Welcome back to the 324th episode of the Financial Advisor Success Podcast!
My guest on today's podcast is Nancy Knous. Nancy is the CEO and Founder for Benchmark Wealth Management, an independent RIA affiliated with LPL Financial based in Memphis, Tennessee, that oversees nearly $340 million in assets under management for almost 1000 client households.
What's unique about Nancy, though, is how, after reaching a moment of business crisis during the market volatility of the 2008-2009 Financial Crisis, the market decline and associated decline in her AUM fees led to a cash flow squeeze and resulted in Nancy having to ask her assistant and best friend for a loan just to make payroll for her staff… which, fortunately, led to substantive changes in how Nancy now manages the profit margins of the firm, allowing her to scale up the business to more than 20 team members and not having any business cash flow problems during the 1,pandemic.
In this episode, we talk in-depth about how, during the Great Recession, Nancy (like many other advisory firm owners at the time) were facing the challenges of a 30-40% market drop and its subsequent effect on her firm’s revenue but because she took for granted that she was a CFP professional with a ‘good’ income she didn’t need to monitor it that closely (until the month she discovered she was coming up $5,000 short on her staff payroll obligations!), how, after struggling with her firm’s and her own personal finances, Nancy asked her business partner for help and he suggested she read Dave Ramsey’s “Total Money Makeover” which helped her transform her own money habits, pay off her accumulated debt over 7 years, and inspired her to become a SmartVestor Pro and even use the book to help her clients engage in deeper conversations about their money habits and savings, and how Nancy has been able leverage Ramsey’s SmartVestor lead generation program to grow her firm to 5 referrals per week (where 2-3 of those referrals became clients), and over a couple of years, gain more than 100 new clients per year.
We also talk about how Nancy and a few other advisors from her previous firm decided to follow one of their well-respected advisor colleagues to start an independent firm with LPL, but it wasn’t until later that she suddenly realized that she had now become not just an advisor but an advisory firm business owner as an independent but that becoming a business owner also meant she now had an opportunity to manage her business and treat her employees the way she felt was best (and steer away from some of the negative experiences she had previously as employee), how, as her firm has grown, Nancy has begun stepping away from client-facing duties and transitioning her clients to another advisor in her firm so that she can focus more on becoming the firm’s visionary and leading it forward to the next stage of growth, and how Nancy realized through trial and error the importance of having employees that are not like her and the need to find the types of employees that complement her strengths and weaknesses which has led to her now using personality tests (like Working Genius by Patrick Lencioni) and developing a 4-8 week hiring process that includes several meetings with team members and even a group dinner comprising of the candidate and their spouse along with firm members and their spouses to really ensure a good fit for the firm.
And be certain to listen to the end, where Nancy shares how she coped with failing her Series 7 exam 5 times in the span of a year before she realized she may have a learning disability and then after consulting with her doctor, she was able to find the right medication for her that improved her focus so much, that years later she got the highest grade in her class on her Series 24 exam, how Nancy spent the better part of 30 years of her career feeling inadequate about her abilities as an advisor because she feared she wasn’t as technical or analytical as other advisors but through supportive friends and colleagues realized that she can have great confidence in the success she’s created through her strength in relating to clients, and why Nancy has recently become a certified Dream Manager to develop her team and inspire them to go beyond traditional goal-setting as she feels that dreams have a deeper financial planning meaning than mere ‘goals’ and hopes to one day translate her training into workshops for her clients so that they create better connections with their dreams… and as a result, achieve more of their financial objectives.
So, whether you’re interested in learning about how Nancy overcame her debt challenges to help her firm scale and grow, why Nancy employs a stringent hiring process and personality tests to find the right employees, or how Nancy uses the lessons she learned to help her clients avoid financial pitfalls, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Nancy Knous.
Resources Featured In This Episode:
- Nancy Knous
- Benchmark Wealth Management
- SmartVestor Pro
- EOS Worldwide
- Traction: Get a Grip on Your Business by Gino Wickman
- Financial Peace: Restoring Financial Hope to You and Your Family by Dave Ramsey
- Total Money Makeover: A Proven Plan for Financial Fitness by Dave Ramsey
- The 6 Types of Working Genius: A Better Way to Understand Your Gifts, Your Frustrations, and Your Team by Patrick Lencioni
- The 6 Types of Working Genius Assessment
- The Enneagram Institute
- Dream Manager
Looking for sample client service calendars, marketing plans, and more? Check out our FAS resource page!
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!
Michael: Welcome, Nancy Knous, to the "Financial Advisor Success Podcast."
Nancy: Thank you, Michael. It's a treat to be here. I just respect and admire the heck out of you. So, I'm looking forward to doing this.
Michael: Oh, thank you. I really appreciate that and your willingness to join on the episode today and talk a little about the evolution of the advisory business and kind of the ups and downs we start hitting when it grows beyond us, and we start adding multiple team members. And just get that phenomenon that other businesses have, but advisory firms don't have for a long time where you get enough employees that making payroll becomes a thing. I got to make sure there's enough cash coming in to be able to cover my staff expenses going out the door, plus whatever my personal expenses are because we live off the net of our advisory firms. And it's one of those things that just it kind of sneaks up, I find, on a lot of advisory firms because the early years, it's usually just us and every new dollar revenue you get just dropped straight to the bottom line.
So, usually the first few hundred thousand dollars of revenue is just... The more dollars you grow at the top line, the more you get on the bottom line. But then you hit this crossover where you have to start adding people, you start adding staff to be able to support an ever larger revenue base. And the good news is you can grow a larger business and ultimately generate more income and profits from a larger enterprise. But the challenge is they all have salaries and expect to get paid on ongoing basis, regardless what's going on in the business. Profitability is your problem, salary is what I expect from you as the employee. And when you start layering on those pesky things like market volatility into the mix, you can get to the point where these numbers don't sync up very well anymore. At best, big market pullbacks can really crush profits down to almost nothing. And at worst, it not only crushes profits, but it even eliminates your ability to fully make payroll. And I find just it's not something we talk about much in the advisory business, how we handle that kind of operational leverage of the business. But I know you have lived some versions of this and the bumpiness of going through this, particularly in the financial crisis. And so, I'm looking forward today to talking a little bit about just that practical, real-world reality of how you have to start managing the business differently as a business-business once it grows to a certain point.
Nancy: Yeah, you have to... I think your description is apt that we start as advisors and eventually we become business owners. And that's sobering when you realize, "Wait, I just wanted to be an advisor and now, I'm responsible for others." So, it's a whole new world, that's for sure.
Michael: Yeah, and it really is to be sort of an interesting effect that it sneaks up on you because just, I know so many other businesses, for better or worse, if you decide to start a small business in most industries, you're starting a business-business out of the gate. You have to start hiring some people out of the gate just to be able to put up your storefront and staff the cash register, and stock the shelves in those kinds of businesses. And advisory firms are unique because so much of this comes from our personal knowledge, and our personal labor, and kind of getting dollars for our time and our efforts that the point where it becomes a businessy business where you're responsible for others, it might not come until 3, 5, 7, 10 plus years into the career, sometimes further out than that. And so, we can go a really long time not needing to deal with that until eventually, you accumulate enough clients that you do. And all of a sudden it's like, "Oh, I'm not playing the same game that I was originally. This changed at some point on me."
Nancy: Right. Yeah, there's a new hat to wear. Exactly.
Benchmark Wealth Management As It Exists Today [08:29]
Michael: So, I want to spend some time talking about how that evolution happened in your advisory firm. But I think to get us started, help us understand just the advisory firm as it exists today and where you are now. And then we'll talk a little bit about the journey of coming here.
Nancy: Well, we have 23 of us, if you count my pit bull because she is our chief rollover specialist and is on the website, and is an absolute scream. But there are 22 of us, 5 advisors will be 7 by 2024 or before. Each of those advisors has a paraplanner and then we have a couple of business development people, and everybody else is support and administrative. And given the size of the practice, many people think and just to give you an idea, we have about $340 million in assets under management and we have about 1,000 clients. So, when some people look at the practice, they're like, "Wow, you're helping everybody." Yeah, yeah, we are.
Michael: I'll say, that is a lot of clients.
