Welcome back to the 264th episode of the Financial Advisor Success Podcast!
My guest on today's podcast is Dan Callahan. Dan is a Partner and the Chief Investment Officer at Capasso Planning Partners, a rapidly growing independent RIA based in Charleston, South Carolina that oversees about $250 million of assets under management for 300 client households across the country that are all served virtually.
What's unique about Dan, though, is the way he and his firm began with nearly zero clients but grew substantially in client acquisition over a 3-year period, especially in areas outside of the local Charleston area, by outsourcing lead generation to online third-party platforms.
In this episode, we talk in-depth about how Dan incorporates third-party lead providers like Zoe Financial, SmartAsset’s Smart Advisor, and Fee-Only Network (to name just a few) to maximize the reach of potential clients beyond his local area, how Dan highlights his firm’s fee structure and flexible meeting times to position the firm to stand out amongst a crowded marketplace of other virtual financial advisory firms pushing for the same leads, and how Dan justifies the non-trivial revenue-sharing and other marketing costs that it takes to buy leads by having gotten from $0 to almost $50 million of assets under management in barely 3 years.
We also talk about how Dan’s perseverance in client outreach allowed him to keep pace with larger firms (despite not having a business development or marketing team), how Dan’s experiences at fee-only firms gave him opportunities early in his career to experience senior-level investment and portfolio work (which lead him to acquire his CFA designation), and how those experiences and his CFA designation gave Dan the confidence to start and grow an advisory firm from the ground up.
And be certain to listen to the end, where Dan shares how developing a financial firm from scratch involved enduring a rollercoaster of fluctuations in his own satisfaction and disappointment (especially when dealing with acceptance and rejection from prospects), why Dan feels strongly about taking risks and being vulnerable to create better career goals and overall achievements, and how Dan places importance on the flexibility of meeting clients virtually to create a less stressful work-life balance for him and his firm.
So whether you’re interested in learning about how Dan leveraged online third-party platforms to generate client leads, how he aids his firm in standing out to compete with larger firms, or how he grew his firm to $50M of AUM in close to 3 years, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Dan Callahan.
Resources Featured In This Episode:
- Dan Callahan
- Charlie Capasso
- Capasso Planning Partners
- Brewer Consulting
- Dave Ramsey's SmartVestor
- Edelman Financial Engines
- Harness Wealth
- LPL Financial
- Mark Tibergien
- Morris Financial
- Nick Murray
- SmartAsset's SmartAdvisor
- XY Planning Network
- Zoe Financial
Michael: Welcome, Dan Callahan, to the "Financial Advisor Success" podcast.
Dan: Hey, Michael, thank you for having me. I'm very excited to be here.
Michael: I really appreciate you joining us and looking forward to the discussion around what I feel like is the brutally challenging topic for anybody that...well, I was going to say that starting the advisory business, but even when we've been in for a while, which is just business development or getting clients in a world where increasingly I find most of us got into the advice business because we want to give advice, we want to serve people, not because we want to be prospecting and cold calling or networking or all the different things that we have to do to get to the clients to whom we can then give advice and get paid.
And some of us are maybe just naturally wired or gifted towards business development and going through that process, but a lot of us are not, or at least, it's not necessarily our favorite thing to do. And in recent years, there's been this big growth of basically like lead generation services. And granted, there have been lead generation programs out there for advisors for a long time, this sort of new wave of digitally-based, internet-based lead generation services, SmartAsset, Smart Advisor, and Zoe and Harness and FeeOnly, WiserAdvisor, and all these different programs out there. And to me, it creates an interesting new pathway around, "Well, what does it look like if you grow an advisory firm because you just spend some dollars to get the lead generation going?"
And I know you've been through this in sort of a slightly different path, not starting from scratch in the industry to get going, but breaking away from a firm where you couldn't bring clients with you so you still have to start from scratch and get going and you spend a lot of time with these lead generation services. And so, just excited to talk about what it looks like when...I mean, some of us, we'll outsource investments or we'll outsource paraplanning or we'll outsource operations to a virtual assistant. How does that work when you try to outsource lead generation?
Dan: It's interesting. So, it was a transition, for sure. So, just full disclosure, I hadn't used any of these systems in my past experience. So, I've been with fee-only RIAs in some form or fashion since I got out of college. They were all relatively established, very local client base, any new clients were typically very warm referrals that come in the office and say that they knew a client, we'd have a meeting, they would close and work with us. Nowadays, and at least for our firm, the main growth engine is almost the opposite of that. We might find a client in California who has a specific need and it works for us and based on one of these lead generation systems, they find us, and then they're comfortable working with us remotely, which was something else that's just completely flipped to the industry, in my opinion, where that maybe wasn't the case even a few years ago. And I know, there's been a lot of successful firms out there that have been remote only from day one. But I think now it's just so much more welcomed from all client types, all ages, it's almost the norm because of COVID. So, that has helped us tremendously.
How Dan Incorporates Third-Party Lead Generation To Acquire New Clients [5:50]
Michael: Very cool. So, talk to us a little bit more about just how this works. I'd love to just dive right in, these third-party lead generation service, just what are you using? How do they work? What are you doing in this regard to get third-party services to send your clients?
Dan: Yeah, so Zoe Financial is, kind of the main partner and the one that we've worked with the longest, so I'll kind of focus on them to start because, as you probably know, they all have a pretty different process, they all have a different...first of all, they're all structured differently on how they get the leads, how they disseminate them to clients, to advisors. So, with Zoe specifically, it all starts with the vetting process, you apply to get on the platform. It's a pretty tough process, they grill you on financial planning, investment process, philosophy, etc. And they say they do 100 interviews and 5 advisors get in from those interviews, so it is tough. Once you're in the door there, they do a really good job, in my opinion, of combining the personal element of what we do with their technology so that it's not just an algorithm that's matching some prospect to some advisor because of certain keywords.
It's part that and then it's part them knowing the advisor and knowing who might be a good fit and who has certain experience in different areas versus other advisors. So, it's a really good combination of human and technology. And for us, it's been a really good fit because those prospects coming to us through the platform, we already know that they have certain needs that we might be a really good fit for, so it kind of takes the salesy-ness out of it, if you will. I don't feel like I'm going on a cold call when I jump on my introductory call with a new prospect. I know their name, now I know like a full snapshot of their finances, I know exactly what they're looking for, I may even have notes from the Zoe team on how their discussion went with the prospects. So, it just makes it really easy to kind of jump in there and learn a lot about them and have a really easy conversation right off the bat.
Michael: All right, so I got a lot of questions about this. So, it sounds like part of the process from Zoe's end is they do, we'll just call it for now, something on the internet that makes a stranger reach out. But they're not just funneling directly to you immediately and instantly, they're funneling to someone on the Zoe team and someone on the Zoe team is taking the conversation, qualifying the prospect, understanding their situation and what they're looking for, and I guess drilling down a little bit further like, "Oh, they got a thing with stock options, you guys do work with stock options, so I'm going to call up Dan's firm, in particular, because I know his firm's good in this space." It's that kind of stuff? It's that kind of matching?
Dan: It is, yeah. So, the prospect will typically get, in their case, three matches. So, they'll fill out that information. Once they fill it out, someone from the Zoe team will reach out to them and try to get more information and have a conversation with them to help all of the advisors that they were matched with. And then they'll go through three interviews, so they'll have access to our calendar, they'll schedule an introductory call, there's really no friction there and they make it super easy to do that, they have access to our calendars as part of the onboarding process.
Michael: So, how does that actually just work in practice? Do you make like a Calendly link thing for them that they can access directly?
Dan: That's right. So, they will be on my profile, they'll scroll down, if they like what they see, my calendar is integrated right there on that screen. And then they even have the choice of video or phone call. So, if they want to do a Zoom call, not only is our Calendly integrated there but our Zoom kind of meeting room is integrated as well. So, they'll click on a date, they'll pick a time, if they choose video, they immediately get kind of a welcome email from Zoe that copies the advisor and the prospect that tells them exactly when the call is, what to expect, kind of a rough agenda. And then we'll go one step further and just reach out as quickly as we can and just send them a nice introductory "Good to meet you" type email, "And we look forward to talking with you Friday at 3:00 p.m."
Michael: So, I want to make sure I understand how the sequence works, though, because I know there are some other services out there, maybe we'll get to them in a moment, where clients can look through a giant list or directory of advisors. Now if they find one they like, they can click on and schedule a meeting or click on and go through the advisor's website and reach out and schedule a meeting there. So, it sounds like that's happening in part through Zoe because they've got their own directory of the advisors that qualify through the vetting to the scheduling process. But then, where does the phone call with the Zoe team fit into this? Prospect reaches out, talks to Zoe team, then Zoe gives them a directory of advisors, and then the clients pick off that directory? Just how does that sequence work?
Dan: Yeah, great question. So, my understanding is the prospect enters their information, they enter their email and their phone and they get three matches of advisors that they can look at right away before they really...they don't really have to talk to anybody at Zoe by that point if they don't want to. Once they enter that information, though, that typically triggers the Zoe team to reach out and just try to get in touch with them and learn as much information as they can. So, it can happen without that part of the process but I would say, typically, they're in touch with the prospect right after they click that button and then they help the advisors by just placing notes like, "Hey, this person already has their estate planning done, they're really just looking for tax planning at the end of the year." And that stuff obviously is extremely helpful going into those phone calls.
