#FASuccess Ep 167: Creating More Buy-In To Change Financial Behaviors With A Life Planning Approach, with Scott Frank

Author: Michael Kitces

Team Kitces

Michael Kitces is a Partner and the Director of Wealth Management for Pinnacle Advisory Group, a private wealth management firm located in Columbia, Maryland that oversees approximately $2.0 billion of client assets.

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

• How Scott Has Evolved His Life Planning Advisory Firm [00:02:42]
• The Importance Of Truly Understanding Clients’ Goals [00:15:20]
• How Scott Incorporates Life Planning Questions Into His Financial Planning Process [00:25:49]
• The Way He Creates Buy-In From Clients Into The Financial Planning Process [00:43:47]
• How Scott Gets His Clients To Implement The Recommended Strategies [00:53:31]
• Where Traditional Financial Planning Software Intersects With The Life Planning Approach [01:03:53]
• How He Simplified His Pricing And Billing Process [01:12:20]
• Why He Hired A Financial Planner For His Family [01:26:29]
• How Scott Decided To Start His Own Firm [01:29:20]
• Advice For New Advisors [01:46:45]
• What Success Means To Scott [01:48:28]

Resources Featured In This Episode:

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Full Transcript:

Michael: Welcome, Scott Frank, to the “Financial Advisor Success” podcast.

Scott: Thanks for having me on, Michael.

How Scott Has Evolved His Life Planning Advisory Firm [00:02:42]

Michael: I’m really excited about today’s discussion and this what to me is a really interesting background and mix you have in how you run your business. I think I’d first gotten to know you or became familiar with you for some of the work that you were doing around deep life planning with clients. I know you’ve been through George Kinder’s stuff and are a passionate advocate for doing financial life planning and going deeper with clients. But you are a CFA/CFP, a person I would normally think is very quant-oriented. The CFA in particular, is a deep dive quant sort of thing to get through all three levels.

I feel like there’s maybe you’re not a fairly characterized but at least stereotyped as either kind of a hardcore numbers-quant-technician sort of person or on the other end on a touchy-feely life planning end. I know that’s actually a little bit of a poor juxtaposition because George Kinder himself, who we had on the podcast two years ago, shared his story and George was a hardcore CPA. He placed, I think, in the top three in his state when he took the CPA exam and he’s a super-sharp-technician tax dude who then went out into the life planning world. But there’s at least a stereotype, that you are either a quant or that you like having these more touchy-feely life planning conversations. And so just this contrast to me that for you, “I’m a CFA/CFP who does life planning” – to me just kind of gave me this like, “Wait, what? Like, you do what? How does that work? How does that work in your head?”

Scott: How weird is that? Yeah, yeah. We’ll dive into background and how I got where I am now, but when I started Stone Steps, which was about five years ago, I finally had the technical chops to do the work that I wanted to do. I had my CFA and my CFP, so I knew how to give people proper solutions. And what happened was, people would come into my office, I would be in there going like, “I’m the hero. Tell me what your problem is. I’m going to solve it for you. I’ll solve it right now.” And then I would deliver them that plan, my solution for them. And have you ever had this happen to you, Michael, where you give someone a plan, it’s a wonderful plan and then they don’t execute on it?

Michael: Yeah. I remember a moment of that really early on in my planning career, probably, I don’t know, two or three years in, and I was working on a plan for a client; we’ll call them the Smiths. And the Smiths had this huge challenge because they had a very financially irresponsible child who I think was actually off in college and running up giant debts while they were already paying for a college education they really couldn’t afford. The kid had gotten into a rather expensive school they were already stretching for, and then they were absorbing all this debt on top.

I still remember having this conversation with the senior advisor I was working with, because fortunately, they weren’t letting me in front of clients quite yet. I was like, “Well, I don’t understand why they don’t just cut him off and teach him a lesson. Just cut him off for a while and then he’ll learn to be more financially responsible. Why can’t we just recommend this?” Just totally cavalier; in the real world when you’ve been nurturing your child for like 20 years, you usually don’t just cut them off because you’re really aggravated they’re being financially irresponsible. It doesn’t work that way in real life. I thought, “It would totally work on paper. I’ve seen this in a book, you cut them off and then they get their heads on straight! Like, why won’t this work?”

Scott: You’re nailing it on the head, right? So I came in with a CFA background, CFP background. I know I have the technical chops, right? But what you just said, IQ doesn’t translate to action. IQ is thinking. Thinking is instantaneous. We act on emotion. So one of the trainers for Kinder, Louis Vollebregt, who’s an amazing man from the Netherlands, he says that emotion, the definition of emotion is energy in motion. And so what I started to learn, what took me a while to finally open up to was, it’s amazing that I have all these technical chops and this ability, but if I can’t use it for this particular person and help them have the energy and inspiration that they need to go do the things they need to do, it’s kind of all for naught. It’s really not that helpful.

And so the way I would give it back, if you think of the bigger picture for one second; imagine that you want to be the best jazz saxophone player you can be. Well, one of the best ways to learn how to do that, that I would probably do, is to learn how to read music. I would learn how to read all the scales. I would learn all of the best standards and all of the best artists in the past that I would want to emulate. But eventually, to be an amazing jazz musician, you’re probably going to show up with three or four other guys or girls at a club, and you guys are going to play based off what you’re feeling in the club at that moment.

And so what I realized was, you need to have the technical chops. I don’t know that you necessarily need to have a CFA to do what I do. You really don’t, in all honesty, though I still have one. But you do need to have a solid technical background so that you can then have these conversations with people and you can help them step into who they’re meant to be. And I just look at it very big picture. It’s honestly a bit of a hat tip to Carl because he framed it one way that nailed it for me. Clients have four things in life they can invest in. They have their time, their money, their energy, and their talent. Our job is to help them look at how they can optimize all of those things to live their best life. And money almost always comes in to optimizing the other three.

Michael: It’s an interesting framing. Clients can build around their time, their money, their energy, and their talent. Where, in practice, the money tends to optimize the other three.

Scott: Well, it’s just money is always needed, right? Typically. Like imagine that you want to have more time with your kids at home but you still need to save for retirement and you still need to go grow a business, you need to do all these things. Well, you might trade off some of your profits for your business so you can hire some staff so that you can have more time right now, right? There’s always a trade-off to be made. The key is to understand what’s truly most important to the client. And the key is not just what’s truly most important to the client, but to each client. If it’s a couple, individually, what does fulfilled life look like to you? What does fulfilled life look like to your spouse? I want the two of you to know that of each other and I want to know that so that we have a lens to look through for all financial choices we make. Then I’ll use my technical knowledge to help you build the plan that works for you.

Michael: I like the framing of, how you still need the technical stuff – it matters, right? We can’t have wonderful conversations with clients and then not actually have the technical competency to know what to recommend to them to get to wherever it is, or you just have very well-meaning, well-intentioned accidents of what turns out to be poor advice. So you’ve got to be able to get to that technically accurate recommendation at the end of the day.

It’s just not the technical recommendation that usually drives the action itself, because if we could always rationalize our way to financial success and financially optimal success, like, I could just make a website. It would say, “Spend less, save more, don’t do anything stupid” and like, well, we’d be done. Like, well, I could just make a thing that said, “Don’t do anything stupid” and then everybody will have great financial lives because we told them not to do anything stupid.

Scott: In my opinion, we are not in the knowing business, we are in the doing business. Our job is to help clients facilitate steps that help them improve their lives. And I think when we get trained, especially younger advisors, we want to come in and we want to be the hero for our clients. We want to solve their problems. We want to go, “Hey, I know everything. This is why you’re paying me.” The shift that’s happened for me over this period of time is realizing that we are not the hero for our clients. They are the hero of their own journey; we are simply guides there to help them along and help them take those steps that they need to get where they want to go. With our technical experience and the tools in our backpack, we can probably help them get there, possibly a little bit faster than if they do it on their own.

Michael: I like that framing that just we are not the hero for our clients, they are the hero in their own journey. It’s one of those things that I can say out loud, but actually really internalizing what that means takes probably 5 to 10 years of beating yourself up doing it, ideally not with clients, to really make that mental adjustment in how you interact with them.

Scott: Well, the other thing it does is it puts you at ease, right? At least for me. Because I used to think like, especially, I have this financial planning software, I better make sure everything is perfect. Now, not to say that I’m not trying to make sure that everything is as reasonable and accurate as possible, but if you switch it to, “Oh, the process of planning is what really matters here.” And it’s the process, the little changes that we’re going to make to make sure first, that people have survival covered but then how do they step into thriving? And then how do we make little tiny tweaks every time there’s an opportunity? If we do that, we’re great. It’s not about doing this one plan once, right? It’s about the process of planning. One of my favorite quotes of all time is from Dwight Eisenhower, and it’s that “planning is everything, the plan is nothing.”

Michael: So talk to us about what this looks like in practice. If I’m going to become a client of Stone Steps Financial, like, Scott, this stuff sounds cool, read your website, want me some life planning, how does this work when I’m a prospective or new oncoming client? It’s like, Scott, I’ve heard about yourself. It sounds great. I want to go through this.

Scott: The process that I use is trained by the Kinder Institute of Life Planning. It’s called the EVOKE process. EVOKE stands for Exploration, Vision, Obstacles, Knowledge, and Execution. And to the average advisor, Knowledge and Execution are already happening on a regular basis. So what’s really different is in the first three meetings, we’re really focusing on the client and what a fulfilled life looks like to them – what’s truly essential to them – before we start looking at what we should do with their money.

Michael: Okay. So I get it in theory, but how does that flow in practice?

Scott: Yeah, we’ll just walk it through because people are going to go, “How do you do that?” So I have a 15-minute phone call just to make sure that I’m not wasting their time and they’re not wasting mine. So we just have a quick call of well, what has you reaching out and is anything urgent? Where are you at? And then if we feel we may be headed towards the right fit, we have them come in for an exploration meeting. I love to see people in person if they can be in person. You can do this virtually as well. I have clients as far as…I have a couple overseas right now, living internationally for the time being. They are U.S. citizens.

When we do the exploration meeting, what we’re doing is we’re simply coming to a conversation, and in that conversation, it really starts with, “Thank you for coming in today. Anything that we share is confidential. Before we go focus on what we should do with your money…” First, we always start with, “Is anything urgent?” Because if something is urgent, I want to make sure that there’s time to address it for them. So they’re not just sitting in their chair going like, “Why won’t this guy let me talk about my RSU comp?” Right?

