Welcome, everyone! Welcome to the 81st episode of the Financial Advisor Success Podcast!
My guest on today’s podcast is Louis Barajas. Louis is the founder of Wealth Management LAB, a multi-family-office style advisory firm in Los Angeles that specializes in providing financial advice and business manager services to entertainers and other celebrities in the Latino community.
What’s unique about Louis, though, is the way that his advisory firm has evolved over time, from trying to serve Latino small business owners in the barrio where he grew up, to writing books and teaching financial literacy to the Latino and broader community, and now focusing on a business that is not just about financial planning, but what Louis calls “financial doing” instead.
In this episode, we talk about Louis’ path into financial planning, from helping his father prepare tax returns and keep the business books as a teenager, to starting out with a broker-dealer in the 1980s but quickly getting tired of the pressure to sell products at the end of every financial plan, getting his CPA license and shifting to an accounting firm that worked with high-net-worth individuals, and then leaving the accounting firm to start his own solo practice after a chance meeting with pastor Rick Warren in a coffee shop, shortly before the pastor published his Purpose-Driven Life book, and how that 30-minute coffee shop conversation changed the trajectory of Louis’ career forever.
We also talk about how Louis built his advisory firm over time, the setbacks he had that forced him to nearly start over from scratch twice after he had to split away from former business partners and associate advisors, because as he’s learned you can have multiple partners in a business but only one Visionary, the Abundance Mentality Louis brings to the table that has allowed each new iteration of his business to grow even larger than the past, and how Louis building more successfully than ever this time with a focus on hiring for heart and teaching the skills, while putting a series of Core Values – or what Louis calls “Immutable Laws” – in place for the business, that serve as a guidepost for the entire team about the deliberate culture of the firm.
And be certain to listen to the end, where Louis talks about why he believes that not just financial planning, but financial doing for clients, is the key to expanding financial advice to a broader range of underserved consumers.
So whether you are interested in learning more about expanding access to financial planning advice to traditionally underserved communities, learning more about how financial “doing” differs from financial planning, or how an Abundance Mentality can help you grow your firm, I hope you enjoy this episode of the Financial Advisor Success podcast!
What You’ll Learn In This Podcast Episode
- How Louis got into financial planning. [3:45]
- What drove him out of working for a broker-dealer and into starting his own firm. [11:36]
- How a chance meeting with Pastor Rick Warren changed the trajectory of his career. [13:16]
- What Louis’ vision was going into starting his solo practice. [17:26]
- When he thinks it’s good to do pro bono work—and when it’s not. [24:48]
- How he built his initial client base. [28:49]
- Why he started doing financial life coaching. [33:46]
- How Louis started getting his work out on a national platform. [48:40]
- The setbacks that forced him to nearly start over from scratch twice. [50:43]
- The best financial planning advice Louis’ father ever gave him. [1:01:10]
- The hiring changes Louis made that have helped him build a successful team. [1:02:18]
- How he sets up his fee structure. [1:16:54]
- How Louis’ 5 Immutable Laws help guide his practice. [ 1:22:50]
- Louis on the industry’s evolution towards financial “doing”. [1:34:50]
Resources Featured In This Episode:
- Louis Barajas – Wealth Management LAB
- The Purpose Driven Life by Rick Warren
- The Latino Journey to Financial Greatness by Louis Barajas
- Small Business, Big Life: Five Steps to Creating a Great Life with Your Own Small Business by Louis Barajas
- Pound Foolish by Helaine Olen
- Redtail CRM
- eMoney Advisor
- TD Ameritrade
- Betterment for Advisors
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Full Transcript: Expanding Access To Financial Planning Advice By Offering Financial Doing Instead with Louis Barajas
Michael: Welcome, everyone. Welcome to the 81st episode of the “Financial Advisor Success” podcast. My guest on today’s podcast is Louis Barajas. Louis is the founder of Wealth Management LAB, a multi-family office-style advisory firm in Los Angeles that specializes in providing financial advice and business manager services to entertainers and other celebrities in the Latino community. What’s unique about Louis, though, is the way that he built his advisory firm over time, from trying to serve Latino small business owners in the barrio where he grew up, to writing books and teaching financial literacy to the Latino and broader communities, and now focusing on a business that is not just about financial planning, but what Louis calls financial doing instead.
In this episode, we talk about Louis’s path into financial planning, from helping his father prepare tax returns and keep the business books as a teenager, to starting out with the broker-dealer in the 1980s but quickly getting tired of the pressure to sell products at the end of every financial plan, getting his CPA license and shifting to an accounting firm that worked with high-net-worth individuals, and then leaving the accounting firm to start his own solo practice after a chance meeting with Pastor Rick Warren in a coffee shop, shortly before the pastor published his “Purpose Driven Life” book, and how that 30-minute conversation in the coffee shop changed the trajectory of Louis’s career forever.
We also talk about how Louis built his advisory firm over time, the setbacks he had that forced him to nearly start over from scratch twice after he had to split away from former business partners and associate advisors, because, as Louis has learned, you can have multiple partners in a business, but only one visionary. The abundance mentality that Louis brings to the table, allowing each new iteration of his business to grow even larger than the past, and how Louis is building more successfully than ever this time, with a focus on hiring for heart and teaching the skills, while putting a series of core values, or what Louis calls immutable laws in place for the business that are meant to serve as a guidepost for the entire team about the deliberate culture of the firm.
And be certain to listen to the end, where Louis talks about why he believes that not just financial planning, but financial doing for clients is the key to expanding financial advice to a broader range of underserved consumers.
And so with that introduction, I hope you enjoy this episode of the “Financial Advisor Success” podcast with Louis Barajas.
Welcome, Louis Barajas, to the “Financial Advisor Success” podcast.
Louis: Thank you for the invitation, Michael.
Michael: I’ve been looking forward to this episode because you have what to me is a particularly fascinating balance between creating a successful advisory firm and also giving back to your community. I know you were the first Latino minority to join the national board of the Financial Planning Association over a decade ago. You’ve written books. You have, like, a membership program to promote financial literacy back to the Latino and immigrant communities. Even as you have this fascinating niche of doing multi-family office-style, like, CFO services to some very affluent international Latino clients in the entertainment industry. And so. I’m just really excited to talk to you today about what you’ve built and this kind of barbelled approach to services with some clients at the very high-net-worth end, and some clients at the very low-net-worth end and trying to balance between and serve the two.
How Louis Got into Financial Planning [3:45]
Louis: Yeah. Well, you know, it sounds really nice, but it took a long time to get there. I started back in 1986, right? And I’ll take you even back further. You know, I come from immigrant parents, parents who are Mexicans, who came to United States. My mother gave birth to me at a very young age, and dad was also very young. And back in 1971, when I was about 11 years old, my dad lost two jobs and started his own business but didn’t speak English, so he asked me if I could help him with the paperwork. Long story short, he opened up an ornamental iron business in East Los Angeles – it’s a barrio in Los Angeles… pretty much 98% or 99% Hispanic immigrants. It was tough for him, and he barely made it.
Then a couple years later, my dad got a knock from the IRS, and they asked me if he had done his tax returns, his business tax returns. He didn’t know, and so he asked me if I could help him. I was 13 years of age. Back in East Los Angeles, there were no bookstores, and so I told my dad “If there’s a book, I’ll figure out how to do a tax return.” There were no CPAs in the neighborhood. So he drove me, like, 13 miles to go buy a book. And I read it from cover to cover, filed his tax returns, and then at the age of 15, we got audited for those returns, and I won the audit.
Michael: It must have felt good as a teenager, like, stuck into the IRS already.
Louis: Well, you know, it wasn’t. You know, the thing is that I didn’t do it because I loved it, I did it because it was out of obligation and necessity. It was rough. It was a very stressful time for us. My dad was barely surviving, and so there was not a lot of money coming in, so we all did what we had to do.
But I made an oath to my dad, I said, “Dad, one day I’m going to go to college and I’m going to college…” – I was the first person ever to graduate from college – “…I’m going to go to college and learn everything there is about business and investments.” And I made a commitment to him. And I said, “I’ve got to help the family out.” Even through those trying times, my dad bought bought their first home when I was in college, and nobody would lend him any money. We had to go through, I think, 15 lenders before they would lend my dad some money. And he had to end up getting a hard money loan. So my commitment was always to go and learn everything and then eventually come back and help a community that didn’t have access to resources or didn’t know how to move in the direction of helping.
So I went out and became a financial planner back then with Ameriprise – it was IDS Financial Services if you remember way back then– and I worked in the Pasadena office. It was one of the top financial planners that sold the most financial plans, but because I was working in my community, I wasn’t really selling a lot of product. I had a lot of pressure, and at the end of the day, I quit after a couple of years and really became disillusioned – to be quite honest with you – became depressed because I had my Series 7, my Series 3, my…you know, whatever we had back then, you had to get. And I was really angry with the financial planning profession.
I left to go get my CPA at a firm in Newport Beach, California called Kenneth Leventhal. But I made a commitment that I would never go into financial planning because, at that time, it was basically very commissions, very sales-driven. I felt the profession was a facade to sell a product and not really help people. And I couldn’t survive.
Michael: So when you were at Ameriprise – I guess early, IDS was known, at least at the time, for being a much more financial planning-centric broker-dealer than at least most of the others that were there at the time, which were solely focused on selling a product. IDS at least tried to also do financial planning, sell financial plans, and then often got paid for both a little bit for the plan and then usually more for whatever came on the implementation.
Michael: The back end.
Michael: It was at least kind of a financial planning-centric process. So I guess your challenge going back to your community was that there were people that would pay for some of the advice and the plans, but they didn’t necessarily need the products at the end, which meant you were doing some volume of financial plans but not much volume of financial product, which means your sales manager was probably not very happy with you.
Louis: That’s it. And you’re correct. Actually, to be quite honest with you, I thought the training was…it was incredible. And to this day, I actually think that I’ve gotten my best training from when it was IDS. I mean, from a financial planning standpoint, I just go back to at the end of the day, you know, there’s so many square feet per office and how many people you can put, and they have to pay the rent and they’ve got to pay the staff, and they’ve got to… you know.
My core belief – and again, this is not what the industry was about back then, but this was my core belief – was that, we were using a lot of those plans as the reason to sell a product. And it wasn’t for just what we need to do. I didn’t have control over what I could charge, or even the work I did, or could I bill a client directly for my time, right? And it was just a process that didn’t work for me. But I felt that it was…I probably had chosen, you know, at that time a very planning-centric company and I just still felt that it wasn’t what I really wanted to do.
So I was married at the time to an attorney, and she was being moved to Orange County, and I applied to get my CPA at a firm called Kenneth Leventhal because they were more of a real estate consulting kind of background. I was very lucky because I had no really accounting background. I had an MBA in finance. I went to UCLA, got my undergrad degree there. I studied with Peter Drucker, Claremont Graduate University, that’s where I got my MBA.
And it just happened that I sent my resume after I quit IDS. Really, I was depressed for a couple years, but I got a job because the girl – it was, like, her first week as HR manager at Kenneth Leventhal, Newport Beach, and she was a sociology major from UCLA, and I was a sociology major from UCLA – and she just basically said, “Hey, listen, I have no right to give you help here, but, you know, from one Bruin to another… and that you’ve got a good background in finance, but it’s mostly with your dad and with IDS.” At the same time, I was at the Denver College of Financial Planning getting my CFP.
So she opened the door for me. Then I sold myself to the partners and I ended up working at Kenneth Leventhal Newport Beach with really high-profile clients. I don’t know if you remember back then, but CPAs could not sell any products. They were the real trusted advisor back then. And we had some really big clients. So the partners approached me and said, “You’ve got a financial planning background, and we’re really interested in starting to do financial planning with some of our wealthier clients. Could you help us out?” So I started working and doing real planning for them. And I was on a salary, and I said, “Oh my God, if I could do this for the community that I lived in – if I could provide these services – how fantastic would that be?”
