Leveraging Structured Notes To Differentiate A Solo Practice

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, Anh Tran, to “The Financial Advisor Success Podcast.”

Anh: Hi, Michael, it’s great to be here. Thanks for having me.

Michael: I’m really excited to have you on the podcast today and get to talk about the journey about how we build teams around ourselves, as I think of it, essentially, to leverage ourselves up as advisors that we can really focus our time and energy on the things that do the most business for, that have the highest impact within the business. And I know you have, I guess, in that context, I would frame it a well-leveraged team structure for yourself in a base of client that you’ve got with a very good amount of revenue and assets under management and a pretty deep team that you built around yourself about how you can manage your time to be able to dial your focus up to the point that it has.

And so, I’m excited to talk about that journey of how we build the teams around us at the same time that we’re out there building the client base to get the clients and to do the advising thing that we do. Because we talk a lot about building clients but the reality for this business is it really only goes so far if you can’t figure out how to build the team around you to leverage up your time and focus to really have that maximal impact.

Anh: Right, that’s very important, making sure you have a strong support team. And I have been working for the last several years on figuring out the exact recipe for what that team looks, so, I’m happy to share my journey with you and, hopefully, it can help others as well.

Hiring A Director Of Advanced Strategies To Develop And Implement Business Structures And Processes [05:25]

Michael: So, I think, to get started, if you could just describe for us the advisory firm as it exists today, just so we’ve got a picture of understanding of what it looks like now.

Anh: Sure. So, I am the sole advisor of the practice and I have a few team members that support me. So, I have my client services manager who has been with us for a very long time, she’s been with us for 20 years, and she’s a registered client service associate. And so, she is able to really handle all aspects of operations and client service, she knows our clients very well. She has been with the team for a long time, and our clients absolutely love her, and she’s a critical part to our team. And then we also have her to support, which is a client service associate, and I also utilize a virtual admin through LPL Financial’s business services that they offer. So, they support Darcey, who is my client service manager.

And then I also have Ray who is a new hire of mine, I brought him onto the team in April. And I spent a long time looking for him and I was very intentional in the role that I wanted to bring him in. And so, finding the right person…and I’m happy to say so far, I think he has been a fantastic fit for our team and will really be able to help us grow and add that strategic planning component to the practice.

I also have two other people in the office. So, about six years ago, there was a merger between our two offices, between my office and Jan and Donna. And so, they are still here, they’re more, I’d like to say, just on a part-time basis, in the sense of they are planning their life towards taking a little more time off now because they’ve been in the industry for over 30 years. And so, they’re still here but also spending more time going on vacation, enjoying things that they want to do. But they’re still here and are part of our team. And so, that rounds out our financial-planning practice.

Michael: So, just to clarify on Ray, so, what is Ray’s role? I understand Darcey is client services manager but what is Ray’s role and task?

Anh: So, Ray’s title is Director of Advanced Strategies. Very, very all-encompassing, right? So, his role in what I wanted to bring him on was somebody to have a component of strategic planning involved. So, his background is very unique in that he was an advisor, when he started off, but then moved over to the broker-dealer side and worked different roles at the broker-dealer side, eventually ending up as a business consultant there. So, he has the ability to understand both what it takes to be an advisor but also from the back-office side.

And so, I brought him in to help me redefine and reevaluate, one, our technology stack and also our overall client experience. So, we currently have our process, our systems, and our technology stack that we use but we can always be better. And for me, being only advisor servicing clients and doing everything, I just did not have capacity to continue to oversee that part anymore. And so, this is part of the growing practice of figuring out where you delegate and finding good people to come in and help you.

And so, he’s come in, taken a look at our technology systems and what we offer to our clients from a technology platform, and we’ve implemented a few changes already. And then also our next key item is just reviewing our overall client experience from the minute they call us as a prospect to when they sign up as a client to our review meetings and overall process. What does that look like? How do we create a client experience for clients that they feel like they are cared for, remembered, supported, and are part of our SageMint Wealth family?

Michael: Interesting. So, in the context of a title of Director of Advanced Strategies, this isn’t necessarily about planning strategies for clients, like, “I’m going to do the fancy estate-planning work and tax-planning strategy,” this is literally business strategic planning, that Ray was a business consultant internally on the broker-dealer side and now, essentially, he’s your own internal proprietary business consultant just to do business consulting for you year round to make sure that your technology and your client experience is where you want it to be.

Anh: Yes, basically, that’s his main role. Now, there is financial-planning aspects in there in the sense that…and this is why Ray has been fantastic, is that, in order for him to understand the technology…so, we were on MoneyGuidePro, which we still currently use as a financial-planning software, but we recently signed up for RightCapital. So, we’ve been using RightCapital probably for the last five months or so because I had Ray come in and do the research and due diligence on the planning software and we really liked the capabilities of RightCapital.

Michael: I’m just curious, in that context where there’s something in particular that either, I guess, MoneyGuide was missing that you weren’t happy and wanted to make a switch or that RightCapital had that said, “We’re going to go through all the pain in the backside trouble of switching planning softwares because this is so worth it,” what was missing on MGP or there for RightCapital that got you to switch?

Anh: It was definitely the user interface. So, RightCapital is a more forward-thinking technology, forward company, and it’s very evident in just their software, just going onto their website, doing the entries. And it’s more intuitive. So, that was immediately off the bat what we liked. And also the client interface, and, so, what they were able to offer clients, being able to sync, aggregate, upload, review their plans, and the different types of reporting.

They recently came out with the new…I believe it’s called Blueprint that they just came out with. And I love that, I’ve always been talking about, “Why can’t we find something to make it more visual?” And so, right now I’m working with Ray, we’re trying to figure out, “How do we incorporate this into our review meetings?” because we definitely have some clients that prefer that way of thinking and viewing their finances, instead of your traditional balance sheet, right, or just your assets and then your liabilities.

Michael: Blueprint is the mind-mapping-style, like, “Here’s your full net worth and financial picture on one page, not just as a giant balance-sheet-style ledger thing but a visual mind-mapping visualization of it.”

Anh: Exactly, yes. And I think it’s great. And so, we’re really starting to see how we can use these for our clients, and that’s really what drove us to make the switch to RightCapital. So, Ray’s role was to, “Let’s do a deep dive, do the due diligence.” And so, because of that he also has to understand financial planning, which, thankfully, he does because of his background. And so, he’s able to run a financial plan and see, “Okay, here’s what we like, what we don’t like, and this is what we’re going to use for clients.” And we’ve been working together to figure out, “Okay, what are the things that are important to clients?” or, “what do clients want to see? And for us, as advisors, what do we want? What will make us better advisors so that we can help them find whatever happiness and meet their goals that they’re trying to reach and be a part of that and help them get there?”

Michael: So, I guess just help me understand the decision for hiring Ray. I’m sure I don’t have to tell you that not a lot of roles like this…well, it exists in advisory firms in general but particularly, once there’s, I’ll say, already someone who’s really solid in a client-services-manager role, as you’ve got Darcey, I think more firms are now just saying, “I need another associate advisor to handle all these clients,” but you hired Ray before going there. So, just help us understand further, where did the decision come from for this role and what led you to say, “I need to hire this before I add more advisors to the team.”?

Anh: Sure. So, the reason why I wanted to hire this role was because I’m a firm believer of you need to have a strong infrastructure and a process in place before you can hire on more people. If I’m going to bring in an advisor whose role is just to generate more business and bring on more clients, we need to make sure that we have the infrastructures to support this. And we have a great system currently…at least I to believe we do, but we can always be better, right…and so, as fintech has evolved and as our practice has evolved, we want to continue to stay ahead of the curve and I really want to make sure that we are on top of our game, making sure that we are able to provide our clients with every technology, every process that is going to be suitable for them.

