My guest on today's podcast is Matthew Jarvis. Matthew is the owner of Jarvis Financial, an RIA in Seattle, Washington that manages $240 million for 170 households.
What's unique about Matthew, though, is his ongoing focus on increasing the overall efficiency and profitability of his firm first by systematizing his business processes in order to deliver even more value to his clients... and then raising his fees so that he's fairly compensated for the greater, more systematized value that he now delivers.
In this episode, we talk in depth about how Matthew's practice has evolved since he was one of the first guests on this podcast, including hiring an additional advisor who is taking over 90% of the firm's client relationships so Matthew could scale the launch of his advisor coaching program and fintech solution, how by graduating clients that aren't a good fit for his firm (and referring them out to younger advisors who are) Matthew has managed to more than double his AUM in the past four years by focusing on onboarding increasingly higher net worth clients, and how Matthew uses a concept he calls "extreme accountability" as his own impetus to move forward on important (but sometimes unpleasant) business tasks… by making the status quo more even more unpleasant than the task itself.
We also talk about why Matthew feels that mastermind groups are so important (and the specific steps advisors can take to create and nurture their own mastermind groups), how Matthew decides which clients to "graduate" in order to improve the performance of his practice (and the things he does for those clients to make their transition as smooth as possible), and Matthew's thought process behind his decision to raise his fees (and how he communicated that increase to his clients).
And be certain to listen to the end, where Matthew shares how his entrepreneurial drive has continued in recent years, including the launch of The Perfect RIA advisor coaching program, a fintech offering, and two podcasts, how Matthew got over his own limiting beliefs and (as he calls it) "head trash" around hiring another advisor on his team by envisioning what he wanted his practice to look like five years from now and identifying what was standing in the way of him getting there, and Matthew's four rules for success, including, "deliver massive value, be intentional, do what works, and willpower is not enough".
So whether you’re interested in learning how Matthew honed his business process in order to deliver more value to his clients, how he doubled the size of his practice with only a slight increase in the number of clients he serves, or how he uses the concept of extreme accountability to move his practice forward, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Matthew Jarvis.
Resources Featured In This Episode:
- Matthew Jarvis
- Jarvis Financial
- Deliver Massive Value, by Matthew Jarvis
- First 2 Chapters of Deliver Massive Value
- The Perfect RIA
- The Perfect RIA Podcast
- Retirement Tax Services
- FA Success Ep 7 with Matthew Jarvis
- FA Success Ep 110 with Micah Shilanski
- The Value Of Advisor Mastermind Groups
- Matthew Jarvis' Letter To Graduate Clients
- Implementing Client Meeting Surges To Boost Advisor Productivity And Systematize Client Value
- XY Planning Network
- Fear Setting, by Tim Ferriss
- Extreme Ownership, by Jocko Willink
- Yosef Kolish
Michael: Welcome, Matthew Jarvis, to the "Financial Advisor Success" Podcast.
Matthew: Michael Kitces, thanks for having me back, buddy. I think it's been four years since we last talked, and it's a real honor to be back on the show.
Michael: Absolutely. I'm excited to have you back. Yeah, we were joking a little before the show that I didn't know that saying you're part of the two timers club is necessarily the best label to adopt, but we've been doing the podcast now for more than four years. You were one of the first guests that joined us, for episode number 7. There's so many stories out there of advisers, that we continue to tell, that we want to tell, that I'm excited to tell, but I think it's cool sometimes to get to come back and visit some of our guests that were on earlier, that were doing cool things, because the reality is just, our journey sometimes shift. Even when we got a lot of clarity about what we're doing and what we like and what we enjoy, preferences change, style changes, approach changes, sometimes our journeys go different ways than we expected. I think, in fact, for most human beings, usually the journey goes somewhat different than what we'd expected.
Matthew: The best-laid plans, yeah.
Michael: Yeah. And I know you've had just a lot of growth, a lot of evolution to the firm and what you're doing, and a whole other platform that you built since you were out on the podcast originally. And so, I'm really excited to have you back to talk about how the business has evolved in the four years since.
Matthew: Yeah, I'm really excited to chat about that. When we talked back, I believe it was 2017, I had just hit a million dollars of revenue, gross revenue, for my practice. And I had thought my entire career that that was really the gold standard, that once I hit that revenue mark, and I don't know how I came to that number, but once I hit that number, then I would just ride into the sunset. And of course, I was just 35 at that time. And then being on your show became what I sometimes call a sliding door moment. There's sort of this idea that something happens in your life that seems small at the time. We just spoke for an hour and a half. It seemed like it would be no big deal. And then suddenly the trajectory of my life changed dramatically. And here we are four years later and we've got a fintech platform and a popular podcast, and I've got best friends of advisors all over the world. And so, a lot of things changed as a result of that episode. I really want to thank you for that opportunity.
Michael: I'm thrilled by it. The evolution, even for our platform, for the Kitces platform, I know only a few people have heard the story. But when I was looking at getting launched with kitces.com, almost 15 years ago now, it was originally going to be a paid newsletter service. And I modeled it very much after Bob Veres, who still writes a wonderful newsletter, and had been doing it already at the time for many years. And I was a reader and follower of his newsletter, and saw this thing of he's sharing his expertise, and he writes it down and people pay him for it, and I'm like, "That sounds really neat," because at the time, I was sending articles into journals and trade publications, and was getting some stuff out there, but did it because it was fun and neat. I wasn't making any money at it.
And so, I had reached out to Bob and said, "Hey, I'm doing some of this writing stuff. I really look up to you in the writing that you do. I'm thinking about trying to do a newsletter thing the way that you do it. But I'm just wondering, what do you think? Am I crazy to try this?" because Bob wrote about practice management, and I wanted to write giant, long, nerdy tax papers, retirement research, and said to him, "Well, what do you think? Am I crazy to even try this?" And Bob had said, "I've seen your writing in the publications. I think it's really good, I think you can do this, and I'll help you get started."
And Bob actually connected me to the developer he was using, that he'd built his readership list off of, so that I could do it, because this was, like, 2007, so there weren't a lot of systems in place yet about how to build membership sites. It's not like today where there's all these turnkey platforms. I had no idea how to get started. So he's like, "I'll introduce you to my developer. I'll send a message out to my subscribers, saying, ‘Hey, you should check out this thing that Michael's doing.’" And that was the launch. And that was really probably the only reason, at the end of the day, I really managed to get the platform going, was that he had given me a little, that little extra push out of the nest, and a little bit of support in making that transition.
And so, it's always been a part of the philosophy for our platform as well, of just what can we do to try to highlight people that are doing cool stuff in the industry, and hopefully try to pay forward a little bit what Bob had done in getting us launched originally in the first place. So I'm just so thrilled to hear that the whole trajectory of the stuff that you're doing has gone in a different direction since you were on the podcast. That's just awesome to me. That's very much a part of what the whole platform is built for for what we do at Kitces.
Matthew: Well, that's fun to hear the backstory on the Kitces platform. I've read your analogy about that iceberg about people see, right? They see the Kitces empire, which that's what I'll call that. I know you don't call it that, the Kitces empire, right? And think, "Well, Michael just goes to these events and he says hi to everybody." But it is, as you said, years and years and work. And I'll confess, I am a compulsive kitces.com reader. I at least scan every single thing that posts on your website and I'm there, I hate to admit this, almost every single day. That's like my go-to, like a cup of coffee in the morning and go to kitces.com and see what's been posted for the morning. So, I'll confess that's one of my guilty pleasures.
Michael: Oh, I appreciate that. I appreciate that.
So, help fill us in a little bit more about just the evolution of your business. Paint the picture back for where we were in 2017.
How Matthew’s Practice Has Evolved Since His First Appearance On The Podcast [08:19]
And, for anyone who's listening, you may want to actually go back and hear Matthew's original episode as well. So, this is episode 247. That was episode 7, so kitces.com/7, and you can hear Matthew's original episode with us. But the picture you paint at the time, as you know, you had just hit a million dollars of revenue, which I think is just...it is a milestone in the industry. I think it's probably some function of “million-dollar producer”, “million-dollar round table”. Like, we've kind of built up to a million dollars as a threshold number. There's probably just something human about it as well.
We still talk to a lot of mass affluent clients where the dream is being a millionaire, and getting to a million dollars. So just, there's something magically round about the number, so, often becomes a goal. You were at a million dollars of revenue, but the head-turning piece at the time was a million dollars of revenue, three-person team, where, only, air quotes, “only” a 3-person team," 150 clients, 50%-plus profit margins, and you were basically saying, "Look, I'm good for where my clients are, my revenue is, my income is." And so, your whole thing at the time was, you were not optimizing for “how do we get more growth or how do we get more revenue?”, necessarily. You were optimizing for days of vacation, and were literally tracking, you were up to like 80 days of vacation. Like, every 80 business days that you were taking off for vacation, and were trying to nudge that number even higher, by just systematizing the practice, and time-blocking, and meeting surges and all these different strategies that you had in place, to make that efficient. So, at the time, I think you represented this quintessential high-profitability lifestyle practice, like, "here's what you can do when you take a focus on this." So, now paint the picture for us. Like, how does that evolve? Are we still hanging out there, or does it look different now?
Matthew: Yeah, so, a lot of my practice is largely the same, other than we've grown. So we're now at $240 million of assets. I just hired, last year, another full-time advisor. So now, we have a team of four, including myself. So I have myself, we have Alex, to whom I'm transitioning 90% of my client relationships. And then we still have Nathaniel and Colleen, who have been with me for a long time. And I maintain taking my days off. So, I've gone from 80 days off, work days off, business days off, to 150. I even took a six-month boat trip with my family through The Bahamas. So, I maintain this lifestyle practice, but one of the things that happened, Michael, after our episode, is I started getting dozens of calls, hundreds of calls, even to this day, from advisors saying, "Matthew, my goodness, I didn't think this was possible what you were doing. Can you show me the way?"
And at first, I just said, "Yeah, yeah, I'd love to." I was just flattered that someone would reach out to me. So we'd talk about surge meetings, and raising fees, and being more efficient, and doing one-page financial plans, and guardrails. And then that evolved into "The Perfect RIA" Podcast, which now gets about 20,000 downloads a month. It evolved into "The Perfect RIA" coaching program, and now a fintech offering, to try to help other advisors do what I've done and what my business partner, Micah Shilanski, have done in our own practices. So, it's quite a trajectory. So, Jarvis Financial is still hyper-efficient, highly profitable lifestyle practice. "The Perfect RIA" is really how we're helping other advisors do what we do.
Michael: So, walk me through a little bit more of the evolution of the practice. I think at the time, you were $100 million under management, about 150 clients. You're now at $240 million of management. Is client count growing with you? Are you just moving up to more affluent clients, but the count is similar? How has client count changed when your AUM went from $100 million to $240 million?
Matthew: Well, we certainly had the advantage of a lot of market growth, right, since 2017. A couple of hiccups in there. We're at about 170 households right now. So, we did some graduation. We've increased our fees, so, when we talked back in 2017, we were 1% across the board. Now we're 1.5% for any household under $2 million of assets. So, we've not only moved up the food chain, if you will, we've also increased our fees, which we think is relative to the value that we're providing.
Michael: All right. I want to come back to fee discussion in a moment because, as you know, that's a hot-button issue and...
Matthew: Indeed, yeah.
