Finding Rollover Opportunities In Transitions After Layoffs

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, John Stokes, to the “Financial Advisor Success Podcast.”

John: Well, thank you, Michael. Nice to meet you.

Michael: I am so looking forward to the discussion today, and what, I think, to me, is both a really unique business and growth channel that you’ve created for yourself, and one that, candidly, I’m not quite sure, it’s so unique that you seem to be the only one who has stumbled upon this. There is a saying in our industry, I remember it most directly from Mitch Anthony, who always has this wonderful gift for words, and this thing that I had always heard from Mitch is, when life goes in transition, money goes in motion. And the idea of it is this recognition that when people go through life transition events, it tends to be very disruptive for what they’re doing with their money, what they’re doing with their finances, and otherwise known as opportunities when financial advisors tend to get hired and engaged.

And so, so many of us in the industry have spent years building around transition moments, of which one of the biggest has always been when people are leaving their businesses, leaving their work. So retirement is a big one because money comes out of 401(k) plans, and there’s rollover opportunities. And liquidity events for business owners are a big one because a transaction happens, and there’s dollars, and there’s change, and a transition underway. But there is a third way that transition comes at work, right? I could retire. I could have a liquidity event because the business has sold, or I can get laid off. And no one seems to really focus on the layoff part of how those transitions happen, except you, John, who has a wonderful website that literally says on the homepage, “Wealth management for professionals in transition, helping you find certainty in uncertain times, uniquely qualified to serve those experiencing job losses.”

John: That’s right.

Why John Chose Layoff Transitions As A Niche Focus [05:46]

Michael: And so, I’m excited to have this discussion of, I’ll call it the third leg of transition out of work. How do you end out in this world where you’re specializing in people that are getting laid off? How does that come about?

John: Well, Michael, yes, indeed, I’ve heard that saying, “Money in motion.” But I took it a little bit further and look at it as more people in motion. In other words, retirement essentially is a one-time event, right? You wait until a certain point in your life and you retire, whereas a layoff seems to be common practice. It certainly happens…it’s happened to me twice in pre-occupations. And so not only did I feel that there is indeed a niche for me at that point, and so as soon as I got into the business, I worked with a Fortune 100 company, if you would. They put me through their grooming stage, where I had to come up with my list of, I think it was 100 friends and family.

Michael: A hundred friends and family that you could call on. Yeah, so I started in the insurance world as well and had one of those journeys, too.

John: Okay. And for me, I came from New Zealand. I came to this country knowing very little people. I had no family. At that point in my life I would’ve not been the most friendly person, because I was trying to build my life, get things going, and had that individual mentality where, “Okay, John’s gotta get this, gotta succeed.” So when I started the business as a financial advisor, I immediately wanted to do something that was impactful. That 100 list, everybody else was doing it. Why should I do it? So it was like this awakening. As soon as I got in the business, I started making those calls to the friends and family. I had the opportunity to do a layoff.

A friend of a friend asked me to go to this manufacturing plant in Orange County, California, and there must’ve been 400, 500 people in this manufacturing plant that were all getting laid off. So here I am in front of these people, not knowing anything really about what this all means, and I’m expected to talk to 400 people about what it means to get laid off, and what sort of financial things you have to prepare for during a layoff. And I thought to myself, “Boy, this is going to be interesting. I can go back to my then branch manager and show him a list of 400 people now that can be added to that family and friends, if you would.”

Michael: Right. What an opportunity to get in front of an audience of 400 going through a transition. You were like, “I can provide them value. I get names. I got a month or two of people to call on.”

John: Oh, sure. At least I had names, right? Obviously I looked at the opportunity of 401(k)s, and the rollover opportunity, but more questions were coming about from these people. “What should I do with my health insurance? What is COBRA? What about my life insurance? Is that going to go with me or not?” These folks had a pension, so all these different questions were coming about. So I sat down with my branch manager and he says, “Yeah, okay, John. If you want to deal with people that are getting their pink slip, then this is what you want to do. Yeah, I guess I have to support it, right?”

Michael: So branch manager was not upbeat?

John: No, he wasn’t happy with this at all. Prior to me stepping into the financial service industry, I had a stopover, I call it, with a very famous country club, and I was servicing the rich and famous, if you would. It was called The Beverly Hills Country Club, and still is, actually. So I was amongst some influential people, and as I’m going through the interview process with this company that were very excited about the opportunity of putting on seminars…

Michael: Got any friends still over there, John, that you can go back and call on now?

John: Oh, yeah, I sure do. Over the years some of them became clients, if you would. But no, it was very interesting. And as I did my research, Michael, there wasn’t any firm out there that really specialized in a person getting laid off. Now we don’t use that term, “laid off.” It’s actually “transition.” The word “laid off” has a negative connotation to it, so over the years we’ve added that “transition” word in there. So as they go through, and we’ve got clients that have gone through two, three, four, five transitions in all the years in servicing their finances.

Michael: So thus, the language even from the website, “We work with people in transition facing uncertainty. We work with those who are experiencing job losses,” right? This is something that happened to you that we’re going to work on and cope with.

John: That’s right. And going through a layoff myself, prior to being a financial advisor…in fact, as a financial advisor I was laid off from a broker dealer at one point, then that takes on a different conversation itself. But be as it may, my father worked for a company for 44 years back in New Zealand. Forty-four years with the same company, and he went through a layoff. Now at the time I was 17 years old. It didn’t burn a hole in my heart because I really didn’t understand the whole dynamics behind it. But no sooner did I start helping people in this layoff situation, I realized, number one, you gotta have empathy. You’ve gotta have a deep empathy.

You can have all the knowledge in the world, but if you haven’t got the empathy to be able to sit down with them, have a heart to heart, tell them there’s life after what they have there in the layoff situation, that was the key, I think, to my immediate success is I understood that. I had that experience, and that really burnt a mission inside my heart to go, “All right, these people…” My branch manager mentioned that I shouldn’t be servicing them, that I should be going onto bigger and better things, if you would.

Michael: Because his view was, “Manufacturing plant workers aren’t going to have enough money opportunity for you?”

John: Right.

Michael: “John, you gotta call on your old country club acquaintances. Stop talking to people at the manufacturing plant.”

John: Precisely, yeah. And so obviously out of 400 people I’ve picked up quite a handful of clients there, and they had smaller rollovers. But when I first started, I was excited if I got a $20,000 rollover. If I brought that back to the branch manager, that was the jackpot for me.

Michael: Oh, yeah, 20-plus years ago, $100,000 client was a big client.

John: Oh, I’d never come across it, and if I did, they would normally be at the big brokerage houses doing business with their financial firms they had in place already. So I did that first presentation and I thought to myself, “If nobody else is doing this, let me go at it.” And so I started basically cold calling. I would call companies and go, “Hey, I went to XYZ company. I did a whole presentation,” and, “Oh, John, I heard this pitch before. You just want to come in and talk about 401(k)s.” “Well, actually, I don’t. I want to come in and talk about unemployment insurance.” “What?” “Yeah. I have expertise in unemployment insurance.” “Well, why?” “Well, because if they get their unemployment insurance,” to your point earlier, we were trained that you gotta get that rollover money.

I’ll get that, but what value can I bring in this case where nobody else is doing it? So I started to learn about the unemployment insurance, learn about the dynamics behind that. And once somebody got unemployment insurance they were able to get other services that were very useful for getting somebody through a transition, so that became my expertise very quickly. And it’s been my expertise every day, all day for 20 years now.