And I never wanted to be the advisor that says, “This is how we’ve always done it,” right, or, “we’ve been doing this forever, so, let’s just stay with this,” because that’s not how this world works, right, and we need to continue to be innovative. And so, that’s really why Ray came on is to help me revamp and figure out, “Okay, how are we going to build this so that we can grow, so that we can add on more advisors, bring on more clients and have a system in place?” Because for us the reason why I think we’ve been successful is our efficiencies in our process and making sure that every detail is notated, that every step is not missed, and that everything is done according to our process.

Michael: So, why a staff member, as opposed to simply hiring a business consultant to come in and consult and look at all your stuff and do a revamp and then move on, as consultants do? What led you to say, “I want this as a team member,” as opposed to, “I want this consulting engagement for someone to help us do this overhaul?”

Anh: So, interestingly enough, I actually do also work with LPL’s CFO team, so, they offer a business solution to their advisors where you can bring on a CFO. And so, that’s how this actually started was, at first, I knew I wanted to just get a deeper dive into our numbers, into our business, our process, and, so, I engaged in the CFO solutions services. And so, we were provided with a CFO, who has been wonderful in helping me understand everything a little bit better with our numbers and everything that is data-driven. But where the struggle in that CFO is and working with outside consultants is they identify what the issue is or they identify where the problem is. But the part that is lacking is who implements it, right? And so, that was where I found the gap is that the CFO would identify all these things. And I knew it too but I did not have time to implement it. So, that’s why I decided to bring Ray on to help me implement everything because the CFO couldn’t do that part.

Michael: Interesting. And so, for you it’s very specifically the person who can do the follow-through to actually implement new tech, new systems, process changes, figure out how to institutionalize that into actual processes and infrastructure. Right? Because, again, it’s one thing to say it’s another like, “Okay, but how do you literally build that in a workflow in your CRM?” So, Ray’s got all of that that?

Anh: That is the plan. And before we hired him, everyone that I interviewed did a Kolbe test because I need to make sure that they were high on follow-through. So, that was my first time using a Kolbe test. And I wish I had used it sooner because I had my entire office do the Kolbe test, and it’s not a personality test and, so, it really helps you identify who are the fact finders, who are good at follow-through, who is a quick start, so, those are usually your risk takers, or who…so those are the people that we needed to identify what their strengths are. And so, for this particular role, I needed them to be strong at fact-finding and follow-through. And so, I made sure to find the person that fit the need, and I think that was really great in part of the hiring process.

Michael: And so, help us understand as well…I think you’d said…so, Darcey is full-time internal as client services manager but I think you said you’ve also got some virtual support from LPL’s Business Services team on virtual assistant and some operation support. So, what is the outsource, what does the virtual admin op support do versus what Darcey does? Where do you draw the lines of who does what?

Anh: Sure. So, Darcey oversees all of the client service. We also have Kay, she’s internal with us as well, she’s there full-time, she is our client service associate and also handles the administrative responsibilities. And then we have Dora who is our virtual admin. And so, how the roles are split up is Dora is responsible for all things related to LPL and their platform. So, if we have a new client or we have applications, anything dealing with applications, forms that run through LPL, Dora is responsible for. Because she is a part of LPL’s team, so, she also has the infrastructure to support her from the LPL side, and she understands and has been trained on ClientWorks, which is the system at LPL. So, that’s what we brought her on for, a very specific role. She doesn’t talk to her clients, she doesn’t answer phones. She really just handles all the forms and processing and anything LPL-related.

And then Kay handles more of your admin responsibilities. Right? So Kay is answering her phones, she’s handling our client gifting, our birthday cards, internal operations and servicing that we have to do, maybe that Dora can’t or doesn’t have enough time to handle. So, Kay also does a lot of work with our CRM system and making sure that the tasks are completed, who they’re being assigned to, and making sure that everybody follows through what they’re supposed to do. And that was a new thing that we actually really focused on this year with her because, when she did the Kolbe test, her follow-through was through the roof, and I did not realize this. And so, when I realized that it made a lot of sense…and, so, we altered her role a bit to have her do the things that required the follow-up, making sure things get completed. And she really started to excel after she started thriving once we changed her role to meet with her natural instincts and natural abilities were.

Michael: So, what led you down the road of doing all these Kolbe exercises to start learning and seeing all this about your team?

Anh: You know, we did this because I’ve struggled with hiring. And I’m sure your listeners, a lot of advisors that I’ve talked to, that is the biggest topic of discussion that comes up when I’m talking to other advisors is, “How do we find and bring on good team members? How do we find someone that understands our core values and believes in them and also will support and take care of our clients the way that they deserve and should be?” Right? And so, finding good help has really been a struggle. And I’ve been through a few different hires that did not work out the last few years. And so, I said, “You know what, I obviously am not doing a good job with hiring, so, I need to change it. What are some things that we need to do differently?” And so, talking to a few other advisors who have had successful new team members come in, a lot of them mentioned the Kolbe test. And you have your other personality tests that people take but this one came up highly recommended by a few different people because it’s not a true personality test.

And so, once we did this, we altered everybody’s role a little bit and made sure that we focused on what their strengths were. And then this also helped me focus on who I was hiring. Because there were a few people I interviewed who I loved, they were fantastic and they were great but they weren’t high, they didn’t score high on the follow-through or the fact-finding. A lot of them scored high as a quick start, right, and I wasn’t looking for that. And so, probably in the past I would’ve hired that person because I liked them so much but because of the test and the numbers that came out I said, “Okay, let’s follow the data,” right, “the data doesn’t lie, so, let’s follow this and see if it works.” That’s what we did.

Michael: Yeah, I’ve long been fascinated with Kolbe, we use it on all of our businesses as well. As you said, it’s not a personality test of the Myers-Briggs and other sorts, as Kolbe puts, it’s a cognitive test, it’s how you tend to tackle projects and tasks and acknowledges there’s not necessarily a right or wrong way to do things but there are certain approaches that are better in certain businesses or roles than others. Or if you’ve got a problem in front of you and you’re trying to figure out, “I need a new tech system, high fact finders,” like, “well, I’m going to make a spreadsheet of seven systems and compare, there are pros and cons of each one,” and a follow-through person comes at it and says, “well, if we’re going to pick one, we have to really focus on what the deployment and implementation plan is going to be because we have to really make sure we create good systems and structure around this.” And a quick-start’s like, “Let’s just try one of them, we’ll see if it’s any good. If it is, we’ll keep it, if it’s not, we’ll go find another one.” Like, “Just grab one and the next and the next.” You can solve a problem with any of those eventually, all those people will get to solutions, but one’s going to make a spreadsheet, one’s going to make a system, one’s just going to get in there and try it. And per your comment, if what the business really needs is someone who can pick up the follow-through and make all the systems, getting a person who likes to just dive in their head first and try it out, probably not the best fit for the business needs.

Anh: Right, right. Exactly. And so, I was really happy to use this. And definitely now, now that we’ve been through it and we’ve made the hire, I really see the benefit in doing this. And going forward, I will have everyone, my team member do these and really also spend time not just doing them just to do it but also to spend time to evaluate, “Okay, what does this mean and how do I use this to make our entire team better?”

Michael: And so, are you doing this on your own? Did you hire a consultant, outside person to help you with it? Just how did you come around to the point of doing this?

Anh: Yeah. So, one of the LPL advisors that I knew was a part of the Kolbe group, I think you can become a consultant. And so, I reached out to him and he connected me with the Kolbe team and, so, they set me up with a Kolbe consultant. So, I think you can go even more in depth and hire a consultant for a period of time. I bought the package and then it came with a consultant that helped me just for this purpose of hiring, and that’s what we did. So, we didn’t go in full depth with all the robust things that Kolbe offers.

Michael: So, just, whatever it is, kolbe.com and dove into their package solution, “Oh, you’re hiring. Here’s the assessment, here’s a person to help you.”

