Welcome back to the 297th episode of the Financial Advisor Success Podcast!
My guest on today’s podcast is Andy Panko. Andy is the owner of Tenon Financial, a virtual independent RIA that oversees $70 million in assets under management for 43 retired client households.
What’s unique about Andy, though, is how, shortly after launching his practice, he created a Facebook group so that he could share his expertise directly with the types of clients he wanted to serve… which unexpectedly became so successful, that in just two short years, he reached the client capacity goal he set out as he went from $0 in AUM to $70 million!
In this episode, we talk in-depth about how, after seeing little success in his initial ‘traditional’ marketing efforts like seminars and creating profiles on advisor referral sites, Andy decided instead to create a Facebook group focused on “Taxes In Retirement” (so that he could more directly engage with and demonstrate his expertise to the types of clients he wanted to work with), how Andy built the initial list of members for his Taxes In Retirement group to gain enough momentum that Facebook’s algorithm would make his group more visible to sustain its growth in bringing new prospects, and how Andy’s Facebook group is still gaining momentum but he has purposefully decided to not take on any more new clients (so that he can still have capacity and flexibility to serve his current clients) and instead has dedicated a page on his website with a list of advisors that have similar focuses so that they can share in the prospect funnel that he created.
We also talk about how, after listening to industry podcasts on his commute while working in the traditional corporate finance world, Andy’s eyes were opened to the possibilities of financial planning which led him to pursuing his CFP marks (along with some other designations) before he ever quit his old job to launch his new firm (to ensure he could hit the ground running when it was time), how, after seeing how his mother’s advisor was not helping her gain the most she can from her Social Security claims, Andy decided to take it upon himself to learn more about retirement planning to help her, which led to an aha moment for him as he realized he truly enjoyed that type of financial planning and would focus his own practice on helping retirees with value-added tax planning, and how once Andy knew what type of practice he wanted to launch, he intentionally structured it with a flat fee model so he could clearly project what his revenue would be, and then used his business projections to determine the target of how much savings he would need to set aside to cover the first three years while his client base got off the ground and ramped up.
And be certain to listen to the end, where Andy shares how, even though he intentionally set out to be a solopreneur for the flexibility and control, he is looking to fill the gap of camaraderie and brainstorming that he misses from when he was part of a larger firm, how Andy didn’t realize he was inadvertently creating a virtual practice by gaining new clients through his Facebook group but decided that it was a positive for him as he can maintain a more casual appearance and approach with his clients, and why Andy believes that though it may take time and be difficult to achieve, it is important for those starting in the financial services industry to continually work hard to find the right position for them that suits their needs and aligns with their values to ensure they can build a longer, much more fulfilled career.
So, whether you’re interested in learning about why Andy decided to become a financial planner after seeing the benefits it provides to clients and their financial futures, how Andy leveraged the connections he made through his Facebook group to turn prospects into clients, or why Andy decided to add a tax planning focus to create a stronger value proposition for his clients, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Andy Panko.
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Michael: Welcome, Andy Panko, to the “Financial Advisor Success Podcast.”
Andy: Hi, Michael. Thanks for having me. I’m looking forward to it.
Michael: I’m really excited about today’s episode and talking a bit about just, basically, social media to grow your advisory business, social media to really, actually, grow your advisory business. There’s been so much focus around social media for, I guess, really, the better part of 10 years now. Early 2010s, the industry started talking about social media as this great new marketing channel, driven in no small part by a lot of social media consultants that were really trumpeting social media as the future marketing channel.
But then, the past 10 years has gone by, more and more advisors are engaged in social media on, at least, if we look at industry numbers, LinkedIn, number one, Facebook, number two, although mostly for personal stuff, and then Twitter, third. And then there’s a long tail of Instagram and TikTok, and the rest. And so, lots of engagement, really little actual client growth.
In fact, we did a study on the Kitces platform of advisor marketing and found social media had one of the highest failure rates of marketing strategies. People who did it for a year and literally didn’t get a single client, and it’s really, really time-consuming to do it.
And I know, you have had, to put it mildly, radically different results, basically, filled up a target client base in the better part of two years, driven entirely by growing on social media with a particular focus into Facebook groups. And so, I’m excited to talk today about what does it look when you grow a practice in social media that actually grows with social media. What have you done that makes Facebook a client driver for you that nobody else seems to be figuring out how to do to make clients come in the way that you have?
Andy: Yeah, I have some thoughts how and why it worked, but I’d be lying if I were to say there isn’t a healthy dose of good luck and, I guess, random timing thrown in there.
Andy’s Inspiration To Become A Financial Planner With A Tax Planning Focus [05:44]
Michael: So, maybe to kick us off, let me actually start by having you describe just your advisory firm, what you do, and how you’re positioned. And then we’ll come back into how did you actually grow it over the past couple of years to get it to where it is.
Andy: Sure. I think my backstory will help tremendously in framing my views and philosophies and thoughts on the industry and why I did things the way I did, so we can get into that. But as far as my business as it stands today, launched it November 1st, 2019, from true scratch, laser focused on being a solo RIA, fee-only RIA, which I am, never had intentions of hiring, outsourcing paraplanner, health, etc. I wanted a quintessential lifestyle-type practice.
Michael: And why? Was it that sort of quintessential-lifestyle label, like, “Just, I want to get enough income to pay my life and let me do the things that I want to do? And then, I want the flexibility, so that’s the goal.” Was that where you were going with it?
Andy: Yeah, largely. And again, going back to my 20 years prior, still in financial services but on the corporate side, that sort of built or let me decide what I did and didn’t want out of my personal and professional life going forward. So that sort of painted the picture for me that a lifestyle practice with flexibility, with control, without employees, without a lot of bureaucracy is the way I want to do things.
Michael: And so, I know, for at least some parts of the industry, there are people that use solo lifestyle practice in a very positive connotation, the freedom, the flexibility to do what you want. There are, frankly, some that use it in a more negative tone and context of, it implies small in a not necessarily good way or limitations. Was that a concern for you? Did that faze you?
Michael: How are you thinking about or getting comfortable with solo lifestyle practice?
Andy: Funny you say that. No, it didn’t faze me. I knew, regardless, what you label it, I had a very clear intention of what I wanted my personal and professional life to look like, vis-à-vis me building this advisory practice to where I’m pretty sure I would have been able to get it.
Michael: So, you had a clear vision of lifestyle solo, and it just sounds like, for you, it was control, flexibility that was the driver.
Andy: Yeah. So, let me try not to get too off on a tangent here, but my backstory is important. So, I graduated college in 2000, went to school for finance, which was normal sort of corporate finance stuff, but wanted to be what I thought an advisor was. I ultimately wanted to help people make decisions about money. So, logically, I interviewed at a lot of the places that were interviewing on campus for roles they called financial advisor and quickly figured out… Yep, you know I’m going with this. We’re about the same age…
Michael: …I can kind of see where this may be leading.
Andy: Not to name names but…
Michael: So, which? One of the large insurance companies…
Andy: Multiple large insurance companies, one of which is a well-known multilevel marketing thing, a few of the major wirehouses. And quickly, I realized they were all just sell, sell, sell. They weren’t about advising. And I had multiple rounds of interviews, if you want to call them that. All but one was purely commission. One of the wirehouses, at least, had a first, small, year living stipend that went away after the first year.
So, I quickly realized… it just felt dirty. I’m not knocking sales, I’m not knocking the products or services they sold, it just wasn’t me. I was very clear. I’m not a salesperson. I will be the worst ever at having to sell in the conventional sense of the word.
So, I kind of got disenfranchised with what I thought the financial advisory industry was and gave up on that, stumbled into an actuarial job at a large U.S. insurer. My resume was floating around on monster.com at the time. They found me an actuarial role, and I took it here in New Jersey.
And it was cool. First year, I was doing reporting on a pension fund product that they managed sort of the actuarial annual evaluations of liability, risk assets, and stuff.
Andy: And it was a junior role, reporting role, kind of got bored. And so, I wanted to see and do as much as I could, as I was young and eager. So, I kind of put myself on my own rotation program at this insurance company.
I had four jobs there in four years, all on my terms. I didn’t get kicked out or whatever. They were all voluntary moves. My second one there was in there helping manage your general account, so doing a lot of the portfolio management, reporting, and analysis for assets and liabilities. My third role there was in their securities lending department, which I learned a boatload about trade desks and behind the scenes of how insurance companies make money and where idle pots of securities go and how they get used. And my fourth role was private placement, credit research, so doing investment analysis of borrowers looking to borrow private money.
Michael: Oh, interesting. So, you’re just really deep into the backend guts of what happens with really large institutions with really large pools of money.
Andy: Yes, exactly. In this case, specifically, insurance, but a lot of this stuff applies just the same across banks and brokerages. In that time, so I stayed there for four years, largely because they were paying 90% for me to get my MBA through a part-time program at Rutgers University. So, I was going to work at the day, school during the night, and bang that out in two and a half years, which was intense, but got that done. And sure enough, they paid 90%, so I paid, I don’t know, three grand out of pocket for my MBA.
Michael: Wow. Right, so nice deal, good incentive to hang out for four years, above and beyond getting some good experience in the work environment itself.
Andy: Exactly and make sure I learned a lot. As I said, I put myself in my own rotation there. And then, with MBA in hand, I was like, “Okay, let me see what this will get me.” There was no requirement to stay after completing the MBA, even though they paid for it. So, pretty soon after I got my degree, left, ended up at a large Japanese bank doing counterparty credit analysis, which I had never heard of and didn’t know existed. It was during…
Michael: And wait, this is mid-2000s at this point?
Andy: This was 2004, summer of 2004.
Michael: All right. So that’s a heck of a time to start going in the counterparty world because you are in the lead up for all things financial crisis. This is the peak era of rate swaps and credit default swaps and all the stuff that was getting built as layers and layers on top of the mortgage housing market.
Andy: Which is interesting you say that because that’s exactly what I did. I worked at a bank where we did interest rate derivatives, FX, and credit default, credit derivatives with hedge funds and other financial institutions. So, I did the analysis, basically, the counterparty credit analysis of who we’re willing to take exposure to and how much and stuff like that.
Michael: So, not necessarily analyzing the investments itself but, literally, the counterparty. Like, “Okay, if this credit default swap has to pay because the thing defaults, can the large investment bank on the other end of this actually pay and make good, or, I guess, as it turned out, could it be the Bear Stearns or Lehman of the future that can’t make good on this thing?”
Andy: Yes, basically. And for a few years, I did the counterparty analysis, the people we were in the other side of the trade with. And then also, for a few years at that same place, did market risks, so that was digging into the products themselves, the interest rate derivatives, the FX, the credit derivatives. So, again, learned a phenomenal amount about the behind-the-scenes of how this whole industry works and how the products work and what have you.
Same thing, every few years, though, I kind of got antsy, got little complacent, wanted to see and do and learn more. So, I kind of bounced around at a lot of the large, major global investment banks doing more or less the same stuff, largely providing financing in derivative trades to hedge funds and private equity funds as the majority of my career.