Michael: So help me understand a little bit more about this space and just what you’re teaching and sharing with them. So I’ll confess from my end, my knowledge on unemployment insurance is quite shallow because I don’t live that space, right? For better or worse, we tend to live more on the income and assets side than on the loss of income unemployment insurance side. So what are you teaching? What are you covering that has this kind of impact and connection to the people that you’re talking to?

John: Well, the initial thing is, in order to collect unemployment insurance you have to be laid off. If you leave your employment because you wanted to make a job change, you’re not entitled to unemployment insurance. The only way you get that is through the layoff scenario, or a company closure, if you would. And completing the application process can be rather intimidating for the majority of people. They’re asking you questions on, “Why did you get laid off? What has been your salary history?” People know that for the most part, right? But getting them through the unemployment insurance is what we call the door opener to getting other services, such as, Michael, over the years there’s been mortgage assistance.

The state of California had a program where you had to have unemployment insurance before you could enroll in the mortgage assistance program. The mortgage assistance program got to the point where they were paying your entire mortgage, up to about $70,000 was the maximum amount, but that’s a good amount of money. Furthermore, once you’re on unemployment insurance, there’s this whole training program that the federal government have in place where you can go get training, make a career change, and it doesn’t cost you a cent, but you have to be on unemployment insurance. So to me, that’s financial advice.

It’s my responsibility as a financial advisor that if I’m dealing with my candidate, which happens to be in transition, I’ve gotta know all sides to that, not just about the rollover, not just about should you elect COBRA versus, now called the Marketplace? How do you deal with that severance? For example, in California you can collect severance, holiday pay, vacation pay, exercise those stock options, and collect unemployment insurance simultaneously. Many other states don’t allow that. So I had to become an expert because I’ve gone beyond California. For many, many, many years, California was my playground, if you would.

Now, I’m licensed in every state because all these companies, all these people out there now know me as the expert. They contact me and say, “John, we cant you to do a presentation for a company out of New York, or Alaska,” and so on. So the unemployment insurance is an absolute key to somebody’s transition to being successful, and it maybe, in some cases, unsuccessful.

Michael: Right. So now help me understand a little bit more of just the way this evolved for you as a business. So you have this realization of, “All right, I can do work with people going through layoffs. There’s opportunities here. If I want to do that, I gotta get in the door with companies so that I can do workshops, but my unique hook isn’t going to be 401(k) plans because that’s what everybody else wants to pitch to.” Companies there employ benefits people, so you’re like, “I’m going to be the one who teaches about unemployment insurance,” and try to get workshops with them that you teach their employees about unemployment insurance?

John: Yeah, it certainly starts with that. That’s my front foot, if you would, that nobody else delivers, so that gets me in, right, to most every meeting. And the unemployment leads into obviously retirement plans, COBRA, health insurance, the severance, how do you handle severance? Can you file for unemployment insurance? Some of the companies still have those pensions. So we cover every aspect of financial planning, if you would, with that front foot leaning on…basically it’s through the unemployment insurance. “Let’s at least, before you do business or potential business with us, let’s at least put money in your pocket. Let’s get that unemployment insurance through the system. Make sure that you get it.” Ultimately it’s not a game-changer financially for most people, but over the years, Michael, it’s saved a lot of people’s homes, if you would, and family environments, so we’re proud of that. That’s a good will, if you would.

How John Engages With Corporations And Structures Layoff Workshops [19:17]

Michael: So, help me understand this just from the business perspective, just what you’re doing for free, what you’re doing paid. What’s in workshop group format? What’s down to the individual work that you do with clients or prospects? Take me through the flow a little bit of how this plays out as a company. Initially, you get some connection to a company that says, “John, we want you to do something with us.”

John: Right, so the call will come in to me. I had two last week, major companies that contacted me and said, “John, we’ve used you before.” One has used us before, the other one is new. All right, let’s use the one that’s used us before. “We understand that you do these workshops, John, you’ve done them before. Can we use you again?” Absolutely. In this case, it’s a virtual presentation. Prior to Covid, Michael, almost 100% of what we did was in a face-to-face environment, right? I would drive up the California coast, if you would, or jump on the plane if it was in Northern California, take my briefcase. In my briefcase I would typically have piles of information that my wife and I had set down during the week and done flyers, if you would, to hand out to the participants that come to the meeting.

So the good thing about what we do is that none of the behind the scenes I have to worry about, other than just getting those packages together so I can have a few handouts. Almost 100% of these people that show up to these meetings is being controlled by the human resource department or internally at their end. So that makes it…

Michael: So these are typically attendance mandatory meetings for the company, so good for turnout? You don’t have to worry about a high no-show rate?

John: That’s right. No, a no show is probably close to 99.9%. If they said there’s 400 people there, if there’s 399, one’s off to the side maybe taking a bathroom break for a while, right?

Michael: Okay, very nice from a turnout. So if a company is reaching out, if that’s how it initiates, does that mean literally they’re doing layoffs, they’ve decided to do layoffs, they’re now trying to figure out their process for layoffs and they’re going, “Oh, we should probably have someone in to talk to the employees to help them in this transition,” and then your name comes up? Is it at that level, the company didn’t just say, “Hey, we’re doing occasional educational lunch-and-learns for our employees. Let’s have John come in.” This is a “We’ve decided to do layoffs. We need to start preparing to help our teams.”

John: So Michael, I’ve got a few stories there. To answer the question, 90% of the time these people know they’re getting laid off.

Michael: Why?

John: Because there’s a federal law that’s called WARN, W-A-R-N, Worker Adjustment Retraining Notification. So, by law, if the company is laying off…and California, for example, if they’re laying off more than 50 or more employees within a 30-day period, they must notify the employees. They gotta let the employees, “You’ve got 60 days before you’re going to lose your job.” In that 60 days, the notification has gone out, and I’m part of a team, if you would, and subject experts that get called into that 60-day period to do those workshops and prepare them for the upcoming transition. So that’s good for me because they can plan around that. And then there’s the other 10%, where they’re under 50, maybe they’re finding out. I’ve been in cases, Michael, where I’ve shown up at a company, the employees have been told 5 minutes or 30 minutes before I walk into the building and they’re emotionally a wreck, right?

Michael: And you’re on. Yay.

John: Right. “And here we have a financial advisor that’s going to give you financial advice.” It’s like, “I already don’t want to hear from this guy, thank you very much.” So in that scenario I become more of a, for all intents and purposes, a cheerleader. “Listen, I know you’re going through this layoff. This is what I do all day. I’m traveling extensively to be in front of people like you to let you know everything will be okay. You’ve gotta make financial decisions. Put your head up. You have to make financial decisions. You have to go after the unemployment insurance. You have to go after these things.” And that allows them at least a little bit of hope at some point.

And I’ll contact them obviously, maybe days later, a week later, “Hey, remember me? I was the guy there that did the pick-me-up, the financial advisor.” So I have many, many, hundreds of stories in that case. I’ve been to well over 600, almost 700…I’m loose with my numbers here, but over 700 companies in the last 20 years, if not more.

Michael: Yeah. So now walk me through a little bit more of just the process of what happens as you go through these and there after. So companies, they’re gearing up to do layoffs. They’re reaching out to you to come in and do education. By the time you’re coming in, at least most of the time, employees have been informed that layoffs are coming because WARN Act required them to do so, so they know the layoffs are coming.