How Matthew Has Been Able To Double His AUM Yet Has Only Increased Client Count By 10 [12:28]
Michael: ...I want to come back to that. But I actually want to start with just this, this shift in clientele, of, you were at 150 clients. Now you're, I'll say, "only” 170 clients. You've added a little bit, only a little relative to the AUM of the business, up more than double. Granted, as noted, some of that is market growth as well, but markets have not quite grown that much. They're not up 140%. So, talk to us a little bit more about how this has worked with clients. Are you doing a one on, one off kind of thing, every time a client comes on, you move one off to try to keep the count similar? Is it more from the other end, like some clients are attritioning by their own natural means, but you're replacing them with larger clients in turn? How is that shift working that you add only 20 clients, but the AUM more than doubles?
Matthew: Yeah, we certainly have some attrition, just by virtue of focusing on retirees. And I always say the worst part of our job is being friends and colleagues to these clients for 10 years, 20 years, and then you see them get sick and pass away. That's my least favorite part of this job. So, some of that is people passing away. Some of it is we do graduate clients on a regular basis. Now, I would love to do a one on, one off, but my head trash, like my limiting beliefs, keep me from doing that. I don't like raising fees, and I don't like graduating clients, because it crushes my soul. So I have to do it in batches. So, once a year, or every other year, we'll look and say, "All right, who's just not a good fit for the service? Who would be better served by a younger advisor who's focused on smaller accounts?" And then we'll graduate 10 or 20 clients all at once, so that it's just one really painful experience and not a death by 1,000 cuts.
Michael: Take me down that further, and I guess, just, we've...I love the label "head trash." We've all got our own head trash. So, I will admit, my head trash, and maybe this is just my head trash, is axing 20 clients at once, and the amount of revenue that costs is freaky. Like, only saying, "Okay, every time I get one, I'm allowed to give one up," so I never feel like I'm going backward, at least, to me, feels more comfortable. You've obviously gone in a different direction. So, just talk with me further just on this how you get to I'd rather do it in batches where a chunk of them go at a time, rather than trying to do a one on, one off, or a one in, one out sort of situation.
Matthew: Yeah, let's jump into that. So, I'm glad you acknowledged, Michael, that we all have head trash. I was working with an advisor, and he called me up and says, "Matthew, I'd like to talk with you." He has an $800 million shop. The guy's a brilliant advisor, he's been in the industry for decades. And I'm thinking, "My goodness, why would this guy with $800 million want to talk to me?" And he says, "Matthew, I've got this great office, this great team, but I'm not ever seeing my grandkids because I'm not able to do surge meetings. And I want to learn from you, Matthew, how you do surge meetings." "Wow, okay, well, let's jump into this." And he had his own head trash around that. So, no matter where you are, I think, in the success spectrum, head trash is still there.
Specific to graduating clients, if I do one on, one off, I'm adding work to my table by bringing on a new client and then I'm trying to clean that back up. I would rather move off of, graduate a chunk of clients, free up that bandwidth, and then I'd have room to take on new clients. So, maybe that's semantics, but I run into advisors all the time that I work with, they say, "Matthew, when I get to this level of revenue, then I'll hire an assistant. When I get to this level of revenue, then I'll get rid of these clients that aren't profitable." And I'm always telling them, "Hey, you've got to make the move first. You won't get to that next level until you take this really painful action, graduating clients, raising fees, whatever the case may be."
Michael: So, for you, it's much more of the perspective of, "Hey, I'm feeling like I'm at capacity. And if I want to grow more, then I have to clear some room on the bus so that I can put some people onto the bus". So, rather than trying to do the continuing, okay, new onboarding, new offboarding, new onboarding, new offboarding, which is a lot of work in of itself, I'd rather have the efficiency of, "We're going to off-board 20 at once, because then we can make the standard letter for all 20, we can have the conversations for all 20, we can do the paperwork for all 20, just, we'll do it in a big batch. Makes it a little more efficient to do it in a batch. And then we've cleared some space on the calendar. So now, I can go get the next few clients and not feel stressed about the capacity limitations."
How Matthew Uses His Concept Of Extreme Accountability [16:56]
Matthew: Yeah, and I don't know that I'd have the courage to do it every time, Michael. If I had to do one a month, which is about the pace that we take on new clients, I don't know that I'd have the courage each time. I think each time, I'd have to decide, "All right, am I really going to do that? Am I really going to graduate this person? They've been with me so long. They paid my mortgage in my early days. Am I a bad person? Am I a greedy capitalist?" Like, whatever my head trash is. I don't want to go through that every month. I just want to, "All right, I'm going to do it." And usually, I have to deal with extreme accountability. I have to call my buddy, Micah Shilanski, and say, "Micah, I need to graduate these clients."
In fact, he and I did an extreme accountability over hiring an advisor, because I'd worked with my mastermind, saying, "Hey, I really need to hire an advisor so I can hand off client relationships." And I didn't want to do it, because I had all this head trash about hiring a person, and they would create a compliance nightmare, and how would I manage them? My buddy, Micah, he says, "Great, Jarvis. Hire an advisor by the end of the year, or you have to ride Uber Pool until you get that advisor hired." Which is good that I did this because, of course, Uber Pool went away during the coronavirus issues. But that was my thing. And I met with this advisor, Alex, who I hired, and I thought, "I really don't want to hire this guy. He's great, but I just don't want to do it." And I thought, "But I'm not going to ride Uber Pool." In fact, the deal was so bad that I couldn't even ride with my family. If I was going with my family to the park, I had to take Uber Pool and meet them there. That was our deal. And that was what I needed on my side to get over the head trash of hiring an advisor.
Michael: And so, that's what you're calling this extreme accountability, basically, "I'm going to go to my buddy and promise him to do something absolutely...I'm going to promise him I'm going to do something absolutely horrible to myself, because then I'm going to do it for the sole reason that I don't want to have to go back to him and tell him that I'm making good on this horrible bet that I've placed upon myself?"
Matthew: Yeah, because here's kind of the psychological hack. So, we have where we're at right now, and it's comfortable. Even though we might say, "Hey, I should be doing this, I should raise my fees, I should graduate clients, I should do value-adds," whatever that is, but the comfort of where we are is so much better than the discomfort of what we imagine to be... We say, "Oh, if I raise my fees, all of my clients will quit, and I'll be a bum and I'll be bankrupt." Okay, we have this imagined fear. So what we need to do is tip the scales and say, "Hey, the pain, this extreme accountability of not doing it, me having to ride Uber Pool, or I had an advisor who had to send $10,000 to his least favorite political candidate, or I had another advisor who had to, for every client he did not graduate, he had to fire one of his best clients." So, we have to make the real pain of not doing it more than the imagined pain of doing it, if that makes sense.
Michael: Yeah, yeah. The default for most people is change is scary, status quo is easy, so you're basically trying to attach really negative, painful consequences to the status quo, and make the status quo more painful than the change. And then all of a sudden, it's like, "Well, I guess I gotta do the thing, just so I don't have the consequences of the extreme accountability status quo I've just inflicted upon myself." I guess the fact that you inflict it upon yourself is...it still totally works. I could imagine a, "Yeah, but you're not really going to make yourself ride Uber Pool when the time comes, are you?"
Matthew: Yeah, so, the extreme accountability only works, I think, in a mastermind format. Since we had our Kitces episode, I do dozens of masterminds now, with advisors all over the place. It takes a couple of days to get to the point where you can do extreme accountability. Like, you and I couldn't do it over the phone here because we don't have that relationship yet. We haven't been out golfing together or skiing or mountain biking. We haven't sat in a hot tub and talked about what works in our practice and what doesn't, and really get down to this core issue of like, "What is it you need to do to achieve your next goal?" And now, we have this level of trust and transparency where I can say, "All right, Micah Shilanski, I give you my word that if I don't do this, this other consequence will happen." And you have that relationship and that integrity between you that you know it will happen.
Michael: So, it's not even just making the status quo more painful. It's having someone you have a relationship with to whom you will be either mortally embarrassed to not have done the thing, or mortally embarrassed if you don't follow through on the horrible thing that you inflicted upon yourself. It takes all of that bundled together...
Matthew: It does. Yeah.
Michael: ...to get us off the status quo. But that's the point, right? Like, status quo is hard. A lot of us get stuck there. Sometimes you really got to give yourself a kick to get unstuck, and so, that's literally the point of the whole mechanism.
Matthew: Yeah. And you need that relationship. So, when we all go to industry conferences, back before, when we were going to conferences, a lot of those discussions are pretty superficial. And I don't mean that as disrespect to any conference. I love going to them. What I mean is our discussions in the hallway are like, "Oh, what are your assets under management? How many clients do you have?" We don't ever say, "Hey, what's the one thing you know you need to do in your practice, but you're afraid to do it?" I don't want to have that discussion with a stranger. It's like financially undressing. And so, you need a platform where you can be that vulnerable with somebody, and especially in the independent space, I think in our entire industry, we're very isolated. We have these numbers we look at, "What's your AUM? What's on your ADV?" But what you're struggling with in your practice, nobody really knows that, and there's not really a platform for sharing that.
Michael: I know how you found it, because you made some connections through people who reached out through the podcast, but just for the average advisor, how do you solve for that? Because I still continue to hear questions from a lot of advisors of, "Okay, so how do I find a mastermind group?" Eventually we wrote a post on "Nerd's Eye View" about this, but I'll admit, I don't love the post, because it basically comes down to if you want to make a mastermind happen, you're pretty much going to have to organize it yourself. And we try to give some tips about how to do that, and I know some advisors that have gone that path and done that, but it's hard, because the first part of the solution is like, "Well, do more work." And sometimes you have to do that to get to the good outcomes. But as you said, advising can be actually a pretty isolating business and experience, and even just finding a mastermind group or the people to whom you can create that accountability system with can be really difficult for some.
Matthew: It can be. In fact, it's funny you mentioned that article. So, before I was on your podcast, I would send copies of that articles to advisors all over my geographical area, saying, "Hey, look, Michael Kitces is talking about these masterminds. I'm trying to put one together. Would you like to be in them?" And no one in my local area would want. They all said, "No, I don't want to." So then I posted it on the FPA forum. I said, "Hey, look, there's this Michael Kitces thing on masterminds. Who is interested in doing it?" And one advisor from Cleveland, Ohio, this guy, Matthew Daugherty, a great advisor with Ameriprise, he reaches out to me, he says, "Hey, we're on different sides of the country, but I'd love to do this." So we started doing a mastermind, him and I, just over the phone. Which isn't ideal, but it started.
But where I cracked the code, and this is what I'd recommend to listeners, is if you belong to XYPN or the FPA, or any group where you run into peers, pick some kind of fun activity. Like, "We're going to Nashville in September to run a Spartan race." And so that becomes our call to action. So I text all of the advisors I know that I've met through the FPA and through Kitces, you, and XYPN and wherever else, and I say, "Hey, I'm going to go run this Spartan Race. If you want to come do this with me, we'll rent an Airbnb for a couple of days. We'll do the Spartan Race one day. Each morning, we'll have some great coach or industry expert call in, do a virtual one, two-hour coaching session, and that will give us something to talk about as we go and ride go-karts or do golfing or run the Spartan Race." And that creates this format for getting together. And it takes a lot of pressure off of everybody, because I'm not saying, "Hey, I'm going to form this really intense mastermind." I'm saying, "Let's get together, let's have some fun, let's all pitch in for the cost of the Airbnb, let's pitch in to have Michael Kitces call us for an hour, pick his brain, and then it gives us something to work on for the day." So, that's the format that's worked really well for me.
