4Xing To $200M AUM In 4 Years While Staying Lean By Leveraging AI, Technology, And Outsourcing All You Can Let Go Of: #FASuccess Ep 499 With Ryan Townsley

Podcast Player:

Resources Featured In This Episode:

• Ryan Townsley: LinkedIn
• Town Capital Down Market Plan – Download (docx)
• Town Capital LLC
• #FA Success Ep 285: Fast-Tracking Growth As A Career Changer With A High-Touch Service To Your Prior Profession, With Ryan Townsley
• #FA Success Ep 479: Maintaining Good Work/Life Balance While Adding Advisors And 4X'ing The Firm To $315M: #FASuccess Ep 479 With Andy Panko
• "Buy Back Your Time" by Dan Martell
• CyberSecure RIA
• Synergy Compliance
• GeoWealth
• Income Lab
• RightCapital
• Holistiplan
• Black Diamond
• Claude AI
• RISA
• Nitrogen
• TaxStatus
• Kwanti
• Hubly
• Loom
• Zocks
• TPCP [Tax Planning Certified Professional]
• CPWA [Certified Private Wealth Advisor]
• RICP [Retirement Income Certified Professional]
• EA [Enrolled Agent]

Full Transcript:

Michael: Welcome, Ryan Townsley, to the "Financial Advisor Success" podcast.

Ryan: Thank you so much, Michael. It's really good to be back. I'm so excited.

Michael: I'm excited to have you here, really, back with us, as you note. You were with us 4 years ago, episode 285. So kitces.com/285 for anyone who wants to go back in and listen to the prior. But when you joined us then, you were having this incredible, fast growth start out of the firm. You'd been going for just a few years. You were already at 50 million of assets in barely 4 years. And so, now, we get to fast forward four more years. It's not 50 million, it's 200 million. It's still just you, some support team around you, but you're the sole advisor. And I'm really excited today just to talk about what it really actually takes to scale up as a solo advisor while you're staying lean.

I feel like the challenge is, for the advice business, at the end of the day, it's a service business. For every X dollars of revenue, you have to provide services to earn that revenue, and you need people to do the work to deliver the services. Which is why when we run a lot of our benchmarking studies and research on the Kitces platform, we regularly find revenue per employee is remarkably consistent regardless almost of size. If I just take gross revenue and I divide by how many total people are on the team, it's amazingly consistent at $2 million of revenue, $10 million of revenue, and $30 million of revenue. Wildly different sizes. And basically, for everyone, it's $300,000 of revenue per employee, plus or minus a little when you're smaller. It expands a little to $400,000 of revenue per employee when you're larger as roles specialize. Which basically means all firms eventually hire to expand service capacity, because the tech only goes so far.

Before, as an advisor, you just run out of time to do things for clients. So a lot of firms top out at $500,000 or $700,000 of revenue for a lead advisor. A lot of IBDs top out at $300,000 to $500,000 before they hit their wall. "Good, productive firms" might get to $1 million of revenue per advisor. And then, every now and then, I see someone that's just much higher, a million and a half of revenue, closing in on $2 million of revenue, often with literally 1 or 2 people in staff support. And then margins get extraordinary. The businesses are incredibly remunerative. And the key all becomes, how really do you leverage yourself to create that much capacity and not be constrained by the inevitable constraints of time? Because we all get the same number of hours in the day.

So, Ryan, I'm really excited to talk to you because you have done this over the past 4 years in getting up to a practice that's now closing in on $2 million of revenue without needing to add other advisors, just a little bit of support team behind you and tech and systems and process and all the cool things. So I'm excited just to hear, what really is it that lets you become such an efficient solo advisor and keep the productivity so high?

Ryan: Absolutely. I'm really excited to share. I think maybe an advantage was that I never really worked anywhere else, so I didn't know that these constraints existed. So maybe kind of developed this all organically and didn't feel like maybe there were any preconceived barriers or anything to hold you back. And I'm really excited to share the journey. The first couple of years when we talked last were amazing, but these last four have just been incredible, and I've learned a ton.

What Town Capital Looks Like Today [06:01]

Michael: So I think, in that vein, just to set the table for us, tell us about the advisory firm as it exists today, just so we can kind of get a snapshot image of what you do, who you serve, and just sort of the assets, clients, revenue, team numbers so we can get oriented here.

Ryan: Absolutely. So as you mentioned, about $200 million in revenue and still pretty steady climb on that. Even to our own, we hold ourselves back. And I'll kind of get into that later about the implementation of a waiting list and some other things. So all of that organic growth, we don't advertise, don't market, anything like that. We'll talk about that too. But $200 million in AUM, closing in about $2 million of revenue, about 155 households. It's just me as the advisor, but we did just make our first full-time hire about a month ago, which I'm excited to talk about. And as you know, our specialty, our niche is nuclear power plant employees. And I still think, to this day, we're the only firm who exclusively focuses on nuclear power plant employees, although we do have our clients that are outside of that industry, and that'll be fun to dive into as well.

Michael: And I do love this about your firm, Ryan. I always have for all the people. If I'm going after a niche, do I really have to put it on the homepage? How far do you go in? And just for folks who are listening, Ryan's firm is Town Capital LLC. You can go to towncapitalllc.com. The homepage is a drone aerial view of a nuclear power plant. We are really unambiguous here. Right there out of the gate, "Yes, this is for nuclear power plant professionals." And in case, for some reason, you don't recognize it's a nuclear power plant, the label, the text right below the nuclear power plant says, "The only financial planning firm in the world created exclusively for nuclear power plant professionals." So we are all in here on who we're going after. This is no beating around the bush.

Ryan: We weren't going for subtlety with it.

Michael: No subtlety here for it. So that's helpful for framing. So $200 million of assets, closing in on $2 million of revenue. So it sounds like just "traditional," roughly 1% of assets, business model, 155 client households. And so team is you and a full-time person you just hired. So, what does that person do?

Ryan: Yeah. So the full-time hire was a graduate of the financial planning program at Towson University. Relatively new program. I've gotten pretty involved in it. And it's actually where I've been doing, being an adjunct professor. One night a week, I teach at Towson University. It's been an amazing experience. And we met at the...they have a wealth management competition, and we were fortunate enough to be invited and be sponsors. So we went, and we were judges. Different people, different advisors are the judges, and so you didn't get to meet or see everybody's presentation.

But when I saw their presentation, it was absolutely incredible. And they didn't win the competition, but they very well could have. They won it out of everybody that I've watched. And so we talked afterwards and made them an offer to come be, basically, a financial planner. So I wouldn't call it a paraplanner because she's really doing so much more than that, so building financial plans and learning the process and learning the intricacies of all of the nuclear pensions and medical benefits and things like that. So she's doing an amazing job.

Michael: So, does she also do the more admin-oriented task work that shows up in advisory firms as well? So, by the time you get to this many clients, there's scheduling and meetings and deposits and trades and transfers. There's just a certain amount of administrative paperwork-y things. So, is she doing that as well, or do you handle that in other ways?

Ryan: Actually, honestly, I still handle a lot of that, and probably a lot of advisors out there are cringing, "What are you doing to yourself? Why are you still doing that?" But I have found that tech solutions have really lightened that burden significantly. So we don't do a ton of ACATs because the vast majority of our assets come from 401(k)s and pensions. And I just find that most people's assets are tied in those two things. And my knowledge of that and my involvement in that process, helping people get that pension figured out and the paperwork and transfer and everything, is my value add. So I haven't really given that up just because.

I will say this very proudly, there is no one on the planet that knows the Constellation Energy benefit system better than me. And I don't say that about...I know that sounds a little pretentious, and I would never say that about something, but there isn't. By this point, I've made thousands of phone calls there. I've done hundreds of pension transfers. I know it inside and out. So I've kept that. But as far as scheduling, Calendly, meeting prep, Zocks. I want to talk about Zocks. What a tool. Trading, GeoWealth, right? We've implemented these solutions that have lightened that burden significantly. So I don't find myself doing a lot of admin work.

Michael: Interesting. Interesting. And so, for you, because you've been able to get so efficient with the tech, the first bottleneck to growth didn't really become the admin task work. It became, I sort of think of, the associate advisor support worker, gather the data, build the plans, do the analyses, prep the plans for clients, be able to support on the "more basic" financial planning issues so I can really focus on the most intricate pension benefits, issues, and help me learn to support me on those. It's that end of, I guess, I think, the knowledge work more than the pure task work.

Ryan: Absolutely, 100%. The bottleneck absolutely was building financial plans and entering holdings into different software, which is really...even that has evolved into AI capture of statements and things like that, right? But it was that piece of work, where it was the retirement, the investments, the tax planning piece of it, and mostly the data entry and thought behind that, that really was the bottleneck. I never found the admin to be...the investments, absolutely, became a bottleneck at one point, but we solved that. And so did IT, and so did compliance, and we solved that as well. So, yeah, the last piece to really free up capacity and let me do what I do best was to hire an associate planner, a financial planner, and I stand behind that decision 100%. It's working out very well.

Outsourcing To Solve IT And Compliance 'Bottlenecks' [12:37]

Michael: So it sounds like before you hit those bottlenecks, there were some...you said investments, IT, compliance. And you solved those. So, how did you solve those to get to the point that you needed to solve the associate advisor?