And same thing, I just learned a boatload about the products, the strategies, and the process of being around and doing intensive due diligence on investment managers. I just learned a phenomenal amount about the products they trade, their investment strategies, their risk management, their treasury, their operations, and just got such a full body cavity search of how institutional asset managers, namely alternative asset managers, function and the products that they use, so super valuable stuff.
But all the while, I still always had this itch to help individuals, right? I made good money, worked with great people, learned a ton doing what I did, but never really, truly fulfilled, in that I didn’t feel like I was making a difference per se. I always wanted to get into sort of the personal individual side of financial stuff.
Michael: So, what was the financial advising stuff you wanted to do originally but didn’t find and get when you started doing interviews and it was all wirehouse and insurance company investing in insurance sales job?
Andy: Correct, yep. And even along the way, I have family members who were working with financial advisors, traditional percent of AUM advisors. And I tagged along on some of those meetings between my family members and those advisors. And I wasn’t really impressed still with that part of the industry. Whereas in college, it was all just sell, sell, sell, which I didn’t like. Now, it was all just sort of gather assets, charge handsomely, come in every quarter for an overly convoluted flipbook about investment returns, and that’s about it.
So, that also sort of rubbed me the wrong way. I was like, “Okay, I still don’t think I like this financial advisory thing based on what I see, even though it’s slightly different than just pushing insurance on people.”
And what really sort of blew the lid off for me was, I guess, it was 2016, maybe. I was like, “Let me look more into this financial advisory thing to see if anything changed,” and came across the XY Planning podcast. And man, that was it. Hearing the stories of other folks on there, I was like, “Wait a second, yes, you can actually give advice, give planning how you think it should be done, not just selling product, not just gathering assets. You can charge differently…”
Michael: So, this was the “XYPN Radio” podcast?
Andy: That’s correct, “XYPN Radio,” 2016-ish, I think, I don’t know, give or take a little.
Also, what coincided with that was my mom, who again worked with a traditional wanting-his-one-quarter-of-a-percent-AUM guy. She was transitioning into retirement and was trying to figure out her Social Security claiming decision. And she has one of the more complicated ones where she’s divorced from my father. They were married for 10 years. She’s of an age where she can still do the restricted application thing.
And her advisor didn’t quite know the specifics of it. He knew enough to know, “Yeah, there’s something else going on here, but I’m not sure exactly what.” So, I helped her dig in and research Social Security, which up to that point I knew nothing about. I frankly thought it was like a forced savings account the government setup for all of us, which now I know is dramatically not that.
Michael: Not, kind of the other end, but yep.
Andy: Yeah. But in the process of helping her research that, just like the proverbial light went off. I was like, “Wow, this is what I thought advice and planning should be.” My mom getting her Social Security right is the most impactful thing she can do for her future, more so than overcomplicating a portfolio of two dozen different mutual funds or whatever. This is it.
And so that coincided with me finding the “XYPN Radio” podcast. It was like, “Boom, this is my future.” And from that point forward, it was just laser focused on, “Okay, let me learn as much as I could about the industry, about the different ways to do things, how and why I want to do stuff,” and bringing it all back after having spent, at that point, I guess, what would have been 16 years in the industry, changing jobs every few years.
I realized the problem is not the industry. The problem is me. It’s just it’s not what I want to do, it’s not fulfilling. Again, money was great, people were great, I learned a ton. But I don’t want to do this for another 20-something years. So, that set my…and I had long commute into and out of Midtown Manhattan from suburban New Jersey, work long hours.
Michael: So, a lot of podcast-listening time.
Andy: Soaked up lots of podcasts in the New Jersey Transit trains for an hour and a half every day, plus subway, New York City subway, plus walking as well. And just, I manage people, I worked in really large places. I’ve gone through the dog and pony show of having to do semi-annual reviews and all that bureaucratic stuff, not to say they’re not important, but I didn’t enjoy it.
And I just I don’t want that. I want something small. I want more control. I want more flexibility over my life in terms of I don’t want to have to commute two and a half hours a day. I don’t want to be shackled to a desk from 8:30 to 6:00 every day. I want more discretion with what I do, how I do it. I want something more meaningful and fulfilling. I want to help individuals, not just help hedge funds, make more money.
And that all sort of framed, “Okay, I want to do this retirement planning.” And I knew I wanted to focus on retirement planning. For whatever reason, I’m very fascinated by that and IRAs, and taxation matters. I have zero interest in helping or working with people like myself, 40 years old with kids and a house and saving for college. It just doesn’t do it for me professionally. And so that was it.
Michael: I’m curious to hear a little more about that. For lot of advisors coming into the industry, particularly with sort of alternative models, which I know you have, we’ll get into more soon… But you had mentioned earlier, you were not a big fan of the AUM model, I know you don’t run one now. A lot of advisors I find that do that, it drives in part because, frankly, they’re in their 30s and 40s, they’re looking at their peers in their 30s and 40s. Everyone’s trying to find an advisor, a lot of them are having trouble finding a good advisor who will just give them advice. And so, they literally make a business to help themselves and their peers.
So, I’m very struck to hear like, “I really don’t want to work with individuals like myself.” I guess, in essence, you’re saying, “I want to work more with individuals like what my mom’s going through than what I’m going through.”
Andy: Yes. And I think that’s why my real sort of inflection point in life and in business was helping my mom with her Social Security decision. And that, I guess, just sort of set the tone for, “Okay, that really sparked it for me. That was clearly retirement focused.” And I don’t know, it just, from that point forward, it was like, “Yep, this retirement thing…”
And I view it as a big, complex puzzle. I’m a fairly technical guy. So, the more I researched and read and learned, I realized, retirement, not to say the accumulation stage of life, the building and saving stage, doesn’t have a lot of parts, isn’t a lot of value to be had. But I think once you hit the point where you’re retired and start to de-cumulate, I think it’s actually more technical. There’s more involved, planning and melding together a cohesive plan about pensions and Social Security and taxes and home equity and IRA distributions and all that stuff. So, that fascinated me and still does to this day.
And I haven’t looked back from day one. It was like, “Yep, retirement is what I want to do.” I knew I wanted to make a strong tax angle from what I saw about the industry. I also realized majority of advisors don’t or flat out can’t do tax advice, which I thought was a tremendous disservice because I realized there’s tax implications to virtually every financial angle of someone’s life. Yet most advisors say, “We can’t do tax planning.”
So, that’s what I wanted to do, pool that all together, tax efficient, retirement-focused financial planning, investment management. That’s what I wanted, and I want to do it as a complete solo.
Michael: Interesting. So that was tax-efficient, retirement-focused financial planning as a solo, that was the…
Andy: Yep, and investment management. I wanted to also manage investments.
Michael: Which, you did, kind of live in that world for 20 years before coming here.
Andy: Exactly. So, yeah, I know I have the benefit of… I didn’t work directly in retail consumer facing financial services, but I like to think, I know I have such a deeper, broader understanding and appreciation of what really goes into investment management and the products behind it. And one of the investment banks I worked at, they were one of the authorized participants for a large ETF provider. So, I even saw how the sausage was made in creating and redeeming leveraged ETFs.
Michael: Oh, man.
Andy: Yeah, it was awesome. And insurance as well, I have a unique understanding of behind-the-scenes insurance. I understand how general accounts work, how they’re invested, how products are priced and created. Those are things that people who’ve only sold insurance don’t know. They don’t have that appreciation.
Michael: So, I can see these pieces coming together, did the corporate world for 20 years really want the freedom and flexibility of the solo, but made good money in the corporate world. “So, I want to be able to leverage myself up as a solo enough to still drive good dollars. Always had this interest towards financial planning, so I want to get back to the individual client end, spent 20 years in the investment management realm, so I still want to do that. Worked on the retirement transition with my mother found, I really liked this sort of taxes and retirement intersection thing that’s going on.”
And so, it sounds like all these pieces start coming together from their various directions to say, “Okay, I’m actually getting a pretty clear vision of what I think I would want this to look like.”
Andy: Exactly. And one more anecdotal story about the disservice of not doing tax planning. I have another relative where I went to a meeting with him and his advisor, handful years ago. And I had reviewed his tax return, which his advisor didn’t, and I saw, he was just over the threshold for Medicare premium surcharges. And the advisor…
Michael: No, it could mean a thousand dollars the other way.
Andy: Oh, dude, it wasn’t even…it was a few hundred bucks. And I brought it up to the advisor. And a lot of his income was voluntary IRA distribution. He had some annuities, so that was guaranteed locked in, as well as social security, but the rest of it was voluntary, discretionary IRA distribution.
I asked his advisor, “If you would have taken out,” I forget, it’s like 500 bucks, whatever, “500 bucks less, he wouldn’t have had to pay these premium surcharges. And furthermore, at the state level, here in New Jersey, that income also knocked him out of the property tax rebate by the same few hundred bucks.” So, I’m like, “How did you not know this and bring it up?” And their answer, with a straight face, was, “We don’t do tax planning. Sorry.”
I was like, “All right, this is it.” That solidified it. That’s just such a tremendous disservice. Had you put in a few extra minutes of work and some basic understanding of some core, tax-related retirement angles, you would have saved this guy hundreds of bucks. A few more than that, a few thousand bucks, because of the property…
Michael: Yeah, probably a few thousands. Well, because it depends how big the property tax rebate is. But, yeah, probably a few thousand bucks for being $500 on the wrong side of the line.
Andy: Yes, so that was another codifying event. I was like, “Yeah, you have to fold in tax considerations. You don’t need to be an absolute tax expert. But stuff like this, if you’re truly retirement-focused, as these people put themselves out to be, there’s no excuse for not doing this.” That was my feeling at least.
Using A Flat Fee To Outline Future Expenses And Revenue As A Solopreneur [24:32]
Michael: So, I’ve got to ask, because I’ve seen this as a challenge for others that have made a similar kind of transition that you did from a career in very large financial services firms, really can be any large firm, but, particularly, career in large financial services firms, and then going out to being a solo on your own. So, I’m wondering, did you have any concern or anxiety of not having a big firm name on your business card when you’ve always had a big, reputable firm name on your business card, and now you’re going to go entirely out on your own with a name that you’re just going to make up and say that’s your firm? That’s what happens when you launch. Were there challenges for you in taking that kind of leap from big firm environments to, “Now, I’m just going to be foraging in the wilderness on my own”?
Andy: I give a lot of credit to podcasts like yours and “XYPN Radio.” I soaked those up for years in my sort of diligence or research process, prior to leaving the corporate world and starting my thing three years later. I knew what to expect. I felt very well versed and aware of the angles and pitfalls to watch out for in this process.
So, to answer your question, no, I was at peace with the decision and the risk. And I knew I was onto something. I know I’m a sharp guy. I don’t like to boast as much as it sounds right now I am. But I know I’m a sharp guy. I know I know the stuff. My concern is, how do I get this out there in front of people? How do I get myself known? If and when I can do that, I think I’ll be okay.