The Importance Of Truly Understanding Clients’ Goals [00:15:20]

Michael: Right. Always an important note. When clients come on board, they can hire us any one of the 365 days a year at any point for the past several years. Something made them come in today and now. So if that’s burdened a hole in their brain, find out first and address it.

Scott: And make sure that we’re leaving time to address it in that meeting so that they can understand what needs to happen there. But from there, if it’s a couple coming in… Michael, what’s your wife’s name?

Michael: Ellie.

Scott: Ellie. Okay. So if Michael and Ellie come in, my office is set up as a living room. So you guys would sit down on the loveseat and we’d have a conversation. And it would just simply start that, “We’re here to focus on you living the best life that you can. And we want to help utilize your money and optimize it so that you can do that as quickly as possible. So before we focus on what we should do with your money, we would just love to learn, what’s essential to the two of you to live a great life?” And then I would just simply ask, “Who would normally speak first here?” And I’m guessing that would be you, Michael.

Michael: Yeah, yeah. Guilty as charged.

Scott: So I would just ask that Ellie please get to speak. And I would ask you to please refrain from speaking while she’s speaking, and just to simply take in what she’s saying and try to feel what she’s feeling. And let that conversation happen. And what we’re doing there is I’m just there to listen. The exploration meeting is an expansive conversation. So if Ellie starts, she’ll… Here’s how I view it. It is a kind of play…a touch of a game that Louis, one of the trainers, gave me…he mentioned this as an analogy and it hit with me hard, but he was just like, “Just pretend that Ellie and Michael each have 10 marbles in their pockets, and your goal for this meeting is just to let them bring out their marbles. Create the space for them to do that.”

So Ellie may start with some financial things, and then I’m just with her and I’m in that conversation with her, and eventually, she gets to the end of it. I recap what she says. “Amazing. If that’s in your plan, anything else?” Then she’ll come out with the next one, and again and again and again. And what happens is you learn…you really learn the power of the pause here. Because if you create the space for someone to speak, they will come out with things that we would kind of…Louis’s wife, Anita, who’s also a trainer, refers to them as hidden treasures.

So imagine that you have seven marbles tucked in your right pocket, Michael, but you have three that are in like your left back pocket that you never show anyone. That’s the stuff I want to know about. That’s the stuff that probably means a lot to you but you don’t ever really get the chance to share. And why don’t you get the chance to share? Because if on the third one you mentioned that you founded XYPN and I didn’t know that about you, then I’m going to start talking about how much I love XYPN and I was a member in like the ’40s and yadda, yadda, yadda, da. And what did I just say to you? I said the first two didn’t really matter to me. The third one mattered to me a bunch, and I don’t really care what else you say after.

So the point of the conversation is you allow them the space to have an expansive idea of bringing out everything that matters to them. And they each get to do that in their own time. And that matters a lot because if one member of the family is more dominant in financial choices or just life than the other and the other doesn’t live into who they want to be, how will it work for you Michael if you’re living a truly fulfilled life and Ellie is not?

Michael: Not going to lie, that’s not going to end well for me.

Scott: Exactly. So the whole point of this is we want to know what an amazing life looks like to you, what an amazing life looks like to Ellie. We want you to know that of each other. So the first meeting, that’s really the conversation, and then the last 15 minutes is bells and whistles. “This is how we work with people. This is the process. Essentially, the thing is, we just had a conversation about everything that’s possible for you guys today. I would love to give you the opportunity to prioritize what’s most essential of those items.” And that’s where the three questions come in, George’s three questions. So that goes from the exploration meeting to the vision meeting. Clients become clients between the exploration meeting, which is my prospect meeting, and the vision meeting. That’s where we start working as clients.

Michael: I want to come to the vision meeting in a moment, but just help me understand a little bit more of how you open up this conversation and what kinds of like questions or statements you’re making to keep this moving along. Because to me, this is probably just the bias in my own head or sort of the default in my own head. I feel like for a lot of prospects, they know they’re coming in to evaluate our services, right? We all have some kind of fit conversation. I want to understand more about you, you want to understand more about me. We’re going to try to do the dance and figure out if we’re a fit together.

And I get it, we always want to try and make the clients talk more about themselves and then they’ve got some questions for us. But I feel like for some subset of clients, this maybe gets weird or potentially gets weird. Like, I thought I was coming in to evaluate you as a financial advisor and you are taking me down this weird touchy-feely marbles-in-my-pocket conversation a few moments in. And at some point, as a client or a prospective client, I may or may not be like, “Wait, how did we get here and what are we talking about and why?” It’s like, how are you getting them to this conversation?

Scott: One is, I don’t actually describe what this process looks like for the clients, it’s experiential. They’re just going through and doing it. I’m not saying, “Hey, Michael, you have 10 marbles in your pocket? Can you bring them out?” Right? I’m just simply saying, “What brings you here today?” And I’m quiet. And I let you talk, right? And then you give me this…you go, and I just allow pauses to allow you to expand on it.

Then I’ll reflect back some of the things you said and just simply ask, “Anything else?” It gives you a moment. The most amazing thing about this meeting is you will have couples turn to each other in the meeting and say, “I didn’t know that about you.” What’s happening there? They’re bringing out stuff that they actually get to talk about that they don’t ever get to talk about. Probably the things that matter most to them. And if we’re going to be true fiduciaries, our job is to act in our client’s best interest. We better know what matters most to them so they can prioritize those things at the top, right?

Now, the other point about what if people don’t like it, well, then they don’t ever come back. And there’s nothing wrong with that either. I’m happy to help them find a traditional planner. I just simply let them know ahead of time, “We do things a little differently here. This is how we do them. We spend three meetings focusing on you and the life you want to live before I give any recommendations on what you should do with your money. Because we believe that our job is to help you live a great life. We’re here for you, not your money. Your money supports you. So we need to understand what you want first. Would you like to have that conversation?” Rare that someone says no.

Michael: I think rare that someone says no, but I feel like that’s what a lot of us say, right? Like, “We’re planning-centric, we’re planning-first. We always do a plan and put clients through the planning process before we implement anything for them.” I feel like a lot of us say those things, but what you’re doing is still different than what the rest of us do when we say something very similar to what you said.

Scott: It kind of is. And there’s nothing wrong with that. This to me – obviously, you can tell I’m passionate about this – this is the future of planning. Because all of the planning stuff that we’re doing, the IQ stuff in the background, we will eventually be able to do the majority of that with computers. It’s just a matter of time. This portion of it will be the most important of it, that will have the most value in the future, in my opinion. I could easily be wrong, but it sure does feel right now.

And the way I think of it is exactly what you’re saying. Remember that in the ’90s, everyone was an investment advisory RIA right? And then all of a sudden, they’re “holistic wealth advisors,” and I’m saying that in quotes because what they were doing was simply running a retirement projection and managing money. And you can kind of find those people when you go look at their website and their client portal is Tamarac or Performance Reporter and they don’t link into a financial planning software, right? And now, everyone is going financial planning, which is great. But again, that’s kind of the next thing. If you want to go really deep, truly get to know what matters to your client and then go do the planning.

Michael: What kinds of issues or discussions come up in practice in this exploration meeting that’s different from any of us doing our, “I got my data gathering process and I’m going to ask them questions”? Because I feel like I’m going to ask them questions about their goals and their retirement goals and what are your other goals. And like, of course, I’m going to ask my client about their business because that’s good planning work.

What’s happening in your exploration meeting process interaction that’s different than any of us just trying to ask clients a lot of questions to understand their situation because we’re trying to figure out if they’re a good fit and what we can do for them?

Scott: Yep. What happens is during those conversations, you see the hidden treasures come out. And it’s never the first three or four things, right? It’s usually down the line that there’s some longing there that they don’t feel like they can talk about. Like someone wants to go from working in corporate life making high six figures or seven figures to doing nonprofit work and making low six figures. And how would they ever do that for their family? It can’t be possible. But why do they want to do that when they have a chat about it? Because they’re tired of being on the road and they really want to spend time with their kids while they’re growing up, because they only have 10 summers left until they’re gone forever. That’s the kind of stuff that comes up.

Michael: And how are you getting there?

Scott: You have the conversation. You give them the space to talk. And then once they’ve had the expansive space to talk, they prioritize what’s most essential to them with the three questions. That’s what it’s designed for.

How Scott Incorporates Life Planning Questions Into His Financial Planning Process [00:25:49]

Michael: So now talk to us about the three questions. I know some people listening may have familiarity, others may not. So can you kind of set the groundwork for us on Kinder’s three questions?

Scott: Sure. So at the end of the exploration meeting, I’m describing how we work together and what we do with clients, I introduce them to the three questions then. Because if they’re going to work with me, they have to come prepared to more than nip. Typically they answer them. I’ll always meet clients where they are. If they won’t answer it ahead of time, we’ll talk about it in the next meeting. I’ve only had that happen once.

The three questions are, think of it as like you brought out your 10 marbles, Michael. And you even brought out those hidden treasures that you typically don’t get to share with people. And then you get to answer your three questions and your wife gets to answer hers. And you’re going to do that separately, and then we’re going to come back and talk about it. And again, separately for the same reason, I want to know what a fulfilled life looks like to both of you and I want you to know that of one another, so that when we look at your time, your money, your energy, and your talent, we look at how you guys can build a life that is supportive of one another, stepping into who you guys want to be.

So the three questions are, the first question is, Michael, you wake up tomorrow morning, you flip your phone open and you check your bank account, well, your investment accounts and the value of your stocks and all your businesses, your empire that you own, and you see that you have more money to take care of all of your needs for you and the family now and in the future. You’re done. You don’t have to make more money. The question is, how would you live your life? Would you change anything and let yourself go? Don’t hold back on your dreams. Describe a life that is completely and richly yours. Put it all on paper.

Michael: So this essentially just opens up for people, sort of thinking from the reverse end like, make a list of all the things that at the end of the day you’re doing because you needed to do it for the money, right? And that are real-world constraints for us? Mouths to feed, retirement, kids to send to college, all those different things that we feel are financial pressures. And then to imagine if you were to solve all of them, what now are you doing and what’s going to change in your life when you truly don’t have to make decisions about your time based on the money?

Scott: Right. It’s really kind of asking the question like, imagine you don’t have to worry about money, what are you going to do with your time, your energy and your talent, right? What do you do? You do anything you want. What does it look like? It allows people to keep that expansive kind of framework from the exploration meeting. Just let them dream, put it all out there. Nothing is wrong. We’re not saying you have Jeff Bezos money here, right? We’re not saying that. We’re just saying that you’re good to go. What do you want to do?