Hopefully they got told more than 30 minutes before you come in, but they know it’s coming, so presumably then they’re already in the mental state of, “Okay, I’ve got stuff to figure out. I’m looking for information. I’m looking for someone to guide me about what to do here because I’m a little freaked out about what’s about to change with these layoffs.” So you come in, you do an educational session or a workshop that is very heavily around unemployment insurance, and what to quality, and what the rules are, and how to not disqualify yourself, and why it’s really good to do it because of the other services that you access?

John: Right.

Michael: So what happens as the workshop closes and there after?

John: So I’ve learned that, at least initially, that if you’ve got 50, 100, 400 people that you have to call, that’s a lot of work. So I got real sensitive with my time management because I was so busy. And we’ll certainly talk about all the people I was signing up. I put that pressure on the employer, meaning you know the work schedule of your employer. I will come back. Put me in an office, put me in your cafeteria, but I want back-to-back meetings. I will be here for two or three days, preferably in an office because we’re talking about financial stuff. We want some sort of privacy. So, I put all that workload on the employer, so all I’m doing, Michael, on the day of they’ve got my schedule. I’ll be there from 9 to 5. There is cases where you’ve got, especially in these manufacturing plants that I used to do initially, they’re on two or three shifts, if you would. They’re 24-hour operations so I could be there at 6 in the morning, all the way til midnight.

Michael: So workshop kicks off first thing in the morning, and then you’re just there for the rest of the day taking one meeting after another that the employer schedules with, they tell their employees, “If you want some follow-up time with our experts, schedule through us. We’ll put you on the calendar.” And then you just get this flurry of one meeting after another with employees for whoever wants time with you for follow-up questions about unemployment, and layoffs, and the transition?

John: That’s correct.

Michael: And how long are these meetings? How many and how stacked are these?

John: Oh, well, I still humbly hold the company record at 33 in one day, so I had 33 meetings in one day.

Michael: Ouch.

John: It was an ouch.

Michael: Sorry, you’re down to…

John: Fifteen minutes.

Michael: Yeah, I would say, 15, 20 minutes per meeting stacked all day long?

John: That’s right, 15 to 20 minutes. So how do I prepare? So at the workshop I’m getting to fill out a questionnaire. “What do you have? What are your questions? Do you have questions related?” So not only I’m preparing to have the information forum, because in the 15 minute, I’m not signing them up. We’re not going in there and, “What’s your date of birth, first and last name, your Social Security number? Let’s get that rollover done.” That happened. More times than not people would say, “Listen, I liked your presentation, John. You talked about certain things. I do feel I’m better off served to have my money elsewhere. Can we do the application?”

Typically I would push that off unless they were like, “I need to sign now. I need that piece of mind.” So majority of the time you go into the meeting, it’s typically no more than 20 or 30 minutes. I’m just gathering information. That’s all I’m doing at that point, gathering information, getting as much as I possibly can to go back for that second meeting. So I’ll be at the company for that presentation. I’ll do the one-on-ones, if you would, and then from there there’d be a handful that would say, “Yeah, no thanks. I have a financial advisor,” or, “I’m not ready for that,” or whatever the case may be. But there would be a good handful that would say, “John, I want to work with you in the capacity of XYZ.”

Michael: Okay. So the focus of this 15 and 20-minute meeting is a combination of, “What issues are on your mind that I can answer for you?” And I know people have a, “Hey, here’s my strange situation. Am I still going to get unemployment insurance? Or I’ve got this other thing going on, how does this apply to my situation,” right, just the people who have more nuances or more complexity so they weren’t fully covered in the workshop so they schedule a follow up. So you’re covering questions like that and just live on-the-spot advice. But then, at the end of the meeting, or at some part of that meeting, saying or seeding the idea of, “And if you want an advisor that can work with you in an ongoing basis to help with some of this, hey, I do that also. And we can do a follow-up meeting on that if you want,” and some say yes and some say no.

John: That’s right.

Michael: Okay. So a couple other questions, is there further follow up after that? Or is it just you do the workshop, you do the on sites for a day or two, or however long it takes to get through all the people that wanted to schedule one-on-ones, and then that’s it? And you’re off to the next business and the next workshop, and anybody who did schedule follow-ups may become a client, goes through a regular new client process at that point?

John: That’s correct, yeah. Over the initial beginning stages of this there was an enormous amount of layoffs. And then California, too, with the amount of companies we have here and just people in general, I was always busy, Michael. I had no time, no time at all. I’m talking about I had zero time to actually have lunch, if you would. It was, “All right, on to the next company.” No sooner did I have those first meetings, it was the second meeting was, “We’re doing business.” In the first 15, 20 minutes in that initial meeting, it was very rare for me to go into a second meeting and second guess myself that that person was not going to become a client. It was, you needed to become a client. If in that second meeting they were giving me, “Ah,” there wasn’t warm and fuzzy, they were looking maybe at not doing it, I would just move on.

Michael: Because, again, there’s so much volume. The other thing is, there’s so much volume as you’re doing these. How many workshop and one-on-one cycles would you go through? It’s like companies, how many companies would you go through doing this in the span of a year?

John: I think the most I did in one year was well over 100.

Michael: Oh, wow.

John: Oh, no, it was incredible.

Michael: So at that level, you’re living in a world where you may get to sit in front of literally dozens of prospects per week on an ongoing basis.

John: Oh, a day.

Michael: So very much a world of, “You want to work with me or move on. I’m not going to chase you. It’s okay. If you want to work with me, let’s go. If not, I’ve got 30 other people to talk to today.”

John: That’s right. No, it was the second meeting was, I call the Holy Grail. Let’s get down to business here, right? And back then, I was trying to incorporate financial planning, going through the whole holistic approach. It was, “Well, I don’t have time to do that.” For the first 10 years it was all transactional, Michael. I would take an application with me. The best technology I had at that point was my mobile printing machine. I would take that with me and spin out applications in that second meeting because I wasn’t going to go back for a third meeting. And that’s well before we had DocuSign, if you would, right? Back in those days you had to have a hard copy in front of you. You had to go through that with the clients, and that took up 50% of your meeting just going through the application, if you would. I had to do shortcuts. I had to learn shortcuts. So for me to do the financial planning and incorporate that was near impossible.

Michael: So do you get paid for the workshops? Do the companies pay you to come in and do this as workshop work, and then you may get something separate?

John: Not at all. Not at all, Michael. To me, it’s goodwill. That was my responsibility to do this. Nobody else was doing it, and to my surprise in the year 2022, there’s probably a handful of people I know that do it. One of them is an ex-employee of mine, if you would. But be as it may, it’s hard work. It’s really hard work. There was an enormous amount of hours that I put into this, Michael, weekends, late nights. And those sacrifices, if I can use the word…maybe it’s not the best use of words, but I put a lot of time in it.

Michael: And so ultimately from your end, happy to do these workshops not paid, because at the end of the day, I’m getting in front of dozens and dozens of prospects every week. And if you see that many people and you help that many people, it is just an inevitable reality a bunch of them are going to want to work with you. They have a need and you helped them. They’re going to want to continue to work with you.

John: That’s right. Yeah.

Where John Stokes Financial Stands Today [34:14]

Michael: So, help us understand then what that adds up to in terms of the business today. What’s the current state of the business of clients, or assets, or team, or however you measure it?

John: Yeah, okay. So our internal word we use is “transition and thrive.” That’s what our workshops are. If you look at our website we’re very clear about that. We’re thriving. I know you’re going to gasp, Michael, with the amount of clients that we have, but we have approximately 1,800 clients managing just north of [$]400 million*, between the 400 and 450. Obviously that’s dropped a little bit this year with the market.