But going back to, again, like XY Planning podcast, they always beat into people, “Your personal expenses can sink you in this business. If you don’t have a few years runway to make this work, you’re going to have to hang it up.” So part of the reason why it took me three-plus years to plan this business, was also to save a stockpile of cash.
And my wife also works, thankfully, I’m married, and she was supportive of this. She works, she gets benefits. So, that was huge. We have two small kids, so I needed benefits. And my analysis was, I think it’ll take me 5 years to get this business where I want it to be, which ultimately is 40 to 50 clients as a solo, give myself 5 years. I had enough cash saved up that I can have literally zero income for two years, inclusive of business expenses, and still just be burning through cash, not tapping home equity, God forbid, not hitting the kids’ 529s or whatever.
So, I was comfortable with that. And listening to you, I know you’re like…
Michael: So, it sounds like two-plus years’ worth of living expenses?
Andy: And business expenses, yeah.
Michael: And that was all of it? And then, you had even a little bit more because maybe by year three, you’re making not zero but not full income. Were you…?
Andy: Yeah, exactly. I figured, if I’m not making any income by a year and a half, two years in, then something’s not working and let me revisit…
Michael: Yes, and there are probably other challenges. It’s hard getting going, but it’s not literally zero for two years.
Andy: Exactly. And I got this from listening to you. I think you said somewhere around the 18-month point, maybe 2 years, you’re not full steam, necessarily, but you know if this is going to work or not.
Michael: Correct, yes.
Andy: So, that was one of my beacons here, was give me a year and a half, two years, by then I’ll know. But otherwise, I can have zero income for two years and cover personal expenses plus business expenses, just from burning through cash.
Michael: Okay. So, you had a three-year build-up of stockpiling cash to be able to put away two years’ worth of living plus projected business expenses, so that you would have the ramp-up period. And if it’s ramping up along the way, two years of expenses should last you three or four, because it’s ramping up as you go.
And then, ultimately, five years was how long you expected to get to the 50-ish clients that you wanted to get to, to make the business work economically for you.
Andy: Correct. My expenses are low. I would have been profitable in terms of breaking even with just a few clients, but where I wanted it to be, 40 to 50 clients, I figured out, I don’t know, five years felt like a fairly conservative guess.
Michael: Okay. And so, what was the vision of the business by four to five years out? Was it a client count goal? Was it a revenue goal? Was it like 40 or 50 clients at X dollars per client? How did you frame up the end goal of where you wanted it to be?
Andy: Yes, to all of those. And this gets into a big part of my DNA and what I do. And part of the reason for my success and growing so quickly is, I charge a flat annual fee, which does a few things. But if nothing else, it makes the revenue projections and long-term planning really, really pretty easy because I know, to the penny, what my average revenue is going to be per client.
So yeah, it was a mix of all those things. It was like, “Okay, 40 to 50 clients, I know what I’m going to be charging per client. I know what that’s going to equate to total revenue. I know what my expenses are.” So, I can map out with a pretty good clarity what my take home is going to be.
Michael: And what was the revenue per client that you were envisioning back then when you were getting started?
Andy: So, just fee things, a squirrely topic, as you know. And there is no right or perfect answer. I put a lot of thought into triangulating what I thought was a fee, a fair fee, a mutually fair fee for both clients and myself. Part of my 20 years in corporate finance was seeing just how many boat loads of money could be made in investment management.
I didn’t want to overcharge people. Now, overcharge is a subjective term. I fully agree with that. I don’t want to undercharge either. I think advisors working with someone who’s got 50 grand, the advisors making 500 bucks a year, you’re doing a disservice to yourself. You’re giving away your services and that ain’t right.
So, I was like, “Let’s cut the nonsense. I don’t want to undercharge. I don’t want to overcharge. Let me just come up with a fee that I think is fair for what I’m going to be doing.” Now, I do an all-in flat fee that includes investment management and planning, not tied to asset size. But it works well for me and what I do, because I have a very clear focus from the get-go of who I wanted to work with, what they look like, what their complexity is going to be, what types of things I’ll be doing for them, what their pain points are. I’m more or less I have this sort of homogenized pool of clients where it’s kind of the same process and I’m thinking about the same things every day so I can be efficient and quick in what I do.
And anything that any client or prospect that doesn’t fit that model, I freely tell them right up front, “No, you’re too complex.” “You’re not complex enough. You’re not going to get enough value out of me.” “There’s too much going on. I’m not interested.” So, I was intentional about who I wanted to work with. Therefore, this flat fee thing makes a lot of sense for the structure of the business.
So, coming back to how to come up with it, it was a few things. One was, let me figure out roughly how many hours I think I’m going to be spending on everyone, not direct face-to-face, but just attention behind the scenes, whatever. And let me apply some hourly rate. Well, my hourly rate is, I don’t know, I was like, 250 to maybe 500 at the high end. And I figured, let’s just assume 20-ish hours per year, times some hourly rate, what does that come up to? Let me also sort of benchmark this against what would the typical 1% of AUM be for my typical clients? What would they pay under 1% of AUM? Let me make sure I’m not too far off from that.
And I know I was going to be lean and efficient. And I know I’m going to focus on a niche, if you will, of fairly plain vanilla retirees who are looking for really good tax-focused advice. I know I can be efficient and sort of pass-through savings and stuff. So, I came up with single folks, $6,000 a year, married folks $7,200. And that was just sort of subjective. Let me do a little bit of a difference for single versus married.
That’s what I came out of the gates with day one. I was also doing pure hourly. And one-time plans because I knew having no clients, I had time, and I could use some revenue. So, I did do some straight-up hourly engagements. One was three hours. One was five. I did about a dozen different one-time financial plans.
But my real focus was, I ultimately wanted to get to 40 or 50 ongoing clients along the way. I would sort of jettison off to hourly and one-time-plan stuff, which I did. So, that was my pricing 6000 for single, 7200 for married.
Michael: And so, if you can get that to 40 or 50 clients, you’re projecting out somewhere in the high 200s to low 300s of gross revenue was that sort of the original business projection?
Andy: Correct, 300-ish gross, my expenses now… Then, even less expenses, about 20 grand a year. Now, it’s 30 a year inclusive of an office I have. So, yes, I was like, “That’s plenty enough, good enough money for me.”
Michael: So, just curious to hear a little bit more on that. What is in your expense bucket at this point that that adds up to 30k a year? What’s in there?
Andy: So, I was working from home at a basement office. That cost me nothing. But as the business started to grow, I got clients. And for sanity’s sake, I needed to get out of the house because of COVID. My wife was home, my kids were home, and I love them dearly, but I just needed some space.
So, 10,000 bucks a year between rent, internet for a little office space I have. And I don’t see clients. I’m basically entirely virtual. I have two clients in New Jersey, everyone else is scattered throughout the country. So, 10,000 for my office…
Michael: So, that office space is not necessarily like, “Here’s where we’re going to come meet with clients,’’ office space. It’s just a “Here’s a place I can work that’s not in my house where my kids are,” kind of workspace?
Andy: One hundred percent right, yes.
Michael: So, is that a shared office space? Is that just you found a relatively inexpensive rent, like office rental setup? Just what kind of space did you get for 10k a year?
Andy: Yeah, the latter. It’s a small, quaint little downtown area. It’s an old building that used to be a bank that has since been retrofit, so the ground floor is retail, top two floors are individual little office suites ranging from 150 to 400 square feet. I have one of those. It’s my own private room. And that’s it. I have a TV, a refrigerator, a desk, and a small little conference table.
And then there’s a shared bathroom. There’s a shared mailbox area. There’s no kitchen area or anything. So, it’s pretty bare bones. But again, it’s for what I need. I’m not seeing clients, I just need to get out of the house. It’s perfect. So that’s about 10 grand.
Michael: And then, so what else is in your expense bucket?
Andy: The largest expense is my membership to XY Planning Network, to be honest, which is worth it. That’s 5500 bucks a year, roughly, I’m rounding. And then also…
Michael: So that’s tech stuff, compliance, the other things that get packaged into XYPN?
Andy: No, that’s just the monthly XY membership, separately… Some of the tech is included, right? So, Wealthbox is included. My CRM is Wealthbox. I pay the extra 12 bucks a month for the email addition. But I also use eMoney for financial planning. That’s 2700 bucks a year. I use Capitect for performance reporting and billing. That’s another 14 a year. Just going down the list here. My web hosting 20 over 10 is 1100 bucks a year. And all the other random office stuff, Microsoft Office, McAfee, PDF, email hosting, text archiving, Zoom, QuickBooks, ScheduleOnce, I use. PreciseFP, Constant Contact is my email.
I have a couple of professional subscriptions, “The Wall Street Journal,” “InvestmentNews,” my CFP and RICP designation fees, my E&O insurance, two grand a year. And all my regulatory, my annual filings. I’m registered in a few states, hat’s another 1200 a year.
Michael: So, it sounds like it’s 10 grand for office space, it’s a little over 5 grand for XYPN. And then the remaining 15 is just this like long tail of a couple of hundred here, a thousand there for just that smattering of all the different tech tools, subscriptions, E&O, maintain my designations, just all that miscellaneous stuff that just adds up to another 10 to 15 and miscellanea.
Andy: Yep, and so those are my fixed costs, about 30 grand inclusive of office. I’ve also started traveling now that the pandemic is largely behind us. So, I started doing laps around the country to go visit clients. I’ve done a few trips so far. So, that’s another handful of thousands bucks a year for flights and hotels and rental cars and whatever and dinners with clients.
Michael: Interesting. That means the core model, as originally projected, was essentially 50 clients, 6 grand a client, 300,000 gross revenue, 90% profit margin was the original model, give or take a few points.
Andy: Dead on. That was the original model. And I actually did increase fees twice along the way. But I did not increase fees for existing clients. So, anyone who’s paying that 6000 and 7200, they’re still paying that. But what I found was, once I started getting clients, and we can circle this back to Facebook group, once I started getting clients in July of 2020, so this was 9 months into my business, that was my first non-family and friend client was 9 months later. Once they started coming, they’re coming fast and furious.
And so, I was onboarding three to four clients a month. And no one was pushing back about fees. I was like, “I must not be charging enough.” So, I upped it to 7200 single and 8400 married. A few months went by, I was still onboarding three or four a month with barely a blink about fees. So, I upped it again to 8400 single, 9600 married. And that’s where the market sort of said, “Okay, you’re at the right point.”
Michael: Meaning, now you started getting a few people saying, “Andy, it sounds like a pretty nice service. But that’s a little expensive for me.” And they’d say no.
Andy: Not even so blunt like that. Just the flow of prospect calls slowed down. The flow of inbound inquiries slowed down to a manageable level. The ones that did still have calls with me, a decent chunk ultimately signed up, and didn’t beef about the fee. So, frankly, I can raise the fee even more, I think, if I were to start taking on new clients, but I don’t know I’m happy with where I’m at. It feels right.