Michael: Interesting framing. And I like the way you note that. Like, it takes the stakes down. It's not like, "Hey, I'm organizing a mastermind group and you all gotta come out," and then it's, when everybody shows up, it's like, "Wow, I hope I really execute this thing well, because I put this together and basically everybody is now staring at me for several days while I hopefully organize it well, which may or may not be my natural gift on this Earth to organize mastermind meetings." But it's a whole different level of stakes to say, "Hey, look, let's go run this 5K thing. If you're into running, come on out to..." right, and obviously, you could do it, I guess, over golf or...
Matthew: Well, anything. I've done mountain biking, we've done shooting matches, we've done skiing, all sorts of stuff.
Michael: So just, "If you like this thing, come out, we'll do this thing together, which just naturally creates a little time for connecting and chit-chat, anyways. But hey, we're going to tack a day or two onto it. We'll rent an Airbnb, just so we can all hang out together. We'll create a little bit of an environment where some conversations can happen, like hire an expert to phone in and just do an hour talking to us, because it'll probably cue up good conversation for the day, and let's see where our conversation goes."
Matthew: Yeah, and if there's five or seven of you, you can split an Airbnb. I think ours usually end up costing $2,000 to $3,000 a person by the time we divvy up all the adventures. And you could do it for a lot less. So if you were on more of a budget, you could certainly do it for a lot less. But that's worked really well for me. I've done dozens of those. We've done some big ones. We did a 50-person one last year, which was a little bit different. The key, regardless of the size, is you have to be transparent. You have to be willing to literally write on the wall, we use these giant wall post-it notes, "Here was my income, my gross income. Here's my net income, the number that no one wants to talk about. Here's the number of clients I have. Here's the top three things that are holding my practice back." You have to be really transparent with each other, otherwise, your conversations become very superficial, and you end up talking about economic commentary or what the tax law is going to do or something like that.
How Matthew Decided Which Clients To Graduate In Order To Improve The Profitability Of His Practice [25:57]
Michael: So, coming back to the discussion of just how you've, I guess, pruned the client base to stay with great revenue and AUM growth, but not necessarily doing a big growth on the head count itself, so, I am just wondering, how are you deciding which clients to offload in, as you noted, that world where, "Oh, man, they've been with me for a lot of years. They basically paid my mortgage when I was getting started, and who knew if I was going to survive, and I feel like I owe them so much, even though they are not a great client for me now mathematically." Right, and we're right down to the head trash space again. So, between the, "I gotta figure out who to actually cut loose when all of these are...or at least usually almost all of them are treasured relationships." Maybe we have a few that are negative PITAs, so that's easy to eliminate. But aside from the few that clearly are pain in the butt and we want to get rid of, how do you figure out who to get rid of, and just, how do you do it and pull the trigger on it?
Matthew: Yeah. At the end of the day, it usually involves making a list of all the clients without their names on it. So, I pull their names off, so I can be a little more business-focused on it. And then I just sort them by revenue, smallest to largest, and we just say, "Great, this is our least profitable quartile of clients." Now, again, I know a lot of advisors, listening to my own head trash, are screaming, "Wait a second, that's pretty selfish and that's pretty cold-hearted business." But at the end of the day, I am running a business. And we deliver massive value, and so that higher group of clientele, we can deliver more value to. Now, that letter that I send to clients, which, Michael, I'll be glad to send you a copy, you can post it in the show notes, let me make a note of that so I make sure that happens, it says, "Hey, listen, as we're making changes, as we're trying to become more focused on spending time with our families, we're trying to see who we can deliver the most value to. It's just really not a good fit for us to work together anymore. But, great news, I've found two other advisors in the area that I think will do an even better job than we're doing."
Now, again, my head trash says, "Well, nobody does as good of a job as I do." And that's not necessarily objectively true. But a younger advisor, who's trying to build a book of business, who's very hungry, they're actually going to give that small client more service than I'm giving them, because they don't have as many clients to focus on. So I can say that with integrity. We also then refund our last quarter's fee as a gesture of good faith. Now, you will pick out, because you're a real smart guy, you have to, right, if you're charging in advance, you have to do a pro-rata refund. We just refund the whole quarter's fee as a gesture of good faith. Also reduces the risk of a complaint, make that transition as smooth as possible to the new advisor. The client ends up winning. Now, they're not always happy, right? "Matthew, I've worked with you for 15 years. What do you mean you're firing me?" And so, that conversation can be tricky, but that's how we go about it.
Michael: To me, there are a few interesting pieces there. Refunding last quarter's fee, which on the one hand just makes it a little bit more gracious on the exit. If you're billing in advance, technically you need to do it anyways, but makes it a little bit more gracious for the client. I guess, mathematically, if by definition, you're carving off the bottom of the client base by revenue, won't actually probably be a huge financial hit, because you're not eliminating the highest client fees quarters, you're eliminating the lowest clients' fees quarter, for the past quarter. And I'm struck there, as well, that you said, "Look, we've already gone and found two other advisors in the area who are ready to service you. So it's a more graceful transition, as you noted, for all of us. Basically, no matter where you are in the spectrum, your C client is someone else's A client. And your A client is someone else's C client. Like, take your biggest client. There are still firms out there where they couldn't even get in the door with the assets that they have.
And for any client you've got that maybe isn't the most profitable and good fit for you, as you noted, somewhere out there, there's an advisor who is newer, has fewer clients, maybe just focuses on a lower end of the wealth or income spectrum, for whom that would be one of their top clients, and they're going to service the heck out of that person because it's one of their top clients, and the client will probably get better service than they were getting from you as your C client, just if we're honest with ourselves about what was going on.
How Matthew Finds The Advisors He’s Transitioning Clients To [29:54]
So, I am wondering, though, are you just scanning online to find a few other advisors that you might refer these clients out to? Do you literally contact those advisors? Are you interviewing 10 advisors to find the 2 that are going to be in this letter? How far down the path do you go of figuring out where you're going to send the clients that aren't going to continue with you?
Matthew: Yeah, I do literally interview the advisor, both. And so, I'll go to XYPN, I'll go to NAPFA. I'll go to the FPA, the CFP board there, find a planner. I'll find ones that are in the similar geographic area, though I know that's not as much of a restriction anymore, but in my mind, it is. And I'll talk with them, and I'll want to see what's your service model and how do you deal with these different things? And can you handle this level of complexity? And I do that for two reasons. One is when I graduate clients, but the other is I routinely have prospects call in who are below my minimum, especially when they're referrals from really good clients. So, if my best client refers me their neighbor, and I discover their neighbor's way below our minimum, I don't want to tell them just to pound sand and go away. What I like to tell them is I say, "Boy, Mr. and Mrs. Prospect, what I do is like heart surgery. I'm like a cardiologist. And what you need is more like knee surgery, like an orthopedic surgeon. So we need to find you a specialist and advisor who specializes in what you need. And great news, I know an advisor, his name's Dave, he's down the road. I'd be glad to make an introduction. Dave specializes in the type of service that you need."
Now, the advantage to me of this, Michael, is twofold. One, I can tell this person, "Hey, I'm not a good fit" without as much head trash for me, but the other is I can go back to my best client who referred them, and I can say, "Boy, thank you so much for the referral. Always glad to talk to your family and friends. We weren't a good fit for Dave, but we got him introduced to an advisor who I think is going to do a great job for him. Is that okay with you?" And they're always ecstatic, especially when we use the doctor analogy. They're used to seeing specialists. As soon as I say, I'm this kind of a specialist, everybody's fine with that.
Michael: It really does change the mental frame. I think for a lot of us, to imagine a client referred someone to us, and I'm an advisor and I say, "Well, I'm not a fit. I'm sending you to another advisor," it just sort of raises the natural question, "Well, why not a fit?" "Well, because you didn't have enough money." "Well, the person who referred me had enough money." "Well, that's going to be an awkward conversation the next time you hang out," and we get stuck very quickly down that pathway. But I love the analogy. If you think about this in a medical context, if you went to a cardiologist who said, "Your pain is really your knee. You really don't need to talk to me. You should be talking to an orthopedist, so I'm going to refer you to an orthopedist I know," no one faults the cardiologist for not seeing you about your knee. In fact, you're kind of thankful that they didn't see you about their knee, because their specialty is hearts.
When we think about ourselves in that specialist realm, or we just, we position ourselves in that specialist realm, turning down referrals that aren't a fit isn't necessarily the problem or the level of awkwardness anymore. It's just, "Hey, here's what I'm good at. But I want to let you know I totally found this specialist that's actually better for that person you referred, and they're in a great place now," with, I guess, just the asterisks that you, as the advisor, have to take the time to find that advisor, vet that advisor, or just in general, build your own network of other advisors you may refer to for various problems.
Matthew: That's right. I suppose you could certainly say, "Hey, I'm not a good fit. Goin peace." But that's tough. And so, I wrote a whole chapter about this in my book, about how to actually get referrals from clients. So, our new business still comes one-third from client referrals, one-third from center of influence referrals, and then one-third from my personal networking. And where most advisors go wrong with referrals is they tell their clients and say, "Hey, if you know anybody else that has a million dollars," or whatever their minimum is, "send them my way." Two problems here. One, the client doesn't know how much money their friend has. Problem number two, they don't want their friend to know how much money they have. So, instead, I tell clients, "Listen, one of the benefits of working with our firm is any friends and family you have that have any kind of money question of any nature, have them give us a call, and we'll get them pointed in the right direction. No cost, no obligation. Because they're a friend of yours, we're glad to do that," which ends up meaning about half the people my clients refer to me have totally unrelated issues. They want to refinance their credit card debt or get a student loan or something. I give them some great advice. I introduce them to somebody. The other half are a perfect fit, and they become amazing clients.
Why And How Matthew Increased His Fees [34:09]
Michael: So, now, talk to us about the second piece of this change in sort of the practice metrics. Your number one was have added a lot of AUM with only a limited increase in the client count because you've got this system for graduating some of the clients, moving them on, to create space for new ones that are a better fit, with more revenue per client. You also said you increased your fees. I think you'd said you were at 1.5% for anyone under two million. And I believe when you were on with us originally, you were at 1%.
Matthew: Yes. Yeah, we were at 1% across the board. And we did a series of fee increases, till...right now, we're in the middle of anybody under two million is at 1.5%.
Michael: So, I guess I have two pretty simple questions then.
Matthew: Yeah, please.
Michael: Why? And how?
Matthew: The why. The why is a tough one. And for anybody listening, whatever "why" I give, it might resonate, or they might say, "Hey, that's really silly." So, one why is we deliver a lot of value to clients. We think that the value we deliver is above average. Now, how do you measure that? It's a bit anecdotal, I suppose. And also, "why" is it's a free market, right? And when you had my good friend Micah Shilanski on, he talked about hotels. He said, "Hey, Motel 6 does not charge the same as a Ritz Carlton, even though from a utilitarian standpoint, they're offering the same service, right, somewhere to sleep for the night." So, again, we feel like our value is above average, and so we want to charge an above average fee. But it's a voluntary transaction. So we go to clients and we say, "Hey, we're raising our fee because we think it reflects our value. If you don't think so, we'd be glad to introduce you to some advisors who charge a lower fee." And when we do that, 45 out of 50 clients that we did it to, they all said yes. And a couple said, "You know what? No, I don't want to." "Perfect, great. We'll introduce you to another advisor." So, I don't know if that answers the why question. I have a lot of head trash around fees in general. I always have to have extreme accountability to do increase. But I think I keep getting better at what I do. I keep delivering more value to my clients. My fees should reflect that.