Ryan: First was to recognize...and I think this is very important for advisors, especially solos, when you're first starting out, you will do everything to start out with, most likely, because you have no revenue. So it's really hard to justify spending any money on anything. You have plenty of time. And that's where I found myself in the beginning, was I have all this time. I can figure this out. I built the website. I still haven't had anybody professionally redo it, which I probably should. I built this. I did all the things because you have a ton of time and you just don't have any clients. But then you find yourself later in the game with enough revenue to justify paying someone else to do it. You just have to really give it up, right?

So we were doing all of our investments, IT, compliance, everything in-house. And when I say in-house, it was me. And not particularly doing any of it efficiently. I think I was doing it well, but not efficiently. There was a big difference. So the IT part of it, we outsourced that. We went with...it's actually a recommendation from your podcast that I heard on an episode with Andy Panko. It was CyberSecureRIA. They took a huge burden off us for IT. We went with, same episode, Synergy Compliance for our compliance needs, which was an amazing decision. Do it again in a heartbeat. And for the investments, that was all being done in-house.

And I realized that, okay, it's not my job to figure out the investments. It's my job to make sure that the investments, number one, we choose really good managers. We choose really good software. It's my job to know the client and know what's best for them, and maybe to construct the portfolio in a manner that makes sense for them, but the individual pieces of it and actually doing the trading can absolutely be somebody else, and should be from an efficiency standpoint and from just time well spent. So we went with GeoWealth. And GeoWealth, for the way that we do, especially retirement portfolios, has been a game changer.

Managing Portfolios And Retirement Income Plans For Highly Analytical Clients [14:43]

Michael: So I want to understand a little bit more of each of these. Let me start with GeoWealth because we're right here. So, what makes a game changer on models?

Ryan: Absolutely. I would say we're still constructing the portfolio, but we're not necessarily constructing the internal pieces of it. So I still make the decisions of, and we do a lot of time segmentation portfolios because I think that that is the best way. You might call it buckets. I like to call it time segmentation. That's the best way to build a retirement portfolio, in my opinion.

Michael: So this is some version of, "We've got short-term dollars. It's in cash for a couple of years. We've got medium-term dollars. This is years four through ten of your retirement spending. We'll build a bond ladder for that. And then we've got a long-term bucket for everything that, by definition, you won't need for ten years because we've got the short-term cash in the bond ladder." It's that kind of structure.

Ryan: Correct. But I think we take it a little…just because of the nature of our clients being very precise and very analytical.

Michael: Literally nuclear engineers.

Ryan: Literally, right? So if you think of it, an average engineer is analytical. A nuclear engineer takes that to a level that you wouldn't even understand, right? And I do want to talk about that because it's...and I mean that as a compliment, right, because that's how I know them.

Michael: So, how does it work? What does your nuclear engineer level of time segmentation retirement portfolios look like?

Ryan: Sure. So number one, it's all based on the cash flows from the portfolio. So we use Income Lab. Income Lab is a great tool for retirement distribution phases. It's unique. I don't think there's anything else like it. And we've been using it for...I think we started using it right before the last podcast, so it's been four to five years by now. So I would call us a power user at this point. And we'll build their plan. And once we have a really good idea of what the plan looks like and we're getting closer to actual retirement and implementation, and at the time when rollovers and pension rollovers and things start happening, we take the actual cash flows from Income Lab. "So, this year, you're spending this. This year, you're spending this. This year, you're spending this." And we'll pick a segmentation for each one of those.

So we're not just bucketing the first three years in cash, bucketing the next four to five years in a different…we actually will buy an individual, either CD, Treasury, a STRIP (Separate Trading of Registered Interest and Principal of Securities), a TIP (Treasury Inflation-Protected Security), anything, even maybe on the longer end, depending on how many years of down market we want to cover, maybe a structured note that has principal protection or something like that. So it's actually individual. So that way, from a precision standpoint, the client can even look in and see, "This slice of the pie is for this year of retirement." And that really resonates with our clients.

Michael: So, if I'm a 60-something-year-old retiree with a 30-year time horizon, do I literally end up with 30 tranches?

Ryan: No, not at all. The way we like to...

Michael: How far does this go? Okay.

Ryan: Yeah, it goes... The tranches are more for...and this is how we like to frame it, and it's really been kind of the genesis of just getting away from starting investment conversations with risk tolerance and really more about, "How many years of a down market would you like to be able to sustain? What type of event would you like to be able to get through and not have to potentially touch your equity while it's down? Is it an average bear market? Is it an average recession? Is it a 2008? Is it the Great Depression?" Because we can look back and say, "Here's how much…" based on your cash flows, right?

And this is why, in my opinion, building retirement portfolios have to be custom. And I could be wrong, and there's a lot of different schools of thought, but the way we do it is they're matched to that client's cash flow. So one client covering five years of down market, their segments or tranches or slices of the pie may be very different than another client because it's all based on their actual cash flows, right? So the way we like to frame it is, how many years do we want to go through and not have to potentially touch our equity while it's down?

Michael: Okay. And then, by definition, the rest now goes in equities?

Ryan: Correct.

Michael: It's sort of their A and one minus A kind of allocation. So if I say I'm worried about three years, then I'm going to end out with three years of cash flows of whatever amounts I need and whatever combination of treasury, CDs, STRIPS, etc. And dot, dot, dot, the rest is in equities. If I say I need five years, then I've got five years of a ladder before I get to the rest is in equities. Am I thinking about that right now?

Ryan: Absolutely. Or equities or other types of risk assets, right? There may be some commodities. There may be some gold. There may be...but yes, the predictable part of the portfolio is the part that's in the tranches. And, I'll call it, the less predictable, at least in the short term, right, more predictable over the long term, would be your equity/commodity/precious metals or whatever we have in that tranche at the time.

Michael: So, just thinking generically, when a lot of clients spend 3% to 5% in any particular year, depending on quite how aggressive their withdrawal rate is in the beginning, these actually aren't huge fixed income buckets then, are they? This feels like a lot of people might actually end up with not much more than 15% to 25% in "fixed income." Extremely fixed because you're literally tying cash flows year by year, but only that portion to cover the five years' worth, and then the rest rolls out to equities.

Ryan: It can be. With Income Lab and with our philosophy of "Enjoy your retirement in the early years," I'm very passionate about front-loading and doing the things in the early years. Because I've seen...and, Michael, this was a huge learning. I thought, when I got into this business and I was starting to help people build retirement plans, that I would have trouble, or the biggest challenge would be trying to get people to spend less money. And it could not be more opposite. The vast majority of my time is trying to get people to spend more money, trying to get them to take the trip, do the thing with the grandkids, buy the place down the beach, do the things. It just so happens that, and this makes sense, it's the nature of our clientele, that they happen to be more conservative. They tend to be, right? I don't want to generalize.

Michael: Well, you spend 30 years where your entire career is making sure there's not a literal nuclear meltdown.

Ryan: Yes. Yes.

Michael: You are highly trained to avoid catastrophic risks and be conservative. I get it, for your clientele, that just feels very wired into who you probably are and how you probably approach it to make that your lifelong career.

Ryan: One hundred percent. And I'm wired the same way. And is it the chicken or the egg, right? Do people who are more conservative gravitate towards that career, or do you become more conservative because you're in that career? I'm not sure. I think it might be a little bit both.

Michael: Fair. Probably a little bit of each. I'm going to assume the maverick cowboy, do things new and different in every way, also has some culture challenges when they show up at the nuclear power plant.

Ryan: Yeah, they don't last long.

Michael: Oh, why would we do that process? We can just kind of wing the process. I'm sure it'll be fine.

Ryan: Absolutely. So the interesting thing is trying to get people to spend money. So, honestly, based on the size of their nest egg, they lean towards spending less. But when I'm able to show them they can...

Michael: But you try to push them to spend more.

Ryan: Right. And I try to push them to spend more and show them, "Okay, if you're willing to set some guard rails in place to protect yourself and you're willing to build a portfolio that literally has X number of years of down-market protection. So we don't know if the next event in the market, if your portfolio is going to be enough to cover that, but we know it's enough to cover at least this portion of it." And that predictability is really important. And funny thing is, Michael, these portfolios don't usually end up looking very different from if we built them in a total return type of fashion.

Michael: That's always been my fascination with a lot of the bucketing, time segmentation strategies. You get to the end, and they're usually still moderate growth portfolios or even slightly more aggressive, depending on how long-term you make the safety buckets or not. But people do…you have that conversation with the client. It's a totally different conversation with the client. I can show you your 60-40, and then market volatility happens, and people get nervous. And I can show you, "Here's literally ten years of cash that you can spend dollar for dollar before you ever need to touch your money." And people are, like, "Oh, I'm totally fine." It's the same 40% allocation in bonds with 60% in stocks. But, wow, you think about it differently when I say ten years of cash.

Ryan: It's a psychological tool, and it works. And it's good for the client, and it's good for the advisor. And in my opinion, you can see the stress and the anxiety leave their body when we have this conversation. We have a pretty unique portfolio building. We don't really do an IPS [Investment Policy Statement] per se, not in the traditional way. We have a collaborative portfolio building meeting that kind of stands as the IPS, and then we produce a document that comes out of there. So it's just a very different process, and I think maybe some are doing it. But, yeah, their allocations end up being very similar. I think where it introduces some unique opportunities is the way that you can do drawdowns on that portion of the portfolio and rebalancing.