Michael: Yeah, markets doing what markets are doing, AUM numbers more volatile than they were in the past year or two. So 1,800 clients, just north of 400 million, so if I do my napkin math, typical client is $200,000 to $250,000 of assets under management. That’s, at least as I would envision for the layoff environment that you’re in, you get a pretty wide swath of pretty middle market folks. “I’ve been working for 10 or 20 years, I’ve accumulated some dollars. It’s not enough for me to retire, which is why I’m in transition and not retiring. But I need some help and I need someone that can help me steward what I’ve got while I go through this transition,” so that’s where Stokes Financial steps in.

John: Yeah. And obviously those numbers may be distorted a little bit because earlier on I was, again, as I mentioned, if I can do a $20,000 rollover back in there, I would sign them up and that’s when I went to work.

Michael: Sure, so legacy client, slightly smaller average, new client, slightly higher average, as many of us evolve over time.

John: Yeah. It’s not uncommon for us to see million-dollar accounts these days. I’ve broken it down into what I call an executive team. I’m on that executive team where my main responsibility is I’m the internal rainmaker, if you would. It’s my name, I get the referral, and depending on the size of that, that goes to a specific team, if you would, a specific advisor team here at the company.

Michael: So then help me understand what the overall team structure looks like.

John: So there is six what we call producing advisors, and there’s seven operations. Out of the seven operational staff, three of them are actually licensed advisors. They team up, several of them team up with me personally to help with my book of business and service that book of business, because I’ve got the book of the clients. And then the other advisors will have a, either depending on their length of period they’ve been with us, how much new business they’re bringing in and servicing, they will have one licensed advisor, or at least at minimum will have a full-time assistant that’s helping them service that book.

Michael: And so what’s a book of clients for your advisors? How do you think about or set targets of how many clients an advisor can handle given your typical clientele?

John: So that brings up what we started. So pre-Covid we were on that treadmill, so we were doing 150. Probably pre-Covid there was 150 workshops a year. That’s what we were doing. We were all over California. We would show up to these presentations and we would have one after the other, so it was chaos. It wasn’t until Covid hit, obviously we couldn’t do in-person workshops. That changed where now we have other formats of doing it, obviously virtual is the new way of doing it. So we’ve taken a breather over the last couple years, Michael, and looked at this and gone, “Okay, what direction do we need to go? How do we, for all intents and purposes, make sure that these clients…” As I said earlier, for all these years I’ve been very transactional, grabbing the 401(k)s, sure, helping them out with the financial planning, begin on the budgeting, the unemployment insurance, but we really never had a true client experience with the financial planning.

So we hired a paraplanner, and his responsibility is to…he has over the last couple of years, he’s gone into the book of business and identified who should be on a financial planning service model, and we don’t charge for that. We incorporate that as part of the service, at least at this point. So for us, we’re going back and taking a look back in time to go, “These clients need this service. Let’s invite them.” And we’re using eMoney as our platform.

Michael: Okay. And so for the clients now getting more planning advice services, if you’re not charging separately but you’re going through the book, I’m presuming that’s essentially clients above a certain asset threshold, or revenue threshold, or just the business can afford to invest into the clients this way, that’s who you target?

John: That’s right. That’s correct.

Michael: So where do you think about setting that threshold just relative to your business and economics? Where does that make sense for you?

John: Anybody with $200,000 of assets we’re targeting now. Obviously we started with much higher than that, but that’s what we’ve worked our way through. And what we have found is the amount of outside assets that we have left behind over the years is astronomical. If I threw numbers out at you, you would be amazed. So we’re bringing a lot of those assets in. We’re telling them the story. We’re giving them the experience. We’re walking them through the decision making with eMoney. A lot of that’s virtual and they’re loving it. So hey, John, Stokes Financial, I wasn’t aware. I just thought that we did the rollovers and a few other things. That was the extent of it. I’m loving this experience, as we are. We’re loving the experience because we’re getting to know the client more.

Michael: So I’m curious, because this is an interesting challenge for a lot of firms that just a lot of us built in a more transactional volume business. Then, as industry evolves we try to get more financial planning centric, and you hit, to me, these sometimes awkward moments of, I’ve got this client that I may have been working with for 3, or 5, or 10 years, but the reality is it’s a more transactional relationship. I don’t know them that well necessarily, which is why there’s an opportunity to go out and do planning, and engage them more.

But then you have to figure out how to just reach out to a client that may have been with you for many years and say, “Hey, you’ve been a client here for five years but we’d like to get to know you better and do more for you.” So I’m wondering, how do you roll this out and communicate it to existing clients that weren’t getting the service, where you want to say now, “Hey, can we do this for you,” in a way that doesn’t undermine the relationship that was already there?

John: Yeah, that was our initial thought process is, “Oh, are we going to shake them up a little bit here?”

Michael: It’s a fine line between, “We would like to do more for you,” and, “We are unwittingly accentuating how maybe not as ideally connected we were to you in the first place.”

John: Well, it comes down to true at heart in that we apologize. “Listen, for all these years we’ve been very busy. You met us in transition. You knew how busy we were. We’re just a busy operation. We’re slowing down here. We apologize. You probably didn’t get the full service of what we could’ve offered you, but we’ve been a busy operation.” I grew from having 1 client to 1,800 clients, so we tell them that story, and it’s a unique story. And they do know that we’re a firm that is all about growing. So, in expressing it that way, we had zero backlash. If anything, it was, “Wow, thank you for being so sincere, John. I do appreciate the kind of thought process behind that. Tell us more about what’s going on there.”

Michael: Interesting. So you almost leaned in to own it and just say, “Hey, there were a lot of layoffs. You transitioned quickly. We were growing quickly. We just haven’t really had the opportunity to invest in this relationship with you, and we recognize that maybe we missed that a little with growing so quickly to 1,800 clients. Can we come back and do a little more for you?”

John: Right, and it’s gone over extremely well. And certainly Covid was a big part of that, where, “Hey, we’re not running up and down the state anymore and doing these presentations where you have met us. We’ve got the brakes on a little bit. We’d like to really get to know you and your family more,” and they’re loving it, as we are.

Michael: And so from a staffing end, it sounds like, because you’ve already got a lot of advisors that have a lot of clients they’re servicing as is that the way you handle this from a staffing end is we’re going to have a centralized paraplanner who’s going to grind, and build, and deliver a lot of these plans because our existing advisors might not have the capacity. Am I understanding it right, just the, how do we operationally deliver on this?

John: Yeah, at least in the initial stages, the financial advisor is the relationship manager of that client. The paraplanner is coming in more on the operational standpoint and going, “All right, I’ll do the hard lifting, if you would. I’ll get the data, do the plan. You can deliver the plan.” Or, “I can be involved in that as well, if you would.” So that’s what we’ve been doing over the last couple of years.

Michael: And does the paraplanner typically do that delivery?

John: It depends on the advisor. The paraplanner we trained in house, he actually used to be a financial advisor with us and went on and did a few other things, then came back to the firm. So we’ve built in what we want, the communication, and depending on the advisor. I want my paraplanner with my clients to be involved in every conversation to the point where he now leads that conversation.

Michael: So how do you think about ongoing servicing and engaging with clients? Is this a, “We’re going out to them this time to do some planning work and get to know them better?” Is this going to be a, “And we’re going to do plan updates for you on an ongoing basis.” How are you thinking about this as an ongoing service model now?