Michael: So at the time, you were doing household CFO cash management, business management kind of stuff under this accounting firm umbrella for high-net-worth clients?
Louis: We were starting to do some actual financial planning like retirement planning that they weren’t offering back then. This was back in 1987/’88/’89/’90, all those years. And so, our clients were multi-millionaires. I mean, we had Donald Bren of the Irvine Company as a client. At one point we worked with Donald Trump. We had a lot of people that I would have never had access to. But now I was there as a consultant starting to do some planning work, right? And so, again, they were not my clients, they were the firm’s clients. They were not financial planning clients, they were clients that the CPA firm was doing more financial planning under the auspices of the consulting side. We were more kind of the CFOs. So because I had come in with that experience and I was the only one there that would have had their CFP…. I got my CFP in 1990.
What Drove Louis to Leave the B-D World and Start His Own Firm [11:36]
And then I had tragedy strike in late 1990, and I had several things happen, and I quit after working a few years with them. And I went back to the barrio to start my own firm.
Michael: Can I ask, like, what happened that derailed you off this path? Like, was it a professional world? Was it a personal world?
Louis: I’ll tell you what happened. So, you know, as my mother was very young when she got pregnant with me, she was 15 and had me at 16. And so when you’re young, you know, your grandmother is also – in a Hispanic family – is very, very important to you. And one of the reasons I made it out of the barrio was because I had an uncle named Frank Medina who was a meat cutter in East Los Angeles, but he also did taxes on the side and was kind of doing okay buying properties. But he used to love books, and he would buy me books, and he and I would say that… I tell people I had the first Oprah Winfrey book club before Oprah Winfrey was even on television. He loved books, and he would give me books, and we would read them together at my grandmother’s house.
So in 1990, my grandmother got ill and had some heart problems and died of complications of a heart attack while I was on some high-profile cases working with Kenneth Leventhal. I ended up doing the eulogy for her funeral, and it was just… there were so many people there and there was so much love. And it really impacted me. And then about a month later, my uncle, her eldest son, who was also my godfather, committed suicide. And then a few weeks after that on September 8th, 1990, my daughter was born. So all within a very short time span, I had my grandmother pass away, my uncle commit suicide, and my daughter was born.
How a Chance Meeting with Pastor Rick Warren Changed the Trajectory of Louis’ Career [13:16]
And the day that my daughter is born, I go to a coffee shop – I stopped off at the house to go pick up some stuff and I go to a coffee shop, and I meet some guy at a coffee shop who changed my life in about 30 minutes.
I stopped off to get a bagel and a cup of coffee. I’m putting cream cheese on my bagel, and he asked me if he could sit next to a chair next to me at a table. And I said, “Listen, I’m going back to the hospital. My wife just gave birth to our first daughter, and I’ve got to get back. So take my chair. It has a cushion on. It’s more comfortable.” And I was sitting down, I’m getting up. While I was putting cream cheese on my bagel, I was thinking about my grandmother and my uncle who were never going to meet my daughter, or my daughter was never going to meet them. So I wasn’t upset. I guess I was sad because I hadn’t slept the whole night while my daughter was being born. And he saw sadness in my eyes.
So we had this conversation, and in this 30-minute conversation with this guy, he changed my life. I went back to the hospital, saw my parents who showed up about maybe three hours later, and I told my dad, “Dad, I’m quitting Kenneth Leventhal. I’m going to go back to the barrio. I’m going to go help our community.” And he says, “Well, what do you mean?” I said, “I just met some gentleman who just changed my life, and I’m going to quit on Monday.” And my dad said, “You know, it’s really funny.” My dad owned a building in Whittier Boulevard and Calzona, right in the heart of East LA. And he said, “For the first time in 15 years, the 2 units above the restaurant [that he leased] are open. Why don’t we just tear down the kitchens or whatever and we can make them into offices for you?” My dad and I are really, really close. And he wanted me back there. And he says, “We’ll help you get started. And you don’t have to pay me rent.” And I did that. So you want to know who is the guy and how he changed my life, right?
Michael: And what the heck did he say to you in 30 minutes?
Louis: Well, let me take you forward about maybe six, seven years later, eight years later, and then I’ll bring you back. I had such a hard time working in the community that I figured out that the only way I can do it was to do seminars that were funny. Like comedic seminars. And I ended up writing a book. And my publisher was HarperCollins. And the guy that I met at that coffee shop, that changed my life, wrote a book about eight years later with the same publisher, and we met back in New York. And I met with the guy and I said, “Hey, do you remember me?” And he says, “No.” And I said, “Yeah, we met about eight years ago in a coffee shop.” And I told him my story. He says, “You know, I vaguely remember you.”
So the guy’s name that changed my life at the coffee shop – he wrote a book about the exact same thing that we spoke about in that coffee shop, and it was a book titled a “Purpose Driven Life” – is Rick Warren. Now, I don’t know, if you look up that book, I think he’s sold 38 million copies of that book already. And I’m not kidding you, about 38 million copies.
So he spoke to me that day – on September 8th, the day daughter Alexa was born – on having a purpose driven life. And I reflected on how blessed I was and how much I had in my life and what I had been given at Kenneth Leventhal, and I was ready to give back to our community. And, you know, I just jumped. I went to my firm on Monday, I told them that I was quitting. I had banked, like, three months of hours so I could spend time with my baby when she was going to be born. And they said, “No, you’re not quitting. What do you need? You’re going to go back to East LA to go help the poor? Forget about it, you’ll be back in three months. Here, take some pencils, take some paper, take these tax books with you. Go… you’ll be back. You’re not quitting on us. We’re going to leave it open for you, and then come back.” And, you know, 30 years later, I never went back.
Michael: “You’re doing good work. We know your new business thing is going to fail, so just come on back when you’re ready.”
Louis: Yeah. “We know you’re overwhelmed. Your grandmother has passed away, your uncle has committed suicide, you just had the birth of the baby, you haven’t slept, you’re exhausted. We know you’re this idealist, you’re always trying to help people out, but you know what? You’re not going to financially survive. You’ll be back. It’s okay. You know, when you come back, we’ll figure out how to do more pro bono work here so you can get it done.” And to be quite honest with you, I never came back. But it was a struggle. It was not the easiest thing. But I did it. I moved onto Whittier Boulevard in East Los Angeles and opened up my shingle. And it was the most frustrating thing I did. I quit probably 20 times. I quit, but I never left.
Louis’ Vision as He Started His Solo Practice [17:26]
Michael: What was the vision of this firm when you were launching it? You’d done IDS stuff, so you had some experience kind of selling plans, getting paid for plans, but knowing there’s not necessarily a lot of dollars on the follow-through with the community you were working with… you just came from doing ultra-high-net-worth stuff where I can only imagine the, like, hundreds of dollars an hour in 1988 that you were billing at that point. And then you’re trying to come back into the barrio and serve your community, giving some kind of financial advice that I’m going to guess did not involve a lot of retirement projections and limited partnerships that were popular at the time. So what were you doing, or what was the vision of what you were going to be doing when you came back into your community?
Louis: So my vision was to be the personal CFO of all these families in East Los Angeles. And so I went back and I said, “If I, Louis Barajas, at 11 years old or 12 years old or 13 years old, with my father who didn’t speak English, or very limited English, or very broken English, would have had access to Louis Barajas who was now close to 30 years old and who had an MBA and was now a Certified Financial Planner and an Enrolled Agent at the time, and a guy who we would trust, who would not sell us something, but would give us the right information, what would that look like? Where would Louis and” – my dad’s name is Agapito – “and Agapito… where would they be 30 years, 20 years later? Would he have helped us put together the financial statements to go out and get a loan? And would he have shopped around? Would he have gotten us life insurance that would be term and not cash value? Would he have been able to do our tax return? Would he have been able to do an estate plan in case something happened to my dad because my dad has a dangerous job?” I don’t know if you know what ornamental iron and welding is, but it’s very dangerous. They cut a lot of material, really a big machinery.
And so I know I can’t, but if I could, how would I charge? What do I do? But I know that I have to be a resource. I’m going to be quite honest with you… 30 years later, 32 years later or how many years later, everything that I’m doing right now, I wanted to do back then. What I didn’t realize – I’ve come into full circle – is that everything that I do right now for every client, which is more the implementation instead of the actual advice, was what I was doing for my dad.
And so let me give you an example. I would do my dad’s tax return. He had a small business, right? He had a small corporation with just a few employees, but I did the accounting. I did his tax return. And my dad never saw a tax return in his life. I would say, “Daddy…” in Spanish, “Daddy, firma aqui.” “Dad, sign right here, these are your tax returns.” Remember this is before the e-file days. And we would mail everything out. And, “Dad, you need term insurance, and it’s really inexpensive. And this is what you need because mom doesn’t have anything.” My mom was a stay-at-home mom with three kids. “And so you need this amount of life insurance.” So I would meet with an insurance agent so they wouldn’t try to upsell him to some kind of policy that he couldn’t afford for a little bit amount of money.
I would schedule the appointment, “Dad, you’re going to get the medical exam. They’re going to come to the house and they’re going to draw your blood and do this…you have to pee in a cup.” And, “Hey, dad, I sat down with the estate planning attorney – and so you’re not overwhelmed because I know you’re not going to understand this – but this is what an estate plan is, this is what a healthcare directive is and a durable power and a trust and a will.” And, you know, by that time he had bought his commercial property and his house and, “We need to transfer it, and this is how it works. And let me walk you through it. And this is what you want. What do you want, dad? How do you want it? If something were to happen to you and mom would have it, how do you want it? How do you want me to take care of my mom? And then if something happens to you both, how do you want it?”
And I would meet with the attorneys and explain to them in English exactly. And I would to to find somebody – this was not somebody that we were used to – who was a estate planning specialist that was bilingual. Back then, there were really not many bilingual estate planning specialists, attorneys. And, “Dad, sign here.” And we would get the notary. And so they trusted me enough because I was their son and I had their best interest at heart. Again, it goes back to… I knew how in the financial planning industry there could be people who were thinking they were doing the best thing but maybe not. And so I wanted to make sure that I was protecting them. So that’s the style.
So I’ll give you an example. A lady comes to me in East LA. I’m above the seafood restaurant called Boca Del Rio in Whittier Boulevard, and her husband has just passed away maybe about a month before. And she’s comes in with a check for half a million dollars – she had a term policy – and you could tell she was still very shaken and was alone. And I said, “Listen, right now, you shouldn’t be making any decisions on the finances or the money.” I said, “Where do you bank?” And she goes, “The Bank of America.” “Oh, the Bank of America across the street?” “Yeah.” And this is all in Spanish. And I say, “Why don’t you walk over right now and deposit the money into your savings account, and let’s you and I sit down and do a plan and think about how we’re going to make this money last for the rest of your life and what we can do – whether we need to pay off your house or whatever – but let’s take time and settle in and really think about this, right?”
So, the lady crosses the street, and she comes back about an hour later, and she says, “Mr. Barajas,” and I said, “Yeah.” And she’s, “Can I have you see the paperwork that they had me do? Because you told me that either do like a three-month CD or to do a money market account with them at Bank of America, but they told me they did that, but it’s just that something doesn’t make sense. Can you read the paperwork for me?” And I said, “Sure.” And I was like about a block away Bank of America. So what happened was they ended up putting her in a CD-type of product through a variable annuity.
Michael: Tied up all of her life insurance proceeds savings she needs to live on in a variable annuity.
