Welcome back to the twentieth episode of the Financial Advisor Success podcast!
This week’s guest is… me! In celebration of our twentieth episode of the podcast, I decided to fulfill what has been, by far, the most popular request from our podcast listeners… to hear my own story. And so Alan Moore, my co-host on the XYPN Radio podcast, serves as our guest host for the week as I talk about my own journey through the world of financial planning and how I got to where I am today.
In this episode, I go all the way back to my start in the industry, and share why it was the job my grandmother took, almost 50 years ago after my grandfather unexpectedly passed away, that ultimately got me into the financial services industry straight out of college at the peak of the tech bubble as a pre-med Psychology major and Theater minor. And how my first job – as a life insurance agent – turned out to be a colossal failure, to the point that I couldn’t even get a position as a paraplanner for $24,000/year, and the path I eventually found that turned it all around.
In addition, we talk about how I made the transition from working full-time in an advisory firm to my current path as a blogger, speaker, and serial entrepreneur, why I think digital marketing is so much more effective at building a business than traditional marketing (especially for an introvert like me!), and the highly strategic philosophy that I’ve used to build my entire business model: by trying to give away 99% of what I do entirely for free.
And be certain to listen to the end, where I talk about my “big rocks” approach to time management, and how I handle allocating my time across what are now half a dozen different businesses, from XY Planning Network, to New Planner Recruiting, our advisory firm and outsourced investment management services for other RIAs… on top of speaking at more than 60 industry conferences, podcasting, and publishing this Nerd’s Eye View blog!
So if you’ve ever been curious to hear my own path through the advisory world, why I do what I do, how I manage my time, and the “secret” to my business model that allows me to give away so much of what I do for free (and still ultimately make the money I need to raise a family and put my kids through college)… I hope you enjoy this latest episode of the Financial Advisor Success podcast!
What You’ll Learn In This Podcast Episode
- How I’ve structured the Nerd’s Eye View blog and my related businesses for advisors as a hub-and-spoke model. [5:20]
- The powerful marketing and business development scalability that comes from blogging and social media. [12:10]
- The odd story of how I went from being a pre-med Psychology major with a Theater minor to a life insurance agent at 22. [22:55]
- What the experience of selling life insurance and prospecting for clients taught me about financial planning. [34:51]
- What I did at my first job as a paraplanner, and how I earned several designations before growing out of the role and moving on to my next job. [44:05]
- How I came to join Pinnacle Advisory Group, and why the early adoption of specialized roles in the firm helped us keep up with explosive growth. [53:41]
- What Bob Veres did to help me launch my speaking and writing career, and the false start that Nerd’s Eye View experienced before I discovered Twitter. [1:06:10]
- How keeping my personal expenses incredibly low throughout my twenties allowed me to make several crucial career transitions, in several cases taking a major pay cut (one step backwards) to ultimately take two steps forward. [1:12:12]
- My current role at Pinnacle, and whether or not I do, actually, find time to sleep! [1:17:18]
- The key time management strategy that allows me to produce content, speak at conferences, and stay engaged with financial planning and advisors. [1:31:05]
- Why learning to delegate has been a key, ongoing skill that has allowed the businesses to continue to grow and thrive. [1:31:05]
- My own definition of success, and how I combine a love of what I do with a strategic approach to life and business. [1:51:06]
Resources Featured In This Episode:
- Pinnacle Advisory Group
- Pinnacle Advisor Solutions
- XY Planning Network
- New Planner Recruiting
- FA Bean Counters
- FPA (Financial Planning Association)
- NexGen Community – FPA
- Bob Veres
- Financial Advisor Success Ep 019: The Evolution And Emergence Of A True Financial Planning Profession With Bob Veres
- Bill Winterberg
- SocialNomics by Erik Qualman
- FAS Ep 016: Building Authentic Client Relationships By Practicing Skills (Not Pursuing Passions!) with Deena Katz
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Full Transcript: Building A Successful Business By Giving Away 99% Of What You Do For Free
Michael: Welcome, everyone. Welcome to the 20th episode of the Financial Advisor Success podcast. My guest on today’s podcast is me. To celebrate our 20th episode of the podcast, I’ve decided to fulfill what has been by far the most popular request we’ve had from our podcast listeners, which is to hear my own story. And so, we’ve got Alan Moore, my co-host on the XYPN Radio podcast here to be host for the day and interview me for this episode. So if you’ve ever been wondering what my own financial advisor career path has been over the past 17 years, how I built the kitces.com platform and whether I ever actually sleep, this episode will answer all of your questions.
You’ll hear about why it was the job my grandmother took almost 50 years ago, after my grandfather unexpectedly passed away, that ultimately got me into the financial service industry straight out of college at the peak of the tech bubble. How I navigated my own career in the early years, from starting out as a life insurance agent to becoming a paraplanner and then eventually a director of financial planning, and the strange turnaround I went through, having spent the first decade of my career trying to make…take financial planning jobs that would avoid any obligation of prospecting for new clients, even though now one of my primary roles is to be responsible for business development across half a dozen different businesses.
You’ll also learn about how I made the transition from working full-time in an advisory firm and in my current path as a blogger and a serial entrepreneur, why I think digital marketing is so much more effective at building a business than traditional marketing approaches, and the philosophy that I’ve used to build my entire business model, around the goal of deliberately trying to give away 99% of what I do entirely for free. And be certain to listen to the end where I talk about my big rocks approach to time management and how I handle allocating my time across those half a dozen different businesses, writing for the Nerd’s Eye View blog, hosting this podcast, and speaking at more than 60 financial advisor conferences a year, and still have at least a little time to spend with my family. And so with that introduction, I hope you enjoy this episode of the Financial Advisor Success podcast with me, interviewed by our guest host Alan Moore.
Alan: Welcome, Michael Kitces to the Financial Advisor Success podcast. Thanks so much for taking the time to be on today.
Michael: Thank you, Alan. It’s strange to be on the other side of the podcast interviewing process.
Alan: Well, I’m excited and very thankful for your inviting me to come on the show to interview you, yourself, on your podcast, which is always fun because I know guests and listeners have been asking to hear more about your story and your, you know, sort of the various businesses you’re involved and how you manage all of that, and sort of your path to becoming Michael Kitces as we know you today. So, I’m excited, this will be fun to sort of dig in.
Michael: I’m looking forward to it. We’ve had a few people now that have been asking both off the podcast and actually wanted to guest on the podcast to do this episode of having me tell my story. So, I’m kind of excited to share it, and try not to be too intimidated because I know now we actually have a lot of people that listen to this podcast. I normally don’t tell our guests how many people listen to the podcast, because I don’t want them to freak out about how many people will be listening, but I actually know how many it is. So, it’s a little bit freaky to imagine an auditorium with thousands and thousands and thousands of people and you’re being interviewed live, so I’m trying to ban that image from my head for the next hour or so that we talk.
Alan: Yeah. I remember Pat Flynn said this one time on a podcast episode, and he was really bombed that he only had a couple of thousand people listening, and you and I did a preconference at Schwab IMPACT in 2016 and there were maybe 600 people in the room, and it was standing room only, and it was like, “Oh my gosh, we’re talking to the entire advisory community right now.”
Michael: So many people, it’s a ginormous ballroom that just keeps going and going with people.
Alan: And there was just faces everywhere, and it was like, “Oh my gosh…” And that’s when you get really nerve-wracked and you go, “Oh, you know, 3,000 people listened to an episode,” or “10,000 people listened to an episode.” Like, “Oh that was a good week.” And it’s like, “Oh my gosh, if I had to talk to 10,000 people, it would be a whole different ball game.” So it is funny how the podcast medium can have such a reach. And even a blog or a, you know, YouTube video channel or what not can have such a reach that would be intimidating if we were doing it live, and yet it sort of gives us introverts a safe place, I guess, to sort of start from.
Michael: It’s just me and a microphone talking to a computer. Two people hanging out and talking and then later, 10,000-plus people are going to tune in.
Alan: So to all the 10,000-plus people out there, thank you for joining us today.
Michael: Thank you. Thank you for joining in our little conversation here.
How Michael Structured His Blog As A Hub-And-Spoke Model [5:20]
Alan: In classic style of the podcast, let’s sort of talk through where things stand today and then we’ll sort of start to connect some of the dots. So, let’s talk about, I guess, your various businesses, starting with I guess the core one being the one that folks are probably listening to right now, are listening to the podcast on this platform, the kitces.com platform. Can you talk through a little bit about that sort of business, and is it a business? Because everyone sort of wonders, because you know, there’s no advertising, you don’t charge. It’s like, is it actually a business?
Michael: I don’t charge money and there’s no advertising. So, what’s the business model of ungodly amounts of free content? You know, it is an interesting thing, and we’ll talk about it more as we kind of talk about the path of getting here, but, the blog at this point, the whole kind of Kitces.com platform really to me now is actually the center of my business world. And it’s a strange thing to have in the center, because everyone knows. I don’t charge for it, you know, we’re not a paid content site. There is a paid members section, where you can get a couple of additional whitepapers and CE credit for CFP and IMCA, and things like that, but, you know, the core content, I mean, we give away literally like 98% to 99% of what we do for free on the site. And there’s no advertising either.
And so, for me, the nature of that platform and kind of how it works for me from the business end is I know the reality is when enough people come and read all of that information, you know, it serves true of anything that’s out there that’s information on the internet. So, some people are going to look information up, and take it and do what they want with it, some people are going to look information up and say, “All right, that was cool to learn and know but I kind of feel like I need someone to help me do this, help me implement it and help me follow through on it.” And ultimately, from the business model end, I now own a series of different businesses that help people implement at least some subset of the stuff that we talk about on the blog. And so, a lot of what I write about are retirement and tax-related strategies, and we have folks that contact our advisory firm or contact me through the site and say, “Hey, I write some of my goal stuff but I’m realizing all these tax efficient drawdowns in retirements and asset location glide paths, and partial Roth conversions and all the rest is just a lot of stuff to deal with, can you guys help?” And the answer is, “Yes, yes. Actually, we can.” And so we get clients from it. And now there’s just…you know there’s kind of growing number of businesses that are tied to the platform. So, for people that end out on kitces.com, some of them hire me to speak at events. I’m still offered probably 60 conferences this year in the financial advisor world. I’m actually trying to trim it down a little. It was almost 75 conferences a year for the past three years, so I really am literally on average travelling every week, and in practice it’s not every week because there’s some slow weeks and some slow months really.
Alan: Six events in seven days.
Michael: Yes, yeah, every now and now. When we get to crazy conference travel season, because our whole industry crams all this stuff together into the spring and the fall and then no one really schedules conferences, and…or at least not as much in the dead of winter or in July because everybody is already on family vacation. So people may come to the site in some small subset and say, “Well, I’d like you to speak at our event,” or “I’d you like you to consult with our company.” And I do a lot of consulting these days, particularly for vendors that work with financial advisers. So lots of fintech companies that are trying to figure out how to reach advisors, or how to service, or how to better serve us. I try to give them some perspective on kind of the advisor mindset and our challenges, and how they can better either serve us and build a product more relevant or maybe just how to market and reach us, and how to communicate with us effectively.
And then we’ve got our advisory firm, Pinnacle Advisory Group also has a outsourced investment management platform. Essentially a team and put some additional back office and consulting services that we work with, primarily independent RIAs that are about $20 million to $100 million under management, that just want to do their financial planning and don’t really want to do the investment management stuff. And we have an investment management process that we can do from the back-end for them.
And then we have a recruiting business, New Planner Recruiting. As the name implies, we help recruit young planners for advisory firms, particularly paraplanners, associate planners, so for all those advisors that maybe have hired some admin staff but haven’t had a lot of lack hiring professional financial planners staff. That’s who we hire for. Lots of succession plans and then lots of just planning associates and paraplanners coming up the line.
