Using Detailed Meeting Checklists to Drive Referral Growth

Author: Michael Kitces

Team Kitces

Michael Kitces is Head of Planning Strategy at Buckingham Strategic Wealth, a turnkey wealth management services provider supporting thousands of independent financial advisors.

In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

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Full Transcript:

Michael: Welcome, Matthew Blocki, to the “Financial Advisor Success Podcast.”

Matthew: Thanks for having me, Michael. Feels good to be back.

Michael: It’s good to have you back. This is one of a few episodes now that we have started to do with guests that we had back out in the first 100 episodes, which now is all about 4 or 5 years ago, which is kind of enough time for us to move further along in our journey of what we’re doing in our advisory businesses. And then kind of look back and see how we’re doing, and what’s happened, and what’s changed. And so, you had a great episode in joining us originally, it was episode 80. So, if anyone wants to go back and listen later, kitces.com/80. And at the time, you were 30, you had had this fast-growth cycle over your first 8 years in the business, had built up to about 70 million under management, almost $800,000 of revenue.

And you were building in a big insurance company and had done kind of this shift of the early start of the business, particularly in the insurance world where it’s kind of very high volume of clients as you’re doing transactions and had been getting into a more focused practice that said, “No, I don’t need a bajillion volume transactional clients.” I think your number at the time was somewhere like 15 great fit clients to take on every year. And you were focusing more and more into working with physicians and retirees, and moving in that direction.

And so, fast forward 4 years later, the business is almost 4x the size, which is just an incredible growth trajectory, particularly given how crazy the past 4 years have been. You made a transition. And so, I guess, I’m just really excited to kind of get caught up over the past four years of where on earth did all this growth come from? And what happened that led to a transition?

Why Matthew Broke Away From His Prior Firm [05:22]

Matthew: Yeah. Well, great question, Michael. I remember you asked me the same question on our first podcast, “Are you thinking about starting an RIA? We’re very focused on the advice aspect of planning versus the product aspect of planning.” And ultimately, through that conversation, and then through coaching, and just really thinking through, “Are my goals, are my plans, are my vision really for me, or are they appeasing somebody else’s plans on my behalf?”

And ultimately, had a lot of self-reflection, and a lot of thinking of, “What are we trying to build? How are we going to best serve our clients?” We came to the decision that it was best to do that in an independent RIA, and really focus on wearing one hat, and that hat being for our clients.

Michael: So, I’m just curious to understand, I guess, the mindset further or what shifted? You said, “Are my plans really for me or someone else on my behalf?” What does that mean?

Matthew: Yeah. So, my prior broker dealer, it was Fortune 100 company, they have tremendous obviously philosophies in place on how they get their sales force to produce amazing results. The culture was very product driven. The compensation, ultimately, was dependent on a mix of products, and then the investment revenue coming in. And you were in study groups, you were in a monthly study group, a national study group. And ultimately, when you look around the culture, you kind of become the average of the people you surround yourself with.

And just looking back, really the first five or six years of my goals, some of those were really created for me due to that culture. And now, really, we want to be an advice-centric financial planning firm that does the best work for our clients. And doing that completely separate, completely agnostic of what products are sold if products are there, that are best interest of clients. Great, we’ll place them. But that can’t be the leading forefront of what we do.

Michael: So, it sounds like part of the challenge was, you live in a large company environment where, as is common for a lot of them, they organized study groups of top advisors, of top producers, of those that are doing well and growing well, and driving the business profitably. So, you end up in study groups with them, and the natural effect is you want to run with that herd. You want to be…I think you said you want to be at least the average of the people that you’re surrounded with. But that means if you’re in a company that, at the end of the day, manufactures product, the people in those groups tend to be people that move a lot of the product because that’s the business of the company. And that ends up putting you in an environment where the focus ends up being more on the products and what’s getting sold because that’s the environment that gets created…I guess because that’s the environment that gets created and set up for you.

Matthew: Yeah, there’s no question. I always use the adage that’s been coached to me, “Your greatest strengths can become your greatest weaknesses if you don’t balance or monitor them that well.” And I think most people at that prior firm… And I can speak for myself, I’m very competitive no matter what I do. If I’m on the golf course on the 18th hole, and I’m down, I’m pressing, let’s get a chance to win. But that competition, if it’s just for the sake of competition, you have to ask yourself, “What’s the point?” But realizing that that is a strength, that can’t be the end goal, right? So, what’s the purpose? What’s the mission? What’s the vision of the company?

If the competition is there as a healthy support system to reach your purpose, to reach your meaningful purpose, then awesome. But if it’s just there for the sake of being there, it can end up being unhealthy, and it can end up…you’re basically pursuing goals that aren’t yours.

Michael: It’s an interesting way to frame it that, look, if you’re competitive by nature, and I get it, you are, I certainly am, I think a lot of folks in the industry are, particularly those who end up in sort of get your client’s business development, grow the business, eat what you kill sort of environment, because just competitive personalities tend to do relatively well in that environment because of the structure of it that if you’re a competitive type and you’re in that environment, you’re going to push yourself to do well because that’s what you do, and you’re wired to be competitive. But if you’re not clear on what you’re actually trying to build, you just end up being competitive towards whatever the company puts in front of you is the thing to be competitive towards, which at the end of the day, I guess it may be profitable and you can make money, but it’s not necessarily what’s serving the higher purpose or scratching the itch of why exactly did you make this business, or come in to be an advisor in the first place.

Matthew: And it’s interesting how we kind of adapt as human beings too, because I think that I give so much credit to the training. We talked about this on the podcast, but the activity, just really being persistent, professionally persistent, getting your language, getting the knowledge down. And I credit a lot of that to that culture where you’re creating it from scratch. You’re competing against every other advisor. First couple of years, I was on stage and I just had the realization, I was really burning at both ends and just for this big goal. And then I realized the goal, when I reached it, it the last 15 seconds. I realized, to get that feeling again, I had to do it all over again.

Michael: Was that like a top producer recognition that you got on stage for?

Matthew: Yeah. First four years as an advisor, you’re competing. It’s every other first year, or second year, third year, fourth year. And so, I think that served a tremendous purpose. And not only just being, “Let’s get after it, let’s get clients. Let’s just survive.” Right? Because less than 3% of advisors in this culture actually make it past those first few years. And it was so hard to do this from scratch, and pound payment, make calls, get referrals, essentially cold calls. So, I think that served a purpose of just making sure I made it. But then after that, after getting the client base, then starting to develop the niche and the business, it end up hurting much more than did help. So, I think it helped. It was a huge catalyst for a couple of years. And then from there, it kind of needed to drop that whole concept, and then focus on kind of what got you here is not going to get you to the next big growth.

Michael: Well, so, what changed? What changed that being competitive to keep up with other advisors in the firm went from, “This is helpful in driving me forward,” to, “This is no longer helpful in driving me forward.”

Matthew: It’s very risk management based. You’re obtaining clients. And most people have very underserved in a risk management perspective, so you can place the right insurance products along with investments and get a whole financial plan going. But then once you have a couple hundred clients, the philosophy there was to get 1000 clients. There’s a whole book that you read. I never actually opened and read the book. But get 1000 clients, and maybe 20% take your calls. Well, I experienced when you had a couple of hundred clients, and you’re actually doing financial planning, not only are they going to take your calls, they’re going to be calling you with questions nonstop.

So, 1000 clients for me, it was just a ridiculous proposition. I was like, “This is a methodology that only works if you’re selling insurance. It’s not a methodology that works if you’re doing true financial planning.” So, I just had a quick realization on my third or fourth year that if I really want to grow a wealth management, a financial planning practice, I have to completely adapt, basically create a system outside of this culture. Obviously, many successful firms, I just didn’t have access to that were already doing this. But inside of that system, it started to build some friction, because you want to do kind of what your peers are doing. But at the same time, it’s impossible to serve, I think, properly serve 150 or more clients as one advisor. So, the fact that they thought of serving 1000 is laughable to me as 1 advisor.

Michael: Interesting. So, for you, it sounds like it was that sort of…the depth of client relationship that you get to have if you’re really doing this depth of ongoing financial advice for clients, just like the amount of questions they have, the amount of analysis you have to do, the amount of just conversations you have to have with them to advise them, and get them through what they’re working on means you can just only do this with so many clients at a time. As you framed it, maybe you get to 150. Frankly, I know some firms that don’t even get that high.

