RPF0142-Proposed_Financial

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00:00:30.560 | Today I'm going to give you some business ideas that you can use to create a financial planning practice.

00:00:36.160 | This will serve those of you who have an interest in getting into the business, but maybe want to do it from a more independent perspective.

00:00:43.120 | I know several members of the audience want to build a financial coaching practice or are accountants trying to set up a business.

00:00:49.880 | So today I'm going to give you my ideas.

00:00:51.360 | This is the business that I was considering setting up if I couldn't make radical personal finance a go.

00:00:57.480 | Welcome to the radical personal finance podcast.

00:01:16.040 | My name is Joshua Sheets and today is Wednesday, January 28, 2015.

00:01:21.200 | Today on the show going to be fairly light, but I'm going to give you a business plan.

00:01:26.120 | This was my business plan, the business I've decided not to start, or at least for now.

00:01:31.560 | Try to give you some insight into it, and I am going to give you all my best ideas and I hereby give you permission to steal them.

00:01:46.960 | Today is going to be fairly light, fairly fun.

00:01:49.000 | I'm in a good mood.

00:01:49.640 | I've had a busy day and I did want to make sure to get a show out here.

00:01:52.760 | But I didn't want to get into anything hardcore or too heavy.

00:01:56.200 | So I'm going to give you a structure and a model for a potential financial planning practice.

00:02:02.320 | This will not be of interest to all of you, although I'd recommend listening to it.

00:02:07.400 | I'm going to pretend that I'm speaking to people that specifically want to start their own independent financial planning firm.

00:02:13.440 | Whether that's because you are maybe a financial blogger or writer and you desire to create revenue from working with clients,

00:02:22.360 | or whether that's because you are maybe an accountant like the show I handled last week with several clients desiring to transition over,

00:02:31.320 | or excuse me, several listeners desiring to transition over from accounting to financial planning.

00:02:35.840 | I'm going to give you just basically my setup, my idea for how I was going to structure the firm I started called Fiduciary Financial Consulting.

00:02:45.040 | I've decided at the moment I'm not pursuing that business so I'm going to give all my ideas away.

00:02:49.920 | Like I said, you are hereby authorized to take them and steal them.

00:02:56.760 | When I left the firm I was with previously, I did not leave because I was dissatisfied with the company that I worked with.

00:03:03.520 | I did not leave because I was dissatisfied with the structure of the business.

00:03:07.640 | I didn't leave for any of those reasons.

00:03:09.280 | I believe at any firm except one which is your own, any financial advisor is probably going to have something that they would like to maybe see done differently.

00:03:18.520 | But there's no such thing as the perfect financial planning firm.

00:03:21.720 | If you're involved in your own firm, there's something you're going to want to see differently.

00:03:25.520 | You're just trying to figure out how on earth do I get the capability to actually follow through with this.

00:03:29.760 | So I had zero ill will, zero problems.

00:03:33.520 | I was able to build a business that I was proud of and to do it in a way that I was proud of.

00:03:39.520 | There were certain shortcomings, certain things I didn't have access to, certain things I couldn't do but it was no problem for me.

00:03:45.920 | I would just simply tell my clients and prospective clients, "I can't serve you in that manner."

00:03:50.320 | I was able to find enough ways to serve them that I could bring the value that I wanted to bring to them.

00:03:55.440 | I think that's the answer for all of you who are existing financial planners.

00:03:59.280 | Recognize you can't serve everybody and you can't serve everybody well.

00:04:03.280 | So simply acknowledge the people that you can't serve well.

00:04:06.080 | If you don't have a product or a solution or an answer for a specific situation, just tell your clients and do your best to send them to a place that they do.

00:04:16.880 | That's the important thing.

00:04:18.880 | So I would not have left the firm that I was at if I wasn't starting this show.

00:04:25.280 | The only thing that I couldn't figure out how to do at that time was to start this show.

00:04:30.320 | It wasn't that I couldn't do any kind of show.

00:04:34.320 | It was that I couldn't do the show in the way that I wanted to do it with the types of topics that I wanted to do it.

00:04:39.520 | I couldn't do it in the daily format.

00:04:41.520 | I couldn't do it with the edgy, kind of interesting topics that I often cover.

00:04:45.920 | I just couldn't do it the way that I wanted to do it.

00:04:49.120 | I either wasn't going to do it or I needed to do it the way that I wanted to do it.

00:04:52.720 | Because the world doesn't need another sanitized, corporatized, professionalized, 27 and a half minute discussion that sounds like you're reading from a financial planning textbook.

00:05:05.520 | That is, I can't stand that.

00:05:07.520 | It's so boring to listen to.

00:05:09.520 | And sure, maybe it's helpful to some people, but I just don't think the world needs more of that.

00:05:12.560 | It's got enough of that as it is right now.

00:05:14.560 | The world needs something that's interesting and that's deep, that makes you think.

00:05:19.520 | But yet, that's also that's accurate and that's relevant and that's careful.

00:05:23.520 | And at that time, when I was kind of building the genesis for this show, I decided the world needed something consistent, something regular that would provide information.

00:05:38.320 | And I couldn't figure out a way to build this show in that context.

00:05:42.320 | So I had to decide when I was decided, "Well, am I going to leave this? Am I going to start the show? Or am I just going to keep doing what I'm doing and not let it exist?"

00:05:50.320 | And it was a very costly decision for me in terms of personal financial cost of the client base that I walked away from to do the show.

00:06:00.320 | But I just figured I feared not doing it and regretting it more than I feared doing it and failing.

00:06:06.320 | So I jumped.

00:06:08.320 | But I needed a backup plan.

00:06:10.320 | And that backup plan is how was I going to monetize a show?

00:06:16.320 | How was I going to be able to earn an income from the show?

00:06:18.320 | The most straightforward way to earn an income from a show like this would be for me to do financial planning for individual clients.

00:06:24.320 | I've received plenty of inquiries for that, and I appreciate every one of them.

00:06:30.320 | It's very flattering.

00:06:32.320 | But the challenge is, "Am I going to do planning or am I going to create the show?"

00:06:36.320 | I haven't been able to figure out how to be productive enough with the 168 hours that I get every week to be able to effectively serve a volume of individual financial planning clients to the level of service that I think should be given and produce the level and quality of content with the regularity that I want to produce it on this show.

00:06:56.320 | It takes quite a bit of time to prepare the shows, to keep them accurate, to make sure that I'm careful, to make sure that I'm detailed with my content, but that I'm not just simply reading chapters from a financial planning book and plagiarizing somebody else's work.

00:07:14.320 | So it takes a tremendous amount of time.

00:07:16.320 | And also just the process of doing it, the process of setting up a website and handling all this stuff, it takes time.

00:07:22.320 | And I haven't been able to figure out both things without having a staff.

00:07:26.320 | I probably could do it if I had a staff, I had a producer, and I just simply had to trot into a studio, sit down and do it.

00:07:32.320 | But I could only do it in that context, actually, if I were just doing exclusively interviews or if I were doing exclusively question and answer.

00:07:38.320 | If I were doing this show live on the radio, just dealing with inbound customer calls or listener calls, that would be pretty easy for me.

00:07:48.320 | It's easy to give a four or five-minute answer that's straightforward.

00:07:54.320 | Most people's financial planning questions are not complicated in any regard.

00:07:58.320 | And so it's pretty simple to do.

00:08:00.320 | That's easy.

00:08:01.320 | No preparation needed.

00:08:02.320 | Interviews are relatively easy, little preparation needed.

00:08:05.320 | What's difficult is to design a show around a certain concept.

00:08:10.320 | What's difficult is to design a planning show and how do I structure this information in a way that is useful.

00:08:17.320 | That takes a tremendous amount of time and effort.

00:08:20.320 | And I believe that's important, so I've chosen to do that and not do individual planning.

00:08:25.320 | But I always had in the back of my mind an idea for a firm, of a way that I could leverage this show into working with individual clients.

00:08:36.320 | I can't do both, and I've decided I'm not going to do the firm, or at least I'm not going to do the firm in the near-term future.

00:08:43.320 | And if I ever do build a financial planning firm again, I need to do it with a partner who can run the firm,

00:08:50.320 | who is an experienced planner, who is well-credentialed, with whom there is a – who understands the business,

00:08:58.320 | who understands the need of how to establish things to serve customers.

00:09:03.320 | And then my role would be on the marketing end, kind of bringing in the clients and building the brand with this show or something similar.

00:09:11.320 | And my role would be in an advisory role of making sure that we're doing an excellent job with those initial –

00:09:18.320 | how we run the business, how the meetings are structured, the technology that we have, the recommendations that we have, that type of thing.

00:09:27.320 | So it would be much more of an advisory and marketing role, similar to what Rick Edelman did with his firm.

00:09:33.320 | He's always been involved in the marketing side and very little in the client side.

00:09:37.320 | I just don't have the – there's not enough hours in the week for me to do it effectively, to do both.

00:09:43.320 | So – but again, if I did some shows and I couldn't make any money on the business, then my plan was I'll go ahead and hang out my shingle and open up business for the firm.

00:09:53.320 | And so here's the business model that I designed that I thought would work effectively.

00:09:59.320 | I would call this model an exclusive financial planning or financial consulting model.

00:10:05.320 | This model does not include a provision for specialized application of investment expertise.

00:10:13.320 | This is strictly mainstream financial planning, detailed financial planning, but mainstream financial planning or financial consulting is what will work in this model.

00:10:23.320 | And essentially the idea is to do everything in exchange or to offer the idea of a monthly fee and to allow clients to pay you a monthly fee in exchange for planning services.

00:10:37.320 | When I look at how to achieve success with financial planning, very little of it has to do with anything that is one time and much of it has to do with things that are on an ongoing basis.

00:10:50.320 | And this is one of the flaws in the way that financial advice is delivered currently.

00:10:55.320 | And the other thing that I'll do in just a moment is I'll tell you the market segment that this serves because not everybody needs this kind of service, but I think there are a lot of people that do.

00:11:07.320 | If you look at the way that compensation is structured in the financial planning industry, it's going to usually be tied to a product of some kind.

00:11:17.320 | And that's okay. That's right. That's as far as I'm concerned that is perfectly fine and ethical.

00:11:22.320 | So here would be an example. It's probably going to be tied to the product of an – the sale of an insurance product.

00:11:30.320 | If somebody needs life insurance, they need a life insurance policy.

00:11:33.320 | And for that specific need, the sale of a product solves the need for the life insurance policy.

00:11:40.320 | If somebody needs investments or investment management, then that's a product.

00:11:47.320 | They can buy investments or buy an investment – buy investment management.

00:11:51.320 | And that can be done – that can be structured either in the form of a commission or in exchange – in the form of an expense ratio or in the form of an asset under management fee if you're working with a specific planner.

00:12:06.320 | But what those things don't address is they don't address the daily, weekly, monthly, individual, personal finance decisions that lead to how much money can be put into the investment account.

00:12:18.320 | Maybe some of these things are addressed if you have an excellent tax planner, an excellent accountant.

00:12:25.320 | But many times, the accountant is being paid for the production of a return, not for the delivery of advice.

00:12:32.320 | When I look at many mainstream middle America, median income household types of clients, the things that they need, there's very little ability to build in excess performance through the sale of a specifically advantageous product.

00:12:54.320 | There's very little ability – insurance product.

00:12:56.320 | There's very little ability to make a massive difference with some unique investment from a public-traded security standpoint.

00:13:05.320 | But there's a massive possibility for other types of planning.

00:13:10.320 | There's a massive possibility for bringing together the need for enhancing income, building a career.

00:13:18.320 | There's a massive opportunity for how to help somebody optimize their tax situation.

