Welcome back to the 177th episode of Financial Advisor Success Podcast!
My guest on today’s podcast is Sara Stanich. Sara is the founder of Cultivating Wealth, an independent RIA based in the New York City area that oversees nearly $50 million of assets under management for 95 ongoing client households. What’s unique about Sara, though, is the way she transitioned into the world of financial advice as a career changer in the midst of the financial crisis and the last bear market, which ultimately forced her into the independent channel with less support but more flexibility to build the business at her own pace, which in the end made it easier for Sara to craft the advisory firm she ultimately wanted to.
In this episode, we talk in-depth about Sara’s journey through the advisory industry. Why she initially started out in a major wirehouse for their training program, what led her to initially skip out on the independent RIA channel and make a switch to the independent broker-dealer channel instead but still choosing one that had more independence, even if it meant a little less salary base and training, why she ultimately made the decision to switch to the RIA channel six years later anyway, though, because of how much the support structures for independent RIAs had changed and developed during the decade of the 2010s.
We also talk about how Sara built her business and gets clients. The way, in the early days, she obtained both her CFP certification and the CDFA designation to go deeper into the divorce niche, how she tried to take advantage of opportunities to buy out what were ‘C’ clients for other advisors in her branch but ‘A’ clients for her early practice, the way, today, she uses DataPoints, a software service, to provide prospects with a wealth-building assessment to understand themselves better and to identify who may be a good fit for the firm, and the three simple things that Sara includes in her monthly newsletter to prospects to stay in front of them for future business opportunities.
And be certain to listen to the end, where Sara shares how the business has evolved in recent years as she has begun to add more CFP professionals to her team, how she kept her confidence through the early years by focusing on the progress she was making, even if the dollars took years to add up to what she had been making in the past before pulling ahead, and her key advice to career changers and other advisors early in their careers who may be struggling in the firm or platform where they’re currently at.
What You’ll Learn In This Podcast Episode
- What It Was Like Changing Careers And Starting Out During A Bear Market [00:04:09]
- Why Sara Decided To Focus On The Divorce Niche [00:27:04]
- How She Gets Clients And Builds Her Business [00:42:07]
- Why Sara Eventually Switched Back To An RIA [00:53:02]
- The Software Sara Uses To Identify Who A Good Fit For The Firm Is And Three Simple Things She Includes In Her Newsletters To Prospects [01:06:58]
- What Surprised Sara The Most And The Low Point Through Her Journey [01:19:22]
- Advice For Newer Advisors And What Success Means To Sara [01:28:20]
Resources Featured In This Episode:
Raymond James Advisor Opportunities
XY Planning Network
TD Ameritrade Institutional
Arielle Minicozzi’s Sphynx Automation
Total Office Virtual Support
CDFA Divorce Designation
Family Law Software
Family & Divorce Mediation Council
Predicting Wealth Building Behavior With DataPoints Assessment Tools
Did you enjoy the Financial Advisor Success Podcast?
And if you have a moment, please Click Here to leave us a rating and review in iTunes!
Michael: Welcome, Sara Stanich, to the “Financial Advisor Success” podcast.
Sara: Thanks, Michael.
Michael: I’m looking forward to today’s episode and talking about what it takes to build an advisory firm, your own client base, especially when you career-change into the industry and do so in the midst of a difficult economic and market environment. I know you came to the industry with an interesting background because you lived a world of doing marketing for a long time before becoming an advisor and then made a career change to take the leap right in the face of the last bear market that came with the 2008 and 2009 financial crisis.
It’s hard enough to get clients when times are good, and people are trying to decide which advisor to work with, never mind when markets and the economy are bad, and we’re just trying to get prospective clients to take their heads out of the sand. So I’m looking forward to a discussion of how you tackled this in the last bear market cycle and what it was like coming to the table with a background in marketing, I think something that most of us advisors struggle with. We may be good at sales, but we tend to struggle with marketing.
So as we get started, I’m wondering what your impression was of the advisor world when you started getting trained and taught how to get clients, given the background you had. Did you even see what you were expecting to see in the industry as you made the career change in?
What It Was Like Changing Careers And Starting Out During A Bear Market [00:04:09]
Sara: Yeah, I did. And just to take a step back on the marketing, something you said just kind of reminded me of my background in marketing, I had done sort of sales and marketing jobs as well as a young person. And then I worked for an online marketing agency starting in like 1997. So it was like really early when banner ads and things were…
Michael: Say like back in the dark ages. Did you buy ads on GeoCities?
Sara: I did.
Michael: Fantastic. That’s awesome.
Sara: I did. I did. I had some cool clients. And I did everything there. I was a digital marketing coordinator, and then I was a media planner, and then account manager for a team, and graphic designers and websites and online tracking, all that kind of stuff. So that was really interesting. We had some big clients, too, like Disney. Anyway.
Yeah, so I worked in an online marketing agency, and then I wanted a more varied marketing background. I worked in market research for a company. I did sales for them, but it was a company that did focus groups, and so kind of really deep qualitative marketing. And then when you’re on the agency side, a lot of times you work really long hours, you’re kind of like committed to the client. Well, I wanted to be the client. So I wanted to be on the corporate side. And I was director of marketing at a Fortune 500 company that actually sold construction equipment. So it was like a very male-dominated industry.
And then from being there, it was time to make a change, but I wanted to…and I also, during that time, got an MBA at New York University. But I wanted to use the marketing experience I had to build my own business, as opposed to building someone else’s business. And so I think that that’s something that a lot…yeah, that sort of entrepreneurial spirit is definitely something a lot of advisors have as well. So maybe I have a few more tools to apply to it but…
Michael: And so is that part of what led you to the advisor world? Like, “Okay, I know some marketing stuff. I want to build a thing where I build my own business, hey, advising sounds good because you get to build your own thing.” Was that drew you in that direction?
Sara: Yeah. I’m definitely always a very independent person. So I was looking for a career change, and I was looking for something where I could kind of cut my own path. And I had spent a lot of time on my own financial planning trials and tribulations dealing with debt. And I bought an apartment in New York City, and kind of figuring that stuff out as a…getting my MBA.
I knew a lot of people in the finance industry. Kind of figuring that stuff out on my own, I thought it would be something that I was good at. And also, I knew I was good at working with clients because I had been an account manager. I’d always been the person that was in charge of managing relationships. So financial planning, there’s a lot in common with that.
Michael: So for you, it wasn’t necessarily the ‘financial’ part of being a financial advisor that was drawing you in, it was more the ‘advisor’ part and the opportunity to build and own a business in which you get to develop and manage relationships because that was the skills that you were good at and enjoyed.
Sara: Definitely. I wasn’t intimidated by the investing part. So maybe that key to it is I felt capable of that, but I didn’t get into it because of like a love of trading or mutual fund research.
Michael: So you decided, “I want to make this shift, I’ve spent 10-odd years in the marketing world, digital marketing, marketing research, director of marketing doing construction equipment, I’m going to make this leap into financial advisor world because I like the opportunity to develop and manage relationships and have something that I’m building for myself.”
So, how did you come at the industry at that point when you decided, “Hey, I think I want to go in this direction?” How’d you approach it? What were you looking at?
Sara: Oh, I knew I was looking for a change, and I started talking to people from networking kind of informational interview-type conversations. And some were with people that I knew through my MBA program.
One friend said, “You would be so good at being a financial advisor. I have this friend, he’s really successful at Merrill Lynch, and he is about as smooth as sandpaper. You’d actually be so much better at this than he was.”
Michael: If he’s succeeding at Merrill Lynch, you are going to crush it.
Sara: Basically. Yeah. So I kind of did an informational interview with this guy. And at the time, this was at the biggest branch at Merrill Lynch. It was the Fifth Avenue branch, Fifth Avenue and 55th Street. I think there were 140 advisors in the office. There were four floors.
