#FASuccess Ep 173: Growing To $250M In Five Years By Crafting A More Specialized Client Experience, with Andrew Leonard

Author: Michael Kitces

Team Kitces

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

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

What You’ll Learn In This Podcast Episode

• The Benefits Of Settling Into A Unique Niche [00:07:39]
• The Challenges Of Working With A Specific Type Of Client And How Andrew Connects With His Widespread Clientele [00:24:45]
• How Andrew Has Evolved His Practice To Focus On Live Presentations [00:38:14]
• The Four Buckets Of Value That Andrew Provides To Customize The Financial Process For His Firm’s Niche [00:44:53]
• The Business Model Used By Andrew’s Firm [01:00:26]
• Why He Decided To Pursue This Specific Type Of Clientele [01:09:37]
• How Andrew Attracts Clients And Services Such A Rapidly Growing Group [01:23:29]
• Why Andrew Found It So Emotionally Draining To Work With Retired Clients [01:31:07]
• Advice Andrew Would Give To Younger Advisors And How He Defines Success [1:41:38]

Resources Featured In This Episode:

Did you enjoy the Financial Advisor Success Podcast?

And if you have a moment, please Click Here to leave us a rating and review in iTunes!

Full Transcript:

Michael: Welcome, Andrew Leonard, to the “Financial Advisor Success” podcast.

Andrew: Thank you, Michael. It is great to be here. I’ve been a regular listener of this podcast since you launched it a few years ago, and I’ve been a regular reader of yours for much longer than that. So it is an honor to be here.

Michael: Awesome. Welcome to the other side of the microphone. I guess it’s not really the other side; welcome from going from the earbuds to the microphone side of the podcast process.

Really excited having you on and talking today about what to me is a really interesting niche that I know you formed, having lived many years in, I guess we’ll call it a generalist practice, and then having a unique opportunity for a clean break and starting again from scratch and deciding to build the second time entirely focused into a niche.

And just how much faster it seems the version 2.0 with the niche is growing than version 1.0 as a generalist, having been on both sides, and talking about just what it’s like when you decide to get more focused and how you pick and how you build in that direction and how the offering evolves over time.

Andrew: Great.

Michael: So, as we kick off and get started, tell us a bit about just the advisory firm as it exists today.

Andrew: Sure. So Geometric Wealth Advisors is about five years old, started in 2015. Currently, the team is eight of us. There are three advisors, including myself, one paraplanner, one portfolio trader, two operations specialists. And then we also have a CPA tax partner who technically is 1099, but I think the services are…she has her own LLC, but the services are well integrated to the point that I think clients view her as part of the team, and in many ways, we do too.

We provide comprehensive financial planning, portfolio management, and tax services to about 110 client families. We manage about $250 million in assets under management. And I think all that is pretty standard for a small, mid-size RIA, but there are a few things that make us unique. One, as you mentioned, we have a very focused niche audience. Of the 110 client families, over half are partners at the top 3 strategy consulting firms, namely McKinsey, Bain, and BCG, if those names mean anything to you or your audience. And of the remaining 50 or so client families, I’d say all of them or nearly all of them are within 1, let’s say standard deviation of that.

So many of them are former McKinsey, Bain, or BCG now working elsewhere or partners at other top-tier professional services firms, private equity firms, investment banks, and law firms. Almost all of them are between the ages of 35 and 45, which is probably not a coincidence. I’m 39 years old. So I’d say the focus niche is one thing that makes us unique.

I think a second thing is we serve those clients almost entirely remotely. The eight of us on the team are in seven different states, and our clients are scattered where you would expect to find people at those firms.

Michael: Large, dense metropolitan areas, D.C., New York, Boston, Chicago, L.A., those kinds of locations?

Andrew: Yep. We always do the first meeting, the first comprehensive meeting in-person. We fly to them for that. And thereafter, it is done largely over video conference, phone, email. And that’s how our clients prefer it.

I guess the last thing that I would point out as being unique is all three of the advisors, and I would expect all of our advisors going forward, are career changers from the industry that we now specialize in. And we can talk about how and why that happened and why it benefits our clients. But I think that’s another thing that’s unusual about us.

The Benefits Of Settling Into A Unique Niche [00:07:39]

Michael: Let me start on understanding the client side a little more. So I’m just doing napkin math, $250 million of AUM, just over 100 clients. So the average client household is over $2 million of assets under management, which is a pretty sizable AUM client in and of itself for most firms.

But you’ve not only got an average client of $2 million-plus of AUM, but an average client with $2 million of AUM, who’s still in their late 30s or early 40s and maybe A, got to $2 million by early 40s, and B, may be plowing more dollars into that for another decade or 2 at that pace, which is a lot of dollars moving around.

Andrew: Yeah. And actually, maybe it’d be helpful to zoom out a little bit, and just sort of describe what strategy consulting is and sort of how that came to be true.

Michael: Yeah. Help us to understand just…because I think for most people in the advisor world, we don’t live in the Bain, BCG, McKinsey world of what that business and what it looks like and why. Apparently, there’s a lot of money moving around in that community. Help us understand that business a little bit more and just where all these dollar flows are coming from.

Andrew: Yeah, I would be happy to. I’d say, in an oversimplified description, strategy consulting firms are teams of very smart people who are hired on limited engagements, typically lasting a few months to a few years, to help their clients solve strategic problems. And the clients are typically very big corporations, but it’s also sometimes governments or government agencies or non-profits.

And the consultants at those firms are typically MBAs from top business schools or pre-MBAs from top colleges. And they work rather hard, long hours. They’re usually on the road two or three nights a week for the entirety of their career. I would say it’s a hard job, not compared to soldiers or coal miners or firefighters, but to the rest of us nerds, it’s a tough job, and therefore…

Michael: It’s a hardcore nerd job. Got it.

Andrew: Yeah. And therefore, most of them sort of don’t have the energy or ability to do it for that long. I’d say most of our clients aren’t intending to work until their…or at least work at these firms until their early 50s. You don’t see too many 65-year-old partners walking around the halls of these firms. And I guess fortunately for them, the only way that that’s possible is they are highly compensated. And there are nuances to each of the firms, and so I don’t want to lump them all together violate any sensitivities around proprietary information.

Michael: Sure. I’m sure they’ve all got their own compensation rules. But put us in the neighborhood here, what kinds of income levels are we talking about? Are these people making hundreds of thousands of dollars a year?

Andrew: It depends on the seniority even within the partnership spectrum. And it can vary widely. And I would sort of say; maybe it’s helpful to report our average client saved into their portfolio that we manage last year right around $250,000. So if you sort of back from there…

Michael: The average client saved $250,000. So that means they maybe need another pittance like maybe another $250,000 to live. If your income is that high, half’s going to taxes. So these are people that may actually be making $1 million a year of top-line income?

Andrew: Yes, that’s fair to say.

Michael: Very, very high-income folks. This isn’t even just sort of affluent households overall, as we measure by classic wealth accumulation, because $2 million portfolios are quite sizable, but these are really, really high-income folks.

Andrew: Yeah, they are. And I’d be happy to sort of tick through the reasons why they’ve proven to be a great niche for us. It is not just the economics; although that is obviously a strong suit, they’re also just incredibly bright, hyper-analytical. And I think one, they sort of intuitively appreciate our investment philosophy, which we’ll probably get to, and don’t sort of require the same level of handholding. I guess the counter to that is they keep us honest intellectually.

Every recommendation we make needs to be intellectually consistent, or they will poke holes in it, which definitely has made us better over time, and make sure we can meet that bar. They’re also just really, really busy. Most of these people have young families and are on the road several nights per week, and therefore, the time they have at home, they want to spend at home and not on their personal finances. So I found that the people we work with are happy to have found advisors who they view as their professional peers who they can just sort of fully outsource everything to. And that’s a role we are proud to serve.

And then I guess a couple of other things that I’ve sort of grown to appreciate about the niche, which I admittedly did not foresee in advance but I’ve grown to appreciate. One is they sell advice for a living, just like we do, and therefore, they appreciate the concept of paying a fee for something as intangible as advice. And I think they just get it in a way that other very smart people who don’t do that may not. An executive at Procter and Gamble where the company makes products might not view it the same way.

The other thing I’ve grown to appreciate, and I would be remiss if I didn’t mention it, is they are almost universally good people or at least good to work with. And I think it’s just the nature of the business. They work in a team environment in somewhat intense circumstances for long periods of time. And so if you’ve made it to be a partner, if you’ve been successful in that environment for 10 or 15 or 20 years, you’re probably nice to work with.

Maybe put another way, they do a good job of weeding out the jerks. And so by the time they reach us, we are fortunate that I think they’re all good people. They are, in aggregate, extremely charitable, both with their dollars and their time and their expertise. In some way, they’re sort of my people. They’re people I like spending my days with, and I think the rest of our team feels the same way.

Michael: So lots of questions that are coming to mind here in part, but I want to come back to it in a few minutes of like, okay, everyone wants clients who make lots of income and have lots of dollars. So how do we get them? But I’ll come back to some of the marketing discussion and kind of how you find them and reach them in a few minutes.

