Executive Summary
Welcome everyone! Welcome to the 449th episode of the Financial Advisor Success Podcast!
My guest on today's podcast is Michelle Perry Higgins. Michelle is a principal of California Financial Advisors, an RIA based in San Ramon, California, that oversees $2 billion in assets under management for approximately 1,500 client households.
What's unique about Michelle, though, is how her firm has grown to $2 billion of AUM entirely organically and has achieved a greater than 99% client retention rate, in part by setting high standards for client service (and sticking to them over time).
In this episode, we talk in-depth about how Michelle prioritizes her clients' time (ensuring they never wait more than 5 minutes for a meeting and always receive a same-day call back when they contact the office), how Michelle created what she calls an "Everything Binder" that allows clients to put all of their key information in one place (providing clients with peace of mind by easing the transition for loved ones if the client becomes incapacitated or passes away), and how Michelle builds a half hour into her schedule after client meetings to record notes into her CRM so that she doesn't forget any important messages the client communicated during their conversation.
We also talk about how Michelle has achieved strong client satisfaction by spending the majority of time during meetings listening to what they have to say (and avoiding jargon when it comes time for her to discuss technical planning topics), how Michelle seeks to go a level deeper when talking to clients about their personal lives (for example, not just asking about where they went on vacation but also whether they had any money conflicts during the trip), and how Michelle ends each client meeting by asking whether there are any issues the client wants to talk through (which may or may not be financial-related and helps her gauge their satisfaction with her service).
And be certain to listen to the end, where Michelle shares how she has built California Financial Advisors with three of her partners over the course of 30-plus years (and why they maintain an "eat what you kill" approach towards compensation), how Michelle has found significant value from operating an internship program (both professionally by identifying talented students who could become the next generation of advisors at her firm, and personally by being able to mentor aspiring advisors), and how Michelle has navigated the challenges of being successful as a financial advisor and as a parent at the same time (including the joys she's had and the sacrifices she's made along the way).
So, whether you're interested in learning about setting and maintaining high client service standards, fostering deeper client conversations, or making a partnership last over multiple decades, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Michelle Perry Higgins.
Resources Featured In This Episode:
- Michelle Perry Higgins: LinkedIn | Website
- California Financial Advisors Introduction Packet 2025 – Download (PDF)
- Loved One's Guide – Download (PDF)
- California Financial Advisors
- The Everything Binder Book: Financial, Estate, and Personal Affairs Organizer by Michelle Perry Higgins
- Stocks, Bonds, and Soccer Moms - 7 Steps to a Balanced Life by Michelle Perry Higgins
- Lean In: Women, Work, and the Will to Lead by Sheryl Sandberg
Are you a successful financial advisor, or do you know of one that would be a great fit for the Financial Advisor Success podcast? Fill out this form to be considered!
Full Transcript:
Michael: Welcome, Michelle Perry Higgins, to the "Financial Advisor Success" podcast.
Michelle: Thank you for having me. This will be fun.
Michael: I'm really thrilled that you were able to join us today, and really looking forward to the conversation about...just as I think about what it means to really give good service to clients, because I find we all say we give good service. We all say we give great service. What service provider in a service business wouldn't say that you give great service? We actually did a survey a couple of years ago out to the advisor community of how do you differentiate yourself from your competition, from all the other advisors out there, and three-fourths of us say that we give above-average client service, which is literally mathematically impossible.
Michelle: Impossible. Right.
Michael: 75% of us cannot be in the top 50% of client service. Mathematical jokes aside, although it really is true, we've repeated it several times, and every time, 70%–75% of advisors say they differentiate on above-average service. We don't even really have clear standards about what it means to provide above-average service or great service. We can see hints of it in the outcomes, like certain firms that are higher retention rate, or higher referral rate, or larger client size, or better share of wallet if you measure that, or clients tend to consolidate with firms that give great service. But because we're not in each other's offices or each other's meetings, it's really hard to see the little things, or maybe sometimes not so little things that we actually do that makes a great service. I know you've spent a lot of time thinking about what it means to give great service to clients, how do you operationalize in your business, giving great service to clients. I'm just excited to talk today about what it really means to try to be above-average service when most of us say that we are above-average service, but only a few of us can truly be above average in client service.
Michelle's Non-Negotiables For Client Service [04:48]
Michelle: I think you mentioned, Michael, the retention ratio seems to be that thing we all go to to look at how a firm or individual is doing, and we could say, "Oh, yeah, our firm and myself, we're over 99% year over year over year, and that's all good, but what does that mean?" What does that really mean from the start, from when a client calls as an intro into our firm to 25 years later when we're still managing their money? I spent some time really thinking about this because I recently wrote an article that's going to be coming out for new advisors, and in my opinion, some non-negotiables, and how it is in my practice how I operate. For us, from the moment that a prospect calls in, we still have a receptionist that we pay to answer the phone. That has been really important. And time again, we hear it from our clients that they do not want to end up in the hit one, hit six, end up in a voicemail.
Michael: Okay. Yeah. So, there are no phone trees, no chatbots. It's like the modern version. So, just a person who answers the phone every time when it rings.
Michelle: She is there. She's been there for decades. She greets the client when they get here. They get a warm cup of coffee. We write down what they like, and we will make sure we have it for them when they come, and that's the beginning. But even to back up, when that prospect calls, we are calling them back. We are formally booking them. I have real people booking these appointments, sending a beautiful confirmation for them to come in, explaining where our office is. It's a little tricky sometimes getting to our new office. So, from start to then when they get here, to probably a huge pet peeve of mine is we are not doctors. Our clients should not be sitting in our lobby longer than five minutes. Even five minutes is too long for me. We're not doctors. We control our calendars as financial advisors. If there is an emergency, okay, that's one thing. In the 30 years I've been in practice, I can't even remember I've been longer than 10 minutes to get a client.
Michael: As we live, right? Doctor metaphor is good in this context. We're not doing a heart surgery. We're not quite at...I know there's a client that has some urgency for a call back, but very rarely are we literally in a, "I need to be late and delay the current client because the one that called is literally so urgent, life and death. I can't call them back after the next meeting that's already scheduled."
