Welcome back to the 121st episode of Financial Advisor Success Podcast!
My guest on today's podcast is Rachel Robasciotti. Rachel is the founder of Robasciotti & Philipson, an independent RIA in the San Francisco area that oversees $140 million of assets for more than 100 individual clients.
What's unique about Rachel, though, is the way that her firm built its own unique proprietary investment process, dubbed RISE for Return on Investment and Social Equity, by going beyond just doing socially responsible investing and actually engaging her local community to develop the screens that they would use to decide what companies would or wouldn't be in their client portfolios.
In this episode, we talk in depth about Rachel's journey through the socially responsible investing and ESG evolution over the past 15 years, why she ultimately moved away from traditional SRI mutual funds and ESG screens, how she developed her local RISE Community to ongoing quarterly feedback on her investment process, the tool she uses to take the feedback from her community and implement it into a portfolio of individually screened stocks, and the way that her engagement with the RISE Community she's created has also become her biggest driver of marketing and business development anyways.
We also talk about Rachel's own path through the financial services industry. How she was incredibly successful starting in a major insurance firm at a young age but ultimately decided to go out on her own as an independent at the age of 25, how the driver of her shift was not the financial opportunity of the independent channel but simply the ability to create the particular vision that she had about how to serve the clients that she wanted, the way that she wanted, while hiring the team and creating the culture she wanted, the way she survived in her early years of relative isolation and found community as a solo advisor until her firm grew, and how her approach to marketing and the way that she communicates with clients has changed over the years as she's gained experience and professional credibility.
And be certain to listen to the end, where Rachel shares some of the unique challenges that she faced starting her firm not only as a young advisor, but as a young black female who came from a poor upbringing, who had no safety net or family to fall back on as she launched her firm from scratch, the sometimes stifling pressure on people from different cultures to act and talk certain ways to conform to the industry standard expectations of financial advisors, and how the reality is that everyone needs help from time to time, and often the biggest differentiator of success is not whether you need the help or not but how helpable you make yourself to receive that assistance and how easy you make it to be helped or not in the first place.
What You’ll Learn In This Podcast Episode
- What made her decide to go out on her own despite being successful at a major insurance firm at a young age. [05:13]
- Her vision for what she wanted to create with her practice. [14:28]
- An overview of her firm as it exists today. [24:25]
- Her journey through socially responsible investing and ESG. [26:22]
- How her firm built its own unique proprietary investment process. [34:37]
- The tools she uses to take feedback from her community and implement it into a portfolio of individually screened stocks. [42:47]
- How her approach to marketing and the way that she communicates with clients has changed over the years. [51:15]
- Rachel's plans going forward for her firm. [1:03:16]
- Rachel’s path into the financial services industry. [1:14:22]
- How the industry can do better in dealing with diversity issues. [1:27:51]
- Advice for young advisors coming into the industry today. [1:38:14]
- Rachel’s definition of success. [1:42:22]
Resources Featured In This Episode:
- Rachel Robasciotti
- Robasciotti & Phillipson
- National Center of Lesbian Rights
- The Defining Personality Traits Of (Successful) Financial Planners
- Ethic Investments
- Folio Investing
Michael: Welcome, Rachel Robasciotti, to the "Financial Advisor Success" podcast.
Rachel: Hi, Michael. Thanks for having me.
Michael: I'm excited to have you on the podcast. You know, I had first come across your story a number of years ago, I guess. I think it was, like, a profile from "Financial Advisor Magazine," you know, who was highlighting young advisors to watch, and you had followed this interesting path of, like, starting out in a big firm and then going out as an independent at age of 25. And, you know, for most advisors, just making the transition ever to the independent side is, like, a freaky, scary thing, you had done it at 25 and as a female in an industry that, I don't know, we're probably barely 10% or 20% women-owned, and as a minority, which, like, puts you in, like, the rare unicorn status in our industry I think. And so, like, I was fascinated reading your story out of the gate of, like, we struggle so hard to bring young people into the industry and to bring women into the industry and bring people of color into the industry, and here's this awesome 25-year-old black female who just went and started her own firm from scratch at 25.
Michael: So how the heck does that happen? Like, I kind of want to start right there. Like, how does that come about?
Rachel: Well, to start, I have to say I had graduated from high school at 15. So, you know, I had started in the industry when I was 20. So by the time I was 25, I did have 5 years in the business. And I think a lot of folks come to this industry as a second career. But for me, it's what I had chosen to do right out of college. It's what I did for my internship. So I knew this is where I wanted to work. But still 25 is a fairly early time, precocious or not, as a young person, 25 is pretty early.
What Made Her Decide To Go Out On Her Own Despite Being Successful At A Major Insurance Firm At A Young Age [05:13]
And, you know, what I was finding in the industry was that there wasn't a place that really felt inclusive of my perspective and of the populations that I wanted to work with and the issues I wanted to work on. And I would end up randomly... You know, it's pretty obvious that I'm a person of color and a woman, but it's not always obvious that I'm queer. I would, you know, end up in industry conferences where I would hear people making homophobic jokes. I would in my own firms definitely not be given the same kind of, like, respect, airspace, etc. as maybe some of the other folks in the firm. And I realized at a certain point that I could keep looking and looking, but there wasn't a firm that was anything like the one that I wanted to work at. And if I was going to work at a firm like that, I was going to have to create it.
So at 25 I was like, "This is going to take a while, so I need to get started." So that's basically what the impetus was. I wanted a firm that felt like a family. I wanted a firm that was centered on racial justice and social justice. And that's really not what the financial services industry is necessarily about, but that's what I've always cared about.
Michael: Well, and to me, it's one of the interesting things out there that, you know, the industry talks a lot when people go start their own firms of sort of the dollars and cents of it. You know, if you start your firm, instead of paying your broker-dealer, your expenses will be this, but they won't take that slice. And, like, if you do all the math, you can take home, like, 7% more of your income, or 10% or 2% or whatever it is. Like, it sort of, it revolves around making, like, the business economic case of, is your broker-dealer providing you the value or should you be out on your own as an independent?
And what's always struck me in the conversations with so many advisors who go independent and start their own firms is, overwhelmingly, it's not actually driven by the dollars and cents stuff. I mean, it sort of matters. Like, you want to make sure you're not blowing up your business. But it's usually driven by, "I want to do things my way for the people I want to serve. And if I don't feel like I can serve the clients I want to serve the way that I want to serve them where I am then darn it, I'm going to make my own firm and then I can control it and I can work with who I want, the way that I want." And that it's much more about, "I've got a vision of the way that things should be that I don't feel like I can do where I am, so I'm going to go make it myself."
Rachel: Yes. And that's definitely where I was coming from. Part of what I was looking for, too, is just community. And this siloed model, this model where advisors are in the same firm and offices next door to one another but in fierce competition for the same set of clients, that just wasn't the environment I wanted. It didn't foster the sense of community, teamwork, taking the best of what all of the advisors knew and pulling that together to do the best job for the clients.
I mean, ultimately, I believe we have to align our incentives with the outcomes that we want. So not only did I want to get away from the incentives around placing clients with products that may not have been what they needed or even maybe the best fit for what they needed, but I also wanted to feel like I came into the office and I wasn't with the group of competitors, I was with my family. I spend more time with the people in my office than I do with anybody else in my life. And so I wanted to have real authentic relationships with them. And I believe that structures that put us in competition with one another kind of necessarily separate us rather than bring us together. And that was a big piece of what I didn't want anymore.
Michael: Interesting. So that sort of competitive environment of being in the traditional industry. And remind me, where did you get started? Where did you come out from?
Rachel: I started at Prudential Financial. That was where I did my internship. I was a business strategist there for a team within Prudential, and then I kind of started doing my own work, my own practice within MetLife Securities.
Michael: Oh, I was...started in MetLife as well. I was on the New England side not long after MetLife had bought the New England. But yeah, I remember that environment as well. And, you know, there were some good people there and there were some smart people there, but there were also a lot of salespeople there. And our office had a giant whiteboard where every month they would write who had the top production for the month. And I remember that same feeling of just the competitiveness that only one person gets their name at the top of the board. And I forgot what it was, there was some kind of bonus or something. There was some incentive attached to it because there were incentives attached to a lot of stuff back then. And yeah, if you thrived in the competitive environment, it was a good environment to be in. And if that wasn't your thing then it wasn't such a great fit.
Rachel: Right. If you wanted to work cooperatively or... And to be clear, like, I'm plenty competitive, that's not the issue. Ultimately I wanted to do well. I made planner of the year multiple years in a row and the nationwide too on the financial planner ranks. In the end, though, doing well and having the kind of environment that I wanted around myself and around my clients every day mattered the most. So I don't actually need to...like, my successes didn't need to come at the expense of someone else losing. And that's the part of competition that never felt right to me. It's not about kind of doing a B class job, it's really about, you know, what are your relationships with the people that you're doing work with? And can't we all do better work together?
Michael: Yeah, it's...I guess I'm wondering, like, when you went out on your own, like, did you have a team? Did anyone come with you? Like, I'm just sort of envisioning this like, "I want community, so I'm going to walk out of the door with a whole bunch of people and set up a solo shop where I'm the only person."
Rachel: Right. Absolutely. Well, I was very intentional from the beginning. I did bring my assistant with me that I'd worked with at MetLife, and I had a really wonderful network of other financial advisors that I was in contact with. I had study groups. And I could actually choose to spend my time kind of with those groups and also doing the social justice work then meant so much to me, and kind of building my practice that way rather than spending my time kind of like the way either a wirehouse or another kind of employee side financial services company would prefer. So I still got to have my community by going out on my own, but it can be a little lonely before you can hire more folks, it can be a little lonely. So I had to make sure that, you know, my calendar was full of client meetings and really having time to be in community with other financial advisors.
Michael: So I'm curious, what did you do on the community side? Because I think for a lot of advisors particularly going out on their own, that truly is, like, the...it is the loneliest point. Even if you were at a firm with a bunch of other advisors that were kind of competitors, at least there were other people in your office when you walked in. And when you go out on your own, like, it's you, or maybe it's you and one other if your assistant is coming along. But I know for a lot of advisors, like, that isolation effect of going out on their own is actually really challenging.