I also just want to understand a little bit more of what the service offering looks like for them. And, as I think we’ll talk about in a bit, you’ve lived, I’ll call it a more traditional wealth management firm and role as well that didn’t have the specific niche but did the broader, “We do financial planning investments for individuals, families, and institutions.”

So talk to us about what the actual financial planning process looks like with these folks. When you fly out to them, do the initial meeting, they say, “Andrew, this seems awesome. You know our people. I want to work with you. Let’s go.” What comes next once someone actually says, “Yes, I want to work with Geometric Wealth, and I’m going to do a financial plan with you?”

Andrew: Yeah. And I think the financial planning process will sound a lot like others, just with every step tailored really specifically to the niche that we work with. So we generally describe the scope of services as being categorized into four buckets, all of which apply to all of our clients.

The first, of course, is financial planning. Everyone defines that differently. Even everyone listening to this podcast defines it differently. We define it for every family; we build a comprehensive model of their financial projections going forward and use that as a framework for near-term decision-making.

And so we do that primarily in eMoney, but a lot of it gets modeled outside of eMoney in Excel because it’s sort of more complex than eMoney can handle and needs to be done in Excel. But ultimately, we build these comprehensive projections along with alternative scenarios and use that as the framework for decision-making.

Meaning, under the base case, we might project that the client is on track to reach financial independence, where work becomes optional, whether or not they choose to exercise that option or not in X years. And then whatever decision they’re considering, whether it’s leaving the firm or buying a different house or buying a second house or sending the kids to private school versus public school, in each case, we quantify it in terms of how many years forward or backward does that push financial independence.

And that’s how it’s framed to the client. That’s what the deliverables are. And I think that just speaks to them. It is a hard job, as I mentioned. Nearly all of them are considering, “How long can I do this?” And none of them have really ever properly quantified it. So we consider it our role to do it.

Michael: But that’s an interesting framing that like, you’re not accumulating dollars towards dollar goals. We’re going to try to get you to $3 million or $5 million or whatever it is. And then you may be $1 million higher or lower, depending on the Monte Carlo distribution of returns.

You’re framing it in, as I like to think of it, like, not the vertical access, like how much does your wealth grow to, you’re framing it on the horizontal access, like, how long down the path does it take before you get to that financial independence transition point. Because if they get there earlier and that’s their goal, they’re not going to keep accumulating, they’re going to pull the trigger earlier, or at least be able to pull the trigger earlier.

Andrew: Right. Some might, some won’t. And we do sometimes get asked that question, sort of the what’s my number of question, “How much do I need to accumulate?” We try to explain; I think that’s the wrong question asked. It’s sort of, we can do better than that by building the comprehensive model that’s inclusive of everything and dynamic to when you want to stop working. And I do think that that frames it in a way that they appreciate.

Everybody listening knows that financial planning ultimately just sort of comes down to deciding among trade-offs. And so, to the extent that clients want us to help them decide, sometimes they ask, “How much house can I afford?” or, “Can I afford to live?” And the answer is always that you can afford a lot of things based on your current income. That’s not the right question. The right question is, what are the trade-offs if I do this? And specifically, how much further back does it push financial independence?

And then we can have an honest conversation once we have quantified it about how valuable is one versus the other. How valuable is the bigger house compared to not having to be obligated to work in your current position for X more years? And that ends up being sort of…the centerpiece of the relationship is those conversations

Michael: Interesting. So to me, it just really kind of emphasizes that natural course of career flow for the partners in these firms; that these are not people that are going to do at least this work until their 60s and 70s because it’s so intensive and the burnout rate is so high. They’re working knowing that they’re not going to be able to do it for the long, long run.

And so everything gets framed to the like, “Yeah, you’re really tired of the time on the road and all the travel and the rest and not seeing your family as much, well, okay, then let’s talk about how many more years you’re going to do that if you decide to buy that other house.” And put it into that time horizon to financial independence, time horizon to burnout framing and then let them make the decision in that sort of niche-specific context.

Andrew: Yeah. And I want to be careful to clarify that these are the opposite of sweatshops. They’re typically among the top-ranked best places to work lists nationally that you see. I think Bain was number one for the last few years running. They treat their employees wonderfully in a variety of ways because they have to, right? Because otherwise…

Michael: Right. You’ve got super-smart people, and you are working them really hard. So be awesome for them or just watch them leave and then you can’t do what you do and charge what you charge.

Andrew: And they have a lot of options. They could go work for their client, or they could do a lot of other things. And so the employers treat them extraordinarily well and deserve to be recognized as such. And then when it comes to, yeah, how much does each person value financial independence, I don’t want to make it seem like that’s top of the list for everyone.

There is a spectrum of if, on one end, is I want to work for as long as I am physically and mentally capable of doing so, and on the other hand is, if I saw the math and believed it, that I could stop working tomorrow and never again have to earn another dollar from my labor, I would do so. And most people are somewhere in between. And we have projections for every one of our clients where they fall on that, and that drives the conversation of trade-offs. Like how badly you want financial independence is going to be different for everybody.

Michael: And so from the planning end, like just the actual tools, notwithstanding the fact that nominally, financial planning software is built to do retirement projections, are you able to do this in eMoney? What does that look like?

Andrew: Yeah. So, like I said, some of it gets built outside of eMoney and then plugged in specifically. Almost all of our clients invest in private equity vehicles through their firms, not through us, and sort of projecting forward the capital call and distribution schedules, those can’t be done in eMoney. And a variety of other sorts of complexities that get done outside.

Ultimately, for those sort of familiar with eMoney, it gets baked into a projection that is the Decision Center. And the Decision Center also allows you to toggle on various scenarios. And under each, we can, if we define financial independence as, again, never having to work again and earn another dollar from your labor and not have to worry about money in retirement, so not just…not run out of money before the end of life but not have to worry about it, we sort of quantify that as, we have to set an end-of-life buffer of portfolio value. And that might be different for everyone depending on their spending and also just their comfort with spending down in retirement. And once you have that, you can sort of toggle forward or backward retirement ages to determine when they reach that number, when they comfortably exceed that number.

Michael: So, Decision Center works for some of the retirement timing trade-offs. Your challenge is some of the investment vehicles that get used, in particular that just…yeah I get it, like private equity investments with capital calls are not really well built for financial planning software.

Andrew: Yeah. And it’s not just that. I think there are certain things eMoney does well, and certain things they do less well. And so some of the things they do less well, we have built models on our own and sort of integrate the two. I think eMoney is great for the long-term; it’s not great for short-term projections.

So anything that requires that we often do in Excel. I think it could be a little bit better on sort of education savings, which is obviously sort of relevant to clients in the age group that we work with. And so we do a lot of that in our own modeling in Excel, and then sort of the output from Excel becomes an input into eMoney. And that’s how we do the projections.

The Challenges Of Working With A Specific Type Of Client And How Andrew Connects With His Widespread Clientele [00:24:45]

Michael: And what other short-term stuff is a challenge? What are you doing that’s short-term-oriented in the context of all these financial independence trade-off projections?

Andrew: Yeah. An example of a short-term thing that needs to be done in Excel, if someone sort of wants to put a down payment on a home in 9 months or 15 months, they’re going to receive 1 or 2 bonuses between now and then. eMoney is a bit of a blunt tool in that things are entered as one calendar year. And if you need to be more nuanced than that in terms of timing, that needs to be done outside.

Michael: Oh, right. Well, and particularly in a world when you get people that are literally making seven-figure income, the timing of that income and exactly when it hits relative to their bills and their cash flow kind of matters a lot. Like if you don’t get the $300,000 bonus until November, you kind of can’t buy the house until November because you need the cash, and that’s when the cash hits.

So, I guess cash flow planning basically is the shorter-term stuff, just dollars in dollars out of the household, recognizing that you have rather large dollars that move in and out. So the larger dollar amounts just put more pressure on getting the timing right, or you literally won’t have the cash?

Andrew: Right. Well, and we do… all of our projections are cash flow-based. We’ve done a lot of experimenting with goals-based and Monte Carlo, and I’ve just found it very difficult to make it actionable for our client base. I personally find it difficult to sort of take anything away from, well, under this scenario, you are 72% likely to achieve financial independence in 7 years, and under this, you’re 57%. And I know that reasonable people can disagree on that one. We’ve found that cash flow-based is right for us.

Michael: And so what does this look like from a meeting perspective as you’re going through the planning process? Are you like, meeting number one, we gather data, meeting number two, we present the plan, meeting number three we implement? Do you have a different structure? What’s the actual cadence to just how you do this and get clients through it in a…particularly when you’re doing this in a virtual world because you may not be going back out to see them again in person after they came on board?

Andrew: Yeah. So, almost every client relationship just starts with an introduction from an existing client. This is part of the power of the niche is they recognize the value provided, and are more likely to tell others, tell their colleagues. And so we typically start with a one-hour introductory call where we just learn more about the client and then typically walk through our scope of services specifically as it relates in their situation. And so that is financial planning, portfolio management, tax services, and what we call collective buying power, which we can also talk about in a minute.