And then, we’ve just got this growing number of businesses that are attached to it. FA Bean Counters. As you can…people can guess, I like to just kind of name the business what it is. New Planner Recruiting, guess what we do? Financial Advisor Bean Counters, guess what we do? Bookkeeping for financial advisors, because the reality as I’ve learned in our wonderful advisory community, we give a lot of advice to our clients and a lot of us do not actually keep very good books for our own business. So, we have a service to do that.
And then obviously the one that I work on with you directly, which is XY Planning Network. So, for advisors who want to build an advisory firm serving younger clients, serving Gen X and Gen Y clients, we show them how to actually do that with a monthly subscription fee model, and how to do that successfully, and what you do for your clients and how you charge them, and how you structure the business, and what technology you need. And we package all of that together. And so, I actually think of it in my head as kind of a hub and spoke model. So the hub is the blog, and it’s free and it’s intended to be free. And I really intend for it to always be free, and I don’t want to charge for that context. I want to put it out there and let people have it. And I don’t mean that in a bad way, in a good way, and let people have the content. Because I know the reality is some very small percentage of people are going to read through all of that and decide, “You know what? I think I want someone to help me out a little bit with this.” And we have solutions to help with that.
The funny thing that happened is that it took me a while to really assimilate into but when the volume of people you reach gets large, so the blog, these days, we typically get about 200,000 people that come to read the blog every month, you know, and I know a little bit of that is consumers that find their way to us, most of its advisors, frankly, and I’m not even sure how much larger it can grow, because there’s only about 300,000 financial advisors in total. So, at some point I’m just going to have all of them who want to come read or are going to have read it.
The Business Development Scalability That Comes From Blogging And Social Media [12:10]
Alan: That math there. There are 350,000 to 450,000 financial advisors in the U.S., depending on how you qualify someone as a financial advisor, and 200,000 of them are visiting the Kitces.com blog on a monthly basis. So, it’s a sizable percentage of the marketplace now is looking to your blog for education and information.
Michael: And so, you know, literally, as I view it, if I am successful in giving away my content to 99.9% of everybody who reads it, so if I assume upfront 99.9% of the people who come to the blog are not going to do business or are never going to do business, like they’re just, “Hey, dude, thanks for the free content, yadada” and walk off with it, if 0.1% of the people actually did business with one of the related businesses, we would have 200 leads a month for our related businesses, 200 leads a month, about 50 a week. And actually, if I try to break down the math across the businesses, some are easier to track lead activity than others, I think that’s actually probably fairly close to accurate about the kind of volume that we find between people who contact the recruiting business, the bookkeeping business, XY Planning Network, outsourced investment service, consumers that contact our advisory firm directly. You know, when I add it all up, that’s actually pretty close.
And so, it’s a fascinating thing, it’s a very strange mindset shift when you come at it saying, “If I can successfully give away everything for free to just 99.9% of all the people who visit, I can grow five businesses simultaneously faster than we can keep up with them.” And it’s a very bizarre kind of concept, and it took me a long time to get used to that, kind of that way of thinking about businesses and marketing and growth, that idea that if 0.1% of people actually act, that’s actually an astonishing large number. If we ever got to the point where only 99% of the people used it for free and 1% of people acted every month, we really wouldn’t be able to keep up with the volume of all the people interested.
Alan: No, it’s very true. And I think that’s…it’s important for folks that are looking…especially advisors that are looking at building sort of this inbound digital marketing strategy, that you may only convert 1%, or one-tenth of 1% of traffic , that you do have to build up a decently sizable volume, but it doesn’t mean that that’s a failed case because only, you know, one out of a thousand people that are coming to your blog actually call you, it just means that you’ve just got to keep producing content, continue to stay honest, stay consistent and build that following.
Michael: You know, if one of every thousand people who come to your site any particular month are going to do business with you then just point in at that point, right? If one of every thousand are going to do business then how many thousands can you get to show up? And I can tell you how much business you’re going to have coming in. And off it goes. And, you know, if you can be a little bit more targeted and get one out of every 500 or one out of every 100, suddenly the numbers get really big really fast.
Alan: When I think back to the old sales days of 10 business cards, three prospects, one sale, you know, that was Rick Kahler, who you had on your first episode. That was my mentor. You know, that was his number was he was a real estate agent, 10-3-1.
Michael: Yeah, 10-3-1 was how I learned it when I came into the business as well, the same thing. And, I mean, frankly to me this is a numbers game as well, very much in the same manner. The difference, for better or worse, you know, frankly the numbers are smaller, they will be smaller because you don’t quite make the same kind of connection as if I’m sitting down with people face to face. The difference though is it scales. I mean, it scales unimaginably well. There’s no possible way I could sit down with 200,000 people to do my 10-3-1 process, or even a fraction of it. If I wanted to generate hundreds of leads in a 10-3-1 world, I have to see thousands of people every month, and there’s just not enough time in a month to do it. And so, I mean, not even remotely close. There’s, barely 2,000 working hours in a year.
And so the idea of it that even if the percentages is slightly worse, at least compared to what you might do in person, the efficiency, the scalability is incredible, right? It doesn’t take me any more work to write an article that 10,000 see than I did years ago to write an article that a thousand people see, or that it did five or six years ago when I was getting started and like 10 people, all of whom were family and friends, showed up to read the first couple of articles that I put out, right? The time is the same, the results just get exponentially bigger, and you can kind of narrow down this funnel of some miniscule subset in any particular day, week or month are going to be interested in doing business. You know, over the long run, more than 0.1% of my readers usually end up engaging with some related business because, 0.1% during any particular month, but we get new business on these businesses month after month. So accumulatively, it does add up to more and the adoption is a little bit higher. But, just the fact that that happens from month to month, ongoing month after month after month, you know, again, you can power a lot of businesses across a lot of different channels. If I add up all of the different revenue growth that comes in from all the different businesses, it’s probably well over $2 million of new annualized revenue that comes into related businesses that I can directly track back to blog activity, people that came through the website. And I know there’s more that comes through that is just hard to track because, not everything is still perfectly trackable in the digital marketing world, but just, huge amounts of revenue growth that get created off of the ability to do business with an incredibly small percentage of people.
So, the other interesting thing about that dynamic is this is also part of why, as people know both from this podcast and what we do on the XYPN Radio podcast, that I pound the table for niches. And if… you know, it’s like all of the businesses I have are niches. We have very specific things that we target and very specific people we try to work with, many of which are financial advisor-related because that’s…you know, my blog platform itself is kind of a niche in the industry and then our businesses are sub-niches, but, we run it like our Financial Advisor Bean Counters is a great example. We could try to do bookkeeping for lots of different people as well, but marketing and bookkeeping services against the broad world is expensive. Building a bookkeeping business that’s incredibly targeted into a niche that we already have a niche penetration into is a much easier business to launch and get going.
And the point of that is, so if you think to the typical advisor’s website that maybe gets…I don’t know, I saw one survey that estimated the average advisor’s website gets like 500 visitors every month. And so, if you imagine there are 500 people who show up at your website every month. Now, most advisors I know, they’re lucky to get like one lead a month that just contacts them through their website. I mean, most of us do not generate a lot of activity off of our website. So if you imagine there are 500 people coming in to your website, and I say you need a niche, you need a focus, you need some way to refine your website so that it speaks to people better. Some segment of people that you can do business with.
You know, the objection of niches is virtually always the same thing as well, but what about all the people that I won’t be able to do business with because, I’m targeting this niche and now they’re not going to want to work with me because they’re targeting this niche? And all I can say is, “You know, so let’s go back.”Five hundred people showed up in your website last month, you got no leads, or like one lead. So, you’re already not connecting with 499 out of the 500. So, if you got a little bit more targeted and you managed to connect with five out of the 500, you deliberately was so niche-focused, you drove away 495 of the 500, you’ll get five new leads a month off of your website. That’s 60 new leads a year. If you assume even just a portion of those close, for most people that’s a lot of new business. And all you would be doing is making your site targeted enough that you drive away, deliberately, 495 of every 500 people that show up.
And it’s that kind of thinking around niches that… again that’s what powers most of my business and business models. And, I mean, it works. I know it works because we’ve been executing a growing number of companies off of it. But the challenge, I think, for most people, particularly in the digital realm, if 500 clients showed up at your office and none of them did business, you would say, “Oh my God, I have to change how I’m marketing and selling.” When 500 of them show up on your website and none of them contact you, but you didn’t see them because you don’t see them unless you track all the traffic to your website, you don’t realize how much the business is walking by, and you don’t realize how many opportunities there are to win just a small slice of that business by getting more targeted and more focused to a subset of them.
You know, it’s kind of like what we were talking about at the beginning that in the digital world, whether it’s the podcast like this or writing on a website, if the people showed up in person and you saw all of them, it would stun you how many people it is, right? Even just the average advisor that gets 500 people to their website. I mean, if you actually imagine 500 people coming into your office, 500 strangers showing up in your office, that’s a ton of prospects, and you’re closing zero of them. And so, think about what it takes to just not drive away all 500 or not drive away 499, to just drive away 495. And that’s a glimmer as to what the opportunity is when you take on a niche and you take on more focus in the business. And, again, that’s literally what my entire business world has been built around at this point. And I mean, I didn’t start out that way. This is what I built towards because I started doing it, and it was working, so I did it a lot more.
How Michael Got Into Financial Services [22:55]
Alan: Yeah. And I know what listeners are asking themselves, “How in the world do you stay involved with so much businesses and produce the amount of content that you produce on a regular basis?” And I’m going to make them wait just a little bit longer to answer that question, because I want to take a step back and talk through how Michael Kitces became Michael Kitces. You could have gotten…I mean, you’re one of the…if not the smartest brand in financial services, producing more content than anybody else I’ve ever heard of, probably producing more content than number two through number 10 combined. So…In addition to all the other things that you’re involved in. So you could have picked any industry, really, why financial services? Why not chemistry, or rocket science, or politics? I guess why financial services?
Michael: So my landing in the industry actually is not only random but actually a funny story to the industry and onto itself. So, to take one step back, I was a child of two computer scientists, both involved in early days of computers all the way up through…You know, being here in the D.C. area, that’s a lot of work in defense contracting and lots of government agencies that, shall we say, have been involved with computers since the very, very beginning of computers. So I was playing with Commodore 64 and literally learning how to hack and reprogram my own games, just a six-year-old, a seven-year-old. So, I was in the computer world very early on. And then frankly, I’d thought through most of my schooling days that I was going to maybe go off and eventually be a computer science nerd, which would have been incredibly well-timed because I would have been graduating right in the tech boom in ’99, 2000.
And the problem that hit for me, and I kind of hate to tell this story in some ways because I love teachers and I love what teachers do, but my path towards computers was completely ended by a horrible teacher I had in my junior year of high school. I had her for two different computer science classes in the same semester, and I was so miserable in the classes that by the end, I didn’t really want to do computer programming stuff anymore. And it kind of sucked my enjoyment out of it. And I started just kind of wandering around and figuring out what else I would do. And so, once I decided at that point that I didn’t really want to do computers anymore, and this is junior year, this just as I’m getting ready to figure out, where I’m going to apply to college. And so, all the computer engineering schools came off of my list and I decided to go do the New England liberal arts thing. So I went to Bates College, just one of those tiny, preppy, New England liberal arts schools. Wonderful school, I absolutely loved it there, but it was very much a… that classic liberal arts. “We teach you think. We don’t prepare you for anything in particular, but we teach you to think, so go be good thinkers.”
I was kind of bouncing around as to what I wanted to do even as an undergrad. In truth, I think I actually just wanted to stay in college forever because I just really liked learning, but staying in college wasn’t an option because eventually I would get expensive. And so, as I was getting to the end of college, I was…as the path had turned out, I had gone into psychology, I was kind of fascinated by it. So, as a psych major, I was a theater minor. Not actually on the performing side, I did stage management and lighting design. It was actually my big thing in theater. And probably, at least in part, because this was the heyday of the show “ER,” I had gone the premed route and was actually very interested in going into emergency medicine. So I was an EMT in college and doing internships in the local hospitals and kind of getting very immersed in the medical world. And I got about six months out from graduation and decided that I really didn’t want to go into psychology because it was kind of neat to study but, pun intended, those folks are kind of nuts to work with. I just couldn’t deal with it. It was neat to study but I didn’t want to do it for a living.