But the insurance environment… I remember when I started, I was…a lot of the opportunities I got early on were doing calls to the existing book of an advisor who’d been there for, I think, 36 years at the time. And he had 1500 to 2000 clients. There was a room in the agency that was just for his client files. No one could have a desk in the office because it was just his client files, because 20 plus years ago, it wasn’t digitized yet. And it was just an unmanageably large number of clients. We were calling clients that he hadn’t seen in 5 to 10 years because there were so many of them, he literally couldn’t have seen them in the past 5 plus years.

But he was wonderfully successful in the insurance environment. He did an immense number of sales, and had cultivated a huge number of relationships. But it was transactional business. There were so many of them, it was literally impossible to have a relationship with more than a handful of them.

So, for you, that drive of, “I really like the financial planning side, but that necessitates deeper relationships, which means I can’t pursue 1000 plus clients that the firm is holding up as success. I need an environment, or I got to reset the goalposts to say how do I be awesome for my 150 and figure out how to do that. And not how do I rack up 1000 clients, because that’s what everybody else on the podium, on the stage has done.”

Matthew: Yeah. I think, ultimately, so much respect for my prior company, and some of my peers there are just some of the most amazing financial advisors that exist. But I think, ultimately, I was a bad fit for them. When clients came to me for advice for physicians, looking at contracts in their RVUs to switching, starting a business, or selling a business, we really wanted to be the center of our clients lives, and wanted to be involved. Not go out of our lane, like do tax returns, but having intimate knowledge of taxes, having intimate knowledge of estate planning, and put it all together. And that was very hard to do because when you’re running a Fortune 100 company, the compliance is to the lowest common denominator.

So, it would be expensive for them to have me as an advisor there, and pay for their own person just to oversee and make sure everything that we did was good. And now we can do that as a private firm. And we have someone that works for us, not against us. That’s kind of how it feels. That friction is completely gone. It feels amazing. But I think it really boils down to we wanted to give our clients advice to solve problems that they needed help with. Not just, “Here’s an insurance and investment mix. Here you go. You’re good for next year.” It’s constant communication through the year. When there’s a big decision, we want to be right by their side, helping them make the decision.

Because I think most of what we do as financial advisors is really table stakes. But there’s two or three big decisions, or big conversations that each client has, and we needed to be there within that 48-hour turnaround time, and be there for not only reducing decision fatigue, making really complex stuff understandable, but then just making sure that the clients are able to make their decision in an informed way. And that was hard to do. It’s been a much easier thing to do in an independent RIA.

And I think one of the biggest things, honestly, is the process of scaling. So, because of the competitive culture, it was very tough to have a lead advisor on my team that wasn’t getting the recognition or the respect of kind of the national conferences, or having your name out there. So, we tried to do that, and we failed to do that. But now that we’re an independent RIA, honestly, our most successful lead advisors, we have three other than myself right now, they are all phenomenal. The clients love them. Probably over 100 of existing clients that had worked with me for 10 years, our primary relationship is now with them because they have the time to serve them.

And that was very hard to do but it’s been very easy to do here. And I think it’s just really because of the culture we built. Our lead advisors are not expected to sell anything. They’re expected to hug and be there for our clients, and make sure that the plan is always updated. It’s always live, it’s always updated. And being able to create that culture versus how many products did we sell this month, or next month, and comparing ourselves, I got over it. But it’s really hard for me to get over it, but then also convince my whole team to get over on a daily basis. And the culture, I didn’t believe it was important, but it is so important to have one ship mentality of your team, and to protect them, and make sure everyone has a positive thought process, and has bought into the mission of the company at hand.

Michael: Interesting. So, I just want to make sure I follow that. So, the challenge for where you were as if I want to put a lead advisor in place to see out my team, where I’m going to take existing client relationships and hand it off to that lead advisor. Which for a scaling business, a scaling advisory firm, hugely important position, hugely value pull position, can get paid pretty darn well in that position, even with very little business development obligation, just to be a good steward for those clients, and the revenue that’s associated with them.

But for the environment that you are in, those advisors would not feel recognized and appreciated themselves because they wouldn’t be putting up significant production numbers. They wouldn’t be putting up significant new business numbers because that’s literally not the point of the role. But then that creates a tension for them because you want to hire people who can serve as clients to help you scale. But the firm is basically telling them, “Well, you really got to be out getting your own clients if you want to be successful. You can’t be successful servicing the clients that Matthew has.” And that would create a tension?

Matthew: Yeah, it would create a tension. And a lot of the advisors on our team, they try out the internship, or they try out being advisor there. And they weren’t the best salespeople, but I can tell you they are the best financial planners out there. I mean, they are knowledgeable, clients feel very comfortable with the most intimate knowledge, and an intimate sharing of all their information. But they weren’t the top salespeople. And I think that whether we were there, or whether we were here, what we were trying to build had nothing to do with sales. It’s growing a financial planning, advice-centric wealth management practice. And those two things were in big conflict. And was that possible? It felt like we were constantly fighting a psychological behalf between the company and between the team members. And it was tough.

How Matthew Prepared His Practice To Transition To Independence [20:17]

Michael: So, you ultimately made the decision to transition. So, tell me about the transition. Well, I guess, first, I’m wondering, just where were you looking to go? I mean, just in general, if you’re a successful advisor leaving a platform, there’s a lot of places you can go, and a lot of people who are very happy to take your call. So, there’s other insurance companies, there’s independent broker dealers, there’s the RIA Channel. How did you decide where to go, or what did you look at to decide where to go?

Matthew: Yeah, that’s a great question. We looked through what’s going to be most beneficial for our clients and what their needs are? What are the problems that they have that we are solving for them, but that we can solve in a better, easier, scalable way? And we looked at other companies that promised us they would be more lenient, or more…or creative ideas. If we wanted to start doing video content, that’s fine, we have this process. But ultimately, we wanted to be able to do stuff quick, wanted to be able to scale as effective as we can. And really, the adversity and the problem solving is something I really…I don’t shy away from. I thrive from.

I always use analogies, kind of like a workout to keep your body in good shape, you have to go to the gym and put it under stress. And if you’re the business, in the same way. You have to feel tension to know you’re growing. If you’re trying to balance, you’re not going to feel good. It’s like balancing on foot is tough. That’s how I view the business.

And doing an independent RIA, that excited me because I knew it was going to come with its own set of not only being an advisor, but all the business decisions that came along with it. It was very hard, but it was very meaningful to me and all team members. So, that’s the direction we ultimately decided to go. And ultimately, it came down to, “How can we best serve our clients’ problems? How can we best serve our clients? And where can we have the greatest amount of autonomy to grow into the vision that we want to create for the company?”

Michael: So, did you look at TAMP platforms, and some of the RIA, “Affiliate with us,” corporate RIA offerings as well?

Matthew: We did. We looked at, basically, every option that was available.

Michael: And so, what did you look at in the RIA channel to make the decision or do the comparisons?

Matthew: We looked at tuck-ins, and it wasn’t at all about the money. In fact, we probably would have been much more profitable. With some of the tuck-ins, we’re going to take 5% to 10% of revenue, and they’ll do all of the back office stuff for us. Ultimately, we decided against that was, again, because of the autonomy and the excitement of making decisions, not having decisions already made for us. That’s part of what we were trying to get away from anyways. And I really saw…so, I had listened to lots of podcasts. You’ve done lots of other podcasts. And I basically saw this huge movement of people moving into RIAs, but then the RIAs, they say they wanted to become an RIA to be a fiduciary, to do what best interests the clients.

And then I started to see this movement where private equity firms got involved, and all these aggregators got involved. I was like, “Wait a second. So, you said you were going to be a fiduciary. Now, it looks like you’re just trying to make as much money as humanly possible.” And so, we didn’t want to get involved in really that because we didn’t move to sell our business. We didn’t move to make as much money as possible. We moved to serve a greater purpose, and to make the field, and provide employment, and provide the best possible advice to our clients. So, we just knew the control of that as the industry was rapidly changing, there was a risk to doing that as the size of a firm that we were at. But also that was going to be the most meaningful and most challenging direction to go.