Anh: Right, exactly. Yeah, and they were great, they were very helpful. There’s your consultant that explains the process for you. You go through what the role is that you’re hiring and then they do an analysis and sit down and talk to you about, “Okay, well, this person scored this and this person did that. I’m thinking this person’s probably a better fit than the other one.” Right? So, they do help you go through and analyze and identify your hires or your new hires and interview prospects.

Michael: So, any other, I guess, just lessons learned from the challenges of hiring, over the years, of what you’re doing now that’s working better or what you used to do that was not working well that you’ve now stopped?

Anh: Yeah, I think the one thing is, and I’ve mentioned it before, is sometimes you hire for a role that you think this person’s going to be able to fulfill everything. And then you quickly realize they’re not going to be able to excel at every single aspect of that. And in our business and what we do, fortunately/unfortunately, every day is different. Right? And I don’t know if there’s any advisor that can say, “My team does the exact same thing every day.” We could come in, think we’re going to do something, and then a client calls and everybody’s up in arms, like “Hey, we got to…”

Michael: So frustrating when the clients call and want things, it’s really disruptive.

Anh: Right. But that happens, that is the nature of our business that every day is different, we do not have the same thing. And so, that’s something that I realized you have to be very clear and upfront when you hire. Especially somebody that’s not familiar with the role, they’re not going to understand the complexities and just how you have to drop everything to get something done if it’s time-sensitive. Right? And so, making sure that you set expectations…and also identifying the strengths of your hire, and that’s what we’ve had to do is realize, “Okay, this is what you’re good at, so, we’re going to fix your role. And this is what you’re going to focus on, and then we’re going to bring somebody else to handle other stuff because they’re going to be better at that.” And so, making sure that you work with your team.

And I’m a big believer in being an empathetic and compassionate leader, that is something that I think really brings the strength in your team because my team knows that I care about them. And if they’re not feeling well or something’s not right, we talk about it and we try to figure out what’s wrong. Because I’m only as good as my team members and, if they’re not doing well and they’re not performing, then we’re all going to struggle. And so, that’s been my form of leadership and how I’ve taken to running my business. And so far, I think it’s not everybody’s style but it’s worked well for me.

Segmenting Clients Based On Complexity To Provide High-Touch Concierge Services [29:23]

Michael: So, what does this add up to at this point, just in terms of, I guess, however you measure the business, assets under management or a number of clients or GDC, what’s the size of the business overall now?

Anh: So, overall, we’ve got about 195 households. And from an AUM, I don’t know if you want to give me 12/31/21 numbers or today, we’re roughly…

Michael: Today, plus or minus, market volatility…

Anh: We’re roughly at about [$]325 million. And so, we have the 195 households of which…when I say “household,” we’re talking husband, wife, kids, grandparents, and so that’s how we’ve grouped our households.

Michael: So, help me understand this just from a capacity perspective, just it’s a lot of client households when you’re the only one in a lead advisor position. So, what does that look in practice on, I guess, day-to-day week-to-week basis for just trying to support that many clients?

Anh: Right. So, we definitely utilize a client segmentation and we’re currently going through a revamp of that, we have a client segmentation model and we’re working on a new type of client segmentation, but we definitely follow that to categorize our clients in their different segments and also identify the level of service that the clients are receiving. For the most part, we also have, out of those 195, a lot of those are also some legacy clients that have been around for a very long time, that maybe have brokerage accounts that are no longer advisory, right, so, but I am including that in there. So, for our…

Michael: They tend not to be as high on demand and service needs, they’re just hanging out doing what they’ve been doing for a long time.

Anh: Correct, yes, absolutely. And so, I’d say 50 to 70 households are probably on that brokerage level. And the rest are all advisory, so, maybe we’ve got about 125 advisory-type that do require our annual meetings, our meetings to review any as-needed basis that they need us. And so, that’s how we’ve identified our client segments, it’s much more involved than that but we do go through a detailed segmentation in order to figure out the level of service.

Michael: And so, help us understand overall just nature of clients, are you primarily working with retirees, working with working folks, who’s your prototypical client?

Anh: So, I have a few interesting niches that I work with. So, 75% of my clients are women. Now, some may argue that’s not a niche since we’re half the population but I’d like to think that we are. So, about 75% of my clients are women. Over half of my clients also identify with being LGBTQ, so, that is, I’d say, probably majority of them are female as well too from female executives. And then I’ve got a good percentage, especially in the last 10 years or so, that I have been working with a lot of clients that have gone through liquidity events, particularly in the technology space and through IPOs. So, it started about 10 years ago, I was working with some Facebook clients during their IPO. And then, since then, I’ve started working with other clients through their various IPOs that we’ve had. So, I’ve probably been through about 10 different IPOs in the last decade or so. So, that has been a very strong focus of ours because of word of mouth and referrals and being able to provide that type of service because of the complexities that are involved with the liquidity events.

And my background was, when I started my career, I started at Goldman Sachs, at their division called Ayco, and the focus was on corporate executives and their executive compensation. So, I was very familiar and still am with stock options, restricted stock, ISOs, and just all the nuances about stock equity and equity compensation through companies.

Michael: So, from a segmentation end, I guess, in practice, how do you try to segment clients? Is this by channels, like there’s one offering for the executives and then a different offering for other folks and it’s by the type of specialization? Or do you segment by assets and complexity or something else? Just how do you break it apart in practice? Seems like firms are very different about how they do segmentation.

Anh: Right. So, there’s a couple of different variables that we consider. One is is definitely the complexity of their situation and also the stage that they are in life. So, I will say a client that comes in whose company is about to go IPO and they have never met with the financial advisor probably has a lot more planning than somebody coming in that’s got a 401(k) plan and is looking to retire. They don’t have the complexities of the stock, right? So, we do look at clients from the complexity of what type of planning they have.

Now, everybody, at the end of the day, still needs the same same type of planning in the sense of estate planning, tax planning, financial planning. But some clients don’t have the stock compensation component, which can be very complicated. Or how do we work around a concentrated stock position, right? What type of portfolio do we create for those clients who have a lot of company stock that they can’t sell because we don’t want to incur taxes? So, we look at clients in that sense, at first, where are they in life and what type of assets are they bringing in, how complex are they? Are they a business owner? So, those are the types of things that we look at in order to determine what type of service that they need. Then also just how much planning from…do they have children, don’t have children? Are they looking for legacy planning? Are we doing charitable gifting? Are we doing a donor-advised fund? Are they gifting to a trust?

So, there’s a lot of different things that are involved, and so that may encompass bringing in our estate-planning practice. Which I have an estate-planning practice with my husband John, and he runs estate planning. And that is all that he does is handle planning, trust admin and probate.

Michael: Interesting. And so, how does that work in practice? This is part of the advisory firm? This is a whole separate thing that you own? How does the estate-planning practice weave in in practice?

Anh: So, it is a separate practice. So, compliance requires us to keep our financial-planning practice and our estate-planning practice separate. However, I am still a licensed attorney, so, I am a partner of the estate-planning firm. However, my practice, I will say I spend 95% of my practice doing financial planning and then a very small percent of the time I will do some estate planning in the sense of I’ll sit down with the clients and help create and plan. I don’t do any of the drafting though, so, we will usually bring John in. And so, John and I have a lot of shared clients. John has a very unique background in that he was dealing with a lot of celebrity clients in his previous career with very large estates. And so, we decided, at the time when we were looking to start a family, was we said, “Let’s come down to Orange County,” we’re in California, Southern California, and there was a need for that type of service. There was not a ton of estate-planning attorneys that are familiar with that level of planning on that, for that type of net worth.