Sara: Yeah, it was a big office. And I did an informational interview with him, and then he introduced me to the branch manager. And then they called me back for some interviews. I think I also maybe talked to somebody else in that time too, but then I went with the Merrill Lynch people in 2007. And so that was in like the summer of 2007. It was kind of like the peak of the market.
Michael: Good timing. Good timing.
Sara: Yeah. And so they had like a training program class there. And it was very different for me. I definitely did kind of get myself into something I wasn’t expecting. Like everything I had read, like, “Oh, financial advisor, you can be so independent and help clients.” There were all these things about it that I was interested in. And then I got there, and I was in this like sort of training class with maybe 20 other, mostly younger guys, right, in their 20s. And just kind of realized, I was like, “Oh, I’m at like the bottom of the totem pole in this office now,” and…
Michael: Which is a challenge. When you’re a career changer coming in, like, I was in a position of some authority and responsibility, and I now find myself in the bullpen with the recent college grads. Not trying to knock recent college grads coming in, but if you’ve gotten a ways down your career path already in somewhere else, that’s a bit of an adjustment.
Sara: Yeah, it was. It was. But I was okay with that. And then I also, during that period, I got pregnant right away with my first son. And that was a strange time as well.
Michael: So, how did it go? What did you draw from Merrill Lynch in that first year? How did it go? What surprised you about it?
Sara: I definitely learned a lot. They had kind of like a weekly meeting. And we had to pass the tests. It was sort of like if you didn’t pass your Series 7, you were fired.
Michael: Yeah. Well, it’s hard to do the business if you can’t get the legal license required to do the business.
Sara: Yeah, yeah, exactly. And I didn’t tell anyone I was…this was something that probably wouldn’t have happened in another job. I didn’t tell anyone I was pregnant until I passed my exams and was like six months pregnant. It was like, “Oh, by the way, I’ve been kind of hiding in the corner, but actually, I’m going to be going on maternity leave.”
Michael: Well, there’s a challenge for us in the business world when there are team members that may be pregnant, you’re really not allowed to ask, both from a legal perspective and from a sociability perspective, it’s kind of scary.
Sara: Yeah. No. But you know what, though, they had no idea. If I had been working in an office with women, they would have all known, but I was working with these young dudes and wore a jacket. And I really didn’t gain much. They had no idea.
Michael: Like, “She always drinks water whenever we go out for happy hour. I guess she’s just chill that way.”
Sara: Yeah, yeah. So anyway, I learned a lot while I was there. But then my son was born in April 2008. And I brought on a few clients, and I did a few things, but it was definitely a challenge because once I went into “production,” I was already like seven months pregnant, and the market’s crashing. So it’s not exactly an easy time to get new clients.
So my son was born in April, and then I was out a lot of the summer of 2008. And then coming out…coming back in like late summer, early fall was really…that’s when…in 2008, that’s when a lot of stuff started happening like with Lehman Brothers. And it was definitely a stressful time in the office.
I had a few clients, not a lot. Anyway. So they started having layoffs. And I definitely saw what I didn’t want. And then in December of 2008, I got laid off with a lot of other people after Bank of America bought Merrill Lynch. So basically everybody who was below a certain line got let go.
But to me, I look on that as a blessing because, by that point, I realized like, “Okay, this is actually…I’ve learned a lot here, but this is not the environment I want to be in.” It’s kind of like a sales environment, it’s not…the sort of independent ideas I had about joining this industry in the first place were not really a reality there. Anyway. So I left in December 2008, along with everybody else in the training program, pretty much.
Michael: So as you were going through that, where did clients come from early on? What were you finding was working for you initially?
Sara: Early on, I did a couple events about college planning. I sent out an email to everybody I knew on LinkedIn. I had a few family and friends of family. Yeah, that’s about it. And they partnered us with an advisor, experienced advisor, and that guy kind of passed me a client that he didn’t want. Anyway, that was…yeah.
Michael: So very much just a world of…I don’t know, I guess I still view this as the traditional way that we, a lot of us end out getting started, particularly if you come through large firm environments, it essentially is, who do you know? Right, the friends and family, the natural network.
Career changer helps a little more because you have acquaintances on LinkedIn, people you worked with and knew in your prior industry, where you can go and say, “Hey, I’m doing a new thing now. So if you ever need help with your financial situation, I’d love to sit down and have coffee.” Right? So at least there’s some people to send that message to, which there’s not if you’re coming in straight out of school.
Sara: Yeah. I was like 35, and I had an MBA. I had worked in different fields; I definitely knew people who were qualified to be clients.
Michael: So Merrill did its downsizing, and you now suddenly find yourself in between opportunities. So, how were you thinking about kind of tackling the business? What comes next? You’d said earlier you realized where you were was not where you wanted to be because it was more sales-centric and wasn’t giving you the independence that you had envisioned. So, where did you go next?
Sara: Yeah. I also just want to acknowledge, I didn’t take it personally because it was crazy times, but it kind of reminds me of now. Like right now, a lot of people are losing their jobs. I’ve had several clients this week tell me that they lost their job.
So in times like that, you don’t really take it personally, but it’s still kind of emotional to lose your job. And so I think we need to acknowledge that for our clients. But because I didn’t take it personally, I think I was able to kind of like…this happened on like a Friday, by the end of the…by Monday morning, I was calling people.
Michael: So the key distinction, I guess, is because you didn’t take it personally, this wasn’t, “Sara, we’re letting you go because we’re not happy with your results.” This was, “Sara, we’ve let go and literally the entire training class that you were in, except that one person who somehow got a bajillion dollars and is staying.”
Sara: Whose uncle brought him with his team.
Michael: Yeah. So I guess at a personal level, this wasn’t a confidence hit personally?
Sara: Yeah, not really.
Michael: It was just like, “Okay, guess I’m not going to be doing it there. So time to find another firm.”
Sara: Yeah, yeah. I felt, though, that I was able to see what success looked like when I was there. I mean, there were definitely people that I’d met during my time there that really enjoyed their jobs and made a nice living and that I was interested in figuring out how I could do that too. So it was good to have that model or a little bit of like a vision of like, “Okay, well, if I can figure out how to make this work, it could be really cool.”
So it was in December 2008, and then I called some people that I had known. I knew someone who was at Merrill Lynch, who had left and gone to UBS. I got interviews right away because I had my licenses and I had my MBA. So even though it was kind of like the bottom of the market and a lot of places weren’t hiring, I did get some interviews and things right away.
And I got an offer…I got two offers. So one offer was at like a more insurance type of firm, and they had like a training program, and then maybe there was like a draw salary. And then the other thing that I ended up doing was joining the Raymond James branch in their independent contractor channel, where I had no salary, no draw, but also no sales targets. And so for me, that was what I wanted, where I would have a higher payout, no sales targets, but I could basically do things at my own pace without the fear of getting fired in six months if I wasn’t making it.
Michael: Interesting. So that was one of I guess the takeaways, the feelings for you coming out from Merrill was like, “Look, I felt like I was on track. I was going to get there, if only I got more time and more runway. So I just want to be at a firm where I get my own runway to do this at my own pace and don’t need to worry that I’m going to lose my opportunity if I don’t do it fast enough to meet their guidelines.”
Sara: Right. Right. And I knew I wanted to get the CFP at that point. That might be around when I started reading your blog, Michael.
Michael: Excellent. We are supporters of investing in yourself and getting more professional education and designations. I’ve done a few of those myself over the years.
Sara: Yeah. And I had a young child. I wanted flexibility, and I wanted to be able to do things at my own pace. That was the most important thing to me. So I joined a Raymond James branch in January/February of 2009. And I had no salary. I brought over some assets, but I actually was kind of losing money in the beginning because I paid them rent, and I paid them like an override to the branch.
And that branch, by the way, was also not an ideal place for me to be because it was right on Wall Street. They moved later, but it was in this terrible ’80s-type office. Everyone in the office was decades older than I was. Actually, around the time they brought me in, they brought in some other people, too. But the people who had been with the branch for a long time, they were really like stock traders. No in-person meetings, all phone calls, and just not exactly the way I wanted to do business.