Michelle: Exactly. So, the booking that takes place and the schedule is a critical component. You get the clients back to your office. They have their warm cup of coffee, and then it begins. So, what does service look like? And I think you just brought something else up that's a non-negotiable for me. There will never be a time a client doesn't receive a call back same day, always same day. It could be, "Sally, I don't know the answer to that question, but I'm going to look into it and I'll get back to you in 48 hours," or my assistant calls and says, "Michelle's going to look into that. Let's book an appointment for you to talk to her tomorrow." Same day. If my clients don't get a same-day call back, they know either the email ended up not making it to me, or something is wrong. If you have a team that is working for you, there's always someone that can get back to that client. And I hear from prospects that come in over and over again, "My advisor takes four days to get back to me, a week to email me back." To me, that's average service. So then they get into my office and...
Michael: Wait, I have a question around this callback policy before we get to some of the other areas. So, if I'm hearing that right, it won't necessarily be you, like Michelle may not reply same day, but someone from Michelle's firm at least will reply the same day. Or is it really always you?
Michelle: Nope. A lot of the time, it's me emailing them back and saying, "So and so will get back to you, or I will call you tomorrow with the answer to this, or Tara, my assistant who books appointments, will call and book an appointment." So, yes, it's either me or one of my team members.
Michael: So, I just got to ask very practically, what if they emailed you and you're just literally tied up in meetings all day and don't see email? Do you always leave a portion of your day to respond to emails? Do you have other team members who can get in your inbox to check if clients have emails that have not yet been responded to? How do you do this when just sometimes our days get pretty packed and busy?
Michelle: Agree, and I think with the level of clients that I have, conceptually, that would be hard. But, yes, I think it comes back to booking. And realistically, I'm not 25 again, I'm 50 and some change. So, to see three clients a day, yes, that's going to eat up a chunk of time. Then there's planning and all that good stuff. I always tell my team this, it only takes 15 seconds to email a client back and say, "Tara is going to call you and book an appointment." And so, no one gets into my email. That is me responding, that is my team responding, and they know same day. So, I do not allow myself to see the six clients I did when I was 25, 35. I ensure that there is time in between for me to do marketing, for me to talk to you, for me to respond to clients that are going to... It's going to come up. I have 241 clients. So, stuff's coming up every day.
Michael: Okay. So, what I'm hearing to that ultimately is you are managing how many meetings you have in the day in the first place and not, I don't know, call like hyper-stacking meetings to the point that it would be impossible to at least take a few seconds to say, "Bill, got your email. Tara will get back to you tomorrow," so that the client did get a response within the same day.
Michelle: Exactly.
Michael: So, as a minor minutiae, but this is just where my brain obsesses, is there some cut off? If I email you at 4:58, are you still obligated on same day? If an email comes in after X time, like tomorrow morning is still acceptable? Or how firm are you on trying to keep the same day part?
Michelle: This is where I say money never sleeps, which means I don't sleep. I think this contributes to my success. It also is my downfall. I will respond on weekends. I will shoot an email out at 6 at night saying, "We'll get back to you tomorrow." Yeah, that could be my downfall. But it also is something that that's just my nature. It's how I'm hardwired. So, my clients are not guessing when they're going to hear from me, which is what I hear over and over and over again from prospects that they just never know when they're going to hear from their advisor, when they're going to get the call back, when they're going to get a response.
Michael: Okay. So, that's helpful and just powerful framing of clients getting response. And I guess it's a call back or an email back, like practically speaking. But if you communicated into us, you will hear back the same day.
Michelle: Yes. Exactly.
Michael: And often you're not stacking more than three meetings a day, so you've got some room to do those as necessary.
Michelle: Correct. What's hard for me is if I have to do the four or five, that's what really wears me down. So, I always say, "This isn't a sprint. It's a marathon to be in the business this long." And there's just things I've learned at this age. Three is my cool spot where it gives me space.
Michael: And how many days in the week do you do that? Is there meetings per week that you also try to manage your target?
Michelle: Yeah, that's a good question. So, Monday, Tuesday, Wednesdays for me are where I hit it hard seeing the clients. Thursdays and Fridays give me a little more space to do other things, focus on marketing, podcasts, looking at financial plans, all that good stuff. So, I really see clients Monday through sometimes Thursdays. It wasn't always like this for the first 15 years of my life. I was working Monday through Saturday seeing clients, and it would be six a day.
Michael: Okay. Whereas now it sounds like it's more like you may be seven to ten in a week.
Michelle: Yeah, it's very systematic. I'm very careful on what new clients I will take today. So, it's different than it used to be for my health, I would say.
Michael: So now, take us back to you were highlighting how some of the way you schedule meetings and the way you buffer between meetings is part of what helps to ensure clients are never sitting in the lobby for more than five minutes. I'm presuming they're not sitting in the lobby for more than five minutes past whatever their scheduled time is.
Michelle: Exactly. Or Zoom.
Michael: If they come 20 minutes early, they are going to be sitting for a little while.
Michelle: Right. And this goes for Zoom. My doctor left me sitting for ten minutes on Zoom, and I was like, "Oh, she's a doctor, just keep my mouth shut." Same thing with Zoom. I will not be a minute late on Zoom. So, it's more the respecting the time of the client. They are paying us. It is our job to make sure that we are giving them the most respect with that, with what we wear. I actually have four interns here today, and I'm not seeing clients. I'm talking to you, and I have some phone calls I need to make. So, it is one of the first days I've ever come into the office in jeans and the sloppy shirt, and they looked at me weird, and I said, "Would you guys hire me?" And two of them said yes. One of them was my daughter. She instantly said, "No, you've told me never to look like that." And I said, "My point is I want to show you the difference of what you've seen me in a business suit every day showing the utmost respect for my clients. They're paying me a lot of money to manage their money. The least I can do is be in a full suit, my hair done, makeup done, on my game."
Today, I proved a really good point to these interns that the way I look today is coming off a golf course. That's not acceptable to me. I don't care if I've been managing money for clients for 25, 27 years. They know me. They've seen me so many times. I will be in a suit every day in my office. That to me has not gone out of style. For many firms, it has. I don't get it. But that doesn't work for us here at CFA [California Financial Advisors]. So, how we look has really been important to us, and it's a respect thing to our clients. So then back to they get in our office, they get in my office, and depending on if we are doing a financial plan that day or if it's just an investment review, we update their financial plans for me once a year. They'll sit down. We get to know each other.