And so, John has really been able to come to Orange County and really grow and build a thriving estate-planning practice. And it’s to the point now where we need to really figure out how we’re going to grow both the estate-planning and the financial-planning practice and where we put our emphasis on the businesses.

Michael: So, the estate-planning practice sounds like goes much broader than solely working with clients of the planning firm. It’s not a subsidiary offering, so, all the planning clients get estate planning, it’s a standalone estate-planning practice you also own and cross over to and clients cross over as appropriate, or as needed.

Anh: Correct. Yes, it is a standalone estate-planning practice. John gets his referrals, he’ll get referrals from other advisors and other planners. And so, he has his own practice and then I have my own practice but we also have a lot of shared clients because we refer our clients to each other. And we are currently in the process of building out an office right now because we are finally going to be under the same roof, we have been in separate offices for the last decade. And I joke about this but COVID actually got us to realize that we can work together and stay happily married. So, we decided to “Let’s combine our offices and be under one roof,” but we will be operating as separate entities.

Michael: So, do you worry or have issues with clients saying like, “Are there conflicts of interest because you overlap and have these practices?” or is the client’s saying like, “this is awesomely convenient because you have both of these practices and I don’t have to worry about anything else.” I know, advisor…I think we tend to worry about those overlaps but I’m curious how those conversations flow in practice with clients?

Anh: So, it’s usually the latter, clients are usually pretty happy that we are able to offer this. However, when I make a recommendation to clients for estate planning, I always give them more than one name. So, I let everyone know John is my husband, I’m a partner of the firm, however, here are other estate-planning attorneys that you can talk to and you can choose to work with whoever you want to work with. And I’m very upfront about that because we want to make sure that clients are working with who they feel the most comfortable with. And we have had instances where our clients decide to go with another firm, for whatever reason that may be, and that’s okay, that’s part of the business. Most of them though do use John. It is convenient for them.

Michael: And do you bundle anything together from the pricing end? “Clients of the advisory firm get a discount on the estate-planning practice,” or, “if you’re a client at a certain size, we cover your estate-planning documents,” or is it still, ultimately, two businesses, two services, two fees, you pay your part to each?

Anh: Right. So, it’s still separate and compliance does not allow us to cover estate-planning fees. However, on the estate-planning practice, if you are a SageMint Wealth client, you will get a discount on your estate planning. But it is separate and we are not allowed to say, “We’ll cover your fees.” Right? So, but they do get a discount being our client.

Michael: Okay. And so, overall business model for you, are you standalone planning fees, AUM fees, blend of the two, how does it work from a business model perspective?

Anh: We are majority AUM fees, predominantly 99% are AUM fees. There are rare instances where we’re working with a client, particularly in a liquidity event situation, where they need the planning but they don’t have the assets ahead of time of which then we will charge a planning fee. But predominantly we are AUM-based.

Michael: And so, how does AUM-fee schedule work for you? Are you a standard rate for everyone? How does AUM operate for you?

Anh: So, the AUM or how the fee is structured is it’s really dependent on the type of service level that the clients are at and how complex their portfolios are as well. So, not every client gets the same portfolio, so, we are different in that I know you have a lot of other advisors that are advocates of models. We actually have different models for our clients. We have a lot of customized portfolios because of the nature of our clients’ portfolios. A lot of them come in with concentrated stock positions, right, of a company stock or a stock they’ve inherited or they’ve had a major liquidity event. And so, we have to work around that portfolio. So, we really are providing a customized portfolio for almost all of our clients. We don’t have models that we use because they’re coming in with different unique needs. And so, the way that we structure it is based on the complexity of what the clients need and also the type of portfolios that they have as well.

Michael: So, it’s not just a standard…I’ll use the proverbial 1% on a million dollars, different clients at a million dollars could have a higher than 1% fee or lower than 1% fee based on their portfolio complexity and their overall financial planning complexity?

Anh: Correct, yes.

Michael: Interesting. And so, how do you figure out what fees are ultimately going to be, is that, “We have two fee schedules, the simple clients and the complex clients,” kind of thing or you just literally have to decide for each client, like, “based on my evaluation of your situation, here’s what your fee schedule is going to look like.”

Anh: We do have what you mentioned, “Here’s a client that’s more straightforward,” I don’t think any of our clients are simple, quite frankly…

Michael: Yeah, sure enough, those are not the people who usually hire advisors.

Anh: Right. So, all of our clients have a unique need where the difference in our clients is how robust their stock option plans are, their equity compensation. If they’re an executive at a major company, they might come to me with a 403b, 457, a SERP. I literally have clients that have 6, 7, 8 retirement plans that we have to work through. Right? So, that’s a different type of level of service. And then they may also have stock options. Right? Or sometimes they don’t and, so, your healthcare worker may have different types of plans versus your tech-company worker. Right? So, and it is dependent on how many hours that we initially might need to spend with them, and it may take years, right, it may take years to divest out of a concentrated stock. I have Facebook clients, it’s been over 10 years since their IPO, and we’re still working on…

Michael: We are still chipping away at it.

Anh: We are still chipping away at diversifying out of their concentrated stock position, and it’s going to be, essentially, their portfolio forever is, “How do we work through this?” And so, that’s the type of clients that come to us because of our skill set and it’s because of my background and being able to also provide them with the estate-planning needs as well and just the planning from a…is everything matching up with what they need, right? So, when I was at Ayco Tax, we prepared taxes for clients. So, I also have a pretty strong tax background in the sense that we were doing all of our clients’ returns and I was signing off on all the returns as well. So, we really truly are providing a service for clients that I say…it’s a concierge service. It is different for everyone and it’s also very different than most advisory practices.

Michael: So, I guess I’m just wondering…by definition, every client’s got different fee schedules because it varies their complexity. So, there is no standard. But I guess I’m just wondering how much of a range is there? It’s one thing to say, “Oh, our baseline is 1% but our really complex clients are like 1.1% and there are a 10% spread between the fee schedules.” Is that the nature of how far yours can vary by client or does it go even wider based on how super complex or not so super complex they are? How much do you have to adjust this in practice?

Anh: It’s not that wide, I’d say it’s maybe a 25-basis-point difference. So, it just depends on size, complexity, where they’re at, what their needs are. And so, that’s how we view each client and really spend time figuring out what it is that we need to provide for them initially and ongoing.

Michael: And I think you said, aside from clients that are pre-liquidity event and don’t have portfolios yet because they haven’t had their liquidity where you have to charge a planning fee, clients are typically otherwise straight AUM? You’re not doing a planning fee and an AUM fee in parallel or planning fees for the planning stuff, investment fees for the investment stuff, it’s one bundled fee for you?

Anh: Correct, it’s one bundled fee.

Michael: So, I guess the other thing I’m wondering is does the pricing differences by complexity also get reflected in the segmentation differences? I’m still trying to think back to…you said you have some segmentation of complexity of situation and stage of life and how much work needs to get done on that end, so, do services vary by, I guess, complexity and fee schedule as well? How does the segmentation strategy come together?

Anh: Right. So, the segmentation strategy really helps us identify those clients that are going to need a lot of work. Usually, it’s initially, as we bring on a new client, that’s usually where the most work comes in. You know, as we’re looking at, let’s say, the 125 households that we’re servicing the rest of brokerage. Right? So, we’re looking at this. And clients, when they call and they need us, we’re, “Absolutely,” we’re not, “okay, you’re not part of this client segment, we’re not going to help you.” Right? It’s not a…

Michael: Yeah, yeah, they’re clients, you have to take them all and serve them, that’s how it works.

Anh: Right. So, it’s not that sense of the client segment, more so we’re looking at this from…okay, we know that these particular clients we definitely have to talk to them more because they’ve got the stock options, they’ve got equities, and they’ve got bonus structures where we have to do more tax planning. Whereas we’ve got these retired clients, they don’t have as much planning in the sense of tax planning per se, right, because they’re not getting bonuses that are varying from year to year, they’re not exercising options. And so, we really do year-end tax planning just to kind of, “Let’s see where the year’s been, you’ve taken your income from your social security, your pension, your annuity, and now here’s what your taxes look like.” Right? So, that segment of clients are less complicated just by the nature if they just don’t have as much going on.