Nancy: It is. It is a lot of clients. And I think what I've discovered, Michael, is one... And as we get into my story, you'll understand why. One, I'm willing to help anybody that needs help because there was a time when I was super stupid with money, and I was a CFP at the time. And I just... I feel compelled to help folks that need help. And that means a kid getting started that needs a Roth IRA for 100 bucks a month. But it also means any number of women who still don't understand how to do any of the investment and that kind of thing. And what it's afforded me the opportunity to do is because we'll help anybody, there are an awful lot of folks that come to us that are pretty simple. They're not complicated. And I can handle the complicated people as can my senior advisors. But some of the younger advisors can cut their teeth on folks that are just getting started.
And I am a financial advisor and I am a business owner. But I think what I've discovered I really love doing is developing people. And that's really what we're doing here. And that's one of the reasons we have 22 people and 1 dog because I feel there are a couple of the gals that we've hired in the last couple of years who have been in horrific, and I think abusive work situations. And we've brought them in and we've shown them a different culture. And they're just flourishing. And I just love that. I just love it. So, I'm getting a lot of satisfaction in doing that, in building a team, in developing a culture. It's just a lot of fun to me.
Michael: So, help us understand a little bit more of this structure. You said 5 advisors. Each advisor has a pair planner person supporting them. So, I'm just envisioning that means this series of 5 2-person advisor teams that each have divvied up these roughly thousand clients that they're working with. Is that a good representation?
Nancy: Yeah, yeah, I think so.
Michael: And are you 1 of the 5? Are you still keeping a client base directly at this point or have you transitioned that?
Nancy: I am keeping some clients, but we are in the midst of transitioning those. And we think the wrong way to do it is to send a client a letter that says, "Here's the name of your new advisor." And the right way to do it is as clients come in and we know that we're going to transition them, I meet with them and their new advisor, and I explain that my role is changing. And at some point, I may want to retire. That's actually doubtful. I think I'll be here until I'm 100, but... And just talk to them about it and just say, "This is something that we think is important for you. I have handpicked this advisor for you. I have trained this advisor and I am always here. I am here to help if you need it," etc. But in a perfect world, I'd get down to 25 clients. I probably have 100 right now. So, we are in the midst of transitioning.
Michael: I'm just wondering, how are those conversations going? I know for a lot of us, we've done this for a long time, we've had these clients for a long time. These feel like really challenging conversations to go to someone that you might have been with for 10 years, 15 years, 20 years, to have to have this conversation.
Nancy: Yeah, I think it can be. What has happened is I do a fair amount of speaking and traveling, and that sort of thing. And so, there are a lot of times I'm just simply not available. And if an advisor is needed and we already know that, for example, Shannon is going to be the one that we transition somebody to, then Shannon is the one who helps them when I'm out of town. So, they already have begun a loose relationship with Shannon, and she's helped them, and gone to the extreme to get whatever they want, and help them with whatever need they have. So, it's not like they don't know her. And then when we do sit down, we just did this with a client this week, I still... All of the clients are under my rep ID. And so, all we're doing is adding an advisor to their accounts. So, when they get their statement or pull up the internet, they're still seeing my name and that seems to ease a lot of folks. And all the advisors know that if I need to sit in an appointment with a client that's coming in and is not transitioning easily, I'll do that in a heartbeat. That's fine.
You're right. Some of these clients have been clients for 30 years and while they might not be an A client anymore, they were at one time, and I wouldn't be here without them. So, we need to do it very well and consider their perspective. And there's one who said, "No, either I stay with you or I go." I'm like, "Okay, that's fine. I'll keep you. It's all good." So, I just think it has to be done like you said, carefully and with consideration. But I think it can be done.
Michael: And so, how many have you transitioned to get to one that said no?
Nancy: We probably had transitioned about 50 before this gal said, "Nope, I'm not moving." And since that time, we haven't had any issues with anybody else. Issues, meaning there are a few appointments that I'm still sitting in on occasion or one of my advisors may say, "Hey, these people are coming in. Can you stick your head in and speak to them?" And that's been an easy thing. One of the biggest issues we just ran into is we had an advisor leave us and it was a big surprise in December. And of his 120 clients, I'd probably given him 70. So, I felt like I needed to call all 70 of those people and just say, "Hey, this guy resigned. It was unexpected. I want you to know we're still going to take care of you." That kind of thing. "And I am working with the other advisors here to figure out who you're going to fit with best. Do you have any questions," etc. And we transitioned all 120 minus 2. One of them left us and one of them, we fired. So, I feel really good about that. There still could be some fallout in a couple of months, but so far, so good.
Michael: Well, I think that's notable because the fear, I think for a lot of us when we think about that realm where we're hiring on new advisors and transition clients to them is like, I don't want to have to have gone through all the work to build up that client base and bring them in, and connect them to me in the firm, and transition them. And then have someone leave and have the clients go with them. And basically, I trained my advisors to go out there. I trained my clients to go out the door with the advisor who doesn't stay. So, what was going on that you didn't have to deal with a lot of client attrition around this?
Nancy: Well, we asked the advisors to all sign non-compete and that helped a lot. And there were at least 1 client that I can remember who wanted to talk to me specifically because he wanted the more transparent version of why this young man left. In other words, did he abscond with money and you had to fire him? Which is something I would have never thought, but I guess everybody's watching "Madoff" on Netflix these days, and there's panic. So, and just explaining that to them. But I think we had more than 5 people say, "We're doing business with you because of your team and your culture." So, that was very affirming to what we're trying to do here and what we've built. And it just makes you feel really good that anybody would even count for that.
Michael: So, at least when the transitions are going well, as you're winnowing down your client base over time, do you have a vision of just how long it takes to do these transitions? Is it like, we're sitting down at one meeting and like, "This will be my last meeting with you. I'll be in the office if you really want to come in." But ideally, this is the transition meeting and this is it, or do you do a multimonth or multiyear process of like, "We'll be in together for a year and then I'll be in sometimes for a year, and then by year 3, I'll be out of the meetings"? How long do you take to do these transitions or when do you officially?
Nancy: Most of them are one and done. I explained to them that my role is changing and I'm the visionary for the firm, and we are growing thanks to them, and that the day-to-day operation of being an advisor is not something that I'm doing that much of. And so, this advisor will be your point of contact going forward. Now, when they're doing your plan, if they have questions, I'm meeting with them periodically to go over anything that they need to talk about. So, it's not like I'm not here. I am here, but really, you're going to get so much better service and so much better responsiveness by working with this individual than you will for me.
And honestly, Michael, I think at some point, I just realized that the joy of being an advisor and working with these people until one of us dies, I'm just not feeling it. And so, I don't want to be halfway with anybody. Now, I still love bringing in new business, but just like we talked about before, I'm a great starter. I'm a very poor finisher. And what I've found is that I need the challenge of bringing new business in and then passing those people to another advisor.
Michael: Is it hard in the moment to say you're going to get better service and responsiveness from this other advisor? You're kind of throwing yourself under the bus at that point.
Nancy: Well, no, because I really... You're going to find as we go on, I'm completely transparent with these people and you, and anybody else that wants to listen that I think I'm still the... Well, I know. I'm by far the most experienced person here and I have an idea of everything that they need to do, and what goes on, and that kind of stuff. But now that I think about it, I'm not sure that I've ever said, "You're going to get better service, but you're going to... This is the person that you can move forward with." And the other part about it is all the advisors that are here are younger than I am. And I think that's important too because I want clients to have someone they can finish with. And I'm not going anywhere anytime soon. But if I did, then we've got a real issue on our hands. I'm perfectly healthy, by the way.
Michael: Is there some point where you envision this has gone so far that you literally transition the rep IDs as well just you're completely off the accounts?
Nancy: I don't see that and our broker-dealer is LPL and in talking with them, they've encouraged me to never do that. I guess it's a possibility at some point, but I think it's important that I built the company, I own the clients, and that's kind of the end to that.
Michael: So, I guess that ties to the nature of having employment agreements as well. These are advisors who are servicing clients under your rep ID, which is part of how you can manage too. Just that dynamic of who's allowed to continue with the client relationship if the advisor parts ways with the firm.