Michael: And so, you said, though, it's not just a technology platform, Zoe is getting to know the prospects, not just to pass some notes and background around them but it sounds like to actually figure out like who's a fit for who, which prospects are a good fit for you.
Dan: That's right.
Michael: Well, I guess I'm wondering like what kinds of things are they asking to figure out who's a good fit, and do you know...what are they doing to determine that you are a good fit? Because a lot of us say like, "I can work with anybody who has at least X dollars, I'm a comprehensive financial planner, I can work with anyone." So, how is Zoe picking you for particular things? Or what types of referrals do you get from them in particular and why?
Dan: So, I think what happens is if they are able to get a hold of the prospect, they have kind of a good list of questioning where it alerts them in a lot of different ways. So, the obvious one would be if there's a very specific or like time-sensitive item, like let's say they have incentive stock options and they need to make a decision by the end of the years just as an example. Those are kind of the obvious ones but as they get into that conversation, they'll start to pick up on other items as well. One really good example is just fee structure. So, in part of that conversation, most times they can pick up right away if this person is more comfortable with an AUM fee structure, or usually, the case is they don't want an AUM fee structure, they want a flat fee, they want an hourly planner, they want a one-time assessment. Nine times out of 10, the prospects will say these things to Zoe. And the reason that I think they open up so much is because, technically, Zoe is kind of an unbiased third party there, they don't really...they just want you to hire a Zoe advisor, they're not necessarily pushing one advisor versus the other. So, the prospect feels kind of like they can open up a little more.
Michael: Right, Zoe doesn't need you to pick any particular advisor, they just need you to pick an advisor. So, the better the job they do creating a match that makes someone follow through and actually work with the advisor, the better it goes for Zoe.
Dan: Exactly. So, the fee things a great example because, obviously, there's no quicker way to kind of squash an introductory call than throwing someone on there that clearly wants an hourly assessment and you put them on a call with a firm that only does AUM and has a $500,000 minimum. It wouldn't even last 10 minutes.
Michael: Right, obviously, it's frustrating for us as advisors as well to get leads...I mean whether it's referrals or strangers off the internet or from a lead generation service where I work on an AUM basis and I have a $500,000 minimum and I get someone who has $50,000 and just wants to pay a flat planning fee. No knock to people who want that and need that but if I'm an AUM advisor with the $500,000 minimum, that phone call is really not a good use of my time.
Dan: Exactly, for all parties involved., right? And so, the prospect gets frustrated, the advisor gets frustrated. So, in my opinion, Zoe does a really good job of sorting that out at the beginning. And obviously, prospects don't call up and say, "I'm an AUM prospect," or, "I'm a flat fee person," but...
Michael: "I would love to pay me a percentage of my net worth and assets."
Dan: So, they do a good job of asking the right line of questions. And it's pretty fascinating, they can pick up on those things, and then it gives us good ammo to go into those calls and I know that this person has no interest in having their portfolio managed, so I'm not going to go into something...go into a call and pitch portfolio management or pitch anything, really. I'm just going to have a normal kind of conversation with them, figure out what their financial planning needs are, and go from there and see if we're a good fit.
Michael: So then, how does this work by the time a lead is getting handed off to you? I think you said something shows up on your calendar via Calendly or Zoom scheduling. So, presumably, you get some kind of email confirmation that so and so stranger has scheduled a prospect meeting on your calendar through Zoe. So, what happens next from your end?
Dan: So, we'll get that calendar link and that will show up, we'll have the meeting, typically 30 minutes for those introductory meetings. Like I said, Zoom or phone call. And for us, this is where the process kind of diverts over to the advisors versus Zoe. So, Zoe is still helping the prospect after that first call, get through the pipeline, meet with their advisors, and ideally make a decision. Even if that decision is, "I'm not ready to hire someone," or, "They all sounded great, but I'm just not sure what I need right now," yes or no, some kind of decision, they're helping them go through that, they're following up with the prospects. But I would say at that point, each advisor has their own system. So, for us, we immediately send a detailed follow-up email from that phone call.
We'll kind of...for me personally, I'll throw some notes in there of what we learned on the call, some of their goals, what they're looking for, and then just attach some deliverables on our services and anything maybe specific that came up on the call to help them out and then ideally try to book a discovery meeting. So, for us, that next step is we have a complimentary discovery meeting, which again, can be Zoom or a phone call, where we can really get more into the weeds on their situation, maybe provide some free advice and just kind of giving them some guidance and let them experience what it's like working with us. Because part of the struggle of working through with prospects that are all over the country and are starting as like a digital prospect, if you want to call it that, I think it takes a couple of meetings to really build the trust. So, that second meeting for us is where we provide really good advice, we look at their situation, we basically have like a full-fledged financial planning meeting with them before they even decide, "Hey, this is a great fit and we want to move forward."
Michael: And so, in the meantime, Zoe is also following up with them just to say, "Did you choose Dan? Did you choose one of the other two advisors we sent you? Did you want to talk to some other advisors because none of these are working with you and we have others that we can connect you with...”
Michael: “...and just trying to nudge them or nurture them along.”
Dan: That's right. So, again, it comes off, it's very unbiased, it's very...they're kind of lending the helping hand, getting them through the process to hopefully make a decision. And the best part about that is so we have the kind of the portal on our end with Zoe and we see these notes, we input our notes after the calls. We'll get the alert two days after the cal and it says, "Hey, I touched base with John and Susan, they loved your conversation, they have one more interview, they had this question, and they'd like to book another time with you on this day." So, a lot of times, that comes from Zoe's reach out, other times, it comes from our reach out to the prospect. But it almost feels like they're kind of like a business development partner for us at that point because it helps us follow up with the clients because the pipeline can get pretty long and it's extremely helpful. And I'll tell you, the most helpful part about it for me is actually getting the feedback on the folks that don't hire us. So, we'll have...
Michael: Because if they don't pick you and they tell Zoe that they didn't pick you, Zoe asked why and then they tell you why?
Dan: Exactly, exactly. There's so many times where we have a fantastic introductory call, we get along great, perfect fit, it almost sounds like they're ready to hire us right then and there, and then for whatever reason, they may not. And in a lot of other systems, maybe you never even find out why not or they kind of just...they ghost you or they just disappear, right? In this case...
Michael: I was going to say I feel like you usually don't get to find out why they didn't pick you or if they do, at least to me, it's often pretty simply, "We decided to go another direction," "We decided to work with another advisor we were talking with." It's like, "Well, okay, I wish you luck and all the best but I'd really like to know why you picked the other advisor. I'm not even trying to be heard, I just literally want to know the things that I not do or convey or show that you apparently wanted to see and I wish I could get that feedback."
Dan: Yeah, it's unique. So, if I'm looking at dentists if I move to a new city and need a dentist and I hire one, I'm probably not going to go reach out to the other two I didn't decide to go to and tell them why, right? So, it's a very unique aspect of the system but it's so helpful because I'll learn...sometimes it's just gratifying to know, "Hey, this person was just really looking for a one-time plan and they didn't want to spend more than X amount of dollars." And to us, "Okay, great, that doesn't mean our system is broken, it doesn't mean we need to make any changes, it's just wasn't a good fit." Other times, they thought the fees were too high, sometimes they thought the fees were too low, or there's just a miscommunication of services, and whatever it is, it's just usually very helpful information for us and we can adapt our processes going forward based on that information.
Michael: Anything in particular...what's the biggest surprise you've had of why a prospect didn't close that you probably never would have heard if Zoe hadn't passed it along?
Dan: That's a good question. We haven't had any major surprises where it's like, "Hey, I thought this person was literally about to sign an agreement with us, and then they just totally went with someone else for some crazy reason." We have had some where prospects will go out of their way to meet three or four times with us and really get into the weeds on their finances and a lot of issues and we can add a ton of value and they seem super excited about it. And then nine months will go by and they just don't respond to calls or emails from us or from Zoe, and then they'll resurface like a year later, which is just so strange to me. But people have crazy lives and sometimes these things are top of mind and then all of a sudden, they aren't. So, that happens every once in a while, those are the interesting ones, right, where it's like these people still remember us after 12 months and...I don't know. If it was a local thing, maybe they probably just hire us, right? But since it's online, it's a little easier to...it's easier to ignore an email than it is to ignore someone local.
Highlighting Fee Structure And Meeting Flexibility To Stand Out In A Crowded Marketplace [20:33]
Michael: So, as leads come through, is this just sort of the whole process? Just at the end of the day, Zoe is queuing up prospects, they appear on your calendar, you do an approach call, ideally, you get to do a second meeting for discovery. If that goes well, then either they move forward to become a client or they don't and either they tell you or Zoe, and then just on to the next. You usually kind of to the end in two meetings one way or the other?
Dan: Typically. We'll have a few scenarios where it takes more than two meetings but yeah, I would say after a good introductory call and a good discovery meeting, we usually know after that second meeting, they're going to hire us or they're not going to hire us or they're not going to do anything. Inaction as we would call it. So, after that second meeting, we have a really clear idea there and then the Zoe folks tend to have the same idea.
Michael: And so, when they're...I guess, from their end, when they're trying to match to you and send prospects to you, what's your differentiator in the Zoe system that gets you leads over other advisors? What's making you guys win in that system?