Michael: So that’s question number one.

Scott: Right. So from there, we become a bit more… if you think of it as a funnel, you kind of start looking at what’s going to become more essential? So the next question is that, question two is you visit your doctor, Michael, and sadly, they let you know that you have a terminal illness. I’m really sorry. You’re going to have 5 to 10 years to live. The good news is you’ll never feel sick for a moment of the time that remains. The bad news is you’ll have no notice of the final day of death. And the question is, what will you do in the time you have remaining? Will you change your life and how will you do it? And then we have clients note that this would not assume unlimited funds. So you and your wife would have the time, money, energy, and talent that you possess sitting in the chair right now.

Michael: So now we’re really getting into, in essence, what are the things that are truly the most important for you. Because the moment death is nigh, death is imminent, it’s a finite time horizon, our brains get focused pretty quickly like, I only want to do the things that have the most meaning to me and the most impact, the most significance, whatever that is. And so that now is what immediately starts surfacing up for people as you think about this. If time was limited and you have to prioritize because you are literally going to die in 5 to 10 years and you don’t know when, what is so important that you ought to spend your precious moments left focused on?

Scott: That’s it. And to me, this one always hits me hard because I’m a parent to two boys who are eight and one and a half. And this question made me reprioritize some of my own stuff. Like I’m assisting coaching my son’s baseball team every season until I’m not good enough to do it, because you can’t get that time back. I want to make sure he knows he’s loved.

Michael: So then what’s the third question?

Scott: So the third question we’re just brutal to you, Michael.

Michael: Because I have to admit, I was feeling a little bit of a downer when you killed me in five years.

Scott: Right. So in the third question, you’re going to go see your doctor and you don’t get a second opinion, but this time, the doctor shocks you with news that you only have one day left to live. So time’s up. And this is not about what are you going to do in your final day. We can all think of beautiful things to do in our final day. The key question here is notice what feelings arise as you confront your very real mortality and then ask yourself, “What did I miss? Who did I not get to be? What did I not get to do?”

Michael: So now we’re essentially evoking…no pun intended, now we’re essentially evoking regrets. This is the regrets phase?

Scott: You can look at this through two lenses, I think, most commonly. One would be regrets, looking backward on, is there something you’ve left undone? Is there a longing that hasn’t been fulfilled yet? But the other side of that coin is untapped potential. What haven’t you lived into yet that you’ve been meaning to do? And they’re both valid here.

Michael: People go through these questions. So I guess first just format or structure-wise, where and how exactly are you delivering this? Like, you give people a written exercise, you ask them in a meeting, you ask them to think about and then they come back and give you answers? Just how do you actually facilitate this three-question process?

Scott: I introduce this to them at the end of the exploration meeting. They know that if they choose to work with us, we will be going through these together in the vision meeting along with another exercise. It’s called the Heart’s Core Grid. It has a similar context to it, just a slightly different angle on a similar methodology. But what they do is they typically go fill this out on their own, and then they come back in. And I ideally love to see their questions ahead of time so I can read through their answers ahead of time.

But then once we come back in and we start having the vision meeting, so long as we have the time, we actually go through their words where I’ll read back to them their answers. And that’s intentional. Physiologically, and this is kind of geeking out a little bit beyond where…I would never go here with clients, but physiologically, the way that we work, Michael, is that when you think something, you think it, it’s an electrical impulse. And when words come back to you and you hear them, you literally feel them, because it goes through your amygdala, which releases chemicals, and chemicals have…I’m drawing with my hand basically a standard distribution curve, right? And it takes time, right? Like if you’ve ever…the easiest one is like if you’ve ever felt a cry coming on, like you feel it building until you actually…it happens and then you let it go. Right? And that’s how we operate.

Michael: See that in my kids all the time. Someone gets hurt, and I’m like, “Oh, theyre going to wind up crying in about three seconds. Yep, there it is.”

Scott: But the thing is, that happens in us all the time. It’s the way we’ve evolved. So when you get your own words back to you, you will literally feel them. And you’ll start to understand where those priorities are. So there’s a power in…that’s what the power of this process is, in my opinion, is that it’s taking IQ and EQ and blending them together, but we’re focusing on where the energy is and where you want to go with your life.

So you have clarity on that, and I understand it, and now we know how to go plan for you to step into what’s most important to you. And then when you look at those trade-offs of how do you make that happen, you have the energy and the inspiration to go step into that. So you go get some more stuff done when I give you your plan.

Michael: I am curious if you can just explain maybe for a few minutes the Heart’s Core exercise as well, just to understand kind of the other tools you’re using in this process. And then I want to come back and understand a little more about the vision meeting. But what’s this Heart’s Core Grid?

Scott: Yeah. So the Heart’s Core is a grid. It has really nine cells in it. There is your…what we call the Heart’s Core, there is “ought to,” and there is “fun to.” And then on the rows, we have “have,” “do,” and “be.” So like what do I have to do that so important to me if I don’t do it I’m devastated? So for me, that’s being a great father, being a great husband, being a mentor to people who are coming up, and giving back in some capacity. That’s what my Heart’s Core would be. And then it’s just, well, what would “do” be? What are the things you have to do in order to be fulfilled? Right? And what do you need to be to be fulfilled? And then what are the ought tos? The things that maybe society tells you you should do, or someone else tells you you should do, what’s there for you? And then what would be fun to but it’s not really in your Heart’s Core? Right? So it’s just a different lens to look through a similar concept, the three questions helps you get to, that can be helpful in aiding in the discussion.

Michael: Right. Because I get it, right? Like, the “ought to” is that I’m struggling with or essentially the things that I free up in the first question, right? I ought to do this and that. Oh, well, what would you do if money was no longer an issue? I’m like, well, pretty much everything in my “ought to” column goes away because I don’t need to anymore. And then as I’m thinking of, what do you do with your terminal illness news, right, now all of a sudden, what am I going to prioritize? Like, some combination of what’s in my Heart’s Core that I have to do or have to be doing and what would be fun to be doing. And then as the doctor shocks me with what’s left, now I’m really getting into like, what could I have been? What were the opportunities? What should I have been doing?

Scott: The other thing that you’ll see if you go answer these yourself is that oftentimes your Heart’s Core is there all along in all three questions, right? It’s just that you filter out the things that aren’t as core to you. And there’s different ways to look at it. And here’s an interesting thing for all the advisors who are listening, though, almost always money…well, almost always, and I’m saying almost because sometimes it’s not the case, almost always financial items show up in the “ought to” column. And it’s interesting because people typically don’t want to focus on things that other people tell them they should do, right? But yet what do we do with our clients? We just talk to them about the stuff they should be doing all the time, but we never go put the energy and inspiration about why they should be doing it before we have them go do it. That’s what the EVOKE process does, in my opinion.

Michael: And so would you be giving both of these exercises to clients? They’re supposed to do three questions and Heart’s Core?

Scott: Yep, absolutely. So then the continuation of the vision meeting, what we do is, is we get to a point with each client, again, they’re each going individually, the other person is not allowed to interrupt. They’re there to listen to the other person. And I’ve watched couples, you see their body language and at the end of it, it’s like they just fell back in love with each other in the meeting.

It is a virtuous cycle, as Ed Jacobson, one of the old trainers would say. He passed away last year; he was an amazing man. You just see it happen and you see people really step into who they want to be, and they start talking out loud about it, and they start getting energy around it.

But what you do is in the end, you paint a picture for them, hopefully with a lot of their own words again so that they can really feel it stepping into a moment in the future when they can actually be living the moment that they want to live and feeling the things that they want to feel is what you’re doing.

It’s, again, to help them get the energy and inspiration, we call it lighting the torch, so that they’re just ready to go. They’re like, “How do I get this done?” Right? So they start doing the work with our assistance and our guidance to help them go live the life they ultimately want to live. That’s what the vision meeting is all about.

And what you leave them with for the vision meeting, and you guys, I’m sure advisors are thinking of this already, like, “Well, what about all the stuff that they have to do that stands in their way of them getting where they go?” That’s what the obstacles meeting is all about. What could possibly get in the way of you living this life? Because we have to talk about it and it exists. But at first, we start with the energy that they need to have to get somewhere.

Louis Vollebregt, one of the trainers, he’s from the Netherlands, and one of the things that he says is the north wind doesn’t push from the north, it sucks from the south, right? So the way I think of that is rather than me push on them, I know what this is the right solution is for them, we’re going to create the space and the time for them to figure out what the solutions are so they accept them. And I’m just going to help guide them and facilitate that process.

Michael: So I’m struck as well by this exercise. I think for most of us when I think about vision, well, frankly, there’s usually a presumed guiding vision. The presumed guiding vision is retirement, right? That’s what “everybody” is working towards. And so even when we think about and talk about clients with retirement, right, a lot of us are usually asking questions to the effect of, “What would retirement look like for you? What would you be doing? Where would you be living?” Some of us go deeper into that than others, but it’s built around painting the vision of retirement.

And part of what strikes me for the exercise that you’re talking about here is, we’re not presuming retirement. We’re not presuming that is the primary goal –  or the goal, or even a goal – which it may or may not actually crop up to be in practice for people as you go through this exercise.

Scott: One hundred percent. Like I have a physician client whose goal is to retire when he’s 75. But if he can keep working and they’ll pay him to do so, he’ll probably just keep doing it. He loves his job. We’ve never talked about your life goals, Michael, but I can’t imagine you not doing something to help make an impact on our industry.

Michael: Yeah. Yeah, like, great way to turn me off as a prospective advisor is to talk to me about retirement. I’m a mission-based dude. What I’m doing may change and morph a bit over time, it has morphed a bit over time, but retirement sounds horrible.

Scott: That’s exactly it. So what George created a while ago… I was talking to him the other day because I’m learning to become a trainer in this process so that I can have mastery of it. Because if I can teach it, I should have mastery of it. But I was at a retreat at his house in Hana, Hawaii and I was talking to him and I was like, “George, I feel like you were just 20 years too early.” And now it’s finally coming to be because it’s not about product anymore, and it’s not just about the plan anymore, it’s like you have to be more. And this is an amazing delivery vehicle for that, right? It really is.

Michael: Yeah, there’s a lot to be said for, he may have just been 20 years too early, and now…because I know George started this work in the ’90s, now the industry is starting to catch up. I feel like just the attitudes of consumerism are changing as well, of just even what retirement means and more of us blowing up what retirement means, right?