00:13:24.320 | There's a massive opportunity for helping somebody go through their monthly budget and isolate individual categories of expenses and illustrate how each category can be trimmed.

00:13:34.320 | So that leads to more investment dollars, and then those investment dollars can be invested more wisely in various aspects of life that go far beyond public-traded securities.

00:13:43.320 | That's where there's easy pickings in the majority of mainstream median income American households.

00:13:50.320 | I think I could walk into most households and just on a regular basis, I could find thousands and thousands and thousands of dollars in an ongoing basis.

00:14:02.320 | The challenge, however, is how on earth do you do that with clients?

00:14:08.320 | After all, I do this show every single day and they're – I mean they're long and I don't run out of topics.

00:14:15.320 | And I've got a list with hundreds of topics that I'm just waiting to talk about.

00:14:20.320 | So how do you help that with a client when you've got one hour a year, two hours a year of client meetings?

00:14:26.320 | Can't be done. Can't be done in the hourly model. That was the model I forgot to mention.

00:14:30.320 | Can't be done in the hourly model because a client walks in and expects in 42 minutes we're going to solve all of my financial problems.

00:14:36.320 | And at that point, I'm just getting started fact-finding, not because I'm slow or not because I'm verbose.

00:14:41.320 | I'm actually not that verbose in client meetings even though I am on this show.

00:14:46.320 | But because we're just starting to figure out the details that are needed to figure out.

00:14:51.320 | We're just starting to peer into some of the things like who's got the higher earning social security record in the spouses in a marriage situation so that we can figure out what's an intelligent social security distribution strategy so that we can figure out how to add tens of thousands of dollars over the lifetime of somebody's retirement.

00:15:09.320 | It takes time. That doesn't come out in the first 42 minutes.

00:15:11.320 | And most people breeze through their financial planning meetings and appointments so fast.

00:15:17.320 | And they just want the quick and easy answer of what do I do with my 401(k) when the reality is I can't do much with 401(k).

00:15:24.320 | I could do a lot with your social security plan.

00:15:27.320 | So that – like how do I solve this problem?

00:15:31.320 | And I thought of it solving it in the idea of coaching, kind of like bringing together financial planning and life coaching and budget coaching and career coaching and everything in the context of coaching and doing that on a regular basis, i.e., monthly.

00:15:48.320 | And I think this model could be powerful.

00:15:51.320 | This is what I would like to find.

00:15:53.320 | If I could find a financial planner who would do this for me, this would be worth money to me.

00:15:59.320 | So therefore, that's how I came up with the business.

00:16:01.320 | I said here's what I would like to find and I can't find anybody doing it.

00:16:04.320 | So here is the model I designed.

00:16:07.320 | Why don't I work with people as their financial planner on an ongoing monthly basis?

00:16:13.320 | And the requirement or the goal is that we speak at least monthly.

00:16:18.320 | And every month we're going to focus on one different area of planning.

00:16:22.320 | And there's nothing off limits.

00:16:25.320 | So that may mean that in January we sit down and we look at the annual budget and we figure out is our annual budget in line with what we want it to be.

00:16:34.320 | That may mean in February that we talk a little bit of tax planning.

00:16:38.320 | What are we going to do?

00:16:39.320 | Should we make contributions to – here it's February.

00:16:42.320 | We're going to make our contributions for the previous tax year.

00:16:44.320 | Should we put them into a Roth or should we put them into an IRA?

00:16:47.320 | Should we fund an HSA?

00:16:48.320 | Should we fund an ESA?

00:16:49.320 | How should we set these things up?

00:16:51.320 | But it might mean that we sit down in March and we say, "Listen, how many books are you reading?

00:16:56.320 | How many posts have you written on your blog to publicize your business or your skills as a professional worker?

00:17:06.320 | How many meetings, lunch meetings have you set up with the leaders in your industry?

00:17:12.320 | How many connections have you made?"

00:17:15.320 | Or it might mean that in June we sit down and we work on homeowners insurance and we figure out can we optimize that in some way?

00:17:22.320 | And in July maybe we figure out can we start a travel hacking program to fund the annual vacation and do it with credit cards instead of coming out of pocket with after tax $4,000 to fund the annual family vacation.

00:17:36.320 | And it might be that November we sit down and design a plan that doesn't involve spending $80,000 on a university education that we can get the equivalent for seven or things like that.

00:17:50.320 | Or in December we might say how can we gift shares of stock in an intelligent way to our grandkids?

00:17:56.320 | I don't know.

00:17:57.320 | But my point is that these are the types of things that matter.

00:18:00.320 | But these are the types of things that very few financial advisors have time to talk about or have incentive to talk about.

00:18:07.320 | This happens in very wealthy families because if you have very wealthy families, let's say that I'm managing money for you and you've got $10 million bucks with me.

00:18:16.320 | And let's say that I'm managing on that $10 million bucks I'm charging a 1% fee.

00:18:21.320 | Well, I've got $100,000 of revenue coming into my practice now on that basis.

00:18:26.320 | So I've got a lot of time that I can devote to making sure that you as a wealthy person are fully helped in every area of life.

00:18:37.320 | I'll go out to lunch with the kids and help them with their career plans.

00:18:40.320 | I'll have Uncle Joe and Aunt Sally who are struggling come into the office and we'll talk about money.

00:18:46.320 | I'll help drunk Uncle Rick get put into rehab so that he stops making stupid decisions.

00:18:54.320 | I'll sit down with Susie who's starting a business and she needs a little bit of help with the details of what type of entity can we do.

00:19:05.320 | I've got $100,000 of revenue into my practice.

00:19:08.320 | I've got a lot of incentive to keep that revenue around.

00:19:10.320 | But if I'm managing $150,000 and I'm just going to use that 1% fee number throughout as an example, as a good benchmark to kind of compare the incentives for the work of a financial advisor.

00:19:29.320 | So I've got $150,000 of your money and a little IRA that has my name on it and I'm charging 1%.

00:19:37.320 | That's $1,500 a year.

00:19:40.320 | On an hourly basis for a skilled professional, how many hours of work should I devote to your account?

00:19:49.320 | Let's say that we have an annual meeting once a year.

00:19:52.320 | That meeting is probably going to be somewhere between one to two hours.

00:19:55.320 | Let's say that I call you or we have two meetings a year.

00:19:59.320 | So each one of those is two hours.

00:20:01.320 | I've got to go drive out and see you or meet you somewhere or come to your office.

00:20:05.320 | That takes an hour out of my time, 30 minutes to get there because I've got to be early to make sure I'm not late.

00:20:10.320 | Maybe an hour to get there.

00:20:12.320 | I've got to fight traffic.

00:20:13.320 | I've got to pay for parking.

00:20:14.320 | I've got to get there.

00:20:15.320 | If we're going to go to lunch, I need to pay for lunch.

00:20:17.320 | I need to get that into my schedule.

00:20:20.320 | Again, I've got to fight parking.

00:20:21.320 | I've got to go in traffic.

00:20:24.320 | If we're going to do a quarterly call and I'm going to call you because you're concerned about the performance of your investments, this is a big deal.

00:20:30.320 | Advisors need to keep in continual touch with their clients.

00:20:33.320 | So that's going to be, let's say, 30 minutes.

00:20:35.320 | You're probably not going to answer, so I'm probably going to have to leave a voicemail.

00:20:38.320 | You're going to call me back later or I'm going to need to call twice so you know that I tried multiple times to reach you but you never felt like calling me back.

00:20:45.320 | I've got to make sure that you as a client know that I tried and that I did my work but you don't feel like calling me back.

00:20:51.320 | So now I just put a check mark and go on.

00:20:54.320 | So the point is let's say that I work at 12 hours.

00:20:58.320 | That leaves me at an hourly rate of $125 and that's gross income.

00:21:05.320 | That's not net of my rent.

00:21:06.320 | That's not net of my staff.

00:21:07.320 | That's not net of my cell phone.

00:21:09.320 | That's not net of my gas.

00:21:10.320 | It's $125.

00:21:12.320 | So I have little incentive to sit down with Tommy with his new business or with Mary when she's going to college and help with that and help with the scholarship forms to figure out and review her essays.

00:21:24.320 | I can't do it on $1,500.

00:21:26.320 | That's a poor business decision.

00:21:31.320 | Rather what I need to do in that situation as an advisor is I need to keep you as happy as I can afford to do so.

00:21:38.320 | So that means giving you as good service in that annual meeting, answering your questions, making sure that you've got some information, maybe my monthly newsletter or something like that.

00:21:48.320 | I've got to give you the best I can but I can't over deliver or it's a bad business decision.

00:21:53.320 | So in large financial planning practices, then we segment our clients.

00:21:57.320 | We have our A clients, our B clients, our C clients and those are clients that are – those categories usually have at least one metric that's based upon revenue.

00:22:08.320 | How big is the account?

00:22:10.320 | And the A client might set up a plan where we say, "Okay, our A clients, we're going to have 25 touches in a year to make sure that we're communicating with them."

00:22:20.320 | So the A clients will say, "We're going to send 12 monthly newsletters.

00:22:24.320 | That's 12 touches.

00:22:25.320 | We're going to call every other month.

00:22:27.320 | That's six so we're up to 18.

00:22:29.320 | We're going to do a client appreciation event, the local wine tasting or a cigar bar or whatever, a dinner out.

00:22:36.320 | We're going to do that.

00:22:37.320 | There's one.

00:22:38.320 | We're going to make sure that we have our quarterly reviews."

00:22:41.320 | So there's four.

00:22:42.320 | But then you have your C clients which you call once a year and you try to do your best for.

00:22:46.320 | And that's a practical business decision.

00:22:49.320 | I don't see any way that it can be any different in that scenario.

00:22:54.320 | But that leaves a lot of middle America without that great advice that they're looking for and that they need, someone to sit down and help with the budget, someone to sit down and help with the debt plan.

00:23:05.320 | And so then that reflects on the financial advice industry as a whole.

00:23:09.320 | And in general, wealthy households are very satisfied with their advisors, are very satisfied with the service that they received.

00:23:16.320 | And yet it seems to me that middle America is not being effectively served because what's often touted is investment outperformance or the uniqueness of one specific financial product.

00:23:31.320 | Put all your money into this annuity and you're going to be – you're market guaranteed.

00:23:35.320 | You get all the upside potential without the downside risk.

00:23:39.320 | No.

00:23:40.320 | That might be okay in the right scenario.

00:23:44.320 | But let's start with the low-hanging fruit.

00:23:48.320 | Why are you driving 182 miles a day?

00:23:51.320 | Why do you have this expensive cell phone plan?

00:23:53.320 | Why do you have this here?

00:23:55.320 | Why are you choosing to do that?

00:23:56.320 | And it's not my job as an advisor to judge a client and tell them what they should do.

00:24:00.320 | But it is my job to ask good questions and make sure that whatever you're doing is in line with what you should be doing.

00:24:07.320 | I was listening today to a friend of mine who is about to make a purchase of a house and – a condo.

00:24:16.320 | And it's a very nice condo, very, very fancy.

00:24:20.320 | But the homeowners association dues are $7,000 per year.

00:24:25.320 | Well, this person is not a professional relationship and it's not – it's just a casual acquaintance.

00:24:31.320 | I have no place – it's none of my business to tell them what to do.

00:24:34.320 | But little decisions like, "Do you realize that you have $7,000 a year of overhead but you're not saving any money

00:24:40.320 | and there's no possibility of you getting out of that overhead?"

00:24:43.320 | That's a big decision.

00:24:44.320 | That's the conversation.

00:24:45.320 | That's the low-hanging fruit.

00:24:47.320 | So as I thought about this problem that I've just outlined for you,

00:24:51.320 | I came up with the idea of doing monthly planning in exchange for a monthly fee.