Michael: “You’re in a good place now, we’re hanging out here.”

Anh: Right. So, we have our segments to identify, “Okay, we know these clients, we have to touch base with them on a quarterly basis because of their taxes.” We need to make sure, year end, that we’ve got all of the estimates coming out, what are their capital gains distributions look like, and are they making a donation to their donor-advised fund? Because we’ve got concentrated stock that we’re trying to divest, and, so, we are slowly gifting into a donor-advised fund. Right? And so, that’s something that we really need to be aware of for a certain number of our clients because they’re just very complex. Versus our retired clients tend to not have as much going on or more so clients that don’t have stock options or they are just W-2. Right? So, they are at a point where they don’t require as much time from us. So, that’s where our client segments really come in.

And then we also have our business-owner clients, right, they have a different kind of need. We’re reviewing their 401K plans or their defined benefit plans contributing to their plans and maximizing, helping them review just their overall finances with the business, their hiring, their team. And so, our entrepreneur clients have different needs as well. So, that’s what we look at when we’re trying to figure out the type of service for the segments.

Michael: And so, does that mean your segmentation really is more functional, the executives offering, the retirees offering, and the business owners offering as opposed to…I guess, I think about it as, at least a lot of traditional advisory firms, an A, A and B, or A, B, and C tiers of just, “Here are the clients that pay the largest dollars so we’re going to do a bunch of extra things for them.” Am I interpreting that right? It’s more functional segmentation for you as opposed to just revenue tiers?

Anh: Yes, it’s definitely more functional for us. Now, we also have your traditional revenue tiers, right, like which clients are generating the most revenue or which clients…where they land in that. But for us it’s really more functionality-based because we’re a lean and small office, we’re very intentional with the type of service that we’re providing in with our client base. Right? And so, at the end of the day though, with 125 households and with having a really good strong team, I think our clients all get a certain level of service and they know that, no matter what we’re providing them with that service, whether some years they may need more than others. Right? And that’s usually the case, right, once you’ve worked with a client for 15 years or so, now you realize there’s ebbs and flows. And sometimes my retired clients don’t even want to meet with me because they’re busy golfing, vacationing…

Michael: “We’re good, Anh. You call us if there’s something going on and we’ll call you if something’s going on, but short of that we don’t need to meet, we’re just going to enjoy our retired life.”

Anh: I’m like, “Please, meet with me, I want to see you,” and they’re like, “we’re good, everything’s great, we’re doing great. We’ll call you when we need you.” And then we’ve got other clients that you just know that they want to just hear from you and they need you to hold their hands. And so, that’s what we do. Clients come to us because they know we provide a concierge service, right, “We are your concierge service, we go above and beyond in our client service.” And we’ve done a lot of things for our clients that I like to think most advisors don’t do in an average capacity.

Michael: And so, from that perspective, I guess you end out with this alignment of you can do more for higher-revenue clients, but you also segment them by what the needs are in the first place. Their pricing is tied to their complexity, so, you end out with a pretty good alignment of really complex clients, end out with more touches because there’s more stuff going on for which they pay a fee that’s commensurate to the additional work, and that’s how you get it all lined up…

Anh: Right, exactly.

Differentiating Portfolio Strategy Through The Use Of Structured Notes [54:06]

Michael: So, on the investments end, I guess I’m curious, as you talked about team staff that you have, you didn’t talk about a big internal investment team. So, just in practice, I’m wondering how are you putting together and building customized portfolios and different models and just trading and implementing all the different portfolios and models? How does that come together for you?

Anh: Right. So, we do customized portfolios for our clients that include…we have what we call our structured-notes portfolio, essentially. So, we have a very unique type of portfolio that we create for clients that have a combination of your ETFs, mutual funds, structured notes. And if they have concentrated stock positions, we’re doing covered-call strategies for them too. So, it depends on what the client needs but majority of our clients do have that core. And so, from a management perspective, we are overseeing the investments and making sure that that group of clients that have these portfolios…it’s we’ve got the funds, we’ve got the managers that we’re using, but what varies is the structured notes, because the notes we buy on a monthly basis. And this is really where our investment portfolio gets pretty intricate in that we have to buy notes every month for our clients, and, so, everybody has a different portfolio.

And so, when I started doing this, a lot of advisors would tell me, “That’s not a good way to manage your business because you’re not in a model.” Right? And so, I chose to believe that this way was actually a better way for my clients because I’m providing them with better value. And I know the purchases that we make vary month to month, and so everybody has a different portfolio. But it has proven to do very well for us, and clients have been very happy especially with a year this with volatility when we’re able to tell clients, “You have downside protection with also an enhanced participation on the upside with your portfolio,” and we’re showing them how the notes are performing. We have thousands and thousands of notes in our portfolio, and it is a very cumbersome and laborious process to track and figure out and find the notes but it is something that we believe has done really well for clients. And clients have seen that. And that’s really how we have gotten most of our referrals as clients have been happy with the structured notes in their portfolio. And they tell their friends and then their friends are like, “Well, I don’t have this,” and then they talk to us about it. So, that’s really how we’ve done our management is the funds stay the same, those don’t…we have a list of funds and ETFs that we’ve identified as our picks for our accounts, it’s the notes that will vary for the clients.

Michael: Interesting. So, I’m thinking for all the firms out there that have had core-and-satellite kinds of models where there’s a core that’s fairly standard for all clients that forms the baseline and then satellites, more specialized offerings, or plug-ins that might be more client-specific. I almost feel like what you’re describing is a version of that sort of framework except your satellites are built primarily around structured notes.

Anh: Yes, yes. So, we have our core, our ETFs make our core holdings, you’ve got your large, your mid, your small, we’re looking at that. Then we’ve got some funds that provide some active management. A lot of times we have ESG as a big focus in our portfolios for our clients, and so we’ll look at, “How can we add that ESG component?” or some active managers on the emerging markets and international side. And then our structured notes will be a component of our fixed-income allocation and also whatever equity position or allocation that we need because it really is a combination of…when you look at it, it’s technically, I guess, they consider structured notes a corporate bond but it’s really its own investment asset, right? It has fixed-income features but it also has equity components, right? And so, when we’re looking at managing this, we can’t just do a regular asset allocation but we look at the notes as, “How does it cover the exposure that we want in the different asset classes?” and that’s how we purchase notes.

And we also use a ladder-structured-notes portfolio style. So, what I do is we ladder them out between two to five years, and so we’re buying notes until they mature every year, so, two, three, four, five, and then, after that, we’re mostly buying five-year notes because the longer the notes are, the better the features have been. And so, we use this as part of our income-planning strategy for clients as well. So, if we know, let’s say, in two years from now, you’re going to want to pay for your daughter’s wedding, then we’ve got some liquidity coming through these notes. Or if not, we’re going to just reinvest them into more notes. So, we’ve been able to use that as part of our income planning for clients as well.

Michael: So, I guess, just help me understand a little bit more of the types of structured notes you buy, because there’s an almost mind-numbing range of all the different kinds of things that have been packaged into structured-note formats. So, what types of structured notes are you typically using?

Anh: So, we typically use growth-type notes. Right? And what I mean by that is we’re using pretty conservative notes in the grand scheme of what type of structured notes are available. There is a lot of them out there but what we like to stick to is really your traditional core note. So, we’re following your major indexes, so, your S&P, NASDAQ, Russell, DOW, IFA, emerging markets. And so, we’re really just tracking major indexes because, at the end of the day, my belief is in diversification, and, so, we’re looking at major indexes. We’re also looking at notes with buffered and barrier features, so, I would love a buffered note for most of the time, but sometimes you can’t get that on all of the notes that you’re buying. So, we’re looking for downside protection with either a buffer or barrier.