The get to know part, and I've heard many of your guests, I think some have really stood out in this area, is the get to know you part is more than just where have you been on vacation, or what school college is your child getting into? It really seems the, "Oh, how's the weather...?" Those are the how are the weather topics. They're just boring to me. Those are important. No doubt. Those are important. But the get to know you, this is where my CFT that I recently got, the Certified Financial Therapist designation, really aligns with what was important to me in understanding money habits, how people go through life correlates to their financial planning with their psychology. It really meshes, if you will. "And so, you went on vacation. Great. Let's talk about, how was your spending on the vacation? Did you guys have any disagreements when you were there because Bob wanted to go on this really expensive excursion or Sue wanted to buy a ring on the cruise?" "Oh, yeah, we actually did have some disagreements..." So, maybe we'll peel back the onion on those issues or...
Michael: And so, is that really an example? Like that's the kind of conversation you might open up like, "Hey, that's great. You went on vacation. How was your spending on vacation? Did any issues come up?"
Michelle: Oh, yeah. Depending on the what's new, I will always peel back the onion on the what's new. And that takes a little bit of work. It's also not being afraid to ask the hard questions. And I guess I've never really been afraid. People say I should have had a talk show because I love to ask questions. But when you ask the questions, much like you, you get to know people in a different level. And once you get to know people, you peel back that onion, you then understand it correlates in so many ways to how they spend money, why their marriage might be suffering because of money. "Yes, I got an inheritance. Oh, I just got an inheritance." "Oh, great. Okay, before we talk about how much you want me to manage with this inheritance, let's pause and talk about the family dynamics that might be going on with this inheritance and get into that." And is that nosy? No, because, ultimately, it's correlating to what my client has been going through, and the stress that maybe is on her back dealing with her sister in this inheritance and they are no longer talking, which she wouldn't have told me, "The sister is no longer talking to me because we've been fighting so much over this inheritance."
So, I think that's where my meetings, yes, could go a little bit longer. On average, they're an hour. But the first 20 to 30 minutes are understanding the client beyond, how's your kids? How's vacation? So, once I get past that, I definitely and at that time, you're documenting, or you're doing whatever you have to do to remember these different conversations. I'm going back to my CRM and documenting this information because when they come back in six months later, or I talk to them a month later, two months later with a call in between their semi-annual reviews, most likely, there's going to be a connection to something that I talk to them about regarding those issues that we need to follow up on. And so, that's where people say, "Oh, yeah, I know my clients so well." Can you know them better before you jump so fast to talking about how the market's doing, how the global markets are doing, how your portfolio is performing, which they want to know, absolutely want to know. But I think everyone can be better money managers by understanding these kind of issues. Why did the guy go spend his whole wife's retirement gambling it away?
Having Clients Complete An "Everything Binder" To Organize Their Legacy Interests [23:58]
Michael: So, are there other common questions or probing areas you like to get into? I'm getting the feeling like that's great. You had a vacation. How was your spending on the vacation is probably one that actually crops up with some frequency given clients do vacations. Are there other questions like that that you often use to open some of these deeper exploration, deeper understanding of clients?
Michelle: So, I created something called "The Everything Binder." And for anyone who's written a book, you know you're not going to become a millionaire writing books. But I wrote this book, and it was my baby. It was created, though, just to back up because there's something called the planning process checklist I'll do with my clients when they come in. So, again, we kind of do the how are you, all that good stuff that I just referenced. And then I pull out my planning process checklist. And on here, again, going back to, is it because I like control, and I want to know everything about someone? Maybe. Years ago, my partner created this, and then I started to turn it into...it just got longer and longer and longer and longer. So, it correlates a bit to when you go to the doctor, he's like, "Oh, how much weight have you gained? Let's get you on the scale. Let's take this. Has any meds changed?" They ask you all those preliminary. "What has changed?"
Well, I started asking clients, "Has anything changed with your insurance, life insurance, homeowners, earthquake, da da da?" No, yes, I'd write it down. "Has anything changed with your beneficiaries? Let's check that." Boom, boom. "Has anything changed with your estate plan?" "No, I haven't even done it yet." We get into that. "Who's your emergency contact?" "X, Y, Z." "Well, does your daughter even know that you don't have an estate plan done?" "No." And so then, that's really was the start of why I started scratching my head years ago. "Okay, your daughter doesn't know you have an estate plan, but she's your beneficiary. She plans to handle all this. Does she know where you have your documents stored?" "No." "Does she know the code to your safe?" "No." "Does she know you have a safe deposit box?" "No."
So then my OCD kicked in. I started asking more questions. "Okay, maybe I'm going to scribble down your safe code just in case. I'm going to scribble down where your safe deposit box is in case they need it. Let's get another signer on your safe deposit box." "Okay, I'll do that." They'd come back. Then I started with the, "If anything happened to you tomorrow, let's walk through all these things. What's going to happen?" Because then, we've all had clients pass away, and we're one of the first people they call after they call their loved ones. It's, "Michelle. Where's mom's estate plan? Where's all her documents?" "Some are in the cloud, some are in the filing cabinet, some are on the computer. Help me." So then a portion of my meetings, Michael, really turned into, I was feeling this intense stress of, "Oh, man, my clients and a lot of the world doesn't have everything in one spot." They say they even have their estate plan done. Well, that doesn't have in there who your gardener is or who your insurance agent is that I need to call to shut all this down if you pass away. It doesn't show in there where your money's hidden, or where the Rolex is hidden, or who is getting this art that you've worked so hard to accumulate. Where am I selling it? Who's it going to?
So, there was all these questions that started in my mind. That was the impetus for me creating what is called "The Everything Binder." It was a binder. Now, it's a book. Ultimately, I need to get this thing online, but I've been a little busy. But that was also a big piece of how I got to know my clients. And in doing so, actually just yesterday, I talked to a gentleman who called in, and he said, "One of your clients you used to have has passed away. And I have "The Everything Binder" in front of me, and it said, 'Call me, Michelle, if anything happens to you. Everything is written down.'" And we parted ways only because she was spending down all of her money, and I recommended it should go to cash, not be in the market anymore. She didn't need to pay me. But he said, "I cannot believe how wonderful it is that you took the time to kind of force your clients to do this." And let me tell you, it is a nagging game. I won't lie. I would say at this point now, 75% of my clients haven't filled out. It's a lot of work.