Nancy: Yeah, exactly. And we have joint rep IDs. But we figure out that there is no commission that goes under most of them. Everything comes into me and then we pay it out based on their cut. So, I can see changing some of that. My business partner and I have a special rep ID, and we're 50/50. And I can see doing that with some of the other advisors as they become senior and potentially partners. But as far as ever giving away everything, I can't really see that until I'm not here.
Michael: And then you said you've got a support admin team around this. So, how is that structured? Are they tied to these clusters of 5 teams as well, where there's an administrative person for each team or is it more centralized? How do you manage the administrative support structure?
Nancy: Yeah. There are 2 administrative folks that do all the paperwork and handle everything once the paraplanners hand it off to them. So, there are 2 of them. There's one gal who is the... I'll call her the relationship enhancer. She's the one out front that meets and greets. And then there are 2 guys that do our research and all of our training. There are also 2 young men who are currently training to be advisors, testing, and whatnot. So, that's kind of how we divvy things up.
Michael: So, what kind of research? Investment research, financial planning research?
Nancy: Yes. Yeah, mostly investment research.
Michael: Okay. And then you said you have some folks in the business development side as well. So, what are those roles?
Nancy: Those folks do our website and all of our social media, and then get us, me opportunities to speak, pick and choose some of the events that we should attend, look at our book and determine if there's something else we need to do with some of the clients that we have, and make suggestions there. So, that's something we tried about a year and a half ago. And I think it's really paid off. They do other things too like one of them just updated our entire contact system. So, everybody here wears a number of hats. And one of the other gals that... There are 2 gals that are doing business development and the youngest of those is really our techno-wizard, mainly because she's under 25. So, she, for example, was on call just in case I couldn't get on the call with you today. She was sitting outside just in case the cadger can't figure it out, but I did. So, it's all good.
Michael: Interesting. So, business development in this context, you're not hiring folks who go out in the community directly and try to solicit new clients, and bring them to the firm. These are more internally marketing support roles within the firm that support you and your business development opportunities and efforts going on.
Nancy: Yes. Yeah, yeah.
How Nancy Overcame Confidence And Attention Issues [24:43]
Michael: So, okay. So, I understand the overall staff structure, and environment, and what's built. So now, take us back to the beginning. How did you get started in the industry that ultimately led, and grew, and compounded to this 22-, plus dog, person business?
Nancy: I went to college and really wanted to major in social work, and my father said something like, "Over my dead body." So, I ended up majoring in advertising and when I graduated, got to work at a bank in their marketing department for a couple of years. And somebody referred me to what they called their financial planner. And the guy called and we interviewed. And I ended up going to work for him, I think because at that point I was 24, and no offense to any young listeners, but when you're 24, you're just a putz or I certainly was. And I think I had dollar signs in my eyes. And he said, "Oh, you can make $100,000 a year." So...
Michael: Which was a lot of money then. That's a good amount of money now, but that was a lot of money then.
Nancy: It was a boatload then. And really what he owned, Michael, was an insurance agency, then they dabbled in financial planning. So, I didn't really recognize it there. I didn't understand what a draw was, but I was about to be sobered by that. And in asking my parents what they thought of it, they both discouraged it. My dad was in residential real estate and he said, "You're going to be selling intangibles, and that's tough." And mom just kind of thought the guy that owned the firm was a little creepy. Turns out she was right, but... So, I go to work and I'm not really a feminist, but this is 1985 and I'm in an all-male firm and I'm 24. And I didn't know what I was doing. In college, I was the kid that was getting a cash advance on Mastercard to pay off American Express. I was just a total idiot. And I'm not stupid but I just never really paid attention, never knew how to do a budget which will come back in my story.
So, I got started and you can imagine, there's just not a ton of single women who are 24, who need cash value life insurance. So, I was not particularly successful. First, before I did any of that, of course, I had to take the life insurance exam, which I failed the first time and just chalk that up to nerves and then studied a little harder and passed it the second time. But also in there, they were doing some mutual funds. And so, they required a Series 7. And so, "I studied." I studied and at that point, back in the day, you couldn't test on a computer, you couldn't test in Memphis. You had to drive to Little Rock or Atlanta to take the exams. And so, I studied, drove to Little Rock, took the 6-hour exam, drove back, and then you had to wait 6 weeks for your results. And your, in this case, GA, general agent got the results and he had to tell me that I failed the first time. I was close. I think I got a 40 that first time.
So, this went on for probably a year. I took the Series 7 5 times before I passed it and each time, I just got lower and lower, and lower, and felt like... I already felt like there was a highlighter on my face because I was the only woman. And now, there are murmurings of, "Is she smart enough?" And I felt called to the profession. I'm a woman of faith. I had prayed about it. I felt like this was something God wanted me to do. But not only am I failing these tests left and right, I am not making a nickel. And actually, you know how a draw works. There was a time when paychecks are being passed out and my paycheck was, you owe the house $300. People at my church were leaving groceries on my doorstep. It was really pathetic. But anyway, eventually somehow, we'll just say by God's grace, I was able to pass the Series 7, never really realizing that I think I have a learning disability. I don't think I'm particularly good at standardized tests. In college, I always got away on personality, and presentations, and writing, that sort of thing. So time goes on and I stayed at that firm for 15 years.
Michael: Oh, wow. This ultimately worked out. I guess you got the sales end going eventually.
Nancy: Yeah, I'd say eventually. Everything was really slow and as is, obviously, my history, there were a number of do-overs. But also that firm got a lot more into financial planning. And I found that I really enjoyed that. And I was good at selling securities where I might not be so good at selling insurance. And one day the advisor that I respected the most in the firm came into my office and said, "I'm leaving." Something that I heard recently, people talked about as an advisor, you can get into that kind of a depressive funk, and I was in that. And I thought it was because my dad had died about a year before. And as I really looked a little bit more deeply, I realized maybe it's what I'm doing. And then I realized, "No, it's where I'm doing it." So, when he said, "I'm leaving," and I said, "Hey, how about taking me with you?" So, there were 4 of us that left there and joined LPL as a group and then one by one, they left to go do something else. And all very amicable. It was just they got out of the business or wanted to do something else. And so...
Michael: So, when was this? This is 15 years past the original firm?
Nancy: This is, yeah, 2000.
Michael: So, we're in 2000.
Nancy: Yeah, in 2000. So, I'm coming back from a conference and I'm on an airplane, and all over sudden it hits me, "Crap, I'm a business owner. I just wanted to be a financial advisor and now I own a company." And I absolutely hate management, hate it. But I was an athlete in high school and college, and I thought I could build a team. I can do that. So, maybe it's just vernacular or semantics, but focusing in on team building to me was something that I could do, and I could be good at. So, that's really what got all of this started. And in those 15 years, I learned a lot about how not to manage a business and how not to treat people. So, that was worth the 15 years right there.
Michael: Meaning how you felt from the employee and then that business to reflect like, "If I do this myself, here are things I'm not going to do."
Nancy: Exactly. Yeah, exactly.
Michael: Okay. So, at the point that you were leaving the original firm and going to the new one under LPL, are you still otherwise a solo at this point? Is it just... I guess, other advisors you were going along with. Did you have a team of your own at this point or that came later?
Nancy: No, I had 1 assistant, and that was it. Yeah. So, when the guys all left, it's just me and 1 gal, and we were doing it by ourselves. Yeah.
Michael: Okay, okay. So, you make the transition. So, what happens at that point? Just because you said you went with some other advisors. Are you in a partnership at this point, or are you on your own, or is it kind of the siloed structure? We're "partners" because we share overhead and office space, but we all have our own practices under one common roof.
Nancy: It really was solo. They all left. And so, going back just for a second to maybe I have a learning disability, that meant that I had to take the principal's exam and obviously, get to...
Michael: So now, you got to go for a Series 24 covering the horrors of the Series 7.
Nancy: Yes, absolutely, absolutely. So, I had a physician client and I went to him, and I'm like, "Jim, here's the issue and I could use some help." And he said, "Well, why don't you try Adderall?" So, he prescribed it and it's like nothing I've ever experienced. Me, who is distractible and knows where every squirrel is, I could sit in a chair for 8 hours, focus like a laser beam, absorb everything that I was reading. It was just miraculous. But when the pill would wear off, I would just hit the skids. I got so depressed. So, I thought, "Okay, I'm just going to stay on this long enough to take the exam." And as things go, I had to go to Atlanta to take the test and I had the highest grade in the class. So, that was just a scream. And Adderall was fantastic, but it also had the negative side effects. So, I stopped taking that, took the prescription back to him and thought I got to figure out a different way to focus. But it was interesting. It was very interesting.