Michael: So in sort of the truest sense, this was an office of Wall Street stockbrokers.
Sara: Yes. Yes.
Michael: Still living in with the 1980s office furniture apparently.
Sara: Yeah, it had this like teal carpet covered with coffee stains. It was terrible.
Michael: Nice. Nice. So help me understand from the overall household context how this works. The challenge for a lot of people coming into the business is just having the runway to be able to say and financially make it work of, “I don’t want to have sales targets. I’m confident I can do this, but I want to do it at my own pace, even if that means I grow slowly and steadily.”
So, how did you make this work from a household, just to be able to do that and get it off the ground?
Sara: You and Alan have talked before about the importance of having a supportive spouse. So I was lucky that I had a supportive spouse. But it was definitely a shock for us because we went from…before I got into the money business, I made a lot more money.
Michael: Well, they say there’s a lot of money in the money business, but not right away.
Sara: Yeah, exactly.
Michael: In the long run.
Sara: Exactly. So there was a period when I was in marketing. We had two good salaries, but then mine kind of like fell off a cliff. But my husband definitely has an understanding of the business and knew that okay, well, if we figure out how to make this work, it could be really great for us financially, and we just figured it out.
Michael: So this was essentially like, “We’re going to live on your salary for a while while I do this advisory firm thing. We can make that work. So let’s try it?”
Sara: Yeah, yeah, that was a big part. I had…before we got into this, we had some savings. I also sold my apartment in New York City at a profit. So we were lucky to be able to make it work. Yeah. But it definitely…financially it’s not easy to make it work.
Michael: So you actually made housing apartment changes just to try to bring costs down?
Sara: Well, just by luck, I was already…I had an apartment in Manhattan when I was single. And then when I got married, we sold it.
Michael: Okay, just going from two to one as the couple’s unit. Okay.
Sara: Right. Right. So some of that profit definitely helped support this endeavor. But really, I thought…I will say that it definitely took a lot longer to make money at this than I thought it would. I had been successful in my previous career and I just…I did…had met people like at Merrill Lynch or wherever who had been successful within a couple of years of being in the business, and so just kind of assumed that I would be too. But it really…it took a lot of time. It took years. And so there were reasons for that. The financial crisis, me having a baby, then I later had twins. There were definitely reasons that slowed things down.
Michael: That just takes it up a whole other level. We have three as well, but we did them sequentially, not doubling up at once, which I’m sure is a whole other level of stress and exhaustion.
Sara: Yeah, yeah. So there were reasons why it took longer, but definitely took longer than I expected it to. So looking back on like, okay, getting into this industry… And also when I got laid off from Merrill Lynch, there was a minute where I was like, “Oh, well, should I take some time off and be a stay-at-home mom?” That didn’t really feel like me, and also, I didn’t want my licenses and things to expire because I had put work into getting those. But there was definitely a minute where I was like, “Well, maybe I should go back to working in the corporate world and get another marketing job.” Which in 2009, there weren’t really a lot of those either.
Michael: Well, so I guess I may as well stay here because marketing’s not hiring at this point.
Michael: So, how long did it take for the advisory business to turn profitable, I guess comfortably profitable, for you?
Sara: Probably three years, which is kind of what they say for any sales territory or sales job is it takes three years to really make a business.
Michael: Is that basically to roughly get back to where you were before?
Michael: Was it even there yet, just at least positively growing?
Sara: It wasn’t even there yet, but to get like a six-figure income.
Why Sara Decided To Focus On The Divorce Niche [00:27:04]
Michael: So. what were you doing at that point as you’re going through this first three years, right? I guess in the first three years after you transitioned to Raymond James. So you’ve got lots of flexibility. You can do it at your own pace, and no one is hitting you with sales targets and cold calling quotas, but obviously, just feeling the pressure of, “I want to get my income back. I want to get growing. There’s now a mouth to feed at home.”
So, what did you do? How did you come at this in trying to build a business in the long run?
Sara: Yeah, I liked…there were things about the independent model that I liked, not having sales targets. I liked being fee-based. I couldn’t call myself fee-only then, but being fee…doing things based on fees instead of commissions. That was something that I saw as a differentiator for myself at the time. I was working hard on getting the CFP. I got the CFP in 2010. And I did the CDFA at that point, too. And the CDFA was…
Michael: So CDFA, for those who aren’t familiar?
Sara: Certified Divorce Financial Analyst.
Sara: Yeah. And so I had had people reach out to me asking…I had had…I did BNI.
Michael: Business Networkers…
Sara: International, is it?
Sara: Yeah. So I did a BNI group and I got referrals from that. Looking back later, I definitely got clients from that. They weren’t my best clients, but I definitely did get clients from that.
But an accountant I knew in that group asked if I could help someone with their divorce. And I started researching that and got the CDFA designation. And that became a bigger part of my marketing. I did the training to become a divorce mediator.
There’s the collaborative divorce training and group in New York City. Basically, I know a lot of divorce mediators and attorneys from that time. And so that was a good differentiator for me and a good source of referrals and also just of revenue.
Having come out of the financial crisis, starting…being a financial advisor and seeing people’s AUM drop and having fee-based revenue, with income tied to the ups and downs of the stock market, I really wanted to kind of diversify my revenue. And so being able to charge people a fee for my time and my advice was something that definitely appealed to me as a way to diversify my revenue.
Michael: So, what were you doing from a business model end? Because you were doing that coming out of the market decline and the AUM decline from the financial crisis. Obviously, this has now become a highly salient topic again lately because we’re going through another bear market cycle. And there’s a lot of virtues for the AUM model and the growth that you get during bull markets, but then you have to deal with the bear market, and it goes the other way. So, what was the revenue model that you were starting to build on?
Sara: Yeah, I’ve increased it over time. So I think when I started doing divorce financial planning, I was charging, I want to say like $150 an hour. And I was totally underestimating the number of hours it would take me to do something as well. But, I was reviewing things for like $500, $1,000, $1,500, something like that. Now I have my rate as $300 an hour, but I estimate…I do like a flat fee upfront for divorce-related projects.
Michael: I charge $300 an hour and I estimate this project is going to take 5 hours, therefore, I’m charging you $1,500 for this scope of work.
Sara: Yeah, but it’s a 10-hour minimum.
Sara: Yeah. So it’s like $3,000. But then if it’s a more complicated case, well, then it might be like $4,500 or more. And then if we work on this for a while, we’ve finished our deliverables but then you come back to me later for just a few things, well, then it’s just an hourly charge, $300.
Michael: So for those who aren’t familiar with sort of the divorce planning niche unto itself, what are you doing for $150 an hour, now $300 an hour, with these 10-hour project minimums and up? What do you do?
Sara: Yeah. I would say that the people I like working with and the people I attract are the ones who are somewhat amicable. And a lot of them have kids, a lot of them are doing the mediation process, but they still need to kind of get organized. They need a budget. Their mediator or attorney is asking them, “Oh, well, what’s your net worth? What is your budget?” They don’t know. And so helping them get organized and like looking back at their last…at their spending history to see what it costs to run their life.
And putting all these documents…I use a software called Family Law Software, which a lot of the attorneys also use. So putting like their net worth and their budget into a format that everybody can work with, and then starting to look at different ways of dividing their assets. There’s usually more than one way to divide it. There can be tax implications. What if they sell their apartment or their home? There could be capital gains implications to that.
Looking at all those aspects before…so that people can make informed decisions. Because really, once you have a settlement agreement, you’re not really going back. The software also calculates child support, spousal support as well. So helping people be realistic about what they can expect in that area as well.