Michael: I was going to say you're triggering my retirement nerd curiosity here.

Ryan: I'm obsessed with it. I love this topic.

Michael: So I get the initial construction now. So help us understand, how does this play out over time? A year passes. You spend one year's worth of the set fixed bucket. Markets did things, up or down, depending on whatever's going on. I get to the end of the year. I'm no longer in sync to whatever the original structure was because a year has rolled through. So, what do you do at the end of the year, or maybe even during the year? How does this get monitored, maintained? Does it play out over time? And you do or do not rebalance or replenish buckets or do the things.

Ryan: So, as with everything else at this company, what was ingrained in me for 19 years is we have a procedure for this, and we get to a particular time in the year where we'll take a look. So imagine this retired client is spending from their first bucket, and we get to the end, and then we evaluate, "Where's their portfolio? Where's the market? Is there enough growth to justify shaving some of that off and replenishing that bucket, or is the market flat or down? And should we just move to bucket two?" So it may...in a down or sideways market, it's almost like the portfolio becomes in a rising equity glide path, because at that point, we're not going to touch the equity, and we're just going to kind of spend down those buckets' portions and naturally rise in equity due to spending them down.

Michael: Okay. So you actually will handle, I guess, the replenishment process more dynamically. If up, sell off growth to replace. If down, let the equities ride, just keep spending the fixed for another year. And while equities are down, you start taking one-year chunks out of a three- to five-year down market guard. You're probably actually, net, going to end up with higher equity allocations as you go because you're still spending down the fixed faster than the equities may decline. So you're building equities as the market's down to capture the rebound.

Ryan: Absolutely.

Michael: Am I thinking about that flow right?

Ryan: Absolutely. That's exactly what happens. And then, as markets do, typically, you may spend a couple of years into that, and then you get a big rebound, and you have a big opportunity to rebalance and replenish and reset those next slices of the pie for the next downturn, right? It's more of a manual process, although GeoWealth has absolutely taken a big part of the burden off of that.

Michael: And, right, because then I'm just imagining, now, I've got to do this across 155 clients that are each on their own mini version of a glide path. I guess, if the market's down, the market's probably pretty much down for everyone. And if it's up, it's up for everyone. So I'm assuming, if you're doing a replenish, it's probably for almost everyone. If you're not doing a replenish, you're probably not doing it for almost everyone. But the actual trade, how much into what is 155 unique transactions?

Ryan: Absolutely. Absolutely. And it might be...it's a bit inefficient, but the value that it brings to the client, knowing that this is all happening…imagine yourself, and this is what I've learned about retirement, it is an interesting psychological journey, right? And I've seen a whole range of emotions, helping, I think, about 80, 90 people, at this point, retire from nuclear power. You work for decades, and you train yourself to save and accumulate and to, I don't want to say, ignore market downturns, but look at them as, "Well, I'm still contributing, and I have time on my side," and all these other things. And then, one day, you're just supposed to flip the switch, and you're no longer a saver. You're a spender, and you're no longer a worker. You're at home, and you're not setting an alarm clock, and you're not doing all these things anymore. And the range of emotions that that brings is fascinating.

Now, what I'll tell you is there's a 100% success rate in people ending up very happy, very happy, "Why didn't I do this sooner? This is amazing," whatever. But the first couple of weeks of retirement, it's almost been described as almost like a mourning feeling to me, a bit of a PTSD, like something's missing, right? And it's just the transition of all of these things at once. "I'm no longer working." There's a social aspect. There's the, "What am I contributing to society? Oh, my God, I just retired, and the market dropped 10%. What am I going to do?" You mix all these things together, and it's a really wild psychological journey.

Michael: So because of that, is there a typical for...when you set up this conversation, how bad of a downturn would you want to withstand, or how many years of spending do you want to have available? What do they typically choose? As you've done this systematically with a lot of clients over time, is it mostly three years? Is it mostly five years? Do people pick longer numbers or different downturn protections? What do they actually end up doing when you take them through this conversation?

Ryan: I would say, if we did a bell curve, the wild majority, one standard deviation, would fall around 5.8. So in between five and six years, that just seems to be the sweet spot. There's some that choose three. In fact, I'm very uncomfortable going any lower than that because 3, for some reason, tends to equate to about 75% equity. And I'm not really comfortable going beyond eight or nine because that just seems maybe a little bit excessive. Although, if that's what the client really wants, we just make sure we educate and say, "Okay, this is what...these are the potential consequences." But 5.8 years is the average that I've come up with.

Michael: Okay. And so, can you talk us through, I guess, just a little bit more mechanically, how do you do this? You start with, "We ran a plan in Income Lab." They're doing some spending that's higher in the early years. So, are we literally down to export report from Income Lab, drop into spreadsheets, apply formulas? How do you do this on a repeatable basis across lots of clients?

Ryan: Yeah, it started as an Excel spreadsheet. It's developed into, I call it, maybe a homegrown proprietary pool facilitated by Claude, which just makes it a bit easier to do it more efficiently and with a little more speed. But, yeah, it started as an Excel spreadsheet. Take the cash flows from Income Lab, put them in, count on some level of dividends and interest and yield coming from the portfolio, figure out what each slice needs to look like, implement those slices, usually individually, buying, like I said, bonds or STRIPS or TIPS or whatever, and then the remaining be in equity. And implementing that all at GeoWealth in, because GeoWealth is really good at doing segmentation.

That's the whole point of it, right? It's a UMA [Unified Managed Account] building platform. So I can have my year one fund be one sleeve in their portfolio, and I can choose. I want all of my distributions just to come from that sleeve. I don't want it rebalanced. I don't want this. I do or do not want this. So you can choose kind of how you want each sleeve to be treated.

Michael: So I was going to say, what's the GeoWealth part? So that's the GeoWealth part. You're using UMA sleeves as your bucket tranches. So there's a sleeve for year one, a sleeve for year two, a sleeve for year three, a sleeve for year four, a sleeve for year five, and then sleeve six is the equities beyond. Or do you even sleeve it further?

Ryan: Well, so year one is its own thing because that's the one that we're taking distributions from. So that's the one where we'll set up in GeoWealth to have automatic cash raises every month to raise their funds. So their distributions can go out. And then year two through whatever, two through six or whatever they chose, end up in another sleeve because we're not really touching those. So there's nothing really to rebalance or do because they're so specific. They're so tailored to the actual cash flow. And then you've got the rest of the sleeve, which typically is a combination of...

Here's my investment philosophy, right? I tell clients, "We will keep it simple if you want us to, but we can get complicated if you want to." So we prefer to keep it simple, pretty simple ETF portfolios for the portion that is equities and risk. Although if the client is really passionate about having some type of SMA [Separately Managed Account] or owning some type of alternative, we have all those options, right? So if a client wants that and it's still going to be a good portfolio, and it's still going to get them to the finish line, and we can replace a large-cap growth ETF with a large-cap growth SMA, and it's going to cost them no more money because we pay for that, then why not? So simple if we can, complicated if they want.

Creating A "Slush Fund" To Support Retired Clients' Spending [32:57]

Michael: Okay. So now, in a sense, you end up with basically three sleeves, year one, the middle years, and the long-term equity sleeve bucket.

Ryan: Maybe. But sometimes there's more sleeves. And this was a learning from...when I first started building retirement plans, it was very rigid. It was very, very specific. And you can see why, right? Because me and my clients, all nuclear engineers, we want everything calculated down to the cent, not the dollar, down to the cent. And I just realized that, if you do that, life doesn't end up like that. So what I would have is I would make a plan and come up with this portfolio and everything like that. And then an unexpected expense would come up that maybe the client hadn't budgeted for because they weren't nearly as used to budgeting as they were when they were working.

Michael: "I'm sorry, this is not the year your roof is supposed to be repaired. So you're just going to have to wait on that."

Ryan: And in fact, because our portfolio is so rigid, we're going to have to wait six years to do this. We can't do that. So I introduced to everyone, it's a requirement, "If you're a client here and we're building your retirement plan, we are going to build a slush fund in your portfolio, in your plan," right? And it is a particular amount of money, and it's a little bit different for everybody. It has a lot to do with potential things that may be coming up, like roofs, if they know about it, and spending habits. And we'll dig really deep into what they want to do, gifting for the kids, all these things, and come up with a particular amount of money that is removed from the equation. It's taken out of the calculations that can determine how much they can spend per month, what their guardrails are, what portfolio we build.

And that's going to be a separate thing that, at any time during their retirement, they can reach into and pull a particular amount of money out, realizing that there would be tax consequences and things like that if they pull large portions out. We talk about that. But it's a cookie jar. It's a place where they can pull money that's not going to affect their month-to-month pay. And that flexibility has just been a very good value-add to clients and us, quite likewise.

Michael: This is my working day's equivalent of an emergency fund, but we're calling it a slush fund because I don't quite have to do it for emergencies, since it could be gratuitous gifts to the kids.

Ryan: Sure. Gifts to the kids, big trips that you want to take the whole family, '67 Camaro, whatever you want it to be. And we're very honest. It's whatever you want it to be, with a caveat, and here's something very important to understand. It could very well be a one-time use, meaning...and I'm not talking about you can only pull from it once. If you have $100,000 in your slush fund, you could pull $10,000 this year and $5,000 next year. But if you spend it down to zero and the market is not considerably higher than where we planned it to be, meaning there's not a massive excess that we've just been very fortunate to get, which is pure luck, then we may not be able to replenish it. So make sure you use it accordingly.