Rachel: Yeah, if you're a people person, you like to be around people and you want to help your clients. And that also means you don't kind of want it to just be you and an assistant in an office. Yeah. No, that makes sense.
So I was really lucky. I was on the board of directors of the National Center for Lesbian Rights. It's a national nonprofit legal firm that was working on LGBTQ issues. And they were in the building that I actually moved into for my first office. I'm actually still in that building, although we're on the 12th floor and have about half of the 12th floor is dedicated to our offices. But I started off just a couple floors down in a two-room suite. And there were a couple of other people and other social justice organizations I was connected to in the building. So I may not have had directly the financial advisors kind of in the next office, but I was in a community of folks. I could walk a couple of floors down. Actually, at one point I could walk a couple of doors over and there was another CFP that was also on that board as well. So I found ways to make sure I wasn't entirely by myself.
Her Vision For What She Wanted To Create With Her Practice [14:28]
Michael: So when you went out to launch the firm, like, you made this comment earlier that, like, you wanted to focus on the things you wanted to focus on, the issues you wanted to work on, like racial and social justice. As you said, like, these are not typically issues we tend to tackle in financial services industry I think in general, and certainly not when it then boils down to like, "This is what I'm going to focus my advisory firm on." So what exactly does that mean in the context of your advisory firm? Like, what were you setting out to do, or, like, what was the vision of what you wanted to create that is an advisory firm that deals with racial and social justice issues?
Rachel: Well, first, I mean, I had to have people in my office working with and for me that represented having some gender and racial diversity within the industry at large. So I thought very much about how to make a clear pipeline for people of color. So I've always had an internship program that we've had here at the firm because we want to have an entry point where people can see themselves reflected. So we get a lot of interns that come through our program, and some of whom stay with us forever, others kind of go off other places in the industry. But that was one way that we really focused on it was creating kind of a good place to land as a first entry into the industry.
And that was no easy task because it's not as though you put out an ad for interns and your inbox is suddenly flooded with women and people of color and LGBTQ folks. So what we actually had to do was go out to other places where we knew that people wanted to work in a diverse and inclusive environment and frequently to social justice activists and say, "You know what? You've got a lot of heart. You love people and you're good with numbers, you'd actually really be good at this job even though you may not have ever thought about it."
Michael: Have you ever considered a financial advisor?
Rachel: Right, exactly. Yeah. Actually, our chief compliance officer now, her last career was, she was in development at the ACLU. Yeah. So it was really about going out and finding those people who may not have already had the experience but who had the personal characteristics that we all know are what makes for the best financial advisors and staff people in our industry. It's really about kind of, like, those characteristics. And it's funny, just a few weeks ago she was raving about coming back from one of the conferences where they were going over the new SEC examination priorities and she was just...her face lit up, and I was like, "Oh yeah, we made the right choice." She's very happy.
Michael: Yeah. That is a compliance win on the hire right there.
Rachel: Right? Yeah. Yeah.
Michael: Excited about the latest SEC initiatives. What you always want to hear from your chief compliance officer.
Rachel: Right, exactly. And it helps that she's wonderfully charming, too. So the regulators like her, it's also always positive.
Michael: Yes. Yes, it does help to be nice to the regulators.
Rachel: Yes, it does.
Michael: Because they'll be a little nicer back to you.
Rachel: Right. Exactly.
Michael: Now, out of curiosity, like, what...as you're building an internship program, like, what would you have interns do? Because I think this is still a challenge in a lot of firms, just like...
Rachel: Yeah, it is.
Michael: ...what do the interns do that is productive for you and doesn't, like, create problems or get you in trouble pretty quickly?
Rachel: Yeah, more than it's worth? Absolutely. So one of the things that we do that we didn't find in a lot of firms was we actually have the interns come into the client appointments with us and take meeting notes. And they actually write the first draft of the notes that the advisor sends out to the client summarizing the meeting. So I know not every financial advisor does that, but for us, it's been really important, not only because it's a service to the clients to have a summary of the meeting, but also, it's an incredible risk management tool. If you send that to the clients and, you know, they agree that that's basically what happened in the meeting then there's a record set of what happened in the meeting. And it takes some work to produce that. So we have our interns sit in the meetings, which really gives them a sense of what it's like to be a financial advisor.
And short of doing that, there isn't a good way of introducing people to the industry and giving them a sense of whether or not they really want to do this work. And we've had it go both ways. We've had some people sit in the meetings and just feel like, "Absolutely, this is what I want to do. I've learned so much about the approach and which types of clients I'd want to work with." And then we've had other people who were wonderful interns and really thank us for the opportunity because they realized, "Oh my God, there's so many personality issues. I think it would just stress me out. I'm going to go and do something else."
Michael: Yeah. You know we did this recent study in financial advisors and personality traits of what tends to be a good fit for an advisor and have staying power. And ironically, or perhaps not, like, one of the biggest predictors we found was what the psychologists call low neuroticism. That just like, if you are someone who is very even-keeled in times of stress, financial advising world tends to go well for you. And if you tend to amplify your stress and sort of match it to the people you're around, this doesn't go well because all the emotional rollercoasters that clients go on, you end out getting stuck on them, too. It's not very pleasant.
Rachel: Oh, wow. Yeah. No, that's fascinating. And I think that's been very true for us. I was the advisor primarily meeting with clients for a long time, and as I did more of my own personal workaround basic things like feeling my feelings rather than suppressing them, those sorts of things, it really actually started to be apparent to me I was more connected with my clients. And rather than being able to do six meetings a day, if I was going to really take care of myself and do a good job with clients, I had to reduce the number of meetings that I would take per day. Yeah.
Michael: Because otherwise there's too much emotional toll, focus toll to try to do too many at once.
Rachel: Yeah, exactly. And we've been really smart and hired people where they do a great job being whole, authentic people with the clients, are able to be with their own emotions, and they are just that extroverted. For me I was...I'm extroverted, but I have my limits. And I think it was important to actually see that and hire folks, right, who didn't have the same...
Michael: Right. Interesting. And so, was that the focus of sort of interns and productivity for you is things like, "They can come into the meetings. They can do all the notes that need to get taken, anyways. They can handle all that stuff so we don't have to think about it. And then the value to the client is, like, they'll actually type them up and send it out. So it's a nice little service for the clients." Obviously, then you can literally explain to the client like, "Why is this person in the meeting?" "Oh, well, you know, Jenny is going to take notes and then send you a follow-up afterward with all the notes." "Oh, okay, that's helpful. Then Jenny can stay in the meeting."
Rachel: The clients are totally fine with it. I mean, it's really true that people react to things somewhat based on your disposition toward them. So we never really thought that there was anything strange about it. Of course, the clients would want to have the meeting notes and the summary of the meeting. That means they didn't have to take the notes. We didn't have to either. We could focus on the conversation. Yeah.
Michael: And so, if you just present to the clients like, "Here's the totally normal way we do things here. There's an intern who's new to the industry who's going to be hanging out and capturing this information and we'll send you the follow-up." Just like, "Oh, okay. I guess that's how they do it here."
Rachel: Yeah, exactly. Clients were totally fine with it. You know, there were a couple of times where clients were in a contentious divorce or something else happened where there was the potential for them to find fault with the advice that we had given just based on their own circumstances, and it was really great to have a copy of the notes. And I can tell you that the interns really digesting the information of what happened in the meeting by putting those notes together, of course, they're always cleared by the lead advisor that's in the meeting, but them just kind of going through that process means that they were not only in the meeting and could see what happened live, but they really had a chance to process it for themselves. So there's really learning and a big benefit to the client, and it's a risk management benefit to the firm. It is an investment to do that, but it's really served us and our clients well over the years.
Michael: So part of this focus on, you know, "We want to make our firm our way to do our thing" was, "Okay, if we're going to support more, you know, racial diversity in the profession then we're just going to make it happen by literally hiring for it and creating internship policies to make a pipeline so that we can live that and do it in our firm."
Rachel: Absolutely. Not only that, but when people...when our interns would express their gratitude for us having given them that opportunity, and frequently we would even find them their first job if a job wasn't available in our firm afterward, we would always say, "There's absolutely no need to pay it back. Just pay it forward. Just create an opportunity for someone else. Let someone else know that they would be good at this work."
Michael: Oh, I love that. I love that. So what else in sort of this vision of, "Well, I'm going to go out and I'm going to create my own independent firm because I just can't do things the way that I want to do them where I am?"
What Made Her Decide To Go Out On Her Own [23:10]
Rachel: So, the other piece about that is I believe that there's a culture within financial services that it's a little bit like law. We work long hours. We're paid well, but we work really long hours. And my business partner, who came along and joined me a couple of years after I started the firm, she and I have always had the same philosophy, which is, actually, I'd rather have some more support staff who, you know, I'm not only giving someone a great job and I'm creating more of the community that I want, but after a certain point, there's really actually only so much money I need in order to live a comfortable life, and I'd rather live a life that's also comfortable in terms of time. And that's something that just was never supported kind of in either the wirehouse, yeah, or maybe the more insurance-focused firms.
Michael: Interesting. So, in essence, you could say, you know, it gave you more freedom to say, "You know, part of what matters to us here is we want a certain level of work-life balance," which when you're the owner just quickly comes down to, "Well, fine then, are you going to put the money in to hire more staff in order to do that?" And the answer is like, well, it's my firm, so...
Rachel: Yeah, it's my firm. Yes, I can do that. Exactly.
Michael: ...yes, that's exactly what I want to do.
Rachel: Exactly. Precisely. So that was another thing that was pretty different about us.
An Overview Of Her Firm As It Exists Today [24:25]
Michael: And so, tell us a little bit more about the firm itself. What's the size of the firm? Who do you serve? What do you do for them? Like, give us sort of the synopsis of the firm itself at this point.