Michael: I was going to ask, how often are clients going through this?
Michelle: And so, every meeting, every meeting, I say, "Is "The Everything Binder" updated?" "No." "I probably need to update it for the last year," and I'll document that. Or, "Michelle, I need to go in there and some of my passwords have changed." I'll go in there, document that, because these are things I want to be able to pass down to their heirs or loved ones and say, "Mom said this, Dad said this." Just recently, about a year and a half ago, I created something called the Loved Ones Guide because I realized there's that portion of clients, my dad being one of them, who does not want to take the time to fill it out. It's making me insane. So, either I'm going to fill it out for him, or I need to have a CliffNote version of the planning process checklist, and "The Everything Binder." And so, I created this document that says, "Who's your accountant? Who's your attorney? Who's your financial advisor? Who's the four most important people in your lives?"
And a question that's really important to me lately because I have clients going into this stage, which is if I start to notice your memory decline, how would you like to be approached? What are some of your wishes? It's pretty amazing the range I've gotten of answers there. One of my partners got sick about ten years ago and was out for nine months to a year. And so, what I'm also setting up is this environment where if someone else has to grab this file immediately like we did with him, I want to have everything laid out for them. I want it to be very clear, "This is my client. These are the people they love. Here's their emergency contacts. Here's where X, Y, Z is at," so they can pick up the file and not feel like they're fumbling.
Thankfully, our firm, we have a very systematic approach on most of the stuff we did. So, it wasn't easy to pick up my partner's business, but it wasn't hard. It wasn't that I didn't know what his file was going to look like when I opened it. So, that consistency also within the firm, so that if I get hit by a bus tomorrow and my partner has got to pick up the file and talk to Sally, he's going to know a whole heck of a lot about her, way more than just, "Oh, here's Michelle's portfolio for her, here's her financial plan," which both tell a story, but there's so much more than that. And for me, that is also what sets me apart. I've been telling my interns this summer, too, "In a meeting with clients, you should be talking 25% of the time. The client should be talking 75% of the time, if you're doing it right." So many people love to hear themselves talk, and you got to let your client talk so that you can saturate that information into your brain and manage their money better and service them better.
Michael: So, I'm just trying to visualize "The Everything Binder" in practice. Is this a book that they're filling out, an app, a fillable PDF? What is it? What do you actually give clients to use and do with this?
Michelle: Yes. So, it started out as a binder, got very expensive to be made as a binder. So now, it's more of a book. But there is the fillable PDF I also share with my clients. The one that's on Amazon is a book that you fill in, a pamphlet-type thing that's 100 pages. It's a lot.
Michael: I was going to say that 100 pages is a lot of pages.
Michelle: It's a lot, right, which is why it was...there are 13 different tabs. The first tab is pre and post-death checklist for when someone gets sick. It's a checklist of everything they need to do. If someone passed away, it's a post-death checklist, everything they need to do. Then it gets into primary information, contacts, medical history, insurance information down to medical, dental, disability, vehicle, business, life. Some of this won't apply to you. So, that's where the 100 pages gets less intimidating. And I tell my clients, don't get overwhelmed. Just scribble in it a little bit each month. Then it gets into private security, which is personal devices, logins, all that. They don't have to put that in there, but they need to tell their kids. You wouldn't believe how many people say, "I can't get into Mom's computer, and all of her information is there." And then it becomes the stress, all this stress on them. Income and cash equivalents, real estate, personal property, where their storage units are, jewelry, what those are worth, all their retirement accounts, their debt, their business ownership. You throw documents, originals, copies, birth certificates, etc. You attach your estate plan to it.
And then the hard part that I've really been working with clients to get filled out is the funeral arrangements. Another area where when your loved one passes away, many, many folks are just scrambling to figure out what's the best service for them. What did they want? What was their game plan? In addition to scrambling, where's all their stuff? What was Mom's wishes? So, it's a pretty comprehensive overview of funeral arrangements. Do they want an obituary? Do they want flowers, donations? It's all they can scribble, and then letters to loved ones if they want to do that. So, that's kind of the quick overview of the book.
Michael: So, I've just got to ask, how many clients go with you on this journey? I can see the whole spectrum. There are some folks you put a checklist in front of them, and they are going to fill the whole thing out. And it'll be beautiful and perfectly organized, and they will diligently update. And then there are other clients who are at the other end of that spectrum.
Michelle: Right. Right. You just look at it and it's daunting to them. They hate that every six months I ask them if it's filled out, and it pains them to say no to me. They're all, "No, Michelle, no." And so, that's why I created what I call the CliffNote version, the Loved Ones Guide, which is three pages for the wife, three pages for the husband, at least give me the basics in some of these areas so that then your heirs...and I want you to share this with your trustee, or your son, or whoever that person is so they know who to call, where are things located, and what are your basic needs or wishes? Just simple. Three pages has been substantially easier to get filled out for those clients that look at the everything book and it's just daunting.
How Michelle Organizes Client Meetings [37:41]
Michael: Okay. So now, take me back to, I guess, just the overall meeting agenda, like meeting flow. Maybe it's actually a meeting agenda of just what you do in sequence. I'm hearing there's a bit of time of check in what's going on lately, but you go deeper. It's not just a small talk of, "Did you go on vacations?" It's like, "How was your spending on vacation?" We're trying to open further. I think then you get into planning process checklist, which it sounds like are basically the questions I asked to find out if anything has changed that might pertain to "The Everything Binder."
Michelle: Correct. And then if I'm doing a financial plan, we'll dive into updating that. If we're not, then I will dive into domestic global update. "How's your portfolio doing relative to the market," and do they need money? Then I get into all that good stuff. "How's their draw? Do we need to take an RMD?" Get into that whole piece of it.
Michael: Okay. So, help me understand, I guess, just a little bit more of what's on the planning progress checklist, how many questions is this? What are the questions? I'm just trying to visualize how much this is relative to the overall meeting when we could also spend hours talking about every page of "The Everything Binder" that could be updated because there's a lot of stuff there. So, what's actually on the planning progress checklist?