Louis: Right. So instead of just putting in a regular CD or regular money market or regular savings account, they opened up an annuity product for her. I called the guy at the bank and I said, “Hey, listen, this lady’s husband just passed away and this is all her savings, and you put her in annuity.” And I said, “Can I ask you what the fees were?” And back then, it was, like, 5%. “I asked her to put in a regular CD.” He goes, “Yeah, but the annuity is the best thing for her.” I said, “But I didn’t ask her. I asked her just to put this.” And I said, “Listen, I need you to take it out and I need you to put in a regular savings account for right now until we figure out if maybe that might be the best or not. But I need you to pull it out.” And he said, “Well, no, I can’t. It’s already too late. We’ve sent the check out.” I said, “Well, no, you haven’t sent the check out. And I’m going to call the California Department of Insurance, I’m going to report you. And I’m going to call whoever I need to call, and I’m going to call Bank of America, your manager, and let her know what happened exactly. I need you to give her her check right back.” “Well, no, we can’t do that.”
So I ended up walking back with her, making a big stink at the bank, and they gave her her check, and we put it in a savings account. And at the end of the day, we did a plan and we decided what we were going to do, and we ended up paying part – she owed, like, $100,000 – we ended up paying her debt down so she wouldn’t have any debt in the house. And we did what we had to do with the money.
When It’s Good to Do Pro Bono Work and When It’s Not [24:48]
So I go back to, it’s that kind of stuff that I was doing back there. But it was very, very difficult to charge people per hour because a lot of people weren’t making a lot of money. But then I got smart, right? Because there were also a lot of epiphanies for me. Like, I have a strong belief about what pro bono should be versus what pro bono shouldn’t be, right? Can I give you another story about that real quick or…?
Michael: Sure. Sure.
Louis: So I’ve got a couple that I’m working with. It’s a husband and wife that come up to my office. I had no elevator. They’d have to walk up and didn’t have any air conditioning at the time. It was real hot. But we were doing planning for them. And they were losing their home. And I said, “Hey, you know what? I’m filling out financial statements whether we need to file bankruptcy. I got a bankruptcy attorney on the phone with me, he’s helping me out.” And I said, “Hey, I need you to come back in a week so we can get all this paperwork signed, so you can sign some papers so we can help you out.” And he goes, “Well, we can’t come back next week, but we can come back the week after.”
But prior to that, I wasn’t billing them because they were losing their house and the guy had lost his job, and I was doing the work pro bono. And he says, “You know, we’re going on vacation. We’re going to Cancun next week and we’ll be back.” So I thought about that, and I thought about, “Well, hold on a second, there’s some priorities here. You know, I’m not billing these people. I’m starving to death. My wife is upset at me because I’m not bringing home any money, yet these people are going on vacation. I couldn’t afford to go on vacation.”
And at that point, I said, “Well, hold on a second, who’s the dumb one here? I mean, I need to bill these people,” right? And so what I got smart was at some point, I figured out that everybody has a certain pain point where if you charge them for advice, they’ll implement your advice or they’ll stay attentive to your advice if they pay. It doesn’t matter if it’s 25 bucks, that’s all they can afford, 30 bucks, 50 bucks, 100 bucks. But if I gave them the information for free, almost 99% of the time they hardly ever implement it. It was more of an opinion than it was advice from a professional.
My belief working in the community for 20 years is that when I bill people – and if 25 bucks was a pain point for them, then that’s what I would charge them, 25 bucks, and they would implement that advice. So pro bono, I believe in pro bono is when – because I realized that there’s different priorities, right? – pro bono I believe is for when there’s catastrophes. There’s things that have happened where, you know, you’ve had a hurricane hit a city or you’ve had an earthquake, or you’ve had a tragedy in your family, helping pro bono makes sense. But if it’s an ongoing, somebody who’s living in the community, who’s there working and living and they don’t make their financial lives a priority, then I’m not going to do the work for free.
Michael: It’s always been an interesting dynamic to me that on the one end, you know, putting a price point up front will dissuade a lot of people because they don’t want to pay the dollars. They might be helped by the advice or what you’re going to do for them, but if you charge them too much upfront, they don’t make the good decision, right? They don’t want the short-term pain of the fee even for the long-term benefit of the advice.
But from the flip side, if you’re trying to figure out who to serve in the first place and you’re essentially trying to figure out who’s really serious about making a change and implementing what I’m going to recommend to them, there’s nothing like setting at least some nominal fee for them just to make sure they’re really serious about it, right? If you really know deep down that you don’t care and you’re not likely to follow through on the advice anyways, you don’t pay anyone for it. When you’re really anxious and in pain about whatever the problem is, you’re more likely to be willing to pay for it, you’re more likely to be willing to act on it. And the willingness to pay becomes kind of an interesting way to figure out who’s willing to act and follow through, as well as I guess just a psychological effect of, “You realize you actually paid me for this advice. Like, how bad is it if you pay me for this advice and then you don’t do anything with it?”
How Louis Built His Initial Client Base [28:49]
Louis: Right, right, right. Yeah. So, you know, those are learning moments for me. But what happened to me is that I got a lot of press. So while I was working at Kenneth Leventhal, I was also working on a very high-profile case that was in Orange County and in Phoenix, Arizona. I don’t know if you remember the Lincoln Savings debacle and the savings and loan crisis that we had back in ’89/’90. I used to work with the media a lot because those were really high-profile cases that I was kind of in charge when I was at Kenneth Leventhal.
And so one of the writers from the “LA Times,” a columnist named George Ramos used to come to me to see if he could get information on these cases that we were working on that the public was interested in. And he called Kenneth Leventhal looking for me, and they said, “No, he left.” I think he said, “Where did he go to?” He said, “He went back to East LA to go help out his community.” They didn’t tell him where, but he found me. He ended up writing this story a couple years later after I’d been back. And he wrote a long – it was a front-page article on the “LA Times” – it was an article based on, like, the prodigal son. The kid that lived and went and came back. And then National Public Radio did a story on me, and then I think “Wall Street Journal” did a story, and then…
Michael: And they were featuring, like, your work going back to the community and trying to give financial advice in East LA?
Louis: Right, that that was it. Basically like, “Are you crazy? What are you doing? You know, and you’re not going to make it.” And so I think, to be quite honest with you, because a lot of these stories were at the end where you would hear the person who would interview me or the article written was like, you know, “I wonder how long he’s really going to last there because nobody really lasts in those communities.” And I think it was with my own personal pride, “Oh, yeah, just watch. I’m not going to leave,” you know. Because there were plenty of times I wanted to quit.
But it got me a lot of press and it got me a lot of clients, and a lot of people were reading. All of a sudden I started to get a client base. But the problem was, Michael, it was not that…I couldn’t handle it anymore. You know, I was a window washer, I used to vacuum the floors or whatever, and I needed to get young kids who were in finance to come and work with me. And this is…you’re talking about 30 years ago, and there weren’t a lot of kids coming into finance or studying financial planning. Now, I don’t know if I’m the very first one or the very first Latinos to get a certified financial planning [designation], but I’ve been around a long time. And Michael, you let me know if you’ve met somebody, a Latino who’s worked in communities that has had a CFP longer than 1990 and been around since 1986.
Michael: Yeah, not that I know of. Maybe we’ll have a listener kind of dial in and say, “I’m the one.” But I’ll admit, I can’t recall coming across any….
Louis: But it doesn’t matter…yeah, it doesn’t matter if I’m the one, or one of the first two or three, whatever, but back then, let me just tell you, [it was tough] to get Latinos who were in the financial planning program or the certified financial planning program, whether it was through the Denver College back then or wherever. But I was growing and I needed help. And I had to pluck kids out of the barrio and help them…move them to finish school. Remember back then, the community that I was in, we had…I think it was a 57% dropout rate in high school. Very few Latinos were going to college and graduating. And it was very, very difficult to find people to grow with. And I had to get kids out of the barrio and get them and help them, pay for their colleges and get them interested and get them into the CFP program, which took years for me.
Michael: So now you’re getting into this pinch, like, your work in the community is bringing media exposure, the media exposure is bringing more clients,and now you’re starting to get to the point of clients who could actually pay something, and the dollars were getting a little better, but suddenly you’re hitting the capacity issue on the other end? You know, “Bad news: I have no clients. Worse news: now I do and I have to do things for them and there’s still only one of me.”
Louis: Yeah, not only that. Let me just share with you, the best marketing guy I had in town was my dad because my dad basically said…he said, “Listen, you want to grow and you want to bring in clientele and you want to do financial planning.” And my dad says, “I know where your heart is at, but I’m going to tell you right now, the only way you’re going to get them is do tax returns at the beginning, and then when they come in, sit there and talk to them about financial planning.” So what I did is, like, for five weeks in a row is I did flyers around maybe about a 2 square mile. It’s a lot of walking, brother. I took flyers and put them in every single house, “Hey, Louis Barajas is a financial planner, but will do your tax return at a low cost to talk about financial planning. It’s almost like, you know, I’ll sell you a hot dog to give you legal advice.” And I started doing tax returns in the neighborhood. And when they would come in, I would spend 30 minutes doing the tax return and an hour talking to them about financial planning.
Why Louis Started Doing Financial Life Coaching [33:46]
But I started to realize back in ’86 that the planning was a little different than I was used to or was taught in the CFP program. And I will share with you…well, let me share with you.. for example, let’s talk about education planning. So you have to understand that first of all, it was very few Latinos were ever even getting into college, but the ones that were, very few were graduating. And again, over a 50% dropout rate in the local high schools back then. And you have to understand back then, most Latinos were unbanked. Forget about using financial products. But my goal was that if I was going to do education planning, it was not about which product to sell. Back then there were no 529 plans, but – I think we had different kinds of accounts – we did the UGMAs and UTMAs accounts of the brokerage. Okay.
But a mother would come in and I would say, “What’s important to you?” “Well that we want to buy a house and we want our kids to have a better life than ours.” And I go, “Well, what does that look like?” “Well, we want them, if something happened to, you know, my husband and myself,” the lady would tell me, “I would want my kid to be able to protect themselves.” That’s the word in Spanish. I don’t know how to say it in English, but that’s…in Spanish is, you know, “I would want them to be able to take care of themselves if we were no longer here.” And so what would that mean? And they would say, “Well, that they would get an education. Because they can take everything away from my children, but they can’t take away their education.” And I said, “That’s great.” So here’s the thing, I said, “So education planning is…so what do you want to do?” “Well, we want to start saving for college.”
So I realized that every friend that I had that came out of the barrio that was educated, not one parent ever paid for college. Not one. They all did it themselves either through grants, through school loans, through scholarships, whatever, but everybody was self-made. And so what happened was I realized that I had to look at things in a different way. So I said, “So tell me what you want to do.” “Well, I want to save enough money for my kid to be able to go to college so they don’t use money as an excuse.” I said, “But that’s not what you want.”
And I would say, “Close your eyes and tell me what you see.” “And so I see my daughter rising up on a podium and wearing this kind of dress.” And I go, “You mean, like, cap and gown?” She goes, “Yeah. And going up there and this tall, white gentleman giving her her diploma, and then coming down the stairs then, you know, showing me her diploma and giving me a hug.” “Oh, so you see your kid graduating from college, right?” She goes, “Yes.” “So that’s the goal. Not to have enough money for your kid to get into college, because only around 2% of the kids were graduating. You see your kid graduating from college, not getting into college.” “Yes, graduating from college.”
So I said, “So what success factors do you believe would make your kid…?” And they wouldn’t know because they’d never been to college. Remember, 99% of my clients were not college graduates. So I would say, “Look, if they have a high self-esteem, high test-taking abilities, whatever, and good grades, they’re self-motivated. But if they’re not, if they don’t have that, then no matter how much the amount of money that we save for them, they’re not going to graduate from college.” So I started asking, “So I need you to go back and I need you to bring me your son’s report card or your daughter’s report card.” So that’s what we would do. So I would have them bring me the kid’s report card. I need a letter from the English and math teacher telling me about how they’re doing in English and math because those are two… in the barrio if they’re good in English and math, everything else we can figure out.