John: I probably will end up, this is a part of my practice management, if you would, working with my coaches internally without our broker dealer, if you would, is obviously we have to go through a segmentation period, figure out which one, where is that delivery initially? What we’re working on now is just bringing in all the outside business, Michael. It’s astounding how much outside business was out there that we’re now bringing in. So as we bring that in, that’s giving us a lot of work to do. So as that unfolds, and we’re in the process of that, as that gets busier, I know I’ll need to build out probably more paraplanners, if you would, and more service as that. Because, yes, the way that we have presented this, this will be an ongoing service that they will have with us.

How John Evolved His Firm By Adding Fee-Only Financial Planning [46:29]

Michael: So, I’m struck by the nature of the model that, particularly in environments like we’re in lately, one of the longstanding challenges and criticisms around, I think, just the AUM model in general is just the cyclicality of it, like you’re growing in bull markets. As the bull markets rise, you get a pullback in bear markets, which is only further compounded by the fact that clients tend to be more antsy, and have more questions, and often need more conversations and service in the midst of a market decline, while revenue may be down. I feel like the industry’s discussion has always been, “But hey, at least the good news is, when markets are down, advisors that weren’t serving clients will get dislodged. You’ll have all these growth opportunities,” although I find in practice that growth still is pretty hard in the middle of a market decline.

A lot of clients just don’t really want to open their envelopes, or the emails now, in bear markets. They often don’t really start moving until 6 to 12 months after the bear market when they pull the ostrich head back out of the sand and look around. Just I’m struck by the nature of your business and model. I feel like you truly have a counter-cyclical model because when the bear market and the recession is on, that is the growthiest of times when you specialize in layoffs. It’s the bull markets when everybody’s hiring and nobody’s laying off that get a little more challenging. But markets are rising, that’s still not bad news, and obviously there’s always some companies that are laying off at any particular time. So do you see that in practice, that your growthiest times come during market declines and bear markets because that’s when layoffs pickup?

John: Ironically, no. Michael, pre-Covid, there was never a month ever, and at that point…so in 18 years, I never had a slow month because there’s always mergers and acquisitions going on. California is in itself a transitional state. Companies don’t want to pay the high fees as much as they used to, if you would, so they’re leaving California. So no, I’ve never seen a period in all honesty where it was slow, and I always thought that was strange, to your point, is, okay, John’s going to be busy during…now don’t get me wrong. As I said earlier, I did 100 companies one year, and maybe the following year I did 30 or 40 but that’s still busy.

Michael: Yeah, darn, we’re only seeing almost a company a week, scheduling dozens of meetings, and standing in front of hundreds of prospects every week.

John: Yeah, to your point, we had this bull market, right, since ’08, ’09, and you would think that John wouldn’t be busy. But as I said earlier, we’re doing 150 workshops a year, so there is no slow down here. And in fact, even with my virtual meetings now, these are done across the country. I’d probably, if I want to set it up, do one or two every single day. So that’s what I’ve found interesting initially. I said earlier, when I joined that Fortune 100 company, initially they were, you’re going to deal with people layoffs, but what are you going to do when there is no layoffs? You know what? I have to ponder that idea, but for now, that’s not my worry.

Michael: Yeah, not the problem.

John: Right.

Michael: So help me understand how this evolved just from the actual business end, right? As you said, early on you were working in a transactional insurance environment. Obviously we all start somewhere on our own of just us. Now there’s 13 people over there between the advisors, and operational support, and license folks. So I’m just wondering, how did this transition for you in practice? Because I’m envisioning as the business is getting going, and you’ve got this really high volume of workshops that the squeeze must’ve come relatively early for, “Okay, it’s working. I’m getting all these clients, but I don’t have any time to service all these clients because I’m getting all these workshops.”

John: That’s right. Well, for the first 10 years, basically, I set it up where it had to be transactional, in that everything then was either a mutual fund, or I think ETFs were becoming somewhat popular then, so it was all commission based. I didn’t get licensed as a fee-based advisor, the series 66, I think, until 2010. So that 400-plus million really started back in 2010 when I joined a broker dealer. It was a smaller broker dealer out of Florida which I absolutely loved, loved everybody that worked in there. They all supported my business model. There was a period where I had the CFO of this broker dealer, he couldn’t believe how much I was doing in the applications. “Now John, I’ve gotta come out here and sit with you in one of these workshops and go through the whole process,” and he did. He jumped on the plane, came out to California. I took him to one of these companies and he was just mystified, right?

He says, “But I’m going to tell you one thing, John. You’ve gotta get out of this commission business, and the reason I’m here is because of the compliance guys are having strokes up there in Florida over what you’re doing here. Get yourself into the AUM model. Starting building in that because over time you’re going to thank us for that.” So it wasn’t until 2010 when I woke up, if you would, and realized that, boy, yeah, doing A and C shares is not the right way to go. Let me now change the future of this, so that’s what took place.

Michael: So help me understand a little more, what was compliance concerned about? I’m just envisioning, it’s a broker dealer in 2010. Commission-based mutual fund is what most people did, so it’s like, that was the environment of the times, so why was compliance upset that you were doing mutual fund business in the mutual fund era?

John: I think it was more parking-the-bus philosophy, in that, “John, you’re so transactional. You’re not really going back and servicing these clients, and that’s somewhat of a concern for us,” right? And that made sense, all right? I can’t remember what rules were being put in place. It certainly wasn’t the fiduciary rule, but back then, Michael…

Michael: But yeah, some of that discussion was starting. FINRA was picking up a little more to say, “Hey.” Well, and there were a bunch of the B share debacles then as well, so FINRA was looking more and saying, “Hey, some of you are getting a pretty non-trivial amount of trails in these A shares and especially C shares. What are you doing for these clients on an ongoing basis for those ongoing trails?”

John: That’s right.

Michael: So what was the idea of shifting to the fee-based side in that context? Was it just stable? The irony to me is if the concern is this business may be too transactional. Let’s go put on a fiduciary, fee-based hat is not always at the top of some people’s list at that point. So what was the driver to the impetus to say, “Hey, we should do this on the fee-based side?”

John: I think it was more, “Slow down here. You’re going too fast, John. This road for everybody that you’re on, that we’re on from a compliance standpoint is almost too hectic, where you’re getting an enormous amount of business in.” I think in the first four years I signed up close to 500 clients, if you would, right?

Michael: Wow, okay.

John: Yeah, and a lot of that was under the non-compete I had with the first Fortune 100 company. So unfortunately I had to leave behind a lot of those clients, and they’ve since contacted me over the years. “Hey, John.”

Michael: Right, some of them find you. But so you had to break away from the original company, do a completely fresh start because you couldn’t bring clients with you, so you went all in on workshops and it worked.

John: Well, here’s the irony, Michael. Here’s the irony of that, that company that I worked with, I did four years with them. For the first two years they were like, “Oh, John’s still doing this transactional business here. He’s bringing in a lot of business.” And then I changed branch manager. I was driving from Orange County up into Beverly Hills on a daily basis, so on top of everything I’m doing I’ve got this morning commute and evening commute that would take me anywhere from three to four hours. It was brutal, right, but that gave me time to at least make my phone calls to those clients and say, “Hey, how you doing today,” right?

Michael: Throw on a headset, do some phone calls, yeah.

John: Mobile office, we called it. So in that third year I went into the Irvine office and started working down there, close to home. The branch manager had gone through my desk and pulled out a few business cards of centers of influence that helped me over the years.