Michael: And so that’s why this ends out being hourly project-style work. It’s just going through with an individual or the couple and helping them get oriented like, “Okay, if you now brought all your stuff together in one place, here is your net worth. Here is your household cash flow. Here is the actual dollars that you live on.” I was going to say the budget you live on. I guess they didn’t budget, it’s not a budget, but more like, “Here’s a reflection of where your money goes.”
Sara: Well, yeah. So it’s like, “Okay, well, here’s what it costs to run your life in the past. But now if you go from one household to two, what can we project for that?” Yeah. It is like a project type of work. It’s really helpful. And it’s also like objective third-party verification. So say one person has been handling all the finances, well, trust is pretty low at this moment in time in the relationship. And so you don’t want to just accept everything that this person gives to the lawyer, you want someone to review it against the tax return, against the statements, make sure that things are accurate. And also, frankly, we’ll notice things about a tax return that most people are not going to notice. I had a client who was filing her taxes jointly and I said, “Oh, well, you’re not retired, why did you take out $200,000 from your retirement accounts last year?” And she had no idea.
Michael: Wait, we did what?
Sara: Yeah, exactly. Like, “Oh, he’s been taking all these withdrawals and I had no idea.” So things like that.
Michael: So, how did you view this overall from the business end? Was the idea, “These hourly and project fees can balance out my AUM?” Was the idea, “I’m going to do this because I can actually get AUM clients but doing the divorce work for them first?” How were you approaching this?
Sara: It was a mix. So I wanted to have revenue that wasn’t tied to assets. Also, with AUM revenue, it takes time for it to play out. There’s a lag. So if you bring in $500,000 in an IRA, well, you don’t really get the 1% paid for that on day one, it plays out over the course of a year.
Michael: Right. Like, congratulations on your $500,000 account. In 3 months, you’ll get $1,000 with the first quarterly billing.
Sara: Right. And so having flat fees or hourly fees was a way for diversifying my revenue, but also to increase immediate revenue. And then some percentage of those clients, probably about a third, have also become long-term planning and investment clients. And those are some of my best clients, to be honest, in terms of revenue, relationship, referrals, all those things. But it’s hard work.
Michael: Yeah. You make an interesting point about this framing of having hourly and project planning fees as a way to fill in revenue sort of early on when you’re not yet at a critical mass of ongoing clients and ongoing recurring revenue. Whether it’s AUM fees or subscriptions or whatever you’re doing, it takes time to build that and accumulate that client base.
And to be fair, if you look at most of the large advisory firms today, the large AUM firms today, many of them did not build AUM from scratch from day one, because they started 20 and 30 years ago, when the world was largely commission-based. And they were earning commissions in the early years because it’s front-loaded compensation, so it makes the math work better. And then after you’ve got a certain base of clients, you start selecting trail options, you start mixing your revenue to be more recurring, you kind of graduate into your recurring revenue over time, and then eventually you’ve got enough recurring revenue that you don’t need the upfront.
If you’re living in a fee-only world today or trying to build in an RIA context, you don’t get upfront commissions as an option to front-load your income, but you do get pay by the hour or pay by the project upfront planning fees as a way to get upfront dollars going for work being done immediately while you build your recurring revenue client base over time.
Sara: Right. That was definitely also something that I saw coming out of my first firm, was that you had these targets, sales targets you had to make, but to do that with AUM fees, it would have been very difficult to do in the timeframe. And so a lot of the advisors who were successful in that, or at least tried to be successful, they were looking for the things that had like a higher commission or like annuities or structured products and things. And so that was…
Michael: Got to qualify your contracts long enough to stay in the game to get the…
Sara: Exactly. Exactly.
Michael: …to get the long-term opportunity.
Sara: Yeah. And so I didn’t want to do that. Now I certainly don’t want to do that or have that option but…anyway, there was still kind of a need to…I keep saying it was like…to me, it was…it made me feel comfortable to diversify my revenue.
Michael: So, how did that grow and evolve over time? Did the divorce world become a growing part of your practice as you got traction there? Did you do less of it? Because once you build enough ongoing clients, like, “I don’t really need to do this project work anymore. I’m going to do less of it?” How did it evolve?
Sara: It’s gone up and down. I started doing some…I did some presentations for like a group of mediators that I was part of. And then I was later…I was on their board for the Family and Divorce Mediation Council of New York. So I got to know a lot of people that way. I will say I definitely have…I understand attorneys a lot more than I used to. So that grew over time.
There have been times that I’ve not really wanted to take on any additional divorce clients because it can be stressful work. There are people that say like, “Oh, this is a successful niche for you, you should do 100% divorce work.” But I just don’t want to do that because it can be…some of my most draining client work is working on some of these divorce cases.
Michael: Interesting. So from I guess the mental or psychological diversification perspective, you actually didn’t want to go all in to the divorce niche.
Sara: I didn’t. Yeah. I’m happily married. So I don’t want to spend my nights stressing about other people’s divorces.
Michael: I get it. Makes sense to me. I’ll admit, even on my end, there’s project work that I’ve done over the years, little bits around divorce, although I didn’t go deeply into that expertise. And for some of my early career, I did a lot of writing and publishing around annuities and ended out doing a stint for a couple of years where I was doing a lot of expert witness work on annuity cases, inappropriate annuity sales to clients, either helping clients make the case against the agent or every now and then actually supporting on agents who were getting unfairly accused of “all annuities are bad” when actually they made an absolutely fine recommendation. There was nothing wrong with it.
But I ultimately stopped doing all that work because I just found being immersed in the middle of the litigation process to not be very psychologically gratifying. It was remunerative; expert work like that pays very well, but it’s stressful. And I was bringing home the stress and decided like, I’d rather find a niche where I feel more helper than a niche where I’m trying to figure out how to defeat the other attorney who’s trying to do every legal trick available to win the case for the client because that’s what a lawyer does, to defend their clients.
It didn’t feel good, at least to me. It wasn’t a game I liked playing.
Sara: Yeah. I haven’t pursued the really…the highly litigated cases for that reason, because I have seen things get really kind of ugly, and I just don’t really want to be involved.
How She Gets Clients And Builds Her Business [00:42:07]
Michael: So talk to us about how the business has evolved then over the years. So you kind of set your…planted your flag at Raymond James, “I’m going to do this on my own pace.” You got your CFP and your CDFA early so that you could start doing some of this divorce work. It diversified the revenue; it brought a little bit more upfront dollars in a world where AUM sometimes builds a little more slowly.
So, how did that kind of marketing and growth process for you change or evolve as the years went by?
Sara: Yeah. I would say my other sort of key client niche would be couples, that I had something in common with. So I was living in kind of what they call Brownstone Brooklyn. And there are a lot of families with young kids living in that area. They maybe have like two-income, high income, but also high expenses. And there’s more responsibility when you have young kids. And I would say a lot of creative professionals like maybe one person has a more corporate job with benefits and health insurance and maybe stock options and things like that, and the other person is maybe like an independent contractor, freelancer type of person.
Michael: Kind of like being in a role where you are an advisor and is an independent contractor in a creative role with a spouse who is in a more corporate job with health insurance and the rest. It sounds vaguely familiar.
Sara: Exactly. Yeah. And what a mystery. Why do I attract these people? So when you look at my average AUM client base, it kind of works out to age…the average is like 45 and the median is probably a little younger than that. So people, yeah, they have good jobs. Maybe a lot of their assets are in their 401(k), but then if they change jobs at some point, well, then maybe we manage that, too. Not all my clients are divorced. So that’s been a niche for me, but it’s not even the majority of our clients.
Michael: And so, how do you think about this now from the marketing perspective? Because it sounds like there’s almost three buckets of clients. There’s people that you get on the divorce end. It works. They even turn along clients, but can’t do that all the time because they’re stressful. You’ve got sort of this dual high income with kids and complex lives subset of clients or I feel like quintessential Gen X because this is our life right now.
Michael: Right. And sort of serving your peer network and the people that you interact with directly. And then it sounds like you’ve also got others that showed up in the practice because if you’re out there doing this long enough, at some point, people refer people and you just end out with some other clients as well.