And then a lot of times, depending on where the volatility is, the markets, your upside is you can get anywhere from 125% to 275% upside. And so, that’s our core and traditional structured note that we’re buying for clients, and they’re maturing between two, three, four, and five.

And then we’re also buying, and these are what I call the really exciting unique notes or your notes that have the dual-directional or absolute returns, where, let’s say, if the market’s down in maturity at 10%, you get a positive 10% return. But also, keep in mind, that means everything else in your portfolio is down 10%, except for the note. Right? So, it’s that one note where in a really bad year, like this year, where we’ve had a lot of volatility, I’m able to tell clients, “Look, most of your portfolio is down but you’ve got some of these notes that, one, you’ve got the downside protection, so, you’ve got a 20-30% buffer, so, if your notes were to mature today, you’re getting your money back, but you’ve also got these dual-directional notes, or absolute returns, where if your note were to mature today, you’re actually getting a positive return.” And that for clients is really like, “Wow, this is something very different and unique.”

And so, I tell clients, “I consider these illiquid,” although you do have a secondary market for them, and we put about 30% of our clients’ portfolios in these notes. So, majority of their assets are still in fully liquid traditional markets but the structured notes really add that extra component that shows them that we’re adding value to their portfolio. And then I’ve had clients this year where notes have matured and they’re, “Am I really up that much?” And I’m like, “Yes, you are because of the enhanced feature on the note.”

Michael: That’s how some of them work, they’re built to do things in down market. So…

Anh: Right. But I’m also very transparent with clients to make sure…because clients will then ask me, “Well, what’s the catch,” right? And so, we tell clients, “There’s a couple things. They’re considered illiquid, they’re issued by major banks, so, you’re only as good as the bank quality,” right, “and then also you’re not getting paid the dividends, let’s say, if you were to be invested in a regular S&P.” Right? So, those are a couple of the downsides. But for everything that we’re looking at, this adds a different type of unique feature to their portfolio that they are not getting anywhere else.

Michael: And how do you think about just the cost tied to structured notes? I know, for some folks, they’ve been critical of structured notes just because cost layers in there, right? Issuing banks got to make its piece as well. So, I guess I’m just wondering how do you think about cost of structured notes or just making sure you’re getting a good deal on a structured note?

Anh: Right. So, for us, when we’re looking at this, we’re looking at total return of a portfolio, right? And so, and I have this conversation with clients, if you’re going to have something that’s providing you with downside protection, you’re going to have to pay for it. It’s like getting insurance, right, if you want to get something that’s going to provide you a benefit that being invested in a regular market is not, there’s a cost to that. Now, the question is is that cost makes sense, right, and are you willing to pay for it? And it’s only costly in the absence of value.

And we have seen, because I personally invest in structured notes for myself, and my clients, we’ve seen the value of what it has provided, one, on either they’ve gotten their money back on a down market or they’ve gotten more than the index return and also the ability to help them have a little bit of peace of mind during these times of volatility, knowing that a part of their portfolio does have this protection.

Michael: And I’m curious why structured notes as opposed to…there’s some buffer ETF structures out there, indexed annuities have been doing versions of this for a long time, just what led you to structured note as the vehicle of choice for this?

Anh: We’ve been doing structured notes before they were even popular. I think now, with the volatility they have…so, the buffered ETFs are good too, I like the buffered ETFs, however, there’s typically caps on the buffered ETFs. So, the advantage to the buffered ETF is, from a tax perspective, you’re not having to pay the capital gains when they mature but the features on them tend to not be as good as a regular structured note because of the enhanced upside. Or they’re capped, and the notes that we’re buying are usually uncapped notes. And so, for my clients that have a longer time horizon where we’re buying five-year notes, we’re hanging on to this long term. The upside is a lot better on the buffered ETFs, which are usually like a year, right, they’re much shorter timeframe.

There’s annuities that are doing these structured vehicles which we do use as well, and I think it’s different for every client, so, you have to determine if it’s the right fit. But we do think that it is a good fit for clients that are looking for this type of investment vehicle.

Michael: It almost reminds me of the distinction of advisors who like to use bond funds or bond ETFs versus those of us that really to buy individual bonds and ladder them, it’s just there’s some flexibility around the building blocks in how you set them up if you’re buying them individually versus in a continuously rolling fund format. And it feels like you’ve got a very similar framework of using structured notes versus a buffered ETF of, “I can buy the exact maturities, I get the assuredness of the maturity, I can get the maturity at the time horizon that I want, I get a little bit more benefits if I can buy longer terms on them because of how the structured note math works.” And so, I don’t know, my words would be like I feel there’s an interesting parallel there of buying ladder-structured notes versus a buffered ETF, similar to buying a laddered-bond portfolio versus a bond ETF.

Anh: Right, I see that. And I think every client has a unique need, right, and so, for us, this is…structured notes we’ve been doing for over a decade now, and, so, buffered ETFs I think have become more popular recently, and they’re coming out with new ones, and I have been looking at them. So, we may start using them. At this point, we have not because we’re still using our individual structured notes, but that’s something that we are exploring.

Michael: And so, then just practically speaking, how do you find them, buy them, manage them? Just, I think you said a lot of clients have a 30% allocation, they’re regularly maturing, so, you’ve got to repurchase roll issue to deal with on an ongoing basis as well. So, what tools or platform or manager are you using just to handle account?

Anh: Right, and that is a great question. And that process of ours has been a constant evolving process where we’re trying to make it better each time because it is such a laborious process of managing the notes. And so, one thing that has come out recently that has been a game changer for us is SIMON. So, SIMON is something that I think came out maybe three years ago, it’s about three or four years ago. They did not have this at all, and back then we used to just have to scour the notes. So, on a monthly basis, we’re reviewing, we’ll get our emails from the different wholesalers and look at all the different notes and we would identify…we would go through our clients and we would go, “Okay, here’s a client’s allocation. Here’s what they need to get added to their portfolio to meet their asset allocation. So, now, this month, we need to find large-cap international five-year notes.” And we want to make sure that clients have notes that mature every year and we also want them to have notes maturing every quarter of the year as well.

So, it’s very robust because the note features vary from quarter to quarter, depending on the volatility of the markets. Right? So, some months we’re getting really good notes. And usually, when it’s volatile, the note features are going to be even better. And so, the last thing I want to happen is, if we just have everything maturing at the end of the year, now we have to buy at one point of the year forevermore. Right? And so, we spread it through each quarter so that we have the ability to buy at different markets as well.

Michael: So, continuous, not just annual rolling and maturities on the ladder but, basically, quarterly…

Anh: Correct.

Michael: …maturities on the ladder so that you always get to reinvest. And, I guess, you can continuously dollar-cost average into current market conditions with whatever your mature averaging out on a rolling basis.

Anh: Yes, exactly. And so, that’s been the model that we have been utilizing, and it works for us. And so, now, with SIMON, it has been a fantastic tool that allows us to really filter out through all the offerings for the month, what we’re looking for. If we know this month we need five-year notes, four and five-year notes with these buffers and these indexes, once you filter it down, it’s pretty good. And then we only buy from major banks, so, we’re really buying out of the major banks with good credit quality, good balance sheets. And then that narrows it down even more.

And so, the trading has been significantly better now that we can place all of our trades on SIMON. So, it’s, essentially, here’s the CUSIP and here’s all the client accounts that we want to buy. And so, we’ll go ahead and just put that in, and you can just have it on a spreadsheet and then the trades will be placed. And then…

Michael: So, SIMON functions as, essentially, that marketplace and listing service to be able to search and screen and find the exact…

Anh: Yes.