Theater was wonderful as a hobby, and actually it’s still something I’m involved with, but I just…I couldn’t see myself doing it as a career. And I was kind of freaking out as I was getting ready for med school and thought, I’m going to disappear for the entire decade of my 20s. In four years at med school and then residency and all the rest, and decided that I just…I didn’t want to vanish. I was having too much fun doing too many different things. And so, literally, I’ve got six months from graduation and all I had basically figured out by large scale was that I was a psych major, a theater minor and premed who didn’t want to do psychology, theater or medicine, and I needed a job.
And so, within a couple of months of graduation, I’ve got to start looking for job opportunities. And the way financial services landed in my lap is almost in some ways even more bizarre, so I have to give a little bit more back story here. My mother grew up in New York and her father sadly passed away when she was pretty young. He had congenital heart issues, died in his….at 39 years old of not his first heart attack. And so, my grandmother suddenly found herself as a single mother with two daughters in the early 1960s on her own. And so, she got a job working for a life insurance agent, and she was basically the secretary and office admin for a life insurance agent in the 60s and into the 70s. And so, when my father married my mother, the wedding gift that my grandmother’s boss gave, so the life insurance agent has a secretary, the secretary’s daughter is getting married, so as a good life insurance agent in the 1970s, what do you give your secretary’s daughter and son-in-law for the wedding gift? A life insurance policy.
Alan: No way.
Michael: So he gave my father a life insurance policy. I don’t know exactly what the deal was, I suspect it was he paid the first premium and then it was on dad. So… the gift that keeps on giving. So my father had this life insurance policy from the70s, when he got married, from his mother-in-law’s boss, and my father kept the policy. And so, 20-something years later, coincidentally around the time that I’m getting ready to graduate, my father gets a phone call from a life insurance company, from one of the local agents who’s calling to say, “You know, Mr. Kitces, you have a life insurance policy with our company. It looks like no one has been able to see you for a long time because the agent who originally sold this to you has long since retired. We’d love to come out to you and do a policy review.” Which for anybody in the business knows this is what you do with orphaned policies. It’s kind of the business opportunity to go out and see people that have orphaned policies and see if you can open a business, particularly back in the late 1990s.
And so my father gets a visit from the local life insurance agent to check out this orphaned policy. And so, they do a policy review and they go over the status of the policy, and it turns out for this particular insurance company, the sales managers of the life insurance company are also producers. And so, it turns out that the life insurance agent that had called my father was also the manager for the local branch. And so, when he finished the policy review, he took off his insurance agent hat, he put on his sales manager hat and he said, “By the way, we’re hiring. Do you know anybody who wants to come into the business?” And my father said, “Yes, my son is about to graduate in two months and has no idea what he wants to do with his life.” And so, I took the job interview and got hired, which at the time seemed incredibly exciting and the retrospect is because I now know that basically will hire anybody who’s willing to take a shot at it, particularly back then.
And so, I graduated from college as a psych major, theater minor, premed student and came directly into financial services as a…What I now know as a life insurance agent. I thought I was going to be a financial advisor and, “You know, we want smart people, and your future is what you make of it.” All the great things that we would tell young people coming in to sell insurance, except telling them they’re going to be selling insurance. And so, literally, I graduated Memorial Day weekend in 2000, and so graduation was on Saturday, I packed everything I owned into my car on Sunday, I drove home on Memorial Day Monday, and Tuesday morning, first business day after graduation, I showed up for work at New England Life, which is now part of MetLife, which is now part of MassMutual.
Alan: Thank you to grandmother’ boss, who’s a life insurance salesman, who gave your father a life insurance policy as a wedding gift, which is incredibly awkward, just to throw that out there.
Michael: That is the reason I am here in the industry. I took no finance in college, I took an Econ 101 class my senior year because I just wanted to try something new and interesting. I think it was like some last ditch effort to find something else that I might want to do since I was kind of mentally designed I didn’t want to do psychology, theater or medicine. I had one Econ 101 undergrad class senior year. That was my only context for economics. And obviously, that wasn’t a financial advising degree or anything.
Alan: And thank goodness it worked out for you, but it’s the bad rap that the industry gets and I…you know, the truth is most of the bad rap that we get is very well-deserved and we’ve earned it year, after year, after year by hiring premed psych majors that didn’t know what they want to do with their life, so we hired them to sell life insurance to their friends. I mean, essentially, you came…and correct me if I’m wrong, but you came in and you were told contact all your acquaintances from college and convince them that they need to buy a life insurance policy.
Michael: And I was deemed a very appealing hire into the financial services industry because my parents lived in a good ZIP code.
Alan: So just start knocking on doors.
Michael: A very good, natural market through my friends and family. Now, ha-ha, the joke was on them. The reality is my parents were in a good ZIP code because when they moved there 25 years prior, when they were pregnant in the early 1970s and about to have me, that ZIP code and that area was the boonies of Northern Virginia. That was the farmland that they started building family starter homes on in the ’70s, and that was the only thing my parents could afford. So they drove like 20 miles out of the countryside, where it was literally just farmland and a couple of random housing developments, and they moved into one of the early housing developments there. And then 20 or 30 years later, the D.C. urban sprawl took off and it turned out that was an…that turned out to be a very affluent neighborhood because of all the building that came in the decades thereafter. So, I didn’t even kind of…It wasn’t even justified off of the ZIP code, not that I told them or explained that to them at the time when they were offering me jobs, once they kind of found out where I lived. But truly, it was just the most bizarrely random landing into the industry that even got me here.
Alan: Which is, again, part of the problem. And when you’re young, you don’t know any different, you don’t know that that’s what they’re looking for. Really what the job is going to entail, but, you know, they bring in 10…
Michael: No, I was so flattered. I was 22 and looking for a job, and they were really nice, and they were enthusiastic, and they said, “You know, we think you have great opportunities.” And all the nice things that sound wonderful and flattering when you’re going out for your first job. So, I thought it sounded awesome.
What Selling Life Insurance Taught Michael About Doing Financial Planning [34:51]
Alan: Yeah. And it’s what you want, especially as someone who is struggling to find a position, find their foothold to be told, “You’re going to be successful in this career.” It is very different than what most of us experience when we go to get our first job, especially non-financial advisors. But, you know, they bring in 10 Michael Kitceses and they get one, maybe. It’s sort of lucky they hold on to one for long enough to actually make their money back on the nine who probably made it about as long as you did. So, how long were you with…I guess, how long were you an insurance salesman?
Michael: I lasted just shy of 12 months.
Alan: All right, you almost hit a year.
Michael: And, you know, as pretty much anybody in the industry knows what happens when you’re coming up on a year, so when you’re coming up on a year, everybody looks to see whether you’re validating your contract and the initial draw or deal that they were giving you. You know, my starting point was a draw against future commissions, fortunately without a payback provision. But, you know, I was a draw against future commissions that I only got to keep the draw if I continued to validate my contract, and I was not validating my contract. I was a terrible salesperson. Actually, I guess to be fare in retrospect, I was a mediocre salesperson, I was a terrible prospector. I’m an introvert by nature, going out and meeting strangers to do business with was terrifying. It probably didn’t help that, I quickly realized that I didn’t actually know anything about finance, which, of course, in our industry it doesn’t stop you from getting the job, but for me meant I just…I had no confidence. I knew I didn’t know what the hell I was talking about, so even in my mind I thought, “Why on earth would you do business with me? I’m a 22-year-old who doesn’t know anything about anything about money, why would I advice you on yours?” And obviously, I didn’t say that word to word for…to prospects but, it comes pretty clearly when you just have no confidence in yourself.
The one good thing was a couple of months in, when I realized that already this wasn’t going terribly well, this was still before the Do Not Call List, so I was doing some cold-calling, which was as horrific as it is, and, I was trying some other cold marketing strategies that were just hopeless, and so, I decided to kind of mentor myself under one of the other insurance agents in the office. And as it turned out, the guy I kind of struck up a rapport with and started to mentor myself under was the one insurance agent in the office who was a CFP back in 2000 when there weren’t a lot of people in insurance agencies with a CFP. And to the extent he could, he tried to do much more holistic planning, or at least was called a more holistic needs-based analysis back then, of the people that he was working with. And I was just fascinated by it because everything else in the office I’m being taught was basically, “Here’s a variable universal life insurance and how it works, now go pitch it to people until you find someone that says yes.” And here is this guy that would go out to people and ask them what their financial problems were, and then just recommend to them whatever solution fit their problems. I feel like that approach makes a lot more sense than the one that they’re making me do, that I happen to suck at anyways. So, I want to spend more time with that guy and see if I can learn his process and what he’s doing, because that just seems to make more sense to me.
And so, I kind of warmed my way in and started myself under him. And he’d been in the business a long time, had a pretty good client base. He actually did a lot of joint work with an even more senior guy in the business who had been in it for, I don’t even know, 40 years or so, so one of those insurance agents that had like a thousand clients, 900 of whom he probably hadn’t seen in five years, but he was an incredibly friendly, sociable guy. If you called and said you were calling from his office, people would take your call and they would take a meeting with you. And so, the guy I was mentoring under was building a lot of his business calling on this guy’s clients and I was trying to do the same thing, calling on his cast-off…kind of his old cast-off clients that he wasn’t working with anymore.
But the problem was that although now having junior advisors call on the…kind of the old B&C clients of senior advisors is actually a pretty common way to work in the business now, it was not popular back then. And the manager of the agency that I was in, kind of the senior manager around the whole thing was not a fan of that strategy. He was actually still to this day probably one of the best natural-born sales people I’ve ever met in my life. He started the business literally selling insurance door-to-door, knock on your door and close a policy. And he was good. And, he could still drop into his… his spiel at the drop of a hat, which he would do occasionally for the new recruits because everybody agreed he was really impressive. He was just one of these people. Like, you’ll get a knock on your door and five minutes later you’re going to be in your living room with him talking about whatever is above your mantle, and think, “I can’t even figure out how we got here. How did you do this to me and get into my house and strike up a conversation with me?” He just…he was that good.
And the problem, which I now know is actually incredibly common in the insurance industry, he was a brilliant salesperson, a true natural savant, and he had actually at one point won the company’s award for biggest sales of the year and his reward for selling was that he got to manage an agency, and the problem was he was a brilliant sales person, he didn’t really know how to manage and train. He was just great at sales. The only thing he knew how to tell people to do to be more successful was, “Just go out there and see more people.” Because for him, that was literally all it took. You know, he could easily measure his income by the amount of time he spent prospecting, because it was always going to work, and he always converted business, and the numbers game always worked for him. It was just a matter of how much time he wanted to spend prospecting to determine how much income he was going to make. So he didn’t know how to teach and train people to do anything else. And when I said, “Well, I want to work with David and see the…you know, the clients that he’s not calling on as much, because I think there’s opportunities to do other business,” A, that meant I wasn’t prospecting and B, that meant I probably wasn’t going to sell them VUL because I was going to sell them some other thing that they needed, which wasn’t part of the focus. And so, that was part of the problem.
And so, coming up on a one-year mark, I was getting pretty desperate, and I found the financial planning side of stuff was much more interesting to me as well as working on planning software of the day. And so, I actually went to the managing partner and said, “So, here’s what I’d like to do. We’re both pretty sure I’m not likely to validate my contract here, so what I’d like to do is I want to become the internal person in the office to run all the financial planning software and do all…and do any background financial planning support work.” There were probably 15 to 20 agents in the office, so I’ll be the one guy supporting 15 to 20 of them. I said, “I’ll take the job for $25,000 a year.”