Michael: I find it just striking just how you’re framing this. I think the industry likes to tell a story that one of the big drivers from insurance and brokerage firms to RIAs is essentially the economics of it. Cut out that broker dealer that charges you whatever, 8% to 12% off your grid. And then they’ve also got that program fee of it’s another 10 or 15 bips which means really like they’re taking 25% to 30% of your gross revenue. And if you put that through your gross revenue, and you multiply that by the percentage, you get much money the platform is taking. And you start doing the math of the staff, and you’re like, “I can hire people for less than this.”

I’ve seen a lot of industry discussion that’s essentially, the math of it can be better on the RIA side because you just don’t have to pay for the things that you don’t need in your platform. You just hire the staff and resources that you want. And in practice, I’ve seen some firms where that’s worked out pretty well, and some where it has not worked out as well because they underestimated their own costs.

But I’m struck as you were framing this that this basically had nothing to do with the economics of it. This was this was almost entirely essentially an autonomy and control decision for you of, “We just want to make sure that we can serve clients exactly the way that we want to serve them,” I mean, within the legal requirements. “We want to serve them exactly the way that we want to serve them without being beholden to anyone else’s compliance or management saying, ‘Here’s what you’re allowed to do and what you’re not allowed to do.'”

And so, that’s what pushed you in the direction of, “We’re just going to have to literally hang our own shingle because anything else we affiliate to means people are going to be able to tell us what to do. And we don’t want that.”

Matthew: You nailed it. That’s it. I mean, I would have taken a pay cut, which we temporarily did. And the economics, they ultimately worked out long term. But that was it. And I’m a young guy. I don’t ever see myself retiring. I see myself wanting to do this and do it well for a very long period of time. So, controlling the environment and building it the way I wanted to build it, I think was going to be the ultimate driver I’d be able to control not being burned out, and always having the excitement and the challenges to keep us sharp. Iron sharpens iron.

Michael: So, what did you do when it came time to actually set up? You’ve got to pick a custodial platform, a bunch of tech, you got to figure out compliant stuff. What platforms and providers did you pick to actually figure that out and get going?

Matthew: I have a smile on my face. They can’t see it because this is a recording. But yeah, it was a lot of decisions very, very quickly. I had done a trip out to TD Ameritrade RIA conference. We were pretty sure, at that time, if we moved, that we were going to go TD Ameritrade. And then they announced the merger with Schwab. And after doing a lot of research, we’re going to be…a TD would have been very big in their ecosystem, comparatively speaking, because they work with a lot. But then in Schwab, we’re going to be a small fish.

So, we were like, “I don’t want to be mixed in while this is happening. Who knows, while we’re trying to make a transition, where we’re going to fall line, are we going to get the right service? Are they going to be focused on this merger?” So, that really just ultimately made it easy decision not to do that. And not to say we won’t partner with them, because they’re both great companies, in the future. But then just researching, looking at where do our clients have their money already. A lot of 401(k) plans at hospitals are with Fidelity.

And so, we contacted Fidelity, really hit it off with them. All the technology we had researched, some of it like Fidelity owns eMoney Redtail, all these CRM, everything just started to match. And Fidelity became very easy choice for us and a custodian platform for us to choose. And this all happened, June of 2020 is when we made the official transition. So, we’re able to do, I want to say 99% of the transition electronically, which made it…it was right during COVID. No one was really…people that would have never met us on Zoom or done a DocuSign. They weren’t forced by us. They were forced in other areas of their life to adopt to that. So, literally everyone just accepted that whether they wanted to or not. So, the timing of it made it the easiest possible transition, I think, in history. Fidelity said we were one of the quickest transitions they had ever seen.

Michael: Interesting. So, the fact that the transition happened in not even just COVID, but early stage COVID, where everything was getting shut down, and limited, made it a lot easier to tell clients, “Hey, we’re doing this transition. And I’m so sorry. I know you’re not really into the digital thing, but we have to do all this with digital paperwork. And I’ll meet with you by Zoom if you have questions.” And you could do that because they couldn’t come in and meet with you in person, and do physical paperwork if they wanted to, because it was the early stage of the pandemic, and everything was getting shut down.

Matthew: That was it. Yeah. I mean, essentially we had thought through of thinking about scaling the practice. What is every objection, what is every question that clients are going to have? And we came up with a frequently asked questions sheet, and we recorded some videos. Every possible question that we anticipated, we got out there, and we prevented a lot of those calls. And then we got the transition done, and then were able to get right back into financial planning mode where we’re doing the systematic reviews and getting everyone on board and used to the new systems.

How Matthew Communicated His Transition And Migrated Clients [29:08]

Michael: So, share with me a little more just how you communicated this. So, I think I heard… So, there was like an FAQs sheet. So, you tried to come up with any question or concern that they’d have, and just wrote it all out in advance. So, was that a letter? Was that like a page you put up on a website? How did you create and distribute this FAQs thing?

Matthew: Yeah, that was a MailChimp, I believe. And I remember we had to replicate by a memory all of our clients, look them up in Whitepages, get their contact information rebuilt. I mean, it was crazy. And then get this email sent out.

Michael: Right. Because the whole dynamic when you’re leaving, cannot take client information. So, you got to remember who they are, and then look them up to figure out how to contact them again outside.

Matthew: Yeah. Which is scary because literally pay for the top subscription on, I think it was Whitepages. And the information’s right there. My information is right there. Your information is right… I mean, that’s pretty easily accessible. It was kind of surprising. We had a consultant helping us with the transition as well, that helped us through these key decisions not to mess anything up from a legal perspective. But it was very helpful, and it turned out perfect.

Michael: And out of curiosity, can I ask, who did you work with for counsel on the transition to make sure you didn’t do anything you’re not supposed to do and get in trouble?

Matthew: Yeah, we still work with her now. She’s now switched firms. Her name is Aimee Jachym and she’s with Miller Johnson. But she was incredibly helpful, just with advice, “Here’s what to do. Here’s what not to do.” And then there was…our team worked very, very diligently around the clock with making the decisions of how we’re going to streamline this on the back end.

Michael: So, from the transition end of it, so you said as well, you were doing videos to explain it. What was that?

Matthew: So, in general, let’s say, the Russia-Ukraine war is happening and the market drops 15%. Ninety percent of the questions we’re going to get are going to be similar questions, “What’s happening with the market? Do we need to make moves? What are we doing proactively, rebalancing, got to stay in the market?” Our answers are going to be relatively the same, different depending on the client’s financial situation, if they’re retired, if they’re young, etc. But the same goes for this transition. And we knew clients were going to have questions of, “Are there downsides for me? Why are you making this transition? What does an RIA mean? Are the fees going to be different?”

There is going to be a list of maybe 10 or 20 questions that we knew we were going to get. And so, instead of scheduling an hour-long meeting to hit every client, let’s say…I don’t remember how many clients we took with us. It was 200 households, or maybe 150 households, 200 households. That’s a lot of time, and a lot of meetings, a lot of energy. So, we figured if we did the videos, batch everything, it would save time. And clients could have rewatch and rewatch if they didn’t…because in a meeting, sometimes you don’t retain the information right from the first time.

Michael: And so, the video, was this also like you recorded it, and then when you sent the email with the FAQ, it had a video as well, or did you distribute videos separate from the FAQ? Just how did you put the word out?

Matthew: Yes. It was all one page. It was one page making the announcement. And then it was a link to a PDF that sat on…an online PDF with the FAQs. And then there was, I want to say five videos that were linked through Vimeo, or some online platform. So, one email, but then with lots of separate links to go to the different resources.

Michael: And so, how did you decide which clients were coming with, or that you wanted to have follow you when you left? Were you trying to bring all clients? Were you trying to bring some clients? How did you think about that part of the transition?

Matthew: Yeah, that’s an excellent question as well. We had evolved into a very highly detailed, sophisticated wealth management practice where we’re doing a lot of things for a lot of people. And that wasn’t scalable. At the time, due to internal protocols as well, we were required to meet with everyone if they had an advisor account, whether someone had $50,000 or $5 million. And so, just thinking about business 101, if you and I were to go buy a car, the same car, and they would offer you the car for $50,000, me the car for $20,000, that would be kind of ridiculous, right? That would probably be illegal from a car perspective.

I think if you look at any financial advisory practice, the same practice, the business practice is happening where you’re providing the same amount of time, attention, and energy, and overhead, and expenses behind the scenes to clients that are paying drastically different amounts of revenue to your firm. So, we realized that issue, and we didn’t want anyone…we didn’t want our biggest clients paying the way for young…our smallest clients to have similar amount of advice.

