’t control the messaging. And you can’t even, like, you know, say that appreciation of the honor, that being a part of their lives even for that short period of time.
Michael: So help us understand a little more, like, not to throw your former partners under the bus or anything at all, but I’m just trying to understand, you know, so most people come to the business, like, the dream is, “I can work my way into a firm, I can work myself up to partnership, make good dollars, participate in the equity growth of the firm, be able to have relationships and drive the growth of the business.” And you were there with all of that and then left.
Kathy: Yep, and I left. You know, I think that life is just too short to not try. Like, do you think what I had is more of an entrepreneurial spirit to me and being in a large, established firm that they were way past that entrepreneurial spirit? Like, it wasn’t there for me?
Michael: Just because as the firm gets larger or just process have to start…processes systematize, you have to institutionalize stuff a little more. I mean, presuming what? By $1.4 billion under management, you were 35, 40, 45 employees or something like that?
Kathy: Yeah, probably 35 to 40, kind of depending on the moment, but, yeah. So too, like, I didn’t really see the path to an internal succession plan for the firm or how that would all work out in the end, and so I thought I could create my own succession plan. The math, you know, if you’re willing to do…take the risk of building the firm, and I totally want to have an internal succession plan as Flourish grows larger, but, you know, like, 10% owner of the firm versus being 100%, you know, as you kind of build up those numbers, you can make up the value of your firm pretty quickly as long as you have some good growth.
Michael: As long as you have good growth, which you weren’t even sure if you were going to have because you didn’t know if you could have clients, solicit clients, bring any clients or what your legal entanglements were going to be.
Kathy: Exactly. But, like, I think probably when I knew I really had entrepreneurism is, like, signing the first lease for our building here, and I’m like, “Oh, okay.” So I think it was, like, $26,000 a year. Since then we’ve had to double our space. But early on I’m like, “Okay, three years,” you know, just doing the math, “Okay, if things don’t work out I’ll just be off, you know, yeah, $80,000.”
Michael: Yeah, almost $80 grand with some inflation increases just on the rent.
Kathy: And then I thought, like when I hired the first team member in September, I’m like, “Wow, I’m responsible for someone else.” But yet I loved it. I like, love, that calculated risk of… And I think like early on when you were saying why didn’t that come to me that I could just kind of just scale in and be at the size that, you know, we were at, I think my mind really just thinks about growth and building. And partnerships are challenging. I mean, you have different personality styles and different influences of control and how partnerships work together. And that’s hard.
And, you know, I really think that Accredited, I think that they do good work and I think that they’re good people that are over there and I have a lot of appreciation for everything I learned at the firm, but I just didn’t see my future in the firm. And in my vision what I did see was like, “Oh, maybe I’ll be there 10 years and then I’ll go do something else.” Versus then all of a sudden reality or, like, that thought came to my mind as like, “Why do you have to wait 10 years to do what you want to do?” And just found my confidence peer, like, my WPO and those connections of, like, challenging me, of, you know, they’re business owners and they’re like, “You can do it.”
And I remember there was one, she’s a good friend of mine, Jane, there was a time I said, “You know, I think I’m just going to stay put.” This was kind of as I was going through these decisions. Like, “Things seem really good right now.” And she’s like, “Oh, Kathy, you always say that but yet you just need to take this risk.” And so then I did.
Michael: So from the other end, because there are a lot of firm owners out there from the other side of this that basically, like, you were their ideal candidate and successor, right? You were young, good at the advising business, strong communication skills, entrepreneurial spirit, right? A lot of large firms really struggle with keeping the entrepreneurial spirit or finding entrepreneurial next-generation owners because frankly a lot of them tend to do what you ended out doing, which is leaving and making their own thing. So I’m just wondering, like, for a firm owner that’s listening to this, that’s wondering, like, “How do I not lose my young entrepreneurial person the way that Kathy ultimately moved on,” do you have any advice for that person? Like, what kinds of things might have made you stay or would make someone like you stay? What makes it appealing? Like, is it down to, you just can’t be the entrepreneurial person, you want to be in a large firm?
Kathy: So I don’t feel like I was able to really have that voice or really like that true leadership that I wanted. But that’s maybe, like, shame on me for not trying to bring that more forward or push that. But, like, my interpretation of the culture was that there just wasn’t that space. And if I really wanted that entrepreneurism or really having an equal voice, like, I had to go to a different space to create that voice. I think the mix of how I wanted to lead in the community, both personally and professionally, finding a more supportive place to have that mix.
Michael: So just kind of come down to differences in vision? Like, just your vision was to take it a different place than where they wanted to take it, and so you couldn’t do the particular entrepreneurial things that you wanted to do because they wanted to do different things and they still had 90% so that was that?