Sara: Yeah, I did some acquisitions when I was at Raymond James also.
Michael: So, what did that look like?
Sara: There was one that was really nice. It was another advisor in my branch. He wasn’t physically located in the branch, so I didn’t know him that well, but he was affiliated with the OSJ. Anyway. So he wanted to kind of reduce his client base and kind of offload his kind of like C clients. And I took those over. And that actually worked out really well. And so there was like a shared payout for some period of time, and then it was over and they were my clients. And I still have a few of them. And this was years ago.
Michael: So I’m curious how that worked a little bit more from the economics end. Because I…to me, this has always been a prime opportunity for advisors in the early years, just this whole phenomenon that like, basically wherever you are up and down the wealth management spectrum, there’s always a phenomenon where your C clients are someone else’s A clients, right?
When you’re getting started, pretty much anyone who fogs a mirror and can pay you is an A client for you, but it might be a C client for someone else. And at some point… I know large firms where their minimums are $10 million. Like, their horrible C client, their accommodation client that only has $4 million is someone else’s amazing A client. It exists up and down the spectrum. There’s always a phenomenon where someone else’s C client is your A client and your A client is someone else’s C client.
But often we kind of hold onto everything. We don’t necessarily let these go. So, how did you figure out a structure or some economics that actually made this comfortable to transition where you got a chance at these clients?
Sara: Yeah. This was years ago, too. And I want to say it was maybe…it wasn’t a huge acquisition. It was like 20 clients, and it was like over 3…a shared revenue with him for over 3 years.
Michael: Just like a 50/50 split kind of thing?
Sara: It was reducing. So I think it was like 60/40, 70/30, 80/20 I think.
Michael: Okay. So he got 40 then 30 then 20?
Sara: Right. Right.
Michael: And the idea, I’m assuming, was he got that split not only on whatever the trails or ongoing revenue was, but anything new that you did as well. That was part of the opportunity for…
Sara: With that client.
Michael: …for him is like, you want to go out and call on them and find new opportunities? Like, okay, you can buy them out, but if you make new opportunities, I still get a revenue share on those. That’s part of how we both benefit, because otherwise, you may as well keep the trails forever.
Sara: Yeah, yeah. So that was fine. And so they all…I don’t know if they started that way or…it’s hard to remember. So long ago. But they were all…became fee-only clients. And I don’t have all of them now because I’ve made changes along the way, but I still have a few of them that are…they’re very dear. They’re nice people. But then I did a second thing like that that was kind of a disaster.
Michael: So, how was this one different, and what changed from the first?
Sara: So someone, he wanted to have a…he was an older gentleman who was kind of being pressured to have a succession agreement in place but didn’t want to retire. Asked me if I was interested, and I said, “Well, not really because, actually, I am pregnant with twins, and I don’t really…this isn’t good timing for me.” And he’s like, “Well, that’s perfect because I don’t want to retire anyway, but I need someone to be on this agreement so that if I get hit by a bus, that I’m covered.”
So I said okay. So I was…I forget what they call it, but I was kind of like the backup person just in case. And he really wasn’t planning on retiring for a few years, and I wasn’t planning on taking over this business. Well, of course, you know what happens is…he was kind of forced into retirement. I’m trying to think. My twins were born in November of 2014, and I got the call on like November 15th saying, “Oh, well, this guy needs to retire December 1. Can you take over?”
Michael: Two weeks after the twins are born and you have two weeks to do the transaction?
Sara: Yeah. And there were RMDs to do. And it was such a mess. I handled it, but I was really not happy about it. And I hadn’t really done a lot of due diligence because I really wasn’t planning on taking over, but they were just not good clients for me. They had annuities and they had the things that were fee. Had way higher fees than I would have done. And he was getting a revenue share, but it dropped immediately. And he wasn’t happy about that. It was unpleasant.
Michael: And so in retrospect, do you wish you hadn’t done it, or wish you’d done it under different terms? What would you have done differently if you could go back and remake this?
Sara: I would have done more due diligence and looked more at like the client investments to see if they were in alignment with my philosophy.
Michael: Meaning like you’re a passive investor, he was active day trading stocks, one of those kinds of distinctions?
Sara: Yeah, just people in like energy stocks, I don’t know, and annuities that were a high…there was a lot of annuities. I don’t want to say too many details. But yeah, we were not really in alignment.
Michael: But I think we get the general gist. And so in retrospect, had you known, you just wouldn’t have done it? Is that the distinction here?
Sara: I would have said, “Pass, find somebody else.” And I wish that’s what I would have said. And I was upfront when I told him, I was like, “Listen, I’m pregnant with twins. I’m not the right person. I don’t want this right now.” And he was like, “Oh, well, that’s perfect because then they won’t push me to retire.”
Michael: So the X factor that you didn’t realize is the reason that some manager was pushing him to complete this form was because the manager intended to expedite his exit as soon as the form was done. And so you became the recipient of that master plan that you were not privy to.
Sara: Yeah. It was kind of a disaster. Yeah. So anyway. So I was at Raymond James. I was in their independent contractor division. And then I had always…I was…most of my business, 90%-plus, 95% was fees. I had a little bit of random trails, I guess. Maybe some 529s, some things that had come along the way.
But most of my business was fees. I wanted to be fee-only. I wanted to start an RIA. So I started my RIA in 2016. And when I left that branch, that acquisition stayed with the branch, which was perfectly fine with me.
Why Sara Eventually Switched Back To An RIA [00:53:02]
Michael: So, what led the shift and transition to say you wanted to go full RIA in 2016?
Sara: I had even looked into starting my own RIA back in like 2009 and decided, okay, well, I wasn’t ready for it. I didn’t have enough assets. I didn’t have enough clients. But it’s funny because I feel like it’s easier now with XY. That doesn’t seem to have stopped a lot of people who join XY Planning Network who start their own RIAs with no clients and no experience.
Michael: Yeah. No, I think that the landscape has certainly shifted dramatically, even just over the past 10 years of… Well, obviously, we put out a platform like XY Planning Network to support people going RIA or launching their own RIAs. But the whole ecosystem and the breadth of technology are drastically different than what they were 10 years ago.
Outsourcing providers, all the different ways that you can get help – you’ve got more tech tools, more providers, third-party services to plug in all over the place. The good and bad news, that means you’ve still got to decide how you want to put all that together, right? That’s the benefit and the curse of being an independent advisor and a business owner.
But I’ve watched it over the years from back in the 2000s sort of the rough rule of thumb was, you didn’t even think about going independent RIA until you had more than $100 million under management. Because that’s basically what it took to cover the hard costs of the staff you would have to hire to do various things.
And then by the early 2010s, it was probably $50 million before the economics really worked. And then by the mid-teens, it was like $25 million. And now these days, I see firms where the crossover is probably something on the order of $10 million. And if you’re growth-minded enough and you think you’ll get there quickly enough, you just launch and do it from zero because you’re going to hit the crossover relatively quickly if you think you’re going to go that route.
Or not even in an AUM basis, but just what it costs in hard dollar costs to get the basic tech and stuff that you need, like $100,000-plus of revenue and you already start seeing the crossover that if you’re going to run a relatively lean RIA, you can start getting better economics from the RIA side than the independent broker-dealer side, at least if you want all the rest of the responsibility and work that goes with running your own business. Some people want that, so you continue using platforms.
Sara: I like that part. And I think that that’s what I always wanted. And so I started seeing more stories and reading about people who were doing the RIA business and seeing those models and realizing, “Well, I could do this, too.” And so I prepared for that, and I launched my RIA in 2016.
Michael: So, what drove you to make the change at the end of the day? What were you going from or trying to get to that made you want to go through that?
Sara: There’s the economics, but there’s also kind of what I said before about realizing like, I’m in an environment that does not align with my philosophy or brand. At a certain point, I was a part of this branch that I have nothing in common with these people.