And we also realized that we weren’t necessarily fit to serve smaller clients anymore, because we didn’t have the time, or the attention, or the resources, or the structure to really serve those clients the best way. So, we did an 80/20 analysis and figured out what are the 20% of our client base that’s making up 80% of the current revenues, of the current growth. And let’s just focus on building our systems, and practice around those, and let’s take those with. And then let’s make sure that the other ones…the other ones did reach out, and we recommended what advisor to stay with the old firm, and that they would be in great hands there.

Michael: So, you didn’t necessarily look at this as a, “We’re going to do a partial book sale, or a transaction of the clients that aren’t a fit that we’re not trying to bring along.” Your focus was just, “We’re going to find the subset that are really good fit by looking at the 80/20 rule, and figuring out what’s the 20% of clients that are driving the bulk of the revenue, and the profits, and the growth anyways. And we’re just only going to hope that we get those. If anybody else wants to follow us, we won’t even take them. We’ll just say, ‘Hey, stay where you are. Here’s another advisor at the firm. You don’t need to make a transition.'”

Matthew: Yeah. And it’s tough because I know a lot of advisors go through that psychologically. They make promises. I think the reality is, you can’t lie to yourself. And you feel bad about the promise made, “Oh, I’m going to continue to serve that person forever.” But the reality, that person would be so much better served with someone that’s excited. And that that person is the biggest client of a younger advisor, and that younger advisor’s capable of holding them. It’s just going to be such a better fit. So, I think to really withhold your promise, sometimes it’s letting go, and making sure that client is the best served, which is not always you. It was a tough decision, but it was the right decision looking back.

Michael: So, how many clients did you have at the old firm, and how many ultimately ended up sticking with you at the new firm?

Matthew: Too many, for sure, because we were in that culture of getting to that 1000. I want to say we had 600 or 700 “clients.” The transition over to the new firm, I want to say it was somewhere between 125 to 200 households that we took with us. I know that’s a large range. I really don’t want to misspeak, but I know it’s somewhere in that range.

Michael: But it’s 600 or 700 from the original that you really are in the 20% to 30% of clients that followed, or that you allowed to follow.

Matthew: Exactly. Yeah. It was really for us a 10/90 analysis from a revenue perspective. But then the other 10%, it was like, “Oh these are young doctors making seven figures a year that are adding hundreds of thousands of dollars every year. So, they’re going to build quickly into the right kind of client that we want to help develop long term.”

Michael: And so, presumably then in that context, 60%, 70+% of clients stayed behind. But the whole point of this is…but the overwhelming majority of your revenue came along because in practice, the advisory revenue was very concentrated in a small subset of the high-volume clients.

Matthew: Exactly. Exactly. And economically, because we’re able to…I think our grid rate when we left was…I don’t know, 79% to 85%. But after the program fees and all the other stuff that went out there know, I think we ended up taking 65%. So, you go to an RIA, you obviously have lots of overhead of technology decisions, and you got to hire more team. So, that ends up being the same, but total revenue wise, I think we were pretty much within three to six months similar amount to where we were before. Even on a third of our client base, because of the 80/20 analysis, and because of being independent.

Michael: Wow. That’s striking. When you remove the grid cuts, and the program fees, and the rest, having only a segment of clients, I mean just at the end of the day, your revenue was almost back to where it was after 3 to 6 months, and that’s with 20% to 25% of the households. So, just literally less work to do, or less distractions to have because you don’t have the other 80% of clients that were contributing net zero.

Matthew: Exactly. Exactly. Yeah.

Michael: So, did you have just challenges from the firm still trying to compete for, and retain clients as you were talking to them about potentially leaving and going with you?

Matthew: Yeah. They assigned our clients to different advisors there that tried to convince them to stay. Looking back, I think the best possible thing we did was just to really develop a rock-solid relationship with those clients. Always keep their best interest in mind. Clients can feel that, and it’s tough to…whether it’s any kind of financial professional, once you find someone that’s good, if we find a client we like, or client finds us that they like, it’s a rock-solid relationship that’s hard to break. And there were people knocking down the door and hammering them. And really, I want to say it was 99% of our clients that we wanted to come with, did come with us. And it was relatively quick. And the calls they got really helped us. They didn’t hurt us because it was kind of a reminder to the… Dr. Smith, I’m just making that name up, who was too busy in the OR.

So, everything happened pretty quickly, pretty painlessly. There was a couple clients that we thought, “You know what? These are young doctors that…” One of the tactics that worked against us was, “Oh, Matt, he’s so busy, he only works with big accounts now. Has he called you in the last six months?” And they’re like, “Oh, no, he hasn’t.” So, that was one or two people that stayed behind. And that’s where the competitive spirit just crushed me. But no, we got over it, and now we are where we are. But it’s kind of funny how little things can affect you when you’re so competitive. But that’s, again, just the self-awareness that your greatest strength can become your greatest weakness quickly unless you keep it in check.

The Processes And Systems Matthew Implemented To Grow And Scale His RIA [39:53]

Michael: So, what was it like in the aftermath? You get three to six months in. Pretty much all the clients you wanted to come came along. Revenue has kind of gotten back to where it was. It’s like, “Okay, now what have done to ourselves, and what comes next?”

Matthew: Yeah. So, we followed the U.S. model written in the Traction book. And I think, on the first podcast, we had just adopted that. And we’ve continued to use that. And so, we just followed the…we’ve got a 10-year, a 3-year, 1-year vision, and then from there, we break it down into quarterly rocks, and then weekly scorecard. And so, every week, we’re talking about this, that is our culture is maintaining that one ship mentality. Everyone’s paddling in the same direction.

And so, from there, it was just establishing the rocks of how do we reach the long-term vision. And really, I think the big mindset shift now is, how do we mostly…the effort, the journey is the reward. The goal is not the reward anymore. It’s the daily basis, the adversity, the struggle, the effort, the companionship of being in a business together. That’s the journey that’s most fulfilling.

Michael: So, talk to us how growth has evolved and flowed. So, when you were with us a little over four years ago, you were at about $70 million under management on the advisory side. Then you still had a flow of insurance business as well. So, I guess I’m wondering, where was it when you actually made the transition? Once you got through the transition, the dust settled, what was the client AUM base? And then how has it changed over the past two years?

Matthew: Yeah, I want to say right when we left, it was 150, 160 there. And then we took 120 with us, with that 20% represented about [$]120 million. And now we’re sitting at, the market’s very choppy, between [$]275 to 300 million. And so, essentially, you said at the beginning 4x. That’s basically from 2017 to 2019, 2019 to 2021, we’ve doubled every 2 years almost exactly from an AUM perspective, but then also a revenue perspective as well.

Michael: So, I’m struck from that perspective. It sounds like growth isn’t necessarily all that different for where you are versus where you were. You doubled in two years before you left, and you doubled in two years after you left. Granted, as the firm gets bigger, the doublings get harder because the denominator gets bigger.

Matthew: For sure.

Michael: But sounds like not necessarily a significantly different trajectory in terms of growth from where you were versus being in the RIA now.

Matthew: Yeah, I think the…I found it has been much more difficult to the bigger you are, the more difficult it is because you have your existing clients, you always keep them first. And you want to make sure that, as you grow, you’re remembering the clients that got you there, and you’re making sure that you have the right amount of advisors, the right infrastructure, the right technology to always serve them in the best possible capacity. So, from here moving forward, it’s just scaling properly and making the right decisions to make sure that that growth is still sustainable.

But as far as how we’ve grown now, it’s much more thoughtful than just a get every single client that will walk in the door and sign them up. We’re assigning one out of every three people that walk in the door. The other two people we have relationship with other advisors that we’re able to say, “Hey. This person will much better fit your needs.” You’re dealing with student loans, or you have…if you’re just starting out, essentially.

Michael: So, I guess, just share with us more, what’s different now about the thoughtful growth? What does growth look like for you? What are you trying to get to grow in a thoughtful manner?