Michael: I do. I am liking the early model Camaro. That sounded pretty cool.

Ryan: Absolutely. I use that example because that's what I would do.

Michael: So, what does this often add up to? I don't know if it's a dollar amount or a percentage. Does this end up being 2% or 3% of a sizable client's portfolio? Is this like, "No, this could be 10% of their assets in slush fund?"

Ryan: If it were up near 10%, we'd probably start to get a little uncomfortable. The most common I see is around 5%. That seems to be the sweet spot.

Michael: Okay. And I'm assuming, because this needs to, by definition, be available for an emergency, as it were, this is cash, bonds kind of stuff. This is a separate fixed income kind of sleeve.

Ryan: We go through that with the client, and it's a little more individual. It has a lot to do with their personality. We actually use a tool for this. It's called a RISA, Retirement Income Style Awareness survey. And the funny thing is it's very similar in the way it asks questions and the redundancy of the questions as the site test that you have to take as a nuclear power plant employee. So it just makes it a very fun conversation where they take it and they're like, "Hey, that reminds me of something." I'm like, "Of course, it does." Because the site test at a nuke plant asks you the same thing, but in different ways, to try to identify if you're changing your mind or not, right?

So this RISA is very similar. And it's not only a tool to figure out the slush fund. It goes a little more into portfolio construction, right? It will identify if this person would gravitate more towards a time segmented portfolio or a total return. It dives into questions about legacy and whether we should build gifting, whether it be advanced or inheritance, into the plan. It goes a lot. So it's an amazing tool that allows us to customize every single plan. Plan first, then the resulting portfolio. Because we never say the portfolio is never the main show. It's a vehicle that's going to help us get to the destination, but it is never the main event, right? So the plan comes first, and the portfolio is going to help us achieve it.

Michael: Okay. And then, ultimately, this all gets implemented with and through GeoWealth.

Ryan: Correct.

Michael: So I'm trying to visualize, who does what at the end of the day? Do you still have to pick the securities to fill all the different buckets and sleeves? Do you still have to hit the proverbial trade button to execute trades and rebalance? Or is any of that done on the GeoWealth side? Who does what?

Ryan: Depending on how you set up that portfolio, they'll do as little or as much as you want, which really appeals to me.

Michael: What do you do? In practice, what do you keep? What do you give them?

Ryan: Yeah, yeah. So the fixed income portion is typically traded at the custodian, because very rarely that any GeoWealth or any type of platform does fixed income. And that's pretty easy. We're just picking. We have kind of a formula. For the short end, we'll pick Treasuries. The longer end, we may go TIPS, structured notes. They get traded at the custodian. We're looking for something that matures near the end of the year. So it becomes cash for the January after that, right? And then it gets moved into the now bucket sleeve. But then after that could be just grabbing an equity sleeve, we typically use BlackRock, but with anything that's available, grabbing an equity sleeve to fill the rest of that. And they'll trade that, right? So because the bulk of their money is IRA, Roth IRA, most, 95% of their funds are qualified. There's very little concern about tax ramifications or anything like that, right? So we do put that portion on auto-trade.

Michael: And I guess, likewise, when you start talking about how to do these sleeves and the allocations and rolling through all of the "how am I balancing this between the taxable accounts and the IRAs," and such isn't really a thing for you either because the answer is, "Well, it's basically all IRA money."

Ryan: For the most part. Now, we do have some clients that have some pretty sizable taxable accounts, and we'll typically utilize those first so we can make room for Roth conversions and do some pretty aggressive Roth conversion stuff in the beginning. I am very passionate about Roth conversions. I love them for multiple reasons. So everybody's going to get an opportunity to talk about and do some Roth conversions, but if you have some brokerage, especially cash, it really opens up some opportunities in the beginning of retirement.

Michael: So then, can I ask? What do you pay? How do the economics work with GeoWealth? I don't even know. Are you paying them a flat fee, like a software provider? Are you paying them good old basis points as an asset manager? How does this economically work?

Ryan: Yeah, basis points. But for what you get and the time it saves, it's pretty cheap. Now, if you're using an SMA or if you decide you have a taxable account that you want to put in something like Aperio, direct indexing, or if you're using something like SpiderRock to manage a big, concentrated position or something, those have added fees. Now, we pay those fees. We don't pass those on to the client because I just feel like that's just part of why people pay us. But the basic ETF portfolio that you're implementing...and there's even managers on there that, if you're using them, it could be supplemented, right, where it's significantly cheaper or something like that. But yeah, it's minimal compared to...it's saving me 10 hours a week at this point, maybe even more.

Ryan's Time-Saving Tech Stack [41:04]

Michael: So now, take us through what else is in the tech stack to keep this business so efficient. As you noted, you've done a lot of things to leverage the tech. So, what else is in the tech stack that runs the business?

Ryan: So we use the RISA for kind of that personality test portion of it. We're using Nitrogen for risk tolerance questionnaires, although we've changed a lot of how the order of that goes, meaning, we are leading more with a discussion on down market protection and the number of years and things like that rather than risk tolerance, and then kind of taking more of an education approach first. So Nitrogen for that. Kwanti for some different portfolio analytics.

Michael: So Kwanti is your investment research analysis tool?

Ryan: Research and kind of where we're building the visuals for the time segmentation so clients can see them.

Michael: Okay. Because it just has a good visual tool to...

Ryan: Good-looking pie chart.

Michael: Good-looking pie chart. Got to love a good-looking pie chart.

Ryan: Yep.

Michael: Okay. Okay.

Ryan: Income Lab, and now I'm happy to say we're making the migration over to RightCapital. So we were doing MoneyGuide before, and we still, Michael. This was a hot topic and maybe a debatable topic, but we still build plans in both of these programs for everyone because of the nuclear redundancy.

Michael: Yeah. This has always been one of my favorite things about your firm since the first time you were with us that, in the nuclear world, everything has redundancies because failures can be catastrophic.

Ryan: For sure. And for everyone, that is not a recommendation to do that. That's what we do because that's what works for us. But I realize how crazy it is for the general…that's what nukes expect. That's what they want.

Michael: Now, I do have to ask. So, why the move from MoneyGuide to RightCapital? That's not a lightweight change.

Ryan: No, it's not. They've made it relatively easy with some of the tools, being able to import things and stuff. But I just feel like they're always adapting. They're adding more features. They're kind of keeping up with the times. They're adding more tools. It's evolving and has evolved, I think, beyond of where MoneyGuide was able to take us. It's gotten, also, in my opinion, a little bit better for accumulators. And we are starting to see more accumulators come to us. People typically would come to us at an average age of 57 to 59. And now they're coming in earlier 50s, later 40s. So our ability to be able to help them, some more budgeting tools, and some things like that so we can kind of capture their pre-retirement expenses to look at post-retirement, it's doing better in that area. So it was a tough decision, but we did it.

Leveraging Educational Designations And Software To Provide A Deeper Level Of Tax Planning [43:43]

Ryan: And the level that we take our tax planning, I'm very proud of. You see, I've added a few things to the end of my name since we talked last. I'm trying to catch up with you.

Michael: A few more designations, TPCP [Tax Planning Certified Professional], CPWA [Certified Private Wealth Advisor], RICP [Retirement Income Certified Professional].

Ryan: Yep, exactly, right. Now, the most recent was the EA [Enrolled Agent]. And that was really important to me because the TPCP and EA combo, I think, are an incredible combo, because the TPCP gives you the fundamental knowledge and the EA gives you the ability to really give that unfettered tax advice versus tax planning, which I really enjoy. Really enjoy, right? So for our clients, because we're so distribution heavy, we're calculating every withholding. It's not just RMDs [Required Minimum Distributions], all their tax withholdings, and obviously, QCDs [Qualified Charitable Distributions] and all that other fun stuff, and bundling together charitable contributions for donor-advised funds. And I've become so obsessed with taxes that I'm just really passionate about helping people keep more of their money so they can decide what they want to do with it. If they want to donate it all the way after that, that's great. But it's my job to help you keep it.

Michael: So if you've been through these, just can you compare/contrast for folks EA, TPCP, CPWA, RICP?

Ryan: Absolutely.

Michael: What's helpful or not? What were the benefits of each?

Ryan: Sure. Obviously, CFP is where to start. That's it. The RICP is super helpful, especially because 80% to 90%-plus of our firm are retirees or very soon to be. And it just has some really cool strategies. That's kind of where I was introduced to the time segmentation. That's kind of where it opened my eyes a little bit to the potential that some people might be right for an annuity, even though it's very few, in my opinion. But you should be open to that conversation. In fact, it's our duty to be open to that conversation for the right people, how to really dig into Social Security timing and strategies and things. So super helpful, RICP. CPWA, I can see the value, but not for my clientele. They just don't fit that high net worth.

Michael: Because that's a much more high net worth, million-plus kind of market.

Ryan: I learned stuff, and if I was in that market, it would be gold. But for me, with our average $1.8 million household, and very few, if any, are business owners, and if they do own our business, it's a little side business, then there's not really significant wealth coming or trust or anything. It's just not...that wasn't it.

Michael: Okay.