I know what goes into this. I know the hours I put in and I don’t feel I’m undercharging at all. So, anyway, so now some of my clients, a decent chunk, are paying upwards of 8,000 or 9,000 [dollars] a year. So, it makes the profit margin even better because my expenses stay the same, honestly, but my total revenue has gone up some.
How Andy Prepared To Launch His Practice On His Own [38:47]
Michael: So, I do want to get into in a moment to just, what on earth you did to get that kind of client flow going? But before that, I want to understand just a little bit more of the lead up to the launch. Because, as you said, there was a base, like a three-year period, 2016, you start listening to “XYPN Radio,” the light bulb goes off. Your mother does or try retirement transition. All these things are coming together. They’re like, “Okay, I think I see I want this advisor thing,” except everybody’s saying you need to build up a good amount of savings. So, you took three years to build up two years’ worth of living expenses.
So, I guess I’m wondering, what else were you doing in that three-year period to try to build up and prepare for the launch? Was there other stuff you were doing to try to give yourself a good launch when you made the transition?
Andy: Yeah, definitely. I was an absolute sponge, soaking up as much as I could about technical knowledge, and business, and just sort of regulatory-environment-type stuff. So, I went about this a few ways. I started getting the formal education and credentials.
I started with the Retirement Income Certified Professional designation. That was a few modules and ultimately got the exam. And sure enough, fell in love with the content as I was going through it. And that was sort of my non-committal way to say, “I didn’t want to go full-steam into the CFP curriculum.” I was like, “Let me start with RICP,” which is a little less involved, not as time-consuming, easier to get the designation because as long as you have basically any job that counts as work experience for that. So, I started with that.
Michael: So that was your toe in the water. That’s maybe a little light to put… There’s a lot of stuff in the RICP, but toe in the water, less intensive of a commitment than going full steam into the CFP marks. “Let’s see if I actually like nerding out on this stuff when I actually get into the curriculum. And it’s a retirement designation when I want to specialize in retirements like this is well aligned for where I’m going, if it’s all working.”
Andy: That’s spot on. I was like, “If I don’t like this, then who knows? Maybe I revisit this whole plan.” But sure enough, I loved every step of it. I pounded my way through the RICP in three months, I think, a little less. And it’s, “Yeah, this is it. Laser focus. Let’s do it.” So, next after that was CFP. So, I signed up for the American College of Financial Services education curriculum and loved it.
Michael: And why the American College? Was it just you were already there from RICP, so I’m just going to hang out?
Andy: That’s exactly it. I’ve comfortable with their portal, their interface, I liked the self-paced thing. I liked the way their content was written, whatever. So, I was like, “Let me just do that.”
And frankly, I learned enough from listening to podcasts and you and whatever that CFP curriculum is more or less the same everywhere, a slight twist on it, but it really doesn’t matter where you go. So, I did what was, I think, was comfortable to me.
Michael: No offense to a lot of wonderful programs out there and all that but, yeah…
Andy: They’re literally, white-labeled. It’s like Dalton and Green, they brand themselves at multiple universities and whatever.
Michael: Yeah. Well, I know there’s a lot of folks out there that sort of debate in general even, when you get into your work career, what the relevance of your alma mater is, “I worked really hard to get into that school. Not a lot of people asked me what school I went to after I finished,” unless you go to a very small sliver of schools at a certain level where the names still carry weight. But arguably, there’s, even less of that in the CFP environment. A lot of employers will ask if have your CFP marks. No one asks where you got it.
Andy: No, it doesn’t. It doesn’t matter.
Michael: It just doesn’t come up.
Andy: So, next was CFP, I signed up for the education, American College. I did that program, soup to nuts, in I think five months, including the Capstone.
Michael: Wow. That is hard-core.
Andy: Yeah, I’m a bit of a freak. I don’t do well with idle hands. And so, I constantly need to be doing something. And I made really good use of all my time sitting on trains and subways commuting to and from work.
Michael: So, the hour and a half commute time for podcasts became an hour and a half of commute times for…
Andy: Studying, yes.
Michael: …studying. And well, yeah, I guess if you really get an hour and a half a day, you can plow through a lot of it quickly. I guess that’s the one virtue of the New York style of commuting because it’s trains that you can read and study on. Whereas, most other metropolitan areas, it’s cars you’ve got to drive, and you can’t read. So nice indirect shout out for New York City.
Andy: And lots of nights and weekends too. Yes, exactly. So yeah, commute time and nights and weekends. I put a lot of time into to get this done and absolutely loved it. I was just soaking it all up.
Next after that, was the IRS Enrolled Agent I did. There is no formal curriculum for that, but I found something from theincometaxschool.com, which is, in effect, the informal curriculum. That was immensely valuable. They have you go through dozens of mock tax returns, learned really good about taxes that way.
Michael: What was the site or platform? Where did you go for it?
Andy: It’s theincometaxschool.com, super hokey name.
Michael: Hey, it works.
Andy: Oh, yeah.
Michael: I’m clearly a fan of just naming those for what they are.
Andy: What it is.
Michael: Right. We call it new planner recruiting for a reason. So, hey, I love it, theincometaxschool.com, you know exactly what you’re going to get.
Andy: And I thought that sounded cheesy. I looked into getting a master’s in taxation, I was like, “There’s no way I can go to this, theincometaxschool.com thing and get a decent education about taxes.” So, I looked into master’s, and it was just grossly overkill. There’s corporate taxation, there’s policies and procedures about running a tax firm, there’s auditing. I don’t want to do that. That’s not what I want to do.
Michael: As someone that got a master’s in tax, I, at least, tried to find a program that had more elective flexibility so that I could get stuff that is more directly relevant. But, yes, I do value the master’s in tax I got, but easily 30% to 40% of that program was completely irrelevant. I had courses in tax audit. I had courses in international taxation. So, it was really cool for a while when corporate inversions to Ireland was a thing. So, I actually knew exactly how they worked from my master’s degree.
But, aside from nerdy tax cocktail chatter, completely useless. Then there was some on the individual and small business taxation side, that was helpful.
Andy: That’s relevant, yes.
Michael: But it was not the most targeted, even trying to find a program that was relatively targeted.
Andy: Yes. So, after some googling and researching, I found what looks to be the most relevant and applicable program for what I was trying to learn was, again, theincometaxschool.com. They had this package called Chartered Tax Professional, which is just some made-up marketing fluff designation that’s unique to them. But the point is, it had these underlying modules and classes that I took that were all self-paced, all do mock tax returns. And it was awesome, the amount of stuff I learned about taxes and tax returns.
And what I found was I wanted to learn tax planning, right, and through this process, I realized you can’t really learn tax planning. Tax planning is nothing more than being able to visualize how actions or inactions will manifest themselves on tax returns. Once you start thinking and seeing in terms of that, that’s tax planning. Now you know what to do or what not to do because you know how it’s going to impact someone’s taxes.
And that’s exactly what I got out of this program. And intentionally, they line up their curriculum to really parallel with the three bodies of knowledge and three exams that the IRS Enrolled Agent exams are. So, they were sort of informal prep for that.
Michael: So, The Income Tax School has its own tax designation, it lines up with the EA. You went through the tax designation program but not actually to use their letters just to be able to prepare for the EA. And then you went and sat for the EA. Do you even use The Income Tax School’s designation that you got along with it?
Andy: No, you had to pay 50 bucks. It’s pointless. No one’s ever heard of it. It’s their own proprietary thing.
Michael: So, literally, went through the designation to get the crossover education for the EA and then ditched the designation. But like, “Thanks for the education,” and went and passed your EA and now you use your Enrolled Agent.
Andy: Exactly. That designation is pointless, in my opinion. I mean no disrespect to The Income Tax School, but let’s call it what it is. They made that up just as sort of a marketing ploy to sell this program, which the program was awesome. I’m not saying it’s not, but the designation is useless. And my advice…
Michael: So, your advice back to them, “You don’t need the program. Literally, just say you’re teaching for the EA. It’s okay. I’ll still pay you.”
Andy: Yep, right. So, I did that, passed the EA exams 1, 2, 3. Also, I knew this would be overkill, but also started doing the CFA. In the corporate investment banking world, that’s the pinnacle of ego stroke of, “I’ve made it,” is if you have that designation.
And I started doing that, and I knew it was for the wrong reasons. I know how complicated and time-intensive it is. I know it puts the CFP to shame in terms of difficulty.
But anyway, so I started doing that. I passed Level One. I got most of the way through studying for Level Two, begrudgingly, because I’m like, “I don’t need this. I don’t need this.” And the last straw for me was, after doing the part about convertible bond arbitrage calculations, and calculating the fundyness of a company’s pension plan. No, forget this. This is not what I want to do. This is a waste of my time. Let me put more focus on planning out the business, listening more to business best practices and stuff like that. And sure enough, that’s what I did. So, I have a CFA Level One, whatever you call it, holder, and I’m not going to bother going back for two or three.
Michael: So, you’re doing all these designations while you’re still working in the finance world at the prior job. Did the RICP, did CFP, did the EA. I guess, practically speaking, because your prior work was all financial services industry, even the investment-management related, you checked to the experience box as well. So, as soon as you got CFP education exam done, you were able to go get the marks?
Andy: Oh, good point. No. So, one of my jobs in my corporate world was prime brokerage, which is lending against hedge funds or mutual funds’ portfolio of assets. Some of the clients we had were multibillion, high-net-worth family offices. So, CFP Board gave me credit for that, roughly a year and a half or whatever it was of prime brokerage experience. The rest of my experience do not apply.
Andy: But I’m also an adjunct professor of finance at Rutgers. And so, I got some hours from teaching. And all said and done, I was 498 hours short of the experience requirement. And guess what? I mentioned I went to the FPA Residency. Coincidentally, that’s 500 hours’ worth of experience if you go to that thing.
Andy: So, man, if I would have been 501-hour short, that would have sucked.
Michael: I know. Someone just make me an intern for a day. I just…
Andy: Yes, something.
Michael: And then send a letter to CFP Board that says, “I worked for you for a day. Give me a…”
Andy: That’s all I need. But now, so…
Michael: Interesting. So, FPA Residency then put you over the line with the combination of partial job experience that counted and partial teaching time that counted.
Andy: That put me 2 hours over the 3000, I think it was 3000-hour requirement. Yep. So, I was able to use the marks prior to even leaving my old world. But I didn’t tell anyone I was doing this because they didn’t know I was leaving. I couldn’t make it public that I was getting these designations that don’t apply to what I was doing.
So, sort of itching, like, “Man, I got the RICP. Now I got the CFP. Now I got the EA, but I can’t tell anyone about it.” So yes, so I got all those out of the way. And so, designations were in hand. That’s what I did with a lot of my three years leading up to my launch. The rest of my time was listening to podcasts like yours and “XYPN Radio” and just reading and learning and listening to as much as I possibly could about how to structure business, things to look out for, regulatory things, pricing, service model, absolutely everything.
I was a sponge, so soaking up all this stuff. During the course of the three years, ultimately, I honed my business plan of what exactly I wanted my business to look like. And I had a crystal-clear vision what I ultimately wanted to get to. Again, I assume would be five years. That was it. The only thing I didn’t know was how to find clients once I went live.
