Welcome back to the 217th episode of the Financial Advisor Success Podcast!
My guest on today’s podcast is Sophia Bera. Sophia is the founder of Gen Y Planning, an RIA based in Austin, Texas that serves just under 100 young professionals in their 20s, 30s, and 40s.
What’s unique about Sophia, though, is that she was one of the first financial planners to launch a “location-independent” firm, specifically to serve Millennial clients using an up-front plus monthly retainer model that now averages $400 to $500 per month for each of her new clients… yet uses a one-page financial plan and an Action Checklist – not comprehensive financial planning software – to deliver ongoing financial planning value to her next-generation clientele.
In this episode, we talk in-depth about how Sophia and her fully virtual team help Millennial clients navigate the plethora of changes and decisions they face as they establish their careers and their families. How Sophia structures her initial client meetings around goal and value discovery and then putting together her one-page action checklist before establishing an ongoing meeting schedule, why net worth reporting (and not portfolio reporting) is at the heart of her planning process, and why she eschews more mainstream financial planning with its long-term retirement projections in favor of solutions that focus on shorter-term goals instead.
We also talk about how working with next-generation clients can entail a higher turnover rate than managing portfolios for retirees, why Sophia is less worried about retaining a stable book of clients than she is about having the capacity to work with people who need her help the most, the way that Sophia is starting to offer established clients new options around how they can structure their ongoing planning relationship as their needs change, and how Sophia’s own life experiences drive home just how much the quick-fire pace of life changes make a financial planning relationship so valuable for those still in their 30s.
And be certain to listen to the end, where Sophia discusses the deliberate steps she and her team took to prepare ahead of her maternity leave (to the point where her out-of-office responder made it explicitly clear that she wasn’t responding to emails at all for four months), how she spent the first month after returning from her maternity leave focused on the business rather than meeting with clients, and how she’s been able to intentionally build her firm and structure her schedule to make a good living while still having time to focus on the things that are important to her outside of her business as well.
So if you're interested in learning about Sophia's experience with retention rates within a subscription-based fee model, how she's structuring her fees for longer-term clients, and how she incorporates a one-page action plan as a client deliverable, then we hope you enjoy this episode of the Financial Advisor Success podcast!
What You’ll Learn In This Podcast Episode
- What Gen Y Planning Looks Like Today [06:35]
- Sophia’s Business Model And What She Does For The Clients That She Serves [11:10]
- How Sophia Implements Action Checklists With Her Clients [25:15]
- How Sophia Is Using Trello To Track Client Action Items [34:38]
- What Sophia Does For Clients Within An Ongoing Monthly Retainer Model [40:27]
- Sophia’s Retention Rate For Her Monthly Subscription Fee Model [48:47]
- How Sophia Finds New Gen Y Planning Clients [1:09:38]
- What Surprised Her The Most About Building Her Business [1:15:25]
- The Low Point Of Sophia’s Journey [1:20:30]
- The Advice She’d Give To Newer Planners Coming Into The Industry [1:29:27]
Resources Featured In This Episode:
- Sophia Bera
- Gen Y Planning
- Gen Y One Page Meeting Recap Template/Action Plan Checklist
- Gen Y Sample Financial Plan
- Gen Y Financial Plan Template
- Setting Up An RIA And Starting A New Financial Planning Practice On Less Than $10,000
- #FASuccess Ep 012: Delivering Profitable Financial Planning To Millennials For A Monthly Retainer Fee With Sophia Bera
- Less Annoying CRM
- Utah my529 Plan For Advisors
- BLX Internship
Michael: Welcome, Sophia Bera, to the "Financial Advisor Success" podcast.
Sophia: Michael, it's so fun to be back. Thank you so much for having me.
Michael: I'm really excited to have you back. We have just now been in this podcast for about four years. We started in the very beginning of 2017. And so I feel like we're just coming to the point in the podcast where our lives wind in these fascinating directions. We never quite know where it's going to go, even if we've tried to plan it out. And there's some point, I feel like we're about three or four years out, like you were usually far enough from where you are in the past where you can look back and be like, “Wow, I am really far from where I was then. And it's fascinating how this journey has taken me to wherever it is.”
And so, I know you have had a lot of life change and personal change over the past couple of years. And even when you were on the podcast, it was a fun waypoint because you had first appeared on "Nerd's Eye View" blog all the way back in 2013, when you wrote an article about how you had broken out from your own firm and launched your own independent RIA from scratch for under $10,000. And that was the big title, and I think became a thing in the industry for a little while, how you can launch a firm with under $10,000, which we don't necessarily recommend, because it's a bit lean, but you can do it. And you did it.
Sophia: When you're broke, Michael, you make it work.
Michael: You make it work. Necessity is the mother of invention. So, you had launched in 2013. And I thought was just a really cool story of, here's how I built it what I did, and you had just this wonderful detail. Like, I bought this software and I found this thing for free. And I didn't have to pay for this. But here's what I have paid and here's how I brought it all together. Then you would come back to us in 2017. And it was going really well. You were building into this new retainer style model working with young people, which we're talking about more now, but was really out there in 2017. And so you had built up to north of $100,000 of take-home pay after just 3 years of building this model. I think the gross was close to $200k. And you thought you're going to get net $200k that year.
And so now we are fast-forwarding four more years, there's been more compounding. I've watched from afar. You were doing a “location-independent” business for a while, I think there was a point where you were servicing clients from other countries and just living abroad. I know now you've had some business transitions, some life transitions, some family transitions. I'm excited to check back in, it's been four years, we never seem to get as much time to chat and catch up as we want to. So now we get to do that in podcast format. But I also feel like just the journey that you've had is just a good reflection on the reality of just how our businesses and careers evolve, sometimes in ways that we expect, sometimes in ways that we don't. Our own changes and priorities change over time. And that's just part of how you do this journey and figure it out a little as you go and try to make it work along the way.
Michael: So maybe just to get started, I think a good starting point is, catch us up on just the advisory business as it exists today. What are you doing? And who are you doing it for? And how many of them are there? And how many people do it for them? What does the business itself look like at this point?
What Gen Y Planning Looks Like Today [06:35]
Sophia: Yeah, so Gen Y Planning today is serving about 96 families across the country. And we have a small virtual team. So, my lead planner, Ashley, is the lead on 25 of those client relationships of the 95. And we've actually moved 14 of those to an annual meeting model. And so then I'm the lead planner on the other 50-something, 7 or so. And the last time I was on the podcast, I had an associate planner, Alex, who has also been on your podcast, Alex Hopkin, who's fantastic. And when she got pregnant with her third baby and moved to Hawaii, I had interviewed Ashley as an associate planner to fill her role because Ashley was also a military spouse moving from Hawaii to Kansas, which I think is hilarious.
Michael: So you were just sort of tagging off with Hawaii. Like, Dear Hawaii. I'm sending you one but I'm taking one back.
Sophia: Yes, except that I ended up hiring somebody else first. And six months later, he went to work for Vanguard, they have awesome benefits and whatnot. And I couldn't provide that as a small business owner. And so I reached back out to Ashley. I said, "Hey, are you still interested?" And I hired her a few days later. It was amazing.
So I highly recommend military spouses because for businesses like mine, which are location-independent, it's been so nice to be able to give them the location independence that they want to be able to move around with their spouses' career in the military, and yet also not lose a team member because of a job relocation.
So Ashley's been on the team since 2018. And then a year later, I hired Caishalynne. So Caish has been on the team since October of 2019. She was a valedictorian from UVU’s financial planning program, and she's a freakin’ rock star. So she started as my client service associate, and we promoted her to a paraplanner role earlier this year. Ashley was promoted from my associate planner to a lead planner last year. So she started taking on clients under Gen Y Planning. And then just this month, like last week, we hired our first intern. So now we have an intern as well. So it is four of us at the core. Ashley, Caish, and I last year really solidified a lot of things so that I could take maternity leave, which we will talk all about.
But I looked back and realized that since I launched Gen Y Planning, I think I've helped over 250 clients, and I've had over 500 financial planners reach out to me from your podcast, or from the article that I wrote for your website, Michael.
Michael: Excellent, excellent.