00:24:57.320 | And the idea behind that fee is I need my incentives and my client's incentives to be aligned.

00:25:03.320 | I need my client to pay me a monthly fee and it needs to hurt enough that they're motivated to talk to me.

00:25:12.320 | It needs to hurt.

00:25:13.320 | They say, "I'm going to get my money's worth out of Joshua."

00:25:16.320 | Because if they don't talk to me, which believe it or not,

00:25:18.320 | most people don't talk to their financial advisors as much as they should.

00:25:22.320 | It's very tough to get people to call you and talk to you as much as they should

00:25:26.320 | because we as financial advisors have done a very poor job of, I guess,

00:25:32.320 | offering ideas and value that go beyond a specific financial product.

00:25:36.320 | So people are quick to think of, "Oh, I'll call Joshua when I need insurance,"

00:25:41.320 | or, "Oh, I'll call Joshua when I need to make my IRA contribution on April 13th,"

00:25:47.320 | but not when I'm buying a house, not when I'm leasing a car, not when I'm doing this.

00:25:52.320 | And that used to just make me scream and I would say, "Why didn't you call me?

00:25:55.320 | I could have saved you thousands with this idea or that idea or this other thing."

00:26:00.320 | So I need my client to be incentivized to call me because that makes sure

00:26:05.320 | that I can actually do my work.

00:26:08.320 | I can actually provide the coaching and the advice and the planning that they need.

00:26:14.320 | That's a big deal.

00:26:15.320 | And I need to bill it monthly so they have an incentive to call me every month.

00:26:21.320 | One thing I like about that monthly idea is it puts the burden on me in a good way,

00:26:26.320 | where if I don't do a good job of connecting with my client every month, they can cancel.

00:26:32.320 | That's another one of the things I'd like to see and that I designed into my plan

00:26:35.320 | is every month they can cancel at any time.

00:26:38.320 | There's no contract.

00:26:40.320 | And so now I'm incentivized as an advisor and as a coach to do a good job of reaching out to the client

00:26:47.320 | and saying, "Hey, listen, let's get this done."

00:26:49.320 | And I've got to make decisions because every month--excuse me, I've got to make an impact

00:26:54.320 | because every month the client is going to see that bill on their credit card statement

00:26:59.320 | or pull it out of their checking account every single month.

00:27:05.320 | That fee is what we call highly salient.

00:27:09.320 | It's felt.

00:27:10.320 | And I like that.

00:27:12.320 | I like the burden.

00:27:13.320 | I like the pressure that that puts on me as an advisor to say,

00:27:16.320 | "I've got to deliver in excess of this fee.

00:27:19.320 | If I don't, I'm not worth it."

00:27:23.320 | I believe that's the standard by which we as financial advisors should be judged from.

00:27:28.320 | We must deliver specific financial value which is substantially in excess of our fees

00:27:35.320 | or we're simply not worth the money, period, and no one should hire us.

00:27:40.320 | It's the same for any transaction, any business transaction.

00:27:44.320 | I've got to deliver.

00:27:45.320 | I like that.

00:27:46.320 | It puts a pressure on me which is probably not a good business decision.

00:27:49.320 | Most businesses want their fees and their costs to not be salient.

00:27:54.320 | This is what's so beautiful about simply billing assets is clients often are not aware of what's being billed.

00:28:01.320 | This is what's so brilliant about expense ratios and paying commissions,

00:28:08.320 | billing commissions on a basis where they're higher but they're ongoing and they're hidden.

00:28:15.320 | Those fees are very--they're not salient.

00:28:18.320 | They're not apparent to most people.

00:28:22.320 | People don't know about them.

00:28:23.320 | That's what makes people who pay attention very upset.

00:28:26.320 | But it's a simple business decision to try to make things as low impact as possible.

00:28:31.320 | Everyone makes--you try to make it easy for people to buy.

00:28:36.320 | That in and of itself is practically the whole idea.

00:28:39.320 | If I can deliver monthly advice and speak with my clients at least once a month

00:28:44.320 | and we have essentially a coaching model, and yes, there needs to be some formal technical financial planning.

00:28:50.320 | I need to create a nice snazzy looking document with some pie charts.

00:28:53.320 | At some point, we need to do some financial planning projections.

00:28:56.320 | But it's much more of just that continual conversation, somebody to remind you,

00:29:01.320 | "Hey, what are you focusing on right now?"

00:29:03.320 | "Well, right now I'm working on this big account. I've got to get this thing closed."

00:29:06.320 | "I'm working on this big project."

00:29:08.320 | "Great. Get the big project done."

00:29:10.320 | But then the next month, "Hey, did you call the guy across town that you needed to go out to lunch with?"

00:29:15.320 | "Are you keeping consistent with your numbers of what you need to do?"

00:29:19.320 | "Are you getting home for your family?"

00:29:20.320 | Kind of that weird amalgamation of life coach, business coach, career coach, counselor,

00:29:27.320 | psychologist or psychiatrist. I don't understand the difference.

00:29:36.320 | You're one of the psych people that helps people.

00:29:40.320 | That's kind of the model that – and right there you have the whole business idea.

00:29:46.320 | But it's hard for me to imagine in that model with that consistent contact.

00:29:53.320 | It's hard for me to imagine not being able to deliver a massive transformation in somebody's life over time.

00:30:01.320 | And because all good financial ideas are iterative, you got to do them again and again and again and again and again

00:30:07.320 | and they all have to be adjusted.

00:30:09.320 | Right now I'm going through and adjusting my accounting system, my own personal household accounting system.

00:30:15.320 | Just because it was good in the past doesn't mean it's good now.

00:30:19.320 | You got to go through and shop everything.

00:30:22.320 | Hey, it's been two years since we've shopped life insurance.

00:30:24.320 | This month we got to shop life insurance.

00:30:26.320 | Hey, it's been two years since we shopped homeowner's insurance.

00:30:28.320 | This month we got to shop this.

00:30:30.320 | Hey, it's been a year since we shopped car insurance.

00:30:32.320 | We need to make the phone call and see is there something that we can get.

00:30:36.320 | Can we get another discount? Can we adjust something?

00:30:39.320 | This is the stuff that people don't do and this is why people stay broke.

00:30:45.320 | And this is what we as advisors I think can make a big difference for median income middle America.

00:30:51.320 | This is not appropriate planning for the wealthy.

00:30:55.320 | The wealthy, although these things, the concepts carry over, there's just not the same connection.

00:31:03.320 | I don't need to sit and talk with a family of multimillionaires and say, "Got to sell the iPhone or get rid of the iPhone because it's too expensive."

00:31:10.320 | That's a total waste of time.

00:31:12.320 | But I do need to make sure the business transactions are structured properly.

00:31:15.320 | I do need to make sure that the amounts that are being spent are in line.

00:31:19.320 | I do need to make sure that investments are being handled well.

00:31:21.320 | So that's a different business model.

00:31:24.320 | I'm talking about something where you can serve middle America median income households.

00:31:29.320 | I like the alignment of incentives with that monthly fee model.

00:31:34.320 | And the other advantage under that scenario, if I'm charging fees directly to a checking account,

00:31:40.320 | which I'm not necessarily convinced is the only way to do this.

00:31:44.320 | I'll cover AUM and asset center management fees in a moment.

00:31:47.320 | But I like the idea, even if I did choose to only directly charge fees to a checking account or to a credit card,

00:31:55.320 | I like that because it's investment style agnostic.

00:31:58.320 | And I don't have to worry about that little tiny conflict of interest of how do I keep my clients in this investment when it makes me money.

00:32:08.320 | This is one of those other complaints that people have against financial advisors.

00:32:11.320 | And I think it can be a fair complaint or it can be an unfair complaint.

00:32:14.320 | You have to look at the situation.

00:32:16.320 | But probably the best example is I told my financial advisor that I wanted to take money out of my investment portfolio to pay off my house.

00:32:25.320 | And they said, "No, don't do it."

00:32:27.320 | And I think the only reason that they said no was because they're earning fees off the management of my money.

00:32:34.320 | Well, what's the right answer in that situation?

00:32:37.320 | Well, the investment advisor may be making a rational discussion and saying,

00:32:41.320 | "Look, the expected return on this investment portfolio here is 8%.

00:32:45.320 | The rate of return on your mortgage is 3%.

00:32:48.320 | All things being equal, it would not be wise to trade an 8% expected return for a 3% expected return.

00:32:55.320 | You should stick with the 8."

00:32:57.320 | That might be a rational cogent argument or it might simply be, "Hey, I don't want you to pull the money out of the account."

00:33:05.320 | Now, the client could rebut that recommendation and say, "Well, look, here are these other factors."

00:33:09.320 | Fine. Convince the advisor it's a good idea.

00:33:12.320 | The point is if you trade 8 for 3, if all else is equal, it's not.

00:33:16.320 | But if all else is equal, not a wise financial move.

00:33:23.320 | The thing I like about just simply billing fees directly is you're just paying for advice. That's it.

00:33:29.320 | Now, how can you possibly do this in a cost-effective way?

00:33:34.320 | One of the things that I was planning is to stop doing in-person planning and to do everything virtual.

00:33:42.320 | Over the last six years when I was actively doing financial planning, I saw a marked transition and change

00:33:50.320 | from the need for doing everything face-to-face in person to being able to do things virtually

00:33:57.320 | with communication done over a phone line and over a computer connection.

00:34:03.320 | When I first began financial planning, it was very clumsy.

00:34:06.320 | The tools existed. Skype has been around for a long time.

00:34:09.320 | But it wasn't clumsy and people weren't well-connected to it.

00:34:12.320 | The screen-sharing programs for your computer software, they worked but they weren't easy and they weren't cheap.

00:34:22.320 | Even if they were easy and affordable, people weren't accustomed to using them.

00:34:27.320 | You would have many clients that are just not comfortable with the idea of how do I pull up this webinar program?

00:34:33.320 | How do I pull up the screen-sharing program?

00:34:35.320 | I've seen that change though.

00:34:37.320 | One of the changes that I made is I learned that I actually used virtual planning as a tool in my back pocket.

00:34:47.320 | One of the rules in financial planning is when you're working through a conversation in which a decision needs to be made,

00:34:53.320 | whether that's we're going to reallocate the portfolio, whether that's we're going to move the money into this trust,

00:34:57.320 | whether you're going to buy this insurance policy, you need all the decision-makers present.

00:35:03.320 | In most middle-income, median-income middle America that I'm talking about here, that usually means husband and wife.

00:35:12.320 | We need both of them present.

00:35:14.320 | I would never make a major financial decision or a major purchase decision,

00:35:18.320 | especially one that included an ongoing commitment without my wife's approval.

00:35:24.320 | She wouldn't make one without me.

00:35:26.320 | As a salesperson, if I were trying to sell to us, I would be a fool to only be sitting with me

00:35:32.320 | because I'm immediately at the end of that appointment, I'm going to immediately say, "Hey, I got to go check with my wife,"

00:35:38.320 | or she would say, "Hey, this sounds great, but I'm going to take it home and talk with my husband."

00:35:43.320 | That's how the majority of households operate.

00:35:46.320 | So I learned, and you learn very quickly if you're taught it.

00:35:50.320 | I was taught it, and I just assumed that the people who taught me knew what they were talking about, and they did.

00:35:55.320 | We're not going to do that.

00:35:57.320 | But the challenge is that we're not going to do that in the sense of I wouldn't take an appointment with only one.

00:36:03.320 | If I were going on my way to an appointment, I might meet initially with one spouse,

00:36:08.320 | but if I were going back to present a financial plan, I would cancel the appointment immediately

00:36:12.320 | if there were only one spouse that was going to be there.