Rachel: Let's see. This week, as we know market fluctuations that happen, but we have $140 million in assets under management, and we have 8 people on staff. There are four of us who are able to give advice to clients. One of the things that we do is that our Social Justice Investing platform, which is basically an impact investing platform that we have, has its own community coordinator. So it's funny because when wholesalers come by and ask, you know, like, "How many advisors? How many support staff?" And, you know, we give them those numbers, we're like, "You know, there's another category, and the other category is our community coordinators." So we have kind of that other aspect. We have a couple of people that work just in connecting with our social justice partners and in organizing our RISE Community.
So the social justice investing that we do is through our platform called RISE, which is Return on Investment and Social Equity. And that is the industry's first ever community developed kind of bottom-up social screen. And what that means is that you have to facilitate a community coming together in order to make a social screen like that. So you have to hire staff to make that happen.
Michael: So talk to us more about this. Like, this sounds entirely different than pretty much what any other advisor I think does, of, like, I heard impact investing, kind of local investment dynamics but community coordinators, which is not a job description that exists in any other advisory firm that I'm aware of.
Rachel: Right, that's true.
Michael: So, like, can you break this down for us a little more? Like, what is this investment process thing that you have created there?
Her Journey Through Socially Responsible Investing And ESG [26:22]
Rachel: Yeah, absolutely. So I've done what we would call socially responsible investing, you know, since the firm started 15 years ago. And things were going along just fine. There were plenty of mutual funds that had screens that matched the values of our clients, and they were implementing them and doing a relatively good job. I could focus on being the financial advisor. I didn't, you know, need to directly pick and choose companies in that way for clients. And then came the Great Recession, which thankfully we survived, and on the rebound kind of from the Great Recession, what we found in 2010, 2011 is that the highest returns that were available in the industry, these rebound returns that we all needed, were from hydraulic fracturing in North America.
So these mutual funds that used to have fossil fuel screens, right, these environmental screens that would exclude, you know, oil and gas exploration and extraction, suddenly, these funds, very large funds, you know, you would see large socially responsible investment portfolios was Exxon start to appear and Halliburton, which is a defense contractor if folks aren't familiar with that. And it took us some time to figure out what in the world was going on. And we realized that this idea of best-in-class, which was kind of a fringe idea in the socially responsible world, this idea that how we're defining social responsibility isn't about an objective measure of a corporation's actions, it's actually about which company is the most socially responsible on a given sector, we realized that that fringe idea had moved to the center and it was actually spreading quite rapidly as a way to allow investment into some of those asset classes that had the returns that were needed.
Michael: So basically your concern was, SRI funds are starting to lag because they are excluding fossil fuels and some of these categories that are rebounding the best, and now it kind of looks like they're compromising their own screens so that they can get the good returners back in there because we want to be SRI-focused, but it's not very fun when your returns are getting kicked in the backside.
Rachel: And especially after the Great Recession when a lot of us were lucky to kind of, you know, make it through that in our industry. Yeah. That's exactly what was happening. And much to our dismay, there was a lot of conversation kind of in the industry zeitgeist about what eventually became ESG investing. And that's mostly what it is now. When people are referring to environmental social governance, they're really referring to this more best-in-class approach, which is taking social considerations into account, kind of social environmental governance into account when they're looking at their portfolios. But it doesn't mean that there's actually any objective screening that's happening. And so we had to be honest with our clients that, "This is what you believe that you're paying for with this fund or this SMA, but that's not actually what you're getting." And it required us to do something that was very difficult for us, which was to talk to our clients about a problem without already having a solution available. And we're just trained against that in our industry.
Michael: Yeah, don't put any issue on the table unless like, "Hey, I just discovered a thing, but it's totally fine because I already have a better solution for you. Just sign here and we'll get that taken care of."
Rachel: Exactly. We'll just get that handled right away. And that's just the way that we tend to do things. But the reality was that the indexes were being produced to track socially responsible investing, and they were using ESG criteria. And so we were like, "Wow." We were...you know, had a loud voice in the industry despite our relatively small size at that time. But, you know, for a few years we really spoke out against it and we talked to investment managers. But that really seemed that that's the way the industry was going, and we knew our clients wouldn't be okay with it. And so we had to basically break the news to our clients. We not only broke it to them one at a time, looking at their own portfolios and showing them what was in the holdings but also, we wrote newsletter articles. And so we were very out about, "Basically, you're not getting what you think you're getting."
And I have to tell you, as someone who grew up poor, black from rural Oroville, it is against all of my coding to be in a place of not knowing, and particularly when you're supposed to be advising clients. But that was actually the most honest place that I could be, and clients really appreciated it. And we went to our clients and we went to prospective clients as well, and we said, "Listen, this is what's happening in the industry. Socially responsible investing as you know it doesn't exist. Let's all take a close look at what happened and let's figure out kind of what happened and if we can find some solutions from that space."
What we realized was that it wasn't just that the investment managers weren't aligned, so it wasn't just that they didn't have the same values as the investors, even though that's a very convenient answer and would mean that we could kind of go around talking to clients about how they want to invest with an advisor that has their values, which is true, and that is helpful, but in reality, we saw that what was happening is that those who're the most affected by the issues that SRI funds were saying they were screening for had absolutely no voice in the investment decisions that were being made. So, for example, in issues of environmental justice, people from the Sierra Club, let alone the communities of color and poor communities who are impacted first and primarily by changes to our environment, they are not part of the process. The investment managers mostly are just kind of putting out the criteria that sound good to investors and that make investors feel good about their investments rather than actually making change.
And so what we in community realized was that what we're going to have to do is to bring together a community with social justice, progressive values, and in that community, we're going to have to develop the social screens because that's one of the only ways we know that there is going to actually be the intended impact, that's the only way we're going to actually support social justice movements, and at the same time, it's the only way you're going to have that natural sense of transparency and accountability that would prevent what had happened after the Great Recession from happening again. So we were actually putting out a new model for investing which we called Social Justice Investing, which is when you really put the community at the core. And it was out of not knowing, it was out of being with not knowing that that was able to arise. And I'm really thankful for our willingness to kind of be with the facts of the situation.
Michael: Interesting. And I guess ironically sort of the flip side of this is, if clients were coming to you for this particular, I guess what was SRI-style was morphing over time, when you go out to them and say, "Hey look, like, all the mutual funds that we use for this seem to be morphing in new ways and we've got some concerns and we're trying to find some alternative solutions," it's not like they have anywhere else to go because the things you were using are the...like, the things that everybody uses are the things that you were raising the concerns about that was resonating with your clients. Like, what are you going to do? Go hire another advisor who buys the same funds? It's the funds' problem. It's not your fault. Like, that's what happens when it's not your...like, it's not your funds. You're just helping clients find them. Like, "Hey, we found you some things, and other things aren't doing what we were expecting them to do, so we've got to find you some new things, which we're trying to find for you."
Rachel: Yeah. And we haven't found it yet. There was a period of about, you know, two years where I was like, "And we haven't found it yet. And we're taking great care of you." We were using conventional funds for those clients and doing the best job that we could while we were really tapping into the wisdom of community to find answers. And the interesting part about this is that the answer that emerged came out of the very community that ended up being our RISE Community. You know, the answer that emerged was, "Wow, you're getting us all together, we're talking about these things, there's so much wisdom that's coming out of this, why wouldn't it be this wisdom in and of itself that could guide an entire investment platform?"
How Her Firm Built Its Own Unique Proprietary Investment Process [34:37]
Michael: So help us understand then, like, what got created at the end? So I understand traditional socially responsible investing wasn't working or the community was moving away from it. You didn't like how the ESG world was shaping up, where the screens were a little bit too soft or a little bit too weightings-oriented and not enough just, "Hey, there are certain things we just don't want in here." So you're trying to make a new thing. So, like, what did you end out with? What are you doing now in your...
Rachel: Yeah, what do we do? What is RISE?
Michael: ...investment process? Or, like, what are you implementing? Yeah.
Rachel: Exactly. So what we do is we actually have community forums, which are in-person meetings that happen once a quarter. And currently, we have a fully developed social screen. It's 40 different screens, and it's available on our website. And those screens came directly out of what the community communicated to us mattered to them. So rather than the template, "No alcohol, tobacco, firearms in the portfolio," kind of everyone starts there and then add some more screens, instead of doing that, we actually talked to investors, prospective investors, social justice organizations, other allies, brought them together in community and said, "What do you care about?"
And so what it means is that the social screen really reflects those values. So there's no tobacco, there's no firearms, of course, but what's really interesting is that this community said, "We don't really care about alcohol. As long as they're covering their environmental screens and they aren't polluting, as long as they're being responsible about consumer impact, then you can have alcohol in the portfolio. But guess what we really do care about? Racial justice and gender equity." And those were things that we haven't traditionally had great measures for in the industry. And so, it's expanded our work even more to become part of the set of folks that's really developing what those types of screening mechanisms are now.
So what it came out of it is a robust social screen that represents the values of a social justice community. And we use that kind of community developed social screen. So all of the individuals who have accounts within RISE, they all share a social screen, but they are able to build their individual portfolios based on the asset classes that they need if they're conservative, regressive or any place in between.
Michael: Interesting. So just to make sure I understand this, like, you've got a...you construct these individual portfolios. Are you going all the way down to the individual security level? Like, you're buying individual stocks so that you can pick the ones you want to pick and not have the ones that you don't?
Rachel: Yes and no. In the end, clients do end up having individual stocks and some pooled investment vehicles on the fixed income side. So in the end, they do end up with that. But we are not traditionally active managers. We never have been. We don't believe that's what adds value.
Michael: Okay. So, like, it's not a stock-picking process, it's just, if we're going to, you know, have the traditional stocks but not include the tobacco but include the alcohol but not include the firearms but also include these companies that are strong in racial justice and gender equity issues, like just, you ain't going to build that unless you get down to the individual stock components so you can buy what you want to buy and not buy what you want to buy.
Rachel: Exactly. So we start with an index-based approach. So we take the largest index possible, we do a more of algorithmic. We prefer more algorithmic approaches to what makes a company representative of the largest companies in the U.S., for example, rather than something like the S&P 500 which chooses by committee. So we're taking these very large kind of mathematically built indexes and then we put them through a quantitative screen, which is anything that can be enumerated and screened. We work very closely with our research partners to decide how we're screening for these various different factors that our community cares about. And that's kind of the first passive screening on that index. And then we do a second set of qualitative screening on our investment committee within the firm.