From there, we may do one or two more calls from there, but typically that’s it. And they say, “This sounds good,” and we fly out to see them. Typically two of us, two advisors, will fly to see them. And we do what we call the comprehensive conversation, which is a three-hour meeting covering everything we need to essentially generate two outputs. One is a proposed investment plan going forward specific to their situation, and two is to gather many of the inputs necessary to ultimately build that model in eMoney.

And so that conversation is just structured like a lot of financial planning conversations are. We go through income and expenses sort of now and in the future. We walk through their current balance sheet, assets, and liabilities. We talk about insurance, we talk about tax, we talk about estate planning, and we talk about risk tolerance, which is sort of why it takes three hours.

Michael: So this meeting, have they already said they’re going to be a client at this point, or are you still ultimately in the proposal phase and have to close them at the end of or after this meeting?

Andrew: Yeah, technically, the latter. I would say some potential clients view it as the first financial planning meeting with their new advisor, and some view it as evaluating us. I think given that we are… they know we are flying out to them, most of them have sort of made the decision before they ask us to do that that they’re going to work with us. And there’s only been a small handful who have not become clients after that meeting. And yeah, that’s just a sort of a risk we’re willing to take that that might happen. And we’re okay if that happens.

Michael: They’re sizable clients. It’s an extremely warm lead. They’re already in your niche. They don’t really have anybody else to talk to who does what you do. So I would imagine the close rate is pretty darn high at that point anyway.

Andrew: Yeah. And even from that first introductory call, we can talk about how that works, but the close rate for those in the niche is… even from that first conversation is very, very high. And I think we’re unique in that one of the criteria we use when evaluating a potential new client, whether or not we are going to accept them, which I recognize the good fortune in even being able to sort of say that, but one of the criteria we use is, do we believe that we are the single best advisor or firm in the country for this client? And that’s sort of a ridiculous claim to make unless you are only working with a very, very narrow slice of the world, right?

Unless you are a specialist, that’s not really the case. I guess I should say, unless you’re Michael Kitces and you are a robot preprogrammed with all the world’s financial planning knowledge, which by the way is not me, it’s not any of us, right? Unless that’s you, the only way you can make that claim and not be delusional is if you hyper-specialize. And so we view it through that lens, and we take that really seriously.

Michael: So, here are the people that we’re the best at. And if you’re one of the people in that niche, then kind of, by definition, we’re the best for you. So why would we not work with you? And if we’re not the best for you, then this isn’t a fit because we’re not the best for you.

Andrew: Right. And in those instances, which might be upwards of…maybe more than half of the introductory calls, we are not the best for them. And we say it as soon as we know it. And in those cases, we consider it our responsibility to try to help them find the advisor or firm who is the best. And we’re probably better at searching for that than they are. And so we use all the search tools, including your XYPN “Find an Advisor,” search by specialization.

And if depending on how they define their own identifying characteristics, maybe it’s by profession, but maybe it’s not, maybe it’s demographic, maybe it’s psychographic. And we try to help them find the best advisor for them, which ideally is someone who is specialized in their needs. And if not, we have a handful of generalist firms that we think are great, and we point them in that direction, which took a little bit of time and growing confidence to be able to do. Some of these would be great clients economically, but if we’re sort of going to be honest with ourselves and say, “We know another advisor who would be better for you,” I kind of can’t imagine taking that client.

And so I think we can feel pretty good about making that sort of somewhat ridiculous-sounding claim that we’re the best for the small niche we work with. The way I put it sometimes is… and by the way, Michael, I learned a lot of this from you over the years, from your pounding the table about the benefits of specializing, etc. So thank you for that.

Michael: My pleasure.

Andrew: But the way I like to put it is, the old way of the world was, someone decides they need a service provider, whether it’s an advisor or an accountant or an attorney or anything else, and they find someone within driving distance of their home who is suitable. And technology allows for the new model being, decide you need a service provider, find the person in the world who has the expertise most specific to what you need and work with him or her.

And that sort of just seems like a better mousetrap for everyone. The client gets better service; the provider can tailor their services and processes and systems and expertise around that. There’s more value created in whole. And I think the world is a better place with that model. So I have come to appreciate that over the years, and yeah, I think we’re probably pretty far down that spectrum towards niche only now.

Michael: Okay. I love the framing around it and just the deep focus of, no, like, seriously, here’s who we’re going to be the best at. And we’re not going to lose any of these clients because there’s literally no one who’s better at this than we are for these particular people.

And then you get into these, as you’ve noted, like, incredibly high close rates. Just to talk about like, “Yeah, we close most of our multimillion-dollar clients off of a single video call” is kind of an interesting thing just to reflect on. This is what happens when you get deeply known in a particular niche and specialization.

Andrew: Yeah. The example I like to give is, I have an advisor friend who is in a…formerly in a study group with me who is a former United Airlines pilot and now an advisor only for United Airlines pilots. And I can assure you if a potential client who is a current or former United Airlines pilot ever calls me, we will be referring him or her to my friend. And I love it when I hear people who hyper-specialize, and I love hearing about how they do it and how they tailor their services and build their whole firms around that. And I think it’s a better mousetrap.

Michael: So continue taking me through the meeting process. So there’s an intro call. You got introduced to us somehow, probably through the niche. Talk about what you do and why you’re super specialized at it for Bain, BCG, McKinsey partners. They say they’re interested or agree on the spot. You set up your flight; you go fly out to them, you have the comprehensive conversation to learn everything, get everything, kind of build-up to a proposed investment plan, and gathering the inputs you need to build the plan or the model, as you had put it. So what comes next?

Andrew: Yeah. So we follow up about a week after that with the proposed investment plan, which sort of starts with their long-term goals and works backward through our investment philosophy, the methodology, and sort of really detailed prescriptive how their portfolio will be managed. And we send that to the client. Typically iterate back and forth on that a couple of times. Given who we work with, they often like to have input into that.

And then assuming we reach alignment on that, which we almost always do, yeah, then we all sign that investment plan, they sign the firm’s engagement documents, and we’re off and running. And so then it’s our job to do all of the account openings, account transfers, restructuring the portfolio, etc., and in tandem, start to build that comprehensive model. And once we sort of have that draft of the model built, we set up a screen share call with the client where we share it, and often that ends up with a couple of iterations for additional modeling.

Ultimately, we reach a place where like, “Okay, this is the model for now,” knowing that life is going to change tomorrow and six months from now and a year from now. And once sort of that first version of the model is in place, then we follow up with sort of a one-page executive summary of their base case, the most likely outcome, and then the handful of scenarios of things they are considering, and in each case, quantifying when they hit financial independence under each of those. So once that’s done, that’s what we consider onboarding. But obviously from that flows all of the other components of financial planning.

Michael: So you don’t actually create sort of the traditional like The Plan, capital T, capital P. Like, “Here’s the 27-page or 57-page eMoney printout of stuff.” It sounds like you’re looking at these models, I guess in Decision Center in the screen shares, deciding what scenarios they want to look at, showing them some of the trade-offs. And then the only thing that actually gets written at the end is the one-page executive summary, “Here’s your base case and your various scenarios and how the trade-offs will hit your financial independence threshold?”

Andrew: Correct. And that has been determined… that process has been determined over time based on what our clients wanted, how they wanted to engage with us.

How Andrew Has Evolved His Practice To Focus On Live Presentations [00:38:14]

Michael: Interesting. Well, and I think for what are otherwise very analytical clients, on the one end, I think a lot of us have struggled with sort of the analytical, the “engineer” type clients because they ask so many questions, want so many iterations of the plan, look at so many different versions.

And so I’m struck that just, in essence, you’re handling that by saying, “Fine, let’s just do the software interactively. I’ll queue up all the scenarios you want. Let’s just grab the little sliders and look at them right here. My goal at the end is just to find out which ones you particularly want to look at or focus on, and that’s what we’re going to commemorate in the executive summary and start building action items from.”

Andrew: Right. And the first time we do that, we definitely walk through the inputs themselves because most of our clients want to see it. They are all people who have built models in their life, and they know a model is only as good as the inputs. And so the first time we share it, we sort of walk through the Excel versions of the model. We walk through the inputs in eMoney and sort of…then ultimately, the fun part of the conversation is in eMoney’s Decision Center and sort of the sandbox of toggling different scenarios on or off.

Typically, once they’ve grown comfortable with us and seen the rigor that we are using on the inputs and what our assumptions are based on, etc., most calls thereafter, most times we share the model is we’re just doing the latter part. We are just looking at the Decision Center and the scenarios and what they want to see. Sometimes they don’t even want that.

Sometimes they will email us and ask a scenario they’d like to evaluate, and we try to get back to them within a day or two with just the one-page summary of, “Here’s the base case, and here’s how it looks with that scenario.” And I think that just speaks to the audience we happen to work with.

Michael: Well, and I’m struck even just down to the language, like, for being in the financial planning realm and wearing the hat as a financial planner, it’s very striking to me like, you don’t call it a plan, you call it the model.