Connecting With Prospective Clients In A Community On Facebook [51:25]
Michael: So, let’s go there. All right. So, you’d said, at the beginning, the thing that drove you away from the financial advisor world in the first place, that you basically took 20 years to come back to, was, “I’m not a salesperson. I don’t want to be in a sales role doing sales things.”
And, granted, charging fees for advice is a very different kind of environment than selling insurance products or investment products, there is a marketing and sales piece. You have to convince people to pay you money for your services. You’re selling yourself and not a product. There is still a sales function and there is still a prospecting or some way that marketing some way that I make the phone ring. So, the self-identified not salesperson, who then has to go and sell themselves and get all their clients, what was the launch plan in terms of actually getting clients?
Andy: Yeah, things that I genuinely believe in, I’d be more comfortable “selling.” And there’s not many such things. I can’t just go sell cars or replacement windows or aluminum siding, whatever. There’s a few products I genuinely love. I won’t name them. But there’s a few: consumer electronics, I’m big into woodworking, there are woodworking products that I absolutely genuinely love, and myself. I am confident in what I know, or I knew, my business was different and unique and, especially, the tax angle. And I know I’m a sharp guy, and I know I can explain well. I knew there’d be value in this. So, I was confident in that at least.
But having to work a room, having to pat backs, kiss babies, or whatever, that’s just not me. So, I was like, “I don’t really know what I’m going to do.” So, my initial plan, again, went live on November 1st, 2019, from, truth, nothing was the centers of influence thing. I started making friends with local accountants and estate planning attorneys.
Michael: Because that’s what the industry…
Andy: Because that’s what I thought I was supposed to do.
Michael: …and that’s what you’re supposed to do? Okay. So, industry says, “Go find COIs,” so you went and started finding centers of influence.
Andy: And again, shout out to you and other podcasts, you made it very clear that a lot of this advisor marketing business development is throw spaghetti at the wall and see what sticks, and different things work for different people. So, I tried a bunch of things. I didn’t know what was going to work for me.
One was centers of influence, I tried. One was doing local library seminars, free seminars about Social Security.
Michael: And so, try the routine as well.
Andy: I tried some of that. I also did have social media stuff. I started posting, made some of my own articles, started sharing other articles, started trying to just write engaging questions through LinkedIn, through Twitter, through a Facebook business page. All of those really had no immediate success and not that they typically do. But nothing was clicking.
I was on XY Planning Network Find an Advisor. I was on FPA Find an Advisor, NAPFA Find an Advisor, and CFP Find an Advisor. I got maybe three or four inbound inquiries from them during those first handful of months.
Michael: Were some more successful than others for you?
Andy: No, two of them were just flat out not good fits, meaning, they wanted just sort of two hours of advice or something, or one person had $100,000. And I was like, “Yeah, it’s no.”
And so, I tried all those things, nothing is really clicking. The biggest flop, and this is sort of fun looking back at it, and I knew this would be a gamble. I’m big into woodworking, like I said. And there’s this National Woodworking Expo that tours the country. And every year, it comes to my area because New York area is pretty big.
And I’ve gone for the last 15, 20 years as a participant, and it’s all tool manufacturers and local woodworking guilds and workshops on how to build cabinets and stuff. I was like, “Most woodworkers are over 50. I like woodworking, right? We have this common affinity.” I know from experience, there’s zero other financial advisors trying to go wangle clients there. So, I was like, “Let me buy a booth, set up a table. I know it’s a long shot.”
But what I have, that’s a random run of the mill wirehouse advisor doesn’t is this natural affinity for woodworking and my company name is Tenon Financial. Tenon is a woodworking term. And even in the logo, there’s a tenon, which is a type of woodworking joint. So, I’m like, “This is brilliant, I think. Anyone who sees it is going to immediately resonate and going to want to talk to me and ask about the sign.” And my wife was like, “This is dumb. It’s not going to work.” I was like, “Yeah, it might not. But if it does, it’s going to be wildly successful or it’s going to be a tremendous flop.”
So, I paid 3000 bucks to get a table to buy signage. I had brought a computer. I had this live eMoney presentation I was going to show people. And it was a complete bomb, absolute bomb.
Michael: Oh, I so wanted it to work. I so want it to work.
Andy: Now part of it, I’m just making excuses, but this was the weekend before COVID happened. So, the crowd was fairly thin because there’s already rumblings about, “People stay inside” and whatever. Last thing you want to do is to be shaking hands and talking to people all day.
But no, that’s not it. It sucked. I sucked. Because I’m not a room worker, right? I thought that woodworking thing will be this natural fluid conversation, but nobody cared. I had maybe, I gave out three business cards, I think, the whole weekend. I talked to maybe five or six people.
So that was like my Hail Mary. This could be a tremendous flop or successful. And it just, it stunk. But then, like I said, that was a weekend for COVID. That was March 6th or 7th, 2020. And then everything stopped. No more centers of influence lunches, no more library presentations, no more ill-fated woodworking expos.
So, I was home, and I was like, “Man, this is a big crimp. Now, what am I going to do?” So that was a setback, I thought. And I was like, “Okay, everyone’s going through it. This isn’t unique to me. Let me just ride it out. I’m only four months into this thing. I’ve got plenty of runway still, so let’s see what happens.”
Michael: And were any clients coming yet from the initial stuff that you’d been doing before COVID shut it down?
Andy: Nothing. No, other than, like I said, three or four inbound inquiries. One from XY, the rest from NAPFA, that was it. And none of those panned out.
So, I did have my mom, my in-laws, my aunt and uncle, and a former coworker sign up in the first month or two, but that was it. It was crickets and kind of the world stopped.
Michael: Okay, so four months out, all this marketing activity, like COI, seminars, and three grand on the wood working event, zero clients outside of friends and family, and then COVID hits, and the world shuts down.
Andy: Yep. I’m like, “Well, good thing. I still have another year and a half of expenses.”
Michael: Yes, so it’s good you have money. It helps to have built up the savings. It means at least you have a good 12 more months before you really need to start panicking. You don’t have to panic yet.
Andy: Yep. And I should say I did have some side hustles, which I was teaching a course at Rutgers that spring of 2020. That wasn’t a lot. That was under 10,000 bucks in total pay. And I started doing tax returns. I only did a dozen returns that year. So that wasn’t massive money either. But nonetheless, I had something coming in.
But yeah, the advisory business was my focus. And it just hit a brick wall when COVID happened. So, it’s like, “All right, now what?”
I started a Facebook group in April of 2020. And the reason why I waited, I wanted to start sooner, but the archiving platform I was using was not yet able to archive Facebook groups. They could only archive business pages. And I wanted to make sure I did everything on the up and up from a compliance perspective. So, April 1st…
Michael: What were you using or what…?
Andy: It was Message Watcher at the time, which was subsidized through XY Planning. I since switched to XY Archive through XY Planning.
Andy: And I got a message from the guy who runs Message Watcher. I think it was February or March. He’s like, “Just so you know, we’re going to start a beta testing of Facebook group archiving April 1st.” I was like, “Sign me up.” So sure enough, I was one of the first users of Facebook group archiving. I went live on April 1, launched my group on April 1. And the rest is history.
Michael: So, I guess just take us further into what the Facebook group is. I guess just what the vision was. It sounds like you already knew you wanted to do a Facebook group, at least in the broader category of “we’re throwing spaghetti at the wall,” right when we get started, so things I can try in my first couple of months to see what works for me, COI Marketing, local seminars, find an advisor listings, go back to my old natural market of woodworkers, and this Facebook thing.
So, I get it. It was one of the things on the list. But what was the vision, or the plan, or the idea? What were you planning on doing with it, particularly since, as you noted, this wasn’t just, “I’m going to make a Facebook page and post things,” this was, “I want to make a Facebook group”?
Andy: Yeah, so Facebook pages are nothing more than a glorified Contact Us card. And I knew that. But I also know you sort of have to have one just in case people look, they want to be able to see you there.
So, I wasn’t surprised my Facebook business page wasn’t really doing anything because it’s kind of a unilateral one-way means of communication. Whereas a group, and I knew this from the XY Planning Facebook group, it’s a multilateral, multi-contributor community, right? It’s not just XY post stuff and people read. It’s member driven.
So I was, “Let me try to build and foster a sense of community.” I want to be educational. I want it to be called taxes in retirement.” Taxes in retirement, not taxes and retirement. And the reason why was there are already multiple generalist retirement planning groups out there. Some are good, some are ehh. I knew my differentiator in my business was the tax focus part of it, which a lot of advisors don’t do.
Retirement planners are dime a dozen. Those with really legit tax knowledge, that incorporate that tax knowledge are much harder to find. And I knew that was me. So, let me pitch my tent to the Facebook group world as the guy who knows about taxes in retirement. Hence, the name “Taxes in Retirement” was the group name.
So, I thought that was… You know, “pat myself on the back.” I thought that was a good name to try to find people if they’re searching for tax and retirement stuff on Facebook, this group should be the first one that comes up.” And my intention was…
Michael: I guess there’s a part of me that just wonders, although I’m sure you’re going to get more into it soon, but are people literally searching for taxes and retirement on Facebook?
Andy: Yes, yes, you’d be surprised. My intention for the group was, I know my stuff, I know I can communicate it well because educating, I’m passionate about it. I enjoy it. I’ve been told by students and colleagues that I can teach and explain well. So let me make a community where I’m just going to give away buckets of answers and knowledge. And I modeled it after this podcast called “The Retirement and IRA Show,” which is hosted by Jim Saulnier and Chris Stein out of Fort Collins, Colorado.
This was one of the podcasts I listened to in my years leading up to this where the education and quality and depth of what they discussed was absolutely mind-blowing, as good or better than what I learned in the RICP curriculum, their retirement-focused, tax-efficient advisors. And I was like, “Dude, they should be charging for this stuff. It’s that good.” But they just give it away like genuine… This guy, Jim, genuinely loves educating, teaching, just given away knowledge.
I was like, “That’s me. It sounds like me.” So, I wanted to do that but in a Facebook group setting, whereas his was podcast format.
Michael: Why Facebook setting and not podcast?
Andy: Because it’s more engaging. Podcast is still one way. He records it, he releases it, people listen. That’s it, right? There’s no interactivity Facebook group, you can get access to me basically live, right? If I’m at my computer, I’ll respond or, if not, I’ll respond within an hour or something. So, much more engaged, much more sense of community with a group like that as opposed to a podcast.
The intention was to answer questions, questions about IRAs, Roth IRAs, pensions, Social Security, annuities, whatever bring it. I’ll answer. And I had nothing else to do, right? Because it was COVID, I was home.
Michael: I have no clients yet and I basically can’t leave my house. So, I’ve got a lot of room here.
Andy: Exactly. Yep, I was doing some tax returns. I was teaching at Rutgers, but that was virtual at that point, so I was home. I had nothing else to do. So, I put all my time and energy here, sharing articles, writing content, asking questions, answering questions.