Sophia: So that feels pretty great because last time I was on I said I really want to bring financial planning to Gen Y to empower my generation. And it's really cool to make an impact on so many of my clients' lives, but also be able to impact the profession in some way and be able to move this profession in a direction that I felt was hard for me to do when I was working within other firms and has been fun to break out and do my own thing and not realize that it was going to also help inspire others to launch their own firms or others to join a company that they haven't thought about or, and now I get to create my own ecosystem, and create these roles for Ashley and for Caish, and now for our intern that I wish existed 10 years ago in financial planning, and didn't and I couldn't find. I told Ashley, if I would have been able to find your role, I never would have launched Gen Y Planning.
So just creating what I desired so much is really fun too to really decide that I'm going to create these roles that didn't previously exist in this profession... or were few and far between.
Sophia’s Business Model And What She Does For The Clients That She Serves [11:10]
Michael: So, talk to us a little bit about the clients and the business model itself. Part of the big discussion, particularly when you joined us four years ago, was you were building with so-called “next-generation clients”, you were building with Millennials for anyone who missed it. The firm's name is literally called Gen Y Planning. So pretty out there about who you're going after from a clientele perspective. So, catch us up in that regard. Like, is that still the clientele you're working with? Is the business model still a monthly subscription fee model or has the clientele or the business model changed and shifted over the past four years?
Sophia: It's interesting, it's actually pretty similar to when we talked four years ago. It's still an upfront planning fee, it's still a monthly retainer. I've actually experimented a little bit more with lowering my upfront planning fee and increasing my monthly retainer. So the last few years, I've really been working on increasing my recurring revenue so that is more sustainable and it's less focused on having to land the next client, which in 2017, it definitely was like, I needed to land every client so I could bring in more revenue. And I was definitely in hustle mode at that time. But now, what's nice is that right now, just like an average client, I would charge $1,500, upfront, and usually, $400 or $500 a month to work with a new client, usually a little higher for a couple, usually around $400 for individuals. And then Ashley is able to charge $1,000, upfront, and $250 for individuals, and $300 or $350 for couples. And so, basically, Ashley, I think at the time, I was taking on two new clients a month, now Ashley's taking on two new clients a month on average, and I'm taking on one new client a month. Just at a little bit higher price point. I tend to work with our higher-income earner clients.
So I would say in terms of the demographic of the clients coming to us, they're aging as I'm aging, Michael. Which I feel like is really fun. I would say the majority of our clients are in their 30's. So a lot of older Gen Y, younger Gen Xers. And then we have a handful of clients in their 20's and a handful of clients in their 40's. But I would still say 80% of my clients are within 10 years of my age still, which is what we talked about last time.
Michael: It's what happens to most of us advisors. Some of us aim, well, or older, in particular, because we end up being younger advisors that specialized in retirees. But outside of younger advisors, targeting retirees is essentially a niche or a specialization unto itself. Almost all of us end out working with basically ourselves plus or minus about 10 years, just because it's who we know, it's who we get. Like, it's really easy to design services that are useful and meaningful for them and the right messages that resonate with them, and the right pricing and offering to deliver it to them because you literally just make what you would buy yourself, which works well because you understand you really well. And so you end up finding other clients like you, which is usually, similar age, similar stage of life, similar socio-economic environment. And it's your natural social circles, usually anyway, so it's even natural marketing to do it.
Michael: And so then talk to us a little bit more about just what you do for clients. When you say $1,500 upfront, $400 to $500 a month ongoing, which amounts to $5,000 or $6,000 a year. What is a 30-something get for $5 grand a year that makes it worthwhile for 30-something at $5 grand a year if it's not necessarily focused around portfolios and investments?
Sophia: Yeah, so I think you know, your 30s are when a lot of people are going through big life changes. So a lot of our clients are getting engaged, getting married, having kids, moving, relocating, landing a new job, getting a bonus. And so with that comes navigating through their company benefits, rolling over 401(k)s, starting Roth IRAs, knowing when to pay off their last of their student loan debt, figuring out how much home they can afford. Should they refinance their mortgage? All of those questions that are top of mind for them are things that we're really addressing with those clients. So we tend to do two big meetings up front. One is more about discovery meeting about their goals and values. And then the second meetings, usually about a month later, where we dive into really putting together their action checklist. So instead of doing these 50-page financial plans that I joke only you can understand, Michael.
Michael: I'm there. I'm like, give me the book, I'm going through every page. I love it.
Sophia: Yeah, you want all the graphs, all the charts. But for a lot of our clients, what we found really helpful is to track their net worth and show them how their net worth is changing over time while they've worked with us. And that has been really instrumental. So instead of focusing on investment growth, or “how much has my portfolio returned last year?” That's really not a question that our clients are asking. They're wondering, “should I refinance my mortgage? And can we afford to take this vacation and pay off our student loans?” So they're juggling these multiple financial priorities. And “what should we be doing for retirement? We don't even know.”
So I would say that second meeting is where we deliver the initial planning recommendations. And that is usually, we really like to start with what are some quick wins that we can actually knock out with our clients on the call with them. So maybe that's logging into their 401(k) plan, having them do a screen share, and helping them rebalance their 401(k), maybe that's setting up a Roth IRA at Betterment, maybe that's really guiding them through a couple of those action items so that when we leave them with the rest of their action checklist, they're more inclined to start implementing the rest of those things as well.
And I'll actually provide to you Michael our one-page action checklist that we have clients complete. We now do this for our meeting recaps as well, we use this. And it's a nice way to show, here's your current net worth, here's how your net worth has changed since our last meeting, here are your top financial goals, here are your action items that came out of this meeting. And now I have had Caish, Ashley sitting in on my meetings the last year. And so what's been really great about that is I'll have somebody take notes in the meeting, and then we'll debrief after the meeting for 10 or 15 minutes, and they'll send out the meeting recap immediately after the meeting. So all of that work is done.
A lot of my time in my early days was just spent putting notes into our CRM and figuring out where we were. And we switched to using Trello a few years ago. And Caish has really worked on streamlining our processes and created a really great meeting prep process, and what she asks the clients and what we still need, or what we need to gather on the call because they didn't give it to us.
And so we're really able to do a nice meeting recap that clients are very clear on what they need to move forward on. And then sometimes our check-in meetings, if they haven't done many of their action items we might say, “okay, we want to focus on these two things at this meeting, we'll knock out those things on the call.” And so it's really fun to be able to be on their team to help them do that.
So basically, when we land a new client, after those first two meetings upfront, we tend to meet with our clients every four months or so. So we usually meet with clients four times the first year, and then three times going forward. And sometimes that'll stretch out to six months depending on what's going on in their lives.
In addition to that, we review their tax returns. So we found a lot of tax planning opportunities for clients as well, whether it's maximizing in HSA or doing Roth conversions or whatnot. And then we also do a company benefits package review, which we have a lot of dual-income couples. Which I didn't know was weird for a lot of financial planners, but I feel like for a lot of traditional financial planners, they're still used to working with “breadwinner clients”. And almost the majority of our clients are dual-income couples oftentimes earning similar incomes. And so really taking advantage of their different company benefits can be a game-changer for them tax-wise as well. So if we can take advantage of an HSA and an FSA for child care and taking a look at the ESPP that the other person has, right?
Michael: Right. And we're going to consolidate you onto this person's health plan because we can jam more into their health savings account over there and just all the different ways you can mix and match across benefits when you've got a couple who both have some companies with good benefits.
Sophia: Exactly. And so that's been huge for our clients. So I think that's one of the ways that we provide a ton of value, tax planning, connecting them with other experts in our network, whether it's somebody for life insurance, or a CPA, or an estate planning attorney, that adds a ton of value. And then really being on their team and being their accountability partner and helping them move forward on certain action items that they're feeling stuck on. And showing them here's how your net worth changed since we started working together.