Michael: Adderall classically is prescription for ADD, ADHD. Was that what was going on?
Nancy: Yeah, I guess. I've never really been tested, but it's pretty apparent that something... I can't. It's just challenging. Even preparing for this, I've got notes all over my desk just in case I forget how many clients we have or something like that. There's just still some things that I can't keep up with it, but I overcome a lot of stuff. I couldn't really figure out how to balance a checkbook, so I just got duplicate checks and now I can do the subtraction, and just stuff like that. And it's really interesting, Michael, because I think being a woman initially in an all-male firm and I'm not technical, and I'm not analytical. I'm relational and I'm habitual. And I get by on a lot of personality. But because I wasn't technical or analytical, I just felt less than most of my career. I wasn't as good as any of the guys and not because they were guys, but because they were more analytical. And I thought, "Well, that's who I need to be."
And it turns out that regardless of what kind of advisor you are, that's who you need to be. You need to be you because that's why people are doing business with you. People do business with me not because I can analyze something, but because I can relate. I can be open with them. I want to listen to them. I want to build a relationship and because they trust me, and I ask the right questions. That's why people do business here. And it's almost like I woke up about 6 months ago because all of this is that fresh and thought, "Yo, sweetheart, you've done all right. You've done all right the way that you've done it. You've got 20 people working on your team, you make a lot of money, you don't have any debt. I'd say you were all right." But it's that thing that we tell ourselves in our head.
Michael: Yeah. Well, I was going to ask how long it took you to get to that point where you're feeling comfortable with it. Is this literally things I've gotten comfortable with over the past 6 to 12 months phenomenon for you?
Nancy: I think it's probably over the past 5 years. I have some very dear friends who tell me the truth a lot, even when I can't see it and I think they've had a big influence on me. And at some point, you have to look at the evidence. And the evidence is clear. I'm good at this and people trust me, and they continue to, and I can build a team, and team members trust me. And it's fun because I do feel strongly that if you're not having fun and you're not making money, why are you doing it? And this is fun. But it has been a gradual telling-yourself-the-truth kind of thing.
Michael: Well, just I am kind of recognizing, having this realization over the past 5 years means you finally got comfortable with this shortly after your 30th anniversary in the business.
Nancy: Yes, exactly.
Michael: So, how do you keep going for the first 30 years before you get to that realization?
Nancy: I think it's kind of a one-day-at-a-time thing. I am the visionary here and I can do about 1 to 3-year plan. We get into 5 or 10 and it gets a little bit fuzzier. I do have an idea of what I want, but I want to make today as great as it possibly can. I want to plan out the day, I want to pray about it, and I want to go after it. And I think it was just kind of one step in front of the other. And sometimes I don't think you know that you're not telling yourself the truth. I don't think I knew it exactly that I'd felt less than all this time, but that eats at your confidence. And I think that sometimes, even now, I think, well, maybe we could be bigger or better if I had more confidence earlier, but it's fine, it's fine. And we're where we should be. And we will be where we're supposed to be when we're supposed to be there.
Michael: Well, I was going to ask in that context, looking back, how do you think this was showing up or impacting you in the journey?
Nancy: I think there were opportunities for me to go after bigger clients and I was intimidated sometimes making presentations. If I didn't have somebody who was more technical than me, I just... I wouldn't feel comfortable doing it and sometimes I just wouldn't do it. So, I think my hiring has been... I think as a business owner initially because some of us are arrogant, I certainly was... I thought, "Well, I want to hire somebody just like me." Well, you've talked to me for a while, you know that more than one of me would be way too much. And I think when you realize you want to hire your opposite, and you want to hire what you're not, and that's how you build a team that's really strong because then everybody has value and everybody has a place, and a seat, etc., etc. So, I think one of the best things I ever did was to hire people that were nothing like me and could really make up for the weaknesses that I have.
How Market Volatility And Budgeting Mistakes Affected Nancy’s Payroll [40:39]
Michael: So, you do this transition into LPL. Adderall gets you through the Series 24 exams, so we're good to go. So now, I guess we're early 2000s and you're on your own with your assistant. So, what comes next as the business continues to evolve?
Nancy: I think I got into a coaching program around 2000 and that really helped me get a little bit organized, and more process-driven, which was helpful. As time went on in this coaching program, they really encouraged setting a minimum and only accepting clients that had over half a million dollars, that sort of thing. And the business grew, and we were doing well and little by little...
Michael: Did you set a minimum though? Because it sounds like you've kept a broad client base.
Nancy: I did. Yeah, I have, but I did for a while. And I think the other thing that sometimes I second-guessed was my intuition, my discernment, and I think I'm pretty good at that, and I think I always have been. But again, I didn't have the confidence to apply it because some of the people at that time that had over half a million dollars were just jerks. And I just don't do well with jerks. It's not worth the money. Who is it? Nick Murray that calls them PITAs. Absolutely, absolutely. Looking at that and realizing, now, I really want to work with people that I really like. And I got into really 3 kind of niches, if you will, professional women, which is sort of a “duh”, teachers and educators because everybody else in the family other than dad was an educator.
And then we have FedEx's home here. And so, I had a lot of FedEx clients and as they retired, of course, that was very lucrative. So little by little, as we grew, we hired a client, actually, who began to deliver birthday gifts for us and then we needed somebody to do more administrative stuff. And so, over the next 10 years or so, we grew to a group of about 5 of us. And then the Great Recession hit. And, oh, wait, there's more mistakes to come.
Michael: All right. So, as you get into financial crisis, Great Recession. So, there's 5 of you. So, I guess do you recall just how big is the business at this point of clients, or assets, or revenue, however you’re measuring?
Nancy: I think it was in the 60, 70 range, something like that.
Michael: $60 or 70 million under management?
Nancy: Yeah. Because I remember, I think I kept up with it daily like a ninny, but there was a lot of emphasis on that in the coaching program. But anyway, I think it was one afternoon and I'm about to write checks because that was back when we wrote them and signed them. And I'm finding myself, this is probably 2010, 2011. And we've lost 30% or 40% of our income because the market has gone down 30% or 40%. And most of our income, 95% probably is tied to assets under management and fees. So, I'm going to be $5,000 short on payroll and it's because, Michael, I had not taken my own advice. I had no budget for me or for the company. I had no savings because I'm single, I'm a CFP. What do I need a budget for? What an idiot!
Anyway, so I'm lamenting this fact with my best friend that afternoon while we're walking and she says, "Nan, don't worry. My husband and I can cover you." So, they give me $5,000 and I make payroll. And the next morning, I come into work and the first person I see is this best friend because she worked with me. In fact, she was my receptionist. So, sobering, my receptionist is keeping my financial planning firm afloat because I've been an idiot. And so...
Michael: So, just that kind of leverage of the firm, advisory firms classically at a stable point can run 25% to 30% profit margins. So, you get a 30% market downturn and that basically goes to 0 or goes slightly negative.
Nancy: Right. Yeah. And I just realized that I was completely unaware. And so, a guy that was working with me at that point, now my business partner, had been teaching Dave Ramsey's "Financial Peace" at his church for 10 or 15 years. And I went into his office, and I said, "Okay, I give up. Tell me what to read." So, he suggested "Total Money Makeover" by Dave, and as previously mentioned, I'm learning disabled. So, I'm not a great reader, but I could listen to it, which is another reason why I love you. So, I listened to the book about 5 times and just heard myself in every paragraph. I'm like, "Oh, this is so painful." So, I'm like, "Okay, pride cometh. It's time for you to humble yourself and do what needs to be done." And so, the first baby step that Ramsey talks about is save $1,000. I don't even have $1,000 saved.