Michael: So if I'm understanding, I just want to make sure I get how this comes together. So you'll start with an index or fund, you know, you'll start with sort of classic index, right? Like, "Here's a market cap-weighted portfolio," because we can start there.
Michael: Then you start running these various screens to decide what stocks might get excluded or removed. The screens themselves are things that come from this community organizing effort that you've brought together of, I guess, clients, potential clients, social justice organizations, other people whose input you want about what these screens should look like in the first place. They give you the framework for the screens, you then do the quantitative number-crunching stuff to figure out which stocks in the index survive the screens, which ones get screened out by the screens within a second layer of more qualitative like, "Okay, we're going to take a look at some of these as an investment committee as well." And you get down to some portfolio allocation that you can then implement of I guess varying risk levels. You just mix the stock bonds and balance a little. But, like, we've boiled it down to these investments based on our screens, and our screens come from this community that we built. So if you're part of that community, these are your screens. You were part of this.
Rachel: Yes, absolutely. And we build those screens by consensus, and we do a lot of work to ensure that we're really investing as a community. Because ultimately, the impact that we can make as investors is only going to happen if investors are bringing their dollars together into a community and if that community is working in coalition and a wider coalition within the industry. Because we know that dollars are what has weight and what actually moves things. And so it's a process of building community on a couple of different levels in order to actually make social change. And yes, the portfolios that you discussed are what we actually end up with. We end up building an investment universe for, you know, large, mid, small, U.S., foreign, etc., like most portfolios would have, and then we mix and match based on what the individual client needs in order to build their portfolio.
Michael: Oh, interesting. So just, like, from the component, like the portfolio building component end. So you'll take a small cap index and then run that through your screens and say, "Okay, this is our version of a small cap allocation." Then you'll run a mid-index through the screens, then you run a large, then you run an international. So you're starting with, I guess call them, you're starting with traditional asset classes and then you're carving up asset classes, taking what's left, saying, "This is our universe of stocks, now let's do..." You know, you get this much in a small-cap, this much in a mid, this much in a large, this much international, like, sort of traditional asset allocation approach, but you're only picking from the stocks in the universe that survived the screening process.
Rachel: Right. And in truth, what you're doing is you're getting a percentage of the large-cap allocation is what's happening. You're getting a small portion, yeah, of everything that's in that so that we can maximize diversification.
Michael: Okay. But there are stocks that literally come out? Like, I don't know if I'm thinking of like an S&P 100 fund, there will be some of those 100 you literally have zero allocation to, you might only own 90 or 80 or 70 of them, or you still own all 100, you just underweight some if they do badly on the screens.
Rachel: No, we actually eliminate them entirely. So our equity side portfolio ends up with, currently, it's about 400 different positions in it. So yeah, compared to what you can get in a very large market-cap-weighted index fund, that's technically a small amount. But I believe that most financial advisors would agree that 400 positions, given how rigorous our screening is, is more than sufficient for a diversification.
Michael: Yeah, you're still quite well diversified.
Rachel: Yeah, we're still doing all right.
The Tools She Uses To Build A Portfolio Of Individually Screened Stocks [42:47]
Michael: So I've got to ask then, like, how...? Well, so two things. One, like, how do you just actually do, like, stock-level screening with your own custom screens and weights? Like, what tools exist to do that? Yeah. Well, let me start there. Like, how do you just actually do that? That is some very labor-intensive sounding work.
Rachel: Yes. Well, we have wonderful investment partners that we work with. And one of the primary reasons we initially chose them is that there are lots of data sources in the industry and some of them feel more trustworthy than others. So there's some independently funded data sources about company's connection to palm oil production, for example, and that is a marker of deforestation. So you have the indexes on palm oil production and ultimately, it's giving you a lot of data about one specific factor. And then you have large things like Sustainalytics or MSCI that are gathering data about companies at a much higher level.
And what we realized would work best is pooling together all of the credible data sources, whether they were going very wide and top level or whether they were going very deep on one particular issue, that if we pooled them together and leveraged technology, then what we could create is an engine for screening. And we did that when our research partners were actually early on in their work, and they're doing a lot in fintech.
So we've created with them a very robust engine for layering the different pools of data on top of one another. And so if something, you know, gets kicked out by Morgan Stanley and Sustainalytics and, you know, they're also failing out on these other screens, if the Quakers also say you're bad then, I mean, you're really out of the portfolio. You have to get more qualitative. You know, when it's like, you know, the Quakers say you're fine but Sustainalytics isn't so happy with you, that's when you have to look closer.
Michael: So that's where that qualitative layer comes in with your investment team? It's basically like when you have to break ties because some organizations say you're failing the screen and some others say you're not failing the screen and you have to figure out how to tie-break?
Rachel: Exactly. That's exactly what we're doing.
Michael: And are these...like, the industry partners and folks that you're working with, like, is this proprietary specific to you guys and your firm? Like, if other advisors are interested in, you know, building their own very granular-level portfolios where they do their own screens, like, are these platforms available to other advisors as well?
Rachel: Yes. So we're working with Ethic Investments out of New York. They are fantastic. And other advisors can definitely take advantage of what they have to offer. The work that they do is amazing and highly customizable.
Michael: All right. So for folks who are listening, this is episode 121, so if you go to kitces.com/121, we'll put a link out to Ethic Investments for folks who want to take a look and go further. So is Ethic, like, are they the ones providing the data that you're doing the analyzing? Are they the tool that takes the data from Sustainalytics and the others so that you can actually, like, do your screens and come up with your investable universe? Is that the part that they fulfill?
Rachel: So what Ethic does is they're actually the purchasers of the data, and they aggregate the data as well. They also support us on the trading side. They don't do all of our trading but some of the aggregated trading, we have them do that for us as well.
Michael: Interesting. My next question that was going to go with this is like, so actually, building models with 400 stocks, like, how does that go? It's kind of a rather manual investment process, just the raw trading and execution. So they do some back-office work on that end as well?
Rachel: Well, right. We also use a couple of different custodians. So for custodians, and, you know, they're leveraging...the Ethic is leveraging their technological engine in order to make a lot of this happen, but in terms of how we're making it happen in smaller portfolios, we're using a custodian that does fractional shares. So we're currently with Folio. And fractional shares are pretty important for getting portfolios at smaller dollar amounts to actually be appropriately diversified.
Michael: Right. Because if you're going to do this with individual stocks and you've got 400-plus stocks, you know, even well, a $400,000 portfolio still gets down to $10,000 positions, $10,000 positions is going to break up...oh no, you're down to $1,000 positions.
Rachel: Yes. I was going to say no, no. Not $10,000, just $1,000.
Michael: Yeah. So you're down to $1,000 positions. Like, now, you know, if the stock trades at $90, like, the math just doesn't work very well. You quickly get to fractional shares
Rachel: Exactly. Very quickly you have to get there. So we actually have to work with two different custodians.
Michael: So you do Folio I guess for smaller accounts because you really have to get down to fractional shares. And then for larger accounts, where do they go? Is that something that Ethic handle directly?
Rachel: We're at Schwab. And it really is a partnership that we formed with Ethic. I think that probably what they created and what we created, we were kind of launching our platforms at the same time and worked together on this.
Michael: Okay. So, like, shout-out to Schwab that they were willing to work with you guys to put all this stuff together?
Rachel: Yes, big shout-out to Schwab. So yeah. And they've been very supportive from the beginning. I think advisors are used to hearing about turnkey asset management programs and those types of things where someone will do your trading and, you know, all the back-office work. And that's not exactly what Ethic does. What Ethic does is kind of the parts of what a TAMP would do, kind of the parts of that that are just too heavy of a lift for financial advisors who don't have data scientists and systems for large trading volumes. So they're actually able to, in a more granular way, trade the portfolios. It's at our direction and with our oversight for sure. And it's certainly not something that you can just hand over to a group like that, but we wouldn't actually be able to accomplish what we do without them for sure.
Michael: Well, yeah, I'm just imagining, otherwise some poor soul is just going through, like, 400 individual stocks, "Let's make sure, you know, we're doing these block trades. Let's make sure the allocations go smoothly." That's a whole lot of stuff to verify and reconcile. And, you know, you can get trade errors pretty quickly when at that level. I know people that have trade errors with 13 ETFs in their portfolio, so 400 individual stocks can get you in trouble if you just have some slip-ups. So I get it on that end.
Rachel: And it's better just to outsource that than to hire in-house. Because, you know, we really...if we're outsourcing for that, we really can work with the data scientists on their team. You know, we can work with the traders, we can work with lots of different folks who come together to help us put the portfolio in place, and we don't have to hire a full staff person kind of in any of those positions in order to make it happen. So it's well worth the cost.
Michael: So take us back for a moment to, like, the core offering of the firm itself. So I'm presuming then, this becomes the center of your investment process and offering to clients? Like, "If you invest with us, we do this particular kind of," you called it Social Justice Investing. "Let me tell you what that means. We do these screens. Our community contributes to them. If you invest with us, like, you can become part of that community and you will have input for the screens." And is that kind of the pitch and the process? Is that what it looks like?
Rachel: Well, you did a pretty good job with the pitch. I would say that even if you don't invest with us, you can still become part of the community. And that was actually really important to the community from the beginning, was that it's not just a community of investors, it's actually a community of investors and non-investors, those that we actually attempt to impact with the change that we're trying to make. So that means social justice organizations, activists, allies, those folks too. So you can be a part of the RISE Community even without investing.
Michael: Okay. Although I would imagine there's at least a subset that...it's nothing like being in the community for a while and being in a community and say, "I actually want Rachel to do my investing stuff." Yes, I'm sure there's a little bit of getting some buy-in along the way.