I just had a client meeting today where we checked in with a client. And when they came to us, I think they had over $30,000 in credit card debt. And that was a year and a half ago. And now they have $5,000 on a 0% interest card. And at the time, they were contributing 3% to their 401(k). And last year, one of them maxed out their 401(k). And this year, both of them are on track to max out their 401(k)s. And this is happening in a year and a half. This isn't over 10 years, “oh, if you just increase your 401(k) by 1% a year...” No, our clients, they're growing their incomes very quickly. And with that, we are able to say, “Hey, now that you are making $20,000 more a year, let's shift that to your financial priorities.” And they're really able to turbocharge their financial goals, which is fun.
Michael: To me, that's always been one of the interesting things around working with folks, particularly into their 30's and 40's. Maybe a little bit less so in our 20s, because careers are still getting going. But by the time you get into your 30's, often, you've picked whatever career interests you're going to be in and you've been doing it for a while, you're starting to get a little bit of momentum, you get to that point, you're starting to get raises and promotions, and you climb the career ladder or the corporate ladder, wherever it is you are and just you get some big raises. Income lifts up a lot.
Which means, you don't necessarily have to help people get out of debt by saying, Okay, we're going on a 90-day purge of blasting out all our spending and go into super-frugal lifestyle because you got to dial it back. It can be as simple as like, “Hey, I got an awesome idea, when you get your big raise this year, let's not spend that. Totally keep doing what you're doing. But just when you get the next raise, let's only spend half of that and book the other half into savings.” And a few years of big raises, and all of a sudden, you can have someone that has a huge savings rate just because in 3 years, they got 30% raises, and they only spent 10% of it. And now they're saving 20% of income, which is out of the new dollars as they grew.
Sophia: Exactly. And one thing we talk a lot about is streamlining, simplifying, and automating. And so that's what we really help a lot of our clients do. And that's how this particular couple was able to increase their net worth so dramatically. It was this combination of paying off debt aggressively and strategically, building up emergency savings for the first time, and getting on track for retirement. And we're doing those all simultaneously. And we're automating it. And so now when their 0% interest card is up in June, they already have their automated payment set up. So they're paying $1,100 a month until that's paid off. And then we're immediately going to be able to redirect that money to other financial goals.
And it's just really fun to see people's lives change really dramatically and see their stress levels go down and help them achieve things that they just didn't realize how they could be optimizing their financial situation in the ways that we're able to because we understand tax planning, we understand the benefits of compound interest, we understand how this credit card debt was severely working against them.
So I love it because I have just loved seeing people really see the value and benefit so much from it and see these net worths go from like, Oh, you had a negative net worth when we started... I had a client that had a negative net worth when we started working together. And five years later, her net worth is three-quarters of a million dollars. It's just like, what? That's possible?
Michael: That's life-changing.
Sophia: Yeah. And now she's buying a condo in San Francisco. And it's just really fun.
How Sophia Implements Action Checklists With Her Clients [25:15]
Michael: So just in terms of structure, you had talked about putting together this action checklist that queues up at the second meeting of the new client process. First meeting get to know them. Second meeting for action checklist in lieu of a big old 50-page financial plan just get down to 1 page of “here's your goals, here are your top action items, here's where we're going to focus and work on between now and the next meeting.”
So, is the action checklist just a first meeting thing as this is the plan as it were? Or is this like your every meeting thing? Because you were talking about having progress on net worth on this as well, where it sounds like this is the equivalent of your meeting agenda, like your one-pager that just comes back for every single meeting with, “here's how your progress is tracking, here's what the goals are we're working towards, here's the actions you didn't, here's what we're working on.”
Sophia: Yeah. So we used to have a second page, which we sometimes still include for that initial financial plan deliverable. But now it is just like our one-page meeting recap is our financial planning deliverable for every meeting. And so they know they're getting that, we're all on the same page, they know what it's on their to-do lists, sometimes we check things off that we get done on the call. And that has really been helpful in people seeing the progress they're making as well.
Michael: So I guess a couple of follow-ups on this. One, how are you actually creating this thing? I'm envisioning a giant series of Excel documents, like a template where you drop in updated numbers and each client has got their own file with the Excel template, and the latest numbers. Is it something like that or are you building it some other way? How does this actually come together in practice, when you're using it for every meeting with every client?
Sophia: Yeah, so we actually have an Excel sheet of their net worth in their Dropbox folder that we share with them, and we have them update their net worth tab for the meeting. It's a one-page PowerPoint in which our team grabs the pertinent information that we need for that. So they'll grab their net worth, they'll update those numbers. And then we give them their action checklist. We print it to PDF and give it to them at the end of the meeting.
Michael: So then, a few follow-up questions. I'm just trying to understand how this works in practice. So I was wondering, how do you track their net worth to be doing it? And is this like a categorization solution or something else? But I think you had just said, no, you just have a spreadsheet with their net worth as an Excel document and a shared Dropbox. And they update their net worth.
Sophia: They sure do. Yeah. So we asked them to update all those numbers. And I know that oh, I could use eMoney or I could use MoneyGuidePro, or all these things and yet...
Michael: You know, Sophia, you could use eMoney or MoneyGuidePro, or one of these things.
Sophia: The synching always breaks. And inevitably, somebody's mortgage or student loans don't link right. I keep wanting to come up with a good tech solution. And I haven't found one that one, everything aggregates like it says it's going to. And two, that looks pretty. And I say that because I cannot handle the reports that these financial planning software [packages] spit out. And I don't understand why they don't hire more people on their design team. I'm like, “you have all these engineers, and you have all of these financial people, but you're using clip art from the '90s to put on these reports. I cannot show this to a client who works at a tech company in San Francisco. I cannot show that to them.” So I just use an Excel document.
Michael: Or clients who literally, weren't alive when that clipart was made.
Sophia: Yeah. And so I'm just like, okay, update some numbers here. Everybody knows how Excel works and just can plug in some numbers. And that's fine. Or they're like, "Can we do this in Google Docs?" I'm like, sure. And then I just have them update a Google Doc, or a Google Sheet, or whatever.
But the other thing that I'm frustrated with, this whole other rant about why I still don't use financial planning software, Michael, but the other thing is a lot of them can't do historical net worth. So I cannot show you, since you've become a client, your net worth has changed this amount over time. It's like they are only like, oh, here's your net worth right now. Or you can log into your portal to see your net worth. And I'm like, “great, but they don't remember what their net worth was six months ago.”
Michael: Yeah. Well, to me, it's the frustrating reminder that at the end of the day, the roots of financial planning software was, you show a client their current trajectory because you know it's going to be not on track because you know that you need them to do something different because there's something different they have to do. Is a thing you sell, right? Like, we show people they had life insurance shortfalls because we sold life insurance, and we show them they have retirement shortfalls because we sold investments and retirement accounts. And we show them they have education shortfalls because we sold 529 plans. The software to me is still very built to cue up a moment in time point of sale because the only time you ever went back to an existing client was because there was something new to sell them. So it had nothing to do with how they progress into the past. It was only about what is the current gap we're going to sell into in the future.
And I know our advisor world is moving away from that. Thank goodness, we're moving into a more advice-based ecosystem. But just that framework where you only ever project a plan from where you are going forward because you're trying to show a gap from today so that you can put a solution in for today because that's what we got paid to do. It's hardcoded into how the software is built that, yeah, something is seemingly straightforward. Like, wouldn't it be cool to just be able to show the client how their net worth has evolved and changed over time is still remarkably difficult to do in a lot of the software packages? And some of them are starting to build some tools for it now, finally, but it still doesn't necessarily go backwards. And, as you noted, the output is not always the most visually clear and appealing because they jammed it into some other screen.
Sophia: Right. And I feel like we just all spend time manipulating what we want the numbers to look like anyway. So certain clients it's like, oh, I want them... I just remember working at other firms, and, “oh, we'll change the rate of return to this or change inflation to this or show them retiring at this age instead of this age” or whatnot. Like, we're all just making these numbers, and we assume that their income just goes up like 3% a year or something.
And so, so many of my clients, they're having these dramatic shifts in income, dramatic shifts in life changes. And the software just isn't that helpful to be able to show that or predict that.
Michael: Do you literally eschew these tools altogether? Do you ever end up in a world where just I want to project out what their current savings and growth rate is going to be to see whether they're on track for retirement or if they need to save more, or if only just to say “you got to save this much a month to retire? And we figure that out because we put into financial planning software and do the projection.” Does it even come in at that level, where you just literally don't do that with clients because it's not helpful?