Because I guess in the management consulting world, I’m presuming that’s what they do. They build models for all the different strategic planning stuff they do to figure out what the impact of this strategic initiative might be on the business. So strategy consultants live in a world of models. So you don’t build plans, you build models because that’s the language they know and they’re familiar with.

Andrew: Exactly.

Michael: So how do you balance… I am curious just kind of the timing of the sequence. I know for a lot of firms, there’s sort of the back-and-forth discussion of like, “How much planning do we do before the investment stuff? How much can we do alongside the investment stuff?”

Obviously, I don’t want to implement a bunch of the investments and then find out the portfolio needs to be very different, given what it turns out happens on the planning side. How do you think about or balance that out when it sounds like you’ve done some level of investment proposals before you do “the plan” or fully build out the model and the interactive model? How do you balance those two of trying to get to an investment proposal that’s consistent with the plan or the model, but you haven’t fully done all the model stuff as you start doing the investment plan stuff?

Andrew: Yeah. And the sequencing depends on the client. There are clients for whom the amount of risk that’s going to be taken in the portfolio needs to be an output of the model, and therefore, that needs to just be a placeholder until we do the modeling. And there are also clients who sort of need other components of the service before they need either of these things. They might need to go deep on a tax issue or a lending issue or an insurance issue. And we prioritize it based on what the client needs.

I think for most of our clients, and this might be unique, they all have the ability to take a high amount of risk. And to the extent that one’s risk tolerance is a function of 1 million different things sort of broadly categorized into ability, need, and willingness to take risk, most of our clients have a high ability and very low need to take risk. And therefore, a lot of the risk of the portfolio should be driven by their willingness to take risk, which is sort of the human emotional element.

And we have gotten good at having that conversation in-person in that comprehensive conversation and asking the necessary questions to get at one’s willingness to take risk such that by the end of the conversation, we feel pretty comfortable about what the investment plan should be. And so it isn’t for our clients often an output of the model, but when it is, we sequence accordingly.

Michael: Well, yeah, I guess it’s an interesting point that just the income and the dollars are so high. And just the sheer savings, I guess from a practical perspective, like, they don’t have to save and invest and systematically compound their money for 30 or 40 years to collect $1 million or $2 million, they just have to save for the next 48 months, and there’s $1 million at least when they’re saving $250,000 a year. Long-term compounding still matters and adds up, particularly if they’ve got a pretty good-sized lifestyle.

But it does strike me; there’s sort of a compressed time horizon to their work because they don’t necessarily want to do this until their 60s and 70s. And there is so much dollar savings going in that whether or how much they save is just overwhelmingly more the driver than necessarily what their investment returns are over the next 5 or 10 years?

Andrew: Yeah. The way we sometimes put it is, if we looked at a properly constructed balance sheet for our given client, their human capital, the present value of their future earnings or future savings, which is currently invisible on their balance sheet, would sort of dwarf the rest of it for most of them because they’re in their 30s and they’re going to be working for at least 10 more years and earning a lot over that period of time.

And so that does create a very high ability to take risk. But you should also honor the low need to take risk. And most of them accomplish their goals taking very little, or at least a lower than age would suggest the amount of investment risk. And that should be respected. So a lot of it does come down to the personal, psychological, emotional part of it. What is one’s willingness to take risk? And so we sort of have to help them get in touch with their emotions on that one.

The Four Buckets Of Value That Andrew Provides To Customize The Financial Process For His Firm’s Niche [00:44:53]

Michael: So talk to us about your four buckets of value. You’d mentioned them briefly of financial planning, portfolio management, tax, and what you called collective buying power. So just walk us through each of these in turn of what you do. We’ve covered the financial planning end, but talk to us about sort of the additional pieces of what you do, how you offer it, what the services for clients are, or how it’s specific for this kind of niche clientele.

Andrew: Yeah. And on the financial planning, I would mention the model, the plan, a lot of things flow downstream from that, right? Like we need to advise on how much and what type of insurance to get and how and when to start estate planning. And none of that can be done unless a good model is in place. And so all of it flows from that. And we are obviously advising clients on all of that, and then when those things are needed, referring out to third-party experts in each of their cities who also sort of happen to work well with this niche. So finding those experts who can serve a McKinsey partner in every city is part of what we try hard at. So, yeah, I guess that’s the financial planning bucket.

On portfolio management, and I’m sure we’ll get into my background a little bit later, but we are pretty far down the spectrum of passive investing. We are firm believers in the efficiency of markets, and we manage portfolios accordingly. So that means, for most clients, it is a portfolio of Vanguard and especially Dimensional Funds managed holistically across their families’ accounts. We use TD as our custodian, Orion for portfolio management, and client portal on the portfolio side.

I guess a unique part of it for… Well, first, I should say that approach appeals to our audience. Almost all of our clients have been to business school, have heard… have seen how the sausage is made on the active management side, and I believe rightfully skeptical of that. And so it appeals to them that no part of our value proposition is our predictive abilities. We don’t think we can pick winning securities or time the market or pick managers who can do either the above. And so all of the value has to come from everything else. That being said, there are right and wrong ways to do passive investing, especially across multiple account types with different tax treatments and nuances for every client.

Specific to our clients, like I said, each of those three firms has access to certain private equity investment options. And they’re different at every firm. And momentarily setting aside my belief of whether or not they should participate in them, almost all of them do, and so part of our portfolio management process has to be thoughtfully integrating those investments into the portfolio that we manage. Those are, in some cases, a significant portion of the portfolio, and we need to manage around them. And so sort of coming up with a thoughtful approach to that, including when each of those opportunities rolls around for them, helping them to model forward what the appropriate commitment to them is in their unique situation, that’s sort of a big part of what we do on the portfolio management side. And clients appreciate that just because they don’t have to explain to us what those are. We have well-worn plans for what to do with them and how to integrate them.

Michael: And out of curiosity, you mentioned, around interacting with clients, you use Orion for portfolio management and client portal. You’ve also mentioned you’re doing eMoney and have got Decision Center. So just curious, how do you decide Orion portal versus eMoney portal when you are figuring out which one to roll out to clients or do they actually use both?

Andrew: Yeah. No, we just use the Orion portal. And like every other decision we make, business planning otherwise, it’s what do we think will resonate with our audience. Yeah, and evaluated all the portals and came to the belief that Orion’s was best for our clients. That said, we have lots of suggested ways that Orion could improve that portal, but it is the least worst option right now.

Michael: Was there a particular trigger point for you of just why the Orion portal over the eMoney portal when you were choosing them?

Andrew: Yeah. I think our clients do understand the investment process probably better than most. And I just think sort of the way that Orion displays the portfolio and allows you to see your allocations holistically across accounts and over whatever period of time you want just correctly speaks to our clients.

Michael: Okay. Because again, these are quantitative, analytical, spreadsheet people, you have to meet a fairly high bar for the rigor of how investment numbers are presented, or they’re just going to flag it.

Andrew: Yeah. And one of the promises we make is when you log onto your investment portal, everything is going to look exactly as we proposed it would in the investment plan. We are not using our judgment; we are executing the plan per our mutually agreed decision-making. And I think clients appreciate that we deliver on that. They see that every asset class is within tolerance every time they log in, and they appreciate that.

Michael: Then talk to us about the third piece, which is tax.

Andrew: So again, sort of I think a pain point for this audience and maybe just sort of the broader niche of high-earning, mid-career professionals is always tax. And it’s both sort of finding a good provider to help you with them, and the feeling that maybe you’re paying too much, and integrating all of it with the rest of what you do for financial planning and portfolio management.

So yeah, right from the start, decided that that would be part of the service we provide. So we partnered with a third-party CPA who herself sort of has a similar niche audience as we do. And she does the tax preparation, filing and sort of year-round consulting and year-end planning for nearly all of our clients. And the benefits being one, she’s quite good, she’s talented. Two, just having the two integrated is helpful to the client. It makes us better at our job to have full visibility into the tax stuff and her better at her job to have full visibility into the planning side.

And the client doesn’t have to coordinate any of that, which speaks to how busy they are. And third, her services are included in the fee that they pay to Geometric. So yeah, “free” to the client.

Michael: So just out of the collective fees that you’re charging clients, you pay her directly from the firm, and just it’s an expense to the firm for the aggregate service that you provide.

Andrew: Right.

Michael: And just wondering, like, why partner with an outside CPA as opposed to literally hiring your own W-2 employee to be a CPA? Is that a capacity issue or a business strategy decision? How did you decide external partnership versus fully internal tax preparation?

Andrew: Yeah, the honest answer is we didn’t have enough clients when we started to have someone in-house for that. So we started as the outsource model. And as we have grown, sort of maybe we are reaching the point now where it starts to make economic sense to bring it in-house. And I would say that is something we talk about a lot. I actually do think to bring in in-house, whether or not it makes sense economically would marginally improve the client experience. And to the extent that we can do that, sort of that drives most of our decisions. So that would be the argument for doing it in the next year or two. And I imagine that we will.