Kathy: Well, I think that I would have equal vote as long as it was the same vote.
Michael: That happens in a lot of firms with successor-owner partners. Like, it’s really hard not to have that happen.
Kathy: Yeah. And I get it because it’s like, I mean, they started the firm. But I don’t know if there was enough space too at that time where I was trying to figure out what’s the internal succession plan. And I wanted to buy more shares, but I, you know, wasn’t given that opportunity for, you know, whatever reason.
Michael: So a little bit is kind of a limbo on ownership as well? Like 10%, you know, of a $1.4 billion AUM firm, like, that’s a meaningful dollar amount and a sizable stake, but it’s not 20% or 30% or 40%. Like as you said, you know, if you get some good growth, 100% of your new thing can replace 10% of a big thing in decent time. It would have been harder if you had 30% or 40% of Accredited.
Kathy: Yeah. Maybe that was answering no. But I also think if you look at internal succession plan, like, the senior partners really have to do a meaningful effort to reduce their share of ownership if it’s going to happen because the firm value just continues to get more and more expensive. So I just didn’t see, like, how all of that was going to happen. And, you know, since then I think that they’ve brought on new owners and, you know, maybe hopefully continues to be more diluted in terms of the ownership piece. But I just didn’t see how that internal succession plan was really…I mean, there was this conversation, “Having this is what we want,” but I didn’t see necessarily the actions at that time to make that happen.
So there’s definitely, how do you create space for that voice? And a different style. Like, I have a different style of leadership. And, you know, maybe it’s not as loud and out there. It’s maybe a little bit more in building relationships behind the scenes too. And I think too, like, here’s new owners coming on board and, you know, like, I agreed to “marry,” I say in quotes, like, with the first two partners, because it is almost like a marriage. And then [inaudible 01:24:36] the partnership is definitely like a divorce. And I’ve been divorced in life. So Jay is, my second and final husband is, like, what I like to describe him as. So I’ve been through that process. And so it’s really hard.
And then here, like, and maybe it’s just kind of the role I played, I was that next generation owner but then we were bringing on other owners. And you don’t necessarily get to pick, like, you know, who those people are and who are you going to end up with and, like, what happens when the two senior partners leave, and, you know, what does this firm look like? And I felt that I could have more control by building Flourish myself.
Michael: So having been on both sides of the divide, like, are there things you miss having been in a larger firm environment that are now challenging when you’re out on your own building from scratch? You know, you’ve got a few people now but, you know, not the resources you had when you were 35-plus at the old firm.
Kathy: Not really. Like, the piece that I missed on day one was, like, paperwork. I’m like, “Oh my gosh, like, what have I gotten myself?”
Michael: “First I’ll hire someone to deal with this paperwork.”
Kathy: Well, we have an outsourced IT firm but, like, you know, having somebody that I could yell down the hall to figure out.
Michael: “My computer is not working, someone come fix this.”
Kathy: Well, here’s my really silly story is, like, miscommunication I’m sure with that person who was helping me with technology, but we ended up buying a monochrome printer. And so I could not figure out why it wouldn’t print in color and yet I was so busy. And my daughter ended up calling and she’s like, “Mom, do you know you bought a monochrome printer?” I’m like, “Oh.”
Michael: “Oh, I thought I just wasn’t clicking the right setting in print setup or something like color, but then it kept flipping back to black and white and couldn’t figure out why.”
Kathy: But I love being more hands-on with clients. I love kind of being able to dig into the planning, the planning work again. You know, I had to delegate a lot more to the team. And I had so many different team members at my prior firm, so there was so many different, like, groups that you would work with, versus I like a little more centralized team. So I think that has been good. I feel like you can still get all of the same resources. And my technology platform is even stronger by having all these integrations. So there’s really nothing that I miss.
I also like being…oh, like, we really didn’t do, when I was there, a real formal strategic planning process. You know, so that was one of the things I implemented in, like, that first eight months where I used Traction or EOS, the Entrepreneurial Operating System.
Michael: Oh, yeah, yeah, Gino Wickman’s Traction. Yeah, we’ve had a few that have talked about it. And we’ll make sure we put a copy of that in the show notes as well. He’s got both a book that I highly recommend called “Traction,” all about, like, how do you gain more traction in your business to grow and a whole, like, training system about how to run your growing business called the Entrepreneurial Operating System or EOS.
Kathy: Yeah. And so that was, like, one of the things I knew. Okay, what I wanted from a business was a strategic plan and measurements, and really kind of, like, one of the concepts in that book is creating. So not only your strategic plan and breaking it down, you know, to your three-year plan and your one-year plan, but working on, like, what are your quarterly goals? They call them rocks. Like, what do you have to put front and center to move the firm forward? And so I just love, like, implementing those tools and systems, which is, you know, again why WPO, it’s here’s a group of women business owners that, you know, many of them use Traction, you know, for their own firms. So it’s been great to be able to figure out what business practices I want as a firm.