Now, granted, I have a ton of equity in the building that I own. I have a ton of money in retirement accounts, but nothing liquid. So, I sold my treadmill because I can hang my clothes in the closet and eventually got to 1,000 bucks, and then just walked through the rest of the steps until I had paid all my debt off, which took about 7 years. But in the meantime, I ordered 200 copies of "Total Money Makeover" and started sitting down with all my clients to say, "Do you know what you're spending?" And that first year, I asked the first 100 clients I met with, "Do you know?" And only 5 of them did. And I thought, "What kind of financial advisor are you?" We give great investment advice, but it's a plan. So, I got on a budget, obviously, or cash flow plan, and I got the business all squared away, but we completely changed our practice at that point because...
Michael: So, just help me understand though that it sounds like there were 2 pieces of this running in parallel for you as a challenge. Part of it was market downturn eviscerates profitability or you can get to a 20% to 30% downturn, can pull revenue down by 20% to 30%, but can pull profits down by 100% because all the top line loss goes to the bottom line, since staff expect their salaries either way. So, you got to the, "I'm running a little bit short on payroll." But then it sounds like at the same time, the bigger issue was the personal household upkeep of just being able to pay your personal bills while profits got crushed in the financial crisis. That was actually the bigger issue that tied to this that created debt that took 7 years to pay off?
Nancy: Yeah, exactly. And I think when you for the first time really look at what you're spending, it's very nauseating. You're like, "How much money does one single woman need to spend on entertainment?" And evidently, it's quite a bit. And also, the behavior of inviting people over, "Okay, I'm inviting you and all your friends over." And you all say yes, and you all say, "Hey, what can we bring?" And I say, "Nothing." And then I go to the grocery store and I spend $200 on beer, and wine, and cheese, and all that stuff. And you all come over, and you forage, and everything's gone, and you leave, and I get mad at you. You offered. I didn't take you up on it.
And so, a lot of it was changing my behavior and recognizing why I was doing what I was doing. And that changed my life too because you realize this behavior is hurting you. And every time you go out with friends, you pick up the check. For what reason? Do you want them to think more of you, or you want to be magnanimous, or what's the deal here? Because you need to stop it, because you're hemorrhaging money. So, anyway. And I think also the willingness to give up whatever needed to be given up. I had just bought the house of my dreams and thought, "Hey, God, is this something you want me to get rid of? And I love football, but do I need to cancel cable?" And all that. And I think to be willing to do all that.
And then now, if I get to speak to advisors, also, I just want them to look at, do you know what you're spending? And that's when I changed also the planning practice because really, the most important number in anyone's plan, not GDP, not your investment return, it's what are you spending and are you controlling it? Because that's the key. You can't control, "Hey, how much income am I going to make or what's the market going to do?" But you can control what you're spending. So it's been a long road, but a good one.
Michael: Interesting because I'm always struck that just when I talk to a lot of advisors that are making decisions around, "Do I want to grow more? Do I want to invest more into the business? Just what am I doing with the economics of the business?" And I often get conversations that amount to, "Well, I'd like to grow more, but there's no dollars left to be able to invest in a growth in the business." I'll say like, "Well, why not? What's the profitability of the business?" Like, "Well, we run pretty good profit margins. We have 20% to 30% profit margins." Like, "Well, okay, then why isn't there any money to reinvest? And really, you just said there's 20 or 30% profit margins." And what it comes down to very quickly is, "Yes, but my personal lifestyle absorbs 100% of the remaining profits." Right?
The meetings expand to fill the space in which they're allotted, and lifestyles expand to fill the profit distributions to which they're allotted. So if you're not conscious about that, we as advisors often get a pretty significant lifestyle inflation creep of our own when you hit those, I call it the mid-career years kind of, for a lot of advisors, it's somewhere in the 5 to 15 years in where you finally get past those horrible, horrible early years, and the money gets good, and then the money gets pretty good.
Nancy: Yeah, very good. Right.
Michael: And you start adjusting and ratcheting up lifestyle. Not that it's bad to enjoy your dollars if you want to enjoy your dollars, but we create sometimes these dependencies where our lifestyle is dependent now on a certain nontrivial amount of cashflow coming out of the business. We don't run our lifestyles like we're on a salary. We run our lifestyles like every free dollar of cash flow from the business is our lifestyle spending. And then when you get market volatility which translates into business and revenue, especially profit volatility because again, you got to pay your staff no matter what. So, top-line revenue decrease, falls straight to the bottom line, we can suddenly end up in these worlds where the business is fine in a market pullback, but I'm in crisis. My household spending is in crisis.
Nancy: And I think a lot of times that's because we are not paying attention or we're trying to keep up with the Jones. I think that there's a lot of... I don't know if there's pressure, but I think many of us say, "Well, I need to drive this car because it communicates I'm successful or wear this watch," or whatever.
Michael: I feel like there's a lot of that in our world.
Nancy: I think it is. I think it is.
Michael: Right? Some of that I think is just as advisors, we tend to be goal-oriented, achievement-oriented people. So, we tend to set successive goalposts that get further up for ourselves over time. So, I always have to ratchet the visible lifestyle a little bit higher for the public perception of it. I would argue there's also a piece that I think maybe has some just real client's business validity of, yeah, it can feel challenging to try to demonstrate that you're a "credible" financial advisor if it doesn't look like you're making a certain level of income or dollars to be perceived as a credible financial advisor. And I can make the case on in theory of why that shouldn't matter at all. But for some advisors it really does. For some client situations, frankly, it probably does. There are clients right or wrong that do judge their advisors in that way. You can say you don't want to work with them, but there are clients that look at it that way as well.
Michael: So, I get that there's both the general lifestyle creep. There's the I want to show that I'm successful as a financial advisor, so I'm going to show it visibly in what I wear and what I drive usually, and where I live usually, these big ones. And then there's the I'm trying to show I'm credible to clients, and prospects, and how fancy of a car, and nice of an office do you need to have in order to do that.
Nancy: Yeah. And we're the only ones that can really judge. But I think when I paid off my house, it made such a big difference in my spending because now I know where I am and how I am. And yeah, I have a nice car, I have a nice house, I have a nice watch, but I don't need 4 houses. And I'm comfortable in my own skin, as mentioned, probably for the first time in 30 years. But I don't have anything to prove to anybody. But I think that there's some insecurity, I think, sometimes with advisors and they really do feel like they need to up their ownership of stuff to prove that they are of value.
Why Nancy Uses Personality Tests And A Multiweek Evaluation To Find The Right Employees [56:16]
Michael: So, help us understand more how this plays out with the team and I understand you're now listening to Dave Ramsey's "Total Money Makeover," and kind of having your moment with personal household budgeting and debt while going through the stress of making payroll in the business. So, I understand the changes that started to happen on the personal side around changing spending and making decisions. Did it change anything on the business end? Did you have to lay anyone off? Did you get to the point of, "Oh, I don't really want to hire any more people because this payroll thing sucks. I'm not going to make it any worse for myself than it needs to be?" Did it show up like that in the business end?
Nancy: No. That's interesting. I didn't have to lay anybody off. I think in part because there were so many expenses that I could cut personally and in the business that we began to breakeven a whole lot faster, and in fact, even save money. And then I was so convicted about all that I had been learning and thinking, if a CFP can get in this kind of trouble, then anybody can. I'm like a naval officer that can't swim. It's just crazy. So, I went applied with Ramsey Solution folks and said, "Hey, how about making me a ELP?" Now it's a SmartVestor Pro. And they did, which meant folks go to Dave's website and they need help in Memphis, and they may see my name, and they may call. Well, we started getting a lot of referrals, a lot of referrals like 5 a week.
Nancy: And 2 to 3 of those would become clients. So, there were a couple of years where we were getting 100 new clients a year. Now, again, the 80/20 rule certainly applied. 80% of the folks made up 20% of our income and vice versa. But there are an awful lot of people that subscribe to Dave's philosophy who have a ton of money. And if clients are debt free, they also have a ton of cash flow. So, it was fun for me to look back and in 2010, we had 5 team members, by 2018, we had 9 and then we've picked up since then, and we've added quite a few now we're at 22. And most of it has been with us.
Michael: What was that path? So, you had 5 team members coming through the tough period you were at, did you say at 9 team members by 2018?
Nancy: Correct. Yes.
Michael: And then jumped up to 22 now 5 years later.