Michael: So, right, the math gets pretty straightforward at some point. Just X clients times Y dollars per client. At some point, when you add it up will be like, “Oh, we’re actually literally spending how much it would take just to hire a full-time person to do this, so we may as well just hire a full-time person to do this.”

Andrew: Yeah. And there are other factors, too. There’s the client experience that argues for doing it. There’s also just sort of the, “I’m afraid that I don’t want to lose focus.” Because as many RIAs who have in-house tax services will tell you, it often is 90% of the headaches in the firm are on the tax side. All of that needs to be weighed in. But the honest answer is like, the economics weren’t even an option at the start. And now that it is, it’s a broader decision, and it’s one that I think we will do pretty soon.

Michael: And then talk to us about the fourth prong. So a lot of firms out…well, most of us do financial planning, most of us do portfolio management, a number of firms do tax or some kind of tax relationship. What is collective buying power, this fourth pillar of value to clients?

Andrew: Right. For lack of a better term, we call it collective buying power. So a few…couple years ago, just sort of thinking about this client list we had started to build and realizing that it’s a pretty desirable cohort of folks for sort of any financial institution to work with, certainly any lending institution, and we should do more things to leverage that for them.

And so the big one there is just a partnership with a private banking group that is willing to lend to our clients, including mortgage lending, at discounted rates. Both because they recognize that the financial trajectory that our clients are on, and I’d like to think because if those same people are also working with a financial planner who serves as a filter on bad financial decision-making, then their risk of default sort of approaches zero. And lenders should be willing to price their loans accordingly. And found a private bank that was willing to do that, and they do.

So any time our clients are buying a new home, or in many cases recently refinancing existing homes, we help them to shop around to create a competitive situation, and then to engage with the private banking partnership that we have to end up with the lowest possible rate. And I’d say in most cases, the group we work with is significantly below market, and the client works with them.

Michael: And what does that mean in practice? Is this like, “Well, we’ll save you an eighth of a point? We’ll save you a quarter of a point?” Do you even get more of a discount than that? What’s the context overall for?

Andrew: It depends on the situation. If I had to estimate in aggregate, it’s probably more like 0.5% or more for the typical loan. And not always. Sometimes there are unique circumstances where our relationship doesn’t win, and we are excited for them to go with someone we don’t work with. But on average, I’d say it’s about 50 basis points discount. And we definitely have a handful of clients for whom that discount is saving them more in interest, mortgage interest per year than they are paying us in fees. And it’s people who happen to have a big mortgage and a small investment portfolio, which maybe is not entirely independent things, right?

Michael: Uh-huh. True.

Andrew: But that introduction alone sort of is more than they pay us in fees. And just in terms of an ability to convey value to a client, that is a win. And so the private banking relationship is the big one. We have other smaller things like that. Some insurance providers have been willing to price our clients as a group instead of as individuals when they’re buying private, particularly long-term disability insurance because they’re all working for the same company anyway. So they’re willing to sort of provide some sort of group discounted coverage for those who have had to buy private insurance. And not all of them do because the benefits at these firms are often more than generous enough. That has been helpful in those cases.

Michael: But that’s an interesting angle. When all your clients are in a single niche, in a single domain with common jobs and common roles and even common firms of only one of three, that you essentially can facilitate group DI or group insurance benefits simply because your aggregation of clients fits that niche even though you’re not going through the employer directly.

Andrew: Right.

Michael: And so how do you…well, so I guess two questions. One, is this actually part of the revenue model for you? Like, do you participate in mortgage origination fees and compensation for group insurance, or is this structured solely as a, “Well, if we get them enough discount, they’ll just like paying our fee more anyway, so I’ll get it on the fee side?”

Andrew: Yeah. No, we are entirely fee-only. We have one line item…one income line item on our company income statement and it is fees for service to clients. So no, all of those are just arranged in an effort to provide the most possible value to our clients. And we think that sort of comes around back to us via happier clients and more referred colleagues.

Michael: And then how do you find these kinds of relationships and set them up? Like, I wouldn’t even know exactly who to call to say, “Hey, can I get my clients 25 to 50 basis points off a mortgage rate?”

Andrew: Yeah. Each one has been established differently. I would say the best way to do it, and this is probably true for anybody working with any niche, is to ask your existing clients who they work with, “Do you love them? If so, may I have an introduction?” And then we have to try to evaluate them for ourselves.

Michael: So find out who they’re working with, who, by definition, already understands the marketplace, at least to some extent because they’re working with them, and then call them and say, “Hey, we have a shared client. I have like 100 more, just like them. If you want to work with us, talk to us about what you can do to work with us together.”

Andrew: Right. I think you are defining collective buying power.

Michael: Excellent.

Andrew: And for insurance, we have one group that we refer to primarily. And they’re great for our niche. Same for private banking. For estate planning, as we all know, that is a state by state game. So we need at least one in every state where our clients exist. So that was a little trickier, but we’ve built that up over time, too.

The Business Model Used By Andrew’s Firm [01:00:26]

Michael: So talk to us about what this looks like from a business model perspective. How do you actually charge clients for this? Are you a planning fees firm? Are you an AUM firm? Are you a retainer firm since these are some pretty high-income folks, and I guess may or may not have the assets, so it sounds like they build them up pretty quickly? What does it look like from a business model perspective?

Andrew: Yeah. So we still charge a percentage of AUM, a pretty traditional RIA-tiered model, starting at just under 1% of the portfolio being managed and sort of tiering down from there. I think our average client pays us about 80 basis points. And I have spent dozens of hours if not hundreds of hours thinking about what the right fee model is, as probably many of your listeners have.

I sort of recognize the intellectual inconsistency of charging based on AUM, charging based on the portfolio when the value comes from so many other things. We have evaluated everything. We’ve evaluated the percentage of net worth, percentage of income, retainer based on complexity, retainer that’s the same for everybody, hourly. We’ve evaluated all of it. And ultimately, sort of circle back to a conclusion I’ve heard you say a few times, but what do they say about democracy? It’s the worst form of government except for all the others.

Michael: Yep.

Andrew: For us, the percentage of AUM is the worst fee model except for all the others. I think when you bake everything into it, what’s best for the client, what’s best for us, what’s operationally feasible, we ultimately land on, yeah, it still makes sense. And I don’t know if that will be the case 10 years from now, but it’s how we do it now.

Michael: Well, and again, at the end of the day, when you’re working with clients that have such high incomes and such saving power where “anyone” either will have a sizeable portfolio or will make one very quickly, this isn’t even just some of us who may be like, I’ve got a high-income doctor who makes a couple hundred thousand dollars a year. And if this goes really well, in 10 years, maybe they can get to a half a million-dollar portfolio if I’m trying to ratchet up my minimums. You’ve got clients that may get to half a million-dollar portfolio in 18 to 24 months of saving if they’re saving aggressively. So even non-AUM clients get there pretty darn quick, I would think.

Andrew: Yeah, I think that’s right. And an interesting note on the income trajectory, one of the unintended benefits of focusing so narrowly on just a handful of firms is we have become the unintended sort of data set for the income trajectory over time. And so, for the most part, if you are a first or second or third-year partner, even at any of these firms, you have no idea what that trajectory looks like going forward. They just tell you how much you made that year and you’re happy about it.

And so, to the extent that a lot of the relationship is based on our ability to accurately model their financial projections going forward when we can do that for them better than they can do and provide some insight about what’s coming around the corner for them, that’s a powerful differentiator.

Michael: Interesting.

Andrew: But I wish I could say I anticipated that one in advance, but the reality is it just sort of, we fell backward into it.

Michael: Interesting. So just you actually work with so many people in your niche that you have better benchmarking data around what they earn than what they can actually figure out for themselves?

Andrew: Yeah. And that’s part of the reason sort of I have to…we want to be so sensitive about sharing what that is because it is not ours to share. We have just happened to aggregate it. And we treat that pretty secretly and don’t want to share with those who it doesn’t belong to.

Michael: Well, and I’m struck as well around just the dynamics of sort of charging fees and proving out your worth. You have this, what to me at least was a fascinating, cost-benefit analysis calculator on your website that just asks clients about a dozen different questions, like, “What is your time worth to you?” Right? For all of them, this can be like $1,000 an hour or something. “What is your time worth to you? How much time do you spend managing your own finances? Here’s what the data says you can generate additional value from tax-loss harvesting or from rebalancing or behavioral coaching. So let me know what your assets under management are.”

Like, all those different value-of-advice studies that can kind of convert it into a portion of their AUM fee. And you literally do the math for them of, “Based on your portfolio and your income and the value of your time and the different services that we offer, here’s our fee, and here’s the value you’re going to receive that it adds up to.”

And it just struck me, A, it’s a cool way to actually take all of that research out there and just sort of operationalize it into a way to interact with clients. B, I thought it was particularly striking because it’s still in your management consultant terms, right? Like, it’s literally called cost-benefit analysis. This is very consultant-oriented. You go through the guided questionnaire; it gives you a spreadsheet-style grid of how everything lines up for you and other options that they might have out there.