Michael: Oh.

John: Right, and the center of influence called me and said, “John, who’s this guy that’s calling from your company wanting to bring his advisors into these companies that we all help out?” And within hours, Michael, I had to make almost a career decision to either allow…the center of influence under no circumstances would have allowed anybody to go in there. Their trust was with me. I had been doing this for a couple of years. I was good at what I do. Why would they want to bring somebody else in there, right?

Michael: Right, so the COI is just going, “What the heck is going on with your company, John? I got a relationship with you, we’re good. Why is someone else calling from your company to pitch some other advisor that’s not you to come in and do what you do?”

John: That’s right.

Michael: And the branch manager was doing it because you’re so darn successful at what you’re doing and getting clients that branch managers were just trying to get in on the game? Basically?

John: Yeah, we would have those company meetings, Michael, you remember them, every Friday morning you had to sit down there.

Michael: Weekly meeting, look at who’s on the board this week.

John: That’s right. And humbly, I was typically on the top there. And the other advisors wanted a piece of that action, and you can’t blame them. It’s like, “Yeah, Stokes is on the top there yet again, yet again, yet again, so hey, branch manager, do something about this,” right? So literally, within days I resigned and decided that, “All right, it’s time for me to do things on my own.” And that’s when I became an independent advisor. That’s when I went down those channels.

Michael: So talk to us more about the transition of being so heavy into the commission based side in the early years through 2010, and then the CEO comes out and says, “John, you gotta get on the fee based side so you can slow down a little and be able to just dig in with clients a little more, and support them more on an ongoing basis.” But I know just the math of that is hard. I’m trying to remember quite where we were on commission scales by 2010, but I think we were still in a 4% to 5% a share range then, and so just practically speaking, going from $100,000 client that’ll pay you $4,000 or $5,000 on an A share, to $100,000 client who’ll give you a $250 quarterly fee 3 months from now, first quarter in AUM billing. That’s a really big shift just to the business, so how did you navigate just the commissions to fee transition at that point?

John: Well, that was interesting. It was almost inertia in that as soon as I got licensed as a fee-based advisor, my confidence level skyrocketed. I don’t know why. I, still, today, I can’t explain it, other than those folks that had financial advisors and that had their 100, 200, 300,000, millions of dollars were now sitting down with me to go, “Oh, so you’re not charging commissions. You’re like my current advisor, you’re on the fee-based platform. Hmm, I would like to meet with you, John, and talk about that.” So those higher qualified clients, if you would, were now having conversations with me.

Michael: Interesting. So they, for better or worse, higher quality clients were, call it, sniffing out that you were on commissions and didn’t like that you were on commissions, and when you weren’t on commissions suddenly just more of those meetings and prospects were willing to talk to you?

John: That’s right, yeah. And as my confidence level went up, I was telling that story to these companies that would basically hire me, for all intents and purposes, going, “Hey, listen, let’s just segment this. I’ll do your blue-collar workers and we’ll knock that out with your upper level C-suite, if you would. That’s going to be a little bit more on the financial planning side, if you don’t mind.” “Oh, that’s fine, John, as long as you give the same message and you help everybody out, that’s all we want out of this,” right? My job was going to the companies and make them look like heroes.

So as the employees are leaving, they’re not having negative experiences, they’re having positive experiences, at least from the financial standpoint. So instead of doing the $20,000 transaction rollover, if you would, now it became $100,000. Okay, the numbers are making sense here, and that’s how it worked out.

Michael: So what does the revenue mix look like today? Are you still on the BD side? Is it all fee based? Is it still a mixture of each?

John: It’s 98% fee based. Very seldom are we doing any commission-based business these days at all.

Michael: So presumably then you still live in a broker dealer environment for what’s left on the commission-based side, right? It’s not zero, you have to have some relationship there.

John: Yeah. We certainly do, yeah.

Michael: So can I ask, who’s your broker dealer platform at this point?

John: Securities America.

Michael: Okay, and so is the fee-based side under Securities America RIA, or do you have your own outside?

John: No, with the RIA. And so the question is, why? I’ve been so busy, Michael, for all these years, and still very busy. I’ve rarely had the time to step back and go, “All right, what we’re doing now is going back and looking at those current clients and offering them more service, right? That’s imperative right now.” And then, once we do that and go through that process, it might make sense to do an RIA. We haven’t got to that point yet.

Michael: Yeah, I’m just curious even how you think about it in that environment. It’s one thing when half my business is fee-based and half my business is brokerage, but at some point, the percentages shift enough. You get new and different choices in front of you.

John: Yeah. Well, we know what we’re good at. This firm is exceptionally good at what we do in helping people in transition. And there’s business out there, that’s our focus is we’re still growing. I have specific goals I want to reach for the company and my staff. We’ve gone through a whole practice management advisory group. Securities America Advisory Group have an exceptional coaching program, absolutely, 100% exceptional, and so we’ve gone through that and that’s been a major game changer for us.

Michael: And so how does that work within Securities America? What do they offer? What do you get when you engage with the coaching program there?

John: They call it next level, so initially it’s, let’s look at the business plan. Let’s take a look at where you’re at. Let’s see what we need to do to enhance that, right? And a lot of that came, “John, you’ve been very transactional back over the years. Let’s go back to those clients and offer them that upper level service,” so that’s what we did, and getting the outside business. There’s hundreds of millions of dollars that we now have access to on eMoney that we’re looking at every day, going, “John Stokes Financial would like to get some of that, if not all of it.”

Michael: So that’s part of the opportunity just in going back through the financial planning process in whole is, now you actually get a handle on not just what they have with you, but what’s in the entire financial picture. And if they do account aggregation in eMoney, you literally get a live, real time, here’s exactly where all the dollars in the household are. Are there any others that you could be serving, because you can see they’re with an advisor not doing good stuff?

John: That’s right, yeah. And the business that we’re getting from that, I had a client that’s been with me for 16 years, had a very small account with us for many years that’s receiving millions of dollars in an inheritance, and that conversation came about with me just going back to say, “I’d like to just offer you more.” “Oh, well, John, by the way, glad you reached out to us because we’re talking with the financial firm.” It was an uncle. We were talking with the financial firm where the uncle was doing business with. “Glad you reached out, we would like to meet with you, and several of the family members have become clients with millions of dollars in assets, if you would, that potentially might not ever have come our way.”

Michael: Right. And so then do you pay for the coaching offering, or it’s just included for Securities if you’re at a certain level of production?

John: We do, we pay for it, but to me, it’s minimal. You get to talk with your coach several times a month, in some cases more for one hour. It’s in the $300 range. To me, that’s worth absolutely every cent and some.

Michael: Three hundred dollars per…

John: Per month.

Michael: Per month? Okay.

John: Yeah, again, it’s minimal.

Michael: Yeah, it’s very, very affordable for experienced coach conversations.

John: And these are good coaches that we’re in front of. Obviously, I think they’ve given me cream of the crop because of the kind of production we’re doing and what level we want to go to as a firm. But my experience has been nothing but very positive. And they’ll put the brakes on us to say, “John, it’s great that you’re going to grow, but let’s take this period, certainly during Covid, where we can look at what’s working, what’s not, what needs to be improved, what you should leave behind,” so that’s been a wonderful experience for us.