Michael: Yeah, so just help me understand how this gets going when you start it? I get the like, “I’m going to post interesting retirement articles in the community and then when they ask questions, I’m going to answer them.” That presumes someone’s there.
Andy: Yeah, now, great point.
Michael: You need people to be there. How does this literally get going and off the ground?
Andy: I’m not a social media expert nor do I pretend to be. And I definitely don’t claim to have it all figured out. But what I figured was, there’s math and logic behind these algorithms. And Facebook’s algorithm probably wants to see some sort of critical mass in a new group early on, otherwise, you’re just going to be a dog in its search findings.
So, I was a member of a few other retirement groups, like retired folks, not advisory groups. And as a member of a few professional groups like XY, FPA, a couple of different tax preparer groups. And I just kind of shamelessly plugged it in those groups.
But it wasn’t just, “Please come follow and join this group.” It was, so for example, for the XY Group and FPA Group, the pitch was, “Hey, you all know planning. You may not know tax planning well. Come join this group. The value add to you and your clients is you can learn about how to do proper tax planning to complement your financial planning.” And vice versa for the tax preparer groups I was in, “You all know how to do taxes. You don’t know much about planning. Come join this group. You can learn more about integrating financial planning into what you do.”
Michael: So, you went to other groups to invite them to join your group?
Andy: Yes. And those other groups were mostly other professionals. It wasn’t going to be clients. But I figured, let me at least get some followers to the group, so the algorithm picks up on it.
But I did also, in other sort of consumer-facing groups, where people just randomly chat about retirement, I was already active in there as a participant. People would ask questions, and I would give these elaborate, well-written answers about tax things, IRA things, whatever.
And so, anytime people in those groups ask questions, I would answer their question and then say, “Oh, by the way, if you’re interested, I just started a group where this is exactly what we talk about, come join.” And I kept doing that. Not too in-your-face salesy, but genuinely first answer their question, give value, then say, “By the way, I have this group if you’re interested.”
And so, in the first week, I got maybe 400 members, most of which were from XY, FPA, and the two tax preparer groups. But I thought that was good enough pop that hopefully Facebook liked it. And I was getting a steady, trickling of, I don’t know, a few people a day from those other sort of consumer-facing retirement groups joining.
And I don’t know what to expect. This was April 2020. My random guess was it’d be cool if I got 1000 members by the end of 2020. Long story short, the group just took off pretty quickly. I hit 1000 members by July. And I don’t even know what it hit by the end of 2020. But at this point, it’s 31,000, 32,000 people and growing by a few hundred a week consistently.
So, along the way, it was just lots of time. I would be super-fast to answer people’s questions with very detailed answers. I would never cross the line into giving specific advice. It was stuff about interpreting Roth distribution rules and what is asset location, how are Social Security taxed, how are annuities taxed, stuff like that.
And what I found was, I got a lot of responses from people like, “Wow, my advisor didn’t even know that” or, “You answered this faster than my advisor did and for free, by the way.” And I was like, “I might be onto something with this.”
Michael: And is there some point where you say, “Well, funny thing. I’m an advisor too. I can do this for you.”?
Andy: No. Interesting you say that. I have such this visceral, anti-knee-jerk reaction to being salesy. I try to avoid at all costs saying, “Oh, by the way, join my newsletter” or “This is what I do, reach out for a call.” I never want to do that.
I have no form of lead capture. I’ve never asked for names or emails, or phone numbers from anyone in this group. I’ve rarely, if ever, even made it known that I do this as a business, let alone tried to pitch people to come reach out to me.
And that was intentional, partly because I hate it and I cringe at the thought of that selling, even though I know my stuff is good. But I thought, like Jim Saulnier in that Retirement IRA podcast, let me just evidence what I know who I am, my approach towards stuff, just give it away, right?
And like you said, at some point, 99% of the people aren’t going to hire you. They’re just there to consume free content. It’s the 1% that eventually will take it upon themselves and be like, “Oh, okay, I’d like more.” And they’ll then, when they’re ready, reach out to you to consider a paid engagement. And that’s exactly what happened. Without me ever selling or lead funneling, in July of 2020, people started reaching out and finding my business site and setting up calls. And it just snowballed from there.
Michael: So, I’m struck by just how this grew and evolved for you. So, I want to make sure I follow the flows. You created the group, just it’s an empty shell like, “We’re here to talk about tax in retirement. I hope someone shows up and talks about it with me.”
So then, you’re involved in some other Facebook groups, XYPN Community Advisor Group, some tax groups that you’re in, and mentions them, “Hey, I’m starting this Facebook group on taxes in retirement. If you’re interested, come check it out.” A bunch of people did, so and a couple hundred advisors, mostly advisors, at least showed up to see what was going on.
At that point, you’ve got an interesting name, there’s a couple hundred people. I guess you start sharing articles, a couple of people start commenting. So there’s some activity. And now, Facebook, just the Facebook algorithm, someone’s searching for taxes in retirement, you start showing up, a few people just start getting to the group because Facebook makes you findable, and then just active engagement into the group. The more activity the more people get prompted in the algorithm, the more people show up, and it just starts compounding on itself?
Andy: I believe so. I’ve never really dug into metrics or behind the scenes stats. But, yes, definitely, some of the membership questions people have to answer when they request to join is, how do you find the group? And they’ll either say, “Searched for it” or “Facebook recommended it.” Facebook has a bar of groups you may like. So yeah, it bubbled up in people’s views.
But a lot of it was also people recommending the group within other groups they were in. So, there’s, I don’t know, a group for federal employees, a TSP group. There’s a group for retired American Airlines employees. I’ve gotten lots of people refer my group within there because the referrer found something helpful and valuable in my group and decided it’s worth making their peers know about it. And so, that’s where a lot of groups came from as well, organic referrals from other folks. So, it’s a whole combination of things.
Michael: And so, I’ve got to ask, when the long-term vision for this is, this is about building your brand and getting known amongst consumers that you can get clients, where there concerns that you started this out by inviting other advisors who are “competition” for the consumers you’re eventually hoping to engage with in this group?
Andy: Not really. I definitely have, and I learned this from you, the abundance mentality. There’s enough people out there who want or need advisory services, the trick is just getting in front of them and differentiating yourself.
What I don’t like, and what I put the kibosh on quickly, is that I make that clear in the group rules, no soliciting your own stuff, no self-promoting your own content, no pitching products or people, no soliciting in the group, or through direct messages offline. If I ever see that, I quickly boot the people out.
And the group’s pretty good. Members do self-report to me. Like, “Hey, this joker just direct messaged me trying to sell me an indexed universal life policy.” I’ll find the person and delete them.
Michael: Interesting. And so, I guess the sort of the effect at that point is, if you’re not allowed to solicit, the only way you really get seen and noticed in the group is you have to literally be active enough and engaged in answering questions that people notice you. And so, almost by definition, the active contributors are going to potentially win some business and get some prospective clients. The rest will not.
And practically speaking, a lot of advisors don’t necessarily have time to do that. When you are in the early days of your business, you had a whole lot of time to do that. So, you were just really going to end up being the primary one who was engaging the group the way it would take to generate business anyways?
Andy: Exactly. There are some other advisors that are super active, super helpful contributors, really know their stuff, and I’m appreciative for them. They have gotten some business out of it, again, not direct, in-your-face solicitations. But they’ve proven they know their stuff, they’re proven that they’re there to add value, not just skim off free prospects from the silver platter of carefully crafted, well-targeted retirees seeking financial help.
I’m very cognizant of that. I don’t want people to sell. I’m aware I created, in effect, this silver platter, goldmine of prospects, that I’m really sensitive about. I don’t want people selling. I’ve had multiple businesses and webinar providers, and services ask me to do affiliate marketing in the group. And I said, “No, I don’t want to do it. It makes me uncomfortable.” Even though, I realized, I could have made a lot of money out of it, it’s just not what I’m out for with this group.
Michael: You make it sound so easy, right? Just make a group on your thing, “Just engage and be involved there.” And I get it is time-consuming. It takes a lot. Not everybody’s naturally wired that way in the first place, which, again, as you noted earlier, just different marketing strategies work for different folks because it just aligned better or worse to our natural style.
Andy: Yeah, and other thing that really poured fuel on this fire was I started doing weekly live videos within the group, broadcast within the group, stream within the group in June of 2020. Every Wednesday night, 8 p.m. Eastern, and each week, I talk about a specific topic in depth.
That’s when things really blew up in a good way, because the element of video… It’s one thing to read something I wrote. You can know from that what my technical knowledge is and how I write and visualize what I sound like. But when you see someone a video, you really get to know them, their mannerisms, their voice.
And I do live Q & As on the spot, where if I don’t know something, I’m upfront about it. And I think that just really, really opened up people getting to know me and further sort of cementing me as their go-to for all this stuff, such as if and when they did, want to consider paid engagement, I was the first one they thought of. And a lot of the sales process was done, I didn’t need to court them.
Michael: Because they already know just how you engage…
Andy: So much of me out there.
Michael: …how you interact, how you communicate. It just literally comes down to, “I like how Andy talks and explains things. I would just like to have him do that for me one-on-one. “
Andy: Exactly. And even what I look like. I wear T-shirts, right? And this is partly because of the pandemic. I shave once a week, so depending what point in the week you catch me, I’m a little scruffy. I wear T-shirts and shorts most days, well, not in the winter. But that’s the authentic me. I can attest that you do not need to wear the stiff, well-pressed white shirt in a fancy wood-paneled office. You can if you want if that does it for you and clients want to see that.
Michael: …clients do like and will look for that, and clients who don’t care about that will continue to not care about that.
Andy: But that’s not the only way to do it. Exactly, those aren’t the clients I want. I want people who want really good knowledge in advice and planning, who aren’t interested in being pampered by showing up to a fancy office, greeted by a receptionist with an impossibly good smile, who knows what coffee drink you prefer, and has it made waiting for you. There’s people who want that. If you want to pay for it, great.
I’m not saying I’m no frills. My advice is solid. I know it is. But it’s a virtual thing, it ended up because of the pandemic. All my clients found me on Facebook, so they’re scattered throughout the country. My practice just sort of became all virtual. That wasn’t what I necessarily set out for, but it’s how it worked out. And I’m happy about it.
And I wear T-shirts in my Zoom meetings with clients. And they’re okay with that, they actually like it. For a lot of people said, like, “We like that you don’t try to dress a certain part or look a certain way.”
Michael: So, just how do you help them get from just the Facebook group where you’re a handy contributor, but for all anybody knows, you’re just a random dude who is a retiree with too much time on their hands who likes talking to other people. And they wouldn’t even necessarily know that you are an industry person.
How do you get them from, you’re 1 of 31,000 people who happens to contribute to this Facebook group to, “No, no, I actually, do this for a living. And I’d kind of like you to hire me.” Just how do they cross that line? Or is there anything that you do to help them cross that line?