00:36:14.320 | It's a waste of my time.

00:36:15.320 | Both spouses need to be there, and it's non-negotiable.

00:36:18.320 | I'm not going to go through and spend an hour and a half of my time presenting this beautiful plan

00:36:23.320 | and then expect you to be able to take it home and go over it with your wife

00:36:27.320 | and understand how Joshua's 147-page presentation actually made sense.

00:36:31.320 | It made sense when I said it, but when it gets home, it's all gibberish to you,

00:36:35.320 | and you're trying to explain it to your spouse.

00:36:37.320 | But what I learned—so the problem is that our schedules are busier than they've ever been,

00:36:44.320 | and with that, it's tough to get appointments done, and especially in middle America,

00:36:52.320 | where it's much less likely that people will have time freedom, will be able to meet during the day.

00:36:57.320 | That's a real challenge.

00:36:59.320 | Many people who are professionals or who are hourly workers, service workers, working in the trades, things like that,

00:37:05.320 | these are great prospective clients, but it's hard for them to get away at 2 o'clock,

00:37:10.320 | and by the time they've got to drive 30 minutes across town to get to my office,

00:37:13.320 | an hour in my office and 30 minutes back, that cuts out a major portion of their day.

00:37:17.320 | So what happens is most planners working in this market, you wind up working at night,

00:37:21.320 | sitting around the kitchen table.

00:37:23.320 | Well, what does that do for the quality of my lifestyle as a planner?

00:37:26.320 | Now, I've got to be away from my family at night, and at 7.30 at night, I'm sitting in a house an hour away,

00:37:32.320 | and I've got to drive home, I get in the door at 9.30, and I'm going to be at the office the next day at 7.30 in the morning.

00:37:37.320 | That's a challenge.

00:37:38.320 | So one of the tools I learned was just simply to do this virtually,

00:37:41.320 | and I learned that I could get husband and wife on a conference call,

00:37:44.320 | and we could do a screen sharing presentation,

00:37:47.320 | and the screen sharing tools were so great that I could actually spend time just simply going through it,

00:37:54.320 | and they could understand it, they didn't need to make any decisions,

00:37:56.320 | they went through the presentation together, and we were able to get stuff done.

00:38:00.320 | And then I learned, me personally, FedEx is cheap compared to driving around town,

00:38:04.320 | so I learned to do a lot of business, even with clients who were in town, virtually.

00:38:10.320 | I never could quite get those relationships as comfortable as they should have been without meeting somebody first.

00:38:18.320 | It's still tough to establish trust, which I'm going to get to in a minute of how you can establish trust.

00:38:23.320 | It's tough to establish trust in an initial telephone call.

00:38:28.320 | If you heard from me out of the blue and you hadn't listened to hours of my podcast,

00:38:31.320 | and no matter how great I sounded on the phone, you would know who I am.

00:38:36.320 | And the type of fact-finding questions that you need to ask in an initial client interview are very personal.

00:38:43.320 | And in person, you can see that I'm a person, and you can see and kind of make a gut reaction like we all do,

00:38:48.320 | whether I'm trustworthy or not.

00:38:50.320 | And so then when I ask you questions, and I'm asking you how much money you have and what your goals in life are,

00:38:54.320 | and if you have group benefits, and how much insurance you have, and what your estate plan looks like,

00:38:59.320 | and I'm going through those questions, that's a comfortable question to do in person.

00:39:03.320 | But if we don't have a relationship, that's an uncomfortable thing to do on an initial basis on the phone for many people.

00:39:11.320 | So I usually would always -- usually would always -- I would go at least the first time for local clients to an in-person appointment.

00:39:19.320 | But once there's some trust there, then I would have the opportunity, and I would just kind of work virtually from then on.

00:39:26.320 | That was a major benefit to me, and it was a major benefit to my clients.

00:39:29.320 | And I think that's one of the futures of even traditional financial planning is to do more virtual.

00:39:35.320 | I believe it's a benefit for all involved.

00:39:37.320 | It's a benefit for me that I don't have to be out of my house at 730 at night.

00:39:41.320 | I can be home with my family.

00:39:42.320 | It's a benefit for my client that they can do things during the day without it taking three hours away from the office.

00:39:48.320 | It's more convenient for everyone involved.

00:39:50.320 | And what I learned is actually I was able to do better planning.

00:39:54.320 | The reason I was able to do better planning is because I was able to translate from force of personality and persuasion, selling persuasion, to consulting.

00:40:08.320 | One of the challenges with being a financial planner is if you're any good as a salesperson, it's easy to be too persuasive.

00:40:15.320 | I've learned.

00:40:16.320 | I was too persuasive sometimes, and I've learned to actually be less persuasive because I could get people excited about a concept or an idea.

00:40:26.320 | I could talk about – I could run some financial calculator magic.

00:40:30.320 | "Look, $100 a month, 8% interest, blah, blah, blah, blah, blah."

00:40:33.320 | Or, "Look, if we just got this up to $600 a month," like I do on the show sometimes, "Look, you just put in $600 and we get you an extra 1% rate of return.

00:40:40.320 | Look at how great things can be."

00:40:41.320 | And I would be too persuasive sometimes, and people would overcommit.

00:40:46.320 | I learned not to do that because overcommitment is bad.

00:40:50.320 | It leads to accounts being closed.

00:40:52.320 | It leads to insurance policies being lapsed, and it leads to a lot of unnecessary cost and expense.

00:40:58.320 | So I learned I had to actually dial back my persuasion and be less persuasive and help clients slow down.

00:41:07.320 | It might sound a little bit strange to those of you who were there, I mean, who haven't been in that situation, but I found it was very important.

00:41:14.320 | Because if I'm persuasive, we all know when we're being persuaded of something and encouraged and inspired to do something, whether it's good or not.

00:41:22.320 | But the point is after the fact, you're left with the mental impression that you've been persuaded.

00:41:28.320 | Now, whether you were persuaded to do something good or not doesn't matter.

00:41:31.320 | Whether the recommendation that I made was persuasive or not doesn't matter.

00:41:35.320 | You're still left with that impression after the appointment.

00:41:39.320 | You think, "Wow, Joshua was so convincing."

00:41:42.320 | And that can be bad sometimes if you have buyer's remorse three months later and you say, "Man, Joshua's got me putting $867 in here, and I'm broke.

00:41:51.320 | I got to back this thing up.

00:41:53.320 | He's taking $867 out, and I can't take my wife out for dinner."

00:41:57.320 | That's a problem.

00:41:59.320 | So the thing I learned to like about virtual planning is it changes the conversation.

00:42:03.320 | It was very difficult for me to be persuasive.

00:42:07.320 | It's tougher to be persuasive on the phone than in person.

00:42:10.320 | And it was much more planning-oriented.

00:42:13.320 | We're just dealing through a computer screen, and we're together.

00:42:17.320 | In essence, we're on the same side of the table looking and dealing with a written plan.

00:42:22.320 | And I'm just updating numbers in the financial planning software and illustrating the impact of certain courses of action.

00:42:29.320 | That changes the conversation from any hint of persuasion or selling to almost that consulting approach.

00:42:40.320 | Now, that's a double-edged sword because if all you do is consult and talk numbers, you don't actually help your clients make a difference.

00:42:47.320 | Credit cards don't get paid off by themselves.

00:42:49.320 | They just sit there in a crew for month after month after month and year after year after year.

00:42:54.320 | And no matter how many spreadsheets, if I don't give a little motivational speech and inspire you a little bit to say, "Listen, get after it. You can do it."

00:43:02.320 | And smack on the butt virtually and say, "Get after it. Go make the first payment. You can do this."

00:43:08.320 | And I build a spreadsheet and show you how you can pay off those debts and show you how if you'll just cut back a little bit here, then you can make some impact over there.

00:43:16.320 | So I've got to persuade a little bit but not too much.

00:43:19.320 | And that's one of those things where it's a very delicate balance.

00:43:23.320 | It only comes with experience. It really does.

00:43:26.320 | Because sometimes you got to pour on the persuasiveness and sometimes you got to pull it way back.

00:43:30.320 | You got to read the situation and see how can I really help this person.

00:43:34.320 | But virtually was a benefit because we're both looking at the plan and it was less about persuasion and more about the numbers and the plan.

00:43:42.320 | And as long as we can follow through with action, enroll in the 401(k), sign up for the investment account, buy the insurance policy, make the credit card payment, pay off the loan.

00:43:52.320 | Go call Joe and get your money back.

00:43:56.320 | Then you can actually have an opportunity.

00:43:59.320 | As long as you follow through, both of those things are put together.

00:44:03.320 | So I think virtual, and that was my plan, is doing everything virtual.

00:44:08.320 | I think virtual is a huge value for the client and for the planner.

00:44:12.320 | Now here's the problem.

00:44:14.320 | How do you market that kind of service?

00:44:17.320 | You've got to solve your marketing problem in the financial planning business.

00:44:21.320 | And this is the major problem in financial planning.

00:44:24.320 | If everybody was out there wanting to buy a financial planner service and their time, then man, this would be easy.

00:44:31.320 | But everyone's not.

00:44:33.320 | You've got to find people and you've got to find people at a point in time at which they want to do business with you, where they need your services.

00:44:40.320 | This is why accountants have such a tremendous benefit, a tremendous advantage in their client relationships.

00:44:46.320 | Like it or not, the U.S. government requires you to get your taxes done.

00:44:50.320 | So that means at least once a year you're going to wind up sitting with your accountant.

00:44:54.320 | And there's a reason to see.

00:44:56.320 | You have to go and see your accountant.

00:45:00.320 | So you basically have a marketing plan.

00:45:02.320 | So one strategy that you have a marketing plan in this way.

00:45:06.320 | One strategy that some financial advisors have done is they buy tax practices.

00:45:11.320 | They will buy out an accountant's tax practices, and that buys them access to the whole base of clients.

00:45:17.320 | There are dozens of ways to market a financial planning business.

00:45:19.320 | But you have to solve your marketing problem.

00:45:22.320 | So whether that's you're going to be -- some firms, "Well, we've got a special deal with the school board, so we'll go down and we'll offer to meet with everybody at the school board."

00:45:30.320 | Or whether that's what I did, friend to friend, call to call, warm referral, get my clients to call ahead, "Hey, Joshua, he's a friend of mine.

00:45:37.320 | You should meet him.

00:45:39.320 | He's worth at least 15 minutes of your time," that type of thing.

00:45:42.320 | Or whether it's advertising on the radio or whether it's -- there's dozens of ways.

00:45:48.320 | You've got to solve the marketing problem.

00:45:50.320 | But one of the major problems that you've got to solve with that marketing problem is trust.

00:45:56.320 | You've got to figure out a way to build trust.

00:45:59.320 | If your clients don't trust you, you don't have an option.

00:46:04.320 | And trust comes with time.

00:46:06.320 | So as you're building a firm, you need a way to demonstrate that you're trustworthy.

00:46:12.320 | This is what's so exciting about 2015 is that one individual person can produce a lot of content.

00:46:19.320 | Those of you who listen to the show, you've built a level of trust with me.

00:46:26.320 | If I ever violate that trust, I'm immediately done.

00:46:28.320 | I'm sunk.

00:46:30.320 | But those of you who've listened to me for enough time, you've gotten a judge of who I am as a person.

00:46:34.320 | I can't hide anything.

00:46:37.320 | There's nothing in my life that I can hide.

00:46:39.320 | I can keep a few things private, but there's nothing that I can hide about who I am because you spent enough time listening to me.

00:46:46.320 | So that builds this amazing level of trust.

00:46:50.320 | It used to be only a few people could do that.

00:46:53.320 | That was why for a decade, Dave Ramsey has that trust.