You know, there’s a self-esteem course at your high school that they take a test or a high self-taking ability, like, a self-assessment test. Back then I forget what the name of the test was. But they would take it. And they would tell us basically what level their self-esteem was. If they had low self-esteem, low test-taking abilities, low GPA and their teachers told us that they were not doing well in English or math, I will tell you, Michael, no amount of money being saved, you know, in a 529 plan or any plan would ever work.
So what we did is we said, “Okay, so how much money do you have that we can use per month?” Well, they would say 50 bucks back then, 75 bucks. We would get them tutoring, we would get them coaching, we would get them…we would get family – sometimes the family dynamics were really bad… there was a lot of dysfunction – we would get family therapy. We would get them to take self-esteem courses. We would get them to do some traveling. And by spending in those things, we gave the kids and the family a better opportunity or a better chance to graduate from college than it was to go directly into some kind of mutual fund product.
Michael: Like, this to me just speaks of this monstrous monumental gap between what we typically teach or what we typically learn in traditional financial planning education, the CFP curriculum, and what you’re talking about here. Like, even just down to the mental shift of, “No, no, no, none of these parents are going to have the financial means to save to put their kids through college, the question is, what can they do with their disposable income to increase the chance that the kids are even able to get through college if they can get themselves there?” It’s just such a mindset shift, a planning shift, a strategy shift.
You’re saying all of this and, like, “Yeah, yeah, that makes sense. That makes sense.” Of course, you know, you help the kids get coaches or tutors or self-esteem course, whatever they’ll need so they can carry themselves through the adversity or the challenge of going off to college, yet I don’t know any other advisor who’s ever put that on the table as a discussion of, “Here are the things that we give financial advice to parents about to help their kids go to and get through college.”
Louis: But you learn in the graduate school – if you have finance and MBA – you learn that you want to use money for its highest and best use, right? Its highest and best use that will create the biggest amount of impact in a person’s life, right? I don’t know a mutual fund that’s really changed anybody’s life. So we’ve got to go back and take a look at, “How can we use money to increase the probability of living a life of dignity,” right? I’m going to share with you that in poor communities, it tends to be maybe people aren’t divorcing as much, but you see a lot of separations. You see a lot of parents living in two separate bedrooms because…what do they tell you that…what’s the number one reason for divorce? Most of the time it’s financial stress, right? And most of the time I believe it’s lack of communication that has to do with the financial stress.
So, in these communities, there was a lot of dysfunction among the parents and couples. And so when parents would come in and we would start doing financial planning, and I knew that because again, I’m from this community, the first question I would ask is, “Hey, before we start doing retirement planning or saving for long-term or whatever goal you have, I want to talk about your marriage. I want to talk on a scale of 1 to 10 how happy you are and where your marriage is at,” I said. Because Latinos tend to have more kids than most people, right? And so what happens is that if you have a strong marriage, your children and your family, your life is also doing okay. But if there’s dysfunction in the marriage or the house… because there’s a lot of what i call white elephants in poor communities….
And I would tell you that if they had $100 of a disposable income… I would share with you, Michael, that I can’t tell you how many times we would send… with that extra $100 of disposable income… we would actually get family therapy for them, because I want to know that this couple is going to be married 5, 10 years from now or longer. [I want to know] that we’re not saving for divorce attorneys, but that we actually are saving for their retirement.
So we would go through that type of coaching back then, right? And again, I don’t know when… this is back in, you know, 1990 when I’m doing this… I don’t know when the whole life coaching thing was going on, when life coaching really started, or financial life coaching, but I was doing financial life coaching back in ’91… not because I even knew what the term was, but because this was what somebody impacted on me, you know, when I was getting my finance degree at Claremont Graduate Schools, how do we use money for its highest and best use?
And I will share with you, we’ve had tremendous amount of success in the barrio over the years. But it was looking at, “What can you use money to be able to go back and tie to their values?” Because if you ask…ask any Latino you meet – and it could be anybody else, but because I work with Latino community – what’s the number one value? If you said, “List your values,” family is always first, but yet, if you take a look at a budget and see where they’re spending money on to building a stronger family, say, “So where in this budget is there to create a stronger marriage? Where are you spending money on your budget to have great kids? Where in your budget do you have a line item to live this great life that you want to live?” And most of the time, everybody is kind of on survival mode, right?
But if you really have these conversations, guess what? Not only would you get the family stronger or the kids who are now going from Cs to maybe Bs or B-pluses, but the parents would get excited about their kids getting good grades, seeing their self-esteem going higher, and somehow they would find the money where there was an extra $25 a month to put away in some kind of fund to be able to start saving for their kids’ education. Because then now they can actually see it maybe potentially happening, where one thing was a desire and a wish, but they weren’t sure if it was going to happen, now they had a better, stronger probability that was going to happen.
Michael: So you’re doing this kind of work, you’re getting some media exposure for it, which is actually bringing in some more clients and a few that have I guess at least a little bit more means to pay, so revenue is starting to grow, and you said you started trying to figure out how you get – I guess essentially – junior advisors, associate advisors in the firm, which for you meant going all the way down to the high school level to find them, teach them, get them through high school, get them through college, and then try to get them on the other end to come back and work with you. Like, is that what happened in the past?
Louis: Yeah, that’s exactly. In fact, I used to be…when I was at UCLA, I worked in a program called the UCLA Partnership program, where I would work while I was at school, but I would work at the local – in East Los Angeles and in Compton – the local high schools and junior highs. And believe it or not, years later, I went after some of those students and I said, “Hey, I can’t afford to pay you much, but I can help you maybe… also help you pay you with your… – they were in junior college back then or community colleges – and if you come work for me,” because they already…they knew my heart. And I had…you know, I had a couple of students come and work with me, and I trained them and I helped them and they grew with me. And then I went from two to… I grew to 11 people.
Michael: Like, 11 advisors or 11 staff?
Louis: No, not 11. We had four advisors, myself, that’s five, and then we had admin. The rest were admin. You had to become a certified financial planner. But it’s hard, right? It’s hard because, again, making payroll, not having a lot of really wealthy people. You know, we would high five if we ever got…you know, we were doing assets under management.
Michael: And you’re doing an AUM model on that basis? Like, you’re charging 1% or…
Louis: Yeah, we were charging… back then it was 1.5%. And also, we were doing tax returns. And if I could bill, if they didn’t come in then I would bill on a sliding scale. Back then was from 20 bucks an hour to 100 bucks an hour. Because understand that I was also starting to attract in the community some of the professionals. There were some doctors. We have a lot of doctors in those type of communities, and I was starting to recruit a lot of the nurses and some doctors. And then I would get some county workers that had decent jobs. I had a lot of teachers, husband and wives who were teachers, who were making back then maybe $40,000 each, so $80,000.
Our average household income was about…medical work you’re making about $35,000, $40,000, $75,000 household income. Husband and wife, it was an individual, usually about maybe $40,000. But we had a lot of people who were making, you know, 20,000 bucks a year, 24,000 bucks a year. And they just needed help. Well, they were starting their 401(k)s. And so we would go in there and help them select their investments in their 401(k)s. But we wouldn’t even open up any accounts for them.
Michael: So you’re kind of doing, I mean, versions of the model that a number of advisors have been kind of experimenting and exploring over the years, except you’re billing at $20 to $100 an hour and doing 1.5% AUM fees on $10,000 accounts if you’re lucky. Which, if I’m doing the math right, means your quarterly billing is $37.50 a quarter? Yeah. So just, you just had a whole bunch of clients to try to add up. And I guess the side benefit of… I’m going to assume at least you can employ people in your community for slightly less than what we probably have to pay associate CFPs here in the DC area.
Louis: Right, exactly. Now, again, this is….we’re talking about 20 years ago, right? Then we grew, and then we have had bigger clients. But, then our clients grew, right? A lot of our clients that started with us who had $500 with Schwab, you know, now have $1 million with us, right? Or they had careers that… we’ve got some very famous clients that started who were working just regular jobs, famous politicians or very famous actors or entertainers over the years. But, yeah, that’s how we started.
Everybody looks at it and says, “Wow, that’s fantastic. I’d like to do that,” but there was a lot of trials and tribulations. You know, there were a couple breakups. At one point I brought in a partner who was a CPA, and that’s when I started writing my books, and I was out of the office a lot. And I was trying to grow the business. And I was marketing the business. And when I came back, the whole culture was changed because that partner I brought in was not from that community, and he had a different mindset. So all of a sudden, there were two different visions. And I walked away from that business and – it was about 15 years ago – restarted my business. I actually gave him the keys to the office. and I said, “You know, it’s my fault that I’m writing books and that they’re doing well – that I’m speaking.” And I was actually speaking to underserved communities all over the country.
How Louis Got His Work Out on a National Platform [48:40]
And the way I was paying for it Michael is that I said, “Listen, at some point, there has to be some organization, some bank that wants to come and bank the unbanked. And if they could buy my books and we could give them away and they could pay for me to travel nationally and speak to all the underserved markets nationally, how would I do that?” And so I approached Bank of America, and Bank of America came in with my very first book and bought, like…I think it was, like, 50,000 copies of my book. And they had me speak at national Latino conferences. I would not have to sell any product, but I would do book signings at the Bank of America booths, and we would give away – I would have, like, 100, sometimes 1,000 people – and Bank of America would take my book from HarperCollins, they would redo the cover, and they would put, “Compliments from Bank of America.” And I would do book signings. And we would give my book away, the book that I wrote, “The Latino Journey to Financial Greatness,” is a book about overcoming limiting cultural beliefs about money. And that’s how I started to get my work out on a national platform.
But my partner didn’t like that I was out of the office. And the staff had joined because of my values, but the values changed when I was out of the office. And then I ended up walking away and starting over. And a few of the employees followed me, and most of the clients followed me.
Michael: Wait, wait. So help us understand a little more what happened there. So, like, you’ve got this firm, it’s built up to 11 people with 4 other advisors plus you. The business starts shifting.
Louis: I brought in a partner.
Michael: You brought in a partner who was, like, one of these advisors…
Louis: A CPA.
Michael: …that moved up. Okay, a CPA. So you’ve now got a partner as well who’s helping to run the firm, you’re starting to travel more because you’re doing the book and you’re getting out there and Bank of America is sending you all over the place to talk about and promote the book. And so I guess your CPA partner is now at home running the firm and running it in a different style than…like, didn’t have your management style to run the business differently?
The Setbacks That Forced Louis to Nearly Start Over From Scratch… Twice [50:43]
Louis: Yeah. Let me give you the straw that broke the camel’s back. So I had been gone for a while on a book tour, and I was exhausted, I came back. And my office was one of the very first office when you walked in in East LA. Well, we were back then in Commerce, like, a couple miles away from East LA. There was this older lady who was the mother of one of our clients, who had come in to meet with one of the accountants at the time, financial planners to do her taxes or something. And I guess she took the bus, and then the bus was, like, 30, 40 minutes late. And so she walked in.
Now, my ex-partner – even though he was Hispanic, he was more Anglicized – felt that Latinos, if there’s an appointment, should not come late, and they should be on time. And so, you know, there’s always this thing called Latino time, people don’t show up on time. And that’s just part of the culture, right? So, I’d just been back from a big tour, my door is open and the lady is there waiting. And I heard the receptionist call the accountant and say, “Well, reschedule her because Bill says if they come in – Bill was my ex-partner – if they come in more than, like, 30 minutes late or something, you know, we can’t see them. Tell them to come back. That’s how they’ll learn to be on time.” Well, this is a lady, honorable lady who had taken a bus. And I don’t know if you’ve ever had to do public transport, taken a bus, but they’re never on time, and they don’t run on time, and you might miss a bus and whatever.