I think back to my grandparents of the prior pre-boomer generation and like, yes, that was very quintessential retirement. Like, they saved up enough money to be able to retire; their pension and Social Security helped a little bit. They had a little bit of savings. They lived their retired life for 30 years. There was a bit of golf, there was a lot of “Price is Right.” Like just, they lived what I feel is that quintessential retired life. And, at least as far as I knew, it was fine for them. That was retirement. That was a norm thing.

But now even as I look at our clients and the generation of essentially baby boomers going through retirement today, they are not living retirement the way that the last generation lived retirement. And then I look at where we as Gen Xers are and millennials coming after, like, as Xers, I can’t see us sort of generationally moving towards that same type of retirement lifestyle. The sort of quintessential streak of independence for Xers means like, I don’t know what it’s going to be, but we’re going to make it our darn own because we always have because reality bites. That’s the mentality.

The Way He Creates Buy-In From Clients Into The Financial Planning Process [00:43:47]

Scott: I think you’re nailing it on the head. And the thing that I wanted to come back to as you were mentioning that is, the way that George kind of frames all of this process, the way he thinks of it is that every single person has entrepreneurial spirit in them. And the question is, how do they bring that to life for themselves? And when I’m saying entrepreneurial spirit, I don’t mean they go start a business. Someone may want to be the best stay-at-home mom they can be right now. And then when that phase of their life is over, another new version of themselves is going to come to the fore, right? You started as an advisor, and then you realized that you really wanted to write, which turned into speaking, which turned into starting all these businesses. And you keep stepping into who you’re meant to be, right? You just keep taking the next step, following the energy.

That’s the whole point of this. It’s not that there’s this one thing that we all do and this is the right answer for everyone. It’s the wrong way to look at it. What’s right for you? What does an amazing life look like to you? Let’s figure out how to get that for you, and let’s figure out how to get that for you as quickly as possible.

Michael: Because I guess at the end of the day, the whole point of this combination of Heart’s Core and three questions is, when you start asking, “What would you do if the money didn’t matter” and you start talking about the things and, “What would you do if you’ve only got 5 to 10 years to live” and you start talking about these things that really have priority in your life, sort of the implied underlying message when you get to the end of that is, so what are you waiting for? Why aren’t we just pursuing some of these things now? That’s ultimately where all that conversation goes. And I guess that’s literally the point of the vision meeting.

The Jedi mind trick with clients is what you answer as your ideal life if money didn’t matter between meetings one and two, actually then suddenly becomes the vision you’re literally creating for yourself. Because you already said these are the things that matter once we get past the money and we get down to the real priorities. So then why don’t we just try to do that now and we’ll get there as quick as we can. And we can’t get their right away because we’ve got obstacles, and that’s why we have more meetings in this process.

Scott: One hundred percent. And the way I would think about that is we just had a legend of our time pass away unexpectedly, right? Kobe. And you see the outpouring on social media and just the news about his passing, and it really affects people. And it probably, in that moment, got them to think for a moment about whether they are living their own life to their fullest? The whole point of this process is to get someone to deliberately do that. What really matters the most to you? Are you doing what matters the most to you? Why are you waiting? Go do it.

My wife and I listen to all music, but we listen to country every once in a while. There’s a song by Tim McGraw called “Live Like You’re Dying.” And to me, that’s the EVOKE process, right? It’s about a guy who finds out he has cancer and the time is up, and he goes and does some things that he’s been meaning to do, like writing a book, but he also speaks sweeter to people in his life. And he forgives people. And he basically lives the life that he wished he could live knowing that he’s going to die now. Well, why don’t we all take a moment to do that and go live a better life? That’s really what this is all about, in my opinion.

Michael: Right. So you kind of go through this exercise. You’re talking about what would you do ideally if your priorities were driven by mortality and money was no object. So then we get to this natural like, okay, and the more we reflect on that in the vision meeting, your sort of natural outcome by the end of the vision meeting is like, so yeah, that’s all cool to deal when you’re about to die and money is no object, but what if we just tried to do that now? For which most people then start saying, “Well, I can’t because this and that and the other.” At which point you say, “Well, funny thing, we have another meeting coming up.”

Scott: So what we do there literally is we give them a vision, we paint a picture for them. And kind of the goal I use in that instance is I just think it’s like a scene for their own movie. We have all of the understanding of their own words, what really matters most to them, and we give it to them. And we usually do it in short order. So much shorter timeframe than they would think is possible. And the reason that we do that is we want them to be inspired and have energy, because we’re going to deal with the obstacles that exist. And people are coming to us because obstacles exist. There’s a reason they aren’t already doing it. If they’re already doing it, they’re not coming to my office, right?

So at the end of the vision meeting, we just simply ask them to live into their own dream. And I do ask them to do a touch more work between now and the next time we meet. I ask them to do…I send them a touch more of inspirational work called ideal day, week, and year, where I just have them think about if you’re really living your ideal life, what does your ideal workday look like? Right? Not on a vacation, you’re just…you’re living at home. You’re back on the East Coast, Michael, or you’re traveling that day. I don’t know ideally how often you’re up in the air. It’s your ideal week. What does that look like? And what does your ideal year look like? So you can start to look at how would you spend your time? Because then you can look at, well, how do I actually spend my time? How far from this am I? What steps can we take to get there? Right?

And then I just simply ask that they…any obstacles…if they come up with anything that they’re worried about, I don’t even use the word “obstacles,” feel free to write it down and bring it in or send me an email about it. But just let it go and just keep living into your own vision. Keep thinking about it, bringing it to life, feeling it. If you want to write about it, write about it. If you want to make a Pinterest board, go for it. If you draw, draw, just do your thing. Like for you, that would be typing on a computer, I’m pretty sure. But so, it’s like, just paint your own picture. Make it better than I made it, right? When we paint that picture for someone, what we typically want to hear is like, “That would be amazing,” or like, “I’d be on fire if I was doing that.” And we ask them like, “Is there anything missing? Did I miss something?” Because it’s your life, not mine, right?

But then they typically leave that meeting with some energy, but when they come back to the obstacles meeting, the obstacles meeting, we’re just simply getting that picture going again for you, Michael, and then just simply asking, “Well, what could possibly get in the way?” And I want to know everything that you think could get in the way so we can address it. Some of it will be real, some of it won’t be. Well, it’s all real, but I meant…the way I think of it is, if your kids ever thought there was a monster in the closet, sometimes you have to go walk in the room, talk to them, give them a little empathy, flip on the light switch, show them that it’s just the vacuum cleaner. We all need that sometimes so we can move forward. And that’s what the obstacles meeting is all about. What stands in their way of stepping into who they want to be? What are the steps we have to take to get them there?

Michael: And so I guess this is where, at least to some extent, we start getting into, I’ll call like traditional financial planning goals, projections. I guess what it is, right? Some of these will just be not our usual planning stuff. Well, to get there, I have to get out of this job that’s killing me. Like, “Okay, great. Well, then let’s start talking about what else could you do and what would you do and what would you get paid and where could you work and how would you find that job?” Right? So some of it may go that direction, which is not exactly something I’m going to like MoneyGuidePro projection, because it’s not really built for cash-flow planning my salary.

Other pieces might be much more traditional planning. Like, okay, I just really don’t want to actually be working anymore. I want to travel the world with my wife. I want to take my kids to all these places. I want to do this stuff. And like, “Okay, let’s start doing the math. You need this much money? How quick can we save it? What other stuff are we going to do? Right now I’m at least into more traditional financial planning modeling, but clients are fired up and potentially much more willing to make dramatic changes to spending and saving behavior now because we just got them all super fired up about this dream that they said is absolutely what they would do if money was no object and they were going to die soon. So great. If I can show you how to get there in a couple of years and you can live your great life, you want to do that now?”

Scott: You’re close. So think of it this way. The E, V, and O meetings are kind of an untraining for us advisors. And what I mean by that is like we have all those technical skills and knowledge, right? You’re telling me that you want to go on a sabbatical for the next year. I’m already computing in my head how you’re going to do that. I already know what the answer is. I want to jump and scream at you what the answer is. But the best way for you to move forward with that is for you to come up with your own solution. So I facilitate a space for you to come up with your own solution.

So if your thing is, “I want to go on a sabbatical for two years with my family,” I’m just going to put it back on you, “Well, what can you do about that? And who’s going to be there with you?” And you’re going to go, “Oh, you probably have the ideas, why don’t you tell me what they are.” I go, “I do have some ideas, but you know your life better than I do. What do you think is the right way to go on this one?” And I’m just going to let you start to come up with ideas knowing that 9 times out of 10, you’re going to come up with something that I was thinking of anyway, right? And if you really are struggling, I might help you come up with some ideas. But have you ever tried to get your kids to go do something that they don’t want to go do?

Michael: Yeah, it’s got to be their idea then it’s fantastic.

Scott: Where does action happen? When they come up with it or when you come up with it? So what you do in the obstacles meeting is as you create the space for people to start coming up with the solutions, our job, again, is to help facilitate and guide through solutions. It doesn’t have to…we still don’t have to be the one who was like, “This is the optimal way to do this.” Because if we do that, the chance of follow-through goes down pretty dramatically.

How Scott Gets His Clients To Implement The Recommended Strategies [00:53:31]

Michael: So getting back to the earlier comment, like, you may be technically right, but you will be technically right about a plan that they don’t do and don’t implement and nothing changes in their lives.

Scott: Exactly. And what we’re doing here is we’re trying to get forward. The way I think about it is like a radiance, like a stone getting cast in a lake, right? If we can help them get their entrepreneurial spirit fired, what ripple effect is that going to have in their life with the people that they come in touch with if they’re living a better life? That’s way more powerful than me getting one extra 1% optimally on something. I still will try to get that, right?

When we actually have the knowledge meeting, I’m going to go through, “Based on everything you guys want to do, here’s how I think we should be handling your money.” Right? I’m still going to give, but now it’s all in support of what they actually want to do with their life.

Michael: How does the obstacles meeting end or wrap up? What’s the endpoint or closure of this meeting?

Scott: So it’s, again, the two of them going separately. And it’s just, “Michael, here’s the vision… this is where you are. This is that moment, you’ve been reflecting back on it. Anything changed since the last time we met?” “No, nothing has changed.” “Okay. Anything urgent?” I’m always asking anything urgent when they come and meet during this process because this is a three-meeting process where if something has changed or is urgent, they’re going to think about that, and this isn’t going to be a helpful process for them, right? So I’m always making sure that they’re okay going through it.