Michael: That was my pitch. And he turned me down cold and said, “I just don’t know what you’ve been doing here and what value the agency would get.”
Alan: So, instead of having a $25,000 a year employee that’s going to back up 15 agents, so basically providing support for them to make sales, which basically means you assisted on what four or sales throughout the entire year to pay for your salary?
Michael: Yeah, that’s probably all it really would have taken, considering the kinds of sales that usually went through that office.
Alan: Yeah, not worth that.
Michael: I wanted to do financial planning and it was an insurance agency.
Alan: And the truth is if you made that pitch today, you probably would have…you’d still get the same response.
Michael: Yeah, it depends on the agency now.
Alan: Or, you know, one of these strict insurance companies like…
Michael: You know, some have come forward more than others, and frankly particularly over maybe just the past three to five years a lot more. The insurance companies have finally been starting to pick up and adopt this, because the move towards financial planning insurance companies really kind of happened, got started really getting underway in the early 2000s with a lot of the firms. And so, by the early 2010s, all these firms had people with 10-year track records of being CFPs, doing financial planning in the firms and actually having good results. Like better production of insurance, better sales of other activity, generates more revenue, has more satisfied clients, fewer regulatory complaints because just you tend to do a better job for people if you do a whole planning process with them. So, I think the industry on the insurance side is finally starting to shift, but it’s still very selective from firm to firm and even branch to branch as to just how supported financial planning really is or not.
Michael’s Job As A Paraplanner [44:05]
Alan: So they turned you down for your whooping $25,000 a year ask. Did you get fired on the spot?
Michael: I didn’t get fired on the spot. I had about two months or a month and a half left on renewing my contract. Yeah, I knew it wasn’t going well, which is why I’d pitched this. And, his basic response was, “No. Just, you know, go out there and see more people.” That was the only thing I did.
And so I still remember the actual final cracks moment. You know, every Monday morning we did a sales meeting at…first thing in the morning at 8 a.m., and one particular morning, I was late to the meeting. I was actually late to the meeting because we had a big case going with the guy that I was working with, and…or trying to mentor myself under, and I’d come to the office an hour early to do a whole bunch of financial planning projections to try to kind of help with what we were going to propose. And I came to the sales meeting 15 minutes late because I’d actually accidentally worked for an hour and 15 minutes on the financial planning stuff and didn’t realize what time it was. And so, I walked into the sales meeting 15 minutes late and the manager said, “You’re late. Get out.” And basically decided he was going to make an example of me because a bunch of other people had been tending to be late and so someone needed to be made an example of and in retrospect, me walking in was probably the best person to make an example of, because he was pretty sure I was going to fail soon anyway, so it wasn’t actually bad to throw me out of the meeting, but he could make to the point all the people that he was actually hoping would shape up and shape up.
And what ended up happening when I got thrown out of the meeting, I was like, “Fine, screw it.” And I went downstairs to the cafeteria in the building and I grabbed the leftover Sunday newspaper that was there, and I pulled out the Sunday want ads and I started looking for another job. And I found one, lo and behold, at an independent broker-dealer firm just a little ways up the street that was looking for a job, they called it a client service manager, I think. But basically, the job description was “prepare financial plans, support on financial planning analysis, support on any related paperwork pursuant to implementing the plan afterwards.” So basically, what we would now call a paraplanner and the exact job I tried to pitch for myself at $25,000 that they’d said no on. And here was the exact job I was looking for listed in the paper and starting salary of 40 grand.
Alan: I’ll do the math real quick. That’s approximately 60% higher than what you had pitched your existing firm on.
Michael: So I whipped up my resume in the rest of the sales meeting that I was not allowed to go into and I sent my resume off that morning, and ultimately got the job.
Alan: So, was that with what is now Pinnacle or was that with a different firm?
Michael: No, that was with a different firm. They were an independent broker-dealer branch out of National Planning Corp, which is still around today. You know, it’s basically just three guys that, formed a partnership and shared some overhead staff and just did financial planning, and then implemented whatever people needed at the end. They were genuinely financial planning-focused, every client got a plan. They were focused pretty heavily around retirees, they did some annuity business back when a lot of the living benefit riders were actually really nice guarantees. They did some annuity business, they did a lot of estate planning. Much of their business was built doing basically seminar marketing around estate planning and revocable living trusts, and AB trusts, and all the stuff that was very powerful with estate planning back when the estate tax exemption was $675,000 prior to President Bush’s first tax legislation.
And so, they had a…just a solid seminar marketing system. It was absolutely a numbers game. You know, send out the mailers, we’re going to do three seminars, we’ll get 50 to 75 people in a room, we’ll get 20 to 25 of them to schedule appointments at the end of the seminar, 15 to 20 of them were short for appointments, five of them were going to do business, two or three of them will be really good clients. Wash, rinse, repeat over and over again. And they did a whole bunch of seminar cycles throughout the year and built a great solid business. You know, even then in 2001, they were probably a…they were three guys doing probably $1.4 million of GDC, so that was a good solid shop, entirely financial planning-focused. Just everything started with the plan and then since they were on a pretty robust open broker-dealer platform, if you did financial planning for every person and they had a reasonable amount of monies, there was at least some chance to do business. Virtually everybody had an opportunity to do business. No one keeps their lives perfect, everybody has got some issue. So, virtually everybody we saw, there was a business opportunity, and most of them ended up doing business with us.
And so, because they were supportive of the financial planning side of things, when I went to them and said, “So I want to actually get my CFP,” they said, “Sure, we’ll support that.” I’m trying to remember exactly what the deal was. They didn’t cover all of it, but I think they gave me something like 50% or 75% reimbursement once I passed a class, which to me was more than enough to get going. And so I started plowing in the CFP coursework and then found out I was fascinated by it, and just completely immersed myself into it, to the point that over the span of about 18 months at the firm, I actually did all of my CFP, all of my ChFC with The American College, all of my CLU, and then got underway for a master’s degree in financial planning.
Alan: In how long?
Michael: About18 months.
Alan: Eighteen months.
Michael: So, just all my spare time out of work. Suddenly when I was not in a “always be prospecting world,” I was just in a stable nine to five job, and that was all. It was just nine to five. So I had a stable nine to five job. Like, “Oh my God, I’ve got so much spare time. I don’t have to do all this prospecting with every spare moment of my day. And so I took all of the time that I used to do prospecting badly and I just started reading. And I just kept reading all of the financial planning books that they were sending me and I would pass a course and I would go get another book and I would continue onto the next course.
And so, the problem that cropped up was, you know, it was a fantastic learning opportunity. They figured out pretty quickly that once I learned my stuff I was actually pretty good in meetings, and so, they started bringing me into meetings. I became the internal product expert for the firm. I was the nerdy kid that would read all of the prospectuses, the early…Well, we’re now actually just finishing the 5th edition of our “Advisors Guide to Annuities” book, but all my annuity expertise kind of came out of those early days because I was the one who was reading all of the prospectuses of all of the annuity contracts. Ironically, that was also when I became friends with Kevin Knull, who up until recently was President of MoneyGuidePro but back then was our local Hartford annuity wholesaler. And so, I was the nerd who read all the prospectuses and he was the wholesaler who actually knew the contracts because he read the prospectuses, and we became friends because we were the only two people who seemed to read annuity prospectuses back then.
So, I was getting all this opportunity to sit in front of clients and explain financial plans and solutions to clients, and plowing through all my course material, and racking up a whole bunch of designations. And then as I was coming up on my two-year anniversary with the firm, kind of realized I had a problem, because they didn’t know what to do with me at that point, because I was grossly overqualified for a client service manager job. In practice, I was doing lot more than that at that point, but they didn’t…, they didn’t know how to pay me and they didn’t know what to do with me. The only real solution they had was well like, “You’re doing really well in front of clients now, you can go get your own clients.” I was like, “Oh hell no, I just don’t want to prospect. I don’t want to go back to the…, I’m fine in front of clients, I’m very comfortable actually in front of clients but I just…I still can’t prospect, I don’t want to prospect.”
And so, they didn’t know what to do with me. And the end result was that I ultimately ended out looking for new job opportunities that would have more upside. You know, still much love to the guys there, and I’m still in touch with some of them but just I outgrew the position. They were a very financially successful firm but not a particularly growing one. They did $1.3 million to $1.5 million of GDC like Clockwork year after year and had for many, many years, and they weren’t particularly interested in messing with the formula that worked. And so I just…I outgrew my position and had to find something new.
Alan: And it’s hard whenever you’re a firm owner. And I know there are a lot of firm owners out there in this position where you’re growing but just not quite fast enough to really create non-revenue-producing positions. And as a business owner, that’s the hardest thing. It’s really easy to say, “Oh well, I’m going to bring you in. You’re going to produce $500,000 revenue, I’m going to pay you $200,000, and the math is really simple.” But as you continue to grow and scale, you start to bring on folks that, I guess on a P&L just cost money. But ultimately, you’re providing such a high-level of service, you’re freeing up your advisors to go across back to get more business. I mean, there are so many things that are going on there. The benefit, it’s a real shame that they weren’t able to, you know, figure out a way to make that work.
Michael: So just the firm wasn’t quite large enough and wasn’t growing in the trajectory that they could make the math work, or they couldn’t figure out what to do with it.
How Michael Came To Join Pinnacle Advisory Group [53:41]
Alan: So, I guess what was the next step?
Michael: So, from there I started searching again. And at that point, I’d actually found my way to the Financial Planning Association. I don’t think I was actually a member yet but I at least was kind of familiar the organization was out there. And as I started looking at new opportunities, I found out, oh, FPA had a job board.”And so I started kind of watching the job board at FPA for a month or two and saw this opportunity for another advisory firm in the area, a little bit larger. They had about $200 million under management or so. The firm was kind of a comfortable size. It was four partners and like five staff, but they were growing more rapidly and they had a lot of aspirations about continuing to grow, and so they were hiring for a position that they were calling their director of financial planning, because they had this vision that as the firm was going to continue to grow, they needed someone internally that could manage the whole financial planning process, a growing team of financial planners that would support all of the partners so that they could go out and do more business development and bring more clients to serve the clients and grow the firm.
I was like, “Holy crap, this is exactly what I’m looking for.” I get to be nerdy financial planner dude, interact with clients, support clients, learn to manage people, which at the time I was very excited about as part of…you know, growing my career and no prospecting, because the partners were going to do the business development and the prospecting stuff. They just needed people internally to make sure that the clients were serviced and do the financial planning stuff in the building and development financial planning department. And so, that firm turned out to be the one that I’m still at today, which was Pinnacle Advisory Group. So, they were, an independent RIA that was early to the independent RIA space.
So the firm was founded in ’93.They had a pretty good start and had grown to almost $200 million in the first seven years by 2000. The three founding partners actually came out of a life insurance agency as well, but they came out of Connecticut General Cigna, which for anybody that knows history of the industry, Cigna was known, even back into the 1980s, as the very financial planning-centric insurance firm. And so, they were all kind of trained and brought up in a world of doing financial planning for people, but they were tired of a world where financial planning always led to an insurance sale, and they wanted to do financial planning where you could work with clients on an ongoing basis, which meant getting out of the insurance world and going over to becoming an RIA. And so, they had a pretty good growth start. They got to about $200 million in their first seven years or so, then the tech crash came, and the market decline came, and they basically treaded water for two years and, you know, were just barely staying even. And then by the time they got to the market bottom and things were turning round, they were still about $200 million but getting pretty excited for what the potential was when the market finally started…would start growing again, and they were hiring for this director of financial planning position.