Michael: And so, did you just literally go straight from 1% to 1.5%? Was this an incremental, you went to 1.1% and then 1.2% and 1.3% and got there gradually, because you either were building up to it or didn't want to hit clients all at once, or was it just like, one year you decided, "Okay, this is the year we're moving our base fee from 1% to 1.5%, and everybody's either coming along with us or they're going to someone else?
Matthew: We did it in waves, but not as the fee, but to whom it applied. So, first we did it for clients...the very first time, we did it with clients under $300,000, so, really small, legacy clients. And then we did clients under $500,000, and then clients under a million. And then right now, we're doing it clients under two million. And at some point, I'll get the courage to just say, "Hey, it's 1.5% across the board," but I only have so much mental ability, like, so much courage at a time.
Michael: Interesting. So, in essence, it was kind of like you introduced a fee structure that said it's 1.5% on the first $300 grand, and told all the clients under that. And then you moved it to $500,000, and told the clients under that, and then you moved it to a million and told the clients under that. So, it was sort of a...I'm imagining just, the first threshold and the breakpoint kept just creeping higher over time, and that naturally captured a wider range of clients as you moved up that threshold.
Matthew: Correct, correct. And we have to remember, we, as an industry, focus around this 1% number, I think, just because it's an easy number to do the math on. It wasn't the 11th commandment. Like, it wasn't on the backside of the tablets that thou shalt charge 1%. And so, if we can charge any fee, like...I suppose as long as you're not doing like 2% and 20% like a hedge fund, your fee's in a range. What I see a lot with advisors, I did a whole chapter on this with my book, is they'll have really low fees. They'll be like, "Oh, these clients I'm charging 0.25%, or some super below average." And so, this idea of raising fees isn't specific to 1% to 1.5%, it's just saying, "Hey, if your value is increasing over time, your fee should reflect that." In my opinion. Now, some people will and have disagreed with that, but that's my approach to it.
Michael: Well, it's an interesting framing. If your value is increasing over time, so should your fee schedules, because I think that makes a subtle but important point. Like, we can acknowledge there's a difference between, "I'm a new advisor launching my firm from scratch and I want to launch my fees at 1.5%," versus saying, "No, I'm an experienced advisor. I've been doing this 10, 15, 20 years. We've really honed in our value proposition. We may not have charged 1.5% in the past, but darn it, we are really good at what we do now. And I think now this is a fair reflection of the right fee for the depth and quality and capabilities and systems that we've got."
Matthew: For sure. And I've had the opportunity to work with a lot of advisors to raise their fees, some from zero, some from a small number, whatever the number is. And we always start by making sure the value they're delivering in their practice is systematized. So, we do a quarterly value-add, we have our one-page financial plans, we have our retirement income guardrails. So we help advisors get really proactive with the value that they're delivering, really just by copying what we do, and then saying great, "Mr. or Mrs. Client, you can see all of this value that we're delivering that we didn't deliver before. We're adjusting our fee now to reflect that value."
The Quartley “Value-Add” Letter Matthew Sends To His Clients [39:09]
Michael: And what is quarterly value-adds?
Matthew: Yeah, so, early on in my career, when we were a state-licensed RIA, our State of Washington, Washington State, not the Capitol, they said, "Hey, you have to send a client a specific invoice for your fee. It can't just be the line item on the custodial statement." That was their ruling at the time. That may or may not be the case still. And so I thought, "Shoot, if I have to send clients a bill every calendar quarter showing them exactly how much fees were taken out, I want to demonstrate value with that same letter. So the letter would say, "Here's your fee. And by the way, here's something valuable we did for you this calendar quarter." So it was a combination of necessity and my head trash. And we're no longer required to do that because we've been SEC registered for a lot of years, but we had this habit.
So, every calendar quarter, once the quarter ends, we send some kind of what we call a value-add. So, for example, this quarter, we just sent out, "Mr. or Mrs. Client, here's a list of your accounts. And in dollars and cents, not percentages, here's how much your beneficiaries are going to receive." So, Michael, you and I can do percentages all day long. We can say 33% of this number is X. Clients can't do that. So, when it says, "Hey, Dave's going to get 33% of a million dollars," it might as well say, "Dave's going to get marshmallows." That's what it means to them. I don't mean that with disrespect, it's just not how their brain works. But if instead it says, "Hey, your son is going to get $330,000 in a lump sum when you die, are you okay with that?" now the client can resonate. They can say either, "Yeah, Dave's responsible, no problem," or they're going to say, "Dave's an idiot. And if he gets $330,000, he's going to blow it all in a minute." Now we can have a discussion on beneficiaries that's gone from abstract to real money, as an example.
Michael: Okay. Okay. And so, just literally, every single client's going to get a little letter that just says, "Hey, just a quick reminder, here's your assets, here's the beneficiaries, here's where it's going, here's who's going to get what."
Matthew: That's right, that's right. And so, we used to do it in my office with Excel. We use Fidelity as our custodian. We would download all this data, we would massage it in Excel, and we would generate mail merge, essentially, out of Excel. But then, working with Micah Shilanski and "The Perfect RIA," we've built it into a web platform so that people...because advisors would say, "Matthew, I love the value-add idea. How do I do it?" And I'd say, "Great, here's my spreadsheet. Knock yourself out." And they couldn't figure it out because, as you know, Excel can be really cumbersome. So now, we've built it into just a web-based platform, so that you can really easily push a button and generate this value-add. Two real advantages. Go ahead, Michael. I'm sorry.
Michael: Sorry, I'm just going to clarify, because at the end of the day, you still basically have to send off, like, create 170 personalized documents, so just, you want some way to, as you know, mail merge in, "Here's the clients' accounts, here's the percentages, here's the dollar amounts, here's what it adds up to, with the appropriate names. And if I don't want to manually type 170 letters, I need some way to systematize the synthesis of these things."
Matthew: Yeah, 170 letters, that's 170 households. Let's say there's an average of five accounts per household, right, husband, wife, an IRA each, a Roth each, and a joint account. So, what are we talking of? Almost 1,000 accounts for an average practice. So, it's work, right? You've got to really be committed. This is why we charge an above average fee. Two great things happen from this value-add. One, of course, I'm demonstrating value to the client proactively. The other is if I have a client pass away tomorrow, I know that I reviewed their beneficiaries just this quarter, because we did everyone's. What tends to happen is advisors forget about clients. And I don't mean that with any disrespect, just life happens. Client calls in and says, "Hey, I've got dementia. I'm going to go to a nursing home." "Oh, no. When did we actually review long-term care last?" For my office, I can look, and I can say, "Oh, that was in the Q3 of 2020. We did long-term care reviews for everybody. We know that you're at least up to date as of then." Same with tax planning, Roth conversions, estate planning, risk management, all of the areas of financial planning.
Michael: So, how do you explain what amounts to a 50% fee increase, just if you're going from 1% to 1.5%? Just, how does that get communicated and explained?
Matthew: So, I do it in a letter. And I'll be glad to send you that letter too, so you can post it. I don't want to do it in person. I just don't have the fortitude to have that discussion 50 times. So we send a letter to clients. We say, "Hey, we haven't raised our fee in this many years. And to reflect the value that we keep providing, here's our new fee, and that will be effective as of this date." The way that our fee agreement's always been set up, the clients have to sign, they have to sign a new fee agreement to make that happen. Some advisors do a negative consent. I'm not a huge fan of that, but they have to sign a new fee agreement. So it's like, "Here's the fee agreement, or, now it's electronic, "and we just need you to send it back by this date." And then if we don't get it by that date, we call them and say, "Hey, listen, we really need it by this date, or we're going to have to resign from your accounts, because we can't continue to be your advisor." And most clients just sign it and send it back. Some want to call and negotiate a little bit. Some really object, and I just have to be ready to deal with those. And by I, I mean really, me. I can't make my team do that. If a client calls and says, "My goodness, my fee was $10,000 a year, now it's $15,000 a year. I think that's ridiculous," that's a call I have to take, as the owner.
Michael: So, I am struck by just the point of, yeah, these conversations suck when you're doing it in person, one at a time, one after the other. You're put in a position where clients may beat you up about it. So just didn't do that. You just send them a letter, and the ones that are going to do a little bit of righteous indignation are still going to call, so you may not get out of those, a handful of tough conversations. But for all the rest, it's like you're just not putting yourself in the position where they may push back on it, then you have to deal with the pushback, because if they're going to be grumpy for a moment, by the time they get around to saying, "Oh, yeah, I gotta call Matthew about the fee increase," the indignation moment has already passed. They are just ready to sign it and move on.
Matthew: Well, and it's just the extent of my courage for to just be really transparent with you, Michael, I have my own head trash. I only have so much fortitude. This is my hack. Now, again, my good buddy, Micah Shilanski, he does them all in person. He sits down, "Mr. and Mrs. Client, are we delivering a lot of value to you?" "Yes, Micah, you deliver lots of value." "Perfect. Well, our fee is now this. Is that okay with you?" He can do that. I couldn't do that. I would not show up to the office. If I knew that was my day, I probably just would physically not show up to the office. I just don't have that fortitude.
Michael: So, what happened when you sent this out? Did you get clients who said no? How many of them called all upset? How many were fine? I don't know if you tracked it, but just, how did this go in practice? I think, for most advisors, well, any fee increase is scary. A number bigger than 1% is scary. The combination of the two is super scary. The magnitude of the fee increase would be probably even scarier for a lot. So, just, as we've noted, no shortage of head trash about how this is going to be a self-destructive, business-imploding decision. You're still here with us, so clearly, it wasn't. But how did this play out?
Matthew: Yeah, well, I'll take my...one of my more recent ones where clients that had between a half million and a million of assets. They were going from a million...excuse me from 1% to 1.5%. And it was about 50 clients. The first thing that I did was, and this comes from Tim Ferriss, the legendary author of "The 4-Hour Workweek." He has a TED Talk about defining your fears, called Fear Setting. So, the first thing I did was write out all of the things that I thought could go wrong, that these clients would all fire me, all 50 of them would fire me. And not only that, they would call all my other clients and get them to fire me. And not only that, they would all file complaints with the SEC, and I would be barred from the industry. And not only that, my wife would leave me, my friends would disown me. This is all the head trash that we go through in our minds.
Michael: If we're going to get hung up on this, let's just get it all out there.
Matthew: Let's get it all out there. Because sometimes, we just say, "Toughen up and do it." So, I write it all down, and then I go back and look, and I say, "All right, how many of these things could really happen? What's the probability of this?" All right, I really don't think my wife's going to leave me over a fee increase. Okay, so I'm going to draw a line through that one." But it is possible that all 50 of those clients fire me as a result of that. Okay, perfect. What would happen in my life if all 50 of those clients fired me? Well, that would be an impact on my revenue. I would probably have to cut back on my travel. Whatever that was, I really map that out, so that I could get clear in my mind, "Here's the actual risk I'm taking, not just this fear, this monster under the bed." So we sort of look under the bed, what's the monster. Then I've got some extreme accountability. I told my buddy, Micah Shilanski, "Hey, I want to raise my fees." He says, "Perfect. If you don't do it by the end of the year, you will send a letter to your top 10 clients, telling them that I'm a better advisor than you are and that you recommend that they move their accounts over to him." Well, okay. So I write these letters...
Michael: That was a very creative extreme accountability solution for Micah. Like, "Hey, just to be clear, if this doesn't work out for you, let's make sure at least works out for me." That's a good version of extreme accountability.