00:46:56.320 | When Dave Ramsey would say to his listeners, "Do this.

00:46:59.320 | Call this person," he's transferring that trust.

00:47:02.320 | He transfers his trust, the trust that his clients have in him, his listeners, and he transfers that to Dan Miller.

00:47:08.320 | He's written a great book, "Utrecht Trust, Dan Miller."

00:47:11.320 | He transfers it to Zander Insurance.

00:47:13.320 | Zander Insurance, great company, he can do that.

00:47:15.320 | He transfers it to Churchill Mortgage, transfers it to his endorsed local provider program.

00:47:20.320 | All that trust gets transferred.

00:47:22.320 | But you as an individual, you don't have that unless you sign up and you're going to be a Dave Ramsey endorsed local provider.

00:47:27.320 | Pay the fee and pay for the referrals and you can do that.

00:47:30.320 | That works.

00:47:31.320 | But you've got to figure out a way to demonstrate that you're trustworthy.

00:47:34.320 | But what's exciting is that in 2015, you can do that.

00:47:38.320 | Every one of us is essentially a media company.

00:47:42.320 | Every one of us has the ability to connect with other people.

00:47:46.320 | Now, how?

00:47:47.320 | That's a big question.

00:47:48.320 | How do I market that?

00:47:49.320 | But whether it's with a podcast, whether it's with your YouTube video, whether it's with having a bunch of information on your website that demonstrates all of your personal philosophy, all of your ideas, your philosophies,

00:48:02.320 | and planning restraint constraints that you place, what do you believe?

00:48:08.320 | Do you believe index versus – passive versus active investing, real estate versus stocks, IRA versus not?

00:48:16.320 | Whatever your deal is, you can convey that.

00:48:21.320 | That's amazing.

00:48:23.320 | I think personally – I can't prove.

00:48:25.320 | This is just a gut feeling.

00:48:26.320 | But I think the value of the big brands is declining.

00:48:29.320 | This is why in the past, big brands were so important.

00:48:32.320 | If you went and you joined Merrill Lynch, you had that gold-plated stamp of approval.

00:48:37.320 | Josh was a Merrill Lynch guy.

00:48:39.320 | I've got to trust him because Merrill Lynch has a gold standard.

00:48:42.320 | I don't know.

00:48:43.320 | I don't see very high approval ratings for most of the firms.

00:48:46.320 | What brand – what big brand today has just a sterling reputation in the financial services business that you, no matter what, would do it?

00:48:55.320 | You, no matter what, would just say, "Because I'm sitting with the representative of this company, I therefore have – they've imparted the trust of the big brand, the trust of the company to this individual representative.

00:49:07.320 | So therefore, they're my person."

00:49:10.320 | There's very few.

00:49:13.320 | Probably the few that have that – and certainly I'm not saying they don't have – some of the big brands don't have brand equity.

00:49:22.320 | But I would say the few that have that just implicit trust is probably the trust companies, different use of the word trust.

00:49:29.320 | But that's what it's built out of, the trust companies that nobody except – practically nobody except the wealthy knows about.

00:49:36.320 | Now, there are certain companies.

00:49:39.320 | Like I said, I was previously with Northwestern Mutual.

00:49:41.320 | We had some of that.

00:49:42.320 | I had a lot of that.

00:49:43.320 | I had clients that trusted just because of Northwestern Mutual.

00:49:45.320 | They liked that brand behind me.

00:49:48.320 | But that didn't make clients walk in the front door.

00:49:52.320 | So I just ask you, "Do you need the value of the brand or do you need to create your own brand?"

00:49:56.320 | I think ultimately we all have our own brand today.

00:50:00.320 | People sometimes they'll put on their Facebook, "This Facebook profile is reflective of the individual opinion of the user and not necessarily of the company by which they're employed."

00:50:10.320 | Baloney.

00:50:12.320 | Nonsense.

00:50:13.320 | There's no disconnection.

00:50:16.320 | I say if there's no disconnection, you've got to be responsible for your own brand.

00:50:21.320 | So one of the things is you can build that.

00:50:24.320 | You can build that trust now.

00:50:27.320 | You can build – establish your philosophy.

00:50:29.320 | You can share that.

00:50:30.320 | You can communicate enough of who you are.

00:50:32.320 | It doesn't have to be like I'm doing.

00:50:33.320 | In fact, don't do what I'm doing.

00:50:35.320 | This would be a death wish for your firm if you try to copy what I'm doing.

00:50:41.320 | But you can build enough of that.

00:50:45.320 | You can see who you are.

00:50:46.320 | You can do a bunch of videos.

00:50:47.320 | You can be interviewed.

00:50:48.320 | You can convey that.

00:50:49.320 | You can write your articles.

00:50:51.320 | You can establish that.

00:50:54.320 | That's a major problem in marketing is you've got to build trust.

00:50:57.320 | Once you build it, by the way, don't ever forsake it.

00:51:00.320 | That's why when I answered the question that I answered on the Q&A show on Monday I did.

00:51:03.320 | It's because I can't – as difficult as it is – and yes, I could have avoided the contentious question and that probably would – I mean I could have done that.

00:51:14.320 | I couldn't do that and live with myself because that was a promise that I made for myself when I did this show that I wouldn't run from this.

00:51:21.320 | I wouldn't run from anything.

00:51:23.320 | I had to do that for me to be happy doing this.

00:51:26.320 | But if I answer it, I have to answer it the way that I think it needs to be answered.

00:51:31.320 | Otherwise, I break trust.

00:51:34.320 | If I ever break trust, I'm done.

00:51:38.320 | I'm done.

00:51:41.320 | I don't do it just because of that.

00:51:44.320 | That's just an external fact that comes out of my – I answer it because of my worldview as of the way I think I should live my life.

00:51:51.320 | But it does build into trust.

00:51:53.320 | Expertise is the next one.

00:51:55.320 | How do you market your expertise?

00:51:56.320 | You need to find a way to illustrate – A, you need to be an expert.

00:51:59.320 | Then you need to find a way to illustrate and demonstrate that expertise.

00:52:05.320 | If you can find a way to do that, I think you can really build a tremendous business in this type of plan.

00:52:15.320 | It's got to be a good fit for you as far as what you want in a lifestyle, lifestyle-wise.

00:52:19.320 | I'm going to go over some numbers and show how this can work in a minute.

00:52:22.320 | But this is not going to be a big moneymaker.

00:52:25.320 | But it might be a nice lifestyle business.

00:52:29.320 | That was actually what my idea was.

00:52:31.320 | I decided that I didn't particularly have any interest in building a multibillion-dollar financial planning firm.

00:52:37.320 | I don't want to do that at this phase of my life.

00:52:39.320 | I've got a young son and another baby on the way.

00:52:43.320 | I don't want to spend the next decade away from home, out of the house 80 hours a week.

00:52:48.320 | What a waste of – I don't want to do that.

00:52:51.320 | But I do want to make a nice income and I do want to do it in a way that fits my lifestyle.

00:52:55.320 | So it's got to be a good fit for you lifestyle-wise.

00:53:00.320 | I think also as far as your marketing plan, you've got to figure out a niche that you're going to work with.

00:53:06.320 | I don't think it's possible to do planning for everyone.

00:53:09.320 | I think you're actually doing a disservice to your clients if you do.

00:53:13.320 | I started off doing kind of generalized planning to everyone.

00:53:16.320 | I think most financial advisors do that.

00:53:19.320 | There's a joke that we use in the business.

00:53:21.320 | Who do you talk to?

00:53:22.320 | Anyone who can fog a mirror.

00:53:23.320 | If you can fog a mirror, I'll talk to you.

00:53:25.320 | That's pretty much where we all start with few exceptions.

00:53:28.320 | There are probably some really smart marketers that have started with something different.

00:53:31.320 | That's changing now.

00:53:32.320 | More and more people are starting with a niche market.

00:53:34.320 | I didn't start that way.

00:53:36.320 | But I think over time, you've got to build a niche market.

00:53:39.320 | You can't market to everyone.

00:53:41.320 | You've got to do some marketing in this kind of business.

00:53:43.320 | I just don't see any way – if you can't build a marketing plan for this where you're going to have a way to reach clients,

00:53:49.320 | that's not door-to-door, face-to-face, that works great in product sales.

00:53:54.320 | The majority of people are underinsured.

00:53:57.320 | If you're selling insurance, that works great, door-to-door, face-to-face.

00:54:01.320 | It's just a matter of running the numbers.

00:54:03.320 | It's a great business.

00:54:05.320 | But this type of business, you've got to have a marketing plan.

00:54:09.320 | That was how radical personal finance and fiduciary financial consulting fit together.

00:54:12.320 | That was my plan.

00:54:14.320 | If the show on its own failed, I had my backup plan where I'd started that marketing process

00:54:20.320 | and there would be an ability for me to reach people.

00:54:23.320 | But you've got to figure out what your niche is.

00:54:26.320 | Don't do what I'm doing because I don't have a clearly defined niche.

00:54:30.320 | You, if you're going to be doing marketing, need to market to your niche.

00:54:32.320 | Even big brands, the big ones that just do this brand awareness marketing, they don't actually market to everyone.

00:54:38.320 | They market based upon need states.

00:54:41.320 | A little bit of industry insight for those of you who are unfamiliar with marketing and the marketing business.

00:54:48.320 | I used to work for a marketing consulting company and we consulted and did research for large brands.

00:54:53.320 | We did a lot of work for consumer brands and large, the day-to-day consumer brands that you're aware of.

00:55:01.320 | We did work with consumer packaged goods companies and fast food, the major fast food franchises.

00:55:09.320 | One of the things that I love learning about in that business is how these companies market their products.

00:55:14.320 | It's all about their marketing "to everyone" but not at the same time.

00:55:19.320 | We had a thing that we called a "need state" and this need state is basically how do you figure out the need that someone is in.

00:55:28.320 | The best example, this wasn't a client of ours, it's just I observed it from watching their marketing.

00:55:33.320 | The best example of this that probably most of you would know would be a company like Boston Market.

00:55:37.320 | Boston Market markets to everyone but only when they're in a specific set of circumstances.

00:55:42.320 | That set of circumstances is you had a long day at work, you want to serve a home-cooked meal for your family

00:55:50.320 | but you don't have the ability to make it, you don't have enough time.

00:55:55.320 | Swing by Boston Market, spend 20 bucks and we'll send you home with a home-cooked meal.

00:56:00.320 | That need state in the marketing business, we would say, "Okay, what need state are they in?"

00:56:05.320 | It's just a term for what's the set of circumstances and maybe we would call that the hurried, harried mom.

00:56:11.320 | Something like that.

00:56:12.320 | That idea of a mother who cares about serving quality, real food that's not hamburgers and french fries to her family

00:56:19.320 | but she doesn't have the time to make it because she's on her way home.

00:56:23.320 | She left the office at 6.15 and dinner's supposed to be on at 6.30.

00:56:26.320 | That's when you think of Boston Market.

00:56:28.320 | Most of the big brand marketing is built upon that.

00:56:31.320 | Whether it's Taco Bell, late at night, their late night thing.

00:56:35.320 | It's all about, "Hey, we went out to the club, now we're on our way home.

00:56:38.320 | We need to stop and get fast food. Taco Bell."

00:56:41.320 | They're the ones who are there for us at night.

00:56:42.320 | That's how the big companies do marketing.

00:56:44.320 | You can't market to everyone.

00:56:46.320 | Whether you're marketing to people that are in a need state, example,

00:56:50.320 | I work with divorced moms who need to put their life back together.

00:56:55.320 | That way, you're then thinking when a mom goes through a divorce and she comes out the other side, that's my planning need.

00:57:02.320 | Or I work with widows whose husbands have died.