Nancy: Yeah. So, we would add. It looks like 3 to 5 a year until we got to 22. And 2 or 3 years ago, we had 3 advisors who were SmartVestor Pros. So that's really a lot of the growth was because we just... I think most advisors can't really handle more than 150 clients well, in my opinion, I couldn't. I don't know what everybody else can do, but that's when I knew I needed to start hiring some help. And we've never hired a licensed person. We've always hired folks that we trained that wanted to be an advisor, that got licensed under us. And for us, that's just how it's worked up till now that could change in the future.
So, I had 3 advisors until about 3 years ago and then we did hire a gal who was a CPA. But she came here to get her license, and now has become a CFP. So, she's quite educated and has been fantastic. So, the practice just grew. And I know just from the numbers and what other people say, that our average client only has $330,000. But our top 50 have a truckload of money, they're each over $2 million. And so, I just... I like the idea that we'll help anybody. Recently, for those folks that we've tried to help and have been unresponsive, we've started selling some of our lower book to LPL because they'll buy it. And that's been some way for us to keep some weight off of our advisors.
Michael: Wait. So, how does that work? LPL will buy a portion of your client base directly. They buy into the home office. So, how does that work?
Nancy: Yeah. I think they've hired, I don't know, 25, 30 licensed folks, many of whom are CFPs. And I think what LPL is trying to do is keep the money in the family. So, if they are people that we're not servicing, rather than making them house accounts, they will buy. If it's an actively managed account, I think they'll pay you 1.5% once. Maybe that's true with brokerage too. But anyway, there's some ratio that they use and then they're responsible for those clients. And they tell you that they're going to call them once a month or contact them once a month, and do an annual review with them once a year. And these are people that we've begged them to come in, to respond, to do whatever, and they just won't. So at some point you're like, "I can't be responsible for these people. They're not going to..." And maybe they win the lottery tomorrow, but regardless, I don't think that they're ever going to be all that great. And LPL said, "Hey, we want them." So, I'm like, "Great. Okay, here you go."
Michael: And so, from LPL's end, I guess... So, they'll pay you 1.5% of the advisory account. I guess not only if you charge 1%, it's 1 1/2 times revenue. So, it's a reasonable purchase rate. I guess paperwork is negligible because the account is already at LPL. So, probably updated repapering for an advisory agreement or a broker record change, and then that's it. You're done.
Nancy: Yeah, we're done. We send a really nice letter to the people that we're sending to LPL and we've only had 1 person... We've only sold about maybe 30 clients. We've only had 1 person who begged to come back. So, LPL is like, "Yeah, yeah, yeah, that's fine. You can keep her." So we did. If people want to work with us, we're in, but if they're just going to be dead weight, we need to move along.
Michael: So, where is all the growth coming from just for that acceleration in growth rate? Is it continued to be SmartVestor Pro really driving a lot of activity in your area, or was that more like that's what was going in the mid-2018s, but it's different in recent years?
Nancy: Yeah, I think that's really what got us started. And then most of our growth has been from referrals from existing clients, some of whom came to us through the SmartVestor Pro program. We've noticed a slowdown in that in the last 12 to 18 months. We had 3 advisors on the platform and we've lowered that to 2 advisors just to save some money. And we're going to try different things.
Michael: So SmartVestor, it slowed down from SmartVestor over the past year.
Nancy: Yes. It still is more than paying for itself and it's something that we believe in, and it's our philosophy. But it's not inexpensive. So, at some point, you have to say, "Okay. Hey, you know what, Michael? Now I'm good with the budget, so I'm editing everything."
Michael: This kind of hiring just for a lot of advisory firms, it's a lot of hiring or as you said, you've been adding 3 to 5 people per year. You were almost 30 years in the business to get from yourself to 5. So, you're adding almost as many people every year each year as you did in the first 30.
Nancy: Yeah, good point.
Michael: So, how does that change from just a hiring person? How do you think about staffing, and hiring, and adding that many people, and figuring out who to add?
Nancy: We have a leadership team of 4 of us and we read the book, Traction, about 2 1/2 years ago, and really adhere to the EOS system, and basically just in mapping out and trying to determine who we need, and when we need them. And I think we've been pretty spot on. And if you hire someone that you want to be an advisor now, it's going to take you 2 years, I think, to get them up to speed just in the training and the licensing, all that stuff, if they're not already licensed. And as we say around here, and indoctrinating them in what our system is, what our culture is. So, I think 2 years. And so, you do have to look out and determine, "Hey, what are we going to need in 2 or 3 years?"
So, I think some of it has been due to projection and some of it has just been, "Hey, we got to have a gal out front because everybody that we've hired out front has decided that they want to be promoted to something else and we need someone who really wants to sit in that chair." So, some of it is just an urgent need and some of it is because of planning. And our hiring system is very long and we try to take all the time that we need because I should have clarified, we have hired all the people I mentioned. But in all that time, we have lost 4 people, 2 that we fired and 2 that have quit. So there have been even more than I told you about. But anyway, and I'm pleased with that too because there's nothing more miserable... People are going to quit. I get that. But there's nothing more miserable than firing somebody. So we really want to be slow to hire and quick to fire.
Michael: So, help me understand how hiring happens in your firm. Who does it? Who's responsible? Who does what in the hiring process to make sure you get the right people on board?
Nancy: Sure. We determine that we need some position and that comes from the leadership team. And then the first thing we do is pray about it, determine who we think we're looking for, and narrow that down. And also, narrow down if they take some of the personality tests that we use, how do we want them to come out. So, are they going to be the right fit and then will they be a good cultural fit? And then most of the people that we gather on the team came from word of mouth. So, we let folks know, we don't advertise, we don't necessarily put it on Facebook, although we do on occasion, and we might get a few applicants.
And the first, our integrator or the gal that is really the person that manages the office, she will call them, and we'll do a fly-by phone call to see how they sound, what they think, etc. Then if she gets the okay, they come in for a personal interview with her. If they get that okay, then they meet with one of us, partners. If we're still okay with them, then he or she is going to be interviewed by a couple of the folks that he or she will be doing their position. And if that's still good, then the individual comes back in to meet some of the other team members.
So, we probably have 7 folks or so that meet everybody, and if we still have a green light, we ask them where they are in process with their finances just to see how they handle their money, etc. And then we usually take... No, we always take them and their spouse to dinner with some of us, and our spouses to see if any of the spouses have any red lights. We've had that happen once. One time, one of the husbands was like, "This gal will not fit into your culture." So, we didn't hire her. And we feel good about doing that because you're spending 8 hours a day or more with these people. So, if any of the spouses have issues, we just flag them. But again, that's only happened once. And that's proven to be a pretty good system. It takes a while, but it's been very successful for us.
Michael: How long does that process take just getting through the initial call with your integrator, then I think interview with your integrator, interview with the partner, interview with the folks they'll be working with, additional round of meetings with the team members, and then the dinner? How long does that take to get through?
Nancy: Probably anywhere from 4 to 8 weeks. A lot of it is just a matter of how quickly can we get this scheduled and are they working someplace else, and how often can they come in, that kind of thing. I think the last 2 we hired took 6 weeks each.
Michael: So... And the folks that you're getting, I think you said mostly, local network word of mouth. You're not necessarily, I don't know, listing on Indeed.com, or LinkedIn, or those kinds of hiring platforms.
Nancy: Yeah, we haven't ever had to do that. We have hired a number of folks that are clients. They've just been really strong administrative types or one of... So, my assistant was already a client, our integrator was already a client. One of our research specialists I went to church with, that kind of stuff. So, a lot of it is people that we already know and so far that's worked very well.
Michael: So, how do you put the word out of that? Just do you literally send an email to client list, "Hey, we're hiring for this position. If you or anybody in your network might be interested, please send them our direction?
Nancy: Yeah. We target folks that we know that know a jillion people. So, there are about 10 of our clients that have been great resources for this kind of thing and we send that to them. And also, now we have 22 people on the team, so we give the description to everyone and say, "Here's who we're looking for. Do you know of anybody?" And again, so far that's worked. And we've always gotten a few applicants, and we don't really want to talk to 60 people. So, some folks have not worked out and they're just not right for the position, or just it's not the right timing, or they don't want the money we're offering, or whatever. But, yeah, so it's gone pretty well.