Matthew: In Micah's defense, we have since changed our rules in extreme accountability. You don't want it to benefit the person keeping you accountable, because this creates a conflict of interest. You also don't want to involve anybody you have a personal relationship with. So, never do extreme accountably with your spouse or your partner or your employees, because it creates a conflict of interest. So that's why we did the Uber Pool thing, or donate money to your least favorite political candidate. Anyway, so I update my ADV at the...basically the last, like, in September. The September before the deadline, I send a letter out to clients. So of the 50, 40 sent it back right away, 5 had some real pushback and they said, "Hey, can we keep the low fee? Can we go to a different model? Can we go whatever we want to do?"
Those five all ended up signing the form. The remaining five, three we just never heard back from. We called them multiple times. They just never responded. So we resigned from the accounts, because that's what we said we would do. And then two just said, "Hey, so we're not going to do it anymore. We decided we're going to manage it on our own," or, "We don't think the value's there. We're going to find somebody else." Perfect. No problem. So, of all of my fear that every single person would quit, two did. Well, I guess five, because three didn't respond.
Michael: Right. But still, at the end of the day, so, of the block of 50, so 10% of them didn't continue with you, and the other 90% increased fees by 50%, which, if I do my napkin math, worked out quite well.
Matthew: Yeah, the other thing that helps when doing the fee increase is to really map out and say, "How many of these clients..." I said 50. "How many of them would have to say no before we break even on the ones who say yes?" So, especially with a 50% increase, you can do some quick math there and say, "If a third of them say no and quit, we're still going to break even on this fee increase," in which case we're coming out ahead. Our revenue is flat, but we're coming out ahead because now we have one-third less clients to service, means we can have more time to deliver value to existing clients, more bandwidth for bringing on new clients.
Michael: Okay. And I guess, getting back to the earlier discussion of how do you clear space to have larger clients over time, part of it just becomes you get attrition due to maybe relocation, you get attrition due to change in life circumstances, you get attrition due to death perhaps, and you get a few that attrition because they don't see your value enough to pay you the higher fee, so they don't, and you move on to the next.
Matthew: Yeah. And whether it's with these clients that we're raising the fee on or prospects, I'm always really quick to say, "Hey, we charge a premium fee because we deliver premium value." We never shy away from that fee. I even volunteer, I say, "You know what? Vanguard has this really great dial-a-CFP program for 30 bips. You can get a CFP on the phone anytime you want." Now, there's a lot of things that they don't do that I do, and I think that's why we are worth the premium fee. But you, Mr. and Mrs. Prospect, you need to decide that for yourself. In fact, I recommend that you go home and sleep on this. In fact, even give Vanguard a call, compare our one-page financial plan. And I don't mean to pick on Vanguard, because I really do think they do great work and I refer people to them all the time. Compare our one-page financial plan to what they recommend, and then really go with the option that you think is worth the fee. And it puts me in a real position of authority, just like the heart surgeon example. The heart surgeon doesn't say, "Hey, would you pretty please use me for your heart surgery?" They just say, "Here's my credentials, here's what we're going to do. It makes sense or it doesn't. Let me know."
How Matthew Communicates The Value He Provides For An Above-Average Fee To Prospects [50:46]
Michael: So, I get it for existing clients, because they're existing clients and you get to have either, well, directly like Micah, or indirectly as you did through the letter, like, "Look, here's all the value that we provide to you that we've provided over time. You see our value, you've experienced our value. If you really don't think we're valuable, totally cool. We'll part ways. But if you do, here's our new fee." And as noted, 90% came along with you on that. But they've seen your value. So, talk to me about how this conversation works when you're talking about 1.5% fees for prospects, for strangers, for people who haven't actually seen that value yet.
Matthew: Yeah. Oddly enough, I actually prefer that one, that discussion, because there's not like...I'm not going to lose that relationship. It's a relationship I haven't yet gotten. So, in my mind, that's actually an easier discussion to have. But we always explain to prospects, and this is on our company website, jarvisfinancial.com. Advisors can see this written out there. We say, "We want to help you make an educated and informed decision about our firm." Now, Michael, that's both a nice marketing line, but it's also the truth. I don't want someone to try to work with me who has expectations that don't align with what I do. So we say, "Hey, we want you to make an educated and informed decision about our firm. We have a process for helping you do that. And great news, you can use this process to evaluate any other firms that you're considering." But now I've set the ground rules for how we're going to evaluate other firms. Performance is not on my list. So I don't have to worry about getting in a performance contest.
Then I explain how we're going to do a one-page financial plan, how they're going to take that one-page financial plan home and sleep on it. They're going to use that. Then they'll have three choices. So I'll say, "Here's your one-page financial plan." I'm really accelerating this explanation. "Here's your one-page financial plan. You have three options. Option number one, you can implement it on your own. We've given you the bullet points. You could go and do it on your own. Option number two, you could find another firm. Now, if you talk to another firm, you might let them produce their list first and compare. Don't give them the keys to the kingdom. Let them work for it. Option number three is you work with us. I'll confess that's my favorite option, but only if it makes sense for you, and it's, again, a decision you have to make on your time. This isn't a timeshare presentation. We're not going to lock the doors." And I smile and joke about that.
How Matthew Integrates A One-Page Financial Plan Into His Planning Process [52:45]
Michael: So then, you've talked about this, mentioned this a few times, so, your financial planning framework and approach around one-page financial plans. You talk about this in your book as well. I think there's been more buzz in general lately around one-page financial plans. You've got a Carl Richards and his whole book around this theme.
Matthew: Oh, yeah, of course. You guys just had a podcast together on that, or when we're recording this, it was recent.
Michael: So, talk to us a little bit about just one-page financial plan and what that means, because I think in general, a lot of people are still struggling with concept of one-page financial plan. I think it's an interesting, an even more interesting juxtaposition for what you do, because we're talking about, "I charge a premium fee for a one-page financial plan."
Matthew: That's right. You get one page of bullet points, and I'm going to charge 50% more than what most people charge.
Michael: So, talk us through that, right there.
Matthew: Here's the tool I use in this. So, we have our prospect process. Again, it's detailed on our website. I won't go into it. I walk through the bullet points, and so we say, "Hey, here's what we're going to do. Here's how we're going to deal with taxes, here's how we're going to deal with your investments, risk management, and so forth. By the way, Mr. and Mrs. Prospect, this is the low-hanging fruit. This is just the stuff we saw on our first pass through. Imagine what we'll do if we work together on a regular basis." And their eyes get big. And I say, "Listen, great news. Our fee, it is a premium fee, but we only charge it on a quarterly basis. So, once a calendar quarter, we deduct our fee. It's a line item on your statement. You'll see "Jarvis Financial Advisory Fee" on your Fidelity statement, and you'll look at that number and I'll look at that number. And if we look at the number and we say, 'Hey, the value provided is worth some multiple of the fee,' then great news, we go another calendar quarter. If by chance you look at that and you say, 'I don't know that it was worth it. This is a lot of money,' perfect, we need to have a real heart-to-heart discussion, see if we can fix that, or we need to part ways as friends. And if we decide to part ways as friends, I'll refund my last fee, and I'll do everything I can to make the transfer as simple as possible."
"So let's go ahead and get started. We'll do all this work for you. Even if we only work together one calendar quarter, you've still gotten all of this work that I've outlined on the one-page financial plan. And I suppose in theory, you could leave after a quarter with all this great work. But let me warn you, nobody actually does that, but you do have that option." And 9 prospects out of 10 say, "Oh, well, why wouldn't I do that? Why wouldn't I pay a premium fee for one quarter to get this taken care of?" And then we deliver so much value that they just end up staying for life.
Michael: And the "delivers so much value" is because you've got this focus around client meetings, the quarterly value-adds, the just, let's make sure we're always showing up every quarter to do something that creates perceived value for clients, and I guess it actually becomes a form of your own extreme accountability mechanism. Like when you've told the client, "Hey, look at that fee line item every single quarter," you've now created a thing in your own head of, "Oh man, I told them to look at the fee line every single quarter. I better make sure we send out something valuable this quarter before they get that fee line item." And that keeps you accountable to make sure you keep putting value out.
Matthew: It does, and I've had a lot of advisors make that same comment, even suggesting it puts too much emphasis on the fee. But here's kind of the news flash for everybody. Clients are already looking at that fee. So I'm giving them permission to do what they could already do. You could leave me at any time. Clients already have that ability to do that. You can take this one-page financial plan home and decide what to do. They already have...that's their right, all right? I can't coerce them into it. So I'm sort of giving them permission to do what they already had permission to do. And so I'm really not giving up anything. I'm just saying, "Hey, here's what you can do. It's what you can already do. I'm just going to encourage you to be intentional about it." Look at that fee and decide every quarter. Whereas otherwise, they're going to look at that fee and they're not going to have a framework to evaluate that. They'll say, "Wow, Matthew charged me $10,000 this quarter. What did he do?" "Oh, Matthew did say that every time we see that fee that we should think about the value. Yeah, he has been really valuable for us. All right, let's keep paying him."
Michael: And so, I guess that still feeds back into what I think is the, I was going to say the latent fear for most of us, although for some, it's probably not even latent, it's more expressed and visceral, of, "Oh my God, what are you doing every quarter to make sure that that math always comes out well?" I think a lot of us have some level of anxiety of, "Am I showing up with enough stuff every quarter forever, to make sure that they're okay with that fee and they don't fire me?" And for most of us, that's at an average fee, not at a 1.5% fee.
Matthew: Yeah, I think it's really at any fee. Even if you're charging a quarter bip, I think the head trash is the same. Maybe it's a little bit bigger at a higher fee, but advisors I talk to at a quarter of a percent, they still have this, "Am I delivering enough value to justify my fee?" And that's why...
Michael: Which, I suppose makes an interesting point, like, if you're going to be caught up in that amount of head trash anyways, and be so focused on delivering more value for your fee anyways, you may as well charge a bigger number because you're still going to be just as psyched out about yourself, so you may as well do all that work for a bigger number, that at least fully recognizes the value you're actually providing.
Matthew: Yeah, and some things that...and advisors, you and I, have been doing this a long time know, some things are really easy to quantify. We can say, "Hey, look, we noticed that you should be doing QCDs, qualified charitable distributions. And over the next 20 years, that's going to save you" whatever the number is. Especially tax strategies, we can really quantify that. Other things like, "Hey, you need to update your estate documents and we're going to help you with that," we can't really quantify that very well, so that just goes into this more nebulous, like, "Hey, we're helping you achieve your financial goals. And either it makes sense to you at this dollar amount or it doesn't. And if it doesn't, then go in peace and find someone who can do it for you at a lower cost."
When prospects get a little edgier on that, when they push back, and I've been doing this long enough I can push back on them, I'll say, "Hey, great. If you can find someone who does more value than we do at a lower fee, you should absolutely hire them. Please also give me their name, because I would love to hire them myself. I just haven't found them." And especially when we do the one-page financial plan... Now, some of the listeners are going to say, "Well, Matthew, that's really arrogant." And I guess in a way, it is. But in my geographical area, in my niche, with the type of clients I work with, I don't think anybody does a better job than I do. Now, maybe somebody will call me and they do in fact do a better job than I do, and I will learn from them and I'll adapt whatever they're doing better, and then I'll be on par with them. So some of this is kind of like a head game, like, "Hey, if I'm going to tell clients they should pay me, I better be the best person. I better not be tricking them into thinking I'm good enough."