And so, I went out and interviewed for the position and actually got it, probably because they were trying to figure out, you don’t see a lot of 24 or 25 years old with my CFP, CLU, ChFC and most of it master’s degree. They were like, “He’s smart and he works hard. We don’t quite know what that’s going to turn into but let’s go for it.” And so, I got hired into this director of financial planning position into the RIA industry. And at the time, I had no idea broker-dealers versus RIAs, fee-only versus not. I didn’t understand any of that stuff at the time. In fact my biggest anxiety at the time was once I…It wasn’t even until after I took the job that I realized that my Series licenses, my Series 7 and 66 were going to drop some day, because I couldn’t keep them on the RIA side. And so, I still remember putting a note on my calendar for two years out when the licenses died. It’s like, “I’ve got to make sure by then that this job is working out, because this is my last chance to ditch out, go back to the…go back to a broker-dealer firm.” Obviously, it never came to that, but I remember being very anxious about that transition.
Alan: Yeah. It’s a really unfortunate part of the FINRA rules honestly that advisors…You know, you used to be able to “park your licenses” where you could just sort of go to a broker-dealer and say, “Hey, I want to park them here while I go do my own thing.”And that was allowable. That’s not allowed anymore. So for advisors that want to go fee-only, it’s a big decision to allow those licenses to elapse because once they elapse, you’ve got to go retake the test.
Michael: Yeah. And, I mean, I managed the test okay, I’m someone who does just tests well, so they’re not huge stresses for me. But, I was like, “I don’t really want to go back and deal with all crap again, and sit for the 7 and 66.” So I said, “I’ve got two years to make sure this thing is going to work out before I actually let those licenses go.” Obviously, as it turns out, since I’m still at the firm 15 years later, it turned out pretty well. I mean, honestly, still looking back, just it was damn luck. I showed up at the right firm, at the right time. You know, when the growth cycle did get underway, because they had done a good job of building out infrastructure, both on the investment side of the firm and with me and what later became the team under me on the financial planning side, we were well-positioned for growth, and so when the market started to get going again and their marketing channel started to get going again, we just…we had explosive growth over the next five or six years. And so, we went from barely $200 million to…I don’t know quite what the number was. Probably close to $700 million in the span of about five years.
Alan: Wow, so quadrupled in…I mean, basically…I mean quadrupled in four to five years, that’s huge.
Michael: Yeah. So, you know, when I started, I was like employee number 9 or 10, by the end of it we were I think pushing to 30. What started out as… I was a director of financial planning for a department of me, because I was the financial planner dude, then it was two, then it was three, then it was four, then it was five, then I was training junior advisors and overseeing senior advisors. And, the firm was eager to let me kind of get more experience in front of clients, and so I was presenting most of the financial plans that I was working on and getting a ton of client interaction through a lot of like the big growth phase in that cycle. You know, we had years where we brought on more than 100 clients in a year, and I did…I either touched, presented or built from scratch all 100 plans. So, I mean, even as I try to think back, I’d probably presented and I probably actually did client presentations for 300 plans, give or take a little.
It reminds me of the saying out there, “mastery takes 10,000 hours of doing something.” Like, you have to do intensively with training, and feedback, and coaching for 10,000 hours. And, you know, if you think… if you work a typical work year, you’ll spend about 2,000 hours. I was working insane hours even back then. The firm was growing so quickly and, you know, God bless who are now my partners, they were reasonably fast with the hiring but not quite as fast as I would have liked at many points during that cycle, so there were lots of literally, 80-hour work weeks, in the office seven days a week for months at a time just trying to keep up with the growth cycle and the opportunities for the firm. So, as I look at it like I basically crammed my 10,000 into the first three years at the firm.
Alan: Just an incredible workload, but I mean, it’s indicative…You know, at the time it may have looked like you were getting pressured to do that but probably just indicative of, you know, you had spent the last several years just crashing at the educational side and, you know, you spent a couple of years getting really 10 years’ worth of education, and you spent a couple of years getting 10 years’ worth of implementation of practice mastery to really, you know, supercharge your career.
Michael: And learning how to talk to clients and present financial planning stuff to people, right? Like, the first few years was just you learned how to make the plans but you haven’t actually presented them or explained them to anybody. Then it was the intensive of actually learning how to interact sitting across with clients. And again, it was great for me because the one part that I was so reluctant to do, which was the prospecting, going and finding people and closing business, I didn’t have to do any of that. That wasn’t the role I’d taken and basically, I took the job because I would get to do all the financial planning stuff I wanted to do except the actual burden of going out and getting my own clients, which was horrific, because I don’t want to do business development.
Alan: Yeah. And it’s interesting that the career path in financial services is so focused on creating the business development financial advisors. It really until recently…I mean, you were 10 years ahead of the curve, or your firm Pinnacle was 10 years ahead of the curve for having non-business development advisor career track. And I know that’s not why they hired you, that was unintentional but it’s amazing that that’s not more prevalent, because I talk to so many young people that say…you know, or students that are like, “I don’t want to manage the money, I don’t want to be client-facing, but I love the technical side,” and yet they’ve sort of been told they don’t have a career.
Michael: Yeah, it was probably four or five years into that job, like maybe around 2007 before I ever actually met another person in the entire industry who had my job title and description. Who was an internal director of financial planning that train people and have client interaction but didn’t have business development or wasn’t tasked as lead advisor, get your clients and manage them was…you know, and do their financial planning and manage financial planners person? Now, fortunately, it’s at least much more common. Lots of firms have these positions, at least larger firms. They were early to that trend of, “If you just hire great people around you and go and do what you do best, which for most of them was just business development, people that were really good at business development, surround yourself with people that do the other stuff well and go and do what you do best and build a hell of a business and a huge growth cycle.” Once they got that infrastructure in place and we had some great people on the investment side of the business that did the same thing. And we were very early to the world of managing our portfolios as models. We were actually the first paying customer of rebalancing software. We were iRebal’s first customer back in like 2004 or something.
You know, it was originally built by three firms. RegentAtlantic in New Jersey, Balasa Dinverno in Chicago, and what was Kochis Fitz, now Aspiriant out in California. And so, they’d hired a guy named Gobind Daryanani to build this rebalancing software for them. And, as I understand it, basically the deal was he had to build it for them for a somewhat nominal cost. They paid for some of the development costs. And once he built it for them, he was allowed to make it a software and sell it other people, and we were the first ones that actually signed the contract with him to buy the software, which I think at the time was $50,000 a year, which in 2004 was an ungodly amount of money to pay for software. And the only reason we did it was because the firm was hitting this…the early stage of this rapid growth cycle, and we were looking at the hiring and we were like, “If we’re going to double the firm, we’re going to have to hire like three or four more people. The investment business isn’t scaling so a $50,000 software is a lot better than three traders. And that was the only reason I think why we wrote the check. Well, we were willing to do it because it was like, “Well, this plus some people to run it is still a lot cheaper than hiring three more traders to build up the business, so let’s go for it.” And it turned out fantastically well. But just the…you know, the firm was so focused on kind of building out those key parts of the infrastructure in the investment side, the financial planning side and putting the firm in a possession where the partners could really just focus on the growth because the infrastructure was there. And it did, and that’s what happened.
How Bob Veres Helped Michael Launch His Speaking And Writing Career [1:06:10]
Alan: So, remind me, what was the timeline from when you got hired at Pinnacle until sort of that you felt that the infrastructure was built and had sort of built out this financial planning department?
Michael: So, I was in kind of this internal cycle with them for about five or six years. It was by…it was like early 2008 was when I started getting kind of the itch to do some other stuff. And so, you know, and in any time period, I was…obviously I was kind of immersed in the firm, but the truth was even in the firm, there was kind of two stages. There was the first three years, which was kind of my 10,000 hours of work in three years doing ungodly hours, and then the second three years was still time-intensive but I started doing a little bit of writing and speaking for the industry. My first speaking gig, if I can recall that, was you know, talking about AMT to our local FPA Maryland study group. Like, we had a study group of 8 or 10 advisors. There was lots of AMT stuff starting to come up back then. Presidio were saying, “Well, someone…a damn annoying thing about AMT I want to explain to the rest of the group.” I’m like, “I’ll kind of research it. I think tax stuff is neat” And did a presentation to them on AMT that was really well-received, so they said, “You should do this for the whole Chapter.” And so I went and did it for a chapter meeting and that basically became my first speaking gig. And I thought I really liked the speaking. It was a new…that was a new muscle for me. I had no experience, I had…I didn’t even know I had any interest in doing it until I did it. It was like, “I don’t know, it was kind of neat. I’d do that again.”
And so I started doing bits and pieces of speaking, mostly through FPA world. I was very active as a Chapter volunteer at the local level, at the national level. So I was kind of networking my way around doing lots of speaking engagements for free, just an opportunity to speak and say I spoke somewhere. The firm, actually, was very flexible with me to let me go and speak. I think, in retrospect, I was working 80-hour work weeks and took no vacation the entire time I was there, so they were probably saying something like, “At least if he leaves the office and doesn’t come in for a day, it’s probably healthy for him. Let’s let him fly somewhere.” And, I was so focused on always doing what I needed to do for the firm. I still figured out how to be dialed in. You know, we figured out VPN connections from 12 years ago when no one was doing that. I had a mobile hotspot internet connection back when it cost like $100 a month to get something that wasn’t even 3G quality just so I could stay connected to the firm’s email and reviewing financial plans from the road. It was like I was really, really diligent about even while I was travelling, doing the work I needed to do and getting stuff done that I was supposed to get done. But, I was doing this writing and speaking stuff, and doing more of it and liking it, and thinking like, “Gee, I kind of want to do more of this.” And I started wondering what I could do or what would it look like?
One of the groups that I was involved with early on was NexGen under FPA. So I was one of the kind of four people that was there at the very beginning, that founded the group back in late…in 2004, I think we started originally. And we did the first conference in 2006 and then the second one in 2007 that I chaired. At the early NexGen conferences, I was interacting with Bob Veres. Bob was kind enough to come out. He actually was the keynote for the first NexGen conference, and he came out to the second one. And he’d seen me doing some of the writing stuff that I was doing, and I had seen his newsletter business and was just fascinated by this idea that you could get paid to do writing and speaking. Like, you can actually make a living at that. And so, I mentioned to him that I was kind of thinking about that as a possibility. And he said, “Let me help you.” And so, it was actually Bob that got my entire kind of this whole writing and speaking career and what ultimately became the blog and all the rest. I owe entirely to Bob. And ironically, we actually talked about this a little bit on his podcast, which was just last week. So for anyone who missed it, kitces.com/19 for episode 19. You can go back and hear the episode with Bob.
But Bob was the one that really got me launched in this direction. He had his web designer help me build out my website and actually covered some of the initial cost of his time just to get an initial framework built. My first 200 or so subscribers came because Bob sent out an email to his mailing list that says…that said, “Hey, Michael Kitces. You all have seen him writing some of his stuff. It’s good, it’s valuable for advisors. Here’s a copy of his first newsletter issue. And you guys read mine, you should sign up for his as well.” And they did. And so, I launched the newsletter at $149 a year for monthly issues, and about 200 people showed up. And so you can do the math. It was like $30,000 of revenue. And at that point, I was getting…You know, I’d been doing speaking for a couple of years.
Basically, the first two years, I did it all for free. Just pay my expenses and let me show up to be a speaker. And it was going well enough that some groups were asking me back. And when they started asking me back for the second or third time, I was like, “I’m going to charge money, They want me back for the third time, like it’s $500 for me to come and speak for you.” And $500, I was so terrified the first few times that I said that. And, I mean, the truth for a lot, I’m like some of them were probably spending $800 to $2,000 just on the travel expenses for me anyway, so for me it was going from 0 to 500, for them it was like, “Well, the total cost will be like $1,300 instead of $800 because we already had to pay for his airfare and hotel and stuff.” I was even thinking of it that way. I was so terrified but, “I’m going to say I’m a paid speaker. I’ve done 50 of these for free, I’m going to charge for the 51st.”