Michael: …notes you want, so, the parameters that you want, and then facilitate trading implementation and have it allocated to client accounts?

Anh: Yes. And that has been a game changer for us and also in the client-review meetings as well. So, SIMON then allows you to pull up a note that you currently have in a client portfolio and you can see how it has performed. And so, the visual, I’m a big storyteller, in the visual, the graph, it tells it all. Right? When you see what the index that you’re tracking is performing versus the intrinsic value of the note, which is what it would be if it were to mature today, and you see the movements, that story tells it all.

And, usually, I will say in a review meeting…or, when you explain to a client, it’s a complicated concept, right? And so, you have to explain it to them every time. But when you can show them a visual of how it’s working, it really tells the story. And that has been a great feature of SIMON that we utilize for all of our review meetings.

Michael: So, for advisors listening, this is Episode 309. So, if you go to kitces.com/309, we’ll have links out for SIMON if you want to go check it out as well. So, Anh, I guess the other thing I’m wondering just in this whole journey and evolution, how do you come to this financial-advisor role in career as someone with a law degree, you said you’re a licensed attorney as well? So, how do you get from the attorney side of law school to end out in a financial-advisor career, in business?

Anh’s Journey Through The Financial Services Industry [1:13:02]

Anh: You know, it really just happened by luck. And so, when I graduated from law school, I took a job in business litigation, and it was a very brief stint because I did not enjoy litigation. And I think it was being in your early 20s, trying to figure out what it is that you want to do. I had always been interested in finance investments, and, so, at the time, the Goldman Sachs was looking to hire staff attorneys in their private wealth management division, specifically for Ayco. And so, I applied and ended up working there, and then quickly realized that I really enjoyed this because it was…well, first of all, when you go from litigation where you’ve got a winner and a loser or something very litigious and hostile, you go into a financial-planning field and you realize, “Wow, we’re all on the same team and we’re all working together for a greater cause, greater good.” And so, I really enjoyed that. And I was still able to use my law background. Right? And I will say my law background has been tremendous in my career in helping me work with clients, be able to understand things in a different way, and also, to this day, providing the estate-planning service that we have with my husband.

And so, I started at Ayco, and it was a really really steep learning curve and you were drinking from the hose and you pretty much learned everything because you were working with such high-powered executives because these were all C-level executives at “Fortune 500” companies that I was working with. And, at the time, we did everything for them. We did their investments, we did their retirement plans, their financial plans. We helped them with their enrollment period and benefits and their stock compensations and also their estate plan and then also preparing taxes. So, I had a team of CPAs that prepared the taxes but these were my clients, so, at the end of the day, I had to review the tax returns, I had to sign off on the tax returns.

And I would say the taxes were a big part of why I decided to go independent. I enjoy taxes but I can’t say that I love taxes but it is really the groundwork for everything. Right? But when you’re preparing and you’re in those tax periods, right, of April and October, and then September for corporate returns, it takes away from the planning process, the financial planning, investment planning. And so, as great of the experience as it was, I decided to leave to go independent because I wanted to really create a practice that fit my needs and my clients’ needs better.

Michael: So, when you were at Ayco, I think you said initially they were hiring for staff attorneys in the Ayco division. But were you there wearing the attorney hat or were you in a more client-facing advisory role?

Anh: It was both but it was more a client-facing advisory role. So, the reason why they were looking specifically for attorneys is because of how complex these clients were and they wanted someone with a legal background to understand all of the stock agreements and the contracts that these executives were receiving and their benefits. Because most of it were all legal agreements they had to review. Right? And so, they were specifically looking for attorneys to work there. And it eventually evolved into me becoming an advisor with my own book of clients.

Michael: And so, what’s that like, I’m just envisioning, in practice, you’re in your 20s and having executives who may literally finish being on CNBC talking about their “Fortune 500” company and then hopping on the phone with you…

Anh: Right. It was one of those pinch-me moments a lot of times. Because a lot of the clients I worked with, on any given time you can look at “Time Magazine” and they’re listed as the top 50 women to watch out for. Or you’re looking at “Forbes” and they’re recognized as a top executive at a company. And so, you quickly realize, “Okay, as intimidating as it can be, being a woman, and not just a woman but a minority woman in this field, you realize you got to just be confident in the work that you do and also that you know more than them in the area of your expertise,” right? And so, making sure that I was always ahead of everyone and everything that I worked with. So, making sure, from a technical standpoint, that I knew all my stuff very well was very important in the beginning of my career. It still is but in the beginning, when people are questioning, “Hey, you’re just starting off, what do you know?” you need to be able to show, “well, I do know these topics that I’m advising you on.”

But it was a struggle. It was really really hard. And I worked really long hours, it was one of those where, at some point…that was part of the reason why I left, being in that environment, because you’re working a very stressful career with very little support in the sense of just it’s you, you’ve got a team, but, at the end of the day, you’re still responsible for knowing and servicing and understanding and working with these types of clients. And so, that’s 2010 or so, I left and I started my own independent practice.

Michael: So, what’s that like to transition from just a firm as mega large and branded as Goldman Sachs Ayco to, “Now I’m opening up my shop.”

Anh: It was hard. At first, I was like, “What was I thinking?” Right? And that’s the struggle, I think, going from a wirehouse advisor right today to becoming an independent advisor. Nowadays, you have a lot of channels that provide support for these warehouse advisors to give them that administrative support, back then it was not really a thing yet. And so, when I left, it was like, “I have to do my own payroll, I have to do my own hiring, setting up an office, a phone system, email, fax,” all of the things that were just given to you. Right? It was just already set up. You really don’t know how much of the entrepreneur process you really have to go through to become an advisor that has their own solo practice until you’re actually in it. And then you’re quickly learning how to run a business and also serve clients at the same time.

And you have a lot of failures when you start off, like, “Okay, well, that didn’t work,” or, “I’m trying to cut costs,” or, “what can I do to really figure out how to provide the best technology for my clients without spending a ton of money on technology?” right? So, those are things that really, as an advisor coming out, you’re really trying to…and, at the time, I did not have a Kitces podcast to listen to either.

Michael: Sorry, not going quite yet, you were before the time in 2010.

Anh: Right, but nowadays there’s so much more information. And also with social media being available to reach out to other advisors to chat with and pick their brains. I feel like the information and exchange of information is so much more now than it was before. And that was a struggle, just not having a place to go to to get answers or to find help or to, “Am I doing this right?” And that’s a struggle, being any independent advisor.

Michael: So, what are your go-tos now?

Anh: So, fortunately, now I will say I have a very strong support unit in the sense of I’m affiliated with LPL, they have been a tremendous support for me in providing me with the support I need from an operational standpoint, whether it’s through compliance, through our back-office support, and also through them providing us with the resources to run a successful practice. Right? So, having a business consultant that they provide for us to help us really sit down and evaluate our business and see how they can help us. And so, I’ve really really utilized the services that LPL has provided and really taken that on to see how they could help me grow my practice. And also connecting with other advisors that are similar to me or having practices like mine, so, really connecting with these advisors, staying in touch, having study groups. I have quite a few different study groups that I’m a part of. And I will say I find my best practice management tools and techniques through these intimate study groups that I’m a part of. That’s really where I get my best ideas because these are advisors that have been doing this successfully. They’ve either been doing this for a long time or they may be new but whatever they’re doing is working. And I like to learn what other advisors are doing.

Michael: And so, how do you find your study groups or find the right study groups?