00:57:05.320 | Or I work – you get the idea.

00:57:08.320 | I don't need to go on with example after example.

00:57:11.320 | Or if that niche is – the point is if you're marketing to everyone, moms,

00:57:16.320 | then it's going to be, "Are they divorced moms? Are they widowed moms?"

00:57:20.320 | Or if you're going to market to a niche, I work with business owners in the Finnish carpentry profession across the country.

00:57:30.320 | Or I work with plumbers that are union plumbers and I understand how to integrate their union benefits with other aspects.

00:57:38.320 | You've got to have a niche because that's the only way you can reach them, that you can market to them.

00:57:44.320 | If you don't have that, then you're back to kind of that face-to-face model.

00:57:48.320 | The problem with adding this business model and unlike what I used to do face-to-face when I had insurance as a backup plan is most people need an insurance policy.

00:57:58.320 | It's a lot tougher to say to someone, "Hey, listen. You're going to pay me X number of dollars a month every month for my financial planning."

00:58:04.320 | "Well, I don't know you."

00:58:06.320 | "Yeah, but you still need to pay me this and it's a big money and it's a lot of money."

00:58:10.320 | So you've got to solve that marketing problem.

00:58:13.320 | One of the benefits to this business structure for you as an individual is that you can cut your costs substantially.

00:58:20.320 | You can do this on your own.

00:58:22.320 | You'll want to establish what's called a registered investment advisory firm.

00:58:27.320 | It doesn't actually cost that much now and it's not that hard.

00:58:29.320 | You can do it yourself and your filing fees, they depend on your state, but it's not that much.

00:58:36.320 | It doesn't actually cost that much to set up the entity.

00:58:39.320 | File an LLC, file with the state, get admitted for business in your state with your RIA.

00:58:47.320 | That's it.

00:58:49.320 | You're going to write what's called your form ADV.

00:58:51.320 | It's an advisory disclosure.

00:58:53.320 | It becomes your form brochure.

00:58:54.320 | You can hire that donor.

00:58:55.320 | You can do it yourself.

00:58:56.320 | I wrote mine, so I did it myself.

00:59:00.320 | It took a few days, but I was able to do it.

00:59:02.320 | The virtual model that I outlined cuts major costs because now I don't have to buy a Class A office space.

00:59:10.320 | I don't have to staff a beautiful reception lobby for my clients to wait for me for the meeting.

00:59:16.320 | I can work in my bedroom and if I have a junky house, I can hang a sheet behind my head and no one knows.

00:59:22.320 | I can put up a screen of some kind.

00:59:25.320 | That virtual model cuts major costs for me as an advisor, and that helps me to deliver more work for individuals at a lower cost.

00:59:34.320 | You can also, as an individual, the price of being able to deliver options to your clients has come down massively,

00:59:42.320 | whether you're talking about financial planning software.

00:59:45.320 | A decade ago, if you wanted some kind of financial planning software, that was probably going to be a massive enterprise-level investment.

00:59:54.320 | A big firm could afford to make the investment to create the software,

00:59:58.320 | but now there are many different software packages that are marketing to individual advisors.

01:00:02.320 | It's only going to get better.

01:00:04.320 | Or whether it's how do I offer, who am I going to hire to custodian the assets for my clients?

01:00:10.320 | There's more and more competition in that space.

01:00:13.320 | This is a huge benefit here.

01:00:16.320 | What I see is the future of what we call the robo-advisors,

01:00:21.320 | the financial advisory firms that are primarily run by an algorithm.

01:00:26.320 | Will they work for individuals? I don't know.

01:00:29.320 | The jury's out.

01:00:31.320 | But I agree with Michael Kitsis on this when he writes about it.

01:00:34.320 | He says the future for the robo-advisors is as back office for the financial advisor.

01:00:38.320 | Here's the transition that's happened over time.

01:00:42.320 | It used to be that I needed to have a portfolio manager.

01:00:47.320 | After all, we've got to figure out what stocks we're going to buy for the client.

01:00:51.320 | I've got to have an analyst in my office. I need a CFA.

01:00:54.320 | They're going to sit there and they're going to figure out what stocks we're going to buy.

01:00:57.320 | But now I can offer good investment options,

01:01:01.320 | and I can hire betterment in my back pocket to sit here and run the portfolio.

01:01:07.320 | They can do that, and I can spend my time planning for the client.

01:01:13.320 | I was planning to go with a firm called--

01:01:17.320 | and to use for the investment option a firm called Dimensional Fund Advisors, DFA.

01:01:21.320 | That was what I was going to build for those clients who wanted to build on the assets

01:01:27.320 | and a management model to go with DFA.

01:01:30.320 | I love DFA strategy. In my mind, it's simple, it's straightforward, and it works.

01:01:34.320 | Now, it's passive only, and I'm not convinced that that's the solution for everything,

01:01:39.320 | but it's certainly a very viable solution.

01:01:42.320 | They only work through advisors, and that helps the performance of their funds

01:01:46.320 | because they can keep what we call hot money out of the funds.

01:01:50.320 | I, as an advisor, can help my client to control their emotions.

01:01:56.320 | They serve advisors, and that's the thing.

01:02:01.320 | Vanguard doesn't help you if you're a financial advisor.

01:02:03.320 | Let Vanguard help the DIYers. No problem to that.

01:02:06.320 | If you have a client that has Vanguard funds and they want to pay you their monthly fee

01:02:10.320 | just out of their checking account, that's fine.

01:02:12.320 | I don't have any problem commenting on Vanguard and talking about what funds.

01:02:16.320 | If I'm writing a book, I'm probably going to use that as the proxy

01:02:19.320 | because if I'm writing a book, then anybody can just trot out to Vanguard.com and buy funds.

01:02:24.320 | But they don't help me as an advisor because they don't offer me a way for those clients

01:02:29.320 | who want to to bill my fees on their portfolio, but DFA does.

01:02:34.320 | DFA has just as good funds, if not better, and they can follow that portfolio.

01:02:39.320 | So check out the DFA story. I think it's a pretty neat story.

01:02:43.320 | That was the best that I was able to find when I was researching it and what my plan was.

01:02:47.320 | Again, at this point, I'm out of it.

01:02:49.320 | But you don't have to offer investment management.

01:02:51.320 | One of the things, again, back to why I started with that monthly fee,

01:02:54.320 | is I refuse to only offer investment management based upon the fee because that, again, conflict of interest.

01:02:59.320 | Oh, everything's got to be in these mutual funds. No.

01:03:02.320 | What do you do with the guy who's got a $10 million business but no money in mutual funds?

01:03:08.320 | How does he get advice?

01:03:10.320 | Well, I'm not going to do it on an hourly basis because then he's not going to call me enough.

01:03:15.320 | But I can set that up on a monthly fee and I can give good advice

01:03:18.320 | and he could just pay me out of the checking account.

01:03:21.320 | So here's the thing.

01:03:22.320 | How much can you make on this kind of model with my--

01:03:25.320 | and I hope it's been fairly clear with what I presented as far as what I had figured out.

01:03:30.320 | That depends.

01:03:33.320 | I would never consider billing, for me, anything less than a couple hundred bucks a month.

01:03:40.320 | That would be the bare minimum I could see billing.

01:03:42.320 | Now, I'm different.

01:03:43.320 | I know advisors who are doing this at $1,000 up front, $150 a month, $100 a month, I guess some.

01:03:49.320 | But I can't conceive of working for that cheap.

01:03:56.320 | If you threw something-- and that would be--

01:03:58.320 | so if I billed-- let's just use $200 as an example.

01:04:01.320 | That would be for simple, simple, simple planning scenarios, simple employed households,

01:04:07.320 | no business owners, no complex, no great wealth, just simple, simple scenarios.

01:04:12.320 | And the value that we're bringing is all of that monthly stuff, all of that car insurance,

01:04:18.320 | the house insurance, the career coaching, all of that stuff.

01:04:21.320 | If you flip it and say if I were doing this, what size portfolio would that be for a client?

01:04:29.320 | $200 a month would basically be equivalent to a 1% gross fee on a $240,000 portfolio.

01:04:37.320 | $200 a month is $2,400 a year.

01:04:40.320 | And $240,000, 1% of that would be $2,400 a year of gross fees.

01:04:44.320 | And let's assume you're doing an RIA so you get 100% of that.

01:04:48.320 | It doesn't go through what we call the grid, which is where your broker-dealer takes out their percentage of it.

01:04:54.320 | So $200 a month, that would be about a $240,000 portfolio.

01:04:58.320 | It's about minimum entry level.

01:05:00.320 | I don't know many good, competent advisors who will accept portfolios of less than $250,000 unless there's some other planning.

01:05:08.320 | So I accepted a couple of smaller accounts when I was an advisor because I did other insurance planning.

01:05:14.320 | But it's just not enough.

01:05:16.320 | You can't run a business on $30,000 accounts.

01:05:20.320 | It doesn't work.

01:05:22.320 | So that's kind of the equivalent.

01:05:24.320 | I think if we work hard, even if the client has $30,000 under my model, if they'll just pay me $200 a month,

01:05:31.320 | yeah, they're grossly overpaying what they would pay for so-called investment management.

01:05:35.320 | But that's not what I'm doing.

01:05:37.320 | I'm doing a lot more than that.

01:05:39.320 | So I think $200 a month is kind of the minimum that I could even see doing.

01:05:42.320 | I think you could probably handle about 100 clients with a model like I've said.

01:05:47.320 | Assume that you commit 2,000 hours per year to working, and that's a lot.

01:05:52.320 | That's more than you probably can do because that only is allowing for a two-week vacation.

01:05:56.320 | That's not allowing for any days out of the office.

01:05:59.320 | That's not allowing for conferences, for education.

01:06:02.320 | That's not allowing for holidays.

01:06:04.320 | I'm just saying 50 weeks, 40 hours a week.

01:06:09.320 | That's 2,000 hours.

01:06:10.320 | Let's just use that.

01:06:11.320 | I think that's aggressive.

01:06:12.320 | Let's use it as an example.

01:06:14.320 | Well, under that scenario, 2,000 hours per year working, and you're accepting 100 clients,

01:06:20.320 | that means that you wind up having 20 hours available each year for each client, each household.

01:06:27.320 | And so you can allocate 20 hours for your meetings, for the follow-up work,

01:06:33.320 | the things that you need to do between appointments, actually handling the stuff after the meeting.

01:06:38.320 | That handles the before the meetings.

01:06:40.320 | That handles everything.

01:06:41.320 | You've got 20 hours per year per client.

01:06:45.320 | If we guess for a moment that you're talking with the client an hour a month,

01:06:49.320 | and I think that's probably more than you would wind up doing for most,

01:06:52.320 | but you might have a three-hour meeting one month,

01:06:54.320 | and you might have a 20-minute phone call the next, nothing the third month,

01:06:57.320 | and then another hour meeting.

01:06:59.320 | That allows you 12 hours of client conversations and eight hours of connection.

01:07:05.320 | If the client's paying you $200 a month and you're doing 20 hours per year,

01:07:10.320 | you wind up with essentially having $120 an hour of revenue coming in for your budgeted time.

01:07:18.320 | I would have to test this, and this is where this was my idea.

01:07:21.320 | I wasn't able to test it, but my guess is that that's my mental planning of I can't commit more than 20 hours per year to a client.

01:07:31.320 | But under this scenario, I think my guess is how this would work out would be kind of like the gym model,

01:07:37.320 | where more clients sign up than go to the gym.

01:07:42.320 | And my guess is that most people wouldn't actually use an hour a month.

01:07:47.320 | Now, I don't know.

01:07:49.320 | It's hard for me to get a show done in less than an hour, so maybe it would be multiple months.