Sophia: Yeah, I don't invest in any financial planning software. I do have a retirement projection that a friend of mine built me in Excel that I still think is the most helpful with clients because we can just talk through it on the call, plug in the numbers, and then show them.
Michael: And I'm assuming that's basically, you save this much a month and it grows at this and it makes a chart?
Sophia: Totally, exactly. And I'm like, great. That's what they needed. That made sense to them. “If you want to retire earlier, you're going to have to save more.” Great.
Michael: Because it's just a recognition of look, you're in your 30s, we can set this path, but we all know, it's going to be so different in 24 months, the fact that you have a habit of spending less than you make and saving the rest is what matters whether you're saving X dollars a month for a vision 37 years from now when you've only been on this earth for 30 years is not really helpful.
Sophia: Yeah. Yeah. And like, show them, here's why it's important that we max out your Roth IRA as well. Or here's why we're doing backdoor Roth because your income is increasing pretty quickly. And so just you maxing out your 401(k) actually means that we're not saving that high of a percentage of your income now that you're making $350,000 a year.
How Sophia Is Using Trello To Track Client Action Items [34:38]
Michael: And so, you had also mentioned using Trello as part of your process. So, for those who are not familiar, what is Trello? And then how literally, are you using it in the business?
Sophia: Yeah, so we are using it internally, we are not sharing boards with clients. So that's one way that some people are using it is you can share your board with them. We haven't gone that far yet. Instead, we have an internal process that we use. And we basically took all of the categories of financial planning and created columns for each of those things. So investments, insurance, estate planning, tax planning, those types of things. So think of those as laid out in columns. And then we have cards for like, “here are all of the investment accounts they have, here are all of the insurance documents they have.” And then we can note very quickly, “does this client have life insurance? Or where are we in the life insurance process with this client?” So we can just open the life insurance card, or see right there that it says $1 million, 20-year term policy is in place.
Michael: So it's like an extension of what a lot of us would probably use our CRM system for where you're gathering all the client documents in one place, as opposed to gathering them in the CRM or simply putting them in a digital client file where it's just either a big old list of documents or maybe folders and subfolders. You're organizing them visually with Trello boards for each client so that you can see in one board, spatially organized here's these documents, here's those documents, you can visually navigate to them very quickly. And you're not sorting through giant lists of documents or nested folders to get to them.
Sophia: Exactly. And we can also link to those documents in Dropbox very quickly if we want to see that specific thing. So now we have a card with their net worth that's all not in Trello. But we have a link to their net worth statement in Dropbox. So I don't actually have to go to Dropbox for things anymore, I can just go to Trello. And my team can prep things, taking the information that the client put into Dropbox and organizing that so that we can find it very quickly and it's organized. I think that one of the problems as you continue in financial planning out of your first or second year is, “how do I find information quickly for those check-in meetings? What did we do with this client? Where is that information now? Where are we at with this thing?”
And so that was something that was really difficult in a lot of traditional CRMs is there's just blocks of client notes. And so, what are you looking back at like five years of client notes to be like, “what happened with insurance? They ran quotes here. Did they put those in place? Did they not? I don't see the statements in their folder. However, they were shopping around different...” You know what I mean? There was all of that. So Trello has been the best way for us to streamline and simplify our client prep work.
Caish will send an email to the client when prepping for the meeting saying, here were the action items that came out of your last meeting, please let us know where you're at with each one of these things. And clients will say like, “haven't started estate planning, increased my contributions to my 401(k) to 10%.” Yes, they'll go through, and then we're able to see, okay, which are going to be just action items we're adding to the meeting recap again this year? This meeting. Versus, Oh, they already did these things. So we don't need to talk about that again.
Michael: And so, do you use a CRM system at all?
Sophia: For my prospect calls. Yeah. So I'm still using Less Annoying CRM for prospect calls. And then when they become clients, they get moved to the Trello board. They get a board.
Michael: Interesting. And just for those who aren't familiar, because it's not really a popular industry CRM. Yes, it's really called Less Annoying CRM. It is lessannoyingcrm.com. We'll have a link to it in the show notes. So, kitces.com/217 for Episode 217. So you are using Less Annoying CRM, or I think they go by LA CRM for short. You are using LA CRM for your CRM system, but only when their prospects just to track? Just the sales process. Like, when was the last time I was in touch with them? Are they moving forward? Am I sending them their agreements? When is our next meeting to check-in, etc?
Sophia: Yeah. And then basically, once they say yes, and become a client, their new home is Trello. And so that has been really helpful as well.
Michael: And so then just like, every meeting, every note, all that stuff for the future just gets accumulated on the Trello board with a growing number of meeting cards for all the meetings that happen over time?
Sophia: Yeah. And so we actually, instead of organizing it by, here's a card for this meeting, we actually take the notes in the card that is applicable. So, for example, it's 2021 now, we've been doing a lot of backdoor Roths for people, or IRA or Roth IRA contributions. So we'll note that in their, let's say they have a Betterment IRA setup, we'll note in the card, made $6,000, IRA contribution for 2020 on the call, and then a note for us to convert that to Roth the next day. And we can now do that on our side through Betterment as well, which is awesome.
What Sophia Does For Clients Within An Ongoing Monthly Retainer Model [40:27]
Michael: So then help me understand, I'm just going back to overall, what we're doing for clients on an ongoing basis. So a little bit more upfront, but the core ongoing is three meetings a year, approximately every four months, give or take, clients scheduling as usual. So every meeting, there's an action checklist where we've updated their net worth, we've identified wherever the action items are that we're working on so we can check-in and see if they got through them and figure out what we're going to set next.
You had mentioned you also do targeted. Like, there's a tax return review, there's an employee benefits review. Is that outside of these meetings, or is that part of the meeting cadence? Like, in our first meeting of the year, we'll look at your tax return, and at our third meeting of the year we'll review employee benefits?
Sophia: Yeah, it's outside of that. So usually, we send a fall reminder to clients saying, Hey, for many of you, it's open enrollments. Open enrollment is coming up. Please send us these things if you want us to review your company benefits. And then Ashley has a template that she put together to help clients with open enrollment, and then she will schedule 30-minute meetings with them if they have a more complicated situation or whatnot. Some clients are just like, here's what I'm thinking about doing. It's the same as last year, let me know if there... Here are some notes of changes in my company benefits. So, yeah. So that's separate.
Michael: Okay, and so, as you go through all of that stuff, I feel like it queues up the infamous question that we still hear so often around advisors on the monthly subscription model, like meetings every four months, maybe a few additional touchpoints in between on tax return review, or annual, or company benefits review, but you're charging monthly, and a not small number, at $400 or $500 a month. So how do you think about or how do you explain or do you get questions about, Sophia, we meet every four months, but you charge me every month?
Sophia: Yeah, those people don't hire me. So like the people that are really stressed out about fees or servicing them a certain number of times usually don't become clients, to begin with. Kind of self-select out. And I would say a lot of times I talk to my clients about, This is annually. It'll be $6,000. We break that into a monthly amount of $500 per month. You have unlimited email support with me and my team. If you want to do a budgeting meeting with Ashley, you can. So some clients may elect to do things like that as well.
And we also really are there for our clients when they're going through big changes. And that's ultimately what a lot of advisors where clients really get their value too. So if a client is going through a refinance, we may be emailing back and forth with them quite a bit for a few weeks. Versus at other times, it may be....and maybe they just had a baby, and they're overwhelmed with a bunch of other things in their lives. And so we're not hearing from them for three months, and then all of a sudden, it's like checking in on a bunch of different things. Like, should I set up a 529 plan now? How do I do that? And we send them an email that shows them, “Here's Utah's 529 plan that we really like, and here's what we recommend.” And so just being there to help them navigate those changes as they come up, again, I think is super helpful.