Ryan: TPCP, incredible. Took our tax planning to another level and really allowed us to use Holistiplan at its full. And the EA is pretty much that check-in-the-box of, "I can take my fundamental knowledge from the TPCP, and I can really give advice." And I can tell people, "Here's what you should do," and not, "Well, you should maybe consider, but talk to your CPA," and all these other disclaimers and things that you kind of have to say. I really like having the ability and the confidence to be able to give them real advice.

Michael: Because of the point of the EA, you are actually licensed with the IRS to give tax advice, big T, big A, Tax Advice.

Ryan: Yeah, you can do it. You're licensed to give advice. You can represent people in front of the IRS, although I would never do that. I think that's a little out of the bounds. But, yeah, it's an interesting certification because you learn a lot about IRS procedure. It's really nothing about tax planning.

Michael: Yeah. I always thought it's more of a tax compliance thing, just literally help you, help your clients be compliant by doing the filings and the forms and the timely returns and the schedules and all the things.

Ryan: For sure. Absolutely.

Michael: How challenging for you was EA versus TPCP versus CFP? How would you compare these on difficulty level of exams and completion?

Ryan: I think the CFP is the hardest to achieve because it's a big test, where the TPCPs and RICPs, you can break them down into three separate tests.

Michael: Okay.

Ryan: TPCP is accumulator tax planning, retiree tax planning, and tax planning and death. And you can take each test individually. That makes it a little bit easier. The EA is also broken down into three tests. CFP is still just this big, massive test, with all this curriculum. But that was still the most challenging, for sure.

Michael: Okay. So, thus, why Holistiplan has become very central in the firm for you.

Ryan: It's the software I spend the most time on.

Michael: Okay.

Ryan: For sure.

Michael: So software use, that's quite a statement. So more even than the planning software.

Ryan: Yeah, because we're just so much with retirees, recurring distributions, one-time distributions. There's so much…Social Security, there's so much going on. Holistiplan, in my opinion, is the software that adds the most value to clients and also shows the most value to prospective clients.

Michael: Okay.

Ryan: For sure.

Michael: And what is it you're doing in it that you're spending so much time and driving so many favorable outcomes in their particular modules or analyses? What are you doing?

Ryan: Usually, it's more planning rather than back-looking. Yeah, we do, obviously, evaluate returns to people, and we've got a really cool connection with TaxStatus where we can download their transcripts right from the IRS. So we never have to ask for a tax return, which is amazing, because I got so sick of pulling staples out and unbounding things and trying to scan them in that being able to pull them right from the IRS is just incredible.

Michael: Wait. And how do you pull them from the IRS?

Ryan: So you have a client consent through TaxStatus, and they consent for X number of years. I think it's five, I'm not sure, three to five. And there's a link from TaxStatus to Holistiplan so that you get, basically, a unique identifier. You put it in Holistiplan. It'll notify you when a tax return has been filed or any communication with the IRS. And then you can just pull the transcript from Holistiplan, through TaxStatus, right into Holistiplan. It's amazing.

Michael: Okay.

Ryan: Saves a ton of time. When you talk about efficiencies and how to be a solo, there you go.

Michael: And just some nominal costs, and now TaxStatus gets paid to pull the return, and then Holistiplan gets paid to upload and analyze it. But it runs straight through.

Ryan: Exactly.

Michael: Okay. Okay.

Magnifying AI Impact By Using Zocks And Claude Together [49:33]

Ryan: From an efficiency standpoint, Zocks has been...oh my God, the implementation of Zocks and the Claude interface with that is really how I think of freedom. Because I was definitely feeling the capacity ceiling, right? I was feeling that, for sure. And that part of it is what alleviated the admin burden that allowed me...so I didn't hire less. I just hired differently, right? Instead of hiring somebody to be an administrative assistant and do that admin work, Zocks took so much of that, that I could focus on hiring the real bottleneck, which was the planning.

Michael: So, then, talk to us more about Zocks or Zocks/Claude. So, what do you do? What are you actually using it for? What's the flow look like?

Ryan: So first, it was just AI notes, and it's like any new software, right? You give it a try, you see value out of it, and then you're getting value out of it. So you don't really always have time to get to really dig into it and be like, "What can this really do?" You're like, "Okay, this took a few hours off my plate. I'm happy. Let me just keep chugging along." So that's how it started at first, was just AI notes. And then the email follow-ups and things like that, right? But then I realized there's so many integrations, and you can teach it to do so many things.

That's really a big part of what I've had our new hire, Molly, doing, is she is building plans and doing all these things. But she's also...I tell her to spend one to two hours a day exploring ways to be more efficient in Zocks and Claude and our other programs. That's part of your job. It's a fundamental part. And she's taken that and just run with it. So at this point it, it writes follow-up emails for us, but it writes them so well. It's almost like you can't tell. You teach it, and you give it prompts, and you tell it, "If the client mentions this, ask for this. If this, do this."

And once you get that, and it's a lot of work up front, but once you get that built, it's automatically building the emails out of the context of the meeting to ask for, let's say, these things or that, like pension statements and all these other things. So, yeah, you can have a canned list of those, but it'll also identify the other things that they mentioned that aren't in your canned list, and it'll add them, and it'll do that. That, plus the Claude integration. You mind if I talk about that for a minute? Because that's been incredible.

Michael: Please. What are you doing? The things and the things.

Ryan: So the Claude integration is so incredible that we've been experimenting with it, and I feel like we've done maybe half a percent of what it really can do. But we've got it to where it'll reach into Zocks, and Zocks is reaching into Wealthbox, to look at all of previous meeting notes and things like that. And you can teach it skills that basically say, "Hey, make me a one-page plan for this client." And it makes it. And it's 80% accurate. And then you get back in, and you say, "Okay, when you're making a plan, be sure to omit this because we don't want to talk about this. Be sure to make this more concise and put it in this format." So if you take the time to teach it skills, which is a particular thing that Claude or any AI will do, it's garbage in, garbage out, or you get really good in and really good out. So you teach it to produce these documents that are better than you could have produced yourself in a very small fraction of the time.

So that's one thing, one-page client plans. I told it, "Go in and evaluate any call I made with Constellation Energy, where I did a 401(k) rollover, and write me a step-by-step checklist on how to do it." And within five minutes, it writes it perfectly. So I've almost been using it to create training for our new hires, soon-to-be new hires. If it keeps evolving where...it's not going to replace any philosophy or face-to-face interaction or anything, but I sure can make a checklist that says, "Here's the things that I'd like you to check when you're building a plan. Here's all the things I'd like you to do when you're evaluating a portfolio. And by the way, it's based off of all of the meetings we've actually had with people." So it's not a generic checklist. It's the way we do business, which is really cool.

Michael: I like the framing of things…look back on all of my Constellation transcripts, where we did a rollover from the 401(k) plan, where I kept talking about how to do it, and then make a checklist of that. So now we have a checklist of it.

Ryan: Absolutely.

Michael: Take the knowledge in my head that I'm already talking about in words and turn it into a checklist.

Ryan: Absolutely. And we take it even further than that because one of our...and this is a huge value add for Constellation employees, and we do it with any employee, but for Constellation, in particular, they have some very unique benefits. They have pension, which isn't particularly unique. It's a cash balance pension. But there's some unique ways to discuss it and the logistics of how you get it over and things like that. But what really makes it unique are their medical benefits. A lot of retirees that leave there have some form of a retiree medical benefit. And those benefits are a little bit different depending on what year you started, they're a little bit different depending on if you were management or hourly, and they're a little bit different if you're pre...well, very different if you're pre- and post-65. But there's some form of benefits for everybody that started at one particular time in the company and before.

So I had Claude via Zocks, via Wealthbox, and via all these things connect, which is beautiful. Go in and say, "Make some checklists and one-pagers and things like that to kind of discuss these benefits," right? And then I use that to create a webinar that was basically, "Hey, here's how to retire from Constellation Energy," which is really, I guess, the only piece of marketing I've ever really done. Because we just have never really done that. It was more informational than anything. I really meant it to send to clients that were retiring that were already with us. But it goes through, and it's able to, based on...because we participate in all of those phone calls with our clients, we've got hours upon hours upon hours of transcripts of those that Zocks and Claude were able to evaluate and make these wonderful outputs for us. Really amazing.

Michael: All right. Then the question I've got to ask, I'm sure it's on everyone's mind, so how are you thinking about data security, client privacy, if all this client data from all these different tools is rolling in and through Claude?

Ryan: Very carefully, right? So first thing was make sure you pay for the version of Claude that has the best data security. Two is make sure you're only ever using the Claude and Zocks interface and not just generally uploading things to Claude and stuff, because that has its own built-in controls. And then we had our outsourced IT take a look at everything, right? CyberSecureRIA, that's everything for us, every tool that we want to use to make sure it's compliant and that we're not...so, absolutely. And then we set some rules internally that say, "You can never discuss medical or HIPAA or anything like that," right? And also, only certain people, aka me, have export function out of it. So, yeah, you have to be careful. You have to really sit down and think about it. And I highly recommend getting a professional, outsourced IT firm or somebody to do that for you. Because, again, it's the, "I probably could do it, but why not let an expert do it?"

Michael: And so it sounds like it's some combination of enterprise Claude, so you can set the data security, "Don't share my data" protections. You let go putting all the data in and through the Zocks interface, because they've got their own enterprise security controls about how they pass down and what they do with it. And then sort of the internal process and procedure of who has access to what and can export what to manage the next layer down of, "Can someone exfiltrate my data by some other problematic means?"