01:07:53.320 | This is where I couldn't figure out how to test it, and I would probably have done higher fees.

01:07:58.320 | But if you run your numbers, and let's just say you've got 100 clients,

01:08:02.320 | and you're doing this all yourself, 100 clients at $200 a month, that's $20,000 a month gross income.

01:08:09.320 | If you pull out your expenses, and this is where it's going to be highly subject,

01:08:12.320 | let's assume that you've got 25% business expenses.

01:08:17.320 | So you've got $5,000 a month of business expenses.

01:08:20.320 | Those are the fees for your software packages, for your Internet, for your phone, for your planning software.

01:08:27.320 | Those are your custodial fees.

01:08:28.320 | Those are your phone fees.

01:08:30.320 | If you need an assistant to handle appointments or if you need a scheduling software, whatever.

01:08:35.320 | I just assume 25%.

01:08:37.320 | You'd have to run your actual numbers.

01:08:39.320 | That leaves you with a total maximum profit margin of $15,000 a month or $180,000 per year.

01:08:48.320 | That could be higher if you work from home.

01:08:50.320 | It could be lower if you need an office and you need staff and whatnot.

01:08:55.320 | But that leaves you with, let's say, a profit of $180,000 a year.

01:09:00.320 | I don't want to offend those in the audience who are making $30,000 a year,

01:09:04.320 | but that's just not much money in the financial business.

01:09:06.320 | It's a good income. Don't get me wrong.

01:09:09.320 | But it's not the kind of thing that the reason most men and women start in the financial business.

01:09:13.320 | It's a good but it's nothing spectacular.

01:09:17.320 | Now the question was, and this is what I decided, is it worth it in terms of flexibility?

01:09:24.320 | Could that be a great lifestyle business?

01:09:28.320 | That was what I decided is that could be a great lifestyle business.

01:09:30.320 | I'd be willing to walk away from the million dollars a year,

01:09:33.320 | if I had the $180,000 a year, that I could do from wherever

01:09:36.320 | without having to wear a suit and tie every day

01:09:38.320 | and without having to drive a fancy car to impress a bunch of people

01:09:41.320 | and I could just work from my computer screen and my phone.

01:09:44.320 | I thought that would actually be okay.

01:09:47.320 | If I were traveling and I'm cruising across the country or cruising around the world in an RV,

01:09:51.320 | and let's say I cut my client base to 50 hours and I budget 60 hours of work in a month,

01:09:57.320 | I can do that on the road.

01:10:00.320 | Or let's say even 80, 20 hours a week while in and around a travel schedule.

01:10:05.320 | Again, cruising across America, I could do that.

01:10:08.320 | That'd be an okay lifestyle business.

01:10:12.320 | $10,000 a month gross, pull out a few thousand for business expenses,

01:10:16.320 | $6,000, $7,000 profit while I'm on the road.

01:10:21.320 | I know a lot of people living on the road that would love to have that kind of business.

01:10:24.320 | So it's not much in the financial business, but it's pretty cool as a lifestyle business.

01:10:31.320 | Might be good.

01:10:33.320 | Now, that's just kind of a minimum standpoint,

01:10:35.320 | and that I think is a model that would work with middle America.

01:10:38.320 | Again, $200 a month, that's about the price of entry.

01:10:41.320 | I can't imagine if you were going to go anything lower than that,

01:10:44.320 | you better charge a nice upfront fee, $1,000 upfront and $150 a month, something like that.

01:10:51.320 | People are trying that model and seeing how it's working.

01:10:54.320 | It'll be interesting to see as more people are doing this.

01:10:56.320 | When I came up with the idea, I didn't know anyone else was doing it.

01:10:58.320 | Then I found out that other people were doing it.

01:11:00.320 | I heard from Alan Moore and Michael Kitts who started XY Planning Network,

01:11:06.320 | and all of a sudden I found out there were other people doing it.

01:11:09.320 | I thought that was the coolest thing.

01:11:10.320 | I joined immediately to get involved with them,

01:11:12.320 | and I had some involvement with a bunch of people over there that are all kind of working this model.

01:11:18.320 | So can you increase that monthly amount?

01:11:20.320 | I think you can.

01:11:21.320 | The key would be to increase your leverage and your knowledge and work into a different field.

01:11:26.320 | Again, this is totally untested, so I don't know if middle America, $100,000 household income,

01:11:32.320 | again, $2,000, $45,000, $90,000 household income,

01:11:35.320 | will a household like that be able to support $200 a month of fees?

01:11:41.320 | I think they would if you're good.

01:11:43.320 | I think they won't if you're not good, which is good.

01:11:45.320 | Be good.

01:11:47.320 | But I would--I mean, personally, I would go work in a more complex area,

01:11:51.320 | and I would always rather work at the higher end of the market myself

01:11:54.320 | and just simply hustle to be worth much higher fees.

01:11:58.320 | I do think you probably need to bill an upfront planning fee.

01:12:02.320 | I'm interested to hear--I would talk with some of my fellow advisors

01:12:08.320 | or former fellow advisors at XY Planning Network to see what's going on.

01:12:14.320 | I think you would need to bill a higher fee up front and see--

01:12:16.320 | because I wouldn't--my concern with the $200 a month is there wouldn't be enough buy-in on the front end.

01:12:22.320 | So I'd probably want to charge $1,000, $1,500 up front to make sure the client's bought in,

01:12:27.320 | that they've actually put some money in so they're vested.

01:12:30.320 | Now, whether or not we do a workout arrangement over time--

01:12:33.320 | I mean, you've got to play with the billing idea--

01:12:35.320 | but I just would want to make sure that the client was bought in at some upfront money.

01:12:43.320 | You do need to be very aware of the fact that if you go with a model like this,

01:12:46.320 | I think you're walking away from the big money.

01:12:49.320 | Let's assume that you follow the traditional financial planning practice

01:12:52.320 | and you are focusing on a high net worth advisory practice.

01:12:57.320 | So let's say over time you can build up your expertise,

01:13:01.320 | you can build up your infrastructure, and you can build up your marketing plan

01:13:04.320 | to where you can work with million-dollar accounts.

01:13:07.320 | This was my plan previously.

01:13:09.320 | I live in a very affluent part of the country.

01:13:11.320 | We have a lot of retirees.

01:13:13.320 | I love retirement planning.

01:13:15.320 | That's my favorite market.

01:13:16.320 | It's funny.

01:13:17.320 | I was corresponding with some listeners, and several of the listeners were saying,

01:13:20.320 | "Well, I'm not in your target demographic.

01:13:22.320 | I'm 53 years old.

01:13:23.320 | I'm not in your target demographic.

01:13:25.320 | I'm 60 years old."

01:13:26.320 | And I wrote back and I said, "What made you think you're not in my target demographic?"

01:13:29.320 | I love--when I was planning, 50 to 70, that was what I was going after.

01:13:34.320 | I love that area of planning.

01:13:36.320 | I like the complex retirement planning.

01:13:38.320 | Just because I haven't talked about it much on the show is because I don't know how much it appeals to

01:13:43.320 | what I think of as a mainstream audience.

01:13:46.320 | But the stuff I've talked about is more accessible than saying,

01:13:50.320 | "Oh, I've got $4 million.

01:13:51.320 | What do I do with that?"

01:13:53.320 | I've got a question on the voicemail line sitting there from a listener who's saying,

01:13:56.320 | "What are the retirement distribution strategies?

01:13:58.320 | How can I set things up?

01:13:59.320 | I'm getting all kinds of conflicting ideas."

01:14:02.320 | So I was starting to get--my practice was starting to develop into million-dollar accounts,

01:14:07.320 | and that was what I loved.

01:14:08.320 | Million bucks, 100 clients, it's 100 million under management, 1% fees,

01:14:13.320 | million bucks of gross income.

01:14:15.320 | Pull out 25% of expenses, $750,000 of net revenue to me.

01:14:23.320 | That's good.

01:14:24.320 | Now, that may sound--again, I apologize if any of this sounds--

01:14:32.320 | it sounds exclusive to you if you're making $30,000 a year,

01:14:37.320 | but this is why people get in the financial planning business.

01:14:39.320 | It's good for you to know.

01:14:41.320 | That might sound impressive, but that's peanuts in the big advisory world.

01:14:45.320 | I don't remember what Paul Merriman said his firm managed when he sold,

01:14:49.320 | but I think they've got a billion and a half under management now,

01:14:54.320 | a billion and a half.

01:14:55.320 | And I know some guys here in town in West Palm, in Palm Beach,

01:15:00.320 | and just right here, teams 300 million, 400 million, half a billion,

01:15:05.320 | with small staff, seven, eight people working together.

01:15:10.320 | There you start to get into some really nice numbers.

01:15:13.320 | Another major problem, by the way, if you're thinking about setting this up

01:15:16.320 | and getting into the RIA space, you're going to be doing fee only.

01:15:20.320 | That's a major problem if you're walking away from your insurance business,

01:15:25.320 | and this is tough.

01:15:27.320 | So let's assume in an insurance business,

01:15:29.320 | if you walk away from your insurance business,

01:15:31.320 | let's just assume you're producing at MDRT,

01:15:34.320 | Million Dollar Roundtable is an industry business, industry affiliation.

01:15:39.320 | I can't remember what percentage of insurance agents are in Million Dollar Roundtable.

01:15:47.320 | It's small, but it's not that small.

01:15:50.320 | It varies depending on company,

01:15:53.320 | but I think if you're not doing MDRT after a few years,

01:15:57.320 | maybe you're a local state farm guy who mainly sells property and casualty

01:16:01.320 | and does $10,000 of insurance business,

01:16:04.320 | but if you're serious and you're in the financial side of it,

01:16:07.320 | you should be working within three, four, five years at Million Dollar Roundtable.

01:16:13.320 | I've never hit Million Dollar Roundtable, by the way.

01:16:15.320 | So that's to be transparent because I'm already being honest with you,

01:16:20.320 | to be transparent to make sure that you know.

01:16:22.320 | I never hit Million Dollar Roundtable because I switched to--

01:16:25.320 | I started just simply to ignore insurance,

01:16:27.320 | but a Million Dollar Roundtable for 2015,

01:16:30.320 | the numbers are $91,000 of first-year commissions under the commissions method

01:16:35.320 | or $156,000 of gross income.

01:16:38.320 | So essentially, you're barely getting to Million Dollar Roundtable.

01:16:42.320 | Million Dollar Roundtable should just probably be the start.

01:16:44.320 | Top of the table, which is another classification,

01:16:49.320 | is $552,000 of commissions or $950,000 of income.

01:16:55.320 | So what's the beautiful model in the financial business,

01:16:58.320 | which is what I was working,

01:16:59.320 | is you build up a massive insurance practice that builds your marketing base

01:17:04.320 | and then out of that,

01:17:05.320 | you build up your investment management business over time.

01:17:08.320 | With those two things together,

01:17:09.320 | you've got a million from your insurance business

01:17:11.320 | and a million from your investment business,

01:17:13.320 | and now you've got the money that you need to staff things.

01:17:17.320 | By the way, to qualify for Million Dollar Roundtable,

01:17:22.320 | that's built on new business,

01:17:24.320 | and so that doesn't count renewals over time from an insurance business.

01:17:29.320 | So the financial business hasn't solved this problem yet.

01:17:32.320 | If you move over to the fee-only world,

01:17:34.320 | you're not accepting insurance commissions,

01:17:36.320 | and that's a real problem

01:17:37.320 | because no insurance company will sell insurance without commissions.

01:17:40.320 | So you're sending away your insurance business.

01:17:45.320 | Now, you can do it if you set up two firms.