And we've had situations, we had a client couple this year, whose CPA had them file as married filing separately. And we basically, we were like, “You need to have your CPA file you as married filing jointly.” And it saved them $10,000 on their taxes because one made $250 grand a year and one made $50 grand a year. And it was like, I don't know why that was the recommendation from the CPA, but we had them redo their return. And we just made them $10 grand. So there's going to be certain years where we're going to get big wins like that for clients. And other years where they might be also spending money doing estate planning, but it's knowing that if they wouldn't have hired us, they wouldn't have got that in place. And that was something that was bothering them that they had a kid two years ago, and they knew that they should get their estate planning documents done. And they hadn't gotten to that yet. And so they were really grateful that we had an attorney to set them up with and connect them with to move forward on that.
Michael: And as you've noted, in practice, there is a pretty powerful self-selection mechanism here. If you're expecting to get monthly calls for this monthly fee, it ain't going to work out. And as long as you're clear upfront about what you do and what you don't do, they just self-select their way out. But I feel like viewing it from the other end, just the whole point is that you end up with clients who want you there when they need you. They know life's happening and stuff's coming at them because a lot of that happens in your 30s. They just want to know you're there when you're there. And they're going to call you when they need you. And short of that, I still think of some of those like the relationship with the doctor. I do pay my health insurance to have access to my doctor anytime I want. I don't actually expect to go every month. In fact, I'm rather happy that I don't go every month. But I better be able to get an appointment when I need one. And that's my expectation.
Sophia: Yeah. I think the other cool thing about growing the team has been, when Ashley first came onto the team, she wasn't sure if she wanted to take on clients. She had had two kids and was just getting back into financial planning. She had been a virtual paraplanner in the past. And I was like, okay, let's just see how these things go. And I had her start sitting in on meetings, and she realized, “Oh, Sophia's clients I can relate to. Oh, these people are like my age. Oh, they have questions that my friends have. Oh, this is interesting. I want to help them. I'm excited about working with these people.” And so when I would say, "Hey these clients could really benefit from diving deeper on their monthly spending and going through a budget. Would you mind meeting with them?" She'd be like, "Okay, sure. Yeah, I could do that." She'll tell you, I threw her to the wolves into budgeting meetings. And so I was just like, "You’ll do fine. I hate budgeting. You'll do great."
Michael: “Here's the deep end. Just take a quick little jump.”
Sophia: Yeah. But she started doing these budgeting meetings for the clients that many of them found really valuable. And so suddenly, I realized, “Oh, my client retention was improving because I was losing some people that I wasn't diving deep enough in their spending on, and yet they were able to get that from Ashley. Oh, cool. This is great.”
And then about a year ago, Ashley started taking on clients under Gen Y Planning. And I was able to feel comfortable saying, okay, I really need to charge more on a monthly basis. And now I can send certain prospects or certain clients Ashley's way or transition them to Ashley, add a little bit lower monthly fee, instead of just losing those clients. So we're actually in the process right now of some of our existing clients moving them over to Ashley who need more budgeting help, or who need more like 30-minute meetings to get done some things on their action checklist that maybe we aren't getting done and they aren't getting done on their own in between meetings.
And so we're still evolving and figuring out how can we better serve our existing clients? How can we better serve new clients? I really want to help everyone, Michael. That's one of the reasons why I can't vet prospects because I'll just be like, I want to talk to everyone.
And so my team has had to do that for a really long time. But now we're able to say, okay, here's another option we have, and here's how we can work with you in a way that we think is really going to benefit you as we get to know them.
Sophia’s Retention Rate For Her Monthly Subscription Fee Model [48:47]
Michael: And so having done this model, for now, coming up on almost seven years since you started down this road...
Sophia: Seven and a half. It's crazy.
Michael: ...I am curious, just what do you find is retention for clients? I feel like there's been this big question mark out there from a lot of people of just what is the retention rate for monthly subscription models? And so, having done this long enough to get a pretty good baseline, do you have a sense in practice, or maybe you track it more directly? What does the retention rate look like?
Michael: Yeah. I don't know exactly, because I don't track it. And again, I probably should. But I'd say a lot of clients are with us, anywhere from like a year and a half to three years. So our client contracts are now 12-month contracts, but they go month to month after that, and people can leave at any time. And I would say the first 12 to 18 months is where we do a lot of the heavy lifting. And that's where we're really trying to make sure they have their protection planning in place, and they're investing, and they're saving for retirement, and they're paying off their debt, and building up savings and whatnot.
And so we're still exploring how can we better serve clients after that. And that's where, at the end of last year, at the end of 2019, I wanted to increase some fees on existing clients but I also wanted to give them the option of basically keeping their fee the same and moving to an annual meeting schedule. And so I ended up moving a handful of clients, increasing their fee on to be able to still meet with them three times a year, have unlimited email support, and whatnot. Some of them, their fee stayed the same but I was just meeting with them once a year, instead of meeting with them three or four times a year. And then we moved a handful of them to Ashley as the lead planner as well. So I think we're gearing up to do that, again, is figure out how, like graduating some people I would say into like, “Hey, you did follow all of the recommendations, I think we just need annual check-ins, and you'll still have us for email support and whatnot if there's things that come up.”
So I think that's still evolving, and I don't have a great way of saying here's what my retention [rate] is. And I definitely think it's very different than like a traditional model where these are your clients that are going to grow old with you. But I think that there's a lot of people that need a lot of help the first few years, and then they get it and they learn. And then let's move them to an annual and if they go through a ton of life changes again, then we'll revisit their fee model or the fee that they have and we'll figure out if they need to go back to a three-or-four-meeting-a-year system.
Michael: Well, I think it's an interesting mindset shift that on the one hand, relative to where so many advisors are, and just where the industry has historically been, as you know, most of us when we get clients, it's clients for life really. Like, awesome, I got a new client, so they should be around for 30 years or so. And we just take it on assumption on faith that's how it works.
And I think it's striking that you're making the point that maybe we just even need to get out of that mindset of you get our clients for life. That just this a model where you work with clients and you help them for a period of time, and then after you've helped them for a period of time, they move on. And on the one end, I think for a lot of us, that feels stressful to say, so basically, I'm always going to have to be out finding new clients, I never get to a point where, “I got my 100 clients, and they're going to stick with me for the next 30 years. And aside from just one or two a year that attrition out, I'm good and I'm squared away.”
But I suppose the flip side of it is there's also just a bajillion young people who don't have an advisor who need help for the first time. It is a really untapped blue ocean of people to get, even if you're only going to work with them for a few years, and then they're going to move on.
Sophia: Yeah, and I think it's really fun working with new clients. We lost more clients in 2020 than we did in previous years, just because of a variety of different things, different life circumstances, and whatnot. But it was also like the new clients that we landed in 2020 are really awesome fits. We just love working with them, they get what we do, they appreciate our help, or they make a lot of progress, we show them how their net worth has really grown since we've started working together.
So for me, I think there's still this excitement of being able to work with new clients and the idea of not taking on any new clients anymore. I'm just not ready. But I'm also not ready to say goodbye to a bunch of existing clients. So that's where we're still putting our heads together as a team and figuring out how can we still have maybe an annual meeting service option for some of our existing clients who still aren't ready to say bye to us, but at the same time, we're like, “Here's your one action item that came out of your meeting. You've done everything else.” And so, just to be able to serve them at a price point that will keep them around, and at the same time give them access to us and not take up too much of the team's time so that we're able to focus on new clients, and yet, they're still able to get their questions answered as needed as well.
So again, we're still figuring that out. And I think that's exciting too because now I'm figuring that out. I'm figuring out, “oh, this is how you can have clients for five or six years. Sweet. Maybe I'll have some of these for 10.”
Michael: Does it stress you the idea that you're going to be an ongoing recruiting new client mode on an ongoing basis for the indefinite future? Is that stressful? Or is like, No, no, no, that's actually part of the fun because you like the new people and the new challenges and the new flow?
Sophia: Yeah, I like the newness of it. I like that it keeps it interesting and exciting. I love hearing people's stories, Michael. That's what really attracts me about this profession is I get to know these people in such an intimate way that a few other people in their lives have insight into and to really see them reach their goals and achieve their dreams and change their lives in really dramatic ways is fun.