Michael: Because you’re trying to be a fee-oriented financial planner in a branch of 1980’s-style stock brokers.
Sara: Right. Right. And so I’m paying them, but what am I really getting for what I’m paying? Someone to deny my tweets. I don’t know. It became frustrating because like, “Why am I part of this when that doesn’t really seem to have anything to do with me?” Anyway. But it wasn’t anything against that particular broker-dealer, their technology was fine. And also, I think having a marketing background is part of it, too, because I really didn’t want to promote their marketing message and their communications and things. I always thought things connected better with clients when I write them.
Michael: Okay. So it sounds like it was kind of a blend of just the, I’ll call it the direct economics. Can I keep more of my dollars when I cover my own expenses than using their own overhead? Sort of the indirect economics of, the broker-dealer takes a slice, but I don’t feel like I’m getting my value for the slice that they take because I don’t use the things that they offer. And then some of the control around marketing and messaging of being able to say, “I want to put out my communications as Sara, from Sara, written by Sara, and not need to run corporate communications that is harder when you’re in a large brokerage environment.”
Sara: Yeah. They were…comparatively speaking, they were pretty progressive in that area. I had a blog since…I think I started in 2012. So I had a blog while I was still affiliated with them. And now that blog has sort of like morphed into my website, but my old posts are probably out there.
Michael: So, how did that transition go? What was it like trying to take that leap and make the transition?
Sara: So the branch was mad at me. They weren’t happy about it.
Michael: Why were they mad?
Sara: Well, because they felt that they had done things for me. And I was their only advisor with business that was actually growing. It’s revenue for them as well.
Michael: Okay. How did you break the news?
Sara: Oh, I don’t even remember. But I asked to speak with the manager. And there was like a father and son team. I don’t really want to say anything negative about them because they tried.
Michael: Obviously, it didn’t work out. You’re not there now.
Sara: Yeah, yeah. I’m not there now. I gave them lots of warning. I told them like three…I was like, “Well, this is what I’m going to do next quarter.” And I talked to… So I kept my assets within Raymond James. So they had a division for like RIAs, and I moved to that division. And so I approached them and I said that this is something I wanted to do and they said, “Oh, well, you’re below our asset minimum to do that. Why don’t you call us back in a year?” And I said, “Well…”
Michael: As though you’re going to move all of your assets off the platform, but then when you grow, you’ll call them back to bring it back.
Sara: Well, no, no, no, they wanted me to stay in my existing branch. And I said…
Michael: Okay. Okay.
Sara: Yeah. I was like, “Well, if I don’t do this with you, I’m going to go someplace else.” Anyway. So I moved assets with them. I was below their minimum, but I moved my assets to that division. But I had to repaper all my clients, which was a lot of work. But they still kept the same account number and the same website, so that was good. But they had to sign paperwork.
Michael: Because you were flipping the advisory agreement, I’m assuming, because you were going from from Raymond James’ paper advisory agreement to Sara Stanich’s RIA advisory agreement?
Sara: Right. Right. And moved office space.
Michael: Why were you using Ray Jay’s RIA platform as opposed to the other choices that are out there?
Sara: Well, then I moved again. So two years later…
Michael: Oh, okay.
Sara: Yeah. So I did that in 2016, and then two years later, I ended up moving everything to TD Ameritrade.
Michael: So I guess I’m curious about both then. What led you to stay, and then what led you to go two years later?
Sara: I think staying…I stayed because I wasn’t particularly unsatisfied with them in terms of like the technology and such. And I thought it would be an easier transition for my clients. I thought that that was reassuring, like, “Oh, your account number doesn’t change. Your money is not moving. You just need to sign this paperwork because,” like you said, “The advisory agreement is changing.” So that was the reason…really the reason I did it was to make an easier transition for my clients. But then I started kind of looking at the technology. I wanted more technology options. And TD was kind of integrated with everybody.
Michael: So the TD Ameritrade’s sort of Veo Open Access platform was the driver just because of all the integrations that are there?
Sara: Yeah. Yeah. So I tested them with a few accounts, a few new accounts. So there was a period where I had two custodians, and then I looked at the economics of it and it was a lot. It was saving me money. TD was more profitable.
Michael: What was saving you money?
Sara: It was like the account types at Raymond James had certain underlying fees with the payouts that would come to me. I can’t even remember the details. Moving to the RIA was an increase in profitability over being within the branch, that’s for sure. But then moving to TD also… And there was also like a technology fee. Yeah, there were some fees. But it wasn’t really…there were some fees, but I would say it was really more about like the freedom to sort of set up my own technology.
Michael: So it was mostly the broader range of technology integrations and ways you could put together your stack.
Sara: Yeah. But not everybody needs that. In fact, a lot of people would rather not have to make all those choices.
Michael: So, what changed in terms of the firm’s marketing or messaging? Because I’m struck, this is sort of the first point in the journey when you are actually entirely under your own umbrella.
Sara: I’m free.
Michael: Because there’s no more corporate oversight of what you can say, not say. Were you still actually pretty happy with where it was and did the same thing? Did it start to completely change? What happened at that point from the marketing perspective?
Sara: Not that much really changed, to be honest. However, I think that the industry changed. And I think that people are looking for fee-only in a way that they weren’t like five-plus years ago.
Michael: Well, I think ever since the Department of Labor fiduciary rule hit and sort of put fiduciary and advisor compensation into mainstream media, there’s more discussion around it than there was before.
Sara: Yeah. And our clients are highly educated. Like a lot of people ask like, “Are you a fiduciary?” And so they didn’t ask that when I got into this business nine years ago. And so, of course, we get clients now from things from NAPFA and XYPN. We’re listed on some places for fee-only advisors now. So I guess we get a few clients from those.
But yeah, I think that that fee-only and fiduciary didn’t use to be…maybe it’s less of a differentiator now. I know you’ve made that point on your blog, but I don’t think anybody was even really looking for it five-plus years ago.
Michael: Yeah. Well, that’s the double-edged sword. First, people start looking for it. And if you do that, you’re different. And then a lot of people look for it and everybody does it, and then it’s not different anymore. Markets are wonderfully adaptive. But it takes some time to get there. When you’re in the right place, when that’s what people are looking for, it becomes a very nice growth opportunity for you.
Sara: And we’ve changed our sales process also. I have a more defined sales process now where I do like a short intro meeting, where I used to do a free consult that was like an hour-plus and wasted a lot of time, frankly. Now I do a short intro call, and then I do a consult meeting that people have to prepare for by providing data and statements and things.
Michael: So walk me through what this looks like now from the marketing perspective when someone is interested. Because I noticed sort of on your site, you’ve got, I guess interesting stuff I don’t see on a lot of other advisory firms.
There’s like a Calendly link. I can, right on your page, set up either an introduction call or a discovery session or a consultation meeting. Your homepage has this cool assessment, “Are You Cultivating Wealth?” because your firm is Cultivating Wealth that takes you to a quiz with a bunch of stuff you learn about yourself.
So talk to us about what that marketing and sales process looks like for you at this point.
The Software Sara Uses To Identify Who A Good Fit For The Firm Is And Three Simple Things She Includes In Her Newsletters To Prospects [01:06:58]
Sara: Yeah. So people find us. Maybe they’re referred by a client, maybe…we write blog posts that get out there occasionally and connect with people. And they can schedule an intro call. There’s that quiz, that quiz is powered by DataPoints. I’m sure you know.
Michael: Okay. Yep. So, what does the assessment do? Just for people who aren’t familiar with DataPoints, what is it? What is it measuring?
Sara: It’s about the wealth-building factors. They have all this research, and studies show what factors are correlated with people who are building wealth. So it’s like the short version of one of their assessments for lead gen.
Michael: So the idea is like people who do this and score well are more likely to be wealth builders, which is otherwise known as probably a good prospect? That they exhibit wealth-building behaviors?