Michelle: So, that would be, "Has anything changed with your insurance, life insurance to who's your insurance agent? Do we need to change beneficiaries?" We review the beneficiaries. I have them file beneficiaries outside of here, life insurance. "Do those need to be changed? Has your estate plan changed? Who is your estate planning attorney?" Usually, I'll scribble that down again if anything has changed there. "Do we need to add a trusted contact to their file? Emergency contact. Has anything changed there? Do we need to take your RMD?" Of course, we'll address that. Most of my clients are in that region. So, that's it. It's a very quick...I would say I've gotten to five minutes or less on that now. It's very easy once you get the routine of...and they know the drill.
Michael: So, I guess the other question I was wondering just hearing you describe all this, and particularly for the level that you get into or these deeper questions around their vacation and other stuff that's going on in their world, just you get really powerful, juicy tidbits about what the client's really like, and what's going on in their head sometimes with those questions. How do you capture that? I think you said ultimately, you're trying to get this into the CRM, but are you a super-fast note taker? Do you have a good, amazing memory? Do you use an AI tool? Is there always a second person in the room who captures all these details and makes sure it gets into the CRM? How do you actually make sure it gets there?
Michelle: That also comes back to leaving myself time in my day to document when I'm done. If I had a...which my days always seem packed, but part of that packed is me taking the notes during the meeting. Plus, I guess when it's that kind of stuff, I don't know, I remember it because maybe it is a little more juicy. And then I immediately, as soon as I am done, I do not typically have an appointment right after that. I will go to my CRM and document personal updates, any changes with the financial plan, changes to beneficiaries, changes to their estate plan, insurance, taxes, and follow-up. And again, it's a very systematic...my assistant cuts and pastes the seven or eight things that I always document on. What's their allocation? What's their defensive barrier? Did they approve the trades? It's this list. I immediately go and document because, yeah, a couple days fly by, I'm going to forget. So, that is an immediate, and then I go and give the trades to our trader.
Michael: So, how long do you buffer, put on your calendar after each meeting to get the stuff out of your head?
Michelle: Maybe a half hour, typically, because then I'll move on to something else.
Michael: Okay.
Michelle: Yeah.
Michael: And what's the CRM of choice to capture all of this?
Michelle: So, we just moved. It is hot off the press. We just moved from Act!, good old-school Act over to Tamarac CRM. So, we're using Tamarac as our reporting. So, everything's in Tamarac.
Taking The Time To Show Appreciation For Client Referrals [43:29]
Michael: Okay. Okay. So, anything else around just this framework of what good service looks like for you, or how you've tried to operationalize them? And I hear a lot of there's systematized pieces of checklists of what we cover in the meeting, checklists of what we do after we come out of the meeting into the CRM, what we cover in "The Everything Binder," response times. Are there other things that you would highlight as well?
Michelle: I think a few more things that come to mind that always blow my mind...there's a few more things that I would say that I'm sharing with the next generation on just things that are important, I feel. We as advisors or any practice you're running, if you're lucky enough to get lots of referrals, how are you then thanking the client and showing your appreciation to those individuals who take the time to refer? And that is also something that I've been extremely consistent with over the years, where every referral I get, even if it's a client that is small to a very large client, my client will hear from me, they will get a thank-you card or note. It does not go unthanked. I won't say the business, but I've been referring someone quite a few clients, and haven't even gotten a call, email, nothing. So, recently, I picked up the phone, called that in. I'm like, "Have you gotten these referrals?" "Oh, yeah, thank you. Thanks. I appreciate it." It's like, "What?" Does it take time? Yes. All these little things take time. But if you go out of your way to be extremely appreciative, which I am, because I don't want to be doing hard marketing, if you could thank your clients for taking the time to spread your praises, that goes far.
The other thing that has really shocked me over the years, and trying to teach the next generation, is your clients come in to you, prospects come in, they know you're smart. They know you've got a resume, they know you've been around a while, you're ranked here, blah, blah, blah, blah, blah. You do not need to talk over your clients or try to show them how smart you are. And I think sometimes that gets lost. It really gets lost. It goes back to the we're talking 25% of the time, they're talking 75% of the time. No one wants to be talked over or confused in meetings. It's the worst. I actually had to get on a three-way call recently with this other financial advisor that I took this very large client from, and the client was on, and the advisor was on.
It was not fun. But I listened to him just ramble most of the meeting over this certain subject, talk over her, interrupt her. And we got off the phone, and she said, "Do you see what I'm talking about?" And I was like, "Yes, I saw it. I didn't even want to stop him because I just wanted to see how long it would go." They come to you for advice, but they want to understand what's going on. So, the art of taking a very complex subject or taking their stress down ten notches by speaking to them in a manner that is peaceful is really cool at the end of the day. I had a client a few weeks ago who her husband has cancer, and I asked her, "How are you doing through this?" And she said, "Thank you for asking. You're the first person who asked how I'm doing." And she goes, "I'm doing horrible. And I'm worried about..." And then she started to list out all these things she's worried about. So, I deviated on what I was getting to, but I think the art of a really good advisor will take that complex subject, take it down a notch, and explain it in a way they get it. And then always, always be thankful for these referrals you're getting. Find a way to show that appreciation over and over and over and over again because getting a slew of referrals a month is the coolest thing, and it doesn't just come. It comes because you are investing time, energy, and you are appreciative for what these people are opening their mouth to share, seeing your faces.
Attaining 99%+ Client Retention Rates [49:39]
Michael: So, do you track or measure this of, I don't know, however you measure outcomes, client satisfaction surveys, or referral rates, or retention rates? Do you have ways to figure out whether or how much this is working or what impact it's having?
Michelle: I think the retention rate for me has always been high. So, our firm five-year numbers, 99 and a quarter. And so, going back to that, obviously, is the easy way to measure it. At the end of each meeting, again, going back to maybe I'm a little bit nosy, but I want to know, is I will ask the hard question at the end of every meeting, "Is there anything you are not comfortable with, domestically, globally, politically, with your financial plan, with your money, with me? Is there anything you want to talk through?
So, at the end of each meeting, it gives me a gauge. Oh, actually, that's one of the things I document every meeting, any concerns, and I will document it. If they have any concerns, I write it down. So, it allows me to continue to keep a temperature gauge on each one of my clients. Should I do a survey? Probably. I've thought about it over the years. I feel like that is an area that I'd rather just ask them point blank and get into the ugly if I have to, "What's really worrying you? What's ugly right now? And can I solve any of those problems? I can't solve President Trump and your political discontent with him. Can't do that. But can I help you with anything relating to your portfolio, your financial plan? Yes, I will sit here for hours and we'll figure it out." So, that gives me a good gauge, and you just can't be afraid to hear the answer.