Andy: I have a website, obviously. And I like to think the website is pretty good, pretty clean, has a good flow, good calls to action, really descriptive about my services and fees. Again, flat fee, it’s easy to be descriptive and transparent. So, when they do eventually go to my site, that answers a lot more of their questions in terms of what I do, what I don’t do, what they can expect.
Michael: And how do they find your website?
Andy: In the live videos, I did have, every time I did this live video, I had an intro saying, “I’m Andy Panko, owner of Tenon Financial.” And I had a little name splashed up on the page and just said, “Owner, Tenon Financial.” So, I did mention people knew, if they cared to look for five seconds, they knew what I did and where I worked, but I didn’t really harp on that.
Michael: And I guess just practically speaking, it’s your group. So, you can do the Wednesday night broadcast for an hour because it’s your group. And if you decide it’s fine to at least note your firm name in the lower third of your video for your broadcast, you get to do that. Since it’s your group, just one of the good things when you build your own space, you get to you get to set that framework. And so that, I guess that just feeds on itself at that point.
Andy: Yes. As much as I wasn’t in your face about it, it was pretty easy to find out or know that I was in this business and find out what my firm name is. So, people did their diligence on me. When they do that, they’d come across, I have a monthly newsletter I’ve been doing since 2019. I have these videos that are all on YouTube as well. I have a YouTube channel. So, I have a lot of content and it’s just building a body of content where people can go to find out more about me through the group, through YouTube, through my newsletter, through my website.
So, anything they wanted to know about me, for the most part, was readily available with a few minutes of searching. So when they did feel ready to actually reach out, they’d set up a prospect call, which I can do right through my website, through ScheduleOnce. We’d have this hour-long prospect call with everyone, except some people we can tell right off the bat it’s not a good fit and cut it short. But otherwise, it’s an hour.
And it’s where we really hash out. Are they the right fit for me? Am I the right fit for them? Find out more about them what they want, what you’re looking for, what their personality is. And then, after that, ball’s complete in their court. I never once followed up with someone after a prospect call, again, because I didn’t want to be salesy. But I was okay with that because I was getting enough clients that I didn’t feel the need to have to go play that part. I left it to people on their own volition to get back to me if they wanted to.
Now if I wanted to push a little bit, sure, I probably could have got more clients faster. But I felt cringey about following up, “Okay. It’s been two weeks. Just checking in. What’s new?” I don’t want to do that. That’s not my DNA.
What Tenon Financial Looks Like Today [1:19:01]
Michael: So then, what has this added up to? What business have you gotten from it? What is the business look like today?
Andy: So now, I’m at… February of 2022, is when I formally announced to the world via Facebook group in my newsletter that that’s it. No more prospect calls. I was at 38 clients at that time, but there was another 5 or 6 in the hopper, let’s say, that I suspected we’d be starting soon. So that was going to get me to 45-ish.
Plus, I figured, with all the prospect calls I had, there’s going to be some other folks that eventually come around at some point, and sort of 50 was my hard cap of where I don’t want to go over. So that was it, February. I said no more, I’m done. I had 38. I’m ultimately at 43 now, still another few more are gonna trickle in in the next few months. And that’s that.
And what I’ve been doing is, since February, I’ve been freely giving away all prospects. Even though I told people I’m done, I still get a few emails a week. Like, “I know you’re not taking on new clients, but can I hire you,” which blows my mind that this is happening. And I don’t even have a waitlist. I just, what I’ve done is on my business website, I created a list of now 20-something other advisors that I freely give away all prospects to with nothing in return.
Michael: So, your website literally has a list of other advisors you can work with that are not me?
Andy: You now follow my website about services and fees, and what I do, follow it down at the bottom. It says, “Sorry, we’re not accepting clients. But you can check out our free resources. There’s a bunch of free downloadable stuff.” Again, no lead capture behind it. “Or check out this list of advisory referrals.” And right on my main menu bar on my website, on the homepage, is advisor referral link. You go there, it’s I think 21 other advisors now that all more or less do what I do, flat-fee, fee-only, retirement-focused, ideally, some element of tax planning that do planning and investment management for a flat fee.
Michael: And I’m curious, how does someone get on such a magical list?
Andy: At first, it was people I was aware of who do this. So, initially, it was three or four people. And then, not surprisingly, as I started publicizing this on LinkedIn and Facebook, other advisors, “Hey, I meet those criteria. Can I get on?” Or I’ve had people change up their business model to get on the list.
And I have probably, I don’t know, a couple calls a week or Zooms with other advisors who are curious about the flat-fee model, or the list, or doing what I do and how I do it. Not to make this a fee discussion, but flat fees is definitely a differentiator. I don’t lead with that. I lead with I do really tax-efficient retirement planning. The flat-fee thing is no doubt a big differentiator in a blue ocean, if you will, where I have gotten a lot of clients that wouldn’t have hired me if I was percent of AUM because they like the flat-fee thing.
Michael: And what is your typical client look like who goes into this model?
Andy: So, my ideal client, and this is ultimately what I have, is single or married. They were or are W-2 wage earner in or near retirement, likely, own a home, often a second home, whether it’s a rental or vacation property, have Social Security, maybe a pension, random smattering of financial accounts, legacy 401(k)s, IRAs, Roth IRAs, HSAs, may or may not have cash value life insurance, some may or may not have annuities, kids are usually all grown. I have one client, they still have someone in high school, but fairly vanilla, if you will.
Michael: Is there a typical asset size?
Andy: And have a few million dollars.
Michael: So, a few million dollars?
Andy: Yes, so I don’t have a formal asset minimum. But, let’s face it, do the math. If I’m charging eight or nine grand a year, someone’s gonna look at my website, they got 500,000 bucks, “I’m not paying this clown, 9 grand. I can go to the run of the mill 1% AUM guy down the street and pay 5000.”
Now, honestly, I can say pretty confidently, my service and my tax planning is most likely better than most folks out there, so the service is better, but still, they’re not going to pay. Most people won’t pay thousands of dollars more than five grand. So, not coincidentally, everyone’s got…
Michael: So, you’re not getting clients that have a million or few dollars, which means your fees still ends out being somewhere…
Michael: …somewhere between 40 and 80 basis points, depending on how large their accounts are, and they kind of self-regulate themselves into that space?
Andy: Yep, and I do have an informal limit. I can say this with confidence. I’m sure you know this as well. Well, whether someone’s got 1 million bucks or 3 million bucks, there’s just, frankly, no difference in what we do or the complexity, or at least asset size alone has zero-bearing on complexity and other stuff.
But, at some point, it does matter. You got 100 million dollars, that’s very different. So, I sort of draw the line at 10 million-ish net worth, 7 or 8 million investable assets is where I cap it. Anyone over that, I just… I’ve had 10 or 15 people with job like that, “No, I’m not for you. Sorry.”
And what I do do, it’s flat fee. And I do ratchet it down for existing clients. And my thought is, some of my clients are never going to spend down their money, others will. They’re all in the accumulation stage. Eventually, some of these portfolios will drop, whether it’s market declines or spending. And I do ratchet the fee down such that it’s not substantially more than 1% of AUM on the way down.
I don’t do that for new clients. Because, like I said, I don’t want to fill up a business of $100,000 accounts where I’m making 1000 bucks every year. But for existing clients, my thought is, they would have already paid me for multiple years my full freight, maybe a lot of the planning work and complexities behind us, Social Security’s on, pensions on, then maybe sort of cruise control and not to say there’s not going to be long-term care, things that pop up, or death in the family or whatever. But a lot of the heavy lifting may be done. So, conceptually, it doesn’t pain me to drop the fee over time as their assets go down.
Michael: So, I was just going to ask, are you just automatically and always bringing client fees down or just specifically, if I have a client who’s literally depleting their own wealth and the wealth gets so low that they would essentially be under $900,000 of assets, I’m going to charge them a lower fee, so my fee doesn’t add up to more.
Andy: The latter, what you said. So, everyone’s fee is what it is and it stays that way “indefinitely.” Well, I say indefinitely with air quotes. So, as far as inflation increases, my handshake agreement with folks is, your fee, the dollar amount, is hard coded in our advisory agreement. It doesn’t go up or go down unless we mutually decide to change it.
But everyone, sort of verybally, is in agreement with that. And I haven’t done those yet, but my thought was every handful of years, I’ll reassess and maybe do some inflation increases. And then, like I said, on the way down, for those whose portfolios do decline, whether it’s spent down or assets, such that their portfolio size with me is now noticeably over 1%, or my fee equates to more than 1%, then I’ll start stepping their fee down.
Michael: So, has that actually cropped up yet?
Andy: It has. Some of my earlier clients, at my lower fee price, their assets, were kind of close to 1% of AUM. Now, with market declines alone, they’ve gotten there, plus decumulation. So just this last quarter, I stepped down three people. And I do it in increments of $1,200. just because I want to be, I don’t know, I like simple round numbers. So quarterly fees are always in even $100 increments.
Michael: What does it say? How do you actually bill this fee? Do you bill it annually? Do you bill it monthly? Do you bill it from their bank account? Do you bill it from their investment accounts, it sounds like they do tend to have investable dollars. How does that fee work for you?
Andy: It’s mechanically no different than fee deductions under percent of AUM. So, the fee does come out quarterly from their accounts under my management. The amount of fee that comes out of each account is simply prorated based on each accounts total size as of quarter end. I use Capitect to do billing. So, it does all the calculations for me. Capitect easily accommodates flat fee.
So, from that perspective, functionally, operationally, no different than percent of AUM. The difference is how you derive the dollar amount that gets deducted. Mine is fixed every quarter. Percent of AUM, it fluctuates. It’s whatever it is at that quarter. So, it’s pretty straight, actually.
The Surprises Andy Encountered On His Journey [1:26:56]
Michael: So, as you look back on this, what surprised you the most about building your own advisory business?
Andy: How well the Facebook group worked? If I didn’t do that or it didn’t take off, I honestly don’t know where I’d be now. I think I’d be like most advisors, two years in, still trying to figure out what works, what doesn’t. Still considering, “Yeah, is this thing going to actually work for me?” And it was a pleasant surprise, but Facebook group was complete… Virtually, all my business came from that.
Michael: And what is the asset base add up to now? I know you don’t operate on an AUM model, but you’re still taking managed accounts as part of the business.
Andy: Yep, so 43 clients. I currently have about [$]70 million. In the next few weeks, there’s going to be another five, six million [dollars] coming in from those clients that are in the process of rolling over. So, I don’t know, 75, maybe 80? So, a room for a few more clients. So, I kind of hoping I don’t hit SEC level, honestly.
Michael: Why not?
Andy: I don’t know, just more process and something to do. I’m registered now in New Jersey, California, and New York, and Texas, well exempt in Texas. It seems an unnecessary process to have to do that. And if I do do it. I don’t know. I don’t know if SEC has any more work, or more likely of getting examined or whatever, but just seems like why go through that if I don’t have to? Just cap it to below 90 million or 100 million [dollars] or whatever it is.