Dan: So, they actually had a webinar about a week ago on this exact topic and that question came up, advisors kind of asking, "How can I get more leads?" and, "How can I make myself more attractive in the system?" I think for us, it comes down to two things. Number one is just the fact that we have multiple fee structures. So, I would imagine probably half the advisors in there are larger, more established firms that just do AUM business, they don't do flat fee, they don't do hourly. So, right off the bat, if you've got a prospect who knows that that's what they want and they're not comfortable with an asset-based fee, it's going to eliminate half the field right there and then we're still in the race. So, that's number one.
Michael: It doesn't have to be about whether AUM fees are better or worse but just literally, there will be some human beings who don't want them because some people don't want any particular model. So, when you're different than the majority, then you carve out the majority the moment the prospect says, "I only want this particular fee model."
Dan: Exactly. And I will tell you, that's one of the shifts that I have seen in the industry in general, in the last two years. I don't know if this is because of COVID and more remote firms or if it's just...my personal opinion, it's kind of the next generation of clients, like all the 20, 30, 40-year-olds that are starting to build wealth but they're asking a lot of really good questions around fee structure and value and it's just becoming a lot more well-known that the options are out there. So, I think years ago, people just kind of assumed most advisors were asset-based and maybe commission-based and things like that. Now, because of XYPN and kind of the different marketing funnels out there, people know what flat fee is and advice-only and all the different iterations of it. But it's popular, it's very popular with the high-income earners, it's very popular with engineers and software engineers and kind of the tech folks that we work with. It just fits nicely and they like it a lot, so just offering that as a huge advantage for us.
Michael: And so then you said there's a second factor as well. So, what else is differentiating for you in the Zoe system?
Dan: Yeah, the second one is the flexibility. So, the fact that we're kind of a young, nimble, growing firm, we do a lot of meetings at night, we do a lot of meetings on weekends. We try to cater that to our clients as much as possible. And honestly, that's something I learned...when I joined Charlie, he kind of taught me that right off the bat and that was something he was doing already that I thought works really well. So, if you think about it, we're working with...most of our clients are still in the accumulation phase, so they're still working. Maybe a 2:00 p.m. meeting on a Thursday, regardless of if it's remote or not, it may not be super convenient for them, right? So, we do a lot of 6:00-7:00 p.m. meetings, after the kids go down, they'll want to do a meeting at 8:30 or 9:00 and just do a quick planning call. We'll do weekends for some of our folks that are just working a lot during the week and they're burnout, they don't want to talk about financial planning on the Tuesday nights, so they'll do it on Saturday morning. So, the fact that we offer that is also a major asset because prospects will mention those types of things in those introductory calls and they'll mention those things to Zoe, and then immediately, our firm will kind of pop up in the race there.
Michael: Well, and at the same time, I find it striking just to think about how many advisory firms have lead generation or contact or "Schedule a meeting with us" forms on their website and may not have realized that they're losing a significant portion of prospects just because they didn't have an option for 9:00 p.m. one or two evenings a week and 10:00 a.m. Saturday morning slot.
Dan: And that's to say, I think on our Calendly still, I'm pretty sure weekends are blocked off on there but we make it very clear on our profile that just ask us and we can typically accommodate nights and weekends.
Michael: All right. So, you at least don't want to just sacrifice nights and weekends by default, but you at least put it out there as a way to differentiate.
Dan: Right, right. And I think a lot of advisors might hear that and it might just scare them, like their calendars are going to start filling up. In reality, it's not like I have meetings every single night and every single weekend, it just tends to be...there's a small subset of clients that it works really well for and our four or five meetings a year with that one client will just happen on Saturdays and it's convenient for them. So, it works on both ends.
Michael: But I'm struck at the same time as you're describing what's differentiating you in the Zoe system. These aren't like radically massive difference things than other advisory firms, one thing that matters to a client that is a differentiator are like, "Could you just charge me $5,000 and not 1% of $500 grand?" or, "Would you be open to meeting with me on a weeknight?" And suddenly, that's what determines that you get the lead versus some other firm that could turn into be a very valuable client in the long run.
Dan: I completely agree. There's absolutely nothing from a fee structure or service level that we're doing that other firms can't do. We have very high service, we try to keep our client count as low as possible and try to make sure none of our advisors have 100 clients that they're working with. Other than that, it's not rocket science as far as being available on nights and weekends, in my opinion. It's just those little things go a long way and when someone's interviewing two or three firms and two firms don't do that or they're just very hung up on the AUM piece with the fee structure, then it just immediately places us in an advantageous spot.
Michael: Well, it just makes the point, right? In a very crowded marketplace, you just need something that you show up differently on that matters to at least some subset of clients, right? I'm sure it goes beyond him but I at least first heard this from Mark Tibergien who had made the point around just being competitive with your advisory firm, you don't have to be better at everything you do, you just have to match the market in everything you do except for one thing that you do differently and you're better than everyone else. You just need one thing that you can hang your hat on and you can win incremental amount of business opportunities in a crowded marketplace with 120 million households in the U.S. It really doesn't sometimes take the hugest thing to show up differently, right? As you're saying, it's just, "We'll also charge you the fee as a fee and not a percentage of your assets that adds up to the same fee," or, "We'll just have the flexibility to meet with you on nights and weekends," is sometimes all it takes to incrementally stand out in a crowded marketplace.
Dan: That's exactly right. It's pretty incredible to me how I feel like the industry is stuck in a few places and I think fee structure is one of them. So, it's not to say that...I think all fee structures have a purpose and they fit certain people. Certainly, we have plenty of AUM clients where they would never want to manage their own assets, they don't know how, they beg us to because they don't want to, so that's a good fit. But at the same time, if I'm talking to a prospect who's been a DIYer their whole life and they have Vanguard, if I can still work with that person and I don't have to do the hard sell on, "You have to transfer all your accounts and you have to do that all on day one before we do any planning with you," then it just makes it so much easier to work with a larger subset of people.
Michael: Well, and I've long maintained around this, even in the context of different fee models, it's not necessarily an A versus B, like AUM fees will die and flat fees will dominate them. I am very, very bullish on flat-fee models and subscription models and the rest but it's a different strokes for different folks thing. There's clients with a lot of different preferences and when we almost all only show up with one model, anybody who's doing anything different suddenly wins a lot of incremental business. We've seen that from some of the advice-only firms that are growing very rapidly and we see it in XY client network on advisors doing subscription fees as well. It's just the fact that you can talk to a prospect and have them say like, "Wow, I've never even talked to another advisor that would work with me that way because everyone else requires I buy their products or I give them my portfolio," that anyone who wants something different, suddenly you might be the only advisor they talk to that does that, which can give you a very good chance of winning.
Dan: Exactly, and it makes the conversation easier. I've always had trouble...again, before joining Charlie here, I didn't really have tons of business development responsibilities in any of my past roles. It was mostly portfolio management, investment operations, things like that, financial planning, of course. But having to have the conversation and just being able to make it easy for people to work with us has been extremely helpful. So, I don't have to have this great call and then at the end of it, tell someone, "Yeah, that all sounds great and if you want that, you move all your accounts over and that's the only way we'll work with you. And oh, by the way, you better have $750,000 in assets under management." Like all these kind of terms that the prospects don't even really know what they mean and it just provides negative connotations to them at the end of that call. So, just avoiding that entire conversation and just keeping it about the client and making sure we're a good fit is the key, in my opinion.
The Process To Transform Third-Party Leads Into Clients [30:18]
Michael: So, what does this add up to at the end of the day? When you go through all this, how many leads are you actually getting from Zoe? How often do they close? How many are turning in the clients? What's all this adding up to at the end of the day?
Dan: Let's see, so I'll start with the leads portion of it. So, on the profile, you have a choice of how you want to filter your leads, so I believe it's by income and by assets, which the prospects will input when they do their profile. So, theoretically, when we started, I had basically turned those down to the bottom, I was just curious like, "Okay, let's see what this looks like." And it's a lot, your week fills up fast with prospect calls. I've had weeks where I've had...
Michael: Which means what? How many?
Dan: Multiple in a day and maybe 10-plus in a week, depending on the settings. Last Friday, I had four. So, last Friday, all through Zoe Financial, I had four introductory calls with brand new prospects that found us because of that website. And right now, my profile settings are higher on there just to kind of reduce the lead flow a little bit because, as you're probably well aware, we're onboarding a lot of clients right now as a newer firm that's growing very fast. So, we're sort of in that tuck-in process with a large portion of our client base, which takes up a ton of time. So, I've reduced mine but we have new advisors with us that are still on that lower end and their calendars are full every single week with calls with prospective clients.
Michael: And so, when you talk about having four leads last Friday, what kinds of, I guess, lead quality? What kinds of dollars or affluence we're talking about? Because you said you've had the filters down, you've had the filters up, are these four people on a Friday that are all half a million-dollar prospects? Or where do you set those thresholds at this point?
Dan: This particular day, all of them were...so net worth-wise, all above $2.5 million I think, one of them was $6 million. Income, these were all higher-income folks, so I think the lowest was...there was a retiree on there with lower income, but the folks that were still working were all above 325, 350, at least that's what they put in the profile. So, obviously, those are kind of round numbers that they just input.