Anh: So, they’ve all been through the different things I’m affiliated with. So, they’re either through LPL’s group of advisors that I’ve met through different groups that they’re connected us with, so, LPL…one group, for example, I’m a part of the Advisor Inclusion Council, and, so, part of that is really identifying different groups that really want to come together to share ideas, like the Women’s Business Community or the Asian American Advisor Group. Right? So, those are things that I’m a part of that we will meet and have events, either virtually or in person, and we’ll talk, “What are the struggles that we’re having? What are some successes that we’ve had?” Or at conferences, right, you’ll meet people and, from there, connect and stay in touch. And LPL will also team us together with different advisors that they think we’re all the same group together. And so, we’ll get together for meetings as well.

The Surprises And Low Points Anh Encountered On Her Journey [1:24:12]

Michael: So, what surprised you the most about trying to build your advisory business?

Anh: There’s a surprise at every turn, Michael. Here’s the positive surprises is, when I left to start my own practice, it was more of just being young and not knowing and saying, “Hey, if this doesn’t work out, I can start again,” but quickly realizing what an incredible industry this is that I can create something that I am proud of, create an office and a team that we have the same values, work with clients that have the same values and beliefs, and get to pick and choose what I want my business to be. And it’s not without struggles, it’s not without hard work, but there’s very few industries that give you that flexibility and allow you to create something that can be different for every single office. Right?

And there’s many different ways to do this and be successful and live a great life. And for me, being able to run a practice where I still have the ability to care for my clients, do what’s best for them, but also spend time with my boys…I’ve got two young boys, they’re four and six, being a present mother. I’m volunteering at their pumpkin patch tomorrow morning. So, doing those things, that’s been the biggest surprise for me is, when you become an independent advisor, you can still do well, be successful, but also pick and choose the type of life and practice that you want for yourself.

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

Anh: The low point on this journey really for me was the struggles that I had starting off and not finding mentors that looked like me, not finding someone like me. Our industry still needs a lot of improvement in diversity, right, and that’s something that I’m working hard to see how we can help change that. But there was no other Asian advisors when I started. I did not know a single Asian, especially an Asian female advisor. And to have to go through an industry that wasn’t very inclusive back then either, not inclusive, not warm and welcoming, and struggling to figure out, “How do I prove to everyone,” because I didn’t come from money, I didn’t have a circle of influence, I didn’t come from wealth, “so, how do I build upon that? How do I get clients? How do I build a network and how do I get people to want to work with me?” And that’s a struggle I think that we all face when we’re starting out.

And even now, for me, it’s constantly evolving. Right? Now that I have my practice and we’ve built a great practice around some wonderfully amazing clients, we get to pick and choose the clients that we want to work with and the clients that fit our values and our goals. But when you’re starting off, it’s not always like that, you don’t get to pick and choose, right? And you have to decide, “Is this for me?” because it’s a struggle, especially back then, the compensation model was different back then, it was all based off of what you brought in. Right? So… And so, now my hope for our industry and for the future is to create a more supportive environment, especially for those advisors who may not be coming from a background that allows them to have a network, a circle of influence but they’re going to be great advisors because they have the qualities for it but they just don’t know that they can succeed because they weren’t told that they can or they didn’t think they had the opportunity.

The Advice Anh Would Give Her Former Self And Younger, Newer Advisors [1:28:17]

Michael: So, what do you know now you wish you could go back and tell you 10-15 years ago as you’re still at Ayco and getting your career started?

Anh: I think nowadays and back then I was always very just…you’re really self-conscious and you’re really concerned about the image you’re portraying, “Did I say that right?” “did I do the right thing?” “am I wearing the right thing?” just every little thing because people judge you based off of your first impressions. Right? And now, 17 years later, I will say, yes, people look at you but also they see how authentic you are. Right? And I think being authentic really shines through. People can see and hear and feel your passion when you’re speaking. And when you’re not passionate about something or you’re not believing in something, then people are going to know. And that comes down to every ounce of our financial-planning practice and what we provide for our clients because everything we do is something that we believe in. And it is truly because we feel like we are creating impact in our clients’ lives and their children’s lives and the charities that they’re gifting to and just being able to live well and do good. Right? Which is our motto, at the end of the day, and we really strive to believe in that.

And so, before, my younger self, I don’t know if authenticity was something that I focused on because I was trying to figure out what did everybody else want, right? And so, it’s taken some time to have that evolve. And then also to…and I always tell this to people that ask me for advice about being a financial advisor is be thoughtful about the relationships that you make. I think sometimes people, they network just to network and it’s like you go to an event, you just pass out your cards. But for what, right? It’s be thoughtful with the people that you meet and really nurture those relationships. Because these relationships are really what’s going to get you through life and anywhere in life is the relationships you build, how they see you interact, the work that you do. It’s not just about a numbers game of how many people you can meet. And so, that’s something that I’ve realized through my career is really to be intentional and purposeful with the relationships that I have and the people that I meet.

Michael: So, any other advice you would give to younger newer advisors looking to come in the industry today or, I guess, particularly young women or those of Asian descent that are trying to figure out how to do the journey that you did?

Anh: I have a few tidbits that I think if I had known would be helpful is, one, if I had found a mentor I think that would’ve helped me a lot in the beginning of my career. And I’m always very open with that, I’m open to people reach out to me all the time and they’re asking for advice. And especially young women, I think this is a great career for women. It is an incredible career, it is something that has allowed me to do so much and to dream so much and to create and inspire others. And it has endless opportunities.

And so, just don’t be afraid of it because it can be intimidating from what you see but, if you can find the right mentors and find the right firm or company to start at, this will really be a great and rewarding career. And so, finding those right people and reaching out to them. And I will say most people are very helpful. If you send a very thoughtful message and they see that you’re seeking help and advice, most people are willing to help. Because I’ve been there, I’ve been through this, and I’ve been incredible to have some really amazing mentors in my career, Jan and Donna, who I merged my practice with. They have been trailblazers in this industry, being in the industry for over 30 years, and doing what they did back then when there were very few women. They’ve been incredible mentors to me and just teaching me different things that I did not know. And so, I would definitely say just go to your different events, look at different associations and different groups, and see where you can connect with people.

How Anh Defines Success [1:32:58]

Michael: And, I guess, in that vein…so, again, this is Episode 309, so, if you go to kitces.com/309, we’ll have links out to Anh’s LinkedIn page if you want to find that journey and reach out, as you generously offered. So, thank you.

So, as we wrap up, this is a podcast about success. And one of the themes always comes up is just the word success means very different things to different people. And so, you built this incredibly successful, as I framed, highly-leveraged solo practice around yourself of crossing 300 million dollars under management, as an individual advisor, and, so, the business has been very successful by any objective measure of the term but how do you define success for yourself at this point?

Anh: I would say that I define success by the term freedom. I have the ability to do anything that I want. I can do everything, I don’t know if I can do everything at once but I can do anything. And when I say that, the freedom to spend time with my children, the freedom to volunteer in their classroom, the freedom to pick and choose the clients that I want to work with, that are aligned with our core values, and the ability to provide and pick and choose the services and the level of service that we want to do for our clients. I think, for me, that has been a sign of success as the freedom that I have to do all of these things and in a manner that allows me to have flexibility in the design of everything. Right?

And a lot of times, when you’re starting off, you’re really tied down to a certain either process or you’re tied down to what your manager wants or senior person wants. Right? And so, for me, I was there right when I started my career. We had protocols, we had process, we had to look, talk, walk a certain way. Right? And so, now being able to define all of those things but for me also allowing my team to do that as well. Now, we have certain processes and protocols but really letting my team members feel like they’re a part of this process. Because, like I said, my team, they’re my family. And my clients, they’re my family. And making sure that this is not just about me, it’s about everyone and everyone around me and our team and our clients. We’re really all in this together and we’ve created this and have gotten us to where we are today.

Michael: Oh, I love it. I love it. Thank you so much, Anh, for joining us on “The Financial Advisor Success Podcast.”

Anh: Thank you for having me, Michael. It’s been so wonderful to have this conversation with you.

Michael: Likewise, thank you. Thank you.