Ryan: Absolutely. Absolutely. It's a risk. Listen, any tool we use has a risk. You just have...it's much like nuclear power, right? There's risk in nuclear power, and you have to consider what's the likelihood and what's the consequence.

Michael: Yeah.

Ryan: All right. Something may be less likely, but very consequential. So even though it's less likely to happen, no one's going to care it wasn't likely if it happens, because it's consequential, right? So that's what you have to be very, very careful and diligent on.

Michael: There's a part of it that just reminds me of when the industry collectively went through this 20 years ago when we were transitioning to the cloud and early on, it's like, how can you put your data on the internet? It's safe in your server closet because you can walk down the hallway and see the server, and it's right there, and it's safe. And then, over time, we eventually got to the point of, all right, well, once it's configured with reasonable security and data and privacy controls, it turns out Amazon Web Services, with the 12-foot fences and the armed guards, is actually a lot better than my server in a closet with a thin wooden door and a drop ceiling that you could just go over anyways if you really actually wanted to steal the server out of a server closet. At most firms, you could do that in a few minutes.

Ryan: Absolutely.

Michael: And we collectively, as an industry, figured out there is a way to do data things in a secure manner. We just have to get there with our systems and process and the tech providers that serve our space.

Ryan: And I think it's a healthy way to start, right? We should start being skeptical and being conservative and cautious and work our way into becoming comfortable. I think if you start comfortable, that's just a bad place, right? You don't have your guard up enough to do your due diligence. We should feel that way and then convince ourselves via data and process and things like that, that it's something that we're willing to take the risk on because we have controls in place.

Using Hubly To Manage Firm Processes [59:02]

Michael: So, anything else you wanted to highlight in the overall tech stack? What else moves the needle for you, as it were?

Ryan: Yes. We have a ton, but I want to mention something that I'm a big fan, because it appeals to the nature of how building process, procedures, and checklists is such an important thing in a nuclear power plant. You don't touch anything in a nuke plant without a piece of paper in your hand that says, "You can do this," right? And for that, for us, it's Hubly. I use Hubly extensively, and I've built some very detailed processes on pre-retirement, post-retirement, all of the modules of financial planning, so retirement, investments, taxes, education, I'll call it risk management, estate planning, and then your legacy and gifting, and then account opening processes and things like that. And it is in a wonderful way when you get to a particular size of firm and you have X number of households.

At first, I would just manage it by memory. And you can do that with a couple of clients, right? When you're just starting out and you're like, "I don't need this tool or something," you're right, because you can't afford it at that point. When you only have a few clients, you're like, "I can manage my workflows and everything." And then you can use built-in workflows, your CRM, and things like that. But I think when you get to a particular point and you're trying to manage 150-plus households, you have to be able to go in and see, where does everybody stand? What do I owe them, and what do they owe me? And what's their next step? And what do we have to do? And Hubly has been amazing.

Now, Hubly is the same thing. It's what you put into it, you get out. So you have to take the time to build out your workflows. And there's some already built, and you can definitely use those. But with the engineer in me, it was, "I need to make these six times as long and more complicated because that's what we do," right? But the one challenge I will say is, if you're a solo and you think you ever may hire, build them as if you're going to hire. Because I worded everything and did everything as if it was only ever going to be me. And so, now, a part of what we're doing is going through and rewording and reorganizing things to make sense for the handoffs between me and Molly, my planner. So, yeah, just be prepared for that. If you're ever thinking about, "I might add a team member," type the thing out a little more so they can read it.

Michael: Oh, I was going to say, can you explain what the blocking point is? Just because you short-handed something because you knew what that snippet would mean. You didn't use whole words and sentences. Is that kind of a challenge?

Ryan: Yeah, pretty much, exactly. Or no detail on how to do it. So I would just say, "Fill out cash balance form." And, yeah, I can do that, but nobody else can do that. So, should I put an example, a blank example with, "How do you check this? Or even this?" We use Loom quite a bit, recording a Loom video that shows how to do something and embedding that into Hubly. That's a better way to do it, right? So I know what fill out this form or do this or do this means, but is that next person going to be able to pick that up and do it repeatedly and efficiently without any more context? Probably not.

Michael: So I think you had said earlier CRM for you is Wealthbox because you had the Zocks Wealthbox integration. So I guess, help us understand, what does Hubly do that Wealthbox doesn't? Why do you have Hubly on top of Wealthbox?

Ryan: I just use them differently. Wealthbox is where notes get dumped into and things like that. But I like to divide that Hubly is for process and Wealthbox is for tasks. So process are things that we have a procedure, a "here's how we do it." So if we're going to open a new account, that's a process. It should be theoretically the same for everybody, with some exceptions of what type of account and things like that. But if it's a one-off, "I need to get back to my compliance person with a question they asked," or, "I need to do that," I keep those in Wealthbox because they're a little more visible. And I like to separate process from tasks, and that's a really good way for me to do it. Again, probably not what I would recommend to anybody else, but it really works for me.

Michael: And then Zocks is all the interaction around the client stuff because you're using the Wealthbox integration.

Ryan: It is, yeah. And the way we taught Zocks is not only for the follow-up things, but the meeting prep. The meeting prep part of it is really the key, is we taught it the templates that we want to see our meeting prep. So when it pulls up, it pulls up kind of in this for us...the template we made is kind of in the CFP fashion where it's retirement, investments, taxes, this, that, and the other, right? And for the retirement portion, it'll pull up what their monthly income is and what their guardrails are and what their slush fund currently is at and what we did for long-term care and what their gifting strategy and all these things that are important. And then, for the investments, it'll pull up, "Hey, they're in a six-year time segmentation portfolio." And for taxes, it'll pull up, "They do QCDs."

So the way it was taught is that it pulls it up in a beautiful fashion to be able to have that right at your fingertips, not only to facilitate the expected things that you're going to talk about in the meeting, but also the unexpected. Because you always get clients that are, "Hey, we've got 20 minutes left. Can we talk about my this?" whatever that this is. And then that's where the challenge of 500 different pieces of tech come. You're logging in the things that maybe you're not logged into and everything where it's right in front of you. And there's a really good possibility that the answer is right there, right? Because it's pulling data from Holistiplan. It's pulling data from wealth.com. It's pulling from Wealthbox. It's pulling from Black Diamond. And it's putting it all in a format, in charts and tables and words, that are just there for you to be able to answer a lot more efficiently.

Michael: So I guess I'm just trying to visualize, what do you log into every day? What do you not log into every day? It seems like there's so many things you're doing in Hubly or Zocks that used to just be CRM function, that were all CRM functions. You still got things in Wealthbox, but you've also got things in Hubly, and you've also got things in Zocks. And there's all the other tools. What do you actually...what's the first thing you log into every morning to kick off your day?

Ryan: The first thing is Wealthbox because tasks typically have more urgency than process, because process are usually, "We're opening an account." Now, although we like to be timely, whether the account gets open today or tomorrow is not going to impact. But whether I get back to a client and process a one-time distribution to help pay for something that they need to pay for by Friday, that is more timely, right?

Michael: Okay.

Ryan: So Wealthbox starts because tasks are timely. Process usually can wait a little longer. So start with Wealthbox, go to Hubly. And then for planning...

Michael: Check on the status of processes that are running for clients.

Ryan: Exactly. So I have a routine. So I have a task in Wealthbox. This is super redundant, but that's me. I have a task in Wealthbox that says, "Check this process in Hubly." So it may say, "Check." I have a process in Hubly that's all people retiring within one year from now, because we have a very specific work down curve from one year in when somebody's retiring, right? It's those seven, eight meetings I was talking about, going over the plan and coming up with a tax plan and the buckets, the time segmentation, and then talking about the logistics of retiring from Constellation, because it's a process, right? And their health care and everything. So I have a task in Wealthbox that says, "Do this process." And there's a task for each one of them, and it's set on different days, so I'm kind of doing things very systematically on certain days.

And another thing I've found, Michael, and this has been really important, this is not something that you do in the beginning when you start a firm. When you start a firm, you will meet somebody anywhere, anytime. Most people will. Saturday morning, you got it. Christmas Eve, you want to...? Sure, whatever you like. I will do what it takes because I should. And that's where I'm at in my career. And there's something to be...you got to respect that, right? Well, I do find that, as you progress in your career, you could be...not make yourself less available, but make yourself more strategically available. So Tuesday, Wednesday, and Thursday, I run very long days. And I'll start early, and I go late. It's usually a 12-hour day. I'm used to working 12 hours because that's a shift at a nuke plant. So it's second nature. I don't even think twice about it. And those are client meeting days where it's really heavy client meetings, right? It's morning to 7:00, 8:00 at night. No problem, because I don't want anybody to have to take off work to come see me.

Michael: How many meetings will you stack in one of those days?

Ryan: Usually not more than...because I never book back to back. There's always an hour in between, because engineers, the analytical part of it tends to run long. We rarely can fit anything in one hour. And that goes on both sides. It's me and them. So I'll do a two-hour block for everybody, and it's usually five.

Michael: Okay. Okay.

Ryan: So five meetings, Tuesday, Wednesday, Thursday. Monday and Friday are left open for pure focus, administrative, process, task work.