Michael: Sure, sure. All right, those are very good numbers. Yeah, that's a lot of dollars. And so, I'm guessing then, you can have 10-plus in a big week, I'm going to guess that not every week, but it sounds like this is like 20 to 30 leads a month kind of thing that's flowing through?
Dan: It easily can be, depending on the settings. We just brought on a new CFP, he's been working with us in a paraplanning role but he's also building kind of his little book of clients, if you will. He's younger, he's based in Austin, Texas, which is obviously a hot spot for the country right now. He started working with clients independently, I think, maybe not even a year ago with us and he's already getting close to the point where he needs to slow the lead flow down, if that tells you anything. So, he's had a ton of appointments, he's had a lot of success in closing these leads. And because of that, now he's onboarding a lot of clients and his time is starting to get constricted a little bit.
Michael: And so, do you have a sense as to what close rates are and maybe you track it more directly? Just of all this lead flow, is this like, "But still, at the end of the day, we only get 1 out of 20?" Or, "Hey, they're handing off to three advisors and we usually get about one out of every three?" What percentage of these actually turn into a business?
Dan: So, at the end of the day, I think it works out to be about 30%, so like 3 out of 10 end up being clients. Now, that number is really hard to quantify for a couple of reasons. Number one, there's a lot of people in the 7 of the 10 that just don't make any decision. So, it's not really like they're not hiring us and we didn't do our job or couldn't close them, they didn't hire anybody.
Michael: Right, it's not that you lost, nobody won.
Dan: Right, right. So, those folks don't hire anybody. They meet three advisors, they like what they hear but they just don't do anything. There's some folks in there where...this is pretty rare, but you'll have like kind of a no call, no show every once in a while where you have an appointment on the calendar and they don't answer. That is extremely rare, that maybe happens once a month these days, and then typically we get them back on the calendar anyway, so that's maybe a small subset. And then there's a few of them where we have a great conversation and they go with another firm and the firm was local, they like the other advisor better, whatever that means, they'll go with the other firm. So, again, it's a tough number to just look at it and say, "Okay, we're only closing 3 out of 10," which some people might think is fantastic and others might think is not great.
Michael: Well, relative to Zoe just makes things appear on your calendar and rough math, 20 to 30 leads a month can be 6 to 9 new clients a month, and so just you're answering your phone and Zoe is making 6 to 9 new clients a month appear.
Dan: And the part I always go back to of why it's just a tremendous value for us is every single one of these people are people we would have never found without that. So, without the SEO, without the marketing arm, without Zoe's outreach, without the algorithm, these people never find Capasso Planning Partners, right? So, it's pretty incredible from that standpoint.
Michael: And so, I guess I'm just wondering like what are typical, I guess, fees or assets for these clients because it sounds like you do some of each, but just...right? I think there's a perception out there that, "Well, it's only going to be like the little clients at the end of the day, no one comes with sizable portfolios through the internet to give you their life savings." I guess is it actually adding up that way? What kinds of fees or assets or revenue flows do you see if you might be getting half a dozen new clients a month?
Dan: So to answer the first part of that question, we do have a lot of really good AUM clients from this service. So, one of my larger clients came from it, $10 million-plus in AUM, all through this system through one person. We have a lot of other 1 million, 2 million, 3 million comprehensive AUM type clients through the system. I'd say it's probably 70/30 on like flat fee/AUM. So, again, where I feel we have an advantage is we can go into that conversation with the person who thinks that they want a flat fee and they're not comfortable with AUM and we don't even talk about AUM, we just kind of figure out what's best for them and move forward and try to attach a reasonable fee to that.
Michael: So, that 70/30, just to be clear, that's 70 on the flat fee side and 30 on the AUM side, so the majority of the folks that you're closing are on the flat fee side?
Dan: That's right. If I had to guess, those are rough numbers.
Michael: But it sounds like isn't necessarily because AUM is dying or anything but because literally, the way you show up differently in Zoe is you have non-AUM options and so you get a disproportionate number of the non-AUM flat fee inquiries in the first place?
Dan: Exactly. What I've found in the process is clients or prospects typically… they either really don't understand or know any of the fee structures and it's just kind of a start from the scratch conversation. Or they are familiar with it and they know that they want flat fee or advice-only or hourly or something like that. It's pretty rare to get someone that's gung-ho on, "Yeah, I want AUM, I don't want flat fee," for whatever reason. So, typically, if they know what they want, it tends to be on the flat fee side and then that's no problem for us, so we're happy to talk with those folks.
How Dan Substantiates The Cost Of Using Zoe Financial [37:39]
Michael: And so, then, the kind of key part to all of this at the end of the day, what is this cost? What do you pay to Zoe to just have half a dozen new clients show up on your doorstep every month? Not to belittle the sales process you have to go through but as you're showing, at some point, just kind of the good old-fashioned Nick Murray game of numbers, if they're going to put 10, 20, 30 leads on your calendar and you're converting about 30% of them, if you do enough of the prospect calls that are good fits, you're going to get some.
Dan: Exactly. So, upfront...and I'll mention this just because so many of their competitors have different pricing models so I think it's good just for apples to apples, there's no cost upfront for us to be on the platform. So, we're not paying for the leads, so to speak, upfront. No one gets paid until the advisor actually starts working with a client, which once again, is helpful in aligning Zoe's interests with the prospective client. So, they're not getting paid to introduce them to us, they're not getting paid until...you know.
Michael: So, they don't...so thus all of the follow-up work that Zoe does, they don't get paid until the client closes?
Dan: Exactly, exactly. And furthermore, on that front, they want it to be an ongoing relationship as do advisors. As you know, I feel like we add so much more value over time, which is why we typically don't do a ton of one-time plans. So, again, Zoe is kind of aligned there where if we have a client and we only work with them for a month, then Zoe kind of did all that work just for one portion of the fee for one month. So, once we actually do close a client, they have two different kinds of referral solicitor fee structures there. For the financial planning flat fee folks, it's 25% of the fee. So, client pays us $100, $25 goes to Zoe, $75 comes to the firm. For the AUM, it's similar, so for the first million, it's the same setup. Any assets over $1 million, that rate goes down to, I believe, 10 basis points, so it's a pretty significant decrease there. So, if you're able to work with the larger client through the system, you do see some economies of scale and some breakpoints on the referral fee at over $1 million.
Michael: And out of curiosity for Zoe, on the AUM fee, is it 25% of the advisor's fee or 25 bps flat? Is it a percentage of what you charge or just they set their bps schedule?
Dan: It's basis points.
Michael: Okay, okay. So, duly noted for advisors that have...if you have below-average fees, that 25 bps is going to gobble up more of your fee, if you have a higher fee, it's going to gobble up less because Zoe's fee is fixed. The challenge for lower-cost advisors is it cost them a higher percentage of their fee to do the business development. I guess, the flip side, at least for Zoe, is Zoe then has no incentive to send clients to high fee advisors, which they would if they charged a percentage, right? If it was a percentage, they're like, "Oh, so basically, if we send all the prospects to the advisors with the highest fee schedules, we get 25% of a higher number and then we make more money," and then they would actually not want to refer to the low low-cost advisor. So, the good news of it is it lets Zoe be neutral in who they send to, and as an advisor, you have to bear in mind that business development and marketing is part of your cost structure when you set your fees.
Dan: And that's for us, it's such a no-brainer as a smaller firm for us because, A, we do not have the scale to kind of go out and hire like a full-time chief marketing officer, right? So, like our competition, if we're going up against a multibillion-dollar IRA, they probably have a chief marketing officer, they probably have multiple employees who are focused on business development and marketing and making the website look good and advertising and all these things where that's certainly not my area of expertise, certainly not Charlie's. We're financial planners, we're investment managers, we're not marketing geniuses. So, I'm happy to hand that off and kind of let them do that for us as a partner, and then we just kind of get plugged in to do what we do best.
Michael: Well, and it strikes me, at the end of the day, this is basically the same fee structure of a lot of the IRA custodians have had for the referral networks for a long, long time, like about 25% for the business development has been out there for a while. I'm thinking back even to just when I got started originally in the life insurance world, the old saying was there are finders, binders, minders, and grinders. The finders did the prospecting, the binders got the sale, the grinders did the planning work, and the minders service the clients in the long run, and each of those got 25%. So, it was 25% for the lead, 25% for the sale, 25% for the plan, and 25% for the ongoing service relationship.
Dan: That's right. It's funny you mentioned that because we were speaking with an advisor that was thinking about joining us and he's with a larger firm and that's sort of their model is just like that. They had different names for it but essentially, you had your hunters out there doing nothing but bringing in business, get paid that clip, and then it's on to the next one. Then you got the advisors that are kind of working the relationship long term and then you've got kind of the higher-ups that come in for strategic planning and an investment meeting or an estate planning meeting. So, it's an interesting model. So, for us, we just dumb that down and say, "As far as marketing is concerned, we are happy to let them market on our behalf and do the SEO and do the technology, and then we'll just plug in when we can, talk to these folks, and try to add value for them."
The Challenges Of Using SmartVestor Versus Other Lead Generation Services [43:16]
Michael: So, now talk to us about, I guess, some of the other services because it sounds like this is not the only one that you have used. You've clearly had some success here, but it sounds like you've used others as well, which means I'm assuming you even have seen and can kind of compare across the ones you've used. So, talk to us about what else have you done in the world of paid lead generation services?