But then what we do is we just simply go, “Well, we paint the picture, what could possibly get in the way?” They start bringing up everything that could get in the way, and we talk through each one of them point by point. And we talk through, if you want to go on sabbatical, what can you do about it? You come up with the ideas. Wonderful. I see you have some excellent ideas here, how will you do it? When will you do it? Who can hold you accountable to getting this done? How will that feel when that’s all done? Right?

What we’re really doing there is we want to make sure that all the energy is still there and that there’s not a leak, right? Because if you’re not dealing with an obstacle that’s real to you, even though I might just be thinking financial obstacles as an advisor, but if there’s something there for you that you need to deal with, we’ve got to talk it through.

And then once you have it talked through, you now know what your action items are for the next thing to get that going, right? And we go through that, do that on every single thing you come up with. And then we do the same thing for your spouse. And then you guys know what you’re going to do from there, and you have the energy to go do it.

I could be the accountability partner for financial things. If it’s not financial, I’m typically going to ask that you have your own accountability partner for it, which almost inevitably you turn to your spouse and ask them if they’ll be your accountability partner. I do always actually kindly say no to that or gently nudge you guys to not do that to each other. Because if you’re trying to make a real change in your life, it’s probably one that you haven’t done yet for some reason, and if you try to get your spouse to be the accountability partner and Michael, yours is to go running at 7 in the morning and Ellie comes back to you 2 in the afternoon goes, “How did that run go today,” you’re going to get mad?

Michael: Yeah, probably.

Scott: Who are you going to take it out on? Who are you mad at?

Michael: Person who just held me accountable for the run I didn’t do this morning.

Scott: Well, you’re mad at yourself, you’re going to take it out on her, right? So it’s best not to have your spouse be your accountability partner. So we help them understand that too.

From there, they have that knowledge, right? So they start living into their plans. That’s the coolest thing about this, they start just getting things done. The next thing that we have them do, one other piece of inspirational work, and we call that goals for life. And goals for life is simply a grid that they can customize however they wish, but it has time across the top, and then it has things like career and family and relationship and health and finances, whatever they want to put in on the rows. It’s their choice. And they just simply fill it out as they wish. And then we start to look at, well, what’s most important to them? They come back with that. That’s really where planning starts. Because once we understand what they want to do, why they want to do it, we understand their values that are driving them to do it, they have the energy to do it, they’re just going to go do it now. Now it’s just a matter of time. It’s inevitable.

And that’s when we bring in traditional planning in that moment. I give them an initial financial life plan, which just simply looks at all the tenets of planning and all this…where they stand today and what are the changes that we can make to help them optimize their cash flow in their balance sheet for the life that they want to live.

Michael: So is that happening at the end of the obstacles meeting or comes in the next meeting?

Scott: The knowledge meeting is its own meeting, and that’s where that happens. Yeah. So thanks for the clarification there. So that’s where that happens. And that’s when you just, you fall into a more traditional style of planning. It’s, “Here’s where you guys are, we know where you want to go, here’s all the stuff we have to do to get you there.” We’re really looking at it from two lenses.

I don’t recall where I saw this, but it was survive and thrive, right? We all know there are these basic financial planning things that need to happen for people to be okay. Like if you live in Southern California and you own a home, you should have a trust, right? Because the probate costs here are ridiculous. You should have life insurance if you have kids and they’re relying on your income to get you through. There are these survival things that just kind of have to happen. We can tie all that back into what matters to them.

Family often comes up, right? So you can just tie it back. But then it’s the thrive stuff, too. What steps are we taking to make it so that you can leave your corporate job and start becoming an adjunct professor and work at nonprofits? And I know what matters most to you now.

So the cool thing is now when we even flip forward to like execution or just normal life with clients… Someone called me last winter when they were in XY’s neighborhood, Bozeman, and they were like, “Oh, Scott, I saw these amazing rental opportunities. I really want to buy one.” I’m like, “That’s amazing. I will go run the numbers for you. Knowing what matters most to you, I just want to let you know that if you do that, you will probably have to keep working at your corporate job longer because now we’re adding a liability to your balance sheet that we’ll have to account for. Do you want me to go run those numbers?” “Thank you so much for this conversation. I definitely don’t want a rental property.”

Michael: I’m trying to envision some of the bridging from obstacles meeting to knowledge meeting and my mental quant, problem-solving brain around just like, where in the overcoming obstacles meeting are we just down to a point where someone’s got to do some math or some projections? Right? I’m envisioning this like, okay, well, what we really wanted…what I want to do is just not have to work anymore. I just want to travel the world with my spouse. We want to see all these things and do all this stuff. We’re going to expose our kids to it as well. That’s what’s important to us.

At some point, someone’s got to do some math to sit down and figure out like, okay, it’s going to take X dollars in the pot to be able to reasonably do that. So I can do that projection in the knowledge meeting, but in theory, we’re still talking about solutions in the obstacles meeting, but clients probably can’t do this math in their head. And I don’t actually want to gear them up to the wrong math because then they’re going to set unrealistic goals and then I’ve got to talk them back from unrealistic goals.

So how does this work if someone starts saying like, “Well, I just want to be able to get to enough that we don’t have to work and we can do this traveling thing with our kids?” I understand conceptually, they have to get to, “Well, you might have to try to earn a little more or spend a little less.” Like, they can get to some lifestyle changes, but no one knows what the magnitude is of what they have to do until we run the math.

Scott: Yep. And I know you’re running from a quant head, and I used to do the same thing, wanting a quant answer. And what I’m going to go back to is it actually comes back to a little bit more of how they feel about it. And what we do is we actually use, I’ll call it two fists. So if I’m making two fists and my knuckles are pointing at you, what I would say to you in that instance, Michael, is I would say, “Over here,” and I’m just like putting my whole hand around my left hand, “Over here, you have all the money that you need to be fully retired and traveling. You’ve reached financial freedom. You’re there.” And then I would stay, “Over here,” and I’ll use my right hand, “You’re working for a much longer time.” Oh, actually, I tried to…”Over here, you’re…” Because I’m trying to use the one that you gave me but I wasn’t. So over here, you’re working until you reach financial freedom, and now you get to go travel, right? That’s one. Over here, you just start figuring out how to take more…a little bit more time to get into those things as quickly as you can, but you may not reach financial freedom as quickly as you want. Where do you stand on that spectrum?

Michael: Fair point, right? Like, “Oh, well, actually, if we could just start doing a couple of weeks of travel and get the kids out to some other places, I feel pretty good about that.” Like, “Oh, okay, cool.” Because that’s going to totally change the projections of the knowledge meeting over what happens if you say like, “Got to be completely out as fast as possible. Just can’t take it anymore or halfway and you couldn’t do it.”

Scott: Right. So the difference there is you and I, what we were both doing in that instance, you were doing it, you probably didn’t realize you were doing it, you’re putting like an I, me, mine on this. Like for the advisor’s point of view, like, “How do I solve this for this person right away?” And the answer is like, I don’t actually know where they stand on this yet. This is a spectrum. It’s not a binary choice, right? So we need to figure out where they actually stand. And then once we know where they stand, then we can craft the solution. And just by them knowing where they stand on that spectrum, they will start crafting their own solution, which in the knowledge meeting, you’re just going to come back with the, “Oh, hey, by the way, we ran those numbers and this actually works.” Or, “Oh, hey, to do that, we’re going to have to figure out how to cut $1,000 out of something else.”

Where Traditional Financial Planning Software Intersects With The Life Planning Approach [01:03:53]

Michael: And so, as we get into the knowledge meeting, are you literally into traditional planning software? Are you plugging some data into MoneyGuidePro or eMoney or one of those and showing projections to clients at this point?

Scott: Answer is it depends. So with clients who need to see the projections, like the clients who…because I work with Gen Xers and boomers mostly. So if I have people who are nearing a major transition from going from earning to spending, I will be showing them the projections, right? Because we’re getting to a point where it materially matters.

If someone’s really on the younger side of things, we can really focus more so we don’t have to go into the projection software nearly as much typically. Right? Because then it’s looking at what are the things we can control? How are you guys doing? Are we on the right pace for hitting targets? And then I won’t necessarily go show them…showing someone that they’re going to have $60 million when they’re age 95 when they’re age 35 with their savings rate is kind of ridiculous. It’s just so far into the future. It doesn’t really make any sense to go show it to them. We have no idea what’s actually going to happen.

Michael: And what is the planning software of choice that you’re using once you get to these conversations?

Scott: eMoney is the one I geek out with, yeah. And I love it because it does do cash-based stuff. So we can get really granular if we want to, which is wonderful. I love doing that when clients are…when they are older, because then we can…with some reasonableness, we can have a sense of where they’re headed, which is helpful.

Michael: And so, fourth meeting, this knowledge meeting is I guess a little bit more of what we might be used to as a traditional plan presentation meeting. I’ve gotten to the conversations differently, I’ve gotten to the goals differently, but at some point, we still just have to like do the math and make sure the math works and they’re not gearing themselves up for failure.

Scott: Yeah. So there what we do is we give them what we call a financial life plan. It’s another hat tip to Carl, but his one-page plan influenced me in the concept of…that for most clients, finance sounds like Latin. So why don’t we keep it as simple as possible and then just ask them if they’d like to know more. And if they do, we show them. But if they don’t, we’re good, right?

So for us, what we show them is…it takes more than one page technically for us, but we do…essentially, we tag their net worth for that meeting, where they actually stand today from eMoney. So what are their assets and liabilities? Then we look at all the major tenets of planning. So we look at investments and what’s happening there, and we look at money. So like what are their savings rates and where’s money going and what do they spend on average and all that type of stuff. And then we go look at taxes, and what could we be doing to optimize that? And we look at insurance and do they have the proper coverages or do we need to help them…are there things we could do to improve? And then we look at estate planning. And so those are the main areas that we’re covering. And then we’re just coming back to it. But it’s all coming back to the conversation of how is this helping them step into who they want to be.

Michael: And then meeting number five, the last E of the EVOKE in this process I think you said is execute. So I guess this is sort of functionally, this is our implementation phase?

Scott: Yep. So I would actually think of K as kind of like a mini execution. Because one of the things we do when a client decides to start working with us between the exploration and the vision, we have a Google Form that they’ll fill out, and one of the things we’ll ask them is, “What’s your most pressing financial concern?” Like what’s the thing that’s really on their mind that has them here? So even if it’s not urgent, what is it that they wish would be addressed first? And that’s typically what we start with.