Michael: So, anything else in retrospect just that you did in the Facebook group that seems to have made it work so well? Again, because I’m just thinking, all the advisors out there that at least that “do Facebook or do social media,” and are, to put it mildly, you’re not having results, 70-plus million [dollars] of assets in 2 years from scratch, so that now you’re referring the excess out because you can’t handle it. Just what did you do?
Andy: I thought about that a lot. And I don’t know. I’ve had conversations with dozens of advisors about this who wanted to know how did this worked. I don’t know that it’s repeatable for everyone. And I’m not saying I’m special.
But what I think worked is a combination of clearly the tax focus. There’s a wide, wide amount of people out there that are interested not just in retirement but the tax angle of it, which most other advisors kind of disregard. Again, I know my stuff. And that comes off in the videos, in the responses. And I’m authentic, it’s not sales-y whatsoever. I cringe at lead capture, like I said, so people respect the no-sale zone.
The videos were absolute jet fuel on the fire, doing that video exposure was phenomenal, and just a lot of time and energy. Sometimes I look back at how many hours I spent on Facebook in a week, “Oh, that’s disgusting.” But it was my sole form of business development, and it costs me nothing from a monetary perspective. So, why not, right? This is all I’m doing to get a client.
Michael: Well, and I guess this effect like, groups are very different than pages, perhaps more so than some people may realize.
Andy: Yeah, I heard, anecdotally, Facebook’s algorithms are starting to put a lot more focus on groups as opposed to pages because Facebook wanted to promote and get more group exposure. I don’t know if that’s true. But that’s one thing, possibly.
Michael: So, I’m curious, what is a typical week look like for you at this point? Now that you’re more or less at the capacity target that you had, not taking on new clients, they’re getting referred out through the advisor referrals page. What’s a typical week for you now?
Andy: It depends on the time of year. So, I learned a lot indirectly from the other advisors I saw that worked with my relatives. The typical people, 10 years ago, and I tag along on some of these meetings was every quarter, go into their office, they have this big flip book of charts, and talk about economic conditions, and interest rates, and market returns. And my relatives’ eyes would glaze over.
And the advisor at the time was like, “I don’t know why we do this quarterly. We should just do meetings twice a year. It would be more productive.” That’s stuck with me. So, that, I always sort of thought, let me do semi-annual meetings.
And because I knew I wanted to do tax focused, I was like, we have to do one towards the end of the year to get in conversions and last-minute distributions and RMDs or whatever. And we can firm up to tax projections, you know, income projections. So, I knew there’d be one November, December. And I was like, “Okay, well, six months prior to that, it means May or June.”
So, I set out early on in this planning stage to know I do semi-annual meetings May or June, November, December. So, I cluster together my meetings so those months are quite busy. The rest of the months, honestly, not too intense as you can figure out, 40-something clients, I have the side hustle tax prep business, I did only 40 returns last year, and nothing too complicated. So, February, March, a little bit of April’s fairly busy with tax returns.
Michael: Are those returns for your clients or just other outside returns that you’re doing?
Andy: A bit of both. Initially, when I started doing returns in 2018, I only did five, but I would do returns for whoever wanted me to. I’ve since stopped taking on returns for people who aren’t also planning and investment management clients because I want that to be a value-add to them. It’s completely arm’s length. It’s a separate fee, there’s no discount to use me, they can use whoever. But if they want me to do their taxes, I do. And most of them do have me.
And I also capped that. I’m done taking on new tax return clients because I don’t want that to get unwieldy. So, otherwise, not bad. Summer is quite not busy. There’s stuff that comes up. I do quarterly rebalancing of accounts. So, that’s a couple of days every quarter, just random servicing, client distributions, contribution stuff comes up. A few new clients I’m working through onboarding with. Otherwise, I’m largely done onboarding, that was a big portion of my time over the last few years.
Michael: So, how do you explain this from your end, the value of financial planning and what you do for this 8,000 to $9,000 fee?
Andy: Oh, man, I’m about to write an article about it. I’m going to anger a lot of people with this. You can’t quantify and measure the majority of the value we provide. I’m not saying there’s not value there. But it’s disingenuous to pretend you can put a number on it. Some things are easy, like reviewing a tax return, I caught some errors and, boom, saved someone 500 bucks in taxes that would have overpaid.
But there’s tremendous value in Social Security claiming and pension claiming. Investments, obviously, low-cost passive is my approach, which I know, over the long term, should do better than concentrated or high-fee funds. But that’s not guaranteed, right, without picking course A and comparing it to what the alternative is, and then fast forwarding 30 years and looking back which one did better for the client, it is literally impossible to say how much value or benefit we can or did create for someone by doing a plan or by making a recommendation XYZ, and tax planning, same thing.
My crystal ball about guessing future tax rates, financial market returns, inflation, client longevity, my crystal ball doesn’t work for me to pretend like it does. And for me to put a number on how much tax savings this Roth conversion recommendation can have for you is intellectually dishonest. So, and I tell clients this. And they are greatly appreciative of it, and they get it.
So, I say, “I know there’s value in what I do. I can’t quite put a number on it. I like to think you’ll get at least, the $8,000 or $9,000 of value. If nothing else, there’s some peace of mind emotional value. Now, that varies for different people. But knowing there’s someone to walk you off the ledge in times of market turmoil or someone to bounce ideas off of, or someone who knows the angles to look out for and run by you the pros and cons of Option A versus Option B, there’s value in that.” That’s my value presentation.
Now I know a lot of advisors will squirm and say, “This dude has no idea what he’s talking about.” But I’m a thinker, right? I know a lot of the angles in the industry and the backstory. And I know I’m a pretty sharp dude. And I just I know you can’t put a value on this stuff. So, I don’t pretend like I can because it’s disingenuous. Sorry, long winded answer, but…
Michael: And that’s literally how you’re explaining it to clients and prospects.
Andy: Yeah. And they like it. Now, who knows? Maybe some folks don’t. Maybe some folks have read things I’ve said or videos I’ve done on the topic and be like, “There’s no way I’m hiring this guy.” And they never reach out to me in the first place. In which case, I don’t know that they don’t like me, but that’s fine. That’s all part of, I guess, screening out the prospect process, right?
The Low Point On Andy’s Journey [1:35:07]
Michael: So, what was the low point on this journey for you?
Andy: There’s no single low point other than, “I’m real lonely sitting in my office by myself.” I’m a social person. I’m outgoing. I’ve always worked with lots of people in really large corporations in Midtown, New York, with commutes that were packed shoulder to shoulder, always around people, always someone to bounce ideas off of and just see in casual chitchat, I have none of that now. And I miss that.
Now, don’t get me wrong. I have a network of folks locally and virtually other advisors and sort of COIs and stuff I bounce ideas off of and go out to lunch with. But it’s just not the same as, “I’m bored this afternoon. Let me look over to Sally or Joe next to me and just go for a walk, quick to get a coffee.” I don’t have that. And I miss that.
Not to the point that it’s making me debilitatingly depressed, but it’s tough doing this as a solo. But I’m also hesitant about ever hiring because, as we discussed, clear-cut focus on what I do and don’t want this to be. And I can clearly visualize what it would look like to hire, what it’s going to cost, what the process will be, what the compliance burdens will be.
I know I can make more money hiring. I’ve done the math behind this. I just don’t think I want that. You can’t unring that bell once you grow and start hiring. That’s basically a one-way street. And I don’t want to create this animal I can’t undo. So, I’m really conscious about this.
Michael: Once you grow the point of hiring, you have to keep growing because if you don’t, your people don’t get growth opportunities to move up. And then they leave. And then you’ve got a business with multiple people who are leaving, which is even more painful.
So yes, there is kind of blowing up the hot air balloon. Once you float it up to a certain level, it’s really problematic to let it down. You cannot float it up there. But once you get up there, you kind of have to keep pumping.
Andy: You’re up there, right? So, I say now, steadfastly, I’ll never hire. But I know me. Ask me again in a year. My story might be very different. If, for no other reason, to have a formal succession plan because now, and this is what I tell clients straight up, and they seem to be okay with it, “If I get hit by a bus tomorrow, we’re done. You’ll lose access to me. Now, your accounts are safe. They live on as they are, but the advice and planning you get from me that simply stops.”
So, it would be nice to have a formal successor of some ilk. It will be nice to have someone to talk to. Now I’d probably have to hire virtually not local, just because the talent pool is that much greater. And I realized I’d got a good thing here. No sales, there’ll be zero marketing or client acquisition requirements. It would be real planning. The pay will be great, the hours will be great, flexible.
And I’d like, this may anger some folks as well, but I’m a white male, I have a lot of advantage in this industry, I would like to give someone else an opportunity to get, again, a good job into a role, into a position that they may not have otherwise easily had access to so.
Michael: Except that you actually don’t want to hire.
Andy: Except that I don’t want to hire. But if I did, I’d try to mix up the demographics of what this industry looks like.
The Advice Andy Would Give Newer, Younger Advisors [1:38:10]
Michael: So, what advice would you give to other newer advisors looking to come into the industry today?
Andy: Do you. You got to find clients and work and the environment and a firm that that fits who you are, what you want to be, who you want to help. That’s important. Don’t try to be someone you’re not, don’t try to dress a way you’re not, don’t try to work at a firm that’s not your cultural fit because you’re not going to be happy.
Michael: And how do you find that?
Andy: Man, as you know, it’s really hard to come by, right, a lot of this industry is still the sales meat grinder, the wirehouses, insurance companies, there’s not a lot of good advisory firms that are looking to hire people to genuinely plan and learn without some sort of sales or production requirement. So, just asking around, being part of networks, expand on LinkedIn, expand in person, join places like XY Planning Network Facebook group, FPA, things like that, and just start getting yourself out there. There are opportunities there, are just few and far between unfortunately.
What Success Means To Andy [1:39:11]
Michael: So, as we wrap up, this is a podcast about success. And just one of the themes that always comes up is the word success means really different things to different people. And so, as someone who just had this incredibly successful growth trajectory over the past few years, the business is clearly in a really good place right now, but how do you define success for yourself at this point?
Andy: I knew this question was coming. And I thought about it for days. And I don’t have a pretty neatly packaged, succinct answer. But for me, it’s, I need to feel like I’m making a positive impact on people’s lives, personally and professionally. That, coupled with it, if I’m happy, if I’m just a happy person, and I enjoy what I do, day to day, personally and professionally, that’s it, right? If I made an impact on people in a good way and I enjoyed my time on this planet, that would have been a success.
Michael: Pretty straightforward. I just I love you launched the firm with that clarity of vision out of the gate, or, well, 50 clients $6,000 in fees. Now it’s more like 50 clients and $8,000 in fees. You can do that, run your 90% margin, serve clients super well, and have a lot of work-life balance to do the things that make you happy.
Andy: With that said, it’s really hard for people to knock lifestyle practice, right? I don’t know, this is a pretty good gig, honestly. So…
Michael: I love it. I love it. Thank you so much, Andy, for joining us on the “Financial Advisor Success Podcast.”
Andy: Yeah, thank you and thank you for all you do for the industry, Michael.
Michael: Absolutely. Thank you.