And so I think that it's not as stressful as it was. I would definitely say the first five years that was stressful of like, I need to land the next client in order to make sure all my bills are paid. It was a very different feeling versus now, the business is self-sustaining. Oh, and I ran some numbers for you, Michael, in terms of where I left off from 2017 as well, to give you some updates there too.
Michael: Yeah. Yeah. Can you walk us through just how has it progressed from a revenue or an income perspective?
Sophia: Yeah, so I think in 2017 when we left off we were at like the beginning of the year and I had just in 2016, like a net around $100 grand. I was right there. And that year, I was like, 2017, I'll probably gross $200,000 or whatnot. So I ended up grossing $243,000 and netting $148,000. And in 2018, I grossed $313,000 and net $197,000. Oh, and 2018, that's when I hired Ashley, and I also took 50 vacation days that year. That was the other important thing to note.
Michael: So, hired Ashley and took 50 vacation days, and still at that point, grew gross revenue from $240,000 to $313,000 and grew the net from $148,000 to $197,000?
Sophia: Correct? Yeah.
Michael: Good year. Good year.
Sophia: Yeah. Right. Now we're talking real money. I feel like before you were like, okay, $60,000. Got it.
And so, in 2019, I grossed $368,000 and I netted $266,000.
Michael: Okay. And so just getting to that new scalability point. So, got Ashley on board, have more team, can handle more infrastructure. So, glanced at the math here. Basically, all of the growth from 2018 to 2019 dropped to the bottom line.
Sophia: Yeah. And I hired Caish that year as well. So that was the thing was like, okay, Ashley is swamped now. We got to hire Caish. We need somebody else prepping for meetings now that Ashley is going to start leading meetings.
And in March of that year, I put all of my stuff in storage and left for four months abroad. And so 2019, I was actually, I'd say houseless instead of homeless because it implies something different.
Michael: Relevant distinction. Relevant distinction. Okay.
Sophia: And so, let's see. I did this program through remote year. That was a four-month work abroad program. And so I spent the month of April in Santiago, Chile, the month of May in Lima, Peru, the month of June in Medellin, Colombia, and the month of July in Mexico City. And then I took a fifth month to spend two weeks on the East Coast, two weeks on the west coast. And then came back to Austin.
Yeah, and then met Brian at the end of 2019, in November. And so that was a busy year. And again, my goal that year was I really wanted to net $250,000. And so to hit $266 was awesome.
And so that had been a big goal. The $100K goal was a big goal leading up to that and just hitting that barely in 2016 felt really good. And then netting $250, it was like, first like, can I gross $250K? And then it was like, “Okay, and now how do I net $250K?”
And then last year, during a pandemic, I was like, no idea what's going to happen. And so it was one of those weird, obviously, a weird year for everyone. But also, I found out I was pregnant in February of 2020.
Sophia: Thank you. And so it was a very wild time because I had just moved in with Brian. So let's see. Personally, what was going on behind the scenes is Brian and I moved in together in January, found out I was pregnant in February, got engaged in March when the pandemic hit, got married on the Fourth of July, went on a month-long honeymoon. It was a road trip through Colorado. Took two weeks off for that. And then worked from the road for a couple of weeks. Came home from that. Moved next door to a two-bedroom because we were living in a one-bedroom bungalow together. Moved next door in August. Had a baby in October, Theo. And basically, went on maternity leave at the end of September. Had a business planning meeting with my team in January where I slowly started phasing back into work. Bought a house and moved across the street in mid-January this year. And now own a home in Austin with my hubby and my baby. And life looks very different than it did a few years ago when I was on your podcast.
Michael: Yeah. So the one hand I'm like that's a heck of a journey unto itself. And the other part of me here is that, and just thinking like, and this is why when we're in our 30s, we often need a lot of financial planning advice because life comes at you pretty fast sometimes.
Sophia: Yeah, exactly, exactly. And so, business-wise, I really started having Caish or Ashley sit in all my client meetings. We all started taking better notes on Trello. We just really figured out what do we need to do to get ready for me going on maternity leave.
And from a gross income perspective, my gross ended up being slightly higher in 2020 than it did in 2019. So it went from $368,000 to $380,000 for the year. And my net was just slightly lower than it was in 2019. So my net in 2019 was $266,000. And my net in 2020 was $258,000.
And that was mainly because I was paying my team a little more. I bumped up my team salary, Ashley and Caish's income when I was on maternity leave because guess what, they were doing a lot more work. Like Ashley was running a firm. She didn't think she'd be doing that two years ago when I hired her. So yeah. So I look at that and I'm like, I was able to take four months off because I had three and a half months for maternity leave, plus two weeks from my honeymoon. So I didn't work for four months in 2020. And I still made a quarter of a million dollars. That's insane to me that I figured out a way to make that happen.
And when I say like, didn't work, Michael, I was out of my email inbox. I was not checking in. And so I literally, got back in January and declared email bankruptcy. Meaning I just marked all of my emails as read and archived them.
Michael: Wow. It gives me anxiety to hear that. Declared email bankruptcy. That's an interesting way of putting it.
Sophia: Yeah. And so I had an out of office that was like, “Hi, I'm on maternity leave. If you need to get a hold of someone at Gen Y Planning, Ashley's running the show while I'm gone. Here's her email. If you want a quote, talk to Ashley or Caish. Caish will be reaching...” It's just like I had their emails there. They knew that I was not going to be getting back to them. And basically, once a week, Ashley would pop into my email inbox. And if there was anything pertinent that she needed to deal with, she would deal with it. But usually, if they had reached out to her. Sometimes there was a weird compliance thing that she would be like, Okay, I'm emailing Jim about this.
But I think the other thing was I trusted my team. And I hire well, and I trust my team. I guess I should say, I hire well, I train them, and then I trust my team. And I think that I've really enjoyed creating a virtual team over the last several years. And oh, the other thing that's cool about having a military spouse as your right-hand person is she was like, "I'm basically pretending you're deployed during this time."
Michael: So she even has a familiar mental framework for dealing with these situations. “Okay, it's like you're deployed and I just got to deal with everything for the next few months until you come back from deployment. Okay, got it.”
Sophia: Yeah. And so what's funny is that, actually, now we're going through growing pains again because I was like, "Ashley, I'm sorry." My email inbox is a mess now, and I'm still getting back into it. And it was really nice. January, I went back to team meetings with the team and working on the business, had some meetings with our compliance consultant, and CPAs, and stuff. And so that work on the business where we realized, “oh, man, we need an intern right now, not just a summer intern crap.” Then it allowed me to get ready for going back into client meetings starting in February. So last week was actually my first week back to client meetings. And we're all figuring out what parts are we doing? And “oh, we need an intern to sit in on my meetings on these days and Ashley's meetings on these days.” And I told Ashley, I was like, “it's like when your husband's back from deployment, but he's still not taking out the trash. And you just have to remind him to take out the trash.” She's like, "You need to email this client, Sophia. They emailed you three days ago." And I’m like, “oh, crap, that's my job again.”
Michael: “Right. Got it. Got it. Okay. Yeah, I got to do this now. All right.”
Sophia: Yeah. But it actually went really smooth. And it's really interesting because three years ago, Michael, I couldn't have done this. I didn't have the right team in place. I had a right-hand person, but I didn't have... Alex was doing a fantastic job but she still wasn't taking on new client meetings at the time, she was busy prepping for meetings, and I hadn't really grown to the point where I needed her to take on new clients yet. Whereas, the next year was really when I was like, “Oh, crap, I need somebody else to deal with all these leads I have coming in.”
And so, I hired Ashley in October of 2018. And then exactly a year later, I hired Caish in October of 2019. And it's just these figuring out that I really needed to put that team in place of a lead planner with an associate planner, or a client service associate type role was really instrumental in being able to take maternity leave, because just even a year ago, without Caish or having her be new would have been really hard for me to be gone for that long. And instead, I got 14 weeks to be with my little man, and he was just such a sweetheart. And it was so fun to be able to get that time. And then January, to have another four weeks to transition back to, oh, also moving and hiring a nanny and figuring out all of that stuff was...just transitions take time. And so we're still getting there. But man, I really thought four years ago that I was going to have to merge with a bigger firm where I would have back-office support in order to be able to do something like have maternity leave.