So it’s like the first thing we’re going to go deal with right away so that it usually puts them a bit at ease, right? Because it’s the thing that’s on their mind. And then from there we just live into…we kind of triage is how I think of it. What’s most important to their financial life? And we prioritize the order in which we should be dealing with things to help them improve upon their finances as quickly as possible. That’s where execution kicks in. And we can do things in between meeting with clients, but once we’re actually in meetings with clients, we like to see them anywhere from two to three times a year. It ends up being two more than likely because most of them have kids and careers and other things.

Michael: So how long does this process take overall? I guess you’re essentially in a five-meeting planning process with clients, or I guess, strictly speaking, one prospect meeting, and assuming they say yes, then four more meetings to finish the planning process after with the door that you open with them as prospects. So how long do the meetings usually run and then how long does it take to get through all these meetings? How much do you space them out or stretch them out?

Scott: So the exploration meeting is usually an hour to an hour and a half. If it’s a couple, I ask for an hour and a half so they have time. The vision meeting is anywhere from, again, it could be…it’s an hour to an hour and a half, depending if it’s individual or a couple. Obstacles is the same. Knowledge is the same. And then execution when on the front end, when we have more things to go through and education to do, they’re typically hour and a half meetings. And then as people become more and more in sync with what they want and need, they get shorter. But it typically takes between two to three months to go through the whole process.

The execution to me would be like knowledge happens, and then execution is the next meeting that happens on a normal cycle. So it’s usually like spaced out either four to six months after the knowledge meeting, right? Because we already have…I always view it as let’s leave the meeting with the action items of what need to be done between now and the next meeting. And ideally, the clients write them down themselves rather than us writing them down. Because if you go read anything about taking notes, you learn that if you write something down yourself, you’re more likely to remember it and do it than if someone does it for you. But we set the tenet of, okay, you say that you want to go make those changes in the 401(k), you know what to do now, you have the time to go do it. When are you going to have this done by? And then we’ll just send them a little calendar reminder, “Did you do that thing?” Let’s put it on their calendar, right? Kind of how we think of it.

Michael: And I like that framing of having clients say like, “Cool, you said all your stuff for it. So when are you going to get this done by? And I’m just going to send you a little reminder email because I’m your accountability partner. So that’s how it works.”

Scott: Right. But it’s not, “We’re going to do everything for you.” The thing is, we’re here to help facilitate doing things. And anytime we can do something, we’re happy to do it for them. But at the same time, there’s a lot of things they need to do for themselves. Anytime they need to do something for themselves, far better for them to write down when they’re going to do it, how they’re going to do it, and we’ll check in with them to see if they did it rather than us tell them to go do it.

Michael: And then how do you keep track of all of this?

Scott: Wealthbox.

Michael: Okay. So Wealthbox CRM for tracking all of it?

Scott: Yeah. Yeah, just CRM to track all the tasks. Make sure it gets handled. Yeah. And then the next time we come back together, it’s literally just, well, here were the priorities we had for the last meeting, have they been handled? Well, they haven’t. What happened?” Let’s talk about that. Like, what do we need to do to get that done?

With some clients, you have to do stuff in meetings to really get stuff done, right? For others, they just go get it done right away. We just meet people where they are. Help them always take that next step.

Michael: That’s an interesting framing itself just to set up like, “Did you get your stuff done? If not, what do we have to do to help you get it done?” And opening the door to, “Oh, I can never seem to find the time to get around to it.” And you say, “Great, how about we just do it right now in this meeting? Let’s just say I get it done for you right here. We have a website with…we’ve got a computer with the internet, let’s just do whatever this thing is.” And obviously, for the other clients that are good at taking their homework and getting it done, they’ll just come back with a list of checked off items to each their own.

Scott: Exactly. So to me, I think they’re the achievers, right, who have high follow-through. They’re good to go. They’re actually a pretty small group is what I find, at least for the group that comes to an advisor.

How He Simplified His Pricing And Billing Process [01:12:20]

Michael: So talk to us about how you do this from the business perspective. Are you charging planning fees for this? Are you doing assets under management? You mentioned minimums earlier. What’s the business model about how you get paid for this planning process?

Scott: Yep. So on the low end, meaning if they don’t have an…so here’s how I think of it. I do it based on investible assets. And investible assets simply means investible assets; 401(k)s are included. And whether or not I can hold assets at TD or not doesn’t really matter. The reason I think that way is, to me, when you think about the planning that we go through, it’s all about helping you optimize your balance sheet, it’s not about where your balance sheet is held. So I just do a percent of investible assets, 1% up to the first $3 million.

Then I have a complexity floor. So a couple starts at $6 grand. And if they come in and they have RSUs and stock comp and all these other things, or they’re a business owner, then it’s going to go up. And we just set the price. Once we have the price set, the price stays in place for two years and then we reset it every two years. Does that make sense?

Michael: Yes. So does that mean even your AUM fee based on investible assets, once you’re in with them, you are locking in that fee for two years, you’re not recalculating every quarter or whatever it is?

Scott: Correct. And technically, I have a few clients who were on an older system of AUM. As I’m doing my compliance updates and all that fun stuff, I’ll flip them over this way as well.

Michael: Interesting. So it’s not a true AUM fee, like, I’m going to calculate average daily balance or closing quarter balance and then do my fee billing basis on an ongoing basis. It’s, I’m going to take in all your information about your net worth because I need it for eMoney and to do this planning process anyways. We’re going to figure out what the number is. I’m going to take 1% of that for everything up to the first $3 million. That’s your fee. Two years from now, we’ll recalculate, ostensibly higher if wealth is building, but we’ll cross that road when we get there.

Scott: That’s exactly it. And the reason I like that, I’ve always been conflicted with just AUM personally. I have younger clients who are physicians at major universities or hospital practices, and I look at them and I’m like, “Hmm, we have all these old remnant 401(k)s, and the optimal solution for them is to move all of that money into their current employer plan so we can do backdoor Roths outside of that.” Well, if I’m charging based on AUM, I have a big conflict there because I’m like, “No, no, don’t take that million and a half over there and put it in your employer plan, which is actually really good because I’ve already looked at it, put it on my platform so I can charge you on it.” I’m like, “No, I’m just going to charge you the fee that’s the reasonable fee for the work that we do together, and we’re going to look at how to optimize everything together.”

And the cool thing about this is people who have real estate, we do the same thing, right? I just look at the initial capital investment that they put in on the real estate is how I think of it if we’re going to look at it with them. But now we’re looking at it from a standpoint of like, well, let’s look at your real estate too. And is it really doing what you think it’s doing? Which almost always it’s not if they’re in Southern California.

Michael: Interesting. So I think some advisors might feel like 1% up to $3 million is higher than some. Often we have breakpoints that we can do for that. But you sort of got this kind of client-favored bias in the other direction, but it’s going to lock in for two years. Markets go up certainly much more often than they go down. So, your fee is going to average out to be lower than that over the next two years as your wealth builds. And I’m going to give you, call it conservative valuations in some of this.

I’m just valuing your real estate of what you put in originally. And we’re not going to Zillow it every year so we can capture the upside and tweak your fee a little bit higher. So like, moderate fee schedule conservatively calculated I would imagine just pulls back some people that maybe otherwise were going to ask questions or haggle over fees?

Scott: Yeah. And the way I think of that is like, I just had a new client come on board that was at a major wirehouse, and I was looking at their underlying fees and they were paying 1.75% on their assets to simply have them managed. And then I look at what I’m…what we offer for our clients as comprehensive financial planners and investment managers who do life planning and I’m like, “Well, 1% seems like a really good deal to me.” And I’ll let them decide that, right? And some people might hear that and go, “That’s high,” and some people hear it and go, “That’s low.” And to me, I just need to find a reasonable price point for the 100 people who we want to work with to come join us.

Michael: And so is there…was there a particular rhyme or reason, like why 1% as opposed to 0.8% or 1.2% or different thresholds of breakpoints?

Scott: Yeah, people understand it. The other thing is, I went through a mentorship with J.D. Bruce at Abacus Wealth with friends from my mastermind group, which include Mary Beth Storjohann and others, Anjali Jariwala, Will Kaplan, and Trace Tisler. They had 1% for $3 million and I went, “Well that makes sense. Why am I overthinking this?”

Michael: Alrighty then.

Scott: Honestly, I did. And a part of me at the time went, “Hmm, if I ever decided I wanted to join with a firm or I wanted to do a succession plan, maybe Abacus would be a good place. I’d like to make it really simple for my wife. I’m just going to put out a similar price point.” But then when I went and looked around at it beyond that, I feel like we all…especially in the financial planning community, a lot of us look at it like, “Oh.” It’s like we’ve rushed to this concept of we’re charging too much. And then I go look at what everyone else is charging and I’m like, “Well, why do we feel this way? We do more for the same price point as an asset manager.”

Michael: Yeah, it’s an interesting phenomenon to me of how much we as advisors tend to focus on what other advisors are charging.

Scott: Yeah. So I just do what’s right for us and we move on from there.

Michael: And so why only revalue every two years?

Scott: I want to make it simple.

Michael: Just that straightforward, like, I could…because I guess in practice, once we’re going beyond like sort of directly managed accounts, at a minimum, we could have a little bit more complexity here around, I need account aggregation software to pull in their 401(k) plans and I need a way to tag their real estate to figure out what it was valued at. And so that stuff is not the easiest to automate right now. So, hey, we’re just going to keep it simple and we’ll adjust it every two years is an acceptable business trade-off for you? Slightly less money on the upside, less stress on revaluations and maybe even just less business costs for not needing to put additional systems in place to capture the incremental upside, so good enough.

And then how do you actually bill it? Because I’m going to imagine for some clients, like, the portion you actually have in managed accounts may not be a huge portion of their total net worth or investible assets, especially if you’ve got some real estate outside. So whatever account you have gets billed, even though it may look like a large number relative to that account or are there other things that you do to manage this?

Scott: Yeah, the answer is it depends. So if it’s a business owner and a portion of the work that we do is business-focused and their CPA believes it’s reasonable for them to take that amount out of their business account, they may pay that way, because that’s more advantageous for them from a tax standpoint. They may pay through cash flow or they may pay through investments. It’s all dependent upon what’s the right solution for them and how do we optimize it for them.

Michael: And how do you manage that from just a systems process? Because now you’ve got business accounts I’m invoicing…

Scott: Through AdvicePay. Yeah, I can answer it really quickly. The answer is AdvicePay or through the investments. It’s one or the other.