01:17:48.320 | I mean, there are ways to make this work,

01:17:50.320 | but for those of you who are established in the business,

01:17:53.320 | just be aware these are some costs.

01:17:55.320 | So I think that's what I wanted to convey

01:17:59.320 | as far as the idea of how I would set up a practice.

01:18:02.320 | So for some of you who are interested in saying,

01:18:04.320 | "I want to set up something as a financial coach,"

01:18:07.320 | you've got to figure out your marketing method,

01:18:09.320 | and this is the problem.

01:18:10.320 | If you can't market your practice,

01:18:11.320 | well, that means you're a practicing accountant

01:18:13.320 | and you offer some additional services to some of your clients,

01:18:16.320 | or whatever your thing is,

01:18:18.320 | you've got to get some practice.

01:18:20.320 | You've got to figure out your marketing plan.

01:18:22.320 | What is my marketing plan?

01:18:24.320 | It's the same with any business.

01:18:25.320 | If you're going to start selling strawberry jam out of your kitchen,

01:18:29.320 | how are you going to market your services?

01:18:31.320 | Same with if you're getting a job, by the way.

01:18:33.320 | How are you going to market your services?

01:18:35.320 | This is what people don't think about.

01:18:36.320 | They don't think as marketers and salespeople.

01:18:38.320 | We're scared of being salespeople,

01:18:41.320 | so we trot down to the Internet and we say,

01:18:43.320 | "What does Monster.com say that I need for a job?"

01:18:45.320 | That's a dumb way to get a job.

01:18:47.320 | Figure out what do I want to do,

01:18:50.320 | who do I need to sell to,

01:18:51.320 | and then build a sales package to that industry or to that company.

01:18:56.320 | It's a whole lot different to go after a high-level,

01:18:59.320 | top-tier job and sell yourself in this company,

01:19:02.320 | in this industry,

01:19:03.320 | than it is just to see who's hiring.

01:19:05.320 | What happens is people absorb some of the--

01:19:08.320 | because we don't talk about sales and we don't teach sales

01:19:10.320 | and we don't teach marketing--

01:19:12.320 | people absorb some of the concepts

01:19:14.320 | but not the fullness of the concept.

01:19:16.320 | We know, "Oh, I've got to get a degree to put on my resume

01:19:20.320 | because that'll be impressive."

01:19:22.320 | What you're doing is you're trying to sell yourself to an employer

01:19:25.320 | so you got a degree so you could put it on your resume,

01:19:28.320 | but you didn't think about the whole package.

01:19:31.320 | Maybe you needed the degree, maybe you didn't,

01:19:35.320 | but do you go a little bit beyond the resume?

01:19:39.320 | Do you build a no-holds-barred, "This is the company,

01:19:41.320 | this is the industry, this is the job,"

01:19:43.320 | or are you just out casting for a job?

01:19:46.320 | We're selling ourselves--

01:19:48.320 | "I've got to dress up, I've got to wear my tie,

01:19:49.320 | I've got to get my hair cut,

01:19:50.320 | I've got to trim my beard before I go to the interview."

01:19:52.320 | We're selling ourselves without actually knowing

01:19:54.320 | that that's what we're doing for the majority of people

01:19:56.320 | who are wage earners,

01:19:59.320 | working as an employee hourly or salary basis.

01:20:03.320 | You are selling yourself,

01:20:04.320 | you're just not thinking that you're selling yourself

01:20:06.320 | because you think you're paid a salary.

01:20:08.320 | No, you're not, you're paid on commission.

01:20:10.320 | If you don't show up, they don't pay you.

01:20:13.320 | So you're paid on commission.

01:20:15.320 | I stole that from someone and I can't remember who.

01:20:19.320 | So sorry for the rant, but the point is

01:20:22.320 | I think we should be teaching sales to everybody

01:20:25.320 | because we're all in sales,

01:20:26.320 | every single one of us in some aspect of our life.

01:20:29.320 | We're selling our employers on keeping us,

01:20:30.320 | we're selling our spouse on why we're a great person,

01:20:34.320 | we're selling our kids on why they should do what we say,

01:20:36.320 | we're selling each other on why,

01:20:38.320 | I'm selling you every day on why you should believe the concepts

01:20:40.320 | and why you should send me your money so I can keep doing it.

01:20:43.320 | That's it.

01:20:45.320 | That's my whole business.

01:20:47.320 | So I think this solves this.

01:20:50.320 | If any of you were interested in this,

01:20:53.320 | the best one that I see right now is my friend Alan Moore

01:20:56.320 | and I need to have him on the show at some point

01:20:57.320 | and give him a chance to talk about his journey to starting

01:21:00.320 | because it's a cool entrepreneurial service story

01:21:03.320 | with starting his company XY Planning Network.

01:21:06.320 | And XY Planning Network, they're big on this model.

01:21:10.320 | This was his idea.

01:21:11.320 | He was starting to do this.

01:21:12.320 | This was his practice and he said we got to promote this.

01:21:14.320 | And they're starting to get a lot of press, a lot of people,

01:21:16.320 | and they've got a really great hand-holding service set up.

01:21:21.320 | So I think the website is I was a member for six or eight months

01:21:26.320 | and then I just decided I can't do both

01:21:28.320 | so I'm just doing this show and I walked away from that

01:21:30.320 | and I canceled my membership finally.

01:21:32.320 | But I think it's XYPlanningNetwork.com.

01:21:34.320 | I'll check and I'll put it in the notes.

01:21:36.320 | But check out his resources.

01:21:38.320 | He's doing a great job.

01:21:39.320 | They've got a bunch of advisors that are signing on with him.

01:21:41.320 | They've got more and more every day.

01:21:43.320 | And many of them are pursuing this model

01:21:46.320 | and they're trying to say how can I provide

01:21:48.320 | excellent financial planning advice

01:21:50.320 | and excellent financial planning service

01:21:52.320 | in a way that is consistent,

01:21:56.320 | in a way that allows me to have my lifestyle

01:21:58.320 | the way that I have it set up.

01:22:00.320 | Alan lives in, is it Wyoming or Montana?

01:22:04.320 | One of them.

01:22:05.320 | And has a big beard and shows up in jeans and shorts

01:22:09.320 | and he's a financial planner

01:22:10.320 | and he wouldn't have it any other way.

01:22:12.320 | So there are other people doing this.

01:22:13.320 | I do warn you, this is not a tested model.

01:22:15.320 | So if you do something like this,

01:22:17.320 | you're very much a pioneer.

01:22:19.320 | And I think that's cool.

01:22:20.320 | I think there's a need for it.

01:22:21.320 | I've done my best at the beginning.

01:22:23.320 | I kind of sold the need of how I see

01:22:25.320 | and what the value I saw in it for people.

01:22:27.320 | I think there's a massive need for it

01:22:29.320 | and maybe this might be helpful to you.

01:22:31.320 | Those are all my good ideas that I gave away to you.

01:22:34.320 | Go make some money with them.

01:22:36.320 | I've decided that I'm not going to do it,

01:22:38.320 | or at least I'm not going to do it right now.

01:22:40.320 | I reserve the right to change my mind in the future,

01:22:42.320 | but I'm not going to do it right now.

01:22:44.320 | So I hope they work for you.

01:22:45.320 | Let me know.

01:22:46.320 | Shoot me a note if you have more questions.

01:22:47.320 | Hopefully this was a useful follow-up

01:22:49.320 | to those of you who have an interest in this type of thing.

01:22:51.320 | I know it's not really mainstream content

01:22:54.320 | of how do I fix my own financial planning life.

01:22:56.320 | Maybe you have some ideas.

01:22:57.320 | Maybe you have a little bit of insight

01:22:59.320 | into the financial planning business.

01:23:01.320 | That's it for today's show.

01:23:03.320 | I'll be back with you tomorrow.

01:23:04.320 | You know what?

01:23:05.320 | Tomorrow I'm going to be releasing this interview

01:23:06.320 | that I did with Kirk Chisholm.

01:23:08.320 | Kirk, you're going to enjoy it.

01:23:09.320 | It's a great show.

01:23:10.320 | Kirk and I dig into how to do self-directed IRAs

01:23:14.320 | and how to invest in all kinds of non-mainstream stuff

01:23:17.320 | within your self-directed IRAs.

01:23:19.320 | Those of you who like the non-mainstream stuff I do,

01:23:22.320 | kind of how do I, again,

01:23:24.320 | how do I put a horse racing team inside my IRA?

01:23:27.320 | Or even better, I didn't talk with Kirk about this,

01:23:30.320 | but hey, I want to race my Porsche.

01:23:32.320 | How do I put my company inside my IRA?

01:23:35.320 | So all our race dollars get put into the IRA.

01:23:38.320 | There's all kinds of things that can be done.

01:23:39.320 | So check back tomorrow for that interview

01:23:41.320 | and support the show.

01:23:45.320 | Last membership program.

01:23:47.320 | Fair warning, it's going away.

01:23:49.320 | It's going to come back in the future,

01:23:51.320 | but it's going away.

01:23:52.320 | If you want in now, well, it's cheap.

01:23:53.320 | It's not going to be cheap in the future.

01:23:55.320 | I appreciate y'all's support.

01:23:56.320 | Cheers, y'all.

01:23:57.320 | (upbeat music)

01:24:02.320 | (upbeat music)

01:24:07.320 | (upbeat music)

01:24:12.320 | (upbeat music)

01:24:17.320 | (upbeat music)

01:24:22.320 | (upbeat music)

01:24:27.320 | (upbeat music)

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01:24:42.320 | (upbeat music)

01:24:47.320 | (upbeat music)

01:24:49.320 | - Thank you for listening to today's show.

01:24:51.320 | If you'd like to contact me personally,

01:24:53.320 | my email address is joshua@radicalpersonalfinance.com.

01:24:58.320 | You can also connect with the show on Twitter,

01:25:00.320 | @radicalpf, and at facebook.com/radicalpersonalfinance.

01:25:05.320 | This show is intended to provide entertainment,

01:25:08.320 | education, and financial enlightenment,

01:25:12.320 | but your situation is unique,

01:25:14.320 | and I cannot deliver any actionable advice

01:25:18.320 | without knowing anything about you.

01:25:20.320 | Please, develop a team of professional advisors

01:25:25.320 | who you find to be caring, competent, and trustworthy,

01:25:29.320 | and consult them, because they are the ones

01:25:32.320 | who can understand your specific needs,

01:25:35.320 | your specific goals, and provide specific answers

01:25:39.320 | to your questions.

01:25:41.320 | I've done my absolute best to be clear and accurate

01:25:44.320 | in today's show, but I'm one person,

01:25:46.320 | and I make mistakes.

01:25:48.320 | If you spot a mistake in something I've said,

01:25:50.320 | please help me by coming to the show page

01:25:53.320 | and commenting, so we can all learn together.

01:25:56.320 | Until tomorrow, thanks for being here.

01:25:59.320 | - The holidays start here at Ralph's,

01:26:01.320 | with a variety of options to celebrate traditions

01:26:03.320 | old and new.

01:26:05.320 | You could do a classic herb roasted turkey,

01:26:07.320 | or spice it up and make turkey tacos.

01:26:09.320 | Serve up a go-to shrimp cocktail,

01:26:11.320 | or use Simple Truth wild caught shrimp

01:26:14.320 | for your first Cajun risotto.

01:26:16.320 | Make creamy mac and cheese,

01:26:18.320 | or a spinach artichoke fondue

01:26:20.320 | from our selection of Murray's cheese.

01:26:22.320 | No matter how you shop, Ralph's has all the freshest

01:26:24.320 | ingredients to embrace all your holiday traditions.

01:26:27.320 | Ralph's, fresh for everyone.

RPF0142-Proposed_Financial_Practice