How Her Approach To Marketing And The Way That She Communicates With Clients Has Changed Over The Years [51:15]
Rachel: It has. What's really great is that we don't spend money on marketing and advertising anymore. We spend money on taking care of the RISE Community because they are the ones who are actually setting the social screen, making change through investing. And doing that and kind of walking your talk, it's the best advertisement you could ever have. And so, yeah, that's where we spend the money and that's where we get most of our new clients as well.
Michael: Interesting. Because at some point there's community of people engaged around a passion of seeing their dollars invested a certain way and not attracting other people who have those same beliefs. And if the other people have the same beliefs, like, "Gee, I know someone who can actually help you implement that. Come to the RISE meeting."
Rachel: Exactly. Yeah. You know what's really great about coming to a RISE meeting, too, is that it gives us something that we're all hungry for, which is community. I mean, there's a lot of us that don't want to be on our own, and especially people who are investors or who are interested in investing, frequently, they want to be involved with what's happening. And if they have social justice values, they want their investments to reflect that, but they don't want to be in the nitty-gritty of sifting through companies and their sustainability reports and crunching the data, they do want to be at the level of having a conversation about how we are going to support the Me Too movement, for example, and, you know, what's their cost and what's the benefit to us of doing that? And, you know, how as investing community can we actually leverage the power of money to make the world a better place? That's where people want to be involved and where they can be involved.
Rachel: Yeah, we do the other stuff. We do the hard stuff.
Michael: So talk to us a little bit more about marketing and where clients come from. You know, as you said, you've built up to this $140 million threshold over the past 15 years, which is fantastic growth for any advisory firm, much less, you know, folks that start out at age 25 who frankly don't have the best success rate because that's tough getting started. Like, talk to us about just marketing and where the clients came from and maybe even how that evolved. Because it sounds like what you're doing now is not quite necessarily what you did in marketing early on.
Rachel: Right. It's generally the same community though. I mean, I think that there's a lot of financial advisors who were told early on, "You should be involved in your community. You should, you know, do various types of community service." But what I found was that I was so tired with the work that I was doing that there's no way I was going to go, for me anyway, and join the Rotary. What I really cared about was the work at the intersections of, particularly when I started out, gender justice, racial justice, and LGBTQ rights. And so working with the various organizations I worked with was actually something that fed my heart and that I found to be kind of nourishing and sustaining rather than another thing I was doing in order to find clients. And in the end, I just can't emphasize enough how it never would have worked for me to be engaged as a generous participant to the world. That never could have happened outside of only wanting to get clients. It really had to come from something that I was passionate about and fed me.
And I think people can feel that and know that you share their values. And people are attracted to that. And I think that that's where you develop real relationships and where you're going to actually have the most fun working with clients. And those relationships that are the most rewarding are the clients that refer other clients to you. And so for a long time I thought that I had to do things I didn't want to do in order to grow and to have a successful business, and it's turned out to be exactly the opposite from that. The things that I've done because I felt that I had to and that were a drudgery are actually the things that zapped the most energy. And I probably didn't excel at either. I probably wasn't the best board member for an organization whose cause I didn't believe in. But when I really fervently believed in something and it was passionate and close to my heart, that was something that could be felt and absolutely had an impact on growing our client base. That's where we did find our clients.
Michael: I love that framing and, like, that transition that you point out. That early on, there's all this stuff we do because we feel like it's what we need to do. I need to show up a certain way. Maybe I need to dress a certain way. I need to try to communicate a certain way. I need to look a certain way. And I've got this image in my head of what professionalism looks like. I've got to do that and do the things that professionally people do because that's how I check the box to try to show up being credible. And I think there's maybe even more pressure on us when we're doing that...when we're starting young and we're starting in our 20s and trying to get the trust of people that have been saving money longer than we've potentially been alive.
Rachel: It's true.
Michael: And then at some point with some level of experience, to me, there's just this shift that happens where, I don't know, like, I feel like some people get there aspirationally or through success. Some people get there just because they're fed up with the other way of, "I'm just tired of putting on a face about trying to be a certain way in front of people when it's not really me. I'm just going to show up and be me because I don't have time and energy to do anything else."
And then lo and behold, like, you get engaged and passionate around the things you're actually engaged and passionate about and often it ends out bringing in clients even more effectively anyways. Because as you said, when you're trying to fake it and put on the face, you usually don't believe it. You don't tend to come out with a lot of energy. You don't excel at it. Usually, at least some clients can kind of see through it anyways or prospects who then become clients see through it anyway. And yeah, there's just this relief that happens when like, "I'm just going to be me and the people who like me can like me, and the people who don't, that's okay because there's a lot of people."
Rachel: Exactly. There's a lot of people in the world. And you know that it turned out to be the same thing about which clients we took on and kept for a while. And I think very early on it is true, you don't have as much of a choice. If someone's willing to trust you with their money that they've been saving for longer than you've been alive then, you do your best job for them, and whether or not you have personality conflicts or don't.
Michael: They have money and can fog a mirror at the prospect.
Rachel: Exactly. So I think that very early on that does happen, but early in the process, once you're not just kind of at that initial survival level around building a practice, I think that similarly, if you're inspired and joyful about working with clients, then you're not going home at the end of your day exhausted. You're actually jazzed and fired up and you actually can go out to the event that'll end up being great networking for you. So the other thing that we started doing was just evaluating our client relationships annually to see who are the clients that really feel like...where we feel like those are our clients and they feel like, "I've found my people?" And when that's happening then the relationship itself is something that creates more energy and more aliveness, which creates more referrals and better goodwill in the community. Those are just, you know, things that happen when you take good care of people.
So we were paying attention to and really feeding those relationships and having conversations with people where we felt like, you know, the relationships weren't working out. And I remember the first time that we let some clients go, we ended up letting go of 25% of our client base. I was terrified, but we were all exhausted at the firm. We were exhausted. We really didn't like, probably, you know, one in every four clients that we had. And that year, I believe that year what we ended up letting go of was about $11 million. But we really had faith that the service we were going to be able to deliver to the clients that remained was actually going to spur growth. And that next year we brought in an additional $15 million in assets. So it was true, it worked out, but we actually ended up with, you know, half again as many clients as we had lost.
Michael: So talk to me a little bit more about just what you did and how you got to this point. I get the whole, "Hey, we've got some clients that we don't really think are the best fit for us." Most firms, once you've been around a while, you've got a few, you're like, "They're a pain in the backside," or just you know they're not a great fit or you just outright dread every time they're going to call you. But I feel like for most firms, like, "Yeah, we totally need to start addressing that, so, like, we're going to eliminate two or three clients a year and then five years from now we'll have most of them gone." You nuked 25% of your client base all at once.
Rachel: Yes, we did. Well, some other things were happening. Some health challenges were coming up for me and my business partner. And while those are challenging and no one ever wants to have those, they can be very enlightening. And so, we didn't really have a choice. You know, the place that we were at, we were tired, we were exhausted and we both needed more spaciousness to kind of take care of what was coming up for us in our personal lives. So, we were like, "If we're going to do this, you know, we have to have really engaged staff that are happy with their work. And it's not happening with these particular clients in the practice." And so it was out of desperation.
Michael: Interesting. So you were having capacity issues anyways, "I've got some health issues. I'm going to have to spend a little less time. We just can't support all these people and we need our staff to step up. So if we're going to ask our staff to step up, we can't serve as many anyways. Let's make the list and...
Rachel: Let's just do it.
Michael: ...whoever is at the bottom of the list ain't going to survive the cut.
Rachel: Oh, I have to tell you. And it was like going through a high school breakup over and over and over again.
Michael: I was going to say, how did you actually break that news? Like, that's a lot of people to break up with?
Rachel: Yes. So we had calls with people and we also sent out letters. And so the clients that would never get back to us when we needed something from them that...
Michael: They got back a little more promptly when they found out they were getting fired?
Rachel: Right. Yeah. Once they got the letter, yeah, then they knew that their relationship was ending and they did get back to us. But I have to tell you, all the things that you go through with a breakup in a romantic sense are exactly what you go through with clients. And the reason why I say it was kind of like a high school breakup is because it's really in those early relationships that once you break up with someone and that person throws a fit and you're like, "Wow, it was a really good choice that I broke up with you." That's exactly what happens with clients.
Michael: Always feels better after the fact. I find, unfortunately, it's the same thing when you have a bad fit employee and it's always so scary to let them go and move on. And most firms I know that have done that, eventually it still doesn't work out and the person gets let go. And then as soon as they do, it's like, "Oh my God, I should've done this sooner." All the problems that were happening suddenly comes forward. Everybody is so much happier. The rest of the team is like, "Oh, I don't know why you didn't get rid of them sooner. They were driving me nuts." Like, "Oh, okay, yeah. I probably should have done this a while ago."
Rachel: But for those listeners that are thinking of nuking 25% of their practice, just know that all the things you didn't like those particular clients for me come out when you're trying to...
Michael: Yeah, if they're unpleasant people and you tell them you're firing them, it probably doesn't increase the pleasantness of an otherwise unpleasant client.
Rachel: Exactly. Exactly.
Michael: So I suppose ironically, that kind of expedites the process?
Rachel: It does.
Michael: "You know, I really wasn't sure whether I wanted to let you go as the client, but now that I'm breaking the news to you and you're reacting this way, I feel really good about, just don't let the door hit you on the way out."
Rachel: Exactly. So that happened, too. Yeah, absolutely.
Michael: Interesting. And so, as you look at the firm now, like, where does it go from here?
Rachel's Plans Going Forward For Her Firm [1:03:16]
Rachel: You know, what we're realizing is that clients hired us early on because we took great care of them. And we're never going to stop taking great care of the clients in our practice. What we realized is that if we're actually going to go out and build coalitions and change corporate behavior, have impact in that particular way with the funds that we've been entrusted with, we actually have to have the time and space to do that. And one-on-one meetings with clients with all those meeting notes that I've told you about, they take up a lot of time and space. And for some clients, that's absolutely needed. And for the clients that that's needed, we want to continue providing those services.