So I called the accountant into my office and I closed the door. And she was shaking. And she goes, “Listen, I know that this is your firm and it’s our culture, but while you were gone, we were told that if somebody comes in late, you know, over 30 minutes, they can’t…we have to let them come back and reschedule.” And I said “Listen, this lady is in her 70s, she took a bus over here. If this was your mother or your grandmother, is this how you would want them to be treated?” And she goes, “Well, absolutely not, but you don’t understand. While you’re gone, you know, we’re having these meetings and I’m going to get in trouble.” I said, “But I understand, forget about that one.” I said, “I want you to see you’re not going to get in trouble.”
I then picked up…I got out of my seat. I walked…my partner was in the very back. Most people didn’t even know who he was because we had him in the very back. And I took my key for the office out of the keychain and I said, “Here you go.” I said, “I brought you to this firm, I think we both have different visions. While I’m gone I think you’re trying to manipulate the staff to have a different vision of what I came back was to help this community out. So I want you to keep the firm. I’m not going to even ask for anything.”
We had just bought a copier that was, like, 20,000 bucks, and we had paid cash for it. I said, “Just give me half of the money for the copier and take every file, every cabinet, everything and I’ll start over.” I said, “It’s not your fault that I wrote a book. It’s not your fault that my heart is in the community. It’s not your fault that I’m not focused on profitability. It’s not your fault. And I’m sorry for that. So I’m not going to ask for anything.”
And so I gave him the key, I walked out, I jumped in my car. I called my wife, and I said, “Angie, I need you to call a realtor and put the house on the market because I’m not going to be able to afford to make the house payment. We’re going to have to either move into an apartment or move into my parents’ for a while.” And she goes, “I have faith.” And so she found me a little tiny place to start all over again, and we never had to sell. We lived on credit cards for about six to nine months while I rebuilt the company. A lot of the clients came over. I had a few staff that came over. And I kind of restarted. But I didn’t restart a brand new firm, I just had to start all over again because I had built a firm with a partner then I realized that… you know, you can have a lot of partners in a firm, but you can’t have more than one visionary. And so that’s what happened. So I’ve started a few times.
And then, later on, a few years later, I had a couple guys that I had helped out to get their CFPs and everything, who…we started then working with more celebrity clients – and again, that happened organically, Michael. I didn’t go after them; I didn’t go after rich or famous people, they came to us – but they felt that they were not part of that side of the business, and they somehow for a year, unbeknownst to me, were telling clients they were meeting with that I was probably going to retire soon, or that I was only going to work with really rich clients and not work with community clients for a whole year. And then they opened up their own RIA behind our back for about six months prior to that, and they copied our RIA. And then all of a sudden I came back from a trip and they gave me an hour notice and left. As soon as they left, within minutes, Schwab was sending me email saying, “This client has just left you, this client has just left you, this client has just left you, this client…”
Michael: So they were building up the paperwork and getting ready to break away and take everybody all at once on a Friday or whenever when you got back.
Louis: Right. And on that Friday, they ended up taking 40% of the clients and left me. And they were the technicians doing most of the work. I felt betrayed to be quite honest with you. I didn’t care that they would have left and started their own firm. I would have actually helped them out if they wanted to start their own firm. I have a really abundance mindset, but it was the way it was done. So all of a sudden, I lost 40% of the clients.
And I called a few of those clients and they said, “Well, you know, they told us for, like, the longest time that you were so busy writing your books and speaking and you were coming out on television. Now you’re working with celebrity clients and that, you know, you’re getting older and you’re probably going to be retiring, soon. So that’s why I signed. But I thought that you had already approved that, and yadda, yadda, yadda.” And it was like, “It’s okay, don’t come back, just stay over there and I’ll figure it out.” And again, once again, my wife Angie was a backbone to everything that happened there, and helped me just kind of reboot and rebuild the company.
So when they left, they took a staff member, and we went down from 11 to 5, and then I went down to 3. That was about seven, eight years ago. And now I’m back up to 12 employees. And we’ve been the most profitable. And every time something happens, I continue to grow, and our revenue keeps growing, and the firm keeps growing.
Michael: I’ve got to ask about…a little bit more about some of these. I guess I’m even just stuck on the first part of the breakup with the partner. I love the statement you made, “You can have lots of partners in the firm, but you can’t have more than one visionary.” Which I think is brilliant, just a brilliant way to say it and frame it. But, you know, I mean I’ve seen a number of advisor partnerships that dissolve, that fall apart over the years, and, you know, for better or worse, most of them are not as simple as, “Hey, this isn’t working out, here’s the key, give me half the copier fee and I’m just going to walk away.” Did you have any thought or inclination like you brought him into the business, saying, “Hey, man, this isn’t working out, you need to leave. You came into this business, you’re changing the culture of the business, it’s not good, you need…like, it’s my business. I’m Louis. I made this, you need to leave.”
Louis: Yeah, you know, but let me share with you… so from my standpoint, I brought him in with a certain intention, and then all of a sudden, nobody knew that Louis Barajas was going to write books. Nobody knew that all of a sudden I was asked to be speaking at CNN in New York and being pulled away from the office, where I did a lot of the work. And all of a sudden he had the burden of having to handle the work.
And, you know, he wasn’t an entrepreneur, he was a technician who was brought into this firm, and it wasn’t his fault. I also understand that, you know, he also helped me build it. It’s never done by one person, right? You have a team of people. And so I felt as an obligation that if I would have walked away and got him away and I brought him in, it would have been a form of betrayal for him. And so since I was going to walk away and say, “Listen, I’m going to go back to doing what I originally intended to do and which I thought I was doing,” then I need to figure it out.
But you have to understand, it was that…when I told you about that story about the lady who was late, that was the straw that broke the camel’s back. So there was a lot of stuff that happened prior to that if you take into context. And so I believe that I can build and rebuild, and every time I rebuild it continues getting better and my vision gets clear, and I’m figuring out how to do it.
Because again, what I’m building right now was the exact same vision that I had when I left, when Rick Warren spoke to me at the coffee shop, at the Renaissance Cafe in Lake Forest, California, September 8th, 1990, right? I’ve always had the exact same vision, but I haven’t figured out how to get there… or how to get there fast enough or profitable enough or sustainable enough. And so it wasn’t his fault. It wasn’t his fault. The same thing like those two guys that left me. If they would have come to me and said, “Listen, this is what we really want to do and we have a different vision and we want to go back,” I would have helped them out. But it didn’t happen that way.
So my goal is always, “How do I leave a relationship?” And I don’t like to burn bridges with anyone. Really, to me, burning bridges is something…life has a lot of twists and turns. And if you live long enough, you realize that, you know, life isn’t perfect, and you’re going to come back to a place sometimes where you’re going to need help from people that things might have not turned out well but they respected you. They respected you. And those are the values that I got from my father.
You know, there was a time, I will share with you, Michael, that we almost went bankrupt. I didn’t even know how the hell I was going to make it. And we had a client named Jesse Perez, who was my father’s client, who bought a lot of property and my dad did a lot of ornamental iron work for him. And my dad told him, he goes, “Listen, my son’s out here, he’s doing financial planning and tax work, and I don’t know if you need him.” But my dad was this great guy who was trying to sell me all the time. And he was a big client.
And they called me, and I had a meeting with him, and they said, “So tell us what you do.” And then he said, “Listen, if you have half the integrity that your father has, I’m going to hire you on the spot.” And I said, “Sir, I have the same integrity as my father. My dad taught me what it is to be a man of respect and dignity and of transparency and honesty.” And he says, “You’ve got the job.” And he goes, “I don’t even know what kind of work you’re doing, but I will hire you.” And that was based on my dad’s values and integrity. And so to me, it’s leaving relationships. I’ve never burned anybody. I’ve always made sure that I put them first and think of them first, just like my dad has always done it.
The Best Financial Planning Advice Louis’ Father Ever Gave Him [1:01:10]
And my dad’s given me the greatest advice. I will share with you from financial planning. I don’t know if this will work with other financial planners. But my dad said, “Listen, every time you give advice in your office and the door is shut, you need to imagine yourself being on the rooftop of your office building, and your client is at the bottom with a whole bunch of people and you’re giving them advice. Because if you can give advice to them and not be afraid of saying to anybody who would listen to you because you know that’s the best advice that at least you know how and it’s transparent and it’s honest, then you know you’re doing the right thing.”
So it’s funny, right? It’s this visual that I have that when I’m giving advice to a client behind closed doors, it’s I’m on the top of my office building or the top of my house yelling it down to a whole bunch of people so they can hear. So I’m not doing anything that’s manipulative, or if anybody has anything to add to the advice to make the advice better then so be it, I’ll take their help. And that’s the approach that I’ve always taken.
Michael: So do you get to a point after all this where you get nervous about traveling because every time you seem to come back after a long travel stints and bad stuff happens while you’re gone?
The Hiring Changes That Helped Louis Build a Successful Team [1:02:18]
Louis: Yeah. And I’m doing a lot of traveling again. So you learn that…I learned that I am very entrepreneurial. I’m very visionary. I’m not a technician as much as I think I am. You know, the name of the firm, instead of being Louis Barajas Wealth Management is now called Wealth Management LAB. My partner is now my wife, who has been the backbone, has always been there for all the most difficult times of our lives and my life, for me creating those messes.
LAB stands for Louis Angie Barajas. It’s not laboratory, but it’s Louis Angie Barajas, that’s where LAB comes from. And she’s here. And she basically said, “Listen.” When she came in, she had been an HR manager, an accounting manager, goes, “I don’t know much about financial planning, I’ll learn it.” But basically, she says, “Let me do the hiring.” And so my wife has basically…Angie has always said, “I hire for heart. Everything else we do is not brain surgery, it can be taught. And if they’re coming from decent schools and they’ve got a CFP designation, we can teach it. But I hire for heart.”
So I let her do the interviews. Once she does the interviews then she’ll introduce me to the people that she thinks would be the best for our firm. And I let her use her intuitiveness and her experience on hiring great people. She’s never failed me. Well, there’s people that I’ve said, “Are you sure you want to hire this person?” And she’ll say, “Babe, this is the person for our firm and for our clients.” “But are you sure? Because I’m not sure about this.” And they’ve turned out to be the best staff we’ve ever, ever had.
So 100% of our team right now has been hired by my wife, based on heart. I’ve done a lot of training, and so I’m not worried about it. And we’ve also done a lot of checks and balances, and I’ve learned that also our greatest and most important clients, I hold that relationship with them. I have not abdicated that relationship to other advisors if these are clients I don’t want to see go away. Because I realize that at some point when it comes to money, there’s a lot of intimacy, right? There’s a lot of intimacy when you’re having these conversations. And sometimes they feel really close to that advisor. And if that advisor leaves you, well, they’re going to follow them. And if you’ve brought this client in. So you just have to decide what you want to do. But, no. But thank you for reminding me about every time I leave. Yeah, I’ve done the most amount of traveling I think in the last couple of months than I have an entire five years. But no, I’m not worried about that anymore.
Michael: Because Angie is holding down the fort.
Louis: Angie is holding down the fort. And again, I am telling you right now that the type of people that we’ve hired, what we’ve done is we’ve really focused on values. And before, I focused on their skills and abilities in the profession and their education. And now we really go back on values. And I can leave $100 cash on my desk, and they could be there. I could be gone for 2 weeks and that $100 will be…I know it’ll be there 2 weeks later, right? I have people I can trust.
Also, the type of work that we’re doing, Michael, is a little bit different, right? You know, being also business managers, we’re paying the bills for clients. We have access to their bank accounts and a lot of their financial information. We’re privy to what other financial planners are normally used to having. So I need to make sure that I have a lot of checks and balances. And I have a lot of these processes set up. And I have a manager also who’s overseeing things. But that’s why the interview process are focusing on values. And for us, it’s been a really big difference.