Michael: And then you said there are some assessments you're using as well that you figure out both the job description is and how you want them to see them show up on the assessments. So, what assessments do you use to do that?
Nancy: Yeah, we've been using... We used Kolbe for a while, but I didn't really understand it. I know several of my friends use it and they're very successful. But we changed to DiSC, and that's something that's been very helpful for us. We're big Enneagram people, so we do that as well. And then recently because of Pat Lencioni, we've started using the Working Genius quiz to determine what their working genius is. And it has revolutionized how we operate in the office and who does what. It's been fantastic.
Michael: Yeah, I've been fascinated by it. I had just started reading the book myself and gone through the assessment with some of our leadership teams. So, I guess if anyone is curious, this is Episode 324. So, if you go to kitces.com/324, we'll actually have a link in the show notes to Patrick Lincioni's, but he has both a book around this called, I think, The 6 Types of Working Genius," and then an actual assessment tool you can take to check it out. But I've been fascinated by, I guess, to me how disturbingly effective the system is. Disturbing makes it sound more negative than it is, but just, it's a very simple system, but it's really good.
The essence of it just says... If you think about how a business comes together, just like how anything gets executed, how any project gets executed, there's a series of stages. Someone just sees the potential of what it could be. Someone turns it into an actionable idea and gets it started. Someone else cuts through all the different ideas and figures out like, "This is the one we should do and not all the other ones." Then someone rallies the team together to get them to act on it. Then someone supports all the team members and manages them through to get it there. And then someone's like the results person that pulls everything across the finish line.
So, they've got these 6 steps of what happens and the idea is if you look across those 6 steps, most people are really gifted into kind of deal with it for 2 and have 2 that are really negative, or challenging, or just don't fit their natural style. So, I went through. I was a wanderer person. I see the ideas, and opportunities, and everything, and I'm a discernment person. I'm really good at looking through all the different ideas and prioritizing and say, "This is what we should do that matters the most and this just isn't probably going to go anywhere."
And then I work with an integrator in our business, and her strengths are the last 2. She's all about supporting the team on execution and making sure they get to completion. We're a great team. I spin up all the ideas and she loves running with them. I get very tired managing people and having a lot of direct reports. She thrives in direct reports and does not want to have to come up with the next big idea for the business. Like, "Cool. I got that. You do you. I'll do me." So, where do you fall on this dimension? Do you remember your working genius types are?
Nancy: I do. First of all, that's one of the best summaries I've ever heard of the 6 steps. So, nicely done. I am an inventor. So I'm the idea gal and I'm a discerner. And the last on my list is tenacity, which means I'm not a finisher, which you already know. We already knew you had wonder because part of wonder too is you're just naturally curious and you ask a lot of questions, and that's kind of what you do. And obviously, you're exceptional at it. But I think what's changed is it's just given so much energy to what we're all good at, at least in our office. It's just been exceptional. And you're right, it's so simple, it's so simple.
Michael: And just to me, there's a power, right? You said it earlier in a way that I feel like it's used at least negatively in some contexts. The thing you said, "I'm a starter, not a finisher." But that's literally the point in Lencioni system is yes, starter people are different than finisher people and no one's actually good at all 6 steps of how a thing gets created. Right? His whole 6 types are basically the 6 steps of how again, a thing comes into being. You see the possibility, you have the idea of how to do it, you discern which one to pursue, you galvanize the team to get it going, you enable them to make it happen, and you've got the tenacity to see it through to the end.
And so, the whole point is, yeah, if you want to get things done, you need people who can do all of those different things together on a team because that literally means there's someone to take it through each step of the process to get it to the end. And so, to me, it's powerful because what it says in your context when you live in the invention and discernment area like, "I'm really good at seeing the ideas of what we can do and figure out which one is actionable. Great. Now, I just need someone who's wonderful at enablement and tenacity in their system, who loves to drive the team forward and get it to completion."
Nancy: Right. Yeah, exactly.
Michael: And that's really good.
Nancy: I think not only has it given me energy around my 2 geniuses, but also a deep appreciation like you were talking about your integrator. A very deep appreciation for those that have enablement, galvanizing, tenacity, all of those things. And I think it just increases the respect in the office. And then something else that you can do on his website is a team map. So it shows you what everybody's genius is and you can see if you're lacking anything. That was very helpful. Or if there's a lot of pressure in our case on the galvanizers because there's only 2 of them. So, we need to be sensitive, etc. So anyway, it's just absolutely... I do think I'm addicted to personality tests, but this has been very, very helpful in the workplace and frankly with relationships too. I think it's interesting to find out what everybody is in the family, etc.
Michael: And so, then I guess in that context right now, it helps on the hiring end because you can look and say, "Okay," I don't know, "I need to hire a manager who's going to have a pretty big team of direct reports." You probably want someone who's really strong in enablement who can lift up that team. You want to hire someone in a strategic innovation role like, "Okay, I need all wonder and invention."
Michael: "We'll put someone else around if it gets it done. Just go think about the next big things." And likewise for all the different pieces along the way. It's powerful to see where you might have gaps or just to force you to think about what skills do you really need on your team to do the role that's being hired for.
Nancy: Yeah, exactly. Spot on.
Michael: So, do you literally... Does that become part of your internal, just job description assessment? Like, "We're hiring for this role and we really need someone who's high in enablement, or at least they can't be low in enablement, or that's just not going to be a good fit."
Nancy: Yeah, internally, that's what we say. We don't advertise that to whoever because, well, first of all, very few people know about Working Genius. I think it's just hit the bookshelves.
Michael: Yeah, yeah. No one would know what they are.
Nancy: Not yet, but I think it's going to take the world by storm. But internally we know who we're looking for and it's just helpful. Like with the example you just gave, if someone's an administrator, they need to have enablement because they're going to be cleaning up a lot of stuff and taking care of a lot of stuff.
Michael: So, you want someone that's excited to do those things because again, the strength around Working Genius, and StrengthsFinders, and a lot of those models is just it highlights people who are actually excited to do the thing instead of the ones you're trying to drag along to do it.
Nancy: And going back to Enneagram, just as an example or DiSC, if you have... We have one 8 on the Enneagram chart, which is someone who's very forthright, and opinionated, and kind of a driver type. You can't have too many of those on your team. And the same with an Enneagram 4, that they're magnificent, brilliant, creative, but they're also sometimes practically bipolar. Fortunately for us right now, we have none of those on our team. They're dramatic and again, incredibly gifted. But I think that's been helpful too to discern who's going to be a good fit and who's not.
Michael: Yeah. As 1 of only 2 Enneagram 8s on our teams, I have a lot of appreciation for that.
Nancy: I'm glad I pointed that out. Okay, great.
The Surprises Nancy Encountered On Her Journey [1:22:08]
Michale: Absolutely. Yup. So, as you look back on this journey of the business growing and evolving, what surprised you the most in this journey of building your own advisory business?
Nancy: Well, I think I thought my perfect position was always going to be under the person that was in charge. I thought I was a good second-in-command kind of person. And so, when I was put in the, "Nope, it's your business and you got to run it," and I did it, and turns out I was pretty good at it, I think that's been a big surprise. It's been a big surprise as you pointed out earlier, that it took me 30 years to really get to the point where I'm like, "Okay, I'm going to start really telling myself the truth." And some of that is that's what therapy is for. And I can't encourage advisors to get into therapy enough because I'm all for it. And medication is really a good thing.
But I also think that the seasons have changed a little bit that I do enjoy working with clients, but not as I once did. And what I really enjoy doing now is coaching team members to meet their dreams and help them grow as advisors, or admins, or whatever else they want to be, and really give people a place where they can work, and have purpose, and be lifers. That's what we're looking for here. I'm a lifer. I think we attract lifers and I don't ever see retiring, Michael. I think I have so much energy coming into work and I don't need to be working. I could have quit 2 years ago, but I don't want to. I think there was a point where it was all about the money, and then that changed, and it was never about the money. And I think getting to that point has been a wonderful point, a wonderful point in my life. And just knowing that I'm impacting people's lives is just incredible. We're very blessed.