But we realized that most of our clients got the vast majority of their benefits through the education that we provided them, and that ultimately, what we could do to create more time and space for ourselves to kind of move forward with RISE and with investing in a better world was to find a way to deliver that education to people in groups, which is why looking forward, we're doing more community-based education, because at the lower asset levels, that's actually the primary benefit of a financial advisor is that this stuff really isn't taught in school. And yes, you're having a one-on-one relationship, but primarily what that person is is a tutor. Well, tutors are expensive and classes are a lot more affordable on both sides.
And so what we've been doing is more and more community-based education and really making sure that we do that one-on-one financial consulting. We've really reserved that for the times when you need someone who understands the intricacies of the five trusts, right, from which you derive your income. So, we're doing the financial consulting on the very high complexity cases, and we're offering a lot more education to the people that are investing with us where that's the primary benefit to them.
Michael: And so, does that get...does that mean essentially you end out with sort of two tiers of services for clients? "If you simply want to invest with us and participate in this RISE process because you're excited to have your dollars invested that way, you know, here's our minimums and what we do and what we charge. And then if you've got a more complex situation and you meet a certain income or net worth requirement, then we'll do the whole comprehensive planning process for you and you can engage us that way if that's a fit."
Rachel: Right. Exactly.
Michael: And so where do you set the dividing lines then? Is it purely, you know, "Here's our planning fee. If you want to pay this because you think you're complex enough, that's great?" Or do you just say it like, you know, "If you've got a half a million dollars, we'll do the financial plans for you. If you're below that, we're happy to help you invest through our RISE program and we'll do some educational programs for you as well, but, like, financial planning is not available for you?"
Rachel: Well, financial Planning is extremely labor-intensive. And I don't think clients ever really understand how labor-intensive it is for us. We charged hourly for a long time. For those of us who were charging hourly, you almost never are charging for the full amount of time because the market just won't bear the actual cost. Right? It takes very intelligent people a lot of time to do a conventional financial plan or to have that type of kind of relationship with a client. And so for us in the San Francisco Bay Area where rents and wages are very high, if clients have more than $1 million under management with us then we're definitely able to do the financial consulting work. We found is that clients who have over $3 million tend to be the ones who have the most complex needs and really need more of that kind of service, but if clients have over $1 million, that's the point at which we can actually afford to do that work.
Michael: Do you charge them separately at that point or you just say, "Look, if you meet $1 million minimum, we will do whatever comprehensive financial planning work you need because you met our minimum so the economics work for you?"
Rachel: That's the way that it's working now. But up until recently, we charged hourly if you had under $1 million. And that's one of the reasons I was really saying that I'm not sure clients understand what the true cost is. Because I think that we gave clients the impression that they were covering the full cost of delivering those services to them by charging them on an hourly basis for the time that we would actually meet with them when in fact there's no way that they're paying us on hourly basis could really cover the entire cost of doing the financial planning.
Michael: Because you've got plan analysis and meeting prep and you weren't necessarily charging them for the back-office work, you were only charging them for the client-facing meeting time?
Rachel: Exactly. Because most clients wouldn't engage in a relationship and they don't... we also as advisors don't want to have the relationship with our clients that lawyers have, where clients...yeah. You know, yelling when they get the bill. So I think a lot of financial advisors have a hard time selling to clients, you know, billing them for time that's not directly client-facing. And so I think when we started out, that's kind of what the market would bear. That was the way to offset the cost of delivering planning services. But what we realized is that for every one hour of meeting time, we spent six hours preparing for and following up from those meetings.
Michael: Yeah. It's like, either you've got to have clients have enough of a pain point that, you know, you're like, "Look, I know we're going to meet for an hour, but, like, this is going to be 6 hours of total work, so, like, I'm going to bill you $1,200, $200 an hour. I know we're only going to meet for an hour, but I've got to do all this other work to get through the analysis for you." And either they'll take you up on it or they don't.
Rachel: Well, that was what the idea was in the past, but truly, you can't find clients. I think we had the hardest time in the $500,000 to $1 million range, where people believed that their financial situation is complex enough that they want the one-on-one advice, but at the same time, you actually just aren't earning enough on the accounts to pay for the true cost of delivering those services. And so we actually just stopped delivering services on an hourly basis. And for our actual asset minimum is $50,000.
Michael: That's for RISE basically.
Rachel: That's for RISE. Yes, specifically. And that's just functional so that the platform works and you get an appropriate allocation.
Michael: Well, yeah, I mean, even there, like, now it becomes all the more clear why you need to be able to handle fractional shares. Like, you get $50,000 accounts that are investing in a 400 individual securities, like, you need cost-effective trading and fractional shares because their average investment position is barely more than 100 bucks. So it's $125 per position. So...
Michael: ...you can't even have a single whole share of a lot of stocks.
Rachel: Right. No, you're mostly getting, yeah, you're almost entirely getting the fractional shares. And that was important to our community, to make sure that the investors as part of the RISE Community were not just the ultra-wealthy, that we had investors at all different levels. But we can't actually deliver financial planning services to all those clients. So we had to be very thoughtful about saying, "We want to deliver the personalized one-on-one service to the people that need it and where we can truly afford to do that. And we don't want to leave the clients where we aren't earning enough in the lurch. We actually want to make sure that we're taking care of them as well."
And what we realized is that the vast majority of the benefit that they were receiving was an education. So we're providing them with education, and more and more, we're providing them with tools that allow them to do some of their own planning as well, which clients really enjoy being able to kind of, you know, play endless what-if scenarios if they're up in the middle of the night worrying about it. So more and more, we're leaning in that direction and toward classes and toward the things that actually add value for the client rather than just assuming that the financial planning relationship is the only one that's workable.
Rachel: And it wasn't actually scalable in the end for the type...if we're truly investing in alignment with our values and wanting to have real impact, we aren't able to do that. That's a lot of work that we aren't able to do if our resources are dedicated to, you know, doing one-on-one work with every client.
Michael: All right. And so, you mentioned, you know, just trying to give clients access to portals and tools. Are you using one of the financial planning software tools and just, like, giving them access directly to start trying it out?
Rachel: We are. So for some of our clients, we're using MoneyGuidePro. We've just started, so I'll have to get back to you with a review of how that's going. But one of the reasons that we chose them is that they were paying attention to the client's experience, kind of like that user's experience as well as the advisor's experience with the software so that it was helping clients to enter data in a way that was not overwhelming for them but giving the advisor tools on our side to kind of process that data. And rather than locking down certain features, where we're starting is really giving the client the full ability to kind of play with the various tools that are there so that, you know, if they do have assets that are less than what they would need to have the one-on-one relationship, they still are able to get some of those financial planning questions answered. And the vast majority of what they're benefiting from education is still available to them in the entire RISE Community.
Michael: Interesting. Interesting. And so, as you look forward here, I guess it's really this combination of, "We'll continue to gather dollars into RISE for our less affluent clients and then we'll continue to do the more high-net-worth, call it traditional financial planning stuff for the more affluent clients." And you build in those channels kind of in parallel?
Rachel: Well, yes. But here's what's interesting. For us, it's not necessarily particularly about how high net wealth they are, it's really more so about who needs the one-on-one work. Because there are clients where you can ask them to enter, you know...the software can ask them what their income is and they can look at their W-2 or their paycheck and enter it, and there are other clients where asking them that question is almost impossible for the client themselves to decipher because it's coming in, you know, from two trusts and a REIT and then this other LLC. And they actually need help with the data entry itself because their situation is so complex.
So we don't have certain asset levels where we're just giving clients, you know, the handheld service. If a client can get answers and education from what we're already offering and they have $15 million, that's great. That works, too. But where the clients need the one-on-one work is where we want to meet them. So we're still wanting to take excellent care of our clients at the point that we can afford to do, though we're just trying to find the best fit for them. You know, are we kind of giving them the tools, the education and the technology that they need to get some of their own questions answered or do they actually need our help in that process? And it really is just ultimately based on their life circumstances.
Rachel’s Path Into The Financial Services Industry [1:14:22]
Michael: Interesting. Interesting. And so, help me understand just the pathway to the industry for you. You know, I think you had mentioned you said, "I grew up poor and black and, you know, not in an environment that was focused on financial planning." So, tell us a little bit more about just that background and where you came from and then how you actually end out in a world of doing financial planning, right? Because, you know, we're an industry that struggles so much with a lack of diversity, both gender diversity and racial diversity. Like, what was the path that you followed and are there lessons we can draw from that about how to expand diversity in the industry?
Rachel: Well, I think that what was... So I grew up in a very segregated area. Of course, segregation was not legal but still, all the black people lived on the south side of town in Oroville and had, you know, suffered from police violence and many of the other things that happen to the black community and poor communities, other communities of color. So growing up in that particular way and with all the trauma that was attendant to that upbringing, I really had a desire to have a life that was different from that. And every time I would ask questions about why something was different for some other kid or why when we were driving through this other part of town, you know, they had sidewalks and things looked different, frequently the answers came down to money. And so money was something I just started to pay a lot of attention to when I was very young. Thankfully, I wasn't afraid of numbers. I wasn't a math genius, but I wasn't afraid of numbers. And I focused in school on learning as much as I could.
What's interesting is that school teaches you some things about money. I got a degree that's partially in economics, but in the end, I actually realized that the kind of information that I was going to need about how money works, the only way for me to get it was to actually work in the industry that offered advice in that area. Because economics deals with kind of abstract concepts and doesn't really deal with personal finance in the same way. There wasn't the kind of CFP programs that we have now when I was starting out, and other financial literacy when I was starting out 20 years ago.
Michael: So it was sort of a very direct like, "I've got my degree in economics but I'm still not learning the level of stuff I want to learn about personal finance and household money, so I'm just going to go in the money business and figure it out?"
Rachel: Yeah, basically. Exactly. And I was like, "Hey, I can help myself, and I can probably help some other people along the way" is where I was coming from with that. And I have to say, in our industry, I think that people talk about money as a success story. That doesn't look at some of the inherent advantages I was born with. I was born as a very light-skinned black person with what are more traditionally white facial features and curly hair, curly long hair. And so there's a way in which it's a lot easier for people in the white community to interact with me than it may be for them to interact with one of my cousins growing up. I also was a child of two very mentally ill parents who were schizophrenics, but one of the things that can happen is that you can get really smart children. And so I came out with almost genius-level intelligence.