Michael: Yeah. So, how exactly do you ask the question? Is there a standard way you set that conversation up?
Michelle: Yep, after I'm done with everything, before I'm about to get off the phone, I'll say, "I've hit everything on my docket that I wanted to go over today. Is there anything else we should talk about? Is there anything you are concerned with that we haven't covered?" Sometimes I'll say, "Is there anything I could do better?" And, yeah, over time, it's also, Michael, helped us as a firm to figure out how can we keep getting better? What do I need to do to keep getting better? Because if you're not afraid to hear the answer, they will answer the question. And then you've got to act on it. You can't just throw that stuff in the garbage, right? And I think my partners and I are really open. We've got a great staff that we've invested in a lot here over the last...we got a new partner, our first new partner. It's been the 4 of us for 30, almost 40 years. But we brought on a new partner, Ryan Dennehy, and he has brought a lot of new technology in. We have an amazing operations manager, and they are moving this firm in...they're really aligning us with where we need to be for the next generation for serious legacy planning, which is a whole nother topic. But we've got to continue to grow and move and not be dinosaurs, which I feel like some of those days.
California Financial Advisors' ‘Eat What You Kill' Approach For Compensating Its Advisors [53:55]
Michael: So, help us then just understand the advisory firm overall as it exists today. You've mentioned your clients, you've mentioned partners. So, just help us understand the business as a whole at this point.
Michelle: Yes. So, our firm started with myself and three partners. We used to work at Lincoln Financial in 1998. We broke off and started our own RIA. We're custodian through Schwab and Fidelity. Most of our money is at Charles Schwab. We manage over $2 billion now. We have 9 lead advisors, 3 support staff, 18 admin and back office staff. Our CFA household count is 1,536. My household count is about 241. Our average account size, the firm's about $1.3 million. Mine's about $1.7 million. Let's see. We talked about retention ratios are 2020... Oh, go ahead.
Michael: I'm sorry, I was just going to ask like revenue overall for context.
Michelle: 2020 for CFA revenue was close to $12 million. Mine was $2.4 million and some change. This year, we're projecting CFA revenue well over $12 million, and mine will be over $2.5 million.
Michael: Okay, okay. And CFA is the firm, not chartered financial...?
Michelle: Yep, that's California Financial Advisors.
Michael: Okay. Okay. So, in terms of the firm overall then, I'm noting you're kind of framing like there's a firm revenue overall and then your client metrics. So, is the firm structured that way? Like each of the partners has their own client base, their own book of business, or is this ultimately clients you serve that are clients of the firm that just happen to be you as the lead advisor?
Michelle: We have always operated on a silo approach. So, my partners and I, when it was just the four of us, it was eat what you kill. So, if I brought in a client, a million-dollar account, I got 100% of that split as a partner. I did not share that and still do not. That has not changed. Partners do not share their splits with the other partners. We have a CFA expense bucket, if you will, that consists of how do we pay for the receptionist, our trader, our operations manager, etc? So, we have all these expenses that those are paid equally by the partners. And we also have the percentage that the non-partner advisors give to the firm. Our new advisor splits are attractive, and this is what shocks a lot of people. They're about 65% to 90%.
Michael: That's a pretty wide range.
Michelle: Yeah. They could get up to that, I should say, based on how much money they bring in. So, truly, the benefits of this, as you can imagine, we all have these nice paychecks. We control our expenses. If I want to have appreciation for my clients, my partners are not paying for that. That's my expense. I'm choosing to do that. I pay for the split expenses, but my revenue pays for my expenses, and then one-fifth of the CFA-split expenses…the receptionist, operations manager, trader. Then there are the expenses that individual advisors will be billed, i.e. rent, their individual rent just for their office. They are not paying for the common area. They are not paying for the reception. They're paying for their office. They are paying for the portion of technology that they are...or any subscriptions they are using. So, the partners continue to split a ton of costs. And I will say what has been a challenge is we never envisioned the cost of technology, cybersecurity, cloud. That has been astronomical and probably the most difficult expenses for us to write the checks for. They've been big. But that's part of the game. This is what we do. So, with this silo approach, if Michelle, for example, with my business, if I decide that I want to have two admin assistants or go higher, which I am, I have a new advisor coming to work for me in a few weeks, I've had an advisor for the last five years, a junior advisor working with me, I personally pick up those bills. That is not a bill my partners will pay.
So, the silo approach does give us freedom to make as much as you want, spend as much or as little as you want. And the downside, Michael, I would say the biggest downside is our business isn't as valuable on the open market as the team approach, but we solved that problem. We've had many, many, many people coming to us and wanting to buy our business and are...my partner Ryan Dennehy, he created an internal valuation model of each client is worth X, Y, Z, that Michelle's business is worth X. So, we have a valuation of what...if Michelle, I say, I want to retire, which I don't, none of the partners want to retire. We're going to just slowly die in our seats. But when I want to sell my business, we are now crafting this whole second generation. And I have interns in here. I'll talk about that in a bit. We've worked really, really hard to have a whole bunch of exceptional, talented advisors that are growing their practices, and they will be the ones to buy our practice seamlessly. So, what that does is our clients feel comfortable with the existing firm. They've been around a while. We don't have to repaper anything. We don't have to change over new technology. We don't have to change to a new name. And we are getting the same valuation, if not more than what the open market has been offering us, or at least from what we've seen from the several firms that we've talked to.
Michael: And who becomes the buyer?
Michelle: So, the buyer would be the next generation that we're training. All the advisors in our office, the 9 to now it might get up to 12 advisors, other advisors in the office would purchase the business. CFA would be the bank, but we would have...every client has a valuation, and every business has a valuation. Now, do I have the right to say, "No, I'm not going to sell it, and I'm going to sell it to the open market"? Of course, yes. We're not saying you have to sell within firm, but what we're doing is we want advisors in here to make good money, take care of their clients, and stay around. And at some point, my partners and I will phase out or slow down. And we're going to hopefully have this very seamless method of doing so by how we've set this up.
Michael: So, how do you figure out what goes in the partner split pool versus the individual pool of expenses?