Dan: Yeah, I think I've tried them all. Honestly, I think between January of 2019 and now, I have...or us a firm, have been onboarded and worked with...I've got a list of six here, a couple of which we still work with. So, we've done Dave Ramsey SmartVestor, Brewer Consulting was the very first thing I did when I started with Charlie back in January with Patrick Brewer who I think you're familiar with. SmartAsset, Wiseradvisor, and Fee Only Network. Now, we do still...we keep our subscription and we do Fee Only Network, I think there's other benefits there, we don't necessarily use them as kind of a lead generation, so to speak. And then Harness Wealth, we recently got onto their platform and actually are going live next week.
Michael: Okay. So, just tell us about each? How it's going? How did they work? What's worked or not worked for you? Obviously, a note for everyone, your mileage may vary, right? You may not do as well with Zoe, you may do better with others, but just at least from your experience, how do each of these work, and what's worked for you or hasn't worked for you?
Dan: Yeah, so I'll walk through those. And I'll say it's funny that, I think, very little aspects of the differences between these firms are what, in my opinion, makes it one of them work very well for us versus maybe another one not working well. So, Dave Ramsey SmartVestor, a good starting point. So, we signed up for them, I think it was like the first week, I kind of got my compliance stuff checked off, I was officially with Charlie with zero clients and trying to try to bring in new business and build up the client base. So, we started on SmartVestor, which is you basically pay for a certain geographical region and then you get leads through there. Now, obviously, if I recall correctly, I believe you end up paying more for the larger regions.
So, if I wanted every lead within 100 miles of Charleston, South Carolina, that would be a certain price point versus just saying, "Okay, I want leads that are within driving distance of downtown Charleston." And then at any moment, at any point in the day, that lead can come through via email. So, that could be midnight, it could be 4:00 a.m., it could be the middle of the workday, it doesn't matter. As soon as that prospective client is on the site and fills out a form, everybody in that region gets the alert. And in my recollection, they keep it down to a certain number of advisors so the prospect is not getting 15 advisor profiles sent to them, I think it's somewhere between 3 and 5, depending on the area. And then it's a race, you try to call them right away, I remember like being out shopping with my fiance and our baby and I'd get the alert and run out and try to make a phone call in the middle of the day on Saturday.
Michael: Because in practice, right, early bird gets the worm, just whoever they talk to first, if they have a good conversation with the first person they talk to, they may or may not even take a second or third conversation. So, if you're not first in, your odds are very, very low you're getting in at all?
Dan: All of the data that they actually provided us basically reinforced that. So, if you get there first, your chances of closing them are like 85% higher than having a second or third conversation. Calling versus emailing, all of those different data points, they would send us these little PDFs and compare them, and yeah, basically, you just had to call them first. So, what would happen was these people with teams of biz dev employees are just sitting around waiting and that's all they do. So, the second that lead comes in, they're going to call these people two, three, four times, the actual advisors are not having to do that. So, if you have like an LPL team on there and there's an advisor and he's got three or four people under him, immediate advantage. So, that's the reason it was not incredibly successful.
Michael: It's hard for you to stay competitive because it's all about speed of response and you didn't have the resources to hire a person to sit around, so when a lead comes in, you should be calling them within 120 seconds.
Dan: That's right, and quite frankly, not what I thought I would be doing with my career, right? So, it's not that I dread it, I don't mind doing the calling, I enjoy being on the phone with folks and talking to people. But the cold call at 9:00 a.m. on Tuesday for something like that when you know that they're getting four other cold calls, it's tough. So, that was not terribly successful for us as you can imagine. I will say, I got my first client from there and he was a pretty good-sized client. It actually kind of worked out where he lived right down the street from our office, we grabbed coffee, he had a whole lot of things that he needed to get done before the end of the year and he's still working with us, it was a great fit. But that was the only client I got from it and I think the leads were probably up in the hundreds, 150, 200, by the time I canceled it.
Michael: Oh, so you got like 1 client out of 100, 200 leads?
Dan: Yeah, the close rate was pretty dismal if I had to go back and calculate it.
Michael: Because you had to be so fast out of the gate and either you were you weren't.
Dan: Exactly. I would go on there...and with all the tools we use, I'll go on there and pretend to be a prospect and see what happens and kind of try to figure out what they're going through in the process and it's Edelman Financial and these huge firms that I'm going up against, right? So, here I am, one person trying to kind of do the whole process. There's no way it would work.
Michael: And I'm guessing that probably has some level of regional variability, though, that just if you're in a dense metropolitan area, there's probably some very large firms that are just grabbing people within seconds of when they submit inquiries. If you happen to be in a less populated rural area, there might not be a ton of leads but there probably also aren't as many people calling on them.
Dan: That's exactly right.
Michael: Maybe you get better odds.
Dan: So, we learned that quickly and then we expanded our lead area. So, just for some backdrop, the cost goes up as you expand that. So, I think at one point, we went up to where we were getting leads anywhere up to like Asheville, North Carolina down to Atlanta. And that was costing like $800 a month, I think. It was pretty significant. So, kind of opposite to the Zoe kind of fee structure, theirs is everything upfront and you could potentially never close a prospect and still pay the money. So, that's tough.
Michael: And thus, the framing here of, right, why are you ending up with a 30% close rate on Zoe and a 1% close rate on SmartVestor, it's like, "Well, when Zoe only gets paid when you close, they have a little more incentive to get you close, when the service gets their dollars up front," right? If you're good at playing the system, I guess it works. The contrast is you said even with the large region, it was $800 a month. I mean, that's $10,000 a year, two or three good-sized clients and that's actually cheaper than Zoe, particularly since, I guess, you paid this once and then you're done. Zoe, if you get the client, they get the percentage of the fee ongoing.
So, I guess even by that basis, one sizable client through Zoe is actually more expensive than one out of 100 clients from SmartVestor on a flat fee basis. The caveat is just you have to deal with all the lead quality and the volume and the pressure and the fast response, or you have to spend more money to hire someone to answer the phone quickly, in which case, good news, leads only cost $10,000 a year, bad news $60,000 a year for the person to call on the $10,000 leads and just to be the first to respond and say, "Hey, I saw you submit an inquiry, would you like to schedule a meeting with Dan and learn more about what we do?"
Dan: That's right. And that's why I think for SmartVestor, it's engineered, the bigger firms will do well on there. We would have kind of study groups on there when I was early on with other advisors and they would build their entire practice on SmartVestor, but what I found was they had full-time people doing the calls and the emails and the follow-up and the marketing drips. And like you said, the math makes sense, you could close 1 out of 100 and pay 5,000 a month if you're a big firm for all these leads. But if every 1 of those 100 has a few couple million in assets, that math checks out pretty quickly for the larger firms. For me, that's half my rent at the time, then that's tough to keep on an ongoing basis.
Michael: Right. Well, I guess that's the other distinction as well is just the sheer financial dynamics of upfront costs versus back-end costs. You don't have to...literally, you don't have to pay Zoe until you have the revenue to pay Zoe just because it's back end-base, it's a percentage of the revenue, whereas a program like SmartVestor, you have to have the dollars up front. So, all the trade-offs that go with that, you can scale flat upfront fees more sometimes, but you take all the risk and you have all the upfront out of pocket.
Dan: That's exactly right. So, for those reasons, again, I think a lot of firms do very well on there, for us...I guess I just say for me specifically, it was not a great fit. Brewer Consulting, so that was probably the first marketing or...I wouldn't call them lead generation, that was a marketing piece that I did from the start and put kind of considerable capital in to just get up and running, get my LinkedIn up and running, get any kind of marketing channel and white papers and all that kind of stuff going so I can start automating those processes because again, I didn't have a team under me to kind of offload those things, too. So, they were helpful. I would say, again, the cost was a little prohibitive at the time for me. We were doing Facebook ads, there was a monthly cost for that.
Michael: I was just going to say what did they do? Like SmartVestor, right? They've got their network, people who listen to Dave Ramsey and go through Ramsey's website and find a local advisor. So, just what did Brewer Consulting do for you?
Dan: So, Brewer was more of a...they would teach you how to do these things. So, I would link up with their software engineers and they would help me put together a good list of Facebook ads on a Social Security white paper or a retirement spending analysis or something like that, so when people go on Facebook and they see that my little video would pop up. They helped me get content going, I didn't really have any of that at the time. Once again...
Michael: So, kind of building out the content marketing funnels and sort of working like an agency in that context.
Dan: Exactly, and automating those processes. So, for me, again, the upfront cost was just too prohibitive at the time. So, I'd left my job, no clients, had some savings. For anyone that does that, money is tight for as long as it takes to kind of get the client base up and running. So, just having anything that was a pretty significant monthly cost upfront where I wouldn't really see the benefits from it longer term was just tough. So, I stuck with them for probably six or seven months. And in fairness to them, that was how it was pitched and that is kind of their structure, they've helped these advisors set up those pieces so that you can get your own leads in a year or two using these automated processes that they help you set up. So, I'm sure it would have worked long-term but it was too cost-prohibitive for me at the time.
Michael: And what kind of cost was it?