And what's interesting is that when I start to kind of tell the backstory of that, rather than it looking like this rags to riches kind of success story, you start to get a picture of what the kind of unreasonable number of advantages had to be in place for me to go from being in rural poverty to owning a successful investment management business. And it's pretty ridiculous. Like I had to...you know, I had to be born very, very fortunate in order to make that happen. So a lot of times when people ask me, you know, "Oh, how did this happen?" More and more I talk about how many advantages that I was born with and how grateful I am for having been born with those advantages that made navigating life easier. I don't believe that those are advantages that people should have to have in order to have their basic needs met. That's the part that I don't want to get lost in the conversation. Yeah.
Michael: So talk to us about how this translated when you actually got to the industry itself. You had mentioned earlier of, you know, ultimately winning, you know, financial planner of the year, you know, for strong numbers, for strong production at MetLife, which at that point you're 23 or 24 years old as a black female in a very, very white male, older industry. So, what on earth were you doing that you found such momentum in just getting clients and being successful in the MetLife environment so young out of the gate? Like, what was working for you?
Rachel: Well, I think that I spent so much time trying not to be what I had grown up as, poor, black, and rural. So I think that for a long time, well before I started in the industry, I had been studying how to be more like the dominant wealthy culture that I was a part of. And I have to tell you, I wasn't particularly happy the first few years in the business because I hadn't been happy kind of in high school and college. I hadn't been particularly happy because I thought to myself, you know, "I have to be something that I'm not in order to not have the life that all of my family members around me were having." And it's unfortunate, but it's true that the drive that comes from fear is a very real drive and a lot older now.
And as I reflect back on my early career, I'm glad that I had as much fear as I had kind of the...I didn't have a safety net. So having this not work out was a much worse fate than it would be for someone who could actually go and move back in with their family. My family, you know, was already living with me. And so not really having failure as an option is both a huge motivator and incredibly sad, but that's what it takes. Yeah. So it was actually a lot of fear of going back to where I had started, and being determined that that's not where things were going to be for me and my family. So it just means I worked longer hours and did more to be what I thought clients would want. And, you know, in the end, I think it means, it's what it comes down to is I worked longer hours. I worked harder. I did more than other people did, but I sacrificed a lot of life along the way. And there are ways in which I can see that now. And one of the reasons why I'm so focused on social change is that I actually want a world where we don't have to give up our lives in order to live one where our needs are met.
Michael: I'm struck by this comment that you made around, you felt like you had to be something that you're not to avoid the life that you grew up around. I don't know, just, like, talk to us more about that. I think it's a...I don't know, it's a challenge I've heard from some other people who are coming into the industry from, or just even broadly say, you know, different backgrounds than the traditional industry and the challenge that that creates of, "This is not my world, but I have to be successful in this world to make it as a financial advisor." Can you talk to us more about what that transition was like and I guess how you look at it relative to now since it sounds like you don't feel the same way now that you did then?
Rachel: Yeah, I don't feel the same way now. Well, let's see. I didn't always speak this way. You know, I sounded like a lot more of the black people that you know, and I was proud of that fact. The fact that I had learned not to speak in a way that could identify me as black on the phone so that when I was calling people and talking to clients, I wasn't bringing up kind of internalized bias. That even though that wasn't in the common kind of language that was being used, I knew it was there because I lived with it. So, you know, it was a constant vigilance around which words I used. It was paying attention to what the markers of success and wealth were and really spending money and time when I didn't really have it kind of putting those markers on myself so that I would look like I belong.
Because in the end, people with money want to know that someone has some experience with money and will take good care of them. And in reality, you need someone smart. You don't need someone, you know, who is as wealthy or wealthier than you are. You need someone smart, and you need someone that you can trust. And I think that in the end, that's kind of what I learned and what I was able to talk to clients about as I started to shed some of that. But for me, it was really a journey into seeing all of the ways in which everything that is black culture specifically and everything that is not middle to wealthy kind of culture is seen as lesser. And so, I mean, I shed everything. I shed the way I spoke, the foods I ate, the way I did my hair. There were so many things that I let go of that I look back on now and I actually think it's really sad.
Like for a long time, I convinced all of my sisters when they had children to get them Anglicized names, you know. Because I didn't want them to have the more creative names that black people had given their children because I thought it would identify them as black and they wouldn't get called for an interview if that was on their resume. That was accurate, but I have a sadness now because not only was I dealing with an accurate social phenomenon, I was also myself looking down on that. And I was looking down on creative names like Beyoncé. And what's really funny is that now that Beyoncé is the most...you know, like, the most popular singer that exists, there's nothing odd or lesser about her name. But that wasn't something at that point in my life that I could see.
And so it wasn't just that I was behaving inside of a certain social construct, I was believing it. And that's the part that I still have healing from. You know, how can I see myself and deal with the social constructs that are around me? How can I be successful in a system and not completely adopt its worldview? And it's not a perfect process. It's a process of seeing where I'm stepping out of, what's true and real for me. So that takes a while. That takes a while and it takes attention. Meditation helps a lot.
Michael: So then I...like, I have to ask, you know, do you regret that that was the path you took to get to success? Like, do you think you could have made it work another way or is that this horrible reality that right now, at least, that is what has to be done to succeed in the industry if you're coming from a, I want to call it, like, any kind of non-traditional background for our industry, which is still predominantly white, predominantly male, predominantly affluent?
Rachel: No, I don't think I could have done it any other way. And when I started out, it was me and other minority groups that supported me. And the consciousness around the racial wealth divide in this country is real. And it's something that you can see. You know, the statistics are right there and easy kind of for anyone to see. And more and more, it's not just people of color and it's not just women, actually, it's white people. It's men who are advocating for women's issues, right? It's the white people who are saying, "No, no, when things are organized this way, it's bad for me too. It's not just bad, I'm not just pitying people of color, like when, when things are unfairly, when resources are unfairly allocated in this way, it's bad for me too. My life is not as good."
And so now I think you can actually go to some firms in the industry where that's understood and where pathways are created for people who don't have the traditional background. And our firm is one of those. And there are others in the industry. But when I started out, there wasn't anyone. If there were going to be doors that were open and glass ceilings that were shattered, I was going to be the one to do it. So no, I feel like I did what I had to do. And what there is also for me to do now is healing and a reintegration, right, of myself. And one of the things that really brings joy to my heart is when I see the men working on women's issues and, you know, white people working to really lift up the voices of people of color, because that's actually when change happens, is when the people who are disadvantaged aren't the only ones who are working to change it. And I'm seeing that now.
How The Industry Can Do Better In Dealing With Diversity Issues [1:27:51]
Michael: So what does it take at this point then for the industry to do better on its diversity issues? Like, I mean, you've mentioned firms that are trying to create more supportive environments. You mentioned, you know, being involved in communities of other minority advisors. Like, is that what we need to be doing more of in the industry? Like, where do you see I guess either the positive steps forward or at least where we should be trying to put more focus and resources?
Rachel: I believe that there are two things that make a huge difference, one of which is going into communities that, you know, are not where you would traditionally find applicants and kind of bringing them into financial services. Like, you can make a good living and you can help people here. That's a good job. That's something that you actually want to offer to other people. So going out and finding people and telling them that they would be good at this work and supporting them through learning how to do it. But that's a commitment that goes beyond just good hiring. That's a commitment that goes to creating a pipeline for people in the industry who haven't been traditionally represented here.
The other thing is that people feel more welcome when they see themselves reflected. And so our kind of traditional, you know, you get to a position of power because you've kind of slowly and truly worked your way up in there, you have all of the experience that's required, we need to kind of change our models for how we're choosing the people that we put into positions of power. Because if you want more diversity in your organization, the number one way you're going to get that is by putting more diverse people in positions of power because other people of color, other women, other career people are going to see that and say, "Oh, they actually get it. They're willing to actually put, you know, people like me in positions of power. There really is a pathway for me there."
And that, because of the...just because of the pure advantages of people in the dominant groups, that in and of itself, they will always be at a greater advantage to be the CEO, to be the CIO, etc. of a firm. But if you're looking based on abilities and character traits when you're looking to promote and you're really taking into consideration the diversity of your firm, in some ways you might be taking a risk by ensuring that you have some people of color if they don't necessarily have exactly the same experience as those in the dominant group, but in a lot of ways you're not. Chances are they're going to have to...they've already had a life of having to work a lot harder for everything, you know, that they've accomplished. And so I think it just requires us taking a different look at like what are the factors we consider for who we put in power?
Michael: So, as you look back over the firm, having built now for, it's almost 15 years, what surprised you the most about just the process and what it takes to build an advisory firm?
Rachel: I thought that fear would go away, and it doesn't, it just morphs. And so they've been different forms. I'm not afraid of making a living or, you know, I'm not afraid that my firm will go out of business. But what's really interesting is that, before I went out on my own, I was like, "Oh, payroll. I don't even know how that works." I was afraid of payroll. You know, I was afraid of what the....independent broker-dealer is what? Like, I didn't understand what that meant. There were so many things I didn't know and that I was afraid of. And now they're entirely different things. Like, you know, we have this big campaign in the summer where we're doing...you know, the investment community is coming together with social justice organizations and consumer activists and employee groups to end forced arbitration for sexual harassment claims. You know, if we don't do everything that we can in that practice then we'll fall flat on our face and it will look really bad.
So it's really interesting that, like, the fear is still there that comes from taking risks. It just takes on different forms. And I think really being able to, like, be with the fear as it's arising and work with what it might be illuminating for you that you need more information about, that's probably been the most surprising. I definitely assumed that at a certain point the fear would go away, but it doesn't.
Michael: Interesting. And what's the adapted coping mechanism now having dealt with the fear for an extended period of time?