Michael: Okay. So if it’s a flat fee, you’ll run it through AdvicePay. And then it’s just a matter of, okay, am I invoicing your personal accounts or your business accounts, right? So that’s just a configuration issue for the client. Or if I’ve got investments, I just use a normal AUM billing structure to, I think you said TD Ameritrade, and do a standard fee sweep.

And so where do clients come from at this point? How are you finding people on this process?

Scott: Yeah. First of all, our website needs to be updated. So none of this would be possible if it wasn’t for my wife. I just want to say that out loud. Because I started the firm five years ago and walked away from my salary to do that and started almost from scratch. I started with $3 million of assets and begged and pleaded with TD Ameritrade to let me on their platform. It was before XY had a relationship with them.

But when we were growing, at first it was friends and family who would come on board. The marketing really is designed so that it looks like the Gen X family right now. That’s shifting a little bit. I’m just taking myself out of it a little bit more because it’s bigger than myself now. And we can get to that in a second. But they really came from our own networks at first. I was really big on being in touch with other advisory firms locally who had higher minimums than I did, and they would refer business.

Michael: So you take their mere castoffs who will only pay $6,000 fees.

Scott: Absolutely.

Michael: It’s a fair point. There are firms out there with million or multimillion-dollar minimums. They get prospects sometimes that they can’t take because it doesn’t fit their firm. Most of us if we have minimums like that feel pretty bad or sometimes outright guilty about it. So it’s nice to find the client a good home. So if you’re an advisor where someone else’s castoffs are your A clients, everybody wins.

Scott: Yeah, you nailed it, right? So it’s exactly that. It’s other advisory firms, other fiduciary firms that would send business.

Michael: So how do you actually approach them to have that conversation?

Scott: Hey, so-and-so, I just started my own firm. I would love to meet with…may I take you out to lunch sometime to learn more about how you got into the business and what’s working well for you?

Michael: Okay, right? Because we all like opportunity to share and talk about ourselves. Yep.

Scott: Yeah. And I just go have conversations with people. What do you do? How did you do it? What are you guys working on? What are the things that you’re focused on? Who’s your target market? What are you hoping to build? Right? I just go have conversations with people and inevitably they eventually ask me about me. And then I’ll briefly explain what we do, and then they’ll end up remembering us and referring business if it’s the right fit.

And in all honesty, I want to know more and more. I do the same thing now for people who come to me that don’t meet my minimum, right? I just look at, well, who in this space is the right person? Because it’s all about finding the right fit for the right person. If we play that game with each other all the time, it turns into collaboration where people, advisors, and clients find better fits.

Michael: Well, that to me is the interesting thing of what happens as more of us get more specialized into what we do and who we serve. When people know you, it’s like, Scott does great financial life planning for Gen Xers with kids and family who are trying to figure out how to restructure their lives. And you get known for that. Then the firm up the street that likes to work with baby boomer retirees, you can send them all your boomers, they can send you all their Gen Xers with complex lives and we’re out of the zero-sum competition game, right?

Like if I send you a client, I lose out, if you send me a client, you lose out. And now we’re just into the, hey, the more people either of us meet, the more that both of us get as clients. Because sometimes I meet people who are good for me and sometimes I meet people who are good for you. And you could do the same. And the more specialized we all get, the more focused we all get, the more every other advisor you know is effectively doing prospecting for you because they only want their ideals and you only want your ideals. And that’s when everybody does better together than separately.

Scott: I couldn’t agree more. And to finish your question, the other thing that I did that was helpful is locally, and I double-checked with my compliance person to make sure it was okay, I asked everyone, all of my clients if they felt the work we were doing was helpful to please leave a review on Google, local Google. So it helped with local SEO search because when someone searches Stone Steps Financial locally or searches financial advisor locally, I have reviews, so it comes up. So it’s really helpful. There was that.

But the interesting thing is I’ve really lived into the financial life planning side of it. The way I think of it is I learned all the IQ, right, or learned how to be that jazz musician, technically, and then the EQ is the stuff I’m learning now. And those two things together are just insanely powerful. So I’m living into that. But I’m also going and speaking about it at conferences and doing things like that. The most interesting thing happened that I didn’t mean to happen, advisors started reaching out to me to be their advisor.

Why He Hired A Financial Planner For His Family [01:26:29]

Michael: So you’re actually doing financial advising for financial advisors.

Scott: I am. And I didn’t even think about it. But it’s actually a ton of fun for me because I love geeking out on all things financial advisor planning, right? Like how do you build a business? How do you scale it? That’s my life. It’s what I do, right?

And then the interesting thing is my wife and I hired an advisor recently. And that’s when it kind of hit me how important it can be for advisors to have their own advisor. Because I actually got…for the first time, I actually started doing what I tell clients they should be doing, right? So the way I think of that is kind of twofold for me personally, we were always the last client at Stone Steps.

Michael: Well, cobbler’s children have no shoes, right? This is long recognized in professional services, unfortunately.

Scott: That’s it. And the other side of that was, whenever we would have a financial conversation, my wife and I, I was at an asymmetric advantage and she was at a disadvantage, right? Like, I know all the stuff we’re supposed to do, this is what we should do, right? And so when she’s trying to tell me what she thinks and what’s going on and I’m just like, “Well, I already know the answer.” So now I’m holding one hand above the other.

But now what happens is the two of us are on the same level speaking to an advisor. And I actually get to hear what matters most to her, because I can actually hear it coming back through the advisor and from her. It’s been really helpful for us. So kind of the way I look at it is, is…it’s an interesting thing to live into, but the way I think of it is like, there are going to be achiever advisors who have high follow-through and have knowledge and are fully on the same page with their partner in life, they don’t need a financial advisor. But if you’re not all those things, you might want one.

Michael: Well, and it makes an interesting point, right, that the conversation around an advisor finding an advisor is not necessarily a, let’s talk investment portfolios or technical planning strategies, because we may feel like either I got that covered. I’m good with managing my portfolio. Scott, I don’t need you to run my eMoney projections. I can run my own eMoney projections. When you get down to like, “Cool. So who’s facilitating the conversation with you and your spouse about your joint goals as a couple? Are you doing that as the financial planner of the couple?” And suddenly it gets a little more awkward because that’s a hard conversation.

Scott: And in all honesty, I’d already done my own eMoney projections, right, and I already managed my own money, but I’m actually really looking forward to having someone else do it for me. Because I was always my last client, and I knew I was always my last client. So it’s just a matter of…for me, that’s how I’m thinking of it. But it’s just, I didn’t even mean for it to happen, but it did tie into your question of who are you working with today?

How Scott Decided To Start His Own Firm [01:29:20]

Michael: So you said you made this transition from working somewhere else with the firm and a salary and then deciding to go on your own and then taking very little assets or revenue with you and basically having to rebuild from the start. It’s like, what was going on that led you to make that kind of leap in the first place? Because a lot of us never want to make that leap. That’s a fricking scary leap.

Scott: So Mike, quick background on me. Undergrad went to Boulder, got a degree in corporate finance. That’s where I met my wife. From there, Fisher Investments recruited on campus, and I went and took a job at Fisher right out of school working in their inside sales department.

So basically, helping…learning…seeing the machine at work. They built a machine that really brought in a lot of assets. I think the month that I left, they brought in around $300 million in assets that month. And I went to a firm in San Diego that had like $220 million at the time when I started there. But I quickly saw that Fisher was focused on investment management, and I knew I wanted more than that.

We also knew we wanted to live in San Diego. My wife grew up in Tucson and her family has had a house in North County, San Diego since she was a kid. So we would go visit in the summertime and during breaks. And we knew we wanted to live here and raise a family. So we jumped at the chance to come here when I found a job and started a firm here.

And while I was here, we were kind of doing that, working for the working wealthy, the $1 million to $2 million, millionaire next door, helping grow portfolios, helping manage portfolios, doing some retirement projections, things like that, and helping grow that firm. We went from $220 million to I think just shy of half a billion when I left. I learned a ton there. Amazing people.

I got my CFA there, got my CFP there, but ultimately realized that the path to partnership wasn’t going to be happening for me. Looking back on it it was…I wasn’t…I don’t think I was…I wasn’t doing what I needed to do to let that happen. But I also, at the time, didn’t know how to ask for what I needed to do to help make that happen.

And then I read an article, and it’s just hilarious now because she’s in my mastermind group, but it was a Morningstar article, I think it was like maybe December of 2013, and it was Mary Beth Storjohann talking about starting her own firm. And I was just like, “Wait a minute, someone started their own firm, how much does this cost?” And I just started looking at like, well, what do you have to do to start it and what does that look like and how much of a runway would I need? And what if I went and did this? And then through that year, XY launched, and I joined XY in November of 2014. And then told my boss I was leaving January 2nd of 2015 and started, I think my doors opened, technically, in April 2015. That’s a short answer.

Michael: What did you end out doing in terms of trying to, as you said, build a runway, get ready for this? Were you trying to save up a bunch of money? Were you surviving on a spouse’s income? How did you facilitate that transition?

Scott: I’m just so grateful to my wife, because if she hadn’t kept working, this wouldn’t have happened. It was with her income and with savings that we had as well that Stone Steps was started. Because we live in Southern California, which is an expensive area to live, and our standard of living, we didn’t really cut, we just kept living as we live. We had the savings and the income to do so. It was a challenge, and the growth rates that I put on the firm when I first wrote it down, it took much longer to get where we wanted to go.

Michael: Yeah. So what was the vision of what that growth pace and trajectory was going to be and then how did it actually turn out?

Scott: Yeah, I think in my mind, I was like, “Oh, honey, in three years, we’ll be all set. You’ll be able to quit working if you want.” And it took way longer. And in all honesty, we’re still in a transition. My wife just left her corporate life in September of last year, which is amazing. Because one of her main goals in life is to spend a lot of time with the kids when they’re growing up. She’s now doing some consulting work and switching over that way.

But in the end, it’s kind of…it’s now her turn to figure out, well, do you want to do consulting work or do you want to not work at all? What do you want life to look like? Finally, we’re at a place where she can start to do that. But yeah, it wouldn’t have been possible without savings and her income. Because it was the runway to grow the business, to leave the doors open to allow it to take place.

Michael: And so what does the firm look like today in terms of clients or assets or revenue or however you measure size?

Scott: I knew you were going to ask about it. So I looked at it this morning. We have 67 clients. The 67 clients is about $380,000 of revenue. When I started, I was charging a little for what I did rather than probably what I should be charging. So some of those clients will be getting repriced, or if they’re…this year if that needs to happen for them.