Michael: Okay.

Ryan: And the efficiency of that, of not having to jump back and forth and, "Oh, I got 20 minutes. Let me try to do this process," or something, it really has just made it a lot more enjoyable and a lot more just systematic.

Michael: And this is just standard week for you. You're not at surge meetings and then gaps. This is just your standard blocked week. Stacked meetings.

Ryan: Standard week. Yep.

Michael: Stacked meetings, Tuesday, Wednesday, Thursday. Prep Monday and Friday, or prep Monday, task out Friday.

Ryan: Exactly. And we don't really run surge, but we do have a service calendar, and that service calendar tends to have busier times of the year. So Fridays could be nothing, and it could be a time to go...my daughter does competitive dance, so we travel the country for that. So it's usually Friday, Saturday, Sunday, we're out for that. So it's great to not have a structured schedule on a Friday. I can pull open a laptop at the hotel and do what I need to do in the morning and things like that. So we don't really do surge, but there's naturally tax time and the end-of-year and things that are more busy. So longer weeks then, shorter weeks when it's not, like in the summer.

How Ryan Views Capacity And Why He Implemented A Waiting List [1:09:08]

Michael: So, are you feeling close to capacity? I still come back to all the cool tech and process things that run 155 clients, and it sounds like you have a fairly active, higher touch service model. These are not the "check in briefly for 30 to 60 minutes once a year and chill out" kinds of clients. So, how are you feeling about capacity and just the number of individual meetings and one-to-one things you have to do with all these clients?

Ryan: I feel fairly good about it with our new hire. I was definitely feeling it as we were rounding the 150 mark. The new hire with Molly, being able to do a lot of the planning, she's been there for a month, so there's a lot to learn.

Michael: Oh, sure.

Ryan: And the speed at which she's learning is impressive, but it takes time. It really takes time to get good at this job. As it should, right? Because it's a complicated profession. But I feel like, with the addition of her and then maybe adding another, that would be my next hire. I would hire another junior planner or associate advisor or whatever you'd like to call it. That would be my next hire. Still wouldn't be an administrative person. But with the addition of them, I definitely can see how capacity would open up.

Now, with that being said, growth to me is only a good thing if you can do it without sacrificing quality or service to your current clients. So I will refuse, I will never take another client if I think that it would ever impact the ones that we already have, because that's what got us here. And there has been many times in the past where we've had to implement a waiting list, and that waiting list has gotten up to pretty significant numbers. And people are very patient with that, and they're okay with it because they know that we're doing the right thing.

Michael: So, how did your waiting list process work?

Ryan: Basically, I was very honest, and I said, "Thank you. This came to fruition because of your referrals." We have the most amazing referral network in the industry. I would probably say it's up there, and it was built off the backs of a 19-year career. So it's not...

Michael: You're waiting-list people who are referred.

Ryan: Oh, yeah, for sure. I have to. I have to. And it may be for a short time. It may be for a little longer. And some of that depends on urgency. If I get somebody that comes to me and they're 41, they're like, "Hey, I'm in no rush. I know you're the firm for the job, but we're not retiring tomorrow, and we don't have anything urgent going on. I just want to see where I'm at." They are very understanding, and they're like, "I understand that I may be on the list a little longer." Whereas somebody who comes to me and is like, "I have a health issue. I have to retire in the next month," we're going to prioritize them for sure.

But these are all referrals that are coming in. We don't market, advertise, anything. It's a 19-year career in nuclear power, the relationships I've built, and then our wonderful clients telling everyone else about us without us asking, because I don't do that. I'm not judging if you do that. I think you should. I'm just not good at it. I've never found a good way to do it, so I don't do it. But our clients are referral machines, and that, in and of itself, is what will allow you to have more capacity as a solo. If you can do a really, really good job and get organic referrals and you don't have to spend your time marketing and seminars and going after it and doing all these things and stuff, that's where a bulk of the time where most advisors could find themselves spending. We spend 100% of our time on clients, with the exception of all the admin stuff, paying the bills, doing the books, and stuff like that, which I outsource, too.

Michael: And how long do they have to hang out if they were on the waiting list?

Ryan: It's been up to a couple of months, maybe three, four months, I think, was the longest.

Michael: Okay.

Ryan: And we're very honest. We're like, "Hey, if you don't want to wait, we get it. I understand. If you're willing to, obviously, we'd love to work with you. But this is what we need to do to make sure you get the same experience that everyone else who referred you here told you about."

Michael: So, how often did people walk away or react negatively to that?

Ryan: They don't. They haven't yet. They've been very good about it. And I think a lot of it has to do with the closeness of our clientele and our firm. We had a client event this past weekend, and think about the unique aspect of how close a lot of our clients are. I'd say probably north of 80% of our clients know each other, and they've known each other for 40 years. We're not talking about a very passerby-type relationship. So we had a client event this past weekend. We went to the Orioles game. It was awesome. It's more of like a nuclear reunion than a client event. Everyone knows each other. They hug in and talk, "Oh my God, I haven't seen you. How's retirement?" and all these things like that. So I think the reputation that comes from all of these people. We may have someone come to us and say, "Hey, I was referred to you by six of your clients, independently. I asked around, and six people told me that." So, with that, I think...

Michael: Now, there's a scarcity effect thing that kicks in, right? I don't go, and I'm like, "Oh, there's a waiting list. What the heck?" I go, I'm like, "Damn it, all my colleagues figured this out before me, and now I've got to wait on the list."

Ryan: Absolutely. Absolutely. And it's funny, Michael, you say that, and I remember sending out an email about the waiting list the first time I ever did it. And I think a bit of how that was interpreted was we're not taking any more clients ever, instead of we're just doing a waiting list. It was more like, "I think we have what we have at this point." And the outpour of, "Can I still get in? Can you still work with me? Can you fit me in? Can you...?" was...

Michael: "Oh, no, I haven't reached out yet, but I still want in. Don't cut me out because I hadn't retired yet."

Ryan: And I was like, "That was not the intention." It was not a marketing ploy. It was not. We do actually have a waiting list. It is real. But, yeah, it's a wonderful thing, and it really makes me happy that I look back sometimes, and I'm like, "I spent 19 years doing something different and I love." I tell you, I liked working in nuclear power. It was intellectually stimulating. I enjoyed it. It is fascinating. I think it's important. It's an important job. Might be one of the most important. But I never loved it. I love this job. I love this career. I'm obsessed with it. Everything that I do is...it's a passion. It is cliché, but I do not feel like I go to work. I absolutely am in love with this job.

And sometimes I think, "I wish I would have found it when I was younger." And then I realize, "No, you don't, because you wouldn't be who you are. You wouldn't have the mentality that you built and all the good habits and all these things through nuclear power, and you wouldn't have the network." And it would be a completely different company and completely different experience. And that was all part of the journey. All part of it.

Building And Communicating A Repeatable Down-Market Plan That Engages Clients [1:15:35]

Michael: So, as you reflect on this journey, though, what has surprised you the most about this building and now even more rapid growth of the advisory business?

Ryan: I think what is surprising is how different this phase is from the first. It's not a continuation of the first phase. The first phase of launching and figuring it out and getting your first client, which is an amazing feeling, right? And then getting your second and implementing a tech piece here and a tech piece. It's so much different from growing and hiring and working on efficiency and building process that can be sustainable over multiple people in the firm. And I just thought it would be a continuation of part one, and it's not. It feels like a completely different chapter.

Michael: And what changed? What got left behind, and what opened in the new chapter?

Ryan: I think a lot of it was preparing, becoming efficient, and becoming...this is pretty interesting, I didn't share this yet, but we have an interesting way to communicate. We communicate a lot en masse, and that is, by no means, meant to reduce the number of individual interactions we have. But we're very proactive during down markets. We have a down market plan. As soon as the market starts to decline, we start posting webinars, and we usually get probably about 50% to 60% of clients show up to the webinars. And we talk about it, and we're like, "While the market's down, every two weeks, we're going to host a webinar. And we're just going to tell you what's going on. We're going to tell you what our plan is. We're going to tell you how we can make a silver lining of it. And I have found that the best silver lining of a down market are down market Roth conversions." It gets everyone excited.

Michael: And there's the tax planning.

Ryan: Yes, there's the tax planning, right? So I'm like, "Hey, down markets are things we're going to deal with. They're not ifs. They're whens. Let's have a plan for it." And we have a published down market plan, and we just implement it. And we communicate, and we hold these webinars, and we do these down market Roth conversions and all these other things that get people really excited. They're like, "Oh, the market's down. Are we going to convert some more?" And I'm like, "I'd never thought I would hear that." It's such music to my ears because instead of having conversations about doing things we're not supposed to do, like going to cash and pulling money out and making bad decisions, we're having conversations about how to take advantage of this. And that's just been amazing.

That's been another part of how to be scalable as a solo, is find your way to communicate that really works for you. And so we'll host a down market webinar. And we may get one or two individual questions. People will reach out and ask particular things.

Michael: Do you do these live, or you just turn on a camera, record some commentary, and post it?

Ryan: Live.

Michael: And how long?