Michael: So, what led to this whole, "I thought my perfect position was to be second-in-command until I landed first in command and had to deal with it"? Is that an extension of the "I thought I wasn't analytical and technical enough that I couldn't be the business owner," or something else that was limiting that for you?
Nancy: Yeah. I think some of it was that. I think there were some things that happened when I was considerably younger that really shook my confidence. We'll just call it people taking advantage of me in a pretty horrible way. And I think that sets you back emotionally and psychologically, and you feel less than for a good long while. I certainly did. But my parents always made me feel like I could be president if I wanted to be, that I could do anything. I was capable of anything. They were great at that and I think I had a lot of encouragement to do it. And again, I knew what I was good at, and I can build a team. And I think leaning into that and leaning into relationships really helped. I think I thought I'd be best second in command because I didn't have the confidence to be in command, but I do now.
Michael: So, what was the low point on this career journey for you?
Nancy: Oh, gosh, Michael, there have been so many. I think failing all those tests was very, very low. I think the Great Recession was a double-low, because I felt personally responsible for all those people that lost all that money. Of course, I wasn't, but they are very tough discussions to have. You've lost 30% and it doesn't look like your kid can go to Vanderbilt or whatever.
Michael: So, not just the impact on your personal balance sheet and the making payroll dynamics, but just sitting across from 1 client after another all the way through to explain to them how much they were down.
Nancy: Yeah. And it's interesting, the disconnect. I think sometimes people watch, and read the news, and hear the market has gone down, but they don't really think it's affected them. I'm not sure what that's about, but those are very difficult conversations. And we lost some clients as a result. But we gained a lot of clients as a result. And last year was a challenging year, and people lost a lot of money. But it's a different conversation now. The money that you have invested is not in there for tomorrow. It's in there for 30 years from now, 10 years from now. And I know what happens. I just don't know when it's going to happen, but the market is coming back. And I think to have that experience and to be able to look across the table and say, "You know what? Everything you own in your portfolio, so do I. I'm never going to put you in anything that I don't already own." And I think that's something that every advisor ought to be saying and doing because I don't think we have any business putting people in something that we don't use or trust. There's some exceptions to that, but I think that's a really important thing to be able to say.
The Advice Nancy Would Give Her Former Self And Younger, Newer Advisors [1:27:51]
Michael: So, what else do you know now that you wish you could go back and tell you 20+ years ago when you did the LPL transition, and stood up your own firm for the first time?
Nancy: You're okay, and you're going to be okay, and who you are is enough. In fact, it's great. And you deal with people the way you want to be dealt with, and you're going to succeed. And as you know, it is not hard to make money in this business, and it's not hard to make a lot of money in business. I have 2 words for you, "recurring revenue." So powerful. So very powerful. But I think it's all about confidence. It's all about trusting yourself and surrounding yourself with incredible people. And really, if you don't love what you're doing, let's find you something else to do because this is a magnificent career. Certainly, has its challenges, but I can't imagine doing anything else.
Michael: Any other advice you would give younger, newer advisors looking to get started in the industry today?
Nancy: I think if you love it, never quit. There's going to be setbacks and mine were tests, and foolishness, and not being aware. Markets are always going to be there. But if you think this is what you've been called to and you ought to be doing, you're going to be... Somebody told me early on, it may have been John Savage, that you're going to be underpaid for the first 5 years and then overpaid every year thereafter. I think mine was more like 7 or 8 years. But that's certainly true. It's certainly true. But those first 5, 7 years are not easy. If it were easy, everybody would be doing it. But it's not because you know, you of all people know you have to be a physician and a psychiatrist, and a coach, and a research analyst, and a communicator. You have to be like 17 different things to clients and it's difficult, and you're going to be strong at some of the things and not so strong at other things. But it's just a remarkable career. And we get to help people change their lives and their family trees, and reach their goals, and see their dreams come. And it's just such a powerful thing because if we can help people get in a better relationship with their money, baby, we can set the world on fire. And I think that's what we're doing.
Michael: So what comes next for you?
Nancy: Well, I just recently became a certified Dream Manager. I don't know if you're familiar with that book, but it's a...
Michael: No. What is that one?
Nancy: It's very good. It's called Dream Manager, and it's a story about someone who owns a janitorial service, and they have 400% turnover. And so, the boss goes to the second command and says, "I need you to find out how we can stop this. Pay the people more, or whatever." And second in command says, "I don't think that's it. I think it's something else. I'm going to..." Hey, here's a lightning bolt. "I'm going to ask the employees what it is." And so, he surveys everybody. And one of the biggest issues was transportation. They couldn't get to work. So once they fixed that, turnover reduced to 200%. Still horrible. So anyway, the story goes on and it's all about how he asked people, their team, what they needed and began to ask them what their dreams were. And that was inspiring for all of them as he was able to basically coach them in their dreams. And so, the challenge in the book is write down 100 dreams. And it took me about 3 months.
Nancy: 100. Yeah. So...
Michael: That's a lot.
Nancy: It is a lot.
Michael: Come up with 2 or 3, I can do that quickly. Come up with 100 is quite difficult.
Nancy: It was and it continues to be. But some of them can be as simple as, I really would like a front-yard full of Bermuda grass or I really would like my dog to sit when I tell her to. But some of them are deeper than that. I really want a strong relationship with my great-niece and great-nephew. They're 4 and 6. That's very important to me. It's 2 different dreams. Well, by writing them down, just like when you do goals, by writing them down, you're making a commitment, and you're much more likely to achieve them. And I think the difference to me between goals and dreams is when I have goals, I just feel like I'm driving myself sometimes mercilessly. Sometimes it feels like self-abuse. But a dream is just something that draws you, something that you would love to have happen, something you've thought about a million times. But you've never written it down.
So they, of course, have a program, and they have a certification, and of course, there's a cost. And so, I got certified to do that, and I'm doing that with 2 groups in my office right now, just walking them through that. And it's just been so fun to see. One of the gals wants to have a baby. She just got pregnant. One of the guys wants to have his teeth straightened. He just got braces. One of the gals wanted to redo the upstairs bedroom. Things like that. And then one of the gals said, "My husband and I have been wanting to go to Paris forever," and they've booked their trip. So, I think it's a writing down, it's a thinking about it and really pursuing those dreams. It's just been a lot of fun.
Michael: So is the context, I guess, more team-oriented? This is about developing your team, not necessarily clients getting to their dreams.
Nancy: Not yet. We're thinking about doing a workshop on it for clients. This is my first thing out of the gate that I'm kind of practicing on the team. They've been very gracious about that, but I just think there's a lot of merit to that. Back to your original question, what's next? I want to continue to pursue that. I want to continue to be the visionary in our firm and to coach our team here. I'd like to do more speaking and I'd love to do some writing. We'll see if that comes about or not. But mom lived to 95 and was in pretty good health until she went to heaven. And so, I think I'll be around for a while. And I don't really, like I said, anticipate quitting anytime soon because I love all the stuff I'm getting to do here.
Michael: I love it.
Nancy: Thank you.
What Success Means To Nancy [1:34:56]
Michael: So, as we wrap up, this is a podcast about success and one of the themes is just the word success means very different things to different people. And so, you've built what anyone would objectively call very successful advisory business with a hundreds of millions of assets and 22 people, and a wonderful dog. So the business is in a great place now. How do you define success for yourself at this point?
Nancy: I think being able to pass all this on to others, to see others be successful as well, meaning to have financial independence. I am financially independent, I consider that a definition of success. But more than that, I think sometimes leadership is lacking in our country. And so, success to me is to be a leader, to be somebody who is a positive influence, and who values other people on a consistent basis. That is a big success definition for me.
Michael: I can see then why you're continuing to lean in further to the hiring, and the management, and the scaling, and the dream management.
Nancy: Thank you. I just think that you've done such a fantastic job and I just love the fact that you know what your mission is, you know what your passion is, and you're all over it. And your website and your influence is just remarkable and I just appreciate everything that you have done and you are doing. And you obviously have a fantastic team because I've gotten to visit with them and really, really nicely done.
Michael: Well, I appreciate that as well. Thank you so much, Nancy, for joining us on the "Financial Advisor Success Podcast."
Nancy: Thank you. It's been a treat.