Dan: I don't remember the exact amounts, but it was a significant monthly cost just to kind of be in the system and have their professionals helping you, and then some of the one-off items that they would recommend also had their own additional costs. So, the Facebook was a good example. Obviously, it costs money to go on there and kind of set up an ad structure and things like that, so that was additive to their cost as well. That's where I kind of had to pump the brakes and say, "Okay, I see the value here and if I had the endless piggy bank, I would happily do it." But I hadn't seen any prospective clients from it after seven months and it was just way too cost-prohibitive for me.
Michael: Okay. So, just one of those...I've long preached it even having lived the business of building out content marketing platform, right, building out through blogging, it takes a lot of time, it takes a lot of time for nurturing before it starts really moving. And so, yeah, I get it, the Brewer system might have a good humming return as your Facebook pixel gets attuned and your retargeting starts ramping up and you refine who you're going after with seminars or webinars or whatever you're doing. But that could take you 6 months or 12 months or longer before the system's really humming. In the meantime, there's a cost to pay marketing professionals to get that up and running for you.
Dan: That's exactly right. So, long-term...and I saw it work for other advisors that had been with them longer. So, there's one guy, in particular, I still follow on LinkedIn, he's out in California, he works with biotech guys and he has this whole system set up where he puts these...he puts great content up on estate planning and asset protection for anyone going through a major biotech liquidity event. And it works for a lot of reasons and he keeps it consistent. So, all of that was kind of from the Brewer system and it works well, but I didn't have the wherewithal or the funds to stick it out at that time.
Dan: So, from there...
How Dan Implements Services Offered From Other Outsourced Lead Generation Services [56:20]
Michael: So, what was next? Yeah, you were just going through all of them. So, SmartAsset SmartAdvisor program.
Dan: That's right. Yeah, I think at the time, it was called SmartAsset, I guess it's SmartAdvisor now. And then WiserAdvior, I kind of jumped on to both of those at the same time. So now, again, this is like a third fee structure I'd been introduced to where you pay upfront but you pay per lead and you can pay based on the type of leads you want. So, you can only say, "I want the million-dollar-plus leads," which costs more, but theoretically, you get less of them. So, there's that route. You can kind of go the whole way and say, "I want to get every lead," including the ones that might cost $50 a lead up to the ones that might cost $750 a lead.
Michael: And was that actually typical cost? The cost could be anywhere in that range?
Dan: Yeah, yeah, I'm sure it's changed in the last year or so but at the time, I believe that was...it might have been 125 or 150 bucks for a smaller-ish lead like someone with 200k in assets and minimal income, I think it was up to 750 or higher for like a multi-million dollar lead. And really, all that means is the person put that on their profile and that's where that number comes from. So, kind of a common theme there. It's less competition, so someone plugs all that information in, it goes out, you'll have I think three advisors that get it in the area. The same type of competition with SmartVestor, so I'm going up against Edelman Financial and their army of planners and biz dev people. It's a race to the phone, so as soon as you get that lead, you got to call them and be the first one in the door. And the stats that I saw on that side were probably even more convincing that you had to be the first one, so a lot of times, they just wouldn't even respond to the second or third person.
And the thing that got me about all of these we've talked about so far, with the exception to Brewer Consulting because it's not really a lead gen, is you still go into that call and it's a cold call, right? You're calling these people out of the blue, they may or may not have even seen this email that has your profile in it. They could have been filling out a mortgage calculator or something else and clicked on a few buttons and, oh, here we go, there's an advisor match. That was my experience when I would actually get any of these people on the phone. So, a lot of times, it's a complete shock that you're calling, it's a complete cold call, you're very fortunate to have another discussion with them regardless of how good the call goes. So, that part of it was frustrating too where you pay for a lead, you get them on the phone, that's a win, but then you immediately realize it's probably not a good fit or it's just really tough to move them forward in the process.
Michael: And again, I'm thinking in the math overall, if I'm paying whatever it is, $200 for a decent-sized lead and I've got to talk to 20 or 30 of them to get 1 client, I still at the end of the day may only be out $5,000 or $6,000 in leads and if I get one good client, I can make that back immediately and still, long term, I guess, pay less than Zoe, right? Like a $1 million client at Zoe is going to cost me $2,500 a year as long as the client is with me. If that client is with me for the long term, I could literally pay tens of thousands of dollars to Zoe. But I got to take all the bad leads to get to the good ones, I've got lower close rates, faster time pressure, all those dynamics that you were highlighting before come right back into play. That's just part of the trade-off. So, if you've got the dollars upfront and you're ready to do the hustle or hire someone to do the hustle, you're probably more profitable by playing this game and winning it. But you have to play the game and win it with upfront commitments.
Dan: Exactly. And again, I don't mind being on the phone, I love meeting with clients, I love having those conversations, but the cold call aspect, I think everyone could admit, it's not the most fun thing in the world. So, when your success kind of makes or breaks on the cold call from the start, it's just a tough place to be when you've got minimal clients and you're kind of counting every penny as you...because I would have days where I'm in the office and I go to the bathroom and I come back and I have three emails, and it's three different leads from SmartAsset, which is great. But even in that like two-minute time span, I'm already not the first person to call them and that might be like 1000 bucks on the credit card that day just from paying for the leads upfront. So, that's also just really tough in the early days. Now, for a big firm, like you said, that math can work out really quickly.
Michael: If I'm a large firm and I've got a five-person business development team, I just tell all of them not to go the bathroom at the same time and I send that email to a shared email address that all of them use and someone's going to see it within 30 seconds and pick up the phone.
Dan: And they have all those metrics like they have to call that lead within 30 seconds or I'm sure they get dinged. It's just a completely different league from where I was operating at the time.
Michael: Right. So, that was SmartAdvisor, so then you said you also tried out WiserAdvisor.
Dan: That's right. And very similar to SmartAsset, so you pay upfront, you get the leads, slight improvements with WiserAdvisor where you tend to know a little bit more about the prospect before you talk to them so you at least know they were looking for estate planning advice, they were looking for tax planning advice, that was part of their input system. So, I would get the email, I'd get the lead, and I knew that at least going into the call. So, I could say, "Hey, I saw you're looking for estate planning, we certainly help with that," and kind of go down that rabbit hole. So, slight improvements but again, it's still a cold call, it's still a cold email, and if you're not the first, then there's no chance. So, similarly to SmartAsset, that was a tough one for me. The lead flow there was not as high, so I actually kept my profile active on there until pretty recently. I think like earlier this year, I finally turned it off. But, yeah, that was the success there and I don't think we actually brought in a single client from there in a year or so that we were on the platform.
Michael: And pricing similar? Just pay per lead and similar kinds of costs to what SmartAdvisor was charging?
Dan: That's right, yep, you would pay per lead. And if I recall correctly, you could choose the different tiers of leads that you wanted. You get a lead alert, you get the name and email and phone number and best time to call. And then it shows a category of what they were looking for which, in our case, it just said financial advisors so nothing too informative there. You'd get their location down to like a city and zip code, size of current portfolio with very vague kind of brackets, so this one says, "1 to 3 million." "What do you need help with?" "Financial planning and investments." And then there's an additional details field that the prospect can fill out if they want to, so some would fill that out more detailed, others would just leave it blank. And that's it. So, once you get that, the second it comes in, you got to jump on the phone and try to give them a call as soon as you can.
Michael: And then what about FeeOnly Network?
Dan: So, FeeOnly Network, we just pay an annual fee to have profiles up on there and I'm no tech expert but from my understanding, the SEO of just being associated with that website and then kind of linking it in with our website and any marketing we would ever do, which we plan to do in the future, is very beneficial from what I've seen and heard from other advisors. So, for us, that's an extremely minimal cost. We get all of our advisors up there with profiles and their various areas and we'll probably keep that up for the foreseeable future.
Michael: And what's the cost for Fee Only Network?
Dan: Let's say for the full year, maybe $600 or so dollars for the profile.
Michael: Okay. Oh, so very different pricing cost than the other.
Dan: Yeah, $696, and at the time, we were setting up three profiles.
Michael: Three profiles, so 200-something per profile?
Dan: Yep, for the year, so very cost-friendly there. But again, they are the first ones to say this, I don't think of them as a lead gen service. They do have, I believe, a find an advisor site or portion on their website but we see them really just as a benefit from an SEO standpoint.
Michael: And then just in practice, have you gotten any leads from them?
Dan: We got one. It was actually kind of funny, we signed up and I didn't know we were live on the website yet, we hadn't even paid our invoice yet. They set up our profiles and then we ironically got a lead that afternoon. And then, obviously, we signed up the next day and it was fine, but it was kind of funny because we got that email and I'm like, "Oh, I guess that's what that looks like."
Michael: Did it close?
Dan: It did not.
Dan: I wish.
Michael: It would have been such a great success story.
Dan: I know, one for one.
Michael: And I think the last one that you had mentioned was Harness Wealth.
Dan: That's right. That's the newest one for us. So, we've been doing the onboarding process, they had a very strict and lengthy due diligence process that we worked through, made it on the platform. So, my understanding there, we actually reached out to them last year and at the time, we were too small from an asset base standpoint and we didn't have enough clients and all that kind of thing. I reached out a few months ago and just let them know, "We've had this trajectory of growth, we now have advisors in some hotspots that your clientele may appreciate, and we do a lot of flat fee planning."