Michael: Well, and it does strike me, you know, you had talked early on about just value of study groups and impact of study groups. But, you know, as we’ve been talking about it here you said, like, you know, your culture snapshot system came from your WPO group and using Traction came from your WPO group, and the confidence to take the leap and go out on your own and do all of this in the first place came from your WPO group. So, you know, I guess just I hope for folks that are listening, that are trying to figure out, like, where do you go to get inspiration ideas on how to run your business better, like, you’re hearing it right here, like, this is part of why study groups matter.
I’ll admit the frustration for me is, and Kathy you kind of said it even in your study group, it’s like a lot of your just how to better run the business as a business stuff comes from not the financial planning world. Like, it’s what you’re doing with WPO and other business owners but not in our financial planning world. I hadn’t quite appreciated it until the past couple of years, but truly, like, there’s a lot of resources out there for advisors if you want to become more productive and efficient in the practice that you’re running. Like, lots of tools and coaches and consultants and folks like that. But for that subset of us that really want to build businesses, like, build and scale businesses that grow beyond ourselves, there’s really very, very little in our advisory world that actually teaches what I call, like, real business ownery stuff.
Kathy: That’s so true. And I think that that’s where it’s been a nice blend between my study groups of people in the profession, and yet I think we could probably do…we do talk about some aspects of running the business, but I think there’s a lot to learn from different types of businesses and be able to bring those new concepts in.
Michael: So where does it go for you from here? Like, you left because you wanted to build this vision of a firm your way, so now you got it, like, so the dog chasing the car just caught up to it. So what next for you from here? Where does it go?
Her plans for the future of Flourish [1:30:58]
Kathy: So I see continuing to grow the business to be able to attract new clients, where I have a book that’s coming out this fall. It’s mostly written right now. I’ve been working with a company called Advantage Media. And I met them actually via FPA, and they work with WPO, too.
Michael: Advantage Media. So we’ll put a link out to them. So, they help people run and create their…like, build and create their own books? That’s their thing?
Kathy: Yep. And then they help with the marketing aspect to it too. Oh, and I actually work with another marketing firm too, so AES Virtual Marketing. So I’d say in December 2016 is when I started working with them. And again, like, an accountability partner to keep our blogs and our thoughts and our social media moving on Flourish. And so Anna Shea and her team have been really great to work with. And I’ve seen that it’s really changed, like, where our clients, or, like, qualified clients are coming from, and we’re attracting a lot of people just, like, via internet presence. You know, they’re finding us at that direction.
It’s like since that time period about 57% of our clients come in that direction and the rest is really more of my professional/personal network, which speaks to a lot of my community involvement. So that’s been really good. So I think from where do we go from here, we’ll continue to create, like, Flourish brand awareness and we’ll continue to grow our team with the people that want to be here and reach more clients and just kind of do it with, like, best business practices. So that’s my goal is to impact and be part of more people’s lives and continue to build Flourish.
Michael: And so what’s the…like, what’s the book about? What have you created here?
What made Kathy decide to write a book to further propel the growth of her firm [1:32:38]
Kathy: So the book is called “Flourish Financially,” with a tagline of values, transitions, and big conversations. And the goal of the book is to help people have the necessary but sometimes uncomfortable conversations around money with their spouse, with their kids, with their parents and even with their friends, breaking down that taboo around money. So that’s what the book leads to. And the first part of it really starts with understanding your own money story and your history. How do you come together to talk through money? And the second, third is all about, how do you plan for those key transitions, whether it’s career or retirement. Yeah, and then there is a book. And so it’s all come together. Advantage Media has been great to work with. Again, that was, like, coming when I committed to them at a time where I’m like, “Oh my gosh, how am I ever going to do this?” But we just worked. I had an editor.
Michael: So do you do the writing and they edit, or is this one of those, like, you record stuff and then they help you turn it into a manuscript?
Kathy: It’s both. So it’s a little bit of talk your book. So the process was, I had a vision for the book but I really didn’t have idea on how it would come together. And then Ivy [SP] basically, like, laid out, she’s like, “Here’s how I can see the chapters.” And, you know, we moved things around. And so then we had, like, a great outline for the book. And then Ivy would send me a list of questions and, like, stories, or like, “Tell me about a time when fear got in the way of a money decision.” You know, whether it’s from my own experience or, you know, working with clients. But she would give me all of these, like, questions. So we have lots of little side stories in the book to help people relate to the conversations. And so she’d give me my homework.