How Keeping His Expenses Low Allowed Michael To Make Several Crucial Career Transitions [1:12:12]
And so, I was kind of cobbling together these revenue streams and figured out that I can make the math work. The one kind of saving grace that I had done for myself throughout pretty much the first 8 to 10 years of my career, when I graduated from college, I moved into an apartment. I convinced a good friend of mine from college to come down to the D.C. area. He was from New England, because we’d gone to school up there. He came down to D.C. area, we split an apartment, we got a third buddy to move in with us as well. And I was living in a three bedroom apartment with two friends. And I did that for basically the entire decade of my 20s. And the good news of that was I lived on next to nothing. I mean, I think my share of the rent, even by the end was like $400 a month or something.
Alan: Which in D.C. is just astronomically low.
Michael: Oh yes, stupidly crazy low.
Alan: For folks that don’t live in a metropolitan city, that may be like, “Oh yeah, that’s not bad.” In D.C. that’s…you don’t get a closet for that.
Michael: Yeah, I mean, you can’t even get a closet. In a decent neighborhood, a nice one bedroom, even at the time, was probably $1,500 a month, now it would probably be $2,000 or $2,500. And I was living on $400 a month and driving a six-year-old car that I…actually at the time that I literally bought off of eBay. I bought a used car off of eBay.
Alan: Yeah, that was not a good call.
Michael: Yeah. Actually it went incredible well. I bought it right after I got the Pinnacle job. I was like, “I got a salary increase, I’m buying a car.”
Alan: I’m buying a car, from a stranger off eBay.
Michael: So, I bought a $5,000 car off of eBay. I had to drive to Delaware with my father to pick it up. So, I was driving an old, cheap used car and living on $400 a month for rent. So…and had no debt. So, my living expenses were just a miniscule fraction of my income, and I was saving and banking everything else.
And so, when I was looking at this prospect of making the shift, I was like, “All right, well I’ve got about $30,000 in newsletter revenue, and then I think I can do 10 or 20 of speaking.” And I went back to Pinnacle and said, “So, I want to do this external thing. I really don’t want to leave. I want to stay connected to the firm but I don’t want to do this full-time managing thing anymore. I want to do a more flexible role. So can we come up with a list of job duties that I’ll still do? I’ll still be the internal geek of last resort on technical questions.” At the time I had a lot of involvement with our investment team. It’s like, “I’ll still do some of these investments research-related things to our models at the time. And I’ll still have certain client things that I’m responsible for, but I want the rest of my time to go and do this writing and speaking thing. And, you know, I’ll take a giant salary cut because I’m basically walking away from half of my job, so you can cut my salary by more than half.”
And, you know, when I cobbled it all together, I was still taking something like a solid 20% or 30% pay cut, but I was living so inexpensively that all it was really…all it really meant was I was just going to save a whole bunch to last that year. I wasn’t going to have to rack up debt or anything because I was going to save a lot less that year. And that was what made the switch possible. It was just the fact that my household expenses were so crazy lean at the time that I really didn’t need much money to live on, to live, and it gave me the flexibility. And God bless my…well now partners, at the time bosses, said, “Yes.” They were willing to do it. I think in retrospect it was probably something like, “We think he’s a complete and total idiot for walking away from the job opportunities and career opportunities at this firm, but he’s clearly strong-minded and good things seem to happen when we keep him around, so let’s keep him around.”
Alan: You know, ultimately, I think there are two things that will…which…And again, lucky for them that it turned out well, which I want to talk more about. Two things will tank a new entrepreneur, the emotional rollercoaster that is entrepreneurship. It really is just a challenge and it’s something to be solved, but the second thing is personal finances. Ultimately, unless you’re building tech or you’ve got to do capital raising and you’re spending way more money than you make, like if you start a business like the one you did, ultimately, it’s not that the business finances will kill you, it’s that your personal expenses will kill you. And if you had decided to, “Hey, I’m in my 20s, you know, and I’m approaching my 30s, I need to buy a house,” because that’s just what you do. It’s just time.
Michael: Yeah. I mean, I had the income, I could have bought a house, I could have been driving a BMW, like the money was there to do it but, you know…and again, I mean, it’s that funny thing about the psychology of spending. I was already living with my two buddies and having fun, I didn’t feel any need to move. So, just I led… I lived incredibly inexpensively and I didn’t want for anything, I didn’t miss anything because it was just the lifestyle I was already living, I just didn’t change it as I made more money.
Michael’s Current Role At Pinnacle [1:17:18]
Alan: It’s sort of that, you know, model of when a resident becomes a doctor, if they can keep living like a resident, that’s how you pay off your student loans. You don’t pay them off by going and buying a million-dollar house and a $100,000 car and then trying to buy into the partnership and all of that. And I think that, you know, in many ways, this was key for you, and your overall success was, you know, you had the ability to make it, to last long enough with this thing, to build up, because obviously, what I would assume, you were to a point now where you were making more than you were when you first walked away, but I guess how has…Well, one of the questions, I have to admit, I probably get as many questions about Michael Kitces as Michael Kitces does. So one of the questions people ask me all the time is, “What is Michael Kitces’s role with Pinnacle? Is he still there full-time?” Which now we know the answer to that part is no, but what is your role just at Pinnacle and then with Pinnacle Advisor Services or Solutions that you play there?
Michael: Pinnacle Advisor Solutions. So, frankly the role…I mean, the role has continued to evolve. You know, I made this transition that we’re talking about back in early 2008. So, in retrospect, well-timed. I stepped back from the firm and a whole bunch of salary right before the market tanked, so actually probably gave them a whole bunch of relief on payroll at a fortunate time for a turmoil in the business. Just, the market decline hit us as it did everybody. So, when I made the shift back then, it was kind of that list of duties. I was internal geek of last resort, I had some investment team responsibilities, I was…I still had some clients that I needed to interact with and support because I’d done a bunch of technical planning stuff for them over the years and so I needed to continue to do that. It was kind of deliberately scaled back to that. I mean, substantively I walked away from my management duties, in part because I had basically figured out that I was not actually a terribly good manager nor did I actually enjoy managing people very much. And so, I was quite okay with letting go of those duties at that point, even though I’d done them for five or six years up to that point. And so, for about three years, that’s what it looked like, where I was connected to the firm that way but the rest of my time was external. And, you know, I was probably 50% in and 50% out for the first couple of years, if I looked at how the time broke out.
Now, the interesting shift that happened. So I’ll keep talking about the blogging and writing side a little, because it will lead back to the Pinnacle side. So, in 2008, I started with the newsletter, and the newsletter was a paid premium service. You spend 150 bucks a year, 12 issues a year. Each monthly issue was a giant Kitces style whitepaper on one topic. And back then, there was no blog or anything else, this was the only content and you paid for it. So, I did that for a little while. And I tried launching a little blog on the side, and…So, the challenge I had, because the vision for the newsletter was that I wanted to do technical content that you’d get CE for, and there’s no CE for anything related to practice management or industry trends, I felt like I needed some other outlet where I could write about industry stuff, because I had some stuff to say about it.
And so, I started this blog, I called it the Nerd’s Eye View, because it was the nerd’s eye perspective on things happening in the industry. And I wrote it for a couple of months and I felt like no one was reading it. Like, I’d send out a newsletter and I would get all this feedback from people, and then I would write a blog post and it felt like it went into the ether. So I installed Google Analytics to try to track what was going on on the blog and basically prove to myself that I was really only writing for myself and like half a dozen people that were friends in the industry who probably came to check it out. And so, I shut down the blog because no one was reading it and just continued with the newsletter for about two years.
And then in the summer of 2010, I was at a study group meeting with Bill Winterberg. So, in the early NexGen days, a bunch of us who were kind of in the first generation of NexGen folks made a study group that actually still meets to this day. We formed it in 2006, we’ve just had our 10-year anniversary as a study group last year, all with the original members. And one of the people in the study group was Bill Winterberg. Back in 2006, Bill Winterberg was just working in a planning firm, I was working in a planning firm, we became friends. This was before I was a blogging dude and before he was an advisor tech guru. So we were in the study group together and he was telling me in the summer of 2010 at one of our study group meetings, “Hey, Michael, you’ve got to check out this Twitter thing. It’s really cool.” And I had not been involved particularly in anything social media. I probably had a LinkedIn account. I don’t think I even had a Facebook account at that point. I wasn’t that into it at the time. But he said, “You’ve got to check out Twitter.” And so, I logged into Twitter and started using a little. I was like, “Oh, this is kind of neat.” You know, I started following people that I just thought were sharing some neat stuff and realized I was basically kind of curating my own personal newsfeed of stuff that was interesting to me, and getting really into it.
And then suddenly I had this light-bulb moment. The classic Eureka epiphany moments, bulb illuminates over head, I had one of those. And the light bulb moment for me was I was reading all this content on social media and realizing that there were some people that I was following that just I would read everything they shared because just the stuff they shared was all awesome and most of it was their stuff and they were just brilliant, so I wanted to read everything they were writing. And so like, “Oh my God. This is the missing gap for me.” I knew how to produce content, I didn’t know how to get it out there. I knew how to sell it through a newsletter because I could do that through my speaking engagements and the rest, but I didn’t know how to write on the blog and get it out there, and realize social media is how you get it out there, that’s the distribution channel.
And so, I got started on Twitter as kind of a starting social media platform, reinvigorated the blog in the fall of 2010. I said, “All right, I’m going to do this for real. I’m going to write the blog stuff and then I’m going to distribute it through social media and see if I can get some engagement. And, God bless Google Analytics, I can track it.” And it worked. And it started working, and the blog started getting traffic, and getting momentum, and getting activity. And, you know, at the time, the numbers felt big, now in retrospect compared to where the site is today, they were very small but, we did it…I did that for the first year and all of a sudden, on a typical day 100 people showed up on the website. Like 100 a day, 5000 a month. That’s a lot of people. And so, I kept going at it and then the next year it was 250 a day that were showing up. And then I went another year and then all of a sudden it was like 500. And the thing was basically doubling in traffic activity every year. And suddenly, the numbers were starting to add up, and more importantly, it was starting to drive some interesting results, and clients started showing up at the advisory firm because they read about my stuff on the blog. Either they read about my stuff on the blog or they read about me in a media article but they read about me in the media article because the media, the personal finance media was starting to follow the blog and then they would call me when I wrote an article about something that was interesting, and then they read an article about the research I just did and quoted me in the article, and then we started getting clients off of it.
And so, when we started getting clients, the dynamic with Pinnacle shifted again. And all of a sudden the discussion was, you know, now…So like, the infamous thing. I joined the firm because I… my sole goal was to make sure I could join a firm where I had no business development responsibilities. And I was determined to do that, and I basically brought in no business for 10 years by delivering design and intent. And then all of a sudden by 2012, two years in the blog, I started bringing in business, and the relationship shifted. And it was enough that it wasn’t any huge, break-down-the-doors numbers. Like, it was material numbers.
Alan: Which at that time, that’s not how advisors got clients. You got clients from your centers of influence, from networking, from knocking on doors. You didn’t get them from the internet. Like, this is not where they came from.
Michael: Right. And then suddenly out of the blue in 2012…I forget what the numbers were, but I brought in like $7 million of new business from the internet. And so, suddenly when I was bringing in business, the conversation shifted. And the conversation that emerged was we’re suddenly at the point where I was doing business development and the nature of my relationship with the firm was changing, and we could all see that this was growing because it really was basically doubling every year. All of a sudden it was, “Well, now we need to reshape the role.” And in a span of just a couple of months, we hammered out a deal and I actually bought in the firm and became a partner.
Alan: Such an amazing turn of events. That to go from like sort of… it was basically shifting yourself out of the firm, being, “You know, a research nerd, the guy that’s sort of name is associated with the firm and he’ll probably be useful enough to cover the salary we’re paying,” to “Hey, let’s let him buy into the partnership.” And, billion-dollar AUM firms don’t just let anyone buy into partnership. That’s not like on the table for all of the advisors.