So, I think that was the piece that they were happy to hear about because I think they work with a lot of very large AUM-focused firms. So, once again, there was a huge need there for these people going on, they have liquidity events coming up, they're tech employees for an upcoming IPO company. They don't have AUM to manage, so that eliminates those folks and maybe they don't want to pay some really, really high flat fee right out of the gate. So, we fit in nicely there where our minimums are probably a lot smaller than some of those firms and hopefully, we'll have the same success there that we're seeing on Zoe.
Michael: And pricing-wise, how does cost work for getting leads or getting clients?
Dan: Very similar to Zoe, no upfront costs, and then just the 25% as like the referral solicitor fee for an ongoing client that we're working with.
Michael: All right, so it would just come down to you'll see whether they can produce similar lead quality and similar flow, but you're not at risk unless they can actually make it happen.
Dan: That's right. And again, I see it as a great fit for us because they have that similar structure where they have the team in place to kind of court...and I think they call it like the concierge, but they court the prospect through the entire process. So, we get plugged in once we get matched, and then they're incentivized to help that person make a decision one way or the other just like the Zoe Financial folks are.
How Inspiration From Younger Clientele Helped Dan Grow His Firm [1:06:51]
Michael: So, just what is all of this added up to at the end of the day? Can you just talk to us about what's the size of the firm now? What did you guys manage to grow to when...I think you said you're essentially starting from scratch about three years ago?
Dan: Yeah. So, mine personally, technically, on day one, I had had zero clients. I guess I really had one. One of my best friends has been a client for a long time and he was technically a client in my old firm, but he was literally my best friend, one of my good friends from college. So, he came with me, which was not a big deal. So, he was my first client. As of right now, I'm personally the lead advisor for 68 relationships and I would say probably 80% of those were from Zoe.
Michael: And, well... I was just going to say, on an AUM basis, no fee measure, but by AUM or by revenue, a lot of them are flat fee, so you're getting a lot of lead flow from flat fee?
Dan: Yeah, we call it asset equivalent in-house just as an easy way to track it. So, basically, turn it into an AUM number, even though...because our flat fee business is ongoing, so it's not typically a one-time plan so the assets...that helps us with that number. So, for me, that's about, I'd say $49 million, roughly, where I'm the lead advisor.
Michael: Okay. Very cool. And so, I guess that's driven mostly by Zoe, so call it in the neighborhood of 40 to 50 million over the span of three years came from Zoe?
Dan: That's right. That's right. And as much as we've talked about flat fee, there is a lot of good ongoing with what I would call the comprehensive clients where we're also managing assets in-house, those came from Zoe as well. So, we focus on flat fee a lot, it's kind of like the new and upcoming fee structure and something that we'd like to do. But for us, honestly, that all started because we meet these younger clients who we know will be very good long-term clients who most likely will want us to manage money for them. But you just have to start with a kind of a low comfortable flat fee because if they have student loans or if they don't have any assets to manage yet, there's still a lot of ways we can help them and that fee structure just makes so much sense to us. But we do have a lot of good AUM clients through Zoe as well, so I want to make sure I harp on that a little bit.
Michael: So, help us with a little bit more context of just your journey, your background, just what was it that led you to starting your practice from scratch three years ago?
Dan: So, I've always been in the fee-only space. I didn't know what that was coming out of college, I graduated in 2010, and I spent a full summer sending my resume to basically any single company that I thought had anything to do with finances or investments or anything like that. So, everything from Northwestern Mutual to the solo advisor down the street at the time. So, I got lucky, landed at Morris Financial here in Mount Pleasant, South Carolina. That was kind of like the formative years of my career. So, right off the bat, I figured out this world of fee-only financial planning and working directly with individuals and not having to push products, not having to cold call. Because certain interviews I had up to that point, I'd have one or two interviews and, "This place is a great fit, great culture, I love the people." And then the third interview, it's, "Okay, I need a list of 300 people you know and their phone numbers and emails."
Michael: Eventually, that friends and family network question comes.
Dan: "Why do you need that list?" And literally, I sat down and did it one night and it took me getting to about the 170th person before I was like...the light bulb went off and I'm like, "Why am I doing this?" Obviously, I know what they're going to ask me to do with this information and that's not really what I'm interested in doing. So, I kindly said that that job was not for me and didn't go through with that interview process, got really lucky to land at Morris Financial, so got to learn the ropes there. I worked with Charlie, who's my business partner now, I actually met him at that role. So, he had left shortly thereafter, I stayed there and I was sort of able to work my way up the ranks a little bit through some turnover, which was extremely fortunate for me.
So, I was able to do a lot of things that most 20-something-year-olds at firms would not be able to do, helping place trades, being in client meetings, doing a lot of like investment analysis type work on the portfolios, and working with the principal of the firm directly on a day-to-day basis because it was a small shop. So, that shaped my entire experience of just knowing this fee-only world was definitely for me and I really loved it. Ended up going very briefly to another firm here in town that sort of pivoted into more of a software technology financial wellness kind of firm, so I was there for a little while. And when they made that pivot, the job role would have been, "Okay, now, instead of working with our IRA clients, you're going to go into these employers and kind of help everyone with their 401k choices and help everyone with their financial planning questions."
So, like hundreds of people in a day type thing, which is not really for me either. So then, I landed at another firm here, which was based in Charleston but the clients were all across the country. There wasn't really a local presence and they had a niche with dentists, so every single client, for the most part, was a dentist that own their own small practice. So, this firm was significantly larger, probably like half a billion dollars or more in assets under management, had a very unique portfolio management and investment philosophy that was cool to learn and help out with while I was there. And then I was able to finish the CFA while I was there as well, which was kind of a huge turning point for my career.
So, once I did that, that kind of gave me the confidence to...deep in my mind, I always wanted to go out and either start my own business or grow something from the ground up with somebody. And once I passed the CFA, I knew that, "Okay, I have the credentials, I'm slowly getting the experience." By that point, I'd had enough experience to feel comfortable going out on my own. And then in my last year at that job is when it really just started to sink in that, "Okay, I'm going to do this, I'm going to make this move," and now I just got to figure out how logistically. Am I going to literally go and start my own IRA by myself from scratch? Am I going to join somebody? Am I going to go to kind of a plug-in aggregator-type IRA?
And I did those interviews and kind of figured out what I like and what I didn't like for probably a full 12 months, which just seemed like forever. And I just came back to Charlie who had kind of courted me through this entire process, and I realized it's just made so much sense to link up with him. He was growing really fast, he needed to hire people. Our expertise, he's a really good CFP, one of the brightest financial planners I know, and then I could come in with the CFA and be a good complement there and it's just worked out perfectly. So, I finally made the decision to do it and then I never looked back from that point.
Michael: So, I guess the challenge and the caveat was you were at a firm that was in its own niche with dentists who's bringing people in through the dentist niche, which wasn't your thing. So, if you were leaving and starting over, you had to literally leave and start over?
Dan: Yeah, and I felt like...so that firm had been through a chaotic kind of transition/succession plan before I got there. So, there was an older founder, most of the clients in the firm were his friends and his longtime clients. He sold the firm, for whatever reason, it was a very long drawn out kind of succession to the new owner. I worked with the new owner and even despite the size of the firm, there's four employees, it was the owner, it was myself, and we had an operations associate and an administrative assistant. So, in my opinion, long term, the new owner was relatively young, I just didn't see a ton of upward mobility there long term. There wasn't new clients coming into the door all the time.
It was a pretty established client base, most of them were getting close to, if not already retired, selling their practices, getting into withdrawal mode. So, I spent almost four years there but I just didn't think the long term was a good fit for me at that point and I just needed a little more freedom and kind of flexibility to work with clients the way I wanted to and kind of start something that I could just have buy-in with and be really happy to do every single day. And working with dentists across the country, for whatever reason, just wasn't putting a huge smile on my face when I woke up every morning.
The Surprises Dan Encountered On His Journey [1:15:10]
Michael: So, as you got out on your own and built over the past few years, what surprised you the most about building your own advisory business?
Dan: I would say just the ups and the downs, which everyone talks about, but I just don't know if you really can figure it out until you've done it yourself. One day can literally be like the greatest, happiest day, I guess, as any business owner can see, I might sign a great client, have two really good meetings, have a client who's just super thankful to work with us, and then the next day, you might have three or four prospective client calls that are just terrible. And it's just like the constant ups and downs and the roller coaster of emotions are very difficult to handle and I think it takes a very unique type of person to do that. And I don't think that's just in our industry, I think that's probably for any entrepreneur out there.
Michael: And just in practice, how do you handle it? How do you cope with it or manage it?
Dan: I am exceedingly optimistic, for better or for worse. It takes a lot to kind of put me down and put me in a bad mood. I feel like I have a fortunate life, I love what I do. I'm typically a pretty happy person, so it takes a lot to put me in a bad mood, which I think gives me a little bit of an advantage. And I just try not to let any of that stuff get to me. So, one of the few downsides to getting most of your business digitally is you do...I don't want to call it turnover in the sense, it's not really turnover where you have a client and then you lose them. But it's just such a different process to get those clients than it is in person, right? Because when you have a warm referral and they come into the office, if that meeting goes well, they're going to sign up and work with you typically and you just don't have to deal with a ton of rejection and you don't have to really chase them a lot, at least in my experience in the past firms.