Matthew: Yeah. So, we really want to do the best possible job quarterbacking big client decisions in our niches. So, right now, we’re working with primarily physicians, retirees, corporate leaders, and business owners. So, we really want to stay within those segments, because then the decisions, offerings, those can all scale. And the majority of what we’ve done thus far is through word of mouth. So, it’s existing clients referring us to friends, family members, or acquaintances. And that, I could ask, “What’s made up the majority of your growth so far?” That’s it. Eighty percent of our growth has been from probably 20% of our clients that do a great job referring us to friends, and families, and close acquaintances.

Michael: And is that similar to what it was in the past as well? Just word of mouth from a small subset of higher referring clients?

Matthew: It was. We also had a lot of joint work partners when we were…before we did a lot of seminars to young physicians. We would ask for referrals in an artful way. And now, we’re not doing really…I did one because I was asked to do it, but we’re not doing any seminars. We’re really not asking for referrals. We’re just trying to do the best possible job, grow our brand through social media, video content, communicate actively, proactively to all of our clients and staying top of mind. And then also just really focus on training our existing lead advisors to make sure that they’re able to take on the right amount of clients, and that we’re able to continue to take on the growth that we’ve experienced thus far.

Michael: So, as I’m sure you know and have seen as well, most advisors want to grow well through referrals and existing clients they’re serving. Most advisors I know are not growing at…well, basically, 40% growth rates is about what it takes to double every 2 years. So, what’s different about what you guys are doing that’s generating so much referral base growth that other advisory firms aren’t doing because most don’t see that kind of referral growth?

Matthew: Yeah, I think the easiest way to describe this, we kind of think of things like…before it was meet because there’s going to be a sales opportunity, or meet because activity drives results, or meet because you have the option to gain referrals. And now, as busy as I am, when I work with other professionals, it really drives me crazy when I feel like time is being wasted or almost disrespected. Like if you’re sitting in a waiting room for 20 minutes. So, most of our clients are in very similar positions in life. They have families, they have careers, they have all these demands pulling themselves in the different direction. That’s why really we formed the name Equilibrium Wealth Advisors, finding balance, getting that tension right to be able to balance things.

So, the way we view things is actually not…we’re not ever going to meet to meet. We want to save your time, not waste your time. Which I think in the advisory field, a lot of people are just meeting to meet. And so, a lot of our processes now are more of a CFO’s perspective, where we’re reporting to clients when they want to be reported to. But we’re trying to take as much as we possibly can off of their plate to save their time, not waste their time. They’re ultimately the CEO. They’re in control of their lives. They’re in control of the direction. But that’s where the relationship we take on. I think clients can really feel that. And that’s a different experience from other advisors that they’ve worked with where it’s like, “Why do you want to meet with me? Are you just trying to sell me something new?” It’s just really creating that concierge, and that trusted advisor experience is where, I think, most of the growth has come from.

And then, instead of doing a portfolio review with everybody, and talking about, we do videos every quarter where we address every question that a client may have. And some clients love watching those and give us great feedback. And some clients have never even clicked on it. And so, we don’t leave it up to our choice of what time is spent on, we give it to our clients’ choices. And those that want to do it have access to it when they want it, when they have time. And then during our client reviews, we’re really able to focus on their life specifics. We’re not just checking a bunch of boxes, which I felt like I was doing in reviews at our prior place.

Michael: So, when you say you’re trying to do more in the form of reporting so we don’t have to meet, and can save you time, I guess just I’m wondering more, what else are you actually do win there? So, I hear one piece is video reviews, so is that video for each client you record a little video for them to talk them through their review, or is this similar to when you were doing the breakaway transition of a one-to-many video that you put out for all clients to see each quarter?

Matthew: So, it’s both. We do, as topics come up that are timely, like the war, if the market’s dropping, we’ll do a video one time for that. Every single quarter we’ll send out our investment portfolio reports. We use Orion, so that goes right in the eMoney vault, but we do a commentary that goes along with that. And so, clients have access to that any time when they have time. But then during what are we actually doing for clients, and we’re going… I view things as retirement planning, education planning, general tax, budget cash flow. And those are all kind of table stakes. Those are things every advisor should be doing no matter what. And we do do those things. And we make sure we have a plan for those things, and those are always updated.

I think the most value we can provide is there’s this competition between these goals. And being able to artfully guide clients into, “Hey, I got this $200,000 bonus. My wife wants me to redo the kitchen. I know our education plan is on track for retirement.” Being able to artfully navigate, and help, and educate clients on those big decisions is really what we do. I’d say most of our clients, their plans are on track, but there’s a lot of artful decisions that need to be made where if you don’t have an extremely clear and concise picture on their overall, it’s going to be very hard to be their CFO.

Michael: So, you’ve talked a few times about trying to manage to sort of staffing when to hire and scale up capacity of advisors. So, now that you’re out of the get a really big volume of clients because you’re doing a high volume of transactions, and you’re focusing in on the relationship structures, how are you looking at advisor capacity at this point?

Matthew: Great question as well. So, each advisor… I look at a lot of your studies, and a lot of the content you put out. I think, in general, there’s probably a consensus where 1 advisor can handle between 75 to upwards of 150 clients. So, that’s really… We’re young, we really like to work, we like to serve our clients. So, we’re more around that philosophy of 125 to 150 clients per advisor. So, my job has really evolved where I’m working with less clients directly as the main contact to helping develop the plans, develop the decisions, delegate and elevate to all the advisors, so they’re able to get to the capacity where they should be. And then we’re ready to hire our next advisor to take on the next 150 clients.

Michael: And for advisors who are taking on that load, that target, is it one advisor has X clients, 125 to 150, or is that a team’s environment, like that’s you and a second advisor, and you’re working them as a team? How does that work from a capacity end?

Matthew: Yeah. So, we have an internal centralized financial planning team, they are doing all the eMoney plans, all the portfolio manager. We use Orion as a technology. All of the tax planning, and all of the behind-the-scenes work. And then each client has a lead advisor that’s the direct communication. If anything, I would describe myself as a support advisor to each of those three advisors because I want them being the main contact. There’s a million times of communication that goes back and forth, and I want them emailing them, not me, so we can scale and I can focus on the high level of the business overall.

But so, it’s a hybrid where we have one team that supports every advisor that are handling all of the financial plans of the portfolio management, all the intricate financial planning details. And then each advisor is one on one with the clients during the reviews and during the communication throughout the year.

Michael: So, share with me a little bit more of this centralized financial planning support. What do they do? Where do you draw the lines of what they do versus what advisors do?

Matthew: Yeah, great question. So, the advisors, ultimately…we have a whole process of preparing before the meeting, getting information that’s needed. Thanks to technology, a lot of stuff is linked up, “Here’s everything.” Executive summaries from the last meeting, “Here’s what we need for the next meeting.” They’re in charge of the meeting. And then the follow up, let’s say the eMoney plan needs updating, or let’s say we need to do a backdoor Roth or adjust allocations, that would fall on the CFP team to update the eMoney plan, to make the trades, to make the transactions, to get accounts transferred. All of that behind-the-scenes work falls on them. And then all of that communication then falls back on the advisor to make sure the follow through is actually done.

Michael: So, I guess I’m just trying to visualize, beyond literally client meetings, what are the lead advisors responsible for? What is the rest of their day and duties outside of the meetings themselves that clearly they got to lead those?

Matthew: That’s their main responsibility, is the meetings themselves, and then all of the communication that happens in between meetings. Because it’s not just, “Hey, here’s one meeting every six months, and we’re going to take care of everything.” It’s, “Here’s meeting in six months. And then two weeks later, this is coming up.” And so, it’s just staying on top of their clients and making sure that they have a very quick turnaround, and those clients are the best served possible at all times.

Michael: But any time they need to do an analysis, they need to run an eMoney projection, they need to dig deeper on tax planning and such, that goes to the financial planning team?

Matthew: That goes to the financial planning team to get it high level. But then the advisor is responsible to make sure that every intricate detail is up to date. I would say 90% of that gets done, and then they get to the finish line, which is almost a forced preparation. It’s almost a forced preparation before the meeting. So, they are also extremely familiar with the client situation, and the client’s financial plan.

Michael: And did I hear you say as well that you’re doing executive summaries of what happened in the last meeting?