Michael: Yeah. I’m going to try and remember the sequencing. The firm was founded by three partners, we added one in the 1990s, just a few years after they got started, and then we didn’t have another partner for 15 years, and then we added me. So, it was a big culture change for the firm at the point that we did that, and introduced a new partner. And the point we made that transition then the role kind of got redefined again, and so, now…And this is still largely what it looks like today. So, I still have kind of what I fondly call the “geek of last resort” responsibility. See, when we get the really hard, weird technical questions and planning issues, strange case design issues, those still come to me and I get pulled into either the internal meetings behind the scenes or sometimes into the client meeting directly to talk through some of planning issues. Then I’ve got some business development roles, including a handful of meetings that I have to be tied into the marketing process, and just being connected to a marketing team to manage prospects that are coming through the…basically the Kitces blog funnel and digital media world. And then as a partner to the firm, our governing structure, we have an executive team of partners that make strategic decisions for the business as well as a management team that handles kind of the day-to-day and week-to-week business. So, I’m not involved in the management team, but I am involved in the executive team. And so, you know, there’s a level of management reporting, and oversight, and duties that I have to deal with on that end.
And then my nominal title is director of wealth management, which in our structure basically means, so when I left the director of financial planning position, ultimately we had to fill that again. And so, we have a director of financial planning who’s physically on-site in the firm all day everyday managing the process and our planning deliverables and kind of the first line of interaction and support for all of our wealth managers, but I oversee him and the initiatives that we’re doing in the entire financial planning department and division. And so, I set a lot of the vision of what do we want the Pinnacle planning process and experience to look like? I mean, if we have to come out, like what’s the firm’s official position on blank? My responsibility is to come out with the firm’s official position on whatever that is, as well as just setting some vision around, you know, what technology are we using? What tools are we using? And obviously I don’t make those decisions in a vacuum. There’s a lot of people involved. But that’s kind of my responsibility at the top of that financial planning area. So, I live at the strategic level. And then our director of financial planning lives at the day-to-day management level.
Now, I also provide some support to the advisors on our Pinnacle Advisor Solutions platform – those advisors outsource their investment management needs to us, but we also provide some practice management and business consulting, and run events for them to help them grow their businesses, and I have some involvement there.
I often get the question of whether I have my own personal client base, and the answer is no. At this point, I wouldn’t have the time and capacity to service them to my own standards of how I think clients should be serviced. So when a prospective client reaches out to me – most commonly through my website – the answer is “WE” would love to work with you. And “we” means our firm, and I transition the prospect to another one of the experienced advisors in our firm.
Now, I do still maintain some face time with our clients. There are some that I’ve worked with for a long time – with almost 15 years at the firm – and I still join in meetings with them from time to time. And there are some client meetings I’m involved with because we’re working through those messy planning issues. Because I’m still the geek of last resort on those complex client situations. And I still sit across from some of our prospects, where I’m involved in bringing the business in and need to help close the new client. It’s actually really important to me to stay anchored in an advisory firm, and maintain some face time with clients, so that I never forget what it’s like sitting across the table from a client. But I just don’t have the time to be the lead client relationship manager, on top of my other duties to Pinnacle, and our Advisor Solutions platform, and the blog, and the writing, and this podcast, and the recruiting business, and the bookkeeping business, and XY Planning Network, and all the rest.
Michael’s Key Time Management Strategy [1:31:05]
Alan: So, this sort of catches us up to where we are today in terms of sort of the process you went through just throughout your career but, you know, most recently talking about Pinnacle and with the blog and sort of how those transitions have happened. And so, again, I get so many questions about how Michael Kitces does it. And, I love the questions. People always say, “Does Michael ever sleep?” Like, I’m, you know, at your house monitoring your sleep schedule, but, you know, they just want to know…And we both know what they’re asking. How in the hell are we balancing all of these things? Because, you know, again, we’ve got Pinnacle, we’ve got Pinnacle Advisor Solutions, we’ve got the blog, we’ve got now a new podcast, we have the consulting, the speaking, the XY Planning network. It’s a long list. And I know you’ve gone through some evolutions here around sort of just overall time management, you know, stuff. So, what have you found that didn’t work for you, and then what have you found that is actually working for you now and to be able to manage all of these balls that you’re juggling at one time?
Michael: So, it’s been an interesting evolution for me in the world of time management. So, frankly, for probably the first, I don’t know what it was, like 8 to 10 years of my career overall. Time management was basically just work harder. Get more stuff done. I worked hard, I worked my ass off. You know, some weeks, and months, and years were harder than others just based on kind of the growth cycles of the business. Like, I worked hard and put in the hours. I got stuff done, and I was a pretty productive person that was, putting my nose to the ground, so I’m getting things done, so I got a lot of stuff done.
The shift for me really probably started, I guess around like 2011 or 2012, when the blog really got going, because the blog kind of blew up a whole bunch of things at once when it started getting going. My speaking business just took off like a rocket, and I probably tripled my income in the first three years after the blog launched, just as all the different income sources that got powered by it. The speaking activity picked up, my consulting started picking up, my newsletter business was growing. I was bringing in business to our advisory firm and became a partner. We had just launched our recruiting business at that point and it was quickly getting revenue going and getting underway. And so, I started hitting kind of some personal walls. The good news was money and income was growing, bad news was now I really actually have a lot of businesses to deal with, even just things like bookkeeping, and tracking et al, and dealing with the amount of travel that I was doing when my speaking schedule ramped up from 40 a year to 70 a year, as it did in 2013 into 2014.
And so, yeah, I started by hiring and I hired with the philosophy…I don’t even know where I read it first. It’s it’s so engrained into my brain now that I can’t even figure out where I got it originally. But it’s this simple idea that you should spend all of your time on whatever your highest and best use is in the business and let go of and delicate the rest. I think it probably actually came from some internal practice management stuff we were doing at Pinnacle, because that was basically how the founding partners ran the business. They were great at business development and managing client relationships, and that was what they did and they built a team around them to do everything else. To do the financial planning grounding and then manage the investment models, and just all that stuff that eventually you have to do if you want to build a business that’s bigger than yourself.
And so, I started hiring for support, and I did it really gradually. I started with a virtual part-timer and outsourced bookkeeping, because it’s to me like bookkeeping is just the first easiest thing to let go. Like, it’s not a coincidence as to why, I helped to create a bookkeeping service for advisors. Just, I live the transition like you really don’t need to be doing it. It really needs to be done, you really don’t need to be doing it yourself. It’s a very outsourceable task. So I let go of bookkeeping first, then I’d already started letting go some of my contracting and invoices that would go with the speaking and newsletter stuff, because we had to keep…, the extension of bookkeeping was all the invoicing and contracts that go with closing business that’s into the bookkeeping.
Then moved from there into, “Well, I now really need someone to help me with just the amount of travel logistics and all the other stuff that’s going on.” It was actually like, “Well jeez, there’s actually some of the newsletter subscribers now. I need someone just to help me handle all the customer service stuff that’s necessary.” And so, I started with a virtual…basically a virtual assistant that was five hours a week, and then 10 hours a week, and then 20 hours a week, and then eventually got hired full-time, as I just spent more of my time focusing on the things that I do well and trying to delicate and let go of the rest. And that’s still effectively the philosophy that I live and focus on today. And the things I’m really good at, I’m good at just taking an information and assimilating it.
You know, the truth at some real level is half of writing the blog is because I just like creating valuable stuff and sharing it. It feels good to help your peers. The other half of it is I like learning things. And, one of the easiest ways to learn something, and the most accountable ways to learn something is create a blog where you have readers that expect you to produce things on a regular basis, and you get really…it’s a really good accountability mechanism to make sure you keep going and learning new things, to share with them. And so, there is kind of a…And I mean it in the most positive way but like there’s an accountability mechanism and kind of a symbiotic relationship there that half of it is because I like sharing and being helpful, and half of it is because I like learning, and going to find new things to learn so that I can share it with everybody. Feeds both sides of that drive.
Alan: And it’s one of the things you shared with me about scaling back your speaking, just because you’ve gone from, 75 events down to 60, which is that your concern was that you were going to miss out on conversations with advisors to figure out what content they’re looking for, because that’s where a lot of your content inspiration comes from.
Michael: Yeah. I mean, I have seen questions like, “Where do you get the ideas of all the things to write about?” I’m like, “Well, 50 conferences and a couple of hundred advisors at every conference, and I can’t quite talk to everybody, because that’s a lot of people, but I talk to hundreds and hundreds and hundreds of advisors in person all year long, and I get even more feedback than that in the emails, and comments in the blog and the rest. And so, whenever I have an idea for a blog article, I’m talking to someone, I’m like, “Oh, this would be an interesting thing actually to write about. People have been asking this a lot, I should write an article about this.” And I’m a heavy user of Evernote, and so I actually keep an Evernote note that’s just blog ideas. So, I’ve got a list of technical ideas, a list of practice management ideas. That article list is literally about 150 article ideas right now. Like, I…when you’re talking to that many people, I’m coming up with things to write about faster than I can write about them even with the crazy volume that I write about.
And it’s one of the reasons why I always giggle at all the people that…all the advisors I know that are struggling with like, “If I was going to start writing a blog, what would I write about?” You write about what your clients are asking you about. It really is basically that simple. Whatever questions people are asking you. If you see a blog article, there’s really only two reasons a blog article ever comes into existence. Either number one, “I just had some chip on my shoulder about some issue that I just felt I needed to weigh in on,” or number two, “At least five people have asked me this question.” And that’s kind of my litmus test. If one or two people ask me and just, lots of people ask questions… I talk to lots of people. Anything I hear five times is something I’m going to write about. And, that’s where most of it comes from.
But it’s all built around this focus that there are basically two things that I do well, but I really just…my unique God’s gift to me to the rest of the world. Number one is, I’m good at taking an information and assimilating it into something that you can draw takeaways from. So, I hoover in information like a vacuum and then I can turn it into blog posts that explain things and teach things. The second thing that I do really well is I’m really good at strategy. Just really the ability to vision a future that’s different than today and figure out what the strategy is to move in that direction, I’m really good at.
And so, that’s what’s led me build the blog, an entire business model around it, where I can drive, a couple of million dollars of new revenue flows just into all of these related businesses. Like, there really is kind of a grand master plan to that. It wasn’t by accident that I kind of stumbled into working, it was having a vision of what I was building towards. And likewise, when I’m involved with now a lot of different businesses that I’m involved with all of them have partners. I mean, all of them like, literally have partners. The only thing I’m a sole owner in is my personal speaking business because that’s me, and the personal writing stuff, but all of the other businesses have partners, have not just co-owners but co-operators that run the day-to-day business, because I, frankly learned after five or six years of lots of management duties at Pinnacle, my gift in this world is not managing large teams of people. I can set the strategy and see the vision but I’m much better when I can then hand that off to someone that’s excited to be the implementer person to do all the details of it. And so, I deliberately keep a pretty small personal team that works with me directly. It’s a couple of full-timers and part-timers that just kind of support my personal world these days. And all the rest are businesses that have great partners that live, and breathe, and execute the business on a day-to-day basis, because that is their strength and that’s not mine. And knowing that and getting comfortable with that frankly took me a lot of years to be able to let go of that, but it really is true that two people working together with complementary skills can build something much larger than either of them can do individually on their own.
Alan: So true. So talk to me a little bit about your sort of the new iteration on time management, which includes this big rock concept. Now, if you’ve talked about it in a previous episode, because I don’t listen to podcasts, so I have to listen to the first 19 episodes.
Michael: I know you hear about it because I tell you all the time in our business meetings that I’m up-to-date or behind on my big rocks. So, there’s an analogy for time management. I heard it first as coming from Stephen Covey. I don’t actually know if it originated with him, so if it’s from someone else, I apologize that I’m attributing your idea to Stephen Covey. But the idea is, so imagine in front of yourself you’ve got a big jar, like a big Mason jar, and it represents all the time you’ve got. So 24 hours a day, seven days in a week, there’s 168 hours in a week. So, you’ve got 24 hours a day and 168 hours in a week, and, whether you’re you or me or Bill Gates, or Warren Buffett, or the President of the United States, we all carve up the same 168 hours.