Sara: Yeah. The short version of that quiz is pretty short. So it’s just kind of…it’s just a way to kind of engage and get people’s email addresses, frankly. So they get a little bit of information about it. Maybe it’s intriguing. But then they’re also added to our email list and to get our newsletter.
The intro call is a 15-minute call with me, Nannette, or Liz. You don’t need to prepare for it. There’s not really much commitment for a 15-minute call. But the 15-minute call, we talk, find out from the client what they’re looking for, why they reached out to a financial planner, and then just give them a very high level of what we do and also how much it costs.
So really to me, the purpose of that call is to kind of qualify people and also, yeah, qualify that they are still interested after they find out that this is something that costs thousands of dollars.
Michael: And you find 15 minutes is enough to get through that conversation.
Sara: It’s enough to…we let it…if it’s…we’re having an interesting conversation, we’ll let it go on. But it’s enough to eliminate people who are not a good fit.
Michael: Right. So the goal is not to get to know everything about the client, to get them fired up to work together and start your data gathering, the point is to screen out the, yeah, this clearly is not going to be a fit.
Sara: Yeah. And actually, even before…so when they sign up for the intro call, 24 hours before that, they get a reminder confirmation, but then also an email of frequently asked questions. And so that is a good…really good screener. So “Thanks for scheduling the call. Fifteen minutes isn’t a lot of time. So here’s some frequently asked questions to get these out of the way so we can spend our time talking about you.” And the frequently asked questions, I’m just going from memory here, but they include, “Are you a fiduciary?” Well, yes, yes, we are. “How do you get paid?” Well, we can…there are really two ways. We can do a flat fee or a project-based fee, though a lot of those are related to divorce, or we can manage your investments, and the fee on that is typically 1% of investments under management. And our flat fees are $4,500 for individuals and $6,000 for couples. And so sometimes people get that email and they’re like, “Actually, this is not something I’m interested in.” Also, one of the frequently asked questions is, “Can I hire you for just an hour or two?” And it says, “Sorry, we can’t do that right now. We’re actually just too busy.”
Michael: And out of curiosity, why cover that stuff in the email confirm, as opposed to on the site itself? Or do you also cover it on the site but people don’t read it, so then you have to send it to them in the email as well?
Sara: It’s also on the site. I just want to make sure they get the point. Yeah.
Michael: Okay. So you put it out there in both, but it sounds like have actively found, “Despite the fact this is on my website, not everybody reads everything on the website. So I’m also going to put it here and it saves me some calls.”
Michael: And so if that call goes well, what comes next?
Sara: The consultation meeting. And so that meeting, we ask people to prepare for that meeting. And actually, it was pretty good process. When you schedule that meeting, it goes to a questionnaire which asks you a few questions and goes to a JotForm form, and also generates a Dropbox folder, a shared Dropbox folder where people can upload documents. So it asks you a few questions like, “Oh, do you own or rent?” And so if you own, it generates a list of documents you should provide. And so it’s like tax return and pay stub. But if you own, it’s mortgage statement.
Michael: What tool or technology are you using to guide that? To give questions and contextual answers, “Oh, since you said you own and not rent, please put your mortgage in there and not your rental agreement.”
Sara: Yeah. Actually, I hired Arielle Minicozzi to set that up for us.
Michael: Okay. And Arielle is an industry consultant?
Sara: Yes, she’s a…I’m sorry, Arielle, but I can’t remember the name of your firm right now.
Michael: We’ll get in touch with Arielle and find out. So if folks are interested, this is episode 177. So we’ll have…if you go to kitces.com/177, we will have links out for Arielle if you want similar automation efficiencies for yourself.
Sara: Yeah. And so something just coming at this with kind of like a marketing background is I started last year actually tracking this stuff. Like, okay, how many introductions calls? How many consultations? How many discovery meetings? So people have the consultation meeting.
In the consultation meeting, we have a PowerPoint presentation, which is a little bit more about our firm, how we work with our clients, but then there’s a few slides that are customized to the client. So “Here’s what we saw when we looked at your stuff. Here are the things we think we would start focusing on for you.” And my idea with that… And then I also have some case studies of clients that have something in common with this prospect.
The idea is to leave them wanting more. Give them some useful information but leave them wanting more. And then if they…after that meeting, we send a proposal. I started using a software called PandaDocs for that, and I really like it. If they say yes to the proposal, we send them the advisory agreement and schedule what we call a discovery meeting.
Michael: So, what does PandaDocs do exactly in this process?
Sara: It’s something I just…I’m trying to remember who I saw using it, but you can have like a template proposal or template documents, like advisory agreement or investor profile. And so you have a template, you put in the new name, the advisor name, the client name, their email address, populates the document, sends it to them, and does like an electronic signature back to you. And there’s also a billing feature to it. So if there’s like a first payment that they’re doing, then they can pay right from there as well. It integrates with QuickBooks. Petty awesome.
Michael: Interesting. Okay. So you come out of your consultation meeting, I’ve got a feel for what their concerns are. You send them a proposal of “here’s what we do.” And what does a proposal look like for you? Is this like, “Here’s some recommendations we might work on?” Is it just like, “Here are portfolio changes we would make?”
Sara: A proposal is like, “Okay, here’s what we heard from you.” The portfolio is not that specific. Maybe it might have some things about asset allocation if they’re way off. It’s not really focused on the investments. So a lot of times what we’re talking about more is like, consolidate, streamline your investments.
So, my clients, they’re sort of Gen X, they’ve changed jobs many times. They’ve opened up accounts all over the place. There’s no like global view of how everything works together. So the consolidate and streamline is actually, I think, more of a value. It’s more the value that I’m focusing on than actually better…objectively better investments. Yeah. So the proposal is, “Here’s what we heard from you and what we would focus on, here’s a timeline of our next meetings that we would do, and here’s the price.”
Michael: And ideally, you send out the proposal, and if they’re ready to be on board, they sign? Do you do like a follow-up call or a “let’s walk through the proposal?”
Sara: Actually, my proposal says, “If you’d like to move forward, reply yes to this email.” So then they say yes and I say, “That’s great news. Let’s get your discovery meeting on the calendar. And I’ll send you the paperwork for your advisory agreement, investor profile, whatever it is.”
Michael: And so they say, “Yes, we’re off and running.” If they say no, like, “So sorry, wish you the best in wherever you end out.”
Sara: Basically. Yeah. They say, “Sorry, we decided to go another direction,” or, “Maybe we’ll reach back out in six months.” It’s fine.
Michael: And then talk to us a little bit more about what you’re doing for getting people up to this point. You had mentioned ultimately, you’re using DataPoints to get someone’s email address. You publish some blog material that you were doing before and have continued. So, what does that look like in terms of trying to get email addresses? What do you do with email addresses? Where are you actually sending people?
Sara: Yeah. So I have a newsletter I’ve been sending out about monthly, and it’s like a message from me. And then kind of we’ve been blogging and…what we’re blogging, what we’re reading. And so there’s usually some recent blog posts, and then some interesting articles that we’re reading.
Michael: Interesting, what we’re reading. So kind of curating like, “Here are a couple articles we’re reading (that you presumably will be interested in as well, or might be),” just so you can add value but don’t have to write it all.
Sara: Yeah. And so it’s like sort of financial planning/economics/life and times of Gen X.
Michael: Who are now home for many, many months.
Sara: Of parents of young kids.
Sara: Suddenly, I’m supposed to be an expert on homeschooling, but I’m really not.
Michael: Yeah, we aren’t either. I feel like there’s definitely sort of a generational Gen X and I guess sort of front end millennials as well of, yeah, I had kids and I work, but I didn’t plan to homeschool my kids while I work. That was not part of the master plan that I’m now rolling with, given the pandemic.
So, as you kind of reflect on this journey, what surprised you the most about trying to build your own advisory business?