Matthew: So, executive summary of the last meeting…and then we…here’s the outstanding things that we have not addressed yet. And so, typically, the structure of the meeting will be, “What’s on your mind? What do you want to discuss? What’s changed?” And then a quick review of what happened in the last meeting. And then our agenda, as long as it fits within their…if that’s what they want to do. And a lot of those things are already done. So, for example, the portfolio management, do you have questions on your portfolio? Do you have questions on the video and the commentary? And usually that video is so detailed that that portfolio discussion, which I found historically could last a half hour to 45 minutes, is now 1 or 2 minutes. So, that’s part of the scaling the business through the video content is…

Michael: So, doing a video commentary of, “Hey, here’s our look of what’s going on in markets for the past month or quarter,” and sending it out to all clients is cutting down on how much clients ask the portfolio questions in the meeting, because a whole bunch of them got to see the video already, and it pretty much covered them. So, they just ask a brief follow up and then that’s that.

Matthew: Exactly, exactly.

Michael: How do you capture these executive summaries of the last meeting? I don’t know, my brain is going to any number of nonprofit boards I’ve been on over the years, where someone’s capturing minutes, and then the top of the agenda of a meeting is to review the minutes from last meeting to make sure that we all agree on the minutes. Am I visualizing this the right way here? Or is this a little bit different for what you guys do?

Matthew: Oh, yeah. We’re case-noting. And every meeting gets summarized in great detail in an email, and that gets case noted as well. So, we’re sending…

Michael: Who does that?

Matthew: The advisors.

Utilizing Client Meeting Checklists To Provide A Personal And Efficient CFO Service [56:13]

Michael: Okay. So, every meeting… I guess, just walk me through, you have a lot of details here of agendas, and summaries, and post-meeting notes, and post-meeting emails. So, I guess just walk me through the whole structure of how you guys prepare for, do, and then wrap up client meetings.

Matthew: Yeah. Before the meeting, we actually have an advisor pre-meeting, during-meeting, post-meeting checklists, and that changes if it’s a new potential client, or if it’s an existing client. And that’s just…that’s not the rigid rule. That’s just the general framework. And then that gets customized based upon the client’s needs.

Michael: So, you specifically got checklists for pre-meeting, in-the-meeting, and post-meeting.

Matthew: Exactly. And those checklists work within, “Here’s our CRM. Let’s pull all the pre-meeting notes.” We have detailed in Google Sheets every…basically, probably 40 sections per client. But it’s essentially just making sure no detail is missed for each client. So, part of the checklist is going through that whole list across the board. So, for example, we have CPA info and tax notes. What tax transactions were done that needed to…was a Roth conversion made, was that communicated to CPA? Were the taxes prepaid? Budget updates. Do we have a line of credit open up against the account? Have we started gifting to their kid lifetime gifting? What happened in the last meeting?

If the target asset allocation notes, backdoor Roths, mega backdoor Roths, are they a direct index of the non-qualified accounts? Do we have a outside 401(k) managed through Pontera? If it’s a private practice doctor, do we have a cash balance in 401(k) plan? Do we have their income and tax information? We have the ACHs? What are they contributing to their taxable accounts, 401(k)s, 529 plans? If they have risk management, what is their risk management products, beneficiaries, etc., 529 plans? Then we have a whole estate planning section, property and casualty section. Then we have a whole R&B section for people that are 72 or later. Some people have beneficiary IRAs. So, it’s…

Michael: Sounds like a giant Google Sheet for each client, or you document all this stuff across the planning domain for each client?

Matthew: Every single thing for each client. And that way no detail is possibly missed. And that gets looked at before, communicated with in the CFP team, and then also updated after. So, that way, if someone’s out, all the information is getting captured in one centralized place where the whole team’s on the same page.

Michael: So, do you literally have to go through every single section of the plan, and every single one of those tabs, every single meeting? Just how does this work in practice?

Matthew: For us, yes. For the client, maybe we’re hitting on two or three things that need to be followed up. But that’s part of what we view as a CFO job is we’re literally not going through every subject, we’re saying, “Oh, that’s covered, that’s covered, that’s covered, that’s covered. Oh, this still needs coverage. Great, we’re going to bring that up.” So, it’s just extracting the exact what you need to know, so we’re respecting their time on a high level.

Michael: And so, where did this come from? Have you just built this from scratch?

Matthew: We built it from scratch.

Michael: And so, I’m just trying to figure if I’m visualizing right, because you had said meeting checklists originally. So, I’m kind of envisioning the 1 pager with 7 to 12 checklist items that you go through. And like pilots have their preflight checklist, you have your pre-meeting checklist. But it sounds like that’s not really what this is. This is more of a, “Here’s all the different things that we touch on for our client base across the different areas of retirement, and tax, and credit, and debt, and cash flow, and gifting, and estate, and held away 401(k)s, etc., each of which are organized in the tab of a Google Sheet template.” And then within each of those domains, there’s a couple of areas or things that you regularly do planning on, and interact with clients. And so, the advisor looks down the list of each of the things in each of the tabs to check and make sure, “Are we on track? Is there anything that we need to address in a client meeting? And then we’ll spot the few things that we want to put directly onto the client agenda.”

Matthew: Well, yes, but this is actually just one part of the checklist. We have another Google Sheet that is just the checklist. And one of the first items on the checklist pre and post meeting is updating this Google Sheet, which has all those different subjects on it. So, that’s just one of the few items on the checklist.

Michael: Okay. So, then what else is on the checklist?

Matthew: I know I can actually just send it to you, and we could put it in the show notes. And send it to you in a usable format.

Michael: Yeah. I was going to say, if you’re willing to share, it would be great to share the checklists out to listeners. So, for folks who are listening, this is episode 308. So, if you go to kitces.com/308, we’ll have Matthew’s checklists in the show notes if you want to check them out and take a look.

Matthew: Yeah. Just to run through it real quick. This is for a review. So, review case notes, any follow-up points one or two years ago, balance sheet updates, ask for an advance, make sure are up to date. Orion reports that ran on that portfolio. Make sure budget cash flow’s up to date. And then during the meeting, it’s… And this all gets sent in advance. What are current goals, ask for update on the goals. Budget updates, we call the technical updates which is all the things I ran through. Running through the eMoney plan. And then we also do a values exercise. So, the more successful people are, the more complicated decision process making.

So, it’s important to have the understanding of…we go through a top five values checklist. And that really just helps us instead of us saying, “We think you should make this decision if you should buy this vacation house,” it’s just pointing out what’s most important to them. Because sometimes there’s a competition between what’s the best financial decision, but then also what’s best for the family, or what’s going to give them the most peace of mind. So, a lot of it’s just a very educational, holistic discussion versus a black or white, “We think you shouldn’t buy this because of this reason.” It’s much more of a discussion, educational base that we’re reporting them on, “Here’s how to make the best decision.”

Michael: And then the during-meeting checklist, is the idea…I guess, just how does that work? Is this basically an agenda for the client? Is this literally like advisor has a little note that says, “Make sure you touch on these six areas of the checklist while you are conducting this meeting.” What’s the during-meeting checklist?

Matthew: Yeah, the during-meeting checklist is the agenda that the client sees in the email format before the meeting. I use the adage, “Every meeting, for it to be efficient, has to have a start time, has to have an end time, it has to have an agenda.” And if those three things are in place, it’s really hard to waste time. And in fact, you’re going to have some of the best, most productive meetings.

Michael: And what’s typically on your agenda for a client meeting?

Matthew: A combination of high-level hug and summary of, “Here’s how you’re doing. Your most important things are educating your kids, retirement,” then just making this up. Other discussions where, “You’re considering buying a vacation house, you’re considering supporting your parents in this way. Let’s discuss those goals. And then here’s the follow ups we need to do. We need paystubs, audit your tax withholdings. We need this to update your financial plan, etc.,” would just be an example.

Michael: And then what’s post-meeting?

Matthew: So, post-meeting is just making sure all of the agreed-upon actions are communicated to the team, so that any action item is followed through upon, and that any action item that is not yet decided, we track and follow up every week for a couple of weeks until the client decides, “Let’s punt this until our next review six months from now, or let’s schedule another call to make decisions.”

Michael: And then you said every client meeting has a post-meeting summary that went out.

Matthew: That post-meeting summary is just another email that ends up going in the client CRM file, which is, “Here’s what we covered, here’s action items that are currently being done, and then here’s what is still yet to be implemented in the future, once we mutually decide upon what’s best moving forward,” would essentially be the gist of it.