And then we’d use prior blogs that we had put together. Kind of like, “Oh, here’s some content,” or, “Here’s how we think about it.” And then I do writing, and then she’d do some writing, and then she’d pull it together. But, like, each week I’d sit down with her. So I do my prep work ahead of time, which would take about eight hours or so. And then I’d sit down with her for about an hour and a half via phone and talk through what I meant in my different pieces and the vision, or maybe have her go out and pull a little of research from some area and then just kind of came together and then now it’s been a back and forth with different editors at Advantage Media in terms of…right now we’ve got, like, our book cover and our jacket for our book, and I owe them back that final proof. And then my book actually looks like a book right now with, like, the images. Yeah, so one final edit and it’ll go back to them. But then it’s all, what do you do with the book?
Michael: Yeah. And what is your plan for what you’re going to do with the book?
Kathy: Yeah. So I have hired Advantage to do some of the…or to do the marketing for the book, you know, both PR and marketing. And the plan is to just build brand awareness. And, you know, there’s a lot of credibility in being an author and use that in business development opportunities. And then also maybe, you know, I think of, like, some people that, you know, they’re really interested in, like, “How do you have these conversations?” Or, “I don’t know how to talk about money.” You know, hopefully, it reaches a broader audience that maybe I won’t touch directly but I will through the book.
Michael: And so what does it cost to hire a firm like Advantage to just, like, shepherd you through this process?
Kathy: Well, okay, I’ll say it’s expensive, but if you do the math in terms of, you know, bringing in clients or you attract a couple clients and a few years of their revenue that they would give to you, but it’s about $45,000 to $50,000.
Michael: Okay. And this for them is everything, like, they’re helping you write it, create it, lay it out, distribute it, PR it, market it, like, it’s meant to be a holistic package?
Kathy: It is. And there’s an additional cost on the marketing side, and it just kind of depends on what you do with it. But that is everything from getting it into print on Amazon, yeah, and just having them as the partner. And then it’s been great too. So I’ve started to attend, like, they had a marketing conference in January and they have other conferences that really kind of help think about, like, business development, marketing, how to get your message out. And so that piece, like, I really believe in the opportunity that it will create. And it’s been fun too. Well, fun, maybe in a few more months I’ll say it’s been a fun process. They’ve made it, I guess, easy as can be, but, you know, it’s definitely…
Michael: It still takes work.
Kathy: It takes time. Yeah.
Michael: You know, you need fewer than half a dozen clients ever cumulatively to make back many multiples return on investment for the spend? You know, it’s still kind of the fascinating thing about our business, like, just long-term clients are so absurdly valuable to the business in the long run that you can actually justify a lot of costs if it brings in just a few people.
Kathy: Yeah. So I think that’s been one of the pieces that, oh, maybe initially struggling to see that as, like, “Wow, that’s really expensive,” but you can make it up in terms of who you attract. And so the book was almost ready to release, like, in four weeks, but we took a step back and said, “Okay, let’s really get this marketing aspect of it down. Like, how are we going to use it? What’s the pure initiative?” And so that’s why we’re waiting till September for the release. But it’ll go to print this summer.
Michael: Very cool. As we come to the end, this is a podcast around success and one of the themes that always comes up is just that success means different things to different people, sometimes different things to us at different stages of our own lives. You know, as you kind of noted, like, your success for a while was about growing as a partner at Accredited and then success was about not growing as a partner at Accredited anymore and going and doing your own thing. So as you look forward from here, I’m just wondering, like, how do you define success for yourself?
Kathy: Okay. I’m going to answer that in, like, two ways because one is a story that happened as I chaired this big event for YWCA Minneapolis. And I brought my family to the event. And their focus is on eliminating racism and empowering women and girls. And so I had the opportunity to speak in front of this group of, like 1,000 people. And my son was in the audience, and at the end, you know, so saying goodbye to him and he’s just…he stopped me and he gave me a kiss and he said, and he’s a seventh grader so this is where it makes it more interesting, he said, “Mom, I’m really proud of you.” And so that is definitely success. So I think about that. And, you know, being my true self in, like, all areas of life, like being authentic in my friendships and with my family, and then being a leader in my profession and in the community. So that’s how I define success.
Michael: Well, very cool. I mean, you’ve got, like, an amazing track record of it so far. You know, I know we didn’t even have time really to talk about it in depth here, but you’re involved in a lot of organizations over the years in your community and our financial planning world. As we said, you know, national board for FPA and your local Minnesota chapter. Both, you know, WPO and WYCA [SP] and a lot of other organizations as well. So thank you for everything you’ve done to contribute back to the profession and to society and joining us on the podcast as well.
Kathy: You deserve just as much things. You have given so much back to the profession and our society, too. So I appreciate you, and thanks for this opportunity to share a little bit of my story.
Michael: My pleasure. Absolutely. Thank you.