And just it struck me both an interesting way to present the fee discussion and have the fee discussion, and also just that even down to how you present and talk about fees, it’s all couched in the terms and approach of management consultants. Like, it’s not a value of financial advice calculator, it’s a cost-benefit economic analysis calculator.

Andrew: Yeah. As we like to say, it is on-brand. And yeah, it was sort of a pet project of all of ours, because, in pretty much every introductory conversation with a potential client, we’re having some version of that conversation anyway, right? These are extraordinarily analytical people, and they’re doing the math in their head anyway.

So they know what they’re going to pay. There’s no fooling anyone because it’s in percentages and not dollars. They know what they’re going to pay, and they start to hear the value proposition and say, “Is it worth it?” So they would often, if not nearly always, ask us for our take, “Walk me through the value proposition.”

And the challenge is always two things. One, compared to what, right? Some of the clients we’re meeting have all of their money in a checking account, while some are managing their portfolio very well at Vanguard and sort of doing the basics of financial planning on their own. So you need to say, “Compared to what?” And two, just different people value different things differently. Some people really value behavioral coaching to prevent them from making bad decisions.

Other people hear that and say, “Yeah, that’s not really worth anything to me.” And so the goal was to build a tool that sort of addressed both of those problems. And it was hard to do. I might not do it again if I was starting from scratch. And then sort of once we had the tool built the way we wanted to, it’s hard to get it sort of compliant, right? And working with our compliance attorney.

Michael: Yeah. I would imagine you’d want to do the math at that level with what, at the end of the day, are still kind of some broad-based-estimate studies. I can’t prove the counterfactual around what behavioral mistakes you would have made without me. I kind of have to make some assumptions based on broad data about the behavior gap that may or may not apply to you.

So I would imagine there were a couple of layers of disclaimers that just have to be added of like, “Here’s how we got all these numbers if you want to vet them,” which some of them probably do.

Andrew: Both legal disclaimers and just normal English language saying, “Here’s sort of how we’re oversimplifying. And take this with a grain of salt.” And we wanted it to be helpful to clients. And we didn’t want it to just be a tool that said, “Work with us, no matter whatever you put in.” And so sort of it is structured as a, I think 12 or 13-question interview that the client walks through, and all they do is answer questions about themselves. How are you doing this now? How valuable is this to you? How much is it worth to have someone do your taxes for you? And the net result is the cost of our service for them, their self-described value of the service for them.

And then compare that against, again, an oversimplified calculation of the same for their other options. What’s the cost-benefit if they do it themselves at Vanguard or Fidelity or Schwab? And so yeah, we just wanted to…it was more of a fun thing to see if we could build. And it will never be perfect. And we don’t pretend that it is, but I think it speaks to who we work with.

Why He Decided To Pursue This Specific Type Of Clientele [01:09:37]

Michael: So talk to us more about this direction of going into the niche in the first place and what led you to the point of making this transition, given what you were doing previously in the industry.

Andrew: Sure. Sort of I’d be happy to walk through from the start if that’s helpful. So even pre-Geometric days. So I’ve been an advisor for 12 or 13 years now. But the story should probably start with my dad. Shout out to Jay Leonard, who, when my sister and I were kids or sort of pre-teens, let’s say, as an encore career, started an RIA firm in an office attached to our house in suburban New Jersey.

And I sort of now recognize he was doing a lot of things right before others were. So he was fee-only right from the start. He was doing some legitimate financial planning before that was cool. He was early on sort of the passive investing trend. And he was sort of one of the first advisors working with Dimensional Funds. Maybe worth mentioning, so he himself got his MBA at the University of Chicago in the late ’60s, where sort of the efficient market hypothesis was first being introduced. He actually took Professor Gene Fama, now Nobel Laureate Gene Fama’s first course in the efficient market hypothesis.

Michael: Very cool.

Andrew: He was in on that trend pretty early, and, yeah, I just started applying it for clients, mostly family and friends, as a little second-career business when I was in middle school and high school. And so that was what I was exposed to. And that was sort of in the air at home and what we talked about around the dinner table. And yeah, so I think I always had it in the back of my head that I might do that.

It just appealed to me that he was doing what he believed to be right for clients and seemed to be genuinely helping them. And I’d say the subject matter appealed to me. He introduced me to John Bogle’s books and then William Bernstein books and financial planning topics. And I always thought it was interesting. And so, yeah, I think it was always in the back of my head that I might like to do that.

As a total aside, I sometimes wonder if my parents had done something totally different, if my mom had owned and operated a chain of car washes, would that be… is that what I would be doing now? Would I be listening to podcasts about car washes, and would I become a geek about car washes? And impossible to say, but if I’m honest with myself, the answer is very possibly yes. And I would like to think I would enjoy it. And so, yeah, I don’t know if that…

Michael: You landed here because you’ve got an analytical brain, and this was what your family set you up for. So here we are.

Andrew: Yeah, I think it’s healthy just to acknowledge the role that randomness plays in our lives. And I feel lucky that my dad happened to choose this and I happened to…it happened to appeal to me. And so yeah, I think it was always in my mind as an option.

And I went to college down in Atlanta, at Emory University, and majored in economics, and sort of still kind of had this in my head while I was doing that. And after college, I moved to Boston and worked for a small boutique consulting firm, much smaller than the firms we work for now. I worked there for three years. And I liked it, and I liked the subject matter, but yeah, it was always in my head that I kind of wanted to do financial planning. And maybe even more specifically, I wanted to own my own business and build a business. I think that’s really what appealed to me.

And so after three years at the consulting firm, I applied to MBA programs and was lucky enough to get into Harvard Business School. And so, yeah, spent the next two years there, which were great. Really fun, really intellectually stimulating. I made some really good friends, including… met my wife there who was at the law school at the time. So it was a productive couple of years. And while there, others were preparing to…want to be executives at big companies. And I was preparing to move back to New Jersey and join my dad and try to help him build his business.

And so I did that straight from school. That was 2007. And at the time, Dad’s practice was still a solo advisor with 1 assistant, probably serving about 40 clients, doing a really good job for them. And we said, “Let’s have a go at this and see if we can build this into a proper business and continue to try to do it right.” And so that’s what we did for the next seven or eight years. And yeah, those were pretty special years for me, just to get to work alongside my dad and learn from him and get to know him sort of from one adult to another in a way that I never otherwise would.

And the same for my mom, she and I would have lunch every day. To get to know her as an adult, in the same way, was great. And the plan had always been… It was also successful. It grew from a very small firm to, let’s say, a mid-size RIA. And the plan had always been whenever Dad wanted to formally retire; I would buy his share of the firm and keep running it as it was.

And somewhere along the way, I don’t know exactly where it happened, found I didn’t love the role of being an advisor to our generalist client base. And maybe for reasons that sort of I should have anticipated in advance, but I didn’t. Most of our clients were retirees and near-retirees. And so different work styles, different communication styles, and more than anything else, just different stages of life such that their financial/life/career decisions they were facing were things I could try to help them with academically but that I never really understood emotionally. They weren’t things I had gone through myself or were thinking through for myself.

At the same time, I developed a little pocket of clients who were friends from business school and their colleagues and just found the opposite with them. Same work style, same life stage, and for all the opposite reasons just were…the relationships were that much more productive and fun.

And so ultimately sort of made the hard decision with sort of talking through with Dad and with his support, we decided to sell that firm, and I spun off with the sort of 20 or so client families that met the niche I really liked working with and founded Geometric. And Dad became an advisor for the buyer.

We ended up selling it to a large sort of nationwide RIA that shared our investment philosophy, shared our client service model. We had sort of admired them from afar for a while. And Dad worked for them for two or three years before he retired. We can talk more about how that went, not necessarily as scripted.

Michael: I was just going to ask like, so who did you sell to, and how did you make the decision that that was who you wanted to sell to? Because I know that’s a very challenging decision unto itself.

Andrew: Yeah. So the firm was acquired by now known Buckingham Strategic Wealth, at the time Buckingham Asset Management, in St. Louis. And I had read all of Larry Swedroe’s books, who’s their head of research, and sort of always admired that, admired him and admired their investment philosophy and sort of patterned a lot of how we made investments at Dad and my firm and how we now do it at Geometric on that. And so how did we decide?

The initial screen was, we worked with Dimensional Funds to identify a list of firms that met the various criteria we wanted around investment philosophy and size and service model. And did they custody with Fidelity, who is our custodian at the old firm, and a bunch of other factors and got a list. And I spoke to all of them many times and sort of narrowed it and narrowed it until we ultimately decided on Buckingham. And yeah, that transaction happened in early 2015.

Michael: Okay. So for you guys, the investment philosophy, it sounds like, was kind of a big driver in who you were picking. You literally went through DFA to find other firms that were DFA style?

Andrew: Yeah. And I think that’s just in our blood, right? That tells you Dad’s background. And I have sort of always been a Boglehead and believer in index funds and Dimensional Funds, etc. It wouldn’t have sort of crossed our minds to let our clients work with someone who didn’t do it that way. Obviously, there are variations within that that it’s okay to be a little bit different. For us, it wasn’t.