Michael: Okay. So I’m also wondering, you have this, to me, you have an interesting model in that so many clients come into service, right, way, way, way beyond what one person could ever remotely manage. It’s why you’ve ended out with a half a dozen. But you don’t necessarily need advisors that drive a lot of business development because you’ve got a machine for going out and doing these workshops that I’m going to presume just keeps growing as you build your reputation, and your experience, and your network. So you have, to me, a very unique balance of how high of a volume of clients you can bring in yourself, but then how high of a volume of clients that need to be served. So how do you approach just the process of hiring advisors and staffing up? Where do you find the advisors and how do you train the advisors to do this within a firm?

John: It all comes from…A majority of our advisors at the firm have come through referrals, and that we know that we’re a, for all intents and purposes, a marketing machine. That’s what they hear about us. And so through a current advisor, he may refer another advisor through maybe going to a conference, if you would, and go, “Hey, I’ve got several hundred clients that I’ve acquired over the last 10 years.” “Well, how did you do that?” The guy I’m working with has been in the business for 25 years plus. I’m his junior advisor but he has less than 100 clients. How is it that you’re doing this?

So they tell the story and then they come in for an interview. We interview not so much on the credentials, Michael. I’ve hired the most intelligent CFPs. They’ve got all these designations, they have it worked out, and because they either didn’t want to do the transactional side of it, they wanted to go into much more of the planning side of it, or they didn’t want to make those drives. They didn’t want to be on the freeway for the two-plus hours every day. There are different circumstances obviously. Or some of them, you try and teach them certain things about somebody in transition, for example, the whole unemployment insurance thing, and they go, “John, that’s not why I got my designation. I don’t want to do something like that for free, I want to charge. If I’m going to sit with somebody and have them go through the application, if you would, with unemployment insurance, should I not be able to charge for that?” Well, we don’t.

That’s part of our goodwill. That’s our outreach, if you would. So the advisors I have, fantastic, got empathy, understand that we’re going to teach them everything they need to know specific to somebody in transition, and that’s your niche. You want to sign onto that, this is the company to be with.

Michael: So then, what are you hiring for or screening for? If it’s not credentials because you’re going to teach them what they need to know about working with clients in transition, what do you assess or evaluate to try to figure out who’s going to be a good fit or not?

John: First and foremost, their human skills. Are they personable? Do they care? In the interview process, if I’m telling sad stories about somebody in transition, I have plenty of those, Michael, where people just absolutely heartbroken. Losing your job in the form of a layoff is, it happened to me. It’s not a nice experience, and there’s a lot of people out there, thousands that I’ve been in front of that are absolutely turned upside down. So we’re looking for somebody with good human skills, and what does that mean? That just means that, are they unique enough where they have their own life story? Have they experienced people before that have gone through layoffs? Do they understand the dynamics there? That’s what we’re looking for.

Michael: Interesting. And so it sounds like you’re getting people who may have some level of experience in the industry because they’re coming through you by word of mouth to the firm and what you’re doing. But I’m going to presume then, still tending to be younger and still learning, and you’re hiring them much more for the human skills, the communication skills. If I tell them a sad story, are they showing, and relating, and demonstrating the empathy that you would hope to see them then conduct in front of clients.

John: That is correct.

Michael: And that’s how you’re evaluating them?

John: That’s right.

The Surprises John Encountered On His Journey [1:10:54]

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

John: The amount of people out there that really need financial assistance. We come across a lot of people, and these people may have current advisors, they may not. But as one of my managers at one point, one of my firms that I worked at said, “John, one thing that I could say in order for everybody to grasp is the responsibility. You have a responsibility as being a licensed professional to offer people financial advice, and that doesn’t mean they have to have HNW on a resume, high net worth. Go through life, since you’re in front of a lot of people, and just be generally interested in their financial life but themselves, and make that your story, and everything else will come later.” That’s been very true.

I have spent, Michael, an enormous amount of time on these do-it-yourselfers, these people that want to take up your time, and have no intentions of doing business with you. And occasionally I get side stepped, if you would, on that, and I still very seldom, but on occasion, will meet with someone and, “Boy, I should’ve known better,” if you would. I’m a lot more articulate with that. I’m extremely concerned about the way I use my time because I do want this firm to grow, but this is not about John, this is about my employees at this point in my life. This is about what they want out of it and to truly deliver that experience.

I’ve had advisors come into this company that I should never have hired. It was not a good fit, so after the fact, being the state of California, you have the, well, they’re my clients but they’re your clients. They’re your clients but they’re my clients, right?

Michael: Yeah, just the challenge over who gets to continue with the client relationship in that world of, I brought the client to the firm, and you service the client to the firm, so you may have had the servicing relationship, but you wouldn’t have had it if the firm didn’t provide that relationship to you. And that creates tension in a lot of firms.

John: Right, but our retention ratio here is over 98.5%, extremely high retention ratio. People come in here as clients because they’re going through a difficult time in their life. We’re there with empathy. We’re there because we know what we’re doing. I jokingly tell clients, “Listen, for the first 15 years I was trying to figure this out. Now I know my stuff. You’re going through a transition, you really need to be at John Stokes Financial because we know how to take care of you, top to bottom.”

Michael: So, how do you handle the ones when you find and realize they’re not a good fit, they’re a DIYer and it’s clear that they’re not going to work for you, but you still try to handle those moments with grace?

John: Just from the heart, just listen…two different ways. Obviously one from the heart, just tell them that we’re probably not the best fit for you. “Why?” We don’t have to give a reason. “Eh, we just feel that maybe at this point where we’re going and where you’re at, we’re probably not a good fit. So stay where you’re at, or go elsewhere.”

Michael: And you don’t give a further reason than that?

John: Not really, I’m not required to. It’s not something that I would need to explain away, if you would. And the other would be more, “We’re not quite ready at this point. We can appreciate you came to us from a company. There’s a lot of layoffs going on there. We need to prioritize our time. We’ll get to you when we get to your type of thing, if you don’t mind. You’re okay right now. Where you’re at right now, you’re okay. Might not be perfect, might not be what you want. You need to shop around. By all means, go and do it. We’ll come back to you at some later date. We’ll talk about this,” if you would.

Michael: And because you know by the time you come back to them they will have gone onto other things, or being doing it themselves, because you can already tell they’re do-it-yourselfers?

John: That’s right.

Michael: So just inserting a pause and waiting period, and then the process sorts it out for itself with that?

John: That’s right, yeah. And we make our mistakes, and I’ve certainly signed up people over the years where as I’m signing them up I’m going, “Oh, boy, this could be a difficult client. This is one of these clients that the market goes down, it’s my fault.” We don’t need that. Everything that we do now is discretionary. This is the way that we operate. We tell them up front, “We make the decisions here. This is what we’re going to do. If that’s not what you want, please don’t come on because we have no interest in you coming to us and telling us our job.”

The Low Point On John’s Journey [1:16:01]

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

John: Actually it all came at the Covid period where, as I said earlier, it was all go, go, go, on that treadmill, roar out there, we’re all producing. Covid hits, and then that face-to-face meetings that we have, those seminars came to a halt.

Michael: Came to a sudden, screeching halt.

John: Screaming halt.

Michael: One I would imagine, in particular, you’re out in California and California was particularly proactive very early on in shut downs, and social distancing, and limiting groups, so you really were in an environment that just…it got stopped?