Michael: So I want to ask you a little bit more about just the nature of the business services now and what you’re doing, but first, I am wondering a little bit more about just this transition of having Angie come into the business. You know, you said, like, she was your wife before the first time you went out on the business and has been with you throughout. So I’m just curious, what created this transition, that after being, you know, with you as you’re creating these businesses for 10 and 20 years when she’s in her own career doing HR, like, what led to the crossover of her coming in? Like, why that change or why now?
Louis: Yeah. Well, a few things, right? One is that I had two daughters from a previous marriage, and she had a son. And one is the kids got older, and so she was able to help me out more.
Michael: Okay. So just shifting family circumstances, she had time to actually get involved.
Louis: The second thing is that she believes in my vision in helping the underserved. I mean, we both come from the same community. We both have the same type of parents, where, you know, if you’re usually the eldest in an immigrant family, you’re the one that’s…you’ve got to help out, right? You’re the one that everybody looks towards, okay? The other thing is that she’s traveled with me and seen the need across America. You know, I’ve gone out and I speak in Indianapolis, in Atlanta, and Chicago, New York, and in Miami, and the need to help underserved communities is great, and it continues to become a greater challenge. And so she has been my rock, and she’s the one that’s helped me execute my vision. And not only that, she keeps my feet to the fire, and she doesn’t…you know, so I get exhausted. It’s not been easy. And she’s been there for me and she’s taking care of me. And then when the kids got older she said, “Let me jump in and help you.”
And so, you know, Angie and I work pretty much. If I’m not on the road, I mean, she’s either on the road with me or she’s basically here, but we’re 24/7 together. But what drives us is the bigger vision of what we’re trying to do, right? It’s not just, “I want to help somebody do some education planning.” We’re trying to help…we’ve got a bigger vision of figuring out. I know we can’t, but if we could help underserved communities and be there and provide the type of advice that we’re used to helping on. Like the education example that I gave you. I know we can’t, but if we could get to that point, how can we do that? And so that’s where Angie’s thing…and she’s 24/7 now. She’s all into what we’re doing.
Michael: So talk to us about the business as it exists today. You said Wealth Management LAB. You know, I know you frame it on your site as a multi-family-style office, although you’ve got this, like, really interesting range of services you actually list. You’ve got hourly planning options, you’ve got comprehensive planning options, you’ve got this family office-style offering. You’ve also still got, like, books and a membership program for people to be more self-directed. So can you paint a picture for us of what the business is and looks like today?
Louis: So it’s wealth and business management. And what happened when I started, one of my clients…here’s a quick story. Let me just take a step back. So what happened was I did a commercial years ago for Hyundai in Spanish. And they had done the commercial, I think it was Suze Orman and Dave Ramsey who was doing in English, and they wanted to know if I could do it in Spanish, and I did.
And the actress in that commercial got to know me because we were there all day shooting this 30-second commercial. And she hired us to be her advisor for her and her husband. Her husband worked for Sony Latin. And eventually, he became the president of Sony Latin and he started referring me these musicians, iconic Latino artists. But we didn’t know the business management side. We didn’t know what it was to pay bills for the clients or pay tours or do the accounting. And they basically taught us. I mean, you know, he held our hand and she held our hand, and they taught us because they trusted us so much that they were going to refer us some of the top artists at their firm.
Michael: So you’re doing…you’re really…like, when you say you’re doing this blend of wealth and business management, like, this is a very literal, like, you are functioning like a business manager for these musicians and entertainers? Like, helping them manage their tours and their crews and I don’t even know what all goes into…
Louis: Yes, absolutely. Doing the per diems and buying their homes and buying their cars. And I’d never bought a yacht before, and buying a yacht. I had never purchased a plane before. I had to learn quickly how to do that. And paying the bills for their businesses, and making…helping them make financial decisions.
Now, understand this that in the world of the Latin entertainment side, there was no such thing as business managers. Business managers really kind of was in the American side. They usually just had an accountant who did their tax return. But a couple of them were doing that. And so right away I had to change our systems. We had to change the way we were doing things. All of a sudden I had access to their bank account. So now all of a sudden I had to change my ADV. I now had custody of funds. I now, all of a sudden, had to get a surprise audit being done. You’re talking about tremendous amount of change. I had to have client managers who were doing the day-to-day stuff. And our hours all of a sudden went from 9 to 5, which now all of a sudden went from, like, 6 in the morning to 10:00 at night.
But here was my epiphany, “Hey, this is exactly what I was doing for my dad. It’s outside of buying yachts.” I go, “I’m not doing anything different than I was doing for my dad. Doing their tax returns… same thing.”
Michael: Just another few zeros at the end, right?
Louis: There’s a few zeros. That’s it. And then what happened was, I don’t know when Helaine Olen’s book that she wrote, “Pound Foolish,” but that book really changed my life, which is another epiphany, right? I read the book, and over the years, I had this feeling in my gut that I wonder if we’ve really changed people’s lives. I know that we have because clients have been around for a while, but how many people did I really change? A lot of clients came in when, you know, we had a lot of…and we gave them a lot of great advice.
And Helaine Olen basically was the writer for the “LA Times,” right? She did the money makeovers. And she wrote that they went back years later to go interview some of the couples that had met with some of the best financial planners in Los Angeles and said, “I wonder if their lives had really changed from meeting these great financial planners.” And she found out that 90% of them probably lives hadn’t even changed. And most of them didn’t even implement any of the advice that they had been given. And I think that there was a study in her book that says around 11% of people really execute any of the financial advice from advisors.
So I said, you know, “Why was my dad now successful and traveling the world and doing well and didn’t even have, like, a sixth-grade education from Mexico and doesn’t really hear well and doesn’t really speak English, why…?” And again, because I did everything for my dad, and we’re doing everything for these artists. And I go, “Well, what if we did this for everybody else? It would cost more, but what if I could streamline it?” And so when I said multi-family-style office, it’s kind of tongue-in-cheek. Because when you think of a multi-family office, you’re talking about people who have hundreds of millions of dollars or multi-family-style office. I mean, multi-family office, maybe, you know, again, tens of millions of dollars. We have clients that don’t even have $250,000, but we’re actually doing kind of a lot of the stuff that we’re doing for all these entertainers. I go, “Why not? My dad deserves it. He’s a hard-working man who came here.”
Michael: Meaning you’re doing bill-paying and, like, managing those kinds of accounts, in addition to tax returns and stuff?
Louis: Well, the only thing we weren’t doing is bill-paying for the smaller accounts. What we were doing is that when we’re doing the…we’re reviewing let’s say their life insurance, reviewing their property and casualty, their auto, their home, and if we find that then we tell them, “Hey, you need to raise your deductible, you don’t have enough coverage,” we would now instead of telling them, we would just email their insurance agent and have them introduce us through their insurance agent. And we would say, “Hey, send me proposals. And I want you to raise their deductible and tell me what the premium would be. And I want you to get more coverage.”
And so instead of us going to the client, we would say, “Hey, listen, this is where you’re weak, and I’m going to reach out to your insurance agent. And we’re going to make sure that they make the changes. And we’re going to get the okay with you, and then we’re going to get it done.” Or, “Hey, you know what? We’re going to go and we’re going to help you, you know, change your 401(k). We need you to log on while we…well, you come in, when you get to the office, type in your username, type in your password, and let’s just get it done right there and then. I’m not going to tell you what you need to do, we’re going to sit there and we’re going to do it for you. And you know what? When …”
Let’s see, what else? “On the estate planning side, we’ll send one of our staff and we’re going to get…we’ll find you because again, you know, we don’t get any commissions or any referral fees, but we’re going to find you the estate planning attorney that’s basically based at your level, that we can help you at a decent price that you can afford. And we’ll sit down with them and you, and we’ll get the…make sure the estate planning gets done. And we’re going to send Isabel from our office to go to your house to make sure it gets notarized and it gets done. And we’re going to follow up and we’re going to follow through that the property did get properly funded and your property got retitled to your trust.” So it wasn’t just, “Hey, go ahead and do it and we’ll see you back in a year, see if it got done.” Because most of the time it never got done. “You know what? Get out of our way, let’s just get it done for you.”
Michael: How do you charge for this? How do you get paid for this? Like, you know, I mean, I hate to say it, from our, at least traditional advisor worldview, you know, what I hear is basically, we do this thing that takes a lot of time, and then we do this other thing that takes a lot of time, and then we do this other thing that takes a lot of time. You know, and I get, like, the value of helping clients to do it. You know, if I could bill all my clients enough, I could do absolutely everything for them. But for most of us, I think right or wrong, it feels like a constraint. So, like, what does this look like in your practice that you’re doing? Like, how are you charging for it and how are you staffing to it to be able to do this and manage your business?
Louis: Right. So we’ve gone from a staff of let’s just say…let’s say about 3 – no, about 4 years ago – of about 4 people, which was just Louis, another advisor, Angie, and another staff person, to 12 of us. So right now we have two EAs, enrolled agents. We have a full-time CPA. We have three…we have two CFPs. One who’s already passed his CFP designation, just getting the hours to get the designations. We’ll be three CFPs on board. We have client managers which deal with the day-to-day stuff on the business management side. I’ve got a couple managers.
We use a lot of technology, right? I use a lot of technology to be able to handle. Now, we can’t have a big client base, right? Because it’s a lot of work. And so there’s a team of 12 people helping. So instead of having, back then, I mean, when I said…when I was back in East LA, at one point we had 900 clients. Right now we have about 25 business management clients and we have about 120 wealth management clients, but of those really probably maybe about 50 that are wealth management clients. The rest are more investment review clients, you know, that we’ve had forever.
How Louis Sets Up His Fee Structure [1:16:54]
When we bill, we bill based on complexity and time we’re going to spend. So if a new client comes in, if it’s more of a retainer client, like I’ve got a regular client that’ll call me, let’s say that…I belong to the Garrett Planning Network and I belong to NAPFA and the FPA, but I would say 90…if i get referrals for wealth management or hourly or retainer, I would say 90% of those referrals are coming in through either Garrett or they’re coming in through NAPFA referrals, okay? Or my regular clients. But those are coming in through there.
And we’re saying, “Okay, so what do you have? What do you want? This is how we work.” And then I will, based on my experience of working with these type of clients, say, “You know what? That’s going to be about 12 hours of time, and this is what we’re going to do for you. And based on those 12 hours, it’s going to be…you know, I’ll multiply $250 an hour of 12 times 12, and that’s what I’m going to bill you. And if the project can be done in three months, we’ll get it done in three months.” Then we have these recurring clients that we’ll bill on an annual basis, and they’ll be anywhere from $3,000 to $6,000 a year. And these are the ones that we’re constantly monitoring. You want to know some of the technology that I use?
Michael: Yeah, please. Like, how are you powering this across all the people? Particularly, I mean, you’re getting, like, the depth of business management services. Is this just, you know, you’re really, really good with CRM or are there other tools you’re using?
Louis: Yeah. So the CRM, let me tell you what’s been a godsend to me. And there’s a lot of CRM, but I use Redtail, and I use 100% of everything that Redtail has to offer. And so we use the activities on Redtail where we keep track of all the workload for every client. And what we do, we become very proactive. So a new client comes in and they don’t have a…even though they haven’t asked us about getting an estate plan done, but if they don’t have one, we put their…get estate plan done. I assign it. So there are team members in my office that focus on making sure that the estate plan gets done There’s team members in my office that just handle…all they do is handle all the information that we get. The financial information is uploaded, scanned, answered in the correct format. We use Redtail as our CRM, but the activities or the tasks and who we assign it to and where it’s at.