Michael: And so in retrospect, it wasn't about being merged in with a larger firm and the resources that that entails, it really just came down to having enough people to keep the systems running and having at least someone who can take the client meeting.
Sophia: Yeah. And also having the clients get to know that person. Having Ashley sit in on my client meetings for a year and a half before she was actually meeting with those clients was really great. And having people get to know Caish on the team and seeing her face in meetings and seeing her email I think that really helped smooth the transition as well.
How Sophia Finds New Gen Y Planning Clients [1:09:38]
Michael: And so, I guess the other question is for all of us. Where do $500-a-month Gen Y clients come from that feed this whole machine and the growth and makes it all work?
Sophia: Yeah honestly, Michael, it's still Google search is a lot of it. I still have clients coming from entering “financial planner for Gen Y” and “Gen Y Planning” popping up. So I'm still getting a lot of clients from Google search. I'm still quoted quite a bit in Business Insider or CNBC or whatnot. And I'm still a member of NAPFA. So sometimes I get clients through them.
It's really interesting. There's a few pieces of press, there's a blog called money under 30. And my 2014, I was named one of the top financial advisors for Millennials on that blog, and I still get traffic from it, still get prospects reaching out from that article that they updated more recently, but originally, I was on it from seven years ago, which is crazy to me. Yeah. And I would say, yeah, there's just still a steady flow of prospects. In 2020, I had significantly less prospects than I did in 2019, but still enough to keep this machine going and keep the ship afloat. So.
Michael: It was a rough year, particularly for the working-age Millennials who are at the ground zero for a lot of the jobs disruption. For better or worse, if you're working with retirees, portfolios recovered relatively quickly, and layoffs were not the problem. So granted, a lot of other bad stuff happened last year, but just from a pure economics perspective, retirees weathered this better. Working-age folks, it was, on average, far more disruptive to household finances. So yeah, I guess when you're working with people who are paying from income and unemployment rates spike that may slow down your growth a little at least.
Sophia: Yeah, and yet, I'm so surprised just how quickly these young people are growing their careers. We'll have people, like 20-somethings, who are making six figures at their first job out of college working at Apple, or Google, or Facebook, and that comes along with company stock, and lots of company benefits, and they need help navigating through those things. So it's also been really interesting to realize, wow, the questions that this generation is asking are just so, so different than previous generations?
Michael: Well, and to me, it makes the powerful point that when you take a different business model, a new different set of clientele, the opportunity set is that large. I don't know any advisors offhand that get a steady flow of new clients by coming up with the search results for financial planner for baby boomers. But you're literally driving material business off of financial planner for Millennials, financial planner for Gen Y. And you said this, even in 2017, when you were with us as well, that the primary source of new clients was Google search. And I don't mean this in a negative way, but it's not even the most complex Google search. Financial planner for a generation with 80 million people. That's what's crushing it for you.
Now, a note for anyone who's listening, wouldn't try to optimize around that keyword at this point, because Gen Y Planning had staked it out for seven years with better SEO, so you might want to get more targeted. But just recognizing that this is what happens when you build businesses in blue oceans and not red oceans, to use the analogy, or so many advisors fighting for retirees, and yes, it's good business and they can pay pretty well. And they stick around sometimes for 20 or 30 years. There's some pluses to that. But the minus is, it's really competitive. There's a ton of advisors going after those clients, and it's hard to show up for them. And when you get into a segment that has almost no one serving them, you can get down to financial planner for Gen Y, literally driving new clients who pay thousands of dollars a year.
Sophia: Yeah. And Michael, do you remember when I started this, and we would talk about it at conferences, and it was just like, baby boomers planners? People didn't get it. And they didn't understand why I didn't have an office and “what do you mean...”
Michael: Weren't you worried if you called it Gen Y Planning, you will exclude baby boomers with million-dollar portfolios who won't give you their dollars, Sophia? Like you're going to blow up your business by having such a specific niche on your website from day one.
Sophia: Yeah, there was that. There was I didn't have an office or that people couldn't shake my hand. Remember, that was a big thing. And it's just...
Michael: Because I feel like we've only lightly glossed over that. It's not just that you've been moving around and your team is virtual. The business is virtual, the clients are virtual. Are you still 100% Zoom meetings or whatever your platform of choice is?
Sophia: Yeah. I think I've been using Zoom for five years now. And a bunch of my clients were like, Hey, we used Zoom with you first. And then the pandemic hit. And now we're using it at work. So thanks, I already knew how to use it.
What Surprised Her The Most About Building Her Business [1:15:25]
Michael: So what surprised you the most about building the business? You're now 10-plus years in the industry, 7 years of building Gen Y Planning. What surprised you the most as you look back on the journey and how it's evolved?
Sophia: How many people were paying attention to what I was doing has just completely come as a shock. So like the number of people that read the article that I wrote for you, Michael, and the number of people who listened to the podcast in 2017, and the number of people who now launch businesses with a very similar business model to mine because they were like, Oh, well, that's really cool that Sophia is doing that. I think I could do something similar. And we're able to serve their niche really well, because of it.
I continue to be shocked by people. I just feel like I was like doing my own thing, because I, again, couldn't find a job doing it. I could get in a back office. But I really wanted to create something for my generation, and it just didn't really exist at the time.
Michael: Well, and again, to me, just a lot has changed even in the industry over the past seven years. There's a lot more out there now around subscription model and working with next-generation clients. And even just generally like, Millennials are more 30-somethings than 20-somethings. So the dynamic and the environment is a little bit different. But when you were launching this in 2013, you were in an entirely alien space, no one was there talking about subscription models for Millennials at that time.
Sophia: Yeah, it was just such a different time. And then it's really funny because now other people are like, “Oh, yeah, obviously, there's money to be had by working with Millennials.” And I'm like, that was not obvious when I launched. It was like, “I don't know if this is going to work.” Again, I told you I launched with zero clients and zero assets. It wasn't like I was at another firm and able to break off with 20 of my own clients and 3 million in assets and have a little something to start with. I didn't have that experience. I had to literally get a client at a time. And at the same time, there's 80 million millennials. We still have so many people to serve, and so many people to help.
And I think one of the things that I'm excited to see is now there is a new emphasis on diversity in this profession, and serving more of a diverse client base. And I'm so excited to see that and I'm so grateful for that. A lot of my clients are first-generation, or immigrants, or married to someone who is from another country, and it's been really fun to help people from all over and hear their money stories and figure out, a lot of times, they were the first person in their family to go to college, and really the success that they've had has been instrumental for their families, and to just really help people in a profound way is like changing their whole family's story.
And so it's really moving and yet we need more people to serve these groups. We need more people, for example, I can name on one hand how many Spanish-speaking CFPs, I know, and yet, one out of every four people in the U.S. speak Spanish in the home. And so just the need to have more Spanish-speaking CFPs is huge to serve their communities.
And so those are some of the things that I'm starting to see now that I'm getting really excited about that our profession is really behind on and has really been behind on for a really long time. And it's really cool to finally see the BLX internship start where they're working on pairing black and Latin X interns with financial planning firms like mine who are fee-only. And I'm just so excited to see these things happening in our profession, that it felt like just so long to get there.
And yeah, and so I still feel like it's still this profession where there's just so much room for growth still, that... Like, look, how many conferences went virtual and virtual this year that would have never gone virtual? Right, Michael?
Sophia: So things like that that are happening. So to me, I just feel like there's so many more people we can help, there's so much more room for growth and room to learn from what other industries and professions are doing and applying that to ours. And yeah, I feel really grateful for my team, I feel really grateful that Gen Y Planning is still going seven years later.
And at the same time, I don't know what this will look like three years from now or 10 years from now because things are changing really quickly. Things are changing in tech, things are changing in the needs of our clients. And so I think that there's still just like these huge opportunities, especially in the financial technology space to help even more people or for us to figure out group coaching, group financial planning, that kind of thing.
So, yeah, still really excited about what's next for this profession.
The Low Point Of Sophia’s Journey [1:20:30]
Michael: So what was the low point for you on this journey?