How Matthew’s Role As An Entrepreneur Is Evolving [58:49]
Michael: So now, talk to us about how just the business and the delivery of all of this has evolved for you. You were the lead advisor on this when you were on the podcast with us originally. You had said you're hiring an advisor now, and the goal is to transition 90% of the client relationships to them, so that's a pretty big, massive shift in just your life, your role, the nature of the business, where you're focused. So, talk to us a little bit about what's leading to that change. Because I think for the average advisors listening, $240 million under management at a 1% AUM fee, with 3 or 4 staff members, while taking 100-plus days off already sounds pretty good. So, where's the, "I need to hire an advisor and transition a lot of client relationships" coming from? Just, where is your head that you're seeing that as the next step from here?
Matthew: Yeah, that was prompted by two things, both of which came up during masterminds and working with other advisors. One is that the financial planning process started to get a little mundane for me. So, when you get really good at something, it starts to get a little bit mundane. And so, I was doing, of course, surge meetings. So, I'm doing a...what am I doing? Twenty-five, 30 meetings a week when I'm in surge. And it was kind of the similar thing again and again, again. So there was a bit of a mundaneness that I wanted to get out from underneath. The other is after I was on your podcast, so many advisors were reaching out to me, and I was having so much fun transforming their practice, having this discussion on raising fees and delivering value, and saying, "Here's how I did it. You can do the same. Look at me, I'm a normal guy. I'm the same as you. You can also do this." That was incredibly rewarding. And then working with my good friend, Micah Shilanski, and all that, it really was a lot of fun.
So, one was, I was getting kind of bored with client meetings. The other was that I wanted to spend more time working with advisors without eating into my free time. And so, we used a recruiter. We hired Alex Lynch, an advisor. He's a CFA. He's got 10 years of experience. And we started this process of transitioning client relations. So, I've transitioned about 50% of our client relations. In this fall surge, I'll transition the remaining 40%, and I'll be left with about a dozen relationships that I lead. And so far, it's gone incredibly smooth. We've had almost no pushback, but we've approached it very intentionally, using the systems that I learned from other advisors. I always want to learn from people who have done it. I don't want to know the theory on transitioning clients. I want to know, "How did you actually do it? When you sat down with a client, what did you tell them when you handed them off to somebody else?"
Michael: And so, speaking of which, what did you tell them when you told them that you were handing them off to someone else? Because I know you've been in the practice for a long time, so a lot of these really are clients that are 5-year relationships, 10-year relationships, even 15-year relationships. So, how did you have that conversation with the clients that you were looking to transition?
Matthew: Yeah, it's really been something we've been working on for a year. Even when we started interviewing advisors, we started telling our clients in person, in our newsletter, "Great news, we're adding a member to our team, another advisor, so we can always be delivering massive value. Especially as my own kids are growing up, I want to make sure I have plenty of time with them, and I want to make sure that when we're traveling, there's always somebody here to help you." So, we're already positioning it to clients, hey, why is this in their best interest? And then, for our first round of meetings, Alex and I did them together, and I told the clients ahead of time, I said, "Hey, listen, our new advisor, Alex, is going to sit in on this meeting so that when you have a question and I'm not available, Alex will be able to answer that. Is that okay with you?" And they all said, "Great." And then this current surge meeting that we're coming up to, I'm telling clients, "Hey, listen, I really need a favor from you. Will you meet with Alex one-on-one without me there and see how he does on his own, and let me know how he does. And if he misses anything, we'll take care of that, you and I offline, but this will really let me know how he does in a meeting without me there." And clients love to help. They're just really excited for that.
Michael: So, you're basically engaging the clients and then, like, "Hey, will you help me with the Alex development process? He's going to meet with you on his own. Let me know how he does." And so, hopefully, at least most clients are into it. They're like, "All right. Yeah, I'm checking up on you, Matthew. I'll see how Alex does. I'll let you know." But now they're taking the meeting with Alex, because they want to see how he does, because you set it up that way.
Matthew: That's right. And then they get done with the meeting and I follow up and I say, "How did Alex do?" And they say, "Oh, Alex did a great job. He's really a smart guy. And he did everything that you did perfect." "Great. Well, it sounds like he did such a good job, he'll probably just take most of the meetings going forward." "Oh. Well, okay. That'd be great."
Matthew: I set them up for that, right?
Michael: Yeah, yeah. I was going to say, you sort of set them up for it there, that you told them, "Hey, are you ready to meet with him and give me feedback?" And then they meet with him and it goes well and they say, "Hey, it went really well." It's like, "So, cool. So, you're happy just to meet with him ongoing basis, because you just said it was awesome."
Matthew: “You just said it was awesome.” Now, I have to give credit where credit is due. My good friend, Matthew Daugherty, who's been in my mastermind for years, like I said, is Ameriprise guy over in Cleveland, I learned this from him. So, I was terrified. I said to my mastermind, "Hey, I can't transition clients. It will never work." And he says, "Listen, here's exactly what I did in my practice and it worked phenomenally well. And if it worked for me, it can work for you." And I think, Michael, again, this is the power of masterminds, to say, "Let me get really transparent. Here's what I'm afraid of in my practice. Has anyone else done this? And how did you conquer that fear?" And that's how I was able to figure that out.
Michael: So, have you had any clients that pushed back? Is this just literally sailing through with all of them?
Matthew: We had a couple push back. We had one client who felt blindsided by having Alex there. We hadn't set the expectations right. We rushed the process. And they said, "I don't know who this guy is. I don't want him in our meeting." But after I talked to him and they met Alex, they were fine. And then I had one of my top clients, which I was already going to keep, say, "Hey, Matthew, we really want to keep working with you. This is important to us." And I thought, "Perfect, you're already on the list of people who get to keep working with me." So, so far, it hasn't been a problem at all.
Michael: So, just sort of reiterating the whole, like, the fears we have are probably more our own head trash than the clients. Or, like, our own head trash than real client problems that are likely to crop up from this.
Matthew: Yeah, let's just give the client the opportunity to validate our fear. So, the clients could have all said, "Matthew, you know what? I don't want to meet with Alex. I only want to meet with you." Okay, well, now we know. Otherwise, and this is like a Seneca or a Marcus Aurelius, like, our fear of what's going to happen, that pain of fearing it is actually worse than the pain itself.
Michael: And I've noticed you said you are looking to transition 90% of relationships, which to me is just noticeably not 100%. So, why the last 10%? Why the 90/10 split?
Matthew: Yeah, the last 10%, two reasons. One, when I'm talking to Alex and I'm managing him and I'm mentoring him, I want to make sure I'm doing that from a place of authenticity. I'm not just saying, "Hey Alex, here's what I think we should do with clients," I can say, "Hey, Alex, I met with clients, this worked, this didn't." Because I have so much relationship capital with a client, I can experiment a little more. I can experiment with a value-add and they'll give me some benefit of the doubt. As the new guy, that's going to be harder for him. If a value-add doesn't land, like a comedian, if a joke doesn't land, that can be a problem if you don't have that capital.
The other, for me, is as I'm doing "The Perfect RIA" podcast, as we're doing this fintech offering, as I'm working with advisors, I'm really committed to only learning from advisors who are doing it, and I want to have that same authenticity when I'm teaching other advisors. So when I'm on the podcast saying, "Here's how you raise fees," I want it to be, "Here's how I literally raised fees this last quarter," not "Here's how I think a fee increase should go. Here's what I think a client will say." Say, "Yeah, here's literally what happened in my practice."
I'm typically working with advisors that are still sub a million dollars of revenue. And so, for my own head trash, I can feel like, "I can really relate to you because I'm doing this in my practice. I'm doing surge meetings, I'm doing one-page financial plans." And it gives it the credibility that these guys need to actually implement. It's one thing, and I read every book there was to read on financial planning. I couldn't actually implement until I met Tom Gau and I'm like, "Oh, Tom, you actually do this in meetings. Here's word for word what you say. Okay, if you can do it, I can do it."
Michael: Yeah. To me, there's always a power that comes from just literally hearing how, exactly how other advisors do it. And we usually...well, sometimes we try to entirely emulate what they're doing. Usually, we don't completely copy and duplicate what everybody else is doing or what any one other advisor in particular is doing, just because we have our own style, we have our own theme, we have our own way of doing things. You know, advisory firms tend to get created in our own mental image. But as the saying goes, it's a lot easier to edit than it is to create, so it's a lot easier to hear, "Oh, well, here's what an advisor does that works." All right, well, I'm going to adapt that a little, but it's a lot easier to start with what they're doing than to actually try to create my own thing from scratch.
Matthew: It really is. If I look at the number of advisor websites out there now that mirror very closely mine, as far as the prospect process, it's awesome. They're like, "Hey, listen, this worked. I'm going to adapt this to my verbiage, to my language, to whatever, and I'm going to follow this process." The number of advisors I meet that are doing retirement income guardrails now, it's phenomenal. I'm like, "Great." And they'll say, "Oh, I changed this and I changed that." Perfect. My way, again, was not the 11th commandment, it just worked for me. I adapted what Guyton had come up with in his white papers on dynamic distribution rates. Like you said, it's easier to edit than it is to stare at a blank piece of paper and say, "How am I going to deliver value?"
Matthew’s Additional Entrepreneurial Ventures [1:07:59]
Michael: So, talk to us now about the rest of the Jarvis world that's grown and evolved since the podcast, since you joined us on the "Advisor Success Podcast." So, you've mentioned a podcast, a coaching program, tech stuff you're working on. So, just share with us a little bit more. What else is going on in Jarvis world, as you're going through this evolution of your business?
Matthew: Yeah, well, one is that my oldest turns 16 next month. And so, just from my personal world, I'm getting kind of rocked to the core there, but that's its own thing. One of the phone calls I got after that Episode 7 was from Micah Shilanski, who I've mentioned a couple of times, up in Alaska, and he says, "Hey, Jarvis, I think my practice is just like yours. In fact, I set a goal this year to meet another highly successful lifestyle advisor. We should meet up." And so, we ended up meeting up. We started doing masterminds. One night after a mastermind, he and I are drinking in a bar in Colorado, at the Boulderado in Boulder, Colorado, and we think, "You know what? We should start a podcast. This would be really fun." So, in a bar, drunk, we start a podcast. The podcast team says, "We cannot air that episode. It's so bad. We can't air it."
Michael: You mean you literally pulled out a phone recorder and just started talking into it in the bar and said….?”
Matthew: You could hear the waitress coming, like, "Do you guys want more drinks?" We're like, "Yes, we want more drinks." And they're like, "This is pure garbage. You can't air it, but you're onto something." So we start recording it in seriousness. We quickly get to 10,000 downloads a month. Which I know is a fraction of this podcast, but for us, that was a big deal. We then launched the "Backstage Pass" last year, which was a paid version of it. We quickly got 200 advisors signed up into that. And then they said, "Hey, can you do a technology offering? Can you take your value-adds and make them web-based, so that we can use them instead of these hokey Excel documents you're using?" And so, we've got that. And then, I've spent the last year writing a book, which will hit the shelves the same time this episode goes live, "Delivering Massive Value: The Financial Advisor's Guide to Kicking..." we'll say "Butt," because this is probably a family-friendly podcast.So that's been our big things. We've got five full-time people now. We launched "Retirement Tax Services" with my brother, who's a CPA. That's a great podcast for advisors trying to provide tax value to clients. So, we've been busy. A fraction of the Kitces empire, but we've been busy.