And I have managers that all they do is manage Redtail, all the activities, the workload. And they’re making sure that they’re following up with all the other advisors, team members, where they’re at and what’s being done. And if they need help nudging the client, okay? We connect that with eMoney. eMoney has also been a godsend. I mean, I use eMoney. We have somebody that all they do is enter information on eMoney. So you can’t imagine how much information you get from a client, but every time we upload every year their auto policies, homeowner policies, life insurance, whatever, disability, health care, if they give us…they send us new information, we scan it, upload it. We use OneDrive to do that. We used to use Redtail Imaging, but we use OneDrive now to do it. It works better for us.
And now they’ve got to enter into the facts section of eMoney the new information, right? Because you just don’t upload the information, now you’ve got to upload it on eMoney because you’ve got new information. So we use eMoney to do a lot of the planning. And again, because it allows us to meet with the clients that are clients. Now, I have an office in Downtown LA, I have an office in Irvine, California, and I have an office in Miami. I also have a home in Tustin, that some of our staff work out of. I also have a home in Miami.
We use Zoom. We use Zoom to meet with pretty much now almost all our clients. Zoom works incredibly well, right? Most people haven’t heard of Zoom, but Zoom is like Skype on steroids. And it’s free. And so we use Zoom to be able to work with and show the clients on eMoney.
For the business management, we use QuickBooks software. We use to do some of the investment. Our custodian is TD Ameritrade Institutional. We work with Envestnet, that’s our TAMP. We use Envestnet. We use to look at software. You know, we use Riskalyze for the risk tolerance. We use Kwanti to look at the portfolios as well. What else do we use? We use a lot of software. But we have a lot of it integrated, and so it works really well.
Michael: So you end out with kind of this…you know, we mentioned at the beginning this, like, barbelled effect for I guess clients. Well, I’m presuming, correct me I’m wrong, like, when you get up to your 25 core business management clients, like, these clients are paying, like, tens of thousands ,tens of thousands of dollars a year for, you know, the amount of time and the staff that’s dedicated to supporting them on all of the stuff that you’re doing for them when you get down to bill-paying and buying houses and cars and such. Is it accurate? Like, you’ve got a chunk of clients or you’ve got this, like, tens of thousands of retainer, a chunk of clients that are in wealth management, and I guess, like, traditional retainers a couple thousand dollars a year. And then what happens on the other end? You know, I know your original kind of mission in going out and doing this was…
Louis: So we charge per hour. Yeah. So somebody comes in and they call me right now, and I’ll have…somebody will tell me, “Hey, I’m losing my house, or this is what’s going on, or, you know, I’m making 40,000 bucks a year. And I just got a job and I don’t know what investments to select or how to fill this out and can I get help?” So I’ll sit them down with one of our staff members, and we’ll see what they’re doing, and we’ll charge them an hourly fee. And then I won’t charge them my hour, we’ll charge them…it may be 50 bucks an hour, 100 bucks an hour.
At that point, to be quite honest with you Michael, I’ll just kind of get a gut feel for what’s going on. We continue doing a lot of pro bono work. Sometimes my wife will call me, the phone, the direct line will go to her sometimes, and she’ll say, “Hey, listen, I have this lady who’s just left her house. Her husband just abused her and then she’s with the kids. And they need some guidance or direction. And can you help them? And can you take the call right now?” And I put whatever down. I take the call, and I find the resources for her and guide her and whatever, and don’t even ever think about billing. It’s just like somebody who’s in need who calls.
How Louis’ 5 Immutable Laws Help Guide His Practice [1:22:50]
And we have a concept we call…I have these immutable laws that we use for our firm, but one of them is called “turn the turtle.” And it’s, again, I’m a very visual person, and turn the turtle basically means that if you’re walking down the street and you see a turtle that’s upside down, this turtle has no way in how it’s going to be able to turn itself over. Stop whatever the hell you’re doing, go to the turtle and turn it over, please. So the same thing we have with our staff. If you have anybody who calls our office is in need and they’re one of these turtles that need to be turned, stop whatever you’re doing and help this person in need, please. And that’s one of the values that we have in our firm. That if somebody calls and they take the call, and if they can’t help them, well, they can direct them to the right person within our firm to help them. That’s kind of our pro bono work.
Michael: All right, now I’m curious, what are the other immutable laws of the firm besides “turn the turtle?”
Louis: So one is…we have different stuff that we have here, but one is called…the first one is called “no que no.” And it’s a Spanish saying. My son would come to me and I would say, “Hey, listen, I need this technology. I don’t know where to find it, but I think somebody is using it.” And he would say, “No, there’s nothing like it. I’ve already done research.” And I said, “No, buddy, you just continue searching for it.” And then he would come back with a big smile on his face a couple months later and he goes, “Louis, I found the technology. I figured it out. I’m going to figure it out for you.” And when I say “no que no,” like, “Well, I thought you couldn’t find it,” you know, and he would be really proud.
The other one we have is called “climb the ladder.” Let’s see if I remember all five of them. But climb the ladder, meaning that whenever you’re doing work, stop and climb the ladder and take a look at from a higher perspective is take a look at what you’re trying to accomplish. Don’t get lost in the work that you’re doing. And it’s the whole concept of what I told you about the child, the mother doing education planning. Don’t think about the first thing is a 529 plan. Climb the ladder, take a look at the big picture, see what you’re trying to do.
Another one we have is “treat it like your own.” A lot of staff would go to my wife and say, “Hey, this is what’s going on with this client and this is what the insurance company is telling them,” or, “This is what the bank is telling them.” And my wife would tell them, “Well, if this was your mother, if this were you, would you accept their answer?” And my staff would say, “Well, no.” “Well, then treat it like your own. If this were you, how would you handle it? Go back and fight for the client.” So “treat it like your own” is one. Another one we have is “dive till you touch bottom.” And meaning that sometimes there’s things that are going on with a client and don’t try to solve the problem but try to figure out what the root cause is. And the last one is “turn the turtle,” “turn the turtle.”
So, you know, a lot of clients, they come in with their budget. When I say…the “dive till you touch bottom” is, we have clients who come in and they spend a lot of money, a lot of these entertainment people spend a lot of money, and a lot of times putting them on a budget doesn’t really help. Sometimes getting them financial therapy, Michael, works better than doing a budget. Because they’re spending money for a lot of different issues and you can’t corral them. I mean, working with entertainers is like trying to herd cats, right? And very difficult. So those are just some of the stuff. I do a lot of these things inside our office when we meet with the staff, but those are our five immutable laws,
Michael: Like, how do you view the balance of this? We’re doing high-end wealth management and then also still trying to serve the community. Like, is the key in your mind just this dynamic of…I mean, I guess you basically end out with three tiers. There’s the core. You know, we’ll call it, like, the clients that get the bulk of the bills paid. There’s the folks that we’re going to charge something because it helps make sure that they have skin in the game. It’s going to be a, you know, diminished number if it’s necessary just to help them, but, you know, we’ll keep this available on an hourly rate or a reduced hourly rate if necessary. And then occasionally we’ll have the pure pro bono “turn the turtle” kinds of clients.
Louis: Yeah. And also continue…I continue writing books and I continue speaking, right? And I get sponsored by people. And, you know, like I’m part of the certified financial planning board, the Center for Financial Planning working on diversity as well, right? That’s all kind of tied to that area.
Michael: And so from the broader perspective, so we talked about this a little bit earlier, but, you know, so much of the planning stuff you were doing and talking about with the people in your community, the folks in the barrio in East LA was just, you know, you were digging into issues and talking to them about things that we just don’t really teach and talk about in traditional CFP world. You know, the best strategy for getting your kids through college is, you know, forget all that 529 plan stuff. Like, have you just looked at coaching and tutoring for $50 a month because it’s a meaningful impact? Like, I get it. It’s incredibly logical as soon as you say it, but I don’t think it’s what comes to mind for most of us because we’re just literally not trained that way.
So when you look at this from the diversity perspective of the profession overall, you know, we’re something like 3% or 4% of CFP professionals are Latino or African American. You know, we struggle to attract minorities than I think we struggle to serve minority communities. Like, is this part of the gap why? Like, are we not teaching the right stuff to be relevant to a diverse population and just not even realizing how far off base we are?
Louis: Well, there are a couple issues, right? One is endemic is that there has to be a business model that makes sense to attract a young Hispanic or African American kid to do the work that I know they want to without having to feel like they have to sell some kind of expensive product or high commissionable product. And let me just tell you, it’s been 30 years of struggle for me to try to make it work. It’s never been easy. I think I’ve mentioned several times that I’ve quit 10, 20 times. I’ve said, “I give up. I’m going to go work in Newport Beach and work with the super wealthy.”
And I just want to mention something about working with these celebrities. Most of these celebrities, I work with the minority community, Hispanic community, they all come from very impoverished backgrounds as well. And believe it or not, they’re even higher targets than people that work in very poor communities. So even though they’re making a lot of money, we’re charging them a lot of money, but we feel that there’s a higher level of protection and transparency that we need to do for them.
But what it is is you’re right, we’re not teaching people how to approach it because you can’t. The only people that are going to get it are the people that come from these neighborhoods. So we have to go into these neighborhoods and we have to get people passionate about helping their communities and showing them that there’s also a…there’s a business around this that you can build that can be profitable, that you can make money. You can also have financial dignity for yourself and not feel like you need to sell something. And so I think I kind of figured out the business model from it. You know, one of the things I’m going to be doing this or soon is, I think, you know, Dave Yeske, right? He asked me if I can come and teach Golden Gate University, teach a class on the business models for financial planning. I’ll be doing that in the fall this year.
Michael: So what do you…like, what’s the business model that cracks the formula for this? Is it just broadly speaking doing fee-for-service? Just being prepared to charge hourly for whatever people need from the community and just hustle enough clients and hours to make it work?
Louis: Well, yeah, but here’s the thing. I think that most people that come into the profession come in as…you know, I’m going to go back to this Michael Gerber and the E-Myth. You know, just because you know how to do something or you’ve been trained doesn’t mean you know how to run a business that does that something. And so what happens is a lot of people come in this profession and they come in from a very sales background. And even though they’ve been taught planning, they still have to sell. And there’s nothing wrong with selling. In fact, you know, the visionary has to be the number one salesperson in their business, but they have to come in knowing how to build a business that can be sustainable and profitable, and what it should look like and what the team members.
And that’s why, to be quite honest with you, I’ve done Strategic Coach, I’ve done E-Myth. I do a blend of both actually, Strategic Coach and E-Myth. I’ve taken the best. I’ve tried to get both Michael and Dan Sullivan together and figure out how they can put this together and they can create the best book in the world, but I don’t know, they won’t do it. But what I’ve done is, you know, I wrote a book called “Small Business, Big Life,” which is a lot of the concepts from Strategic Coach and the E-Myth and then blended it. That’s what needs to happen, I think. And I think that we need to get kids from these communities that understand really…and also, we have to understand that there are a lot of people out there in the Anglo community that could be offering the service as well. They just have to think about things. And I go back and think about how they can use the highest and best use of money for that family and be culturally sensitive.
Michael: What’s the business model end of it? I mean, what do you see is the secret to the business model that makes it work where others have struggled? You know, what you’re going to, I guess, teach for Yeske’s class.
Louis: Believe it or not, I went back, and again, isn’t it funny that this whole epiphany was about Agapito Barajas and Louis Barajas as an 11-year-old, as a 12 or 13-year-old helping his father and I’m actually taking control? What I did with my parents was, I didn’t get them help, I just took control. And so the business model is that there are a lot of people out there that will pay and value the services if you do the work for them. Because they don’t…what happens, you give them advice, and a lot of the way we speak in the profession that we have goes over their heads or goes through one ear and out the other. And because they’re embarrassed to tell you that they really didn’t understand you, they go away, they’ve paid you and nothing got accomplished. But if you actually did the work for them, they would pay you for it. Because I’ve seen…
Look, I’ve seen people in impoverished communities pay $200 a ticket to go see a concert. You know, they’ll go spend 400, 500 bucks, but they won’t spend 500 bucks on a financial planner, or they’ll spend more on different things. And it’s a matter of priorities, but it’s a matter of seeing that the money they’re paying you, that they sacrifice, to say that it’s really changed and impacted their lives. And so I think that we’ve missed the boat by not doing the work for them. They’re willing to pay you even more if you get it done for them because they see the value and the impact. So that’s just my take on it because it’s working for me. And I keep attracting and we keep growing. I mean, you know, I’ve gone to 12 people and we’re looking at hiring 2 more people. And who knows where I’ll be two years from now. But back to doing the work for Agapito Barajas, it was for my dad that’s changed everything for me.