What Surprised Sara The Most And The Low Point Through Her Journey [01:19:22]
Sara: Maybe I was just overconfident, but I think it surprised me how long it took. So it’s taken a long time. There’s just been a lot of ups and downs along the way. It’s a really good business to be in. I have to say, I feel very lucky that I love what I do, and I have the ability to do work that I enjoy.
Michael: So paint a picture for us of what the firm actually looks like today. Where do you stand on, I don’t know, clients or AUM or revenue, or however you size the practice? Where does it stand today?
Sara: Yeah, we have like $50 million in revenue and…
Michael: Or $50 million in assets under management?
Sara: I mean assets, sorry, assets. Yeah, $50 million in assets. And about 85% of our revenue is AUM fees. And so then there’s kind of close…I would like it this year to be like $100,000 in non-AUM fees type of revenue.
Michael: So that’s still the divorce planning project work?
Sara: Yeah. Yeah.
Michael: And that’s because you want to grow it or that’s just some of your counterbalance to the market downturn?
Sara: No, just this past quarter, it was like almost $40,000. So it’s actually more than $100,000 for the year. It was like $40,000 in planning fees, non-AUM fees, so just planning fees. So that’s divorce and… We also do general comprehensive financial plans for people who don’t want us to manage their assets.
Michael: Okay. And how many clients across the business now?
Sara: So there are 95 households where we’re managing their AUM, and then at any given time, there’s probably somewhere between 5 and 10 planning clients.
Michael: Okay, they’re just at some stage of the planning process.
Sara: Right, right.
Michael: And what does this look like from a team and infrastructure perspective? Are you on your own? Do you have other support in place?
Sara: Yeah. So I have two CFPs that work with me. So one joined us in 2018. So she’s full-time. She’s a CFP. She works with clients. But we generally kind of do like a team-based approach where we both are in most calls with clients, but she’ll lead the email follow-up, developing the plan. And then another planner joined…someone I knew through XY, Nanette, that you know too, joined in October of last year. So now there are three planners. We also have a virtual assistant. She brought some of her own clients, but we work together on clients as well, new clients coming in. And then I have a virtual assistant who handles all our TD paperwork.
Michael: And is that a full-time employee? Is that a part-timer?
Sara: She’s definitely part-time. And she’s affiliated with a firm called Total Office, and they work with other advisors, other financial advisors. A lot of them are TD, custody with TD. So she’s familiar with the paperwork. So that’s a big load off. I’m trying to think. That’s about it. I had a marketing person part-time, very part-time consultant. I have a bookkeeper. That’s about it.
Michael: And so, how has the firm evolved with your role as the team grows and shifts?
Sara: I’d like to grow our team. I would like Cultivating Wealth to be a regional RIA. I would really like to grow dramatically and hire more planners, more client-facing, maybe a paraplanner to support my planners so that they can spend more time talking to clients. And I would like to actually reduce my time talking to clients so that I can spend more time on marketing and sales and operations process, things like that.
Michael: So, what was the low point for you on this journey?
Sara: I guess or I haven’t really thought about quitting since like 2009. So I guess maybe I have a lot of perseverance.
Michael: I feel like we’re all getting our resiliency tests a little bit more in the current environment.
Sara: Yeah, yeah. I’ve had…I’ve gone through phases like with the divorce clients where I’m like, “Why am I doing this? Why am I working on this case, it’s a death march. I should not do this type of work.” Or a client is unhappy because they’re just emotional. So, yeah. I guess the low point has just been kind of general frustration of like not succeeding as quickly or as greatly as other people around me seem to be, comparing myself to others. But of course, as you know, we’re all on our own journey.
Michael: Well, I think it often becomes the challenge. Alan Moore likes to call this when we start “shoulding” on ourselves, right? Like, I should be here or there or doing this or generating that much revenue or having this many clients. And in essence, it creates an expectations gap, right? When you say you should be at a certain place and it’s different than where you are, it basically means you have an expectation of being somewhere different than where you are. And expectations gaps create dissatisfaction. We don’t like gaps between expectations and reality.
Sara: Yeah, yeah. I love what I do, I’m grateful for what I have, but yeah, on some level, it’s like, “Well, I’ve been doing this a long time, why don’t I have $1 billion in AUM or something.” But that’s all right.
Michael: So, how do you…I don’t know, how do you think through that or process that?
Sara: Why don’t you have…?
Michael: How do you feel about the fact that there’s not $1 billion under management?
Sara: I just have to think about…I don’t know, I think progress is motivating. So to me, it’s like, okay, well, if I’m making progress, that’s fun and exciting. I think that happy clients are motivating. I think that we have just a real opportunity to run a business here that a lot of people don’t have.
Michael: So as you look back on this path, is there anything that you wish you’d done differently since I guess kind of getting started at Raymond James, when, at least, you were on your own and had that level of control? Anything you know now you wish you could go back and tell you from 10 years ago?
Sara: I was probably ready to launch the RIA sooner than I did. But then again, I did it in 2016. I had twins in 2014. How much earlier was I really going to do it? So part of me is like, “Ah, I could have done things faster, better,” but could I really have? So, yeah. I just try and be like kind of forgiving on myself.
There are definitely things that…like a focus on process, probably could have done sooner, growing my team, could have done that sooner. I like the things that I’ve done, but really, I tend to maybe overanalyze and really think through things for a long period of time before I actually pull the trigger. So I think that some people…
Michael: I’m very familiar with the problem.
Sara: Yeah. Yeah. So I think that some people act first, whereas maybe I could use a little bit more of that type of behavior.
Advice For Newer Advisors And What Success Means To Sara [01:28:20]
Michael: So, what advice would you give to newer advisors I guess that could be young or even career changer coming in, as you did, about starting their firm and building the path today?
Sara: My advice is, don’t give up. Learn where you are. And I would say like if you don’t like where you are, you can move on.
Michael: That’s right, just remember if you don’t like where you are, you can move on.
Michael: So as we wrap up, this is a podcast around success. And one of the themes that always comes up is the word “success” means different things to different people. So you’ve had this successful path building to a $50 million practice, and it’s chugging forward. You’ve got, I know still a long timeline to go from here of continuing to compound however far you decide you want to compound. But how do you define success for yourself at this point?
Sara: Success, it’s freedom, yeah, it’s financial freedom. It’s financial freedom for me, it’s happy clients who appreciate us and recommend us, a team. I would say…I said progress is motivating, but I think growth is success. I always want to feel like I’m growing, learning, expanding every year, that’s success. By doing a little bit better each year, each quarter, that’s success.
Michael: And what comes next for you?
Sara: I want to grow the team. And I think that there’s an opportunity in this environment right now that…I think that it’s…there could be people who are looking to join another fee-only advisor. So I want to grow the team and grow my practice and really grow. I think coming…like right now in 2020, I’m in a lot better position to grow exponentially than I was in 2009. In 2009 I was really just getting started in the business and a little bit deer in the headlights. Well, now is like a do-over for me.
Michael: Yeah, I do feel like there’s an interesting phenomenon here for a subset of us that have been around long enough to have gone through the last bear market and sort of know what it takes to hunker down and survive, but then the opportunities that come in the other end, if you’re well-positioned for that growth, that I’m seeing a lot more firms ready to come out swinging on this for growth than the financial crisis I feel like had a much more just-hunker-down-in-survival-mode mentality for the industry.
Sara: Yeah, yeah. Yeah, I want to grow and, like you said, come out…I don’t know, come out swinging, I guess. But like I said, maybe I’ve been too hesitant before, well, I want to take those chances now because we’re ready.
Michael: Very cool. I’m excited to see how it goes for you from here and may have you back again in a couple of years to talk about how…
Sara: Thank you.
Michael: …2020 was that transition point where we started hiring up and firing all cylinders coming out of the coronavirus pandemic recession.
Sara: Yep. We’ll try.
Michael: Well, thank you so much, Sara, for joining us on the “Financial Advisor Success” podcast.
Sara: Thank you, Michael.