Michael: So, help us understand a little bit more just the layers of how this works. So, the podcast is out there. We'll have links out so people can find it. It's "The Perfect RIA Podcast," but we'll have links out to it in the show notes as well, for anybody that wants to check it out. So, podcast, I'm presuming, just, it's free, you get it on iTunes, because that's the podcast way of things these days. So then, you said the next pieces is there's a "Backstage Pass." So what's a "Backstage Pass?" What is that? How does that work?
Matthew: Yes, the "Backstage Pass," it's a paid version, essentially, of the podcast, where it's kind of a quasi-coaching program, quasi-here's-everything-that's-in-Micah-and-I's-office. You can take it and copy it and use it on your own. And so, every quarter, when we do a value-add, every month we do a webinar for them. And then we did another offering we call "INVICTUS," which includes our technology stacks out of our office, and we're implementing, or onboarding people on that right now. So, it's really exciting. It's fun to just say, "Hey, here's what I did in my practice. Here's what we mailed out last quarter to our clients, take it, put your name on it, put your letterhead on it, adapt it to your voice, send it out to your clients."
Michael: Okay. So, the idea, in essence, of things like the "Backstage Pass" is just, "Hey, we're talking about things like the value-adds we're offering. You just literally want a copy of it in whatever you do, Word or Excel document form, so you can literally try applying this in your own firm. That's what you get in the "Backstage Pass," just, you can literally download those things and get access to them to apply it for yourself.
Matthew: Yeah, and we have a forum, and we have access to Micah and I, and we have monthly webinars and things like that. But really, our goal with all of this is to help advisors double their practice success in one of four areas. We think there's four areas where you can measure a practice's success. It's effectiveness, it's ability to prospect, the value to clients, and then profitability, EBOC, earnings before owner's comp. So, we're really looking and saying, "All right, which of these four areas, one or more, can we help you double in the next 36 months?" And that's a bold hurdle, but it's a fun one for us to tackle, and we've actually been really successful. We've helped dozens of advisors double these different areas of success in their practice, because we can go in with credibility and say, "Hey, if you graduate these clients, if you increase your value, if you streamline this thing, if you implement surge meetings, this will quickly double the success of your practice."
Michael: And so, for those who are interested in accessing and seeing some of the tools and such more directly, just, what is this cost? What's involved? What does it take to do "Backstage Pass," or sign up for the tech, I guess, templates for going even deeper on it?
Matthew: Oh, boy, I should have written these numbers down. We only open it up for new members once a quarter. That way, we can onboard people. It also keeps our teams streamlined. I want to say right now the "Backstage Pass" is $350 a month. And "INVICTUS" is about $1,200 a month. Something like that. I apologize. I should have that number written down. You can tell that I don't do the pricing. I provide the content.
Michael: All, good. All good. And the idea of these is just, it's "Backstage Pass" is getting some of the templates, "INVICTUS" is it's actually now fully embodied into technology so you can just more fully automate this, rather than just, "Here's the template, but you still have to manually change it if you want to use it."
Matthew: That's right. And that's where advisors were struggling. They're saying, "How do I make this Excel document work? The macros in it are having problems." Now, our team goes on, logs into their custodian with them, helps them download the data, gets it imported, gets it reconciled and cleaned up, and then they just hit the PDF button and out comes a report. And they can email it to clients, they can print it, add their disclaimer, get it past their compliance department, things like that.
Michael: And primarily built around your quarterly value-adds and the physical deliverables that you're providing to people?
Matthew: Correct. That's our main one, guardrails, beneficiary value-add, the year-end 1099 letter, our tax strategy tools. And then we're rapidly...because Micah and I are doing this in our own practice, we're always rapidly adding more things in.
Michael: Right. And then, help us understand where does the book fit into all of this?
How Matthew’s New Book Addresses Advisor Pain Points [1:14:05]
Matthew: Yeah. So, the book was actually a goal that I had set, like, 10 years ago. I'd always wanted to write a book. I'm an avid reader. I'm always reading three or four books at once, and I'd always wanted to write a book. And then, after your episode, or our episode together, I started making a list of the most common questions or the most common lessons advisors were asking. Then any time an item or a lesson had more than a dozen advisors say, "Wow, I implemented this and it had a huge impact on my practice," that became a chapter in the book. And so, we have chapters on raising fees, and surge meetings, and all of these things.
Michael: And so, you said the book is, well, I guess, coming out soon as of when we're recording this, out recently, by the time this goes live. So we'll have a link in the show notes for those who are interested in getting a copy of the book, or knowing where to get a copy of the book?
Matthew: Yeah, it's on Amazon for Kindle. For Audible, I did my own Audible recording, which was a lot of work, but a lot of fun. And then, of course, as a physical copy, you can order those and they'll come out of my life...I guess they come out of my garage or something. I don't even know how the shipping works on that. But it's been a lot of fun. And then we put the first two chapters, Chapter 1, "Know Who to Trust," and Chapter 2, "Implementing Surge Meetings," we just put that on my personal website, matthewjarvis.com, and you can just go there and there's a button you can just click and read it. You don't have to download it or anything. It's just sitting right there for you.
Michael: Okay. So, we'll have links for all of that in the show notes as well. So, again, this is Episode 247. So if you go... So, kitces.com/7 was the original one. Kitces.com/247 is this episode. And so, we'll have links out if you want to check out the full book on Amazon, or to at least check out the first few chapters directly from Matthew and see what it's all about.
Matthew: Yeah, yeah, that would be a lot of fun. I think, it's been fun working with advisors. I worked with a guy named Todd a month ago at a mastermind, and he had 300 clients, old legacy clients, old commission clients that needed to be graduated. So we said, "Great, Todd. You've got to graduate all 300 of these clients, or here's your extreme accountability." And these kind of big changes, they make incredible impacts on people's practices, kind of going, saying, "I'm going to be really intentional about everything in my practice, not just do it because that's how I've always done it, or that I think that's how it's supposed to be done."
Michael: Well, and I think you made a powerful point around this from the start of the discussion, that the truth for most of this is that, particularly if you're at a certain level of experience... I think if you're getting started and completely new, there really is a lot that we're still learning. There comes a point where you've got a healthy base of experience, and most of what it takes to get to the next level is not really actually nearly as much about what do you do that's the magic thing to do. It's just getting over your, as you've put it so well, getting over your own head trash that's keeping you from doing it, because it's all...we get caught up in our own, "I can't change it because it won't work, because it's scary and it's different. And then people will get upset and then they'll fire me and then they'll tell their friends who will also fire me, and then everybody in town will know that I'm the advisor who gets fired, which means I should never be worked with. And then my business will collapse and my life will collapse and everything will cascade into a failure." And it's like you realize, “We were just talking about sending out a new deliverable. That really escalated quickly.”
Matthew: Yeah, or people getting your email, or going to surge meetings, or whatever that is. Yeah, somehow it escalates to the monster under the bed.
Michael: And that a lot of this, really, to me, just comes down to...I come from the psychology background as my undergrad, so, the psych term is "limiting beliefs." I think "head trash" is a much better label for it. But just, this recognition of how much change could you achieve if you just weren't holding yourself back with all the negative self-talk? And I think there's something very powerful around the frameworks you've created for yourself around extreme accountability, is just, we gotta have some way to get off of our status quo and over our limiting beliefs and our head trash. And so, you've found your way, and it's moving your business to some pretty amazing places.
Matthew: Yeah, and I would say, a real action item, I always love any of my podcasts with action items, real action item would be, for anybody listening, you've got to find a mastermind that you can be part of. Create one yourself. It's not easy. Create one yourself, find one you can be part of. All of these big changes we've talked about, Michael, in the last four years, have all been a direct result of masterminds. And so, I really just can't advocate strongly enough to form a mastermind. And then the other action item, of course, would be find a "should" in your life. Find somewhere where you're not being intentional, whether it's your fees, or your schedule, or how you're handling email, and get rid of that "should" and just say, "Here's what I need to do, here's what I'm going to do, and to make sure I do it, understanding that willpower is not enough, here's what's going to force me, my extreme accountability, into that."
What Surprised Matthew The Most About Building His Advisory Experience [1:18:33]
Michael: So, what surprised you the most about building your advisory business? And I'm thinking in particular over the past four years, as you've gone through yet another doubling, from this million-dollar threshold that was supposed to be the endpoint, and now it wasn't because you're still going. What surprised you the most of building your business over the past couple of years?
Matthew: I think what surprised me the most is coming off of the podcast with you four years ago, and... Because I thought it would just be a fun story to share. I was totally honored to be on your podcast. I think the episode before mine was Ron Carson, and he was doing these amazing things. And I thought, "Well, that was kind of cute. That was fun. I'm glad I got to do that." What surprised me the most was all of the advisors who said, "Wow, that really made a big impact in my practice. I want to duplicate what you're doing." Now, I guess that doesn't speak specifically to my practice. That's life in general. The thing that surprised me the most over the last four years is just recently bringing on another advisor. For my entire career, I had thought the last thing I want to do is hire another advisor, the last thing I want is that headache. And I had all this head trash around that. And then, when I really penciled it out, when I fear set it out, when I actually did it, set the extreme accountability, it's been really transformative. It's what let me write this book. It's what lets me grow The Perfect RIA, is saying, "Hey, I'm going to get over my head trash on hiring somebody to bring in the right people, and I'm going to make it happen." And we made it happen.
Michael: So, what was the head trash that was blocking you that you got over?
Matthew: A lot of it was, "Hey, nobody can do it as good as I can do it. This advisor will come and they'll take all my clients, or they'll come and they'll create a compliance mess, or they won't be very good, or I won't be able to find a good one." Working with a recruiter helped a lot on that, because they did a lot of the screening, and made that process a lot easier. But, it was really... Go ahead.
Michael: And so, who did you use for the recruiting process to get through it?
Matthew: Yeah, a gentleman by the name of Yosef Colish. He does recruiting specific for financial advisors, for RIA firms, primarily. He's in New York. We can get his contact information. He did a great job. It was interesting, when I had my call with him, I talked to him and another recruiter, and he says, "Jarvis, what's your quick start on your Kolbe?" And I said, "Oh, it's a 10, maybe an 11. I don't know." And he says, "Mine's a two." And he says, "What's your fact-finder and your follow-through?" I'm like, "Oh, those were both twos." And he says, "Mine are 10s. That's why you need to work with me." "Oh."
Michael: Sales process. I respect that.
Matthew: Yeah, he said, "You'll post an ad and you'll interview three or four people, and then you'll get bored and you'll hire the fifth person just because you got tired of it." He says, "I'll talk to dozens of people, interview them each five or six times before you even talk to them." "Oh. I like this idea."
Michael: Okay. And so, was there anything in particular that just, I don't know, that got you past the head trash you were stuck on? Because you had a whole bunch of very different fears in there. Like, "They won't do it as good as I can, they won't be good, or maybe there'll be good, but I won't be able to find the good people, or they'll be so good that they'll take my clients. Like, great, so if they're bad, I lose, and if they're good, I lose." You pretty much hedged all possibilities as a losing proposition.
Matthew: That's right. Yeah. That's how head trash works, by the way. It always seems like perfectly, like, your logic is infallible.
Michael: Yeah. No matter which path you go, it's definitely going to fail. So, just, what changed? What shifted? How did you get past that point?