Michael: Well, and it’s an interesting point that because of our roots in the industry, I guess, around selling insurance, selling investments, where we’re only supposed to be doing the products and, you know, custody is, like, the evil, banned thing, you know, never have custody of clients’ assets, like, you make an interesting point that when you go to the other end of the extreme, like, no, no, no, get in there and do all of it for them, right down to helping them with their bank accounts and their bill-paying if you want, and just deal with the custody and the surprise audits and the rest. You now open up a new and different kind of business and marketplace for people that really don’t want advice, they just want to pay someone they can trust to do it.
Louis: That’s it. You nailed it. That’s it. And I think people are willing to pay for it because, hey, I don’t think people are paying for it. But I will share with you that it’s a boatload of work. And let me tell you, 10 years ago, I was not doing one-tenth of the work that I was doing. Now, it was really easy to bring in assets under management, charge 1%, 1.5%, whatever you were charging back then, and, you know, do modern portfolio and asset allocation and let everything just basically flip the switch and answer whenever they would call you and have your quarterly meetings that nobody would really even have quarterly meetings because you couldn’t get your clients to come in quarterly. You’d have meetings once or twice a year.
How (and Why) the Industry Will Move Towards Financial “Doing” [1:34:50]
You know, we’re working really hard for our money, but again, I go back to…my personal belief is this is where the profession is going to get to eventually. That I think that at some point, that most of the work that we’ve done in the past because of technology is being commoditized, and the real value is going to be the work that we have to do. And unfortunately, the work means that the advisor now has to roll up his sleeves, really has to read a lot, really has to be in tune with what’s going on, and he’s going to have to do a lot of the work. If they don’t have that kind of work ethic, they’re not going to survive.
And I think the older planners that have older clients that everything is copasetic and nobody is questioning anything, that eventually is going to end. Give it another 10 years, 15 years, 20 years max. But most people now are either going to do it themselves, but I just think that every…my personal belief is everyone needs a financial planner. And I think behavioral finance is also a crucial role. Financial therapy is a crucial role for the new financial planner. So that’s my take on where the industry is going to be.
Michael: So, you know, you’ve had all of these ups and downs of…like, you made an interesting point, you built the business, then you had to split with a partner and had to go backwards. And you built again and had the split with the 2 advisors who left and took 40% of the clients. And then you rebuilt again. And as you said, like, each rebuilding is actually taking you to a bigger and better place than the last one. Like, I’m sure at the moment they don’t feel like one step back to take two steps forward, but they effectively have been for you. But I’m just wondering, like, how do you stay positive and keep pushing through it? Like, most people would have probably quit at any number, like, a dozen different places that you raised some of those issues.
Louis: Yeah, it’s been tough. There have been times where I got really sick actually from the emotional stress of those things that you had just mentioned. So, you have to have a belief that what you’re creating is something bigger than yourself. And it’s not about me figuring out how I can make more money or make money, it’s about what we can do to change lives. And I go back to this whole thing, I know I can’t, but if I can create something that will leave a social impact, if I can create a model that will be the model that I saw in my brain or in my head, you know, 30 years ago, this vision of what it would be to take care of Agapito and Sarah Barajas with dignity, with care, with transparency, with honesty, with no sense of manipulation, with clarity, what would it look like? What would it feel like? And I continue to get there. And so that’s what drives me.
But also what drives me is also, what gets me excited is that the technology that we have now that wasn’t around 20, 30 years ago, that’s available to be able for me to do work where I can go online if I want to and avoid having to deal with an insurance agent and get my client directly term insurance without a commission, at lowest cost. There’s now…all those products, all those companies have just popped up in the last what? Six months to a year, a year and a half, right? These robo-advisor stuff, some of this stuff is really good, Michael, and it really works. As much as people say it doesn’t, but it works. But you still need somebody to hold your hand. But nobody is going to do that inexpensively. And at some point, they’re going to continue getting better and better. And so you have to embrace the technology.
And let me just share with you, that technology is going to open the doors for the masses that did not have accessibility to those type of investments because they didn’t know that they didn’t know that they could have this, right? So my job is to open up the doors for that. I mean, those small accounts right now, I use Betterment Advisors. That’s what I’m using for the real small accounts. So we don’t turn anybody away. I don’t have any kind of minimums. So that’s what keeps me excited.
You know, Michael, the Bob Veres’ of the world, the Michael Kitces’ of the world, you guys you tell it like it is. That’s what gets me excited. You’re not afraid to say what needs to be said without any form of manipulation. And that to me is what gets me excited. So I think we’re moving in the right direction, and I think that there’s a lot of support for me that I didn’t have in the past.
Michael: It’s a fascinating dynamic to me that, you know, for all the fear around the rise of technology and, you know, even if it doesn’t completely put advisors out of business, I think there’s a lot of fear that at least it will shrink the advisor market as the number of clients who need, you know, call it the fancy stuff we do will be fewer because it just gets simpler and simpler with the technology. But the thing that’s always excited me about the evolution of the technology is the way that it makes the pie of who we serve bigger, because it makes it feasible to serve clients that we otherwise couldn’t and wouldn’t serve.
And, you know, the most fascinating case in point example for me, and there’s been a bunch of studies done on this now. When the ATM, the automatic teller machine, was introduced back in, God, I think it was, like, the late ’70s, there was a whole bunch of fear and concern, in the most literal sense, like, automated tellers were going to replace tellers and that there were going to be no more bank jobs because the ATMs were going to destroy all the teller jobs. And what actually happened over the subsequent 30 years is that the number of teller jobs went up for 30 years after the automated teller machine showed up. And when the economists went back in and kind of did the post-mortem, like, how did everybody get this so wrong, you know, they were absolutely right that the introduction of the teller machine dramatically reduced the number of tellers that were in bank branches. You know, really changed the landscape. It really did kill jobs and tons of bank branches.
But what changed was that, when the technology showed up, it was so much cheaper to run a bank branch that only needed two tellers and a bunch of ATM machines instead of six tellers, that the banks opened drastically larger numbers of branches in neighborhoods and areas and communities they never would have had a bank before or a branch before. And the end result was fewer tellers per bank, thanks to the technology, way more bank branches, and the total number of jobs went up because the pie of who got served increased even faster than the jobs were being replaced by the ATMs themselves.
And I see very much a similar path coming for us in the advisor world, that, yeah, you know, individual advisors may be able to serve more clients and we may need to do fewer things for these clients because more and more of it gets automated by technology, but then there’s all these clients that we can’t serve today because there’s just no cost-effective way to do it, until the technology makes it easier and easier to do things and automate things and make sure that everything is getting done properly. And suddenly you start opening up markets that didn’t exist before. Like, I’m just imagining the business model you’re talking about now, if you’d been trying to do this 20 years ago with, like, the server version of GoldMine or Act!, or all the, like, really simple databases that we had back then, you couldn’t do it. You had to wait until the technology got to the point that it was feasible. Now you’re doing these new things for new clientele that no one has been doing before because we needed the technology to show up to make it feasible.
Louis: Absolutely. Yeah, it’s 100% right, you know. And you tell me…you know, I always go back to someone I once heard, I don’t know who it was, that said, you know, financial planning is about a process, not a product. And I always go back, you know, I think financial planning is about people and not a product. And if we really…you can’t lose putting people first, right? This whole concept of fiduciary, the concept that we’ve been talking about for the last few years, fiduciary, it’s nothing more than, you know, the golden rule, right? And so all I do and I continue to grow and I use the technology, and I continue hiring more people not less people is because our focus has been…is put someone else’s interest first. Take care of them. Don’t worry about yourself, take care of them, they’ll take care of you.
And at least for right now, it’s working for me. I’m very excited about the future. I can’t tell you how excited about the future. You know, there were times where I couldn’t sleep because I was so stressed out about money, but right now sometimes I have a hard time sleeping because I’m so excited about all the stuff that we’ve got going on.
Michael: So what comes next for you? You’re the visionary guy, like, what’s your vision of what comes next from here?
Louis: Yeah. So I’d love to make this multi-family-style, “wink wink” right, office available to almost anyone. I’m trying to figure out how we can use systems, I’m a very systems person, and the technology, and with the staffing to make it as affordable as possible. Doesn’t mean it’s cheap but is affordable as possible. So that’s my vision right now for the masses.
I’m writing another book called “The Encorepreneur Revolution,” because we’re getting a lot of people coming to us who are people who are retired and starting businesses again, who want to create businesses from a different perspective, not for success, but for significance and social impact. And so I’m working with Michael Gerber on something right now, some coaching program. Actually, some small business school that he’s trying to do online. And then, you know, I’d like to, you know, continue building the staff so that I can kind of step away a little bit so I can do some teaching. I really love to teach. And so right now I’m going to be doing…I taught at East Los Angeles College, but it was very difficult for me to be in one place at one time because I travel so much. So Dave Yeske asked me if I can teach a class at Golden Gate University this fall, which is an online course. So we’ll see how that goes. So that’s what’s next.
Michael: Very cool. It’s very cool. So as we come to the end, this is a podcast about success, and one of the things we always observe is just success means different things to different people, sometimes different things to us at different stages of our own lives. And so as you’ve built this successful business and are now, you know, growing and reaching new folks in the community, I’m just wondering at a personal level for yourself now, how do you define success for yourself?
Louis: Well, simple. So remember I told you that I met Rick Warren at the coffee shop, and, you know, he wrote the “Purpose Driven Life.” Well, one of the things that he spoke to me that day in that 30-minute conversation was, he mentioned something to me. I explained to him that my grandmother had passed away, my uncle had committed suicide, my daughter was born. And he was talking about how blessed I was and everything I had and where I’ve been. And I had to use everything that has been…that has come to me in my life and use it for a better purpose. But he also said something that stuck with me my whole lifetime, and which is…he said, “I’ve never seen a U-Haul behind a hearse.” And what he basically meant was you’re not going to take anything with you in life. And the most important thing is that success is that you leave some kind of social impact, that you don’t focus on success but you focus on significance. Because focusing on things don’t really make you happy, right?
I love that Jim Carrey quote that…I don’t know even if he said it but it’s always…they put it on the social media. He says, “I hope everybody could get rich and famous and have everything they’ve ever dreamed of so they’ll know that it’s not the answer.” And because I deal with so many people who’ve never had and they think that by having things or more money or whatever is going to be the answer to their level of happiness. And I deal with a lot of people who have a lot of money but they’ve figured it out that that’s not it. And so I’m trying to figure out how I can take and create something that’s going to also create a social impact and significance in their lives by the use of money, but not for the end purpose of having more money. And I think that’s what will make me happy. Outside of the simple things, as long as I’m healthy and I’m happy, that’s success as well.
Michael: Well, amen. Well, I’m excited to see where the journey takes you next. It’s a pretty amazing shift to go from, “I’m having trouble sleeping because I’m stressed about the money in the business,” to, “I’m having trouble sleeping because I’m so fired up for the opportunities in the business.” So I’m really excited to see where it takes you from here.
Louis: Thank you, Michael. Thank you so much.
Michael: Absolutely. Thank you for joining us on the “Financial Advisor Success” podcast.
Louis: You got it. Anytime.