Michelle: That has gotten a little more challenging as technology, cloud, whatnot, have really increased in costs. And so, some of that has been passed down to the advisors. We do our best to be really fair at the end of the day. We absorb, as partners, a majority of the expenses, but we are passing down what we can and what can be clearly linked to an advisor. If it's his or her expense, then they will pay it. If an advisor has a dedicated assistant, then that he is paying for.
Michael: What is your fee schedule? Where do you price? How does it work?
Michelle: So, our average bill rate is about 65 basis points. $100,000 to $300,000, 1.2, $300,000 to $750,000 is 1%, $750,000 to $1.5 is 0.8%, $1.5 to $3 million's 70 basis points. Let's see, $3 million to $6 million's 60 basis points, $6 million to $10 million's 50 basis points, and then $10 million and up is 40 basis points. Our fees do not follow tax bracket rules. So, once you cross over to that bracket, you're in it to win it. You're in it. And so, our fees have been on the lower side than the industry. We just got Schwab's survey back. They definitely fall into the lower compared to many. But it's important to us to be as cost-effective with our fees, with the funds that are in our clients' accounts. We use a lot of Vanguard funds. We want to be as cost-effective around everything that we're doing here at the firm and for our clients.
What Surprised Michelle The Most Building Her Business [1:06:36]
Michael: So, as you reflect back on this growth journey, what surprised you the most about building an advisory business, building a multi-billion dollar advisory firm?
Michelle: I think for me, a few things. The technology cost surprised us all. That hit us over the head, and I think still does. How hard it is to find customer service executives or executive assistants that align with my expectations of what I brought up, those are really important to me, to everyone around me. So, that's been a bit of a challenge. And then I would say the final one is that there's no real off button for me. And that's been hard as a mom, as a female in this business. And I had two girls right at the height of some crazy success in 2000 when AT&T did a huge layoff, and that's really our number one company. We worked with a ton, hundreds and hundreds and hundreds of clients at AT&T. And it was hard. I had a week and a half off of maternity leave, and I think for me, that's been a battle. That's been one of my biggest battles is juggling, being a great advisor, giving the best service, and then knowing money does not sleep. It is my job to take care of their portfolio. It's my job and no one else's job here. So, I don't have the luxury of being...I never did the mom that was at school events, the mom that was working in the classroom. If I wanted to be the best, the top, I knew I had to make some sacrifices earlier on, and that's been a challenge over the years.
Michael: Has that changed as the years have gone?
Michelle: I think yes. I've learned I can control my schedule. I have the ability to say no to clients that don't work for me anymore. I can say no to new clients, which is extremely difficult to me. I've gotten better at referring out in the firm to other people. But mom doesn't really relax on vacation. I'm one of those people. And so, it is hard as a silo business. My partners are doing as well as I am. They don't have the time, the bandwidth to take over backing me up for me to go on six vacations a year or to go on a six-month maternity leave. They just didn't have that bandwidth. So, I've gotten better, I would say, at working really hard to have a team to support me when I'm gone, but I wouldn't say it is easy. And I think there is clearly a difference even today when you go to conferences of how many men are in the room versus women. And it is a different challenge for us as women in this field to have kids and be at the top. It definitely came with a lot of sacrifices.
And I think what the key to that and how I got through that was a pretty amazing husband that he gave up his dream in being what he wanted to do to to be accessible to our kids, having partners that were understanding, having a family that was supportive and friends that understood I wasn't going to be at everything. I'm not going to do Wednesday night dinners. You're not going to call me. I'm not doing lunches. And that's just how it's been for me. I know not everybody's like this, but for me, this is what it's taken for me to get here. Would I do it again? Probably so, of course, because I'm very proud of what I've built and where a firm's at, all the tons of young women and men that I've mentored. I'm so proud of that. It's come at a cost. So, that's the ugly part, again, of this business for me is trying to always juggle that.
The Low Point On Michelle's Journey [1:12:34]
Michael: So, what was the lowest point on this journey?
Michelle: Well, as it relates to that, I would say driving back to work after I had a baby, and she's a week and a half old, and I'm handing her off to my best friend to watch. That was pretty low for me. Yeah, that's pretty low. And I wrote a book called "Stocks, Bonds, and Soccer Moms." And I talk about pulling over and crying on the side of the road. My two girls, though, are strong. And is that me justifying it? Maybe. I have one sitting 50 feet away from me. She's one of our interns this summer. My girls have watched their mom work her tail off to be where I'm at today. And they watched that sacrifice, and the late nights, and the weekends, and the working on vacation. They see it. They know what it takes to climb the mountain. And so, I do look at it and say, "Okay, did some good come out of it?" Yeah, I've got two really, really strong girls. But I also am very honest with all the young women that I mentor. Do not be shocked. Silo approach or even team approach, you are going to face the same battle. It is a problem that all moms in different ways we face. That juggling act is no joke. And you have to have a team around you that supports you, that understands your goal, your mission. And, boy, you better find a great spouse who gets it because clients don't just show up at your door endlessly. You got to work really, really hard to stay top of your game, the best.
Michael: It was a surprise to me, a couple of years ago, we started seeing a uptick of women in their 20s and early 30s joining XYPN to launch their firms. And when we had started asking them like, "So happy you've joined, but why did you leave the bigger advisory firm that you were at to hang a shingle and build your firm from scratch as an independent RIA? Don't you know entrepreneurship can be a little rough?" And what we heard from a whole bunch of them was, "The only path I could find to start a family was that I first had to launch a firm so I can grow it big enough to grow my own team so that I have a team that can take clients when I want to go on maternity." And they were at firms that didn't have any kind of infrastructure to help cover for their clients. I think it's similar to your scenario, right? There are other advisors here. They're all busy with their own clients. They don't have time to cover yours for several months. And so, they were finding their only path to getting the coverage they needed was that they had to start their own firms so that they could have the dollars to reinvest to build the team they needed so that a couple years from now they could start a family and have a team that could cover for them to actually be on maternity leave, which is just a fascinating bizarre path for our industry. I don't think there's any other world where you hear people say, "Oh, yeah, I wanted more flexibility for taking time off. So, I became an entrepreneur."
Michelle: Right. I took on all those risks.
Michael: Yeah. "I'm starting from scratch where I have to do everything because that lets me get more flexibility in the future to start a family." But that's what we were seeing. I think there is a broader industry challenge that when clients get so attached to us individually, a lot of our firms are really not built for...I was going to say women to take maternity leave and men to take paternity leave as well. Parental leave is not really a thing at most advisory firms.