We didn’t want anyone who was selling their predictive ability to our clients. So yeah, that sort of instantly boils the ocean down to, at the time, only maybe 10 or 12 firms that sort of met all the criteria. And then it was a matter of interviewing them and getting to know them and their leadership and their plans. And by the way, their experience with M&A and talking to others who had been acquired, etc. And yeah, that was the process for us.

Michael: And so when you pulled the trigger, so your father went to Buckingham with the existing clients, you spun off with 20 or so of your own, you said.

Andrew: Right.

Michael: All right, that’s when the split happened. And I guess it was negotiated as part of the deal like, “Buckingham, you’re not buying everyone, you’re buying everyone but these 20 because I’m going this direction with these 20.”

Andrew: Right.

Michael: So did that actually create weirdness around the buyout for what I’m presuming was a firm that was still materially owned by your father? Did you have to buy those from him? Was that just part of the split because you’d brought those in in the first place? How do you actually untangle that spin-off? Because I’m sure Buckingham would have bought those if that was an option for them to buy them. There were dollars on the table.

Andrew: I bought them from Dad on the same terms as Buckingham acquired the rest of the firm. And it was just subtracted from the sort of whatever I would have received from the acquisition in the first place. So more than 80% of the firm went to Buckingham, and less than 20 came and formed Geometric. But, right, it was obviously a different cohort that came with Geometric.

And that we were fully transparent with the exact list. And I think there was some concern on Buckingham’s part, and they’re owned in part by Focus Financial, that it was an unusual situation. And is Andrew just going to try to recruit away all of the clients transferred to Buckingham? And so I had to assure them of what my plans were and that that was not the case. And, yeah, that has not come close to happening. So I think it worked out well on that front.

Michael: And so when you spun off and went out on your own with 20 clients, what was the size of that client base or asset base? What did you actually get to seed Geometric with?

Andrew: Yeah, I don’t remember entirely. It was something like 20 clients with approximately $20 million in assets under management. And it was enough so that I am very lucky to have gotten to skip the really challenging early months, early years that most go through.

Michael: Well, I guess you lived them in your father’s firm while you were also building on that end, I guess, more gradually. So by the time you were going out from scratch, you get to seed with 20 clients and $20 million.

Andrew: Or maybe I lived them when my dad was first starting, right? He was the breadwinner in our family, and my mom worked at my elementary school. And yeah, I saw it was hard to build from scratch. I guess I witnessed it that way.

I’m grateful that I got to join an existing firm with him and got to, as you said, seed Geometric with sort of a critical mass. Which both… the economics that were helpful, but there was also just I needed…I wanted to make sure it was going to be a going concern for our clients’ sake. And nobody knows for sure that that’s going to be the case. And so I was lucky that sort of there were 20 client families that really fit the niche as we defined it at the time to start Geometric.

How Andrew Attracts Clients And Services Such A Rapidly Growing Group [01:23:29]

Michael: And so talk to us about just marketing and attracting clients and the growth trajectory. Just, you went out 5 years ago at 20 clients with $20 million; you’re now at 110 clients and $250 million. That is a lot of growth in five years, starting with just a seed base of clients.

So how does marketing business development work, I guess for you in general and kind of within this niche that just you’ve had $230 million come in in 5 years into a new firm? I guess a portion of that is market growth, recent pullback notwithstanding, but that’s a lot of new clients and flows into a business that you just got started a few years ago. So how does growth work in this niche and bringing people in?

Andrew: Yeah. For the most part, one client at a time introduced by existing clients. It’s a little bit more involved than that. But yeah, when starting Geometric, the mandate was really okay, if my wife and I were the target clients, how would I want everything to work? Who would the advisors be? What would their academic and professional backgrounds be? What would the scope of services be? What technology would they use? What would the cadence of communication be? Etc. And just try to build the firm that I would use. And that was fun. Get to hit reset on everything that Dad and I had tried and learned and sort of start from scratch with the firm I would want to be a client of.

And so I think that the niche…originally defined, the niche was high-earning mid-career professionals in business and law, which at the time I thought was a really narrow niche, and was kind of terrifying, right? That’s already excluding 99.-something percent of the population. And that’s scary. And as anybody who works with a niche, it takes a little confidence to start narrowing and narrowing. But with that group, it started to resonate, right?

That broader group, it started to resonate and got a handful of early clients. And maybe it went from 20 to 30; I don’t really remember. But at some point, sort of started looking at the broader niche and thinking, “Even within this, there is a subset for whom we do our best work. And what if we sort of narrowed it a little bit to…”

The next step was partners at sort of professional services firms. And then that worked a little bit better and moved a little bit faster. And clients were a little bit more likely to tell their colleagues and felt like our services were a little more refined for them, etc. And then who do you really like working within that cohort? For me, it was the partners at those three firms: McKinsey, Bain, and BCG.

It was never a sort of official that sort of leaped the divide from one definition of the niche to another. But the more things we did to nudge it in that direction, the better it was for clients and the better it was for us. And that sort of has driven all the growth.

I will say the one sort of proactive marketing that we have done, which is sort of, again, can’t be done without a really hyper-specialized niche, is when we had about 10 clients at one of those firms, I wrote a white paper called “Financial Planning for Partners of Bain and Company” and shared it with our clients and shared it on LinkedIn. And our clients shared it with their colleagues. And that drove a lot of introductions and still does.

I think that white paper has been shared around the office many times. And a lot of people we talk to for the first time say something like, “I read your white paper two years ago, and I’ve sort of been meaning to call since then.” So I sometimes joke like that paper has put my kids through college. And it’s only because by the time we had 10 clients at that company, we were speaking their language and understood their needs and concerns and pain points and wrote a paper accordingly. And I would say the paper is more introducing their questions and not providing all of the answers that would be difficult to do in a seven-page white paper. But sort of just to demonstrate sort of how they should be thinking about it, and that we understand who they are and what they need.

And so the one form of sort of proactive marketing we’ve done with that is we shared it on LinkedIn directly with partners of that firm who were not clients or offered to share it with them via LinkedIn direct InMails, and a reasonably high percentage took us up on it, given how sort of hyper-specific the title of the paper is, and a reasonably high percentage of those people became clients and to the point where we stopped doing that because we were having trouble sort of meeting the demand. And we’re still, to some degree, playing catch-up with that. And I recognize sort of how…the privilege associated with being able to say that.

Michael: Well, it certainly makes the point for just how impactful that is. Because I was going to ask you like, if you had such good success with the one for Bain, why haven’t you published “financial planning for partners in McKinsey” and “financial planning for partners at BCG?” So it sounds like the answer is because it might actually work.

Andrew: Right. And we have them written; we haven’t shared them because what happens when we do? And the challenge of all of this is, as I mentioned, our advisors are career changers from that industry and often from those firms. And those are hard people to find, hard people to hire, hard people to train. They’re career changers.

It is different than posting the job on the CFP website or from hiring someone out of college and grooming them into it. And so that was a decision made early that if…I guess my feeling was if I could find someone at, let’s say McKinsey, who was a personal finance geek and just had never done it professionally, I could fill in the gaps of their subject matter more easily than I could find someone who had all the subject matter knowledge but didn’t understand the cultures and people at those firms.

And so I think that has worked well. And part of the sort of validation process with potential clients is, okay, this advisor used to work at McKinsey. And therefore, that says this and this about them. And they can be my…I will view them as my professional equal and outsource all of this to them. The downside, how do you find those people? How do you train them from having never done it?

That’s sort of the limitation on growth. And frankly, I don’t think we want to be growing faster than we are. We can talk about that, but the goal is not to be the biggest firm here. And so yeah, that’s sort of the…that’s why there hasn’t been more proactiveness on the marketing firm.

Why Andrew Found It So Emotionally Draining To Work With Retired Clients [01:31:07]

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

Andrew: Yeah. And I probably go all the way back to when I first started with Dad. And it was how emotionally challenging it was for me to be between people and their money. I had read the books. I knew both sort of on investment philosophy and methodology and even sort of the behavioral side of it. And I said I joined Dad in 2007; after that came 2008 and 2009.

Michael: I was going to say that was some good timing.

Andrew: Right, right. I joined Dad in July or August 2007. I think the stock market peaked in October 2007 and was largely a straight line downwards from there. And I found myself sort of a brand new advisor in between clients and their money, and emotionally unprepared for that. And in many cases, in most cases, those clients were my parents’ age.

I sort of wasn’t maybe mature enough or emotionally ready to serve that role for them, to try to tell them sort of…to empathize with the emotions that they were feeling, the understandable fear that they were feeling at that time. I found that really difficult. Felt it emotionally, felt it viscerally. Like had trouble sleeping and sort of wondered, “Is this for me?” And I know I’m not alone in that feeling.

A lot of advisors were feeling the same thing at the same time. It still took me by surprise because I felt like I was so prepared going in, in terms of subject matter knowledge, etc. It was still a smack in the face of sort of the reality of the job. And I’d like to think sort of over time that I have become more emotionally prepared for that so that whenever the next one happens, whether that’s right now or 10 years from now, I’m more capable of handling it without it affecting me so deeply. But time will tell.