Sophia: Man, Michael, there were so many. I launched my firm when I was 29. And I wrote that first post for you when I was still married to my ex. And when I really was six months into this profession, and little did I know that like six months later, we would be getting separated, I'd be moving from my in-laws' basement into my parents' basement at age 30. And I was just determined to not have my business fall apart, just because I felt like my personal life was falling apart.
And I think that there was just a lot of heartache in 2014 and 2015 for me. And at the end of 2015, I moved from Minneapolis to Austin. And I think that was a big shift in really starting to create my ideal life.
And it's just been such a crazy whirlwind. And I didn't know if this business was going to work. I didn't know if I was ever going to be a mom someday. I didn't know if I would meet another partner. But now I can honestly say I am living my ideal life. And if you would have told me in 2014, 2015, you're going to hit some lows, and it's going to be hard, but life is going to get really good.
I couldn't even imagine my life being this good, Michael. I couldn't even imagine being this happy. And I just feel super fortunate.
And I really feel like things had to fall apart to choose intentionally how I wanted to put them back together again. And I think if you're listening to this, and you're going through a hard time to just know that that is just for now, it is not forever.
And what I love about what I've created at Gen Y Planning is none of us work full time. All of us have decided we want to work 25, 30 hours a week, and that's good. And we want to have lives outside of Gen Y Planning. And I tell my team, Your job is to take care of yourself first, and your family second, and our clients third.
And I think that is a big shift in any firm that I worked at, and any job that I have. And this is the longest job I've had anywhere, is creating it myself. But I also wanted to create something that was sustainable and where I wouldn't burn out. And I had a job working at a fintech startup where I was working 50 or 60 hours a week, and I pretty much burned out after a year. And I promised myself I would never do that again. Like yeah, there were maybe some 40-hour weeks, 45-hour weeks when I was really into Gen Y Planning.
And now, I really value my time, and now I work Monday through Thursday. And my mom watches my baby Monday mornings, and I take Monday afternoons off to be with Theo. And I take Fridays off to be with him. And my client meetings, I prep for my team, or I have a team meeting on Mondays or we prep for the week. And my client meetings are Tuesday, Wednesday, Thursdays. And just designing my schedule so that I have Fridays off and designing my schedule so that from 12:30 to 2:00 every day, I have a lunch break, and I can feed my baby and I can have lunch with my husband. And Ashley was like, "Why don't you block off this time on your calendar every day?" And one of the things I enjoyed most about maternity leave was being able to eat lunch with Brian. And I was like, oh, I actually really enjoy that. And she was like, "Why don't you just schedule a lunch break?" And I was like, "In seven years of running my own business and being in charge of my calendar and my schedule, it never occurred to me to literally block off a lunch break." I know it's so funny, but it was such a game changer for my sanity.
Michael: I love the frameworks that just sometimes things have to fall apart first to figure out how to put them back together again, intentionally.
Sophia: Yeah, I think a lot of this was percolating on the professional side for the few years before that, where I wanted to stop living for my two weeks of paid vacation. When I was working at traditional firms. I was just like, why do I only get two weeks of vacation? This is dumb.
And then I got this job working at a startup and I was working remotely with all these clients. And I was like, Oh I really like working virtually with clients. This makes a ton of sense. And so it was like, oh, okay, more of that. And so there was things that I was planning professionally so that when I launched Gen Y Planning that I didn't have any money to hire staff. So that cut my expenses. And I couldn't afford an office space and didn't want an office space because I liked working virtually. So that cut expenses. And so there were some of those things that I was setting up just so that I would be able to travel more, so that I could, but I didn't know that I would move from Minneapolis to Austin. And I think that getting divorced made me realize I don't want to be in Minnesota. I've dealt with snow for 30 years, I'm done. I'm done with snow.
But yeah, I was starting to change these different things in my life. And the last thing I needed to change was my relationship. I was like, I couldn't just dive into work and ignore what was happening in my marriage anymore. I really was like, “Okay, I've launched this business, it's going in the direction I want it to, but this relationship, we're going in different directions.” And I think that that was really hard. But it also allowed me to say, what do I want for me? And I realized, I hate the cold, and I want to live someplace warmer. And so I visited Austin and I loved it. And three months later, I moved here with two suitcases and a laptop bag.
But I would say that sometimes, these low points can really be such a gift. And at the time, I did not see them as a gift. I thought it was awful. And yet, I feel like they were such a learning moment. And I'm able to connect with my clients in ways that I couldn't before. And I'm also much more appreciative of this life that I have because it was not always this easy and fun and exciting and whatnot, it was really challenging and difficult. And so I feel like I'm also able to be there for my friends who are going through hard times.
The Advice She’d Give To Newer Planners Coming Into The Industry [1:29:27]
Michael: So what advice would you give younger or newer planners coming in today? They don't get to pick up where you are. They got to start close to where you started. What advice would you give to someone who's coming in and getting going today?
Sophia: Yeah, I think just being hungry to learn as much as you can, wherever you're at. I think that sometimes with our first or second job in financial planning, it can be really frustrating because you're not doing exactly what you want to be doing or what you thought you'd be doing when you entered this profession or whatnot. And I've heard you speak, Michael, about how it's really your third or fourth job that it gets you to figure out like, Okay, this is more of what I want to be doing. And know that I still think that there's a lot of value in getting that experience of working with a firm where you can really learn a lot of skills there. And you can maybe finish your CFP classes or you can meet your experience requirement there and get to use your CFP marks.
And I think the CFP is still really valuable in a lot of ways. I think that getting the classes done, getting some experience, and then also reaching out to the ideal firms or the ideal companies where you want to work and getting to know people there.
Michael: So as we wrap up, this is a podcast around success. And one of the themes is, success means different things to different people and sometimes different things to us at different ages and stages of life. And so, as you noted, getting to that threshold of personal success where more dollars in income doesn't necessarily materially change the situation. And so I'm wondering just for where you're at now, how do you define success for yourself?
Sophia: Yeah, so success for me is being able to really help my clients in a way that allows me to make good money. So for me, I think a quarter of a million dollars a year feels like a really good threshold to be at. So I'm making a quarter of a million dollars a year, working 25 to 30 hours a week. To be able to spend that time with my family on the weekend. And also be able to be location-independent, because I really love travel. And that's a huge passion of mine and one that Brian and I haven't been able to do as much together as we want. And that's something that I think is really the thing that we're really looking forward to doing as a family.
So it's being able to both have that balance between having that six-figure income while doing meaningful work that we feel is aligned with our purpose and having time for our family and being able to go on adventures still. That really feels like Success to me.
Michael: I like that, how that lines up. Having a good income and being able to do meaningful work aligned with purpose and having time for family, and still being able to go on adventures.
Sophia: Yeah, again, like 10 years ago, this was the stuff I started dreaming about. I was listening to podcasts that were business podcasts about location-independent entrepreneurship. And I was like, I think I want to do something around helping people with their money. And I also want to work with my generation, and I don't know if there's an overlap there or not. Literally, back in 2009, that's when I was like, I don't know. Can you do that?
Michael: So amazing how much it shifts over 10 years and still having decades to go, per your point. I don't know what this looks like in 10 years because it's been a heck of a lot of change from the past 10 years.
Sophia: Yeah. And I think that's the thing. It's that these things turn into way bigger than we ever could have dreamed them to be. And that has been, I think, the thing that has surprised me the most.
Michael: Yeah. Well, thank you so much, Sophia, for joining us on the "Financial Advisor Success" podcast.
Sophia: This is a lot of fun. Thank you so much, Michael.
Michael: Absolutely. Thank you.
Elliott Weir - III Financial says
How ironic, Sophia: “I’ve dealt with snow for 30 years, I’m done. I’m done with snow.”
Posted one week after Austin Snowpocalypse 2021.
An egg. A sunset.
Michael, great interview. Sophia mentioned an action checklist she was going to share your way. Would you mind sharing the link?
Jim Koford says
Hi SS, thanks for your question. Sophia did indeed share a sample of her post-meeting checklist template, which can be found here: https://www.kitces.com/sophia-beras-financial-plan-template-sample-financial-plan-and-meeting-recap-template/