Michael: So, how do you think about the timing of hiring and scaling up from here? Practically speaking, if you’re aiming for 125 to 150 clients per advisor, when do you decide you’re close enough to capacity that’s time to hire the next advisor? And how do you decide on the timing for the rest of the hires as well?

Matthew: Well, I’ve always gotten the advice that by the time you’re thinking to hire someone, you’re probably six months too late. So, I don’t think there’s ever been a time now and probably moving forward that we’re not looking to hire somebody new. Our most recently advisor probably has a capacity for another 75 clients. We expect that will happen in the next 12 to 24 months. Also, it’s in the next…immediately, we’re looking to hire another internal person to fit on that centralized financial planning team to help with the eMoney plans, the portfolio management. Recently, we just adopted direct indexing, so a lot of work there. And then the next hire after that will be the next lead advisor.

Michael: So, how many advisors are in the centralized planning team versus out in the lead advisor client facing role?

Matthew: So, there are three lead advisors, not including me. And then there are two internal. And so, we don’t have an exact ratio or science. We really look at it with workload, but technology, we’ve made some pretty heavy investments in technologies that you’ve done very heavily research into on the Kitces platform. But I would say probably it probably moved before, it’s two to one, two advisors for every one internal team member.

Michael: Because I’m struck by that. That means if you’re a 120-plus clients per advisor, but then you’ve also got a support advisor for every two advisors in that group, then you really end up with an average of about 80 clients per financial planning professional of which some are primarily client facing, and some are primarily support.

Matthew: For sure. For sure.

Michael: So, as you just look at this growth cycle, like how is it different for you in the independent world compared to where you were? Just now that you’ve lived it, you lived the old world for 10 years, you lived the new world for 2 plus years now, so how is it actually different in practice? Or I guess I’m wondering how is it different in practice compared to what you imagined it to be when you were making the decision originally?

Matthew: Yeah. I think one of the greatest fears were, we did have a lot of good joint work relationships. We’re kind of known as the nerds who would dig into the details. So, when someone had a complex, wanted to set up a mega backdoor Roth, or give advice on just fill in the blank topic that wasn’t just normally selling a product. We were brought into a lot of joint work cases, so a lot of times we didn’t have to do a lot of network, we end up having joint work. I would say probably about a third of our business before was joint work. And now that’s not at all. It’s up to us to make firm the rainmaker and to replicate clients through word of mouth, and through eventually…we just started, actually, literally two weeks ago, started working with a great company doing Google and Facebook ads, and we’re going to test that out to see how that works.

But I would say there was definitely some fears there. Are we still going to be able to grow? And it’s been really great to get past those fears, and realize that we’re just doing great planning. We don’t need to be salespeople, just do great planning and affluent clients will replicate themselves. I mean, they know, they can feel that if you have their back, you have their best interests in mind, you’re doing way a step above and beyond of what they would be getting for the fee they’re paying elsewhere. You’re going to get the retention, and you’re going to get the replication. Pretty simple as that. So, that’s just…

Michael: I got to ask again, though, a lot of advisory firms have really smart advisors that give great advice, and are not growing at 40%. Why are your clients replicating themselves faster than everybody else’s clients?

Matthew: That’s a great question. I don’t know. I think a horse that wins a horse race by an inch is worth $1,000,000, and the second place is worth a lot less. Right? So, I don’t think that we’re doing anything dramatically different. I think we are doing certain things, we’re thinking out on a very intricate, detailed level. And it may not look on a surface level that different, but it can make a big difference to clients.

And this may sound obvious or corny, but just like the feeling that…I’ve always heard the quote, “Clients don’t remember what you do, but they always remember how you feel.” And so, just building an unstoppable culture of a can-do attitude. I’ve gotten a lot of emails back from other professionals where it’s kind of you feel dismissed. Right? You ask a question. It’s like, “I don’t know. It would be a pain in the butt for me to figure this out. So, you can go here to find that answer.” That’s not the experience they’re going to get at EWA. The experience they are going to get is, if we don’t know the answer, we’re going to admit that we don’t know that, but we’re going to do everything possible to get the answer.

So, one example would be, there was a stock that was a marijuana-based stock. And the custodian that we work with didn’t want to have that on the platform. So, we went down this deep rabbit hole. And most advisors, I think, would have stopped right there and said, “We can’t do this.” Then we opened up a relationship, because it was with the top client, through Interactive Brokers. They’ve been great to work with. And just that’s an example, where it’s not…we’re not a… I think a lot of people will find problems, but very few people solve those problems. And I would describe our firm as we’re the problem solvers, not the problem finders, with the can-do attitude. I think those two things alone make a world of difference. And that’s an experience that clients want to go and replicate for their friends and family.

Michael: I’m really struck by your analogy, the horse that wins the race by an inch is worth $1,000,000 more than the second place horse that was an inch behind. You can have such an outsized reward by being better than your competition that you don’t have to be drastically better. You don’t have to lap the second place horse to win the race for the first place prize. You just have to win by an inch and that’s enough. And that idea of it’s not necessarily about being radically better than all advisors. It’s about being slightly better in a way that you can clearly demonstrate and show sometimes is all it takes for very different growth outcome.

Matthew: No question. I think there’s…because if I had some magic I could just share with you that would change it, I would. Actually, I just don’t know. I just know what we do, and I know how we show up every day. And the results are what they are, and I’m very humbled…I don’t know where we stand as far as normal growth patterns. I know the culture is really important, delegating and elevating other people. And I know that constantly searching for the best answers and solutions, the direct indexing is something that we’ve…

Recently, I was talking to a firm in New York, Altium. They’ve grown like crazy. I actually met them at the TD conference, and they shared with me what they were doing. And I’m like, “Well, that’s an incredible value at the tax-level servicing they’re able to do versus someone that’s just doing ETFs in a non-qualified account. So, let’s adopt that.” It was quite the undertaking, quite the big investment. The clients can feel that’s in their best interest. And I think that’s just another example of just not looking for retention, it’s constantly looking for the solutions that will best serve clients. It’s just a general philosophy. I think clients can feel it’s not a one-time thing, it’s just a lifelong thing. And clients can feel if they’re with a firm that’s going to do that or not.

Michael: And out of curiosity, what platform or solution are you using to implement direct indexing, tax loss harvesting solution?

Matthew: It’s through Orion, I think it’s called Astro. But no, it’s been great to work with them. And clients have really responded well to it.

Michael: I was going to say, how are clients taking it up? Because there’s a lot of debate out there in the industry right now of is it really that valuable to do the direct indexing, and do clients even really care?

Matthew: Yeah, I think a lot of it depends on the sophistication and the tax rate of the client. How much money they’re going end up accumulating in non-qualified account? But a lot of our clients, they max out. Eighty percent of their savings goes to…a seven-figure earner, they’re going to max out their 401(k) if they’re in private practice, they’re going to set up a cash balance plan, they’re going to max out 529 plans. And most of their wealth ends up being in a non-qualified account and being able to accumulate money and then distribute that money later with big loss carryforwards to offset those gains.

I was talking with the other firm, I think it was 2021 where mostly there was not that much opportunity to tax loss harvest, if at all, and they were able to get a 4% or 5% tax alpha just that year because 900 out of the Russell 3000 companies went down, not up. And I saw that as a big advantage just from a tax perspective.

Michael: And I guess as noted, because you’ve got a big focus into physicians, you’ve got a subset of clients who are very high income.

Matthew: For sure.

Michael: There’s a lot of dollars and some very high tax rates, which means marginal tax savings is quite material for them.

Matthew: No question.

The Surprises And Low Points Matt Encountered On His Journey [1:13:37]

Michael: So, what surprised you the most about this journey of building your advisory business?

Matthew: That’s a great question. I think it’s never going to get easier, and that’s just a mindset. I watched a video recently, I think it was on YouTube, where it’s like it’s how well you handle hard is going to be how successful you are. Because in my life, just as an example, when I get to my first 100 clients, then I’m set. Or no, it’s when I get to a million of revenue, then it’s going to be okay. Or when I get to…when I pay off this debt, I’m going to be okay. Well, there’s always that. And now the most recent was, when I transition, everything’s going to be okay.