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

Andrew: Yeah. I guess the part of the story we didn’t tell was, so Dad became an employee advisor of Buckingham. And it wasn’t perfectly smooth, for some reasons that I think were entirely predictable, right? Dad was a business owner for 20 years and definitely had the shopkeeper’s mentality.

To move from that to an employee of a much larger business where you sort of lose control over decision-making and even in some way the client experience, that was hard for him, and he bristled at that. I think he and I were prepared for sort of him giving up the strategic and business decision-making. I don’t think we were prepared for sort of how it would feel when he gave up the client experience part of it.

And the best way I can put it is, when Dad and I had a meeting at the old firm, this is not a metaphor, this is a literal story, he would go outside and sweep the walk that led into our office. The definition of a shopkeeper mentality. Never sort of occurred to him to do anything else. And I think we ran the business…every other part of the business like that, or at least we tried. And you have to give that up when you work for a bigger firm.

Buckingham is an exceptionally good firm, and they are doing what they believe to be right for clients, it was just hard for that to be a different thing than, in some cases, what Dad thought was to be right. And he had a hard time. There were also some more specific things. Like the advisors they selected to take over the client relationships, the first wave of advisors didn’t work out and had to be replaced with advisors who are now quite good. But that left Dad scrambling and concerned for his clients, etc.

And so the reason I pick that as the low point is, I felt responsible for that. One, I had sort of orchestrated the fact that there was a transaction in the first place. It was my decision and Dad, because he’s a loving father, went along with it. And I picked the firm and planned ahead as much as possible. But when it was actually time…once the transaction occurred, I exited stage left and was often running with Geometric. And he was left trying to figure it out on his own. And I had felt very responsible for that in any way where it went badly and felt a lot of guilt about it, and still do.

He and I sort of talked every day for the whole two or three-year period, the ups and downs, but I couldn’t do anything about it. And yeah, so at a time when I would have liked my dad to sort of be doing the victory lap on his career, to see him struggling and to feel responsible for that was undoubtedly sort of the low point in the journey for me.

Michael: Yeah, it’s an interesting challenge around just kind of the sale and tuck-in process of…there’s a subset of people I think just don’t want the sometimes overwhelming number of decisions you have to make and things you have to be responsible for in running your own business. That’s why there are independent models and there are employee models in the advisor world. And there will always be.

We saw independent broker-dealers and independent RIAs break away and distinguish themselves from the employee models of wirehouses. And now a lot of the IBDs and RIAs are growing so large that they’re becoming employee models and reinventing the wirehouse model. Slightly different underlying economics, but that split of employee versus independent is just, some of us have brains wired one way, and some of us have brains wired the other way.

And neither is necessarily right or wrong until you put yourself into the opposite channel of where you’re naturally aligned, and then it gets hard. If you would prefer that employee world, the independent world just feels awful and overwhelming and too many decisions and all this burden of responsibility you don’t want. And if you like that stuff and you like dealing with that stuff, it’s really hard to go to an employee model.

Andrew: I love that you always have sort of pounded the table that the small solo practitioner will probably always exist. Because I am of the belief that some of the best advisors in the country with some of the happiest clients are working in total anonymity in home offices and shared office space, and just sort of obsessing over their clients. And that should always exist.

And so the whole experience has sort of changed my, what’s the goal for Geometric? I like to say that we only want Geometric to grow to the extent that it benefits the clients to do so and it is more fun for us. And thus far, the second point has undoubtedly been true. And the first point has also, but it’s harder, right, as we grow. For example, just sort of bringing tax services in-house, as we talked about earlier, bringing some estate planning capabilities in-house, that just requires a little more scale than we can have.

Also, just having sort of multiple partners and redundancies and two heads thinking about a client situation, etc., I do believe results in better outcomes. That said, I don’t know if that sort of is true forever. I think it is difficult to scale to a size without talent getting diluted and the client experience getting worse. And so I like to look to, well, firms outside of our industry, including McKinsey, Bain, and BCG, how have they grown so big while sort of every partner is still so, so good? And obviously, that’s not universally true, but pretty close. And it’s hard.

I think it’s not always the case in the RIA industry. And I think we only want to grow to the extent that it is true. And the hard part is, well, one, it is no longer only my decision, of course, right? That’s the nature of having partners. And, more importantly, having a team of people who depend on the growth of the firm to advance their own careers and create opportunities for themselves. And I take that really, really seriously. I take that responsibility very seriously. So it’s easy to say you’re only going to grow to a size. I don’t know how you actually turn it off. So instead, we just focus on, okay, how is scaling going to benefit our very narrow slice of the world clients and work on that.

Michael: So anything you wish you’d done differently as you launched Geometric? Anything you know now that you wish you could go tell you from five years ago?

Andrew: Yeah. I’ve been lucky that Geometric has largely been a straight line up. It’s easy to say sort of I would have focused on the niche earlier, but we did it pretty early.

Michael: Well, and $230 million of flows later in 5 years, apparently still got it in reasonably early enough.

Andrew: Yeah. So it has gone well. And that’s not to say there haven’t been a million and one mistakes made along the way every single day, right? It’s just none of them have been anything approaching existential, right? And they are necessary, right?

Maybe others can learn from books and from mentors, etc. To some degree, we got to make the mistakes ourselves. At least I do. And so I don’t think… I can’t point to anything really big would have done differently because they have… any of those mistakes have proven to be learning experiences that sort of led to where the firm is today.

Advice Andrew Would Give To Younger Advisors And How He Defines Success [1:41:38]

Michael: And so what advice would you give younger advisors looking to come in and become a financial planner today?

Andrew: Yeah. Probably not surprisingly, it would be to, over time, find the group of people for whom you can be the best in the world. For whom you can sort of honestly say, “I am the best advisor for this person.” And so that takes time and probably happens with trial and error. And it doesn’t need to be pre-planned before you become an advisor, even before you start your own firm. But I think that should be the goal. Because once you find that, you can feel really good about what you’re doing. And chances are the clients will know it and recognize it, and it will work out better for you.

So when I’m talking to new advisors entering the industry or people thinking about specializing more, I say sort of try to find… picture the Venn diagram of overlapping circles. What is the overlap between people with unique and repeatable financial planning needs, people with sort of the wherewithal to pay your fees and sort of the service model you want to deliver, maybe people who sort of naturally are in your personal network, and people you like spending your days with? And if you sort of find the commonality between that in your world, that sounds like a good niche to me.

Michael: So what comes next for you in the firm?

Andrew: In the short-term, I think it’s sort of trying to scale up to meet the demand in a manner that doesn’t impact the quality of what’s being delivered to clients. And so sort of finding ways to find and train new advisors in a little less of a one-off manner. But really it’s just sort of keep doing what we’re doing and doing a good job for clients and trying to build the team to match what they need.

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. So you’re off on this incredible trajectory for building a successful business already much larger than the average firm. But how do you define success for yourself at this point?

Andrew: Yeah, I think professionally, it’s just, do I feel proud of what we are putting out there in the world? Do I feel proud of the team we are building? And the answer to that is a definitive yes. And do I feel proud of the quality of the service we are providing to clients? And I think that is an unqualified yes also. So I do feel good about where we are. But that’s just professional, and that’s I think a small part of the overall answer, which is, personally, it’s just the quality of my relationships.

How is my relationship with my two little daughters aged five and two? How’s my relationship with my wife, with my parents, sister, and friends? And all of those mean a lot more to me than anything we’ve talked about so far. And so as long as those are healthy and positive, and I’m happy to say that they are, yeah, then life, in general, feel successful. So I guess that’s my rather soft answer.

Michael: No, I think it’s a great answer, and I think highlights well the same kind of challenges and conversations that you’re having with the clients you serve, which as you noted are kind of similar in age, right, the late 30s and early 40s, when you’re 39 and going through those similar challenges of building a career and building income and trying to balance career and life and starting a family and having kids. Yeah, to me, it’s part of what supports the authenticity, and I’m sure is part of why you’ve had such successful resonance with the clients that you’re working with. Because you’ve got a definition for what your success looks like that I think will resonate with others. And so when you help them find that path, it feels good for them too, and they want to pay you for your services.

Andrew: Yeah. A conversation I love to have with clients is the clients speaking how I know I’m going to make whatever very large number next year. And it might double the year after that. But my kids are little, and I don’t get to tuck them to bed every night. And that’s a hard decision. I don’t think there’s a right answer there. So as any good financial planner will tell you, it really comes down to life planning and sort of finding people who align with your values. And then having meaningful conversations with them is the part of the job I like the most.

Michael: Well, amen. I love it. Well, thank you so much, Andrew, for joining us on the “Financial Advisor Success” podcast.

Andrew: Thank you, Michael. And I should thank you for… I have learned an incredible amount from you over the years. And I know many, many others have. Everyone on my team reads and follows your stuff. So thank you for everything you have taught me over the years.

Michael: My pleasure. Thank you.