And so, as Covey puts it, you can imagine the stuff that fills that jar falls into three types. The first are big rocks. Like, the big, meaty things that come up from time to time that you’ve got to spend a lot of time on and work on and work through it when they’re a big deal. Then you’ve got kind of the mid-sized items. So, if there are some big rocks, there’s a whole bunch of small pebbles. Like, they’re sizable, they’re things you’ve got to deal with, they’re not quite as of a big deal and intensive as big rocks, but there’s more of them because there’s always this kind of drumbeat of stuff you’ve got to deal with. And then the third type is the sand. And there’s a million grades of sand. The sand is emails, you know, people that pop in from meetings. Just all the incessant drumbeat of one-off stuff that will forever interrupt your day until you have no time left in your day because you were just dealing with all the sands. Like, the fire hose of email and phone calls, and people who want to pick your brain and all the rest.
And so, the point that Covey makes is most people manage their time kind of reactively. And when you manage your time reactively, what ends up happening is the sand fills most of the jar, the pebbles fill most of what’s left. And if you imagine like a Mason jar that’s filled two-thirds of the way with sand and then with a big layer of pebbles, if you took a big rock and tried to put it in there, it will not fit in there, because the jar is already too full of sand and pebbles. The better way to manage time is you start with the big rocks first. So, if you imagine now emptying out that big bottle and the first thing you do is put in a giant rock. Now the giant rock is going to fill a bunch of the jar but it’s also going to have a bunch of space around it. So next, you pour the pebbles in on top of the rock. And like, you actually imagine this happening. So, you start pouring the pebbles in. Like, they’re bouncing around, they’re kind of settling into the gaps around the big rock. Then last, you take the sand, and you pour the sand on top. And the sand now will fill down and fill in every single gap that is left in there, because sand is really good at doing that. But, because you put in the big rock and the pebbles first, all of the things that matter are going to get done. So, to the extent there’s not enough space in the jar for everything, because there never will be, to the extent there’s not enough space in the jar, if you put the rock in first and the pebbles second and you pour the sand in last, when you run out of room, the only thing that you miss out on is sand, which by definition was the least important part.
And so, it’s kind of a fun analogy but I literally embody that to the point that every day for the year, I actually now create a calendar for myself for the entire year, every day of the year. And every day of the year, I assign one, and exactly one big rock. Now, some big rocks are like the entire year of Sundays, my big rock is try not to work on Sundays. I don’t always fully succeed in it because there might be a little bit of sand that shows up, but no big task for myself on Sunday. I try to spend some time with family. I have kids. Mondays, my big rock is team meetings. I run internal team meetings. I’ve got both Pinnacle meetings for some of my obligations there as well as kind of my personal team. So, I’ve got an executive assistant, I’ve got a research associate, I’ve got someone that does all of our technology and website design work, I’ve got someone that I work with on marketing. And so, all of those people get scheduled on Monday. Some of them are weekly meetings, a few of them are bi-weekly meetings, but, like, Monday is team meetings day. That is the big rock for the day. So, no matter what happens on that Monday, I’m going to get my team meetings done, and then if I have to, I’ll deal with emails around it.
Tuesdays, Wednesdays and the Thursdays are kind of flexible big rock days for me. So, sometimes those are travel days, I’ve got to go down for a speaking engagement, sometimes I tag those as writing days. Like, I’m going to do an article for the blog that day. And some of them might be just business meeting days. So, when our Pinnacle executive team has meetings, that’s pretty much a full-day meeting. They’re usually once a quarter, so just the big rock thing that day is I’m going to be sitting in a Pinnacle meeting for a couple of hours. So, there’s one big rock assigned to every day, and I plan out the whole week and the whole year like that. So, I put in a couple of flex days for myself, because if you actually schedule every single day, then the minute a speed bump comes your world is going to unravel. So, there’s a couple of flex days. But, whatever it is, I always tag one big rock to a day. There’s one thing that I have to get done every day.
And the interesting thing when you plan that out for the entire year, you quickly get an understanding of whether you are truly at the end of the day overcommitted. So I know how many blog articles I have to write for the year, I know how many days it’s going to take me to write my newsletter for the year, I know how many travel days I’m scheduling for myself, I know how many personal days I’m taking, I know how many team meeting days I need. I know how many days I need for business meetings for Pinnacle and XYPN, and our recruiting business and the rest, because those partner meetings get scheduled. I’ve got one big rock day a month to do podcast recordings so that we can do a whole bunch of them at once and try to work the time together.
And so, I manage my whole world around that idea of make sure you get your one big rock item done for the day. And part of the point of it is a related concept called time blocking, which is when you’ve got to do a task, when you’ve got to do things, group them together into blocks. So, realistically, it takes me three or four hours all the time to make a full article for the site. I could do that by spending an hour a day across four days, but if I spend an hour on that, and an hour on something else, and an hour on something else, all that switching really drags down your productivity. So, if the Tuesday’s big rock is a blog article, I’m going to spend three or four hours that day until I get the article done, and then the next day, I’m going to spend three or four hours on something else, and the next day I’m going to spend three or four hours on something else. Because by blocking the time together, you’re much more productive when you can focus on something and see it through to the end than when you’re constantly switching around.
Now, a lot of those blogs only take three or four hours, my days are still more than full because there’s still these pebbles and there’s still the sand. We’ve got stuff for an upcoming speaking gig and I’ve got to work out some travel logistics, and we’ve got to send them an outline, and, “Hey, there’s a contract issue,” and I’ve got a client issue, I kind of get pulled in on Pinnacle, and then there’s a business issue that comes off XYPN, so we’ve got to talk about that for an hour. So there’s still plenty of pebbles and sands that come and fill the rest. Again, that’s kind of the point. Like, any remaining time in your day, if you’ve got any and in all act of the business, the time will get filled. But you start by scheduling the big rocks first, and that’s what ensures both that you get stuff done, and I found this incredibly helpful at figuring out when you’re really truly getting overcommitted. The challenge I found is the busier the business gets, the harder it is to figure out how to draw the lines about when you’re too busy and when you just have to say no to something.
There’s a fantastic quote out there that, “the difference between successful and really successful people is that really successful people say no to almost everything.” And it was a quote that I never appreciated until I got to the point a couple of years ago, when my world started really, really, really getting busy across all these different businesses, that, when we’ve all got the same 168 hours of time in the week and you want to have at least a little of that to yourself, and friends, and family, and the rest, everything that you say yes to is time you’re going to…you’re not going to have, which is going to be a no to something else. And so, if you can’t figure out how to allocate that time, if you can’t figure out how to say no to things, every no isn’t just a no, it’s a yes to the time for something else. And if you can’t be selective about that time and setting priorities, eventually the business just dominates and controls you. And I’ll admit, it’s still a struggle for me of drawing those lines and not being overcommitted and figuring out how to say no as often as I shouldn’t probably need to.
How Michael Defines Success [1:51:06]
Alan: One of the truth is the more success you experience and the bigger the blog and podcast reach get, the more opportunities that present themselves, and there will always be great opportunities to get involved in, and it’s really about balancing the ones that you have a passion for, and that, make the most meaningful impact, which sort of ties into my final question for you, as we’re sort of wrapping up this episode of the podcast. And that is that ultimately something gets you out of bed in the morning and drives you to do the work that you do, and so how do you define success? What does success mean to you, and how do you know if you’ve achieved it in your life?
Michael: You know, it’s such a good question because I ask it to every guest, so it’s always strange to have it turned around on me now. For me, the framework for success is it’s got kind of two core components. Number one is, I need to enjoy what I’m doing when I get out of bed in the morning, and I do. I love what I do. And, it’s not that I enjoy every part of everyday, there are still management challenges and business frustrations, and no end to the issues and challenges that come up, but I wake in the morning and I’m excited to see what emails have come in, because usually the first emails that I see in the morning are people who read something that I wrote last night and sent me some email after I went to sleep. Because, you know, the reach of the blog these days, both people read around the clock and I’ve got a readership that’s literally around the globe now. We’ve got a lot of readers in Australia, India, UK, Netherlands, South Africa. Like, anywhere there’s pockets of financial planning, there’s pockets of Nerd’s Eye View readers. And so, I literally get emails that come in around the clock. And, I’m excited to wake up in the morning and see what questions people have and are bringing. And just that the fact that I’m still excited to work on the business and work in this business every morning when I wake up is just a huge personal success fulfillment to me. It’s having impact, and I know it’s having impact because I get the feedback that it’s having impact from the people who write and the people that I talk to when I get to travel and go speak. And knowing that it’s having an impact and being able to interact with people around that is a huge piece of what drives me.
I’ll admit that the second part to me is…and I want to know that it’s ultimately driving to some point where I can afford a lifestyle that’s comfortable and my kids can go to college, and I can support my family. You know, I work well, full-time and then some…My wife is home full-time with our three children. That’s part of our family balance, just trying to make it work, particularly with the amount of travel that I do. And so, I’m still even acutely cognizant that I function in a world where I’m my family’s sole breadwinner. And so, it’s not even enough just to say like, ‘Well, I want to do things that I enjoy.” You know, we had Deena Katz on our podcast a couple of weeks ago, kitces.com/16, and, she’s coming from this point there’s all this discussion these days about pursue your passion, and she had said, “Forget pursuing you passion. Work on skills that are valuable, that gets you paid, and find your passion in something else, because there’s a lot of things you can do that are like really fun and pursue your passion, but it won’t pay your bills.”
And so, it is important to me actually finding that balance of I want to enjoy what I do, but I do want to make sure that I can actually do something that’s a viable business to get paid for it. I think it’s part of just how my brain is wired. Like, there’s an efficiency mechanism in there that says, “I can’t just do things, I have to do things that have some productive end result.” And so, figuring out how to design an architect to that is kind of part of the fun game, right? To figure out how to build a business where I wake up every morning with the goal of figuring out, “How do I give away 99% of what I do for free?” Because if it’s actually just 99% and not 99.9%, we’re going to have a growth problem. Figuring out that challenge is a really fun and exciting challenge to me, and it’s been working so far, and I look forward to continuing to do it.
But I will admit, there is a part of it for me that… it has to work for me and it has to work from the business perspective as well, and I’m always cognizant of trying to make sure that I’m balancing the two. You know, our lifestyle still actually hasn’t actually changed that much over the years. I spend a miniscule portion of our household income, it lets us save a lot of money. It’s also given me a lot of the financial means to reinvest in the businesses and grow the platform and do some other things as well. So, it’s not the money that drives me, but there is a part of it that for me that I want to make sure it gets me excited to get out of the bed in the morning, and it does make sure that my kids will be able to go to college and do the things that our family needs to do as well. And success has to check both of those boxes for me. You know, I don’t want to get to the point where I love my life and love what I do and I’m putting my family through a financial distress in the process. That doesn’t work for me. It’s got to fit both.
Alan: So, do you think this will win the award for longest response to that question at the end of an episode?
Michael: No, not quite the longest. In defense to some prior guests, I’m not going to actually call out who had a longer response than that.
Alan: And for listeners out there, I know it’s not the normal framework for the show, but if you have more questions about Michael’s past sentimental, maybe we could do a rapid fire mailbag-type episode, you know, at some point in the future if there are more questions and things that I didn’t cover.
Michael: You can post more questions in the show notes comment section as well. So, as always, we’ll have this posted on the blog. This is episode 20, so kitces.com/20. You can ask follow-up questions there if there’s a…something that Alan still didn’t quite get to in our unusually long podcast episode here.
Alan: Well, Michael, thank you for giving me the honor of coming on and interviewing you. Hopefully this was great for listeners, and look forward to having you on our show again sometime in the near future over at XYPN Radio, sir.
Michael: Absolutely. Thank you.