Michelle: Correct. So, that would probably be a struggle that's not talked about still a lot in our industry. I've tried to really spend some time talking about it with our young interns, and my daughters, and the females we have in this office so that they don't have to go through what I went through. I just had a great advisor that's worked with me for five years. She just got married, and it's like, "Okay, well, I know the baby thing is going to be around the corner. How do we set that up? How do we start setting that up now so that your path is a little bit lighter. And how can we support you in that?" Because we don't want to lose great advisors in this process. And I think our business year over year over year, we do. We lose them because this has been a challenge for females.
Michelle's Advice For Her Younger Self And For Newer Advisors [1:18:27]
Michael: So, what else do you know now you wish you could go back and tell you 10, 20 years ago as you were much earlier stage in this growth journey?
Michelle: There's no doubt my partners and I would all agree we took way too long to hire an operations manager, COO, whatever you want to call it in our business. Are we hyper-controlling? Are we frugal? Could be a mixture, but we were too involved in the day-to-day where when you look at our hourly rate, we shouldn't have been doing a lot of that for long time. We just hired a compliance firm that was mostly internal, and my two partners were doing it. They took on these tasks that really these things should have been outsourced a long time ago. And we're getting better. We are all getting better at delegating or hiring these services because, again, focusing on what you're really good at is how you're going to make more money and be a better advisor for your clients to be fully present, not focused on all the running-the-firm items you have to tackle. So, we're getting better. And that is definitely something where I'd say today the partners are all focused on what they should be doing, not heavily running the business.
Michael: So, what was holding you all back from getting there sooner?
Michelle: I do think it's a good combination of us being frugal because that nut in the Bay Area where we're located was not cheap, and us wanting to not lose for one ounce that level of service or control that we thought only us could do provide, etc. It's a combo of those two. And thankfully, we have found some exceptional people where they've showed us, "Okay, you can trust us to download all this information, too. You can trust us." And finding the right people, that's not easy. And I think a lot of us in the business talk about that. It is not easy. And the price tags in the Bay Area for slots are large. But we're getting better. And I think even for my internal team, I've had a right-hand woman next to me for the last five years doing a ton of stuff that for years I didn't want to delegate. The financial plans, the globals, pushing through the trades, maybe documenting if she was in with meetings, all that stuff. So, when I'm allowed to push that down, what it does is it gives me the ability to be more present with my clients, listen more, and get back to the basics of all this stuff that maybe wasn't, "I didn't spend as much time as I used to."
Michael: So, what advice would you give younger, newer women looking to come into the profession today and navigate their path?
Michelle: Yeah, great question. The firm that they attach themselves to, number one, is a critical choice. And I think when we're young, you don't realize how important that choice is, but moving a book of business is not easy. Not that I've ever done it, but I've seen friends in the industry do it. It's rough. And so, picking the firm, number one, important. Once you get into the firm, you find the most successful advisor that you feel you can align yourself with and find a value proposition for them where you can offer value, where you can be three steps ahead of that individual, where you can help them and add value so that you can learn from the best. That's always something I like to tell in any business. When you figure out what's your value proposition and how you can take work off of someone who's running 100 miles an hour, you become really priceless to them.
And then I think Sheryl Sandberg wrote that beautiful book, "Lean In." I think women still struggle to sit at the end of the conference table. One of my interns didn't want to sit there the other day. I said, "Always take that seat. Don't be afraid to take that seat." Pushing the young advisors to go into those uncomfortable places, which I often see they don't want to do, uncomfortable. Going on CNBC, not always comfortable. Doing podcasts, not always comfortable. Responding to all the reporters who want quick quotes takes time. I've heard a lot of people say, "Oh, yeah, say no to everything." I don't know if I agree with that. I think I've been a say yes to a ton of stuff so that you can learn, you can grow. That uncomfortable feeling is what makes you great in the business. And I want the young generation to know they've got to feel uncomfortable a whole heck of a lot of times in their career doing new stuff. The complacency, not ideal. So, that has been important to me.
I just told the interns also, don't leave the office until you've asked everybody in here, "Does anybody else need more help?" And it's pretty obvious the advisors or the young advisors that stand out versus the other ones that don't. And I love mentoring the next generation. It takes a whole heck of a lot of my time. And that's one thing. Could I be getting more clients instead of...? Probably. But this has been my little passion project for decades. I've mentored so many interns, and I think it's been cool for us to see these are kids we want to hire someday. And these are kids that maybe aren't meant for the business. And so, I recommend for any advisory firm, take the time to implement an intern program because you're interviewing them, they're interviewing you. And when they graduate, if you found the diamond in the rough, they're going to want to come back. And it's easy, seamless.
So, yes, it's hard for me right now. They're here, and I got to make time for them throughout the day, but it's fun and it's great to see that youth and excitement in our business. And I want to just download as much as I can because I have two or three months to do that, and then they're off and running again. And I've told them all by the end of the summer, I want you to be able to tell, "Do I want to be a financial advisor or not?" In three months, you're either going to have a massive passion for this, or you're going to say, "I don't like it." And then I want you to go back to school next year and try another career if you don't like it or another area in finance. And so, I've always believed, too, it's our job to really mentor the next generation. So, that's been a fun little project for me.
What Success Means To Michelle [1:27:38]
Michael: So, as we wrap up, this is a podcast about success. And just one of the themes that comes up is that word success means very different things to different people. And so, you've taken the business in this wonderful place as you're crossing $2 billion of AUM, so the business is very successful by any objective measure, which is why all the PE firms call. How do you define success personally for yourself at this point?
Michelle: I can peacefully say I've climbed the mountain, and I still love this business. I have no plans to retire. I love it. There are so many people that wake up on Monday, and they're like, "Oh, I got to go to work." I rarely feel that. I love my clients. I love spending time with them. I think that is a huge success. Having partners for 30, 40 years, huge success. I don't even know if I've ever met another firm that has had that. And I'm still married through all that stress. I'm still married and have two girls that, as I mentioned, are strong and confident. So, I think all those things piece together.
Michael: Indeed. Well, thank you so much, Michelle, for joining us on the "Financial Advisor Success" podcast.
Michelle: Thank you, Michael.
Michael: Thank you.