Rachel: Oh. Well, rather than seeing it as paralyzing or crippling or interacting with it that way, I've been like, "Oh, this is something that's coming up that's letting me know there's something to pay attention to here. What is there to pay attention to? What can I do about it? What can I not do about it?" And it's really somewhat like the serenity prayer that's in those recovery programs where it's like, you know, "Grant me the serenity to change the things I cannot change." Yeah. Wow, not to change the things I can't change. But it's kind of like the serenity prayer that you want to change what you can and leave what you can't and be wise enough to know the difference. So, in the end, it's working with fear and letting it be an illuminator rather than something that overwhelms.
Michael: So what was the low point for you in the journey?
Rachel: Oh, probably February, March of 2009 when basically it seemed like the financial world was ending. And we had just expanded our firm and got some more space, and we had hired some more people. And we saw, like, our assets under management drop by double digits in a single day. I wasn't sure what was going to happen next. And I was worried that I was going to...I was worried that people whose livelihoods depended on our being in business were not going to have jobs. So that was definitely the low point. That was the low point for me.
Michael: Oh, interesting. So that's not just about clients losing assets, that's also your team whose livelihoods depend on the business...
Rachel: Absolutely. Absolutely.
Michael: ...have their jobs at risk.
Rachel: Because in a certain sense, the clients, we gave lots of education to clients and they had taken on that risk, and employees haven't necessarily in a certain way taken on that risk. They're depending on you to get a steady paycheck. And so yeah, I was worried about that. Thankfully, we made it through and no one got laid off. So yeah, thankfully, we made it through. My business partner, I was fortunate enough that she has a family that was able to help us out with a small loan to kind of get through that period of time just to make sure that we could keep paying ourselves. Because we had enough to pay the staff but not ourselves. And I was very...it was hard for me to accept help, and it was absolutely necessary if we were going to stay in business. So yeah, that was a low point. But the funny thing about those low points, about the hard things that happen to us in life, is that they soften us up. They make us more empathetic people. So yeah, it's a little bit easier for me to ask for help than it was then.
Michael: Yeah, there was a session I still remember, God, I don't know, it was, like, some NAPFA National Conference probably 10 to 15 years ago, but it still sticks in my head. It was, I don't know, some inspirational speaker, another, I want to say it was, like, an athlete, who had, you know, had a lot of personal difficulties that she'd overcome.
And the thing that stuck in my head was she had the statement that, you know, the reason why a lot of people fail is that they don't make themselves helpable. Sort of this acknowledgment that, look, we all hit challenges from time to time, we all have difficulties, the people who sort of wall off and insist that they've got to do their own thing their own way are the ones that often struggle the most. Because the truth is that, you know, almost no one does it entirely on their own. We all get help in various ways at various times. And so her takeaway message at the end was if you really want to be more successful, be more helpable. Just be more open and willing to be helped in the first place so that when the speed bumps come, at least you'll be ready to take them.
Rachel: Absolutely. And I would add, make yourself easy to help. So being more helpable, you have to be open to it, to begin with, but, you know, make yourself easier to help. I give this advice to people who are starting out in the industry and they're like, you know, "Will you write me a letter of recommendation?" And I, you know, send it back to them and say, you know, "Sit down and write out for me what you would hope that I would write." You know, and it's always a lesson. And if you're willing to ask for help, make it easy for the other person to help you. I can tell you, in 2009 when we were in the middle of the financial crisis, I was the one writing out the promissory note to the family that was giving us a loan. I was not going to ask them to do that as well.
Michael: Right. Good point. Right. Like, you know, "If you're going to lend us the money and otherwise get through this, I'll figure out how we're supposed to structure this so it's appropriate. Like, I don't need you to spot me on that part as well."
Rachel: So I think that it's both make yourself helpable, but I think that there's a balance there. You know, be open to being helped, but also, like, help other people give you the help that you need. And that includes feedback, too. Some of the most helpful contributions people have made to my career and my life have been when they've given me feedback. And the times that I've been defensive, it's taken me much longer to learn those lessons, and then I've had to ruffle back through my mind, "Oh, somebody tried to tell me that five years ago." One of the ways I make myself easier to help is by assuming that when someone has critical feedback for me, that even if they aren't delivering it perfectly, there's probably something in there for me to learn. So, you know, it comes in lots of ways making yourself easier to help. So sometimes you write a promissory note, other times you choose not to be defensive when someone is giving you feedback
Advice For Young Advisors Coming Into The Industry Today [1:38:14]
Michael: I love it. I love it. So, you know, you've actually offered a couple of good tips in here along the way of, you know, if you want a letter of recommendation, like, just make the draft for them and tell them they can modify it if they want. Make it easier for them to write the letter of recommendation. But, you know, letters of recommendation aside, like, other advice you would give for younger advisors looking to become financial planners today or maybe, in particular, you know, women or people of color that are trying to figure out like, "How do I come into this industry? What's my pathway?"
Rachel: Yes. I think that the independent world is a better route, and you're not going to find as many job postings, but just reaching out and getting to know the women and the people of color who are at independent financial firms. Usually, independent firms don't have as much of the ingrained kind of traditional structure of the industry in them as getting a job at one of the larger firms. And so, you know, it's more likely that you're going to find more inroads there. But they don't have, you know, the big...they don't have the big application engine and kind of job seeking map for you. You have to really just create those relationships. Check out where they are on social media, follow them. You know, support events that they're doing. Get to know them. Develop that network and really go someplace that gets it, right? Go someplace that really understands that you can't have a traditional firm and expect to have non-traditional clients. Go somewhere that, you know, has really learned the lessons for what it takes and is willing to put people of color and women in positions of power.
Michael: So what I heard is, if you want to work at Rachel's firm, first you cyberstalk her on Twitter, then you just start showing up at RISE Community meetings and you will find your job opportunity.
Rachel: This has happened. Let me say this has actually happened.
Michael: I believe it. I believe it.
Rachel: Yeah. Yeah. It works. So be proactive for sure. For sure. And it's a welcoming industry in that way. Like, the folks who are the subset of the independent advisory space, we're pretty welcoming. So we don't make it hard to do.
Michael: Yeah, there is a piece there that I love around and just, be proactive and don't be afraid to be proactive. Like, I know for a lot of people, like, that's just scary, and reaching out to strangers is scary. And then what if you reach out and they say no? It's like, that's kind of our world when you're trying to get clients anyways. Like, that's just for us how the world works. You're going to have to go through a certain number of nos to hopefully get to a couple of yeses. But, you know, while not every advisor will, you know, happily give their time and their energy and such because you email them out of the blue and ask, you know, the truth for I think particularly, well, any advisor who's actually built their own practice, like, we've all been there in that part where it's so hard to reach out to strangers and ask them for something, whether it's help in your career or doing business with them. And there really is sort of, I find, a certain level of just respect that you end out getting if you're willing to make that outreach...
Rachel: It's true. It takes a lot.
Michael: ...to an advisor. Like, we know how hard that is. It doesn't mean you're always going to get our time and attention, but, like, we know how hard that is. So if we're looking at all, your willingness to do that and make that outreach and, you know, be reasonably polite and tactful while basically saying, "I want to insert myself in your life and take some of your time to learn from you," whatever it is you're going to ask from them, like, there actually is a positive respect that comes from that. I think it's unique in our industry over a lot of others because just, we've all been in that realm of getting beat up trying to find prospects who will respond to our inquiries. And so, you know, anyone who's willing to do that I think tends to get a little bit of extra attention.
Rachel: Yeah, we have a lot of empathy. We've been told no a lot.
Michael: Yes, having been beat up the same way.
Rachel: Yes, exactly. That's true.
Rachel’s Definition Of Success [1:42:22]
Michael: So as we wrap up, you know, this is a podcast about success, and one of the themes that always comes up is, you know, even the word "success" means different things to different people. And so, you're building this firm that I think anyone would objectively call successful. You've grown assets. You've gone 15 years. You've got a team of 8. So, like the business is doing well and you're iterating from there. But at a personal level, how do you define success for yourself at this point?
Rachel: You know, at this point, success has really expanded to mean a lot more than my own success. It's really expanded to mean everyone at our firm having work and lives that they feel like...that they feel good about. And, you know, really, I want everyone to feel like they have work that supports overall the lives that they want to have. And we want our clients to feel the same way. And so, you know, people have been talking about work-life balance for a long time. I think one of the easiest ways to achieve work-life balance is when you do work that you actually deeply care about because then it naturally becomes a part of your life and it's not always a tradeoff.
So really for us, success is finding our people out there that really...you know, the clients that want to work with our firm and the people that want to come and work with our firm on the employee side. And in the end, like, kind of at the end of our lives, it's the relationships that we have that are going to matter most. And the people that we spend all of those hours with at work, those people are our family too. And so having good relationships with them and having work really support the rest of your life. Those are the things that I think ultimately mean success.
Michael: Well, and I love that theme that you've mentioned a few times of just, you know, the relationships we form with the people we work with. You know, we often end out spending more time with them than our own families in many cases. So, you know, find people you actually enjoy working with and try to do work that is meaningful to you to do with them, and it's kind of powerful what happens at that point.
Rachel: It is. It's the secret sauce because none of us really has enough energy to spend all day with people we don't like doing things that we hate. I don't think anyone actually has enough energy for that. It is the secret sauce, those two things.
Michael: Well said. Well said. Well, thank you, Rachel Robasciotti, for joining us on the "Financial Advisor Success" podcast.
Rachel: Thank you for having me, Michael. I appreciate it.
Bill Holliday, CFP says
Nice interview. Nice to hear Sustainable, Responsible, Impact Investing addressed (a bit). There are three components to SRI – screening, shareholder advocacy and community investing. Screening has no impact – it’s nice not to hold certain companies but quietly avoiding a company does not impact that company.
If you get a group of investors together and they quietly sell their Wells Fargo stock, Wells Fargo doesn’t care – someone else is buying those shares from them.
Shareholder advocacy and community investing do have an impact.
I did not hear Rachel discuss either of these. I hope they are engaging with companies. Many funds and investors will hold shares of companies that they want to engage with and influence. I’m not clear what her issue is with SRI funds – there is a pretty big variety out there now. We also use Folio – through First Affirmative to hold individual companies for picky clients. However, the big impact of First Affirmative is not the stocks they hold it’s the shareholder engagement they do.