And it's just the complete opposite digitally, you have to work really hard to earn that trust upfront, you have to do a lot of work upfront before you kind of get paid for any of it, it's just the way the process works. So, we do a lot of planning and a lot of discovery meetings, I'm getting on planes to go see people, I'm doing last-minute trips to Atlanta and Austin, Texas, and anywhere else just to go and try to close a good prospect. It's a lot of that, it's a lot of upfront costs. But at the end of the day, we're in a very fun business, we're helping people and we're doing it the way we want to do it. So, we have clients we love. There's no one on my client list, and I think everyone in our firm can say this, where we see that meeting on the calendar and we dread it. That just doesn't really happen. We try to sort that out from the beginning, so we actually enjoy working with every single one of the clients that we're working with.
Michael: And just really quickly, you said like there's even trips to see prospects to go out and close prospects. So, is part of that an extension of Zoe? Do you have Zoe situations where you get a good lead but they're halfway across the country and if it's going well enough, you'll get on a plane and fly to see them to try to close the business?
Dan: Yeah, and that's where...I'm definitely a risk-taker and that's where the hunger kind of comes in. We've had a few instances where a prospect, for whatever reason, has met with three or four advisors and just hasn't found a good fit, Zoe will kind of plug us in and they know we're flexible in those situations. So, I still do this but especially early on in pre-COVID, we might get that call on a Wednesday and it's, "Hey, I know this is kind of crazy timing but if you can see him on Friday, it sounds like it's a really good fit," then as long as it seems worth it to us, I was happy to do that, especially at a time when I was...when the client list was still pretty small, it was worth...
Michael: "It's not like I had any other existing clients to meet with on Friday."
Dan: Exactly. So, it's hectic, I still remember some of those days. I had one time on the not successful side, we drove up to Raleigh, which is about a four-and-a-half-hour drive from here. Drove up. met some prospects at a restaurant. had a really nice lunch with them. and drove back the same day, found out on the drive back that they hired someone else but they loved us and blah-blah-blah. Days like that can be a little tough but yeah, that was us kind of trying to go the extra mile and not letting location be a barrier for someone who we thought might be a really good client long term.
The Low Point On Dan’s Journey [1:19:12]
Michael: So, what was the low point for you on this journey?
Dan: Ah, boy, I would say, early on, just... getting from 0 to like 5 or 10 is really difficult and I think that stays true even if you kind of grow the numbers up a little bit. Going from 100 to 200 clients as a firm, that's a little bit more fun journey. Getting from 0 to 10 is really tough because every time you get the no or you don't close on someone you think is a could fit, it hurts. Because when you don't have that many clients and you think you can grab somebody, you start counting that as revenue and you start saying, "Okay, this is going, this is starting to go well," and then they don't sign on for whatever reason and you're back to square one. That part is extremely difficult. And then just the timing, I can't stress this enough but I just see so many ebbs and flows with how these things work.
And obviously, COVID was probably the largest ebb and flow where there were three months there where not one person across the country really wanted to talk about their finances with anybody, everyone just sitting tight and kind of doing nothing. So, that was early on in the journey for us and that was a scary time for me personally. And thankfully, once the market started to rebound and people got a little more comfortable talking about financial planning, it was like the floodgates just opened up and the calendar was full for two straight months with prospective clients. So, just being able to survive those ebbs and flows and just know that even if times are tough, there will be that good day or that good week where you might sign two clients in a day, right? And then you go a month or two and you don't have a ton of success and then it happens again, and that's kind of what my journey has been like up to this point.
What Dan Would Have Done Differently With Current Knowledge [1:20:48]
Michael:Anything you wish you'd done differently? Just as you look back at how it's gone, what do you know now you wish you could tell you from a couple of years ago as you're getting ready to take the leap?
Dan: Yeah, it would be easy for me to look back and look at all the money I spent on some of those programs we talked about and think of it as kind of a sunk cost. And in a way, it might be because, on paper, I didn't get a ton of clients or have a ton of success in any of those programs. But I think what those programs did was opened up my mindset to how this kind of digital client acquisition could work. And I had not experienced anything like that in my prior work with any of the firms we were working with, so it was a completely new concept. So, I kind of credit it, in a way, to opening me up to the Zoey Financials of the world and saying, "Okay, this can literally build our practice." And it has and not just with clients, we've literally added advisors in places in the country and we've gone out on a limb to do that because we're that confident that they will have a constant pipeline of kind of local prospective clients through Zoe. So, it's transformed not just the clients I'm working with on a lead advisor type basis but us as a company. That's why you go on our website and there's 14 profiles there now instead of 2.
Dan’s Advice For Younger Or Newer Advisors [1:22:00]
Michael: So, what advice would you give younger or newer advisors who are getting started or getting launched?
Dan: Yeah, number one, I would say...and again, this goes back to people's personalities and just like who's a risk-taker and who's not. But I certainly did not have six months of living expenses saved up, I probably didn't do it by the book, I definitely took some chances and took some risks. But I feel strongly that that's the only way you kind of get to the place that you want to go, you have to make some uncomfortable decisions. I have so many things I could think back on and think, "Man, that was an uncomfortable experience, that was a tough phone call, that was a tough meeting," and all of that just kind of gets you to where you want to go. So, take the risk, take the step to go out there and put yourself out there. And also, I would say try to have flexibility.
So, early on, I think it's really tough to go out and start your own firm and immediately say, "Okay, I'm only working Monday through Thursday, 9:00 to 4:00, and I'm not going to do meetings on Fridays or weekends." And I totally get work-life balance. I have a two-and-a-half-year-old, that was one of the major reasons I did want to start my own company and have the flexibility there. Ironically, I work way more now than I ever have at any point in my career, but I have the ability to be with him in the mornings and go home and walk the dog at 2:00 if I have to and just have a more flexible schedule versus if I was kind of an employee at a larger firm, where I would just be working the firm hours and it'd be a much more kind of corporate experience. So, go out there and take that risk and take that chance and just be confident that it will get you to where you want to go, as long as you put in the work to get there.
Dan’s Plans For The Future [1:23:37]
Michael: So, what comes next for you as you're closing in on 50 million of asset equivalent and 68 client relationships, which usually starts making it pretty busy from just a volume of clients you get?
Dan: Yeah. So, right now, literally as we speak, we're trying to shift the firm a little bit where before, it was basically Charlie kind of working with his clients and me working with my clients and the same for some of the other advisors that have joined us. As we grow, we know that that's not a very...at least in our minds, not a super sustainable model. So, we're trying to get a little bit more of a team-oriented approach where we're going to have different kind of expert areas. I'll be plugged in as sort of a CIO investment-focused role with a lot of the clients of the firm, not just the ones I'm working with directly.
Basically, going down that route, so building it out a little more traditionally where we're going to...we just brought on a paraplanner, which was a huge pain point for us until recently. When you're onboarding 30 new clients in a couple of months, just getting the data into MoneyGuidePro and eMoney can take hours. So, we finally have a good paraplanner that we brought on last week and already it's making such a difference. It saves me hours every single day and the same with all of our other advisors. So, just little additions like that is in the near term, and just trying to make this a scalable business so that we can continue to service clients the way we like to and be really personable and flexible, which is the reason we've gotten to this point, and not abandon that just because we get larger.
How Dan Defines Success [1:25:09]
Michael: So, as we wrap up, this is a podcast about success and one of the themes that always comes up is just the word success means different things to different people. And so, you're on this wonderful path for success for the firm and incredibly rapid growth with the next generation of lead generation tools that are out there, so the business is doing very well and successful. But how are you defining success for yourself at this point?
Dan: Yeah, for me, I kind of go back to that analogy of waking up happy every day. So, being in the spot that we're in now and just doing what I love every single day and having the flexibility, it's something I literally think about every single morning and will never take for granted. So, especially in our world of just the kind of finance investment world in general, I have a lot of good friends and colleagues that work a lot of hours and they're in the office all day and they're stressed. And I'm just incredibly fortunate to have helped forge this path for our company where we all work very hard but we just don't have that culture. You can go home and walk the dog when you need to, you can take a day off and take a breather and recharge your batteries a little bit. That is just so important to me and it's something I literally will never take for granted and I'm thankful for every single day. So, that's where I go for when it comes to success.
Michael: So, it's not necessarily the fewer hours because you said you're working more now in this context than you were before but the flexibility of the hours if there are going to be more of them.
Dan: That's right. A typical night for me, we put Kingston down and the computers open up and I'm working on the couch for a couple of hours and the same thing early in the morning, 6:00-7:00 a.m. We're working a lot more, it's flexible where scheduling is so much easier and just being with my family and being able to have somewhat of a life outside of the offices, I'm just extremely thankful for that.
Michael: Oh, very cool. I love it. Thank you so much, Dan, for joining us on the "Financial Advisor Success" podcast.
Dan: This is great, thank you so much for having me. I hope this is helpful for any of the advisors out there.
Michael: I think it will be. That pain of how do you get going with prospects when you're getting started is challenging for anyone. And I think even for many advisors who've been in it for a long time, business development outside of the passive flow of referrals is still a challenge, so you've given a lot of ideas for a lot of advisors about other pathways to explore.
Dan: Great. Well, thank you again for having me. This was wonderful.
Michael: Thank you.