Matthew: Ultimately, what shifted was saying, "All right, where do I want my life and my practice to be five years from now? Do I want it to be the same as what it is right now, where I'm doing the same surge meetings, maybe I'm inching up profitability, but do I want it to be materially the same, or do I want it to be very different? Do I want to have time to work with other advisors to write a book, to do more travel with my family? Okay, I want this other outcome. I want to have time to write a book. Perfect." The way to get there is by hiring an advisor. So I was able to connect, like, "This is what's standing in the way from where I am to where I really want to be." And then I worked well in extreme accountability to say, "All right, my courage isn't enough. That vision's not enough. I need some extreme accountability to make sure it happens." But I think that's the same for fee increases, it's the same for graduating clients. "Where is it I ultimately want to be? How much time do I ultimately want to spend with my family? What's standing in my way? Oh, not doing surge meetings is standing in my way. All right, I better implement surge meetings."
Michael: So, what does a typical week look like for you at this point?
Matthew: Well, we're recording this in the middle of the summer, so a typical week looks like mountain biking, CrossFit, and dirt biking. And then I spend my Mondays working on "The Perfect RIA," and then I have a once a week check-in with my team that lasts about an hour to two hours, depending on how many things they have.
Michael: And just that framing, that's because you run a surge meeting approach, it is summer, your surge meetings are not in the summer, so you're between surge meetings, and that's the whole point, is when you build a surge process, the load between surge meetings gets a lot lighter.
Matthew: Correct. So, I was already doing that before we hired Alex. And then we, each month, we schedule what I call a "mini surge," so I could take two days, a Wednesday and a Thursday. Because what inevitably happens is we do a surge, like, we do a surge meeting in April. And as soon as surge gets done, a client calls and says, "Oh, I need to see Matthew." And if we say, "Hey, you can't see him again until October," that doesn't always go over well. So then we can say, "Hey, listen, he's got two days available each month and you can get on one of those days, via Zoom, because he's probably traveling."
Michael: And just what if they don't even want to wait until the next month? Like, "No, no, no. This is urgent. I got stuff going on in my life. I need to talk to Matthew."
Matthew: It would have to be legitimately urgent. And so, my team has a process they go through. Because clients call in, "Hey, I need to talk to Matthew." "You know what? Matthew is helping another client right now. Is there something I can help you with?" Now, inevitably they say, "No, I have to talk to Matthew." "Perfect. So that Matthew can be prepared for the call, what can I tell them it's regarding?" And they'll say, "Well, I need to change the address on my account." "Oh, great news, I can take care of that." So, that screens a lot of it. If they said, "Hey, my spouse just died and I'm really freaked out and I don't know what to do," then my team will get ahold of me and I'll take a call that day or the next day. But that only happens, Michael, maybe once a year. All the other ones we just say, "Hey, listen, here's when we do client meetings." Just like if I call my doctor and I say, "Can I see you on a Saturday afternoon because I forgot to schedule a meeting?" “No. No, you can't.”
Michael: Well, I think that's a great example. I think the head trash for a lot of us is like, "I have to be always immediately available for my clients because that's my value, and a good service, and high touch," and all those other things that we do to explain our fees and our value proposition. And it gets to the point of, "Well, no. If I don't take that client's meeting immediately or tomorrow or in the next week, they're going to fire me." And as you're noting, no, no. Almost always, they're...almost, almost always, they're fine if the meeting's in a few weeks, or even a few months, particularly if you set those expectations in the first place. Because, as noted, unless it's a real serious emergency when you call your doctor and say, "I really like to see the doctor," they'll be like, "Cool, we'll schedule you in three weeks."
Matthew: Yeah, or three months. I don't know which doctors will see in three weeks. But yeah.
Michael: Yeah, and it goes fine. And we still see our doctors, and we're not firing them left and right.
Matthew: Yeah, you definitely have to manage that expectation with clients. You can't abruptly go into surge and just say, "Hey, I want to do a surge meeting so I can take more time off." That's not going to go over well with a client. I'm going to say, "Hey, so that we can serve you better, we want to meet together in April during tax season, we want to meet together in the fall. And of course, if something urgent comes up in between, then we'll meet. But otherwise, we're going to focus our meetings then, so that our team can take the other time to do all the work we do behind the scenes to deliver value to your family." So we're positioning it why it's in their best interest. Now, it's also in my best interest, but we've got to position it accordingly.
The Low Point On His Journey, What He Knows Now That He Wishes He Knew Then, And What Success Means To Him [1:25:41]
Michael: So, what's been the low point for you on this stage of the journey?
Matthew: I think the low point has been when everything got going with "The Perfect RIA," and with the book and everything else, for a minute, I let go of my focus on how much time I wanted to take off and how I wanted to run my life. Because it's easy to let life fill in with this, that, and everything else. And so, I was starting to get these calls from advisors and from our employees at "The Perfect RIA," and for my team. And suddenly, I found myself in this really frantic, reactive mode. And it took another mastermind to say, "Wait a second, I'm not being intentional with my time. I'm letting my world become a reactive world."
And then I was able to step back and say, "Great, all right. Here is when in my calendar "The Perfect RIA" lives. Here's when Jarvis Financial lives, here's when I CrossFit, here's when I dirt bike, here's when I mountain bike," so that I'm being intentional. And Michael, you probably know this 100 times more than I do, because you have so much going on. You have to really be intentional about your time, or you'll just be consumed, and be totally reactive all the time. So, I think that was really the low point. And it took me a while to recognize it. There was several tense weeks and months where I wasn't on my top game because I was in such a reactive mode, and I just didn't notice that that was what was causing that low point.
Michael: So, is there anything else now, like what you know now that you wish you could go back and tell you from four or five years ago?
Matthew: Yeah. Me four or five years ago wouldn't believe anything that me is telling to do. The day before our podcast, if I said, "Guess what? You're going to meet this guy, Micah Shilanski, and you're going to start this company, and it's going to turn into this big thing, and advisors all over the world, they're going to call you asking for advice," I just flat wouldn't have believed that. Short of that, it would be, be very intentional. Fear setting. Anywhere you have a "should." I guess that would be it. Anywhere there's a "should" in your life, "I should raise fees, I should spend more time with my family, I should be out of my email," anywhere there's a "should," some kind of action needs to be taken there. Get out of the "should" world, get out of the victim world, read Jocko's book, "Extreme Ownership," and look at those shoulds and just get rid of them. Either say, "Hey, I'm just not going to do that. I'm not going to spend time with my family and I guess I'm okay with that," or, "I am going to, and here's what that means, and here's how I'm going to get there."
Michael: So, what advice would you give to newer advisors getting started in the industry today?
Matthew: Yeah, my number one would be figure out how to deliver massive value. That really solves so many problems in prospecting, in client relationships, and everything else. If you can say, "Who in the industry do I respect what they're doing, does their approach, their philosophy, resonate with me, and how do I mirror what they're doing?" And Michael, you've done this with a great job with XYP...well, I'm getting tripped up, XYPN. You've brought together a community of people who say, "Hey, this is how we think the industry should be served." And then new advisors can go to that and say, "Great. I want to serve people the same way. Now I have a community. I have people I can ask and say, 'Hey, when somebody comes in with student loan debt, what do you do?'" And so, for new advisors, I'd say, "Find that role model, that person who has the practice you want, and do everything you can to essentially copy what they're doing."
Michael: And that's okay, because I think there's a...we learned in school you're not supposed to copy from others. You're always supposed to do your own original work. So I think there's a... Because there's an interesting reflection there, like it's okay that you're trying to replicate from what someone else is doing, because the truth is we all still run our own advisory firms our own way with our own style and our own conversations. No matter how hard you actually try to replicate someone else's practice, you're going to do it differently, in your own style. So it's okay that you're going to do it differently in your own style.
Matthew: Yeah, I kind of have two thoughts on there. One, Seth Godin, G-O-D-I-N, he's one of the most brilliant marketers currently alive. He talked about in a podcast that there hasn't been anything new in marketing since Jay Abraham was selling pots and pans door-to-door. He says, "Nothing new has happened since then. It's all been just repurposed, what Jay Abraham learned." Same for you and I. We're just doing what everybody else has done. We might've found a new variation on that. So, nobody really has an original thought. They're just implementing it different way. I would, however, add one caution. I have seen advisors get in a lot of trouble for just blatantly plagiarizing other people's stuff. If you go to kitces.com and copy and paste an article and put it on your website, that's plagiarism, that's copyright infringement, that's going to get you in a lot of trouble. If you say, "Wow, I really like how kitces.com is laid out, and I'm going to lay out a site similar to that," okay, that's a whole different thing,
Michael: Right. It's like you can copy other people's systems and processes. Be careful about literally copying their words. Or at least there's an additional layer of permission you have to do so you don't get into copyright issues for literally taking their words. But copy their systems.
Matthew: Yeah, find what works. So, we have these four rules of success. And rule number one is deliver massive value, rule number two is be intentional, and then rule number three is do what works. Don't try to reinvent the wheel. Find somebody who's doing what it is you want to do, and as much as possible, model that. And of course, rule number four is that willpower is not enough, which is where extreme accountability comes in.
Michael: So, as we wrap up, this is a podcast about success. And one of the themes is always that the word "success" means different things to different people. So, you're on this wonderful journey for success. So, you joined us four years ago for an incredible success journey, and then more than doubled it. So clearly, the business is going well. But how do you define success for yourself at this point?
Matthew: At a high level, I define it on how much of my time and energy is spent intentionally. How much of it is saying, "This is what I want to do today, this week, this month, this year, versus how much is reactive?" So, if I'm checking emails because I just think I need to check emails, that's not being intentional. If I'm working because it feels like working, but if I'm saying, "Hey, listen, I'm going to spend this week really focused on this," or "I'm going to spend this month going on driver's ed drives with my daughter every single day," like, I'm being intentional on that, that's how I define success. Right now, professionally, I really get a lot of success validation out of all these texts and emails I get from advisors. I got one from an advisor friend, Ben, recently. He said, "Jarvis, when I first heard your podcast, I made $100,000 take-home income that year." And he says, "This calendar quarter," he sent me a copy of the check, "I made $100,000 this calendar quarter, so I've 4X'ed my practice in the last four years." Now, that advisor...
Michael: Four X'ed his take-home, like 4X
Matthew: Four X'ed his take-home. And by the way...
Michael: Yeah, that's the check he took out, right?
Matthew: That's the check he took out. And by the way, he spends...he's in what he calls "The 79ers Club," which is advisors that take more than 79 work days off, which means you spend half the year out of the office, including weekends, and half the year in. And now, this advisor deserves all of the credit. He did all of the really hard work, surge meetings, one-page financial plans, guardrails. What I take a lot of success in is to say, "Wow, I was able to point and say, 'Hey, try going this direction.'" So he deserves all the credit, but that success, to hear like, "Hey, this path also works for me," because, Michael, like in your early days, my early days were really dark. It was really painful and really hard.
Michael: That industry pretty much sucks for everybody in the early years. Yep.
Matthew: It destroys you. So, to see that happen, to see Ben say, "Wow, following your path really helped me," it gives me some validation, like the price I paid was worth it, like the price is I'm getting more from that investment than I thought I could.
Michael: I love it. And I really appreciate you coming back just to share the next stage of the journey, how it's continuing to evolve. Congratulations again on the success through this next stage, and I'm excited for you with the book, with the podcast, with the platform that you're building. Again, you will have links out for all of it, for anyone who wants to go check it out. I got to read an advance copy of the book. It's a very cool book, with lots of just good, practical ideas, so I hope everyone goes and checks it out. And thank you again, Matthew, for joining us on the "Financial Advisor Success Podcast" again.