John: Oh, yeah, absolutely. But there was still layoffs, and so these…maybe centers of influence, or my reach outs, I participate in a lot of other types of events, where HR events, different things, all that came to a screaming halt and it went virtual. It went virtual very quickly, and that’s a skill set going from having face-to-face presentations and now doing this virtually. So I had to, and I’m still in the process of developing that skill set, fine tuning our presentations, right? Because it’s easy to be in eye-to-eye contact with somebody for the most part and going, “Let’s get to that next meeting.” Just your energy alone can portray that level of confidence to get you to that meeting.

Whereas virtually, in some cases I don’t even get to see who I’m presenting in front of. So with that comes, Michael, a new skill set that I’m still learning. As I said earlier, prior to Covid, we were licensed in maybe 10 states or so. Now I’m licensed in every state because we’re getting these virtual meetings from all across the country, people participating all across the country. That’s a positive, but the negative side of that is, I have to be an expert on almost every state’s unemployment insurance, if you would, and a majority of those states have different rules.

Michael: Interesting. So the “good news” of Covid and being driven virtually is it unlocks a whole market in 49 states beyond California’s, as far as California is, but you open up a whole huge, broader market of companies that you can get in front of. It’s pretty straight forward to do it in virtual workshop format, but there’s still domain-specific knowledge of unemployment insurance rules in that state. Not all the states are the same, and so all the efficiency you had of knowing California cold is now disrupted because you gotta learn a whole bunch of new states as you go through each workshop in whatever state that company’s employees are in?

John: That’s correct.

Michael: So how do the one-on-ones after the workshop work in a virtual environment? Is it still the same thing, like the company will open up your time in calendar, the employees in 15 to 30-minute intervals, and you just have 8 hours of Zoom meetings, 15 and 20 minutes at a time, all day long?

John: Essentially, yeah. We give them opportunity to take advantage of what we call the consultation. I don’t like to use the word “free,” if you would, because that downplays what ultimately will take place in the consultation, but we’re going to offer a consultation, and that typically is just a dialogue. Where are you at? Where are you living? What’s your circumstances? Why were you laid off? How is your severance? Take a look at what I call the moment, “Let’s take a breather and look at where you’re at now.” And then I go into, “Where would you like to be,” and getting more into that whole roadmap experience, if you would, with them on the Zoom. And is it working as well as with face-to-face? No, it’s not.

I’m a great believer that if you get somebody in front of you, the probability of you doing business with them is much more higher than doing a virtual experience. And I always listen to your podcasts, but I’ve listened to the ones that do virtual and they’ve figured it out. But for me and my style, I’ve gotta have face-to-face meetings. Don’t get me wrong, we’re signing up clients all across the country that have very large portfolios, and that may be because they’ve not got a financial advisor beginning into a layoff, and, “Oh, okay, well, John’s going to handle maybe this rollover, right? Here’s in front of me. He seems to know what he’s doing here. Well, let me just hand it over to him.”

The Advice John Would Give His Former Self And Newer, Younger Advisors [1:21:03]

Michael: So what do you know now that you wish you could go back and tell you from 10, 20 years ago when you were still in the early days?

John: Less transactional. Looking back, it was absolute chaos. And if I had started maybe with a minimum back then…as you said earlier, if you got $100,000 rollover 20 years ago, that’s equivalent to a million-plus these days, right? So just getting into the whole fee-based environment a lot earlier, I think, would’ve been extremely helpful.

Michael: So what would you have told yourself to actually get you there, though? You started transactional and stayed for a while. What was not connecting, or were you not seeing fee based originally?

John: It was more, “Boy, I have to learn a whole new skill set here.” Number one, I wasn’t licensed in the 66. I didn’t have that, so okay, I’ve gotta take a week off maybe, and I was just so busy. Taking a day off for me was just something I couldn’t do. So just stepping back, and looking at my future, and going, “Hmm, do I want to maintain this transactional way of doing it?” I knew earlier on that was not what I wanted. It was just I couldn’t be brave enough if I would, or I wouldn’t take that moment to look at my future and go, “Oh, well…” It wasn’t until my manager in compliance said, “John, we need you.” It was a forced issue. “We need you to stop here, slow down, and look at this from this standpoint.”

Michael: Interesting. So what advice would you give younger and newer advisors coming in today?

John: Find that inner passion. My niche is something that I created 20 years ago, when the word “niche” was never discussed. I said earlier, my management thought I was…it was, “What do you mean you’re helping people only in layoffs? Why would you do that?” So find whatever it is that absolutely wakes you up in the morning and you’re ready to go, and get that niche. To me, that is absolutely imperative. And once you ascertain what that niche is and determine what it is, live it, breathe it, study it, get mentors out there if they’re doing it, and just do it and be proud about what you do. As I said earlier, we’re licensed professionals. Be proud of what we do. Use that license for the better good of society and yourself.

Michael: And how do you figure out what the niche should be? How did you arrive at what yours is?

John: Mine came from my prior life experience. When I got laid off, my father got laid off. So find circumstances in your life that maybe you had prior experiences. Maybe you dealt with financial advisors before that, I don’t want to be like that person. I don’t want to be that way. I want to be this way. So ultimately I don’t think I can articulate that, Michael, other than find that inner passion, because this business now allows you to do that, and you’re expected to do that. You’re expected to be in that niche from day one.

The Next Steps On John’s Journey And What Success Means To Him [1:24:38]

Michael: So what comes next for you from here?

John: I love the fact that I can have the rainmaker title, if you would, because I absolutely love what I do. I’m married to what I do, and telling that story, and meeting with the clients, and having face-to-face meetings, or these virtual meetings, that’s my calling, Michael. Behind the scenes I’ve built in a great infrastructure, a core of excellent advisors, and we’re real comfortable in that respect. Our goal is to double what we’re at now, and I believe that we’ll just do that purely and simply off organic growth.

Michael: Very cool. Very cool. So as we wrap up, this is a podcast about success, and one of the themes that comes up is just the word “success” means different things to different people. And so you’ve had this wonderfully successful fast growth business, and extraordinary flow of clients, and now scaling up even further, and so the business is doing very, very well. How do you define success for yourself at this point?

John: At this point in my life it’s all about balance, spending much more quality time with my wife and my children, getting back and knowing my family members more. Because for a certain period I was all, “Go, go,” and I missed out on that opportunity. And just balancing out that, I’m biking now about 100 miles a week.

Michael: Wow.

John: Yeah, right.

Michael: That’s a lot of biking. Okay.

John: I’ve got a bike ride next weekend. It’s 100 miles, 7,000 feet of climbing, so give me a call the following week, Michael, and we’ll do another podcast, and let’s see how I feel then.

Michael: That’s quite a ride with that much elevation.

John: So we hear about this a lot, and especially in this day and age, with work-life balance. For me, it’s just balancing out all of those important things that maybe I don’t have as much time to be involved in. I own a semi-pro soccer team so I’m doing that now. So I’m a mentor to these players on my team. They have a lot of struggles in their life. They’re young men, so I spend as much time…I go out to every practice. I pick up the balls for them, I take their water to the games. I do things now where I can look at this and go, “All right, I’ve achieved a lot but there’s a lot more to do for other people.”

Michael: Well, very cool, very cool. Well, thank you so much, John, for joining us on the “Financial Advisor Success Podcast.”

John: Michael, I’ve had a lot of fun today. Thank you very much.

Michael: Likewise, thank you.

*John Stokes Financial Assets Under Management exceeded $400 million as of the date of this interview, 10/12/2022.
**Securities offered through Securities America, Inc., member FINRA/SIPC.
Advisory services offered through Securities America Advisors, Inc.
John Stokes Financial and Securities America are separate entities.