Ryan: An hour, usually about an hour, plus or minus ten minutes. Sometimes they go a little long with the Q&A, but they're very informative. They're informal. I usually spell something wrong in the PowerPoint because engineers can't spell. We can do math. It's low production value. It's nothing special. But clients really love it because it is proactive, and it's informative, and it makes the conversation you have, the follow-up conversation, much more specific. Rather than having the same one 150 times, you have it once, and then you have some one-offs after that. So the combination of that and the down market plan have really gotten good feedback, really good feedback.

And we treat the down market plan like we're at a nuke plant. When you're in a nuke plant, you're running an emergency procedure. When you hit a particular threshold, you do the thing that it tells you to do, right, as long as it's a real indication. So if you're at a reactor level of this or a reactor pressure of this or whatever, or a temperature of this, right, you do the thing that the procedure tells you to do. That's what you're trained to do. So we treat it like that. At -10%, we will do a whole sum of your expected Roth conversions up, and we'll do them. At -15%, we do this. At -20% the market, we do this. And it's rigid. We do it. That's our procedure, and we follow it. And that appeals to people because they almost get excited about it. They're like, "We're at -18%. Are we going to do something?" I'm like, "No, we do it at -20%. It's what we do."

Michael: So, is this actually a whole written document thing?

Ryan: It sure is. It's a one-pager. It's very simple. It's not bullet points that kind of get to the point of what we're doing, but yeah, it's a published thing that we give our clients and say, "Hey, here's a game plan."

Michael: Would you be comfortable sharing that with folks who are listening who just want to visualize this?

Ryan: Yeah, of course.

Michael: Okay. So I guess, so for folks who are listening, if you want to see the written down market plan thresholds and triggers, this is episode 499. So if you go to kitces.com/499, we'll have a link in the show notes. If you scroll down a little, show notes section out to Ryan's down market plan.

The Low Point During This Chapter Of Ryan's Advisory Journey [1:20:21]

Michael: So, Ryan, what's been the low point in this chapter? So the chapter's changed into this growth phase. So, what was the low point in this chapter?

Ryan: In this chapter, it was the first person I hired. So my recent hire was my first full-time employee. I did hire somebody part-time to do some paraplanning at one point, which was a great experience. Wonderful person, wonderful employee. And this is the importance of this podcast, right? This podcast brings people together. And I really want to share this part of it in that, after the first podcast, 4 years ago, I probably had, and this is not an exaggeration, 50 people reach out for one reason or another. "Hey, I'm thinking of making a career change. I'm thinking of starting my own firm. Would you be willing to share some pointers? Would you be willing to help me out with this? What tech stack do you use?" Just all kinds of questions. Should I niche to only work with HVAC employees, or should I remain general? Those kinds of questions.

And I talked to all of them, most of them multiple times. And I enjoyed every second of it, especially as a solo. You don't get a lot of interaction with the industry sometimes. So someone reached out to me and said, "Hey, I heard you on the podcast. I'm local. I'm looking to get back into the industry. Would you want to talk? Maybe we could work together." And we met, and she was an amazing fit. And I was like…I was not looking to bring anybody on at all. I was very happy with being just me and everything like that. But I also saw the talent. I saw the potential. So I was like, "I don't want to miss this." So brought on, but unfortunately, I had nothing set up ready to go. All of the Hubly was written in my language. There was no onboarding. I didn't have an offer letter.

I had nothing, right, because I wasn't planning on hiring. And I think, that experience, it just wasn't enjoyable for her. It's okay for some people that are entrepreneurial mindset that are like, "I'll figure this out," but people joining a team or company, they want some structure, right? Because structure equals stability. And I just didn't have it figured out, and I was like, "How could I have done it differently?" I either should have stopped and made those things very early in her hiring. So, that way, we could figure it out early instead of trying to do it all along the way. And ultimately, I left it up to her. She ended up leaving. She went back to a job that was a lot more flexible. She had very young kids. And the job here was becoming less flexible because we were growing so fast, and it was kind of impeding on time and things.

But I think if the experience was better in the beginning, then we probably could have made it work and found another solution. So the low point was I really didn't have a good plan when I brought her on, with very good intentions, just no infrastructure to support it. And I would never make that mistake again.

Ryan's Advice For His Younger Self And For Newer Advisors [1:23:01]

Michael: So, any other pearls of wisdom, what you know now from the experiences you've had that you wish you could go back and tell you four or five years ago as you were transitioning into this chapter?

Ryan: Yes. Let go. Let go of the things that you don't need to do. There are people out there who get paid to do them well, that that's all they do all day, every day. And if it's not an exact client-facing value-add, just let it go and let somebody else do it. And that's easier said than done when you're early. And really, when you're early, you can't afford it, so it's not an option. And I completely respect that. But as you start to be able to afford it and you feel the pinch on your time, hire the IT firm, hire the outsourced compliance, implement a trading platform or somebody to kind of do that for you, get the tools like Zocks and things like that that can increase the efficiency. That's really the only way you can build this size of a firm and be able to service everybody properly, is that you got to let go.

Don't be a hero. Retaining those things are great when you have to, but beyond the point where you have to, why do it? There's somebody out there that that's all they do all day, every day. So let them do that well. You're more of a hero for finding that, I'll call it, that subject matter expert, much like that nuclear model, that knows everything about that thing, and letting them do it rather than you trying to do it in triple the time or quadruple the time that they would take it. So that's my best advice to somebody in this phase, is start to let go.

Michael: Yeah. I think you highlight it well, that journey, right? Early on, I've got a lot of time and not a lot of money, and so I do all the things. And then, at some point, that switches, and you don't have a lot of time, but there's actually some money, and you can start doing that trade. It's like Dan Martell's, "Buy Back Your Time." You couldn't before. You really didn't have that much revenue. But now you can buy back your time.

Ryan: Absolutely. And your clients will notice because you're not spending ten hours a week on the administrative things, and somebody else is doing it for you. And just think, it's not only time. It's peace of mind, right? Hiring CyberSecureRIA and Synergy and these people, it's peace of mind. It's that. The clients could see the difference in the IT with the way that we're doing encrypted email and stuff that we were kind of doing very badly before, and now it's much more clean. And they know that you have a really good team behind you that can do an incident response and things like that. It helps me sleep better at night. It helps the clients sleep better at night. It allows me to spend the vast majority of my time doing the thing I love and the thing that I can add the most value to people's lives. And that's the actual client-facing and financial planning.

Michael: So, any other advice you would give newer advisors looking to make the transition and start down this path themselves?

Ryan: Yes. And again, reverting back to my days in the nuke plant and getting a senior reactor operator license, which, to this day, is still the hardest thing I've ever done in my life, it's the most studying and the most stressful thing I've ever done. And I wouldn't change it for anything because it made me who I am, but I very much believe in level of knowledge. People can judge you for so many things. They can judge you on your age, the amount of time that you've been doing a particular thing. Because if you're changing careers or if you're a new advisor, if you're young, people are going to judge you, and they're going to have preconceived notions. But you can't judge someone's level of knowledge.

If you are extremely knowledgeable in your topics and you wake up every day pleased and proud but never satisfied, and you try to be smarter than you were the day before, and you outwork and outsmart the other people around you, and I don't mean your team, but not your competition either, but just strive to be the best and smartest version of yourself. No one could argue with that. If you present a client an amazing tax saving strategy or an awesome way to take the stress out of their retirement by building a portfolio a certain way or spending more in the early years and all these things, if you do that, that stands by itself, and your level of knowledge will allow people to let their guard down because they see the time and effort you put into getting smart so you can help them.

What Success Means To Ryan [1:27:09]

Michael: So, as we come to the end, this is a podcast about success, and it's a word that means different things to different people. It changes for us through stages of the business, seasons of life. And so the business for you seems to be in an amazing place right now as you're climbing up towards $2 million of revenue, with one team for support. The business is in an amazing place economically, effectiveness, efficiency-wise. How do you define success for yourself at this point?

Ryan: I love this question. It's three things. One is, first and foremost and always will be, client happiness. How do they feel about the service that they're getting? And how is their feedback? How are their referrals? Not that we're just looking at referrals, but a referral is a good indication of happiness, right? If clients are happy and they're telling friends, that's a measure that you can put in your indicators. People are happy. Do they feel like the level of service is improving? Because it should always be improving. Never, never going in the other direction, right? So that's number one. If my clients are happy and they're giving me feedback, and I'm sitting in that room presenting a retirement plan, and I can see in their eyes that the past 40 years have been worth it of saving and everything like that, and I get that moment where they look at each other, a couple looks at each other and, "This was all worth it." That, number one, is a measure of success.

Two, how much opportunity can I create for other people? And it's not about growing the firm. I don't care about AUM. I don't care about revenue. None of that matters. Am I able to get other people to have really amazing careers in this industry? Because I think this industry is incredible, and it's important, and we do awesome work, and I want to be able to give people the opportunity to do that at a really high level. And I think we do it at a high level.

And then three is, how much impact can I have outside? Which is why I've kind of taken on these passion projects of teaching and being on the editorial board of the Journal of Financial Planning and kind of doing a masterclass here and there and doing these podcasts. How do we get other really great people that would be amazing at this career to get into this career and do it at a really high level? So that's my three-step formula for success.

Michael: I love it. I love it. Well, thank you, Ryan, for joining us on the "Financial Advisors Success" podcast again.

Ryan: Michael, I'll tell you, it's my pleasure, and coming back a second time is just a blessing. Thank you so much for having me.

Michael: Awesome. Awesome. Thank you.