I think what surprised me is how hard never stops. There’s always going to be the next hard in your life. It’s just how well you handle it. And if you lean into it versus lean away from or victimize. Turn that into something good. I think that’s what’s most surprising is every corner I’ve turned, where I’m like, “Oh, now life’s going to be easy.” It just gets harder and harder and harder. But it’s just how well you handle the hard. And just the mindset around it is, running your own RIA, you have to have that mindset where it’s, “Bring it on. We’re going to turn this into something good whenever something hard happens.”

Michael: So, what was the low point for you on this journey?

Matthew: This is going to get deep. I would say the low point…so, at the prior firm, I was asked to do talks. I was asked to do educational talks, or sometimes at the national meetings talks. And so, you have this really good feeling of giving back. And leaving, there wasn’t a lot of communication, a lot of friends…you thought you gave back. It was kind of felt like it was forgotten the second you left. So, I realized how…it was really a good lesson to me as a…you really just have to focus on clients and doing the best possible job. And it was probably the sign they shouldn’t have been there from the get go. But that was part of my identity that I felt like I had probably pushed too much of my identity in is giving back, and trying to provide value when that was really only there when I was part of that culture. And as soon as I was gone, that was forgotten.

Michael: So, it hurt to have given that much of…as you put it, to given that much of your identity towards that effort. And then when you left, it vanished.

Matthew: Yeah. It was kind of like, “Okay, that was 10 years of my life wasted.” But then when you look at it really, it’s like, “No, that was 10 years of my life I learned the most important lessons.” I went through adversity, and now I’m able to learn probably a lesson…I forget the exact quote. It’s something like, “In your 20s, you worry about what everyone else thinks. Then in your 30s or 40s…” And then when you get older, it’s like you realize no one’s actually thinking about you. And so, to have learned that lesson early on, I think is absolutely invaluable. So, you can really just shut your mind off, and just focus on what really matters.

The Advice Matt Would Give His Former Self And Younger, Newer Advisors [1:16:27]

Michael: So, in that context, though, anything you wish you’d done differently? Or what do you know now you wish you could go back and tell you 10 years ago?

Matthew: I think just recently, and I was sitting down with one of my best friends. And unfortunately, he’s going through some rough times with his father was diagnosed with cancer recently. And they’re both some of my best friends. And we always talked about business is so hard. So, we’ve gone back and forth, “What, do you sell your business? And then spend more time…” So, one of the discussions we have is basically, “You sell your business, now you’re more family time. Well, what kind of example are you setting for your kids then? They’re going to grow up saying that you don’t work.”

So, it’s this constant… And then if you’re just working so hard, you’re not spending your time… So, we basically…and he said it best, he’s like, “Basically, I view tension as the best possible thing. I thrive when I feel a tension. If I don’t feel a tension…or when I feel stressed, it means I’m going way too far in one direction. But when I feel a tension, where everything is kind of pulling me a little bit in different direction, that’s the healthiest thing.”

And that’s back to that workout analogy. I wish I would have known that because I just stress too much about feeling like I was a failure in one area over the other area of life. But in reality, I think it’s human beings were meant to get beat up, or meant to go through adversity, that’s how we grow. And having the mindset of that actually being a good thing, oh, that would have saved me so much worry and stress over the past 10 years of just viewing that as a good thing. And yeah, let’s always grow and have stuff on our plate, that’s going to move the ball forward.

Michael: So, what advice would you give younger, newer advisors getting started in the financial planning career today?

Matthew: I would say the journey is more important than the goal, for sure. Use the 80/20 analysis every year, evaluate what the 20% of your effort that’s going to give 80% of the result. And I would say…

Michael: How do you do that in practice? I mean, do you do that…use the 80/20 rule analysis every year, how does that show up for you?

Matthew: We do for sure every year. We look at, “What drove…here’s all the clients that came. Where did they come from? How can we spend…that came from these clients, their great set of influence, how can we spend more time with them, or how can we replicate relationships like these where other clients feel so good about referring us business?” That would be one example of just realizing where’s the growth coming from and replicating it, versus trying to do a million different things that maybe…like throwing random darts at a wall and seeing what sticks.

Michael: And so, every year, you literally sit down and look at the data of where did your growth come from to do that evaluation?

Matthew: Absolutely. And part of that would be establishing. We follow the traction system. So, every quarter you’re coming up with rocks for every team member. You have three rocks, three goals that they need to accomplish that quarter to all fit on that one ship mentality. So, part of the 80/20 analysis is, what are the 20% of the activities that are going to drive 80% of the results, and deciding those rocks for every team member on a quarterly basis. So, that really shows up not just on a yearly basis, but on a quarterly basis as well in our firm.

The Next Steps On Matt’s Journey [1:19:22]

Michael: So, what comes next for you?

Matthew: Great question. So, our goal is we really want to continue to grow, and push ourselves, and do best work for our clients, and continue to scale, and to do that based upon all industry data. We want to get in the top 1% of RIAs out there. So, I think based on my research, that would be getting to that billion dollars of AUM where we can continue to make the best technology, hire the best talent, and serve our clients the best. So, the goal in the next 5 years would be get to that billion-dollar AUM mark and get to a that $10 million revenue number.

What Success Means To Matt [1:19:55]

Michael: So, this is a podcast around success. And one of the themes I’ve always observed is the word “success” means really different things to different people. And so, as someone who’s built a very just objectively, economically successful business, how do you define success for yourself at this point?

Matthew: I knew that question was coming. That’s a deep question. Yeah, I would say success, for me, would be feeling tension in all the right areas of my life. I’ve gone through this recently, I’ve gone through this life wheel exercise, where it’s like you rank your different areas of your life, personal, or relationships, or financial, or business, rank them 1 to 10. And if you have…imagine a wheel on your piece of paper, 1’s a 5, 3 are 10s. It’s a lopsided wheel. And as you roll through life, it’s going to be really bumpy. So, I would say success is evaluating those. And making sure everyone’s consistently in eight or nine. Because if 1’s a 10, and that causes 2 of them to be 3s. That’s going to cause some big friction, and the tension to be really overload in one direction. I would say is just having success right now would be continue to grow, continue to have tension, and continue to have that balanced approach to life.

Michael: Very cool. I like that analogy of just look at the domains of your life. How well are they running on a 1-10? If the numbers are all similar, at least the wheel is rolling smoothly. If some are particularly strong and some are particularly weak, you get a really lopsided, jagged wheel, and that’s what produces the most disruptive, bouncy journey.

Matthew: No question. No question. And then I guess one of the other…what’s next, or how would I define success, is just really giving back to the other advisors. I mean, this has been one of the most fulfilling careers I’m very passionate about, that we’re starting to essentially create…this started by creating an internal resource for EWA, our firm, of how can we get new advisors up and running as quickly as possible? There’s a lot of talented people, young people that want to be in the field, but don’t necessarily want to be salespeople, or call their friends and family to do so. So, how can we get them up and running as quickly as possible?

So, we started to create videos and courses to get them bought into the culture, and then also to…there’s information everywhere, but to get that information and translate it to clients that then take action, that creates a lot of artwork. So, we’ve created a whole course and framework, and we’re actually making that now available to the public. It’s going to be called wealthadvisortraining.com. And so, we really want to give back in a big way and create a good culture through that new business.

And also learn from other advisors, and figure out what are their problems, and help solve those problems. And then the next initiative we’re going to do is, there’s a huge gap between what affluent people have access to, an RIA firm out there like us or others, compare it to what middle or lower class have available to. And sure there’s information, but actually getting the right information because there are so many influencers and entertainers out there getting the right financial literacy out there. So, we’re going to create a financial literacy course that we’re going to help distribute through non-for-profits.

And then actually use some of that content also to start bridging the gap between our clients and their kids. We don’t necessarily have the time to scale and have every kid become our client but creating a good educational platform also for our clients’ children for financial literacy, so that when this huge wealth transfer happens, it’s done so on a very successful, mature, and values-based basis where the wealth just doesn’t disappear within a couple of years.

Michael: Very cool, very cool. Well, for advisors that are interested, again, this is episode 308. So, if you go to kitces.com/308, we’ll have a link out to Matthew’s Wealth Advisor Training platform as well if you want to see what it looks like as they’ve taken their internal training and making it available to other advisors as well. Well, thank you, Matthew, so much for just sharing the journey, sharing the update and the journey for how much has changed over the past couple of years on the “Financial Advisor Success Podcast.”

Matthew: Thanks for having me. My pleasure.