Looking forward at where we’re headed, last year’s revenue total was $310,000, right now we’re at $380,000 with existing clients, but prospects who’re coming on board in February and March puts us over like $410,000 or something like that. So we bring on about two clients a month now. We won’t bring on more than two a month because we want to make sure we have the time and space to bring them on. That’s where we’re at. And the average revenue for the clients now is somewhere around like $9,000 or $10,000 a client.

Michael: And so what surprised you the most about trying to build your own advisory business and going this direction?

Scott: I must say, I’m a little surprised at where I’m standing now, where financial life planning is such a big part of my life. Because I grew up as a kid in the Midwest, in a family where you kind of tuck emotions down in your belly, you don’t talk about them.

Now I’m learning by reading up on it and looking into the science behind it, like, “Oh, wow, all this stuff actually works.” The way I think of it now is we all have a five or six-disc CD changer that’s in our brain that has this old playlist that we’re running on the regular. And if we don’t ever take a moment to look at it and reprogram that when we want to, we don’t really get to live into who we want to be. So I’m kind of blown away that I help people…we help facilitate that now for clients.

Michael: Well, I’m struck as well the kind of evolution of it as you framed it. As you said, you started on the IQ side and then you morphed into the EQ side. You started with the CFA and the CFP and a lot of the technical stuff and then came here. Like, was that just the journey of how you ended out or do you kind of feel like that is the path or that is becoming the path?

Scott: I think for me, it was a progression of just stepping more into who I truly should be. And I think at first when I was younger, I thought that the way to prove myself was to have technical knowledge. So I was like, “Oh, I know what I’ll do. I’ll go get my CFA. Because if I have my CFA, no one will ever question that I know what I’m talking about.” Right? That’s really hard. It’s not just anyone who shows up and gets that. And I was like, “Oh, I’ll go get my CFP now.” I was always looking for the thing that was going to make it so that I was okay being in a place where I was with people, not realizing that I just needed to learn how to be comfortable with who I am. And that’s kind of the progression that’s happened over time.

And it’s interesting; I use DFA Funds for some of my stuff that we do with clients, and I went to a DFA chat, I think it was on like applied communications where they talked about a great way to frame what we do for clients, they call it the four C’s. So it’s Confidence, Coaching, Convenience, and Continuity.

Well, Confidence is really just the technical knowledge, right? The other three, in so many ways, tie back into EQ, soft skills, all that stuff. And it’s really important.

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

Scott: There’s that picture of starting the entrepreneur’s journey. It’s like you’ll see it on Twitter and all that stuff of like when you get started and the elation, and you have to go through like the trough of despair before you come out on the other side. The lowest point for me was when we got to the area where I thought we would be okay for my wife to get to move on and we weren’t there yet, for her to get to step into who she wants to be.

Michael: Meaning time-wise? Like, I thought we were going to be there in three years and then three years in we’re not there, I’m like, “Oh, crap?”

Scott: Exactly. Exactly. So time-wise, my timeline was off. Because I just…I felt like I let her down. So the interesting thing is when you want to learn the life planning process, the best thing you can do is get life-planned yourself. So in the five-day training, you life-plan someone and they life-plan you. I know when I will hit that moment, I will send a picture of me and my wife with a French press sitting at our kitchen table, and it will be the moment I’m telling her that she doesn’t have to work again if she doesn’t want to. And that French press is sitting in my kitchen cupboard. It’s wrapped in bubble wrap. I see it every day. And I really want to give that to her. And when I do, I’m going to send that picture to the guy who I did the financial life planning with.

Michael: And so as you look at that journey or back at it, did it just not grow as you expected? Was there a setback along the way? Did you just overestimate quite how quickly clients were going to come in and it took a little longer than expected?

Scott: Yeah, it’s a lot of things, right? It’s when you go step out on your own, you think, “I can’t charge these fees for this work.” Right? You have the impostor syndrome. I see it in XY advisors often, right? You know the benchmarking surveys for that group, everyone raises fees, right?

Michael: Yeah, yeah, of independent advisors who went out and started their own advisory firm charging standalone planning fees, that benchmarking study has shown I think every year it’s run so far that 100.0% of advisors raise their fees in the first 3 years. And like, yeah, well, I’m sure we get a little bit better as we go and maybe that merits a little bit more, but not 100%. The 100% to me essentially comes down to, we’re all kind of scared witless when we take that leap and you’re staring down little or no revenue and you’ve got to get some clients going. And the first thing we do is either discount our value or not have enough confidence to charge what we’re worth. And it kind of slows down your revenue growth when you’re not charging your full value.

Scott: That’s exactly it, right? So it was all of that. Because when I look at the growth rate that we have now and who our average client is now, it’s so vastly different than who it was three years ago. But that comes with time and experience and confidence and process and knowing what we do and having confidence in it. It’s like it’s a part of the journey that you go on when you go start your own business.

Michael: Anything substantially different that you wish you’d done? Is there something you wish you could go back and tell you from five years ago as you were getting ready to make the leap, or I guess 15 years ago as you were getting going into the industry?

Scott: Well, when I started the firm, I wished that I’d had a mentor at the time…and honestly, I have to give a shout out to J.D. Bruce for the work he did with us mentoring us. But he basically was like, “Well, you need to charge what you’re worth.” And he walked us through that. What do people charge? Why do they charge it? Right? And got me to understand it so that I was charging what I was worth, which is what I should be doing.

Michael: Was there a particular mental breakthrough for you? What got you there?

Scott: For me, it was having an image…yeah, it’s having an image of my…or at least thinking of it. I don’t have one up right now. But actually, I do have one up right now. It’s an image of my family and is the reminder that if I ever discount my time with my clients, I’m taking away from my time with my family. The other thing that was really helpful, I don’t remember who said it, I think it was maybe Seth Godin, but it was something along the lines of like, what do you say to someone if they ever ask you for a discount? You just simply say, “It wouldn’t be fair to the rest of my clients.” Once I had those two things, I was good to go. Because now I just look at it like, well, we only have so much space on this bus as we want to grow the initial size of the firm now, so I’m going to be really selective. And it’s okay if you’re not the right fit, we’ll help you find a great advisor who is the right fit.

Michael: And so what comes next for you? Like, as you said, there’s only so much space on this bus. I imagine particularly for the depth of the planning conversations you’re having, like truly, only so many people are going to fit on this bus. So are you growing to some point and then you stop? Like, I got enough clients, we’re making enough income, we can live the lifestyle we want and we’re just going to service them going forward?

Scott: Yep. So that’s step one, for sure. So we’re building an initial diamond team, which refers to Angie Herbers’ Diamond Team paper. I have an associate advisor, Mary, who works with me, who’s amazing. She’s been with me for five months. She’ll eventually be a lead advisor and a registered life planner. So she’ll be able to do these…do the fully EVOKE process with clients. And then we’ll hire another associate advisor and have one more. So we’ll eventually have three advisors on the team. And we have a client service associate, Patti, who joined me first. He works part-time. And that’s the initial team that we’ll build out.

From there, I don’t know where we’ll go. The purpose of Stone Steps, or the “Why” – Simon Sinek’s “Start with Why” was a very big book for me, and it kind of got me on my path to looking more at why we actually think the way we think and why marketing works the way it works, which comes back to the physiology we touched on earlier – the purpose of Stone Steps is to align money with life. That’s what we view our job is here. We’re actually starting a wall in the office that just says, “Living our best life.” And it’s pictures that clients have sent to us that with their permission we put up of them living their best life. They start living out the visions that they’re crafting for themselves.

So from here, once we have that to a point where there’s a full team, I don’t know where we’ll go. I don’t know if we’ll make it a bigger thing or if I’ll put time and energy into other projects like you do, for instance, because I have some ideas on other things we could be doing as well. Time will tell. For now, getting to that…drop in that French press is my focus.

Michael: And do you have a sense as to how many clients are capacity when you’re sort of this three-person, four-person team, I guess? Like three, you and two other advisors and an administrative support person at the bottom of the diamond?

Scott: So when you actually go look at just the numbers on how the numbers typically work for the average advisory firm, I think you can typically run about $2 million of revenue that way. And if you just assume it’s on average $10,000 per, then that’s 200 clients. And then if the relationship manager is also running the business, well, they’re probably not dealing with all of those clients, so maybe they have 80, 80 and 40 or something like that.

I don’t really know what the exact mix is going to be. We’re going to figure that out along the way. But I know there are already a lot of people figuring that out and I’m going to look to them for more knowledge. We’re just going to keep improving the process and systems we utilize so that we have the time and capacity to work with our clients.

Michael: So you still have a lot of growth trajectory and aspirations from here. Like, sitting at almost 70 clients with almost $400,000 of revenue run rate, which are fantastic numbers in and of themselves, you’re still looking at 5X-ing from here, at least on revenue, maybe 3X-ing on clients. Haven’t decided if you’re going to 10X, but you still want to 3X or 5X from here?

Scott: Yeah. I want to create the space for some advisors to become advisors. Mary is a career changer. I worked with her at my old firm, actually. She started by working administratively at the office. She wants to become a financial life planner. She got her CFP. She’s amazing.

I want to give people who fit with the culture of who we are, if there’s opportunity, I want to give that to them. And our thing here, we all want to live our own best lives and we want our clients to live their best lives, right? So we’ll see where that takes us.

Advice For New Advisors [01:46:45]

Michael: So what advice would you give to newer advisors coming into the profession today who are trying to figure out how they get from zero to where you are some number of years down the road?

Scott: A couple of things. One is to give back. Because by giving, you’ll receive in ways that you don’t understand. So examples I’ll give there. The biggest one I would give is when I joined XY, I was like number 40-something or other I think. And as we were in the low numbers, I remember I already had TD Ameritrade and I already had Orion and I already had DFA and I already had eMoney and all this stuff. And so every time I would run into Alan, I would just be like, “Hey, Alan,” like at a conference and be like, “We’ve got to figure how to get all these things for the members.” And then it was like the second or third time that happened, I think it was like up to 100 members now. I’m like, “Hey, man, we should just…I don’t mean to keep bugging you like this. We should just like form some type of an…” I think I said, “You should, and create an advisory committee or something so that advisors can come back to you and tell you what you need.” And he came back to me a couple weeks later and he was like, “Great idea. You have to be on it.” I was like, “Okay.”

So it’s like, by doing that, I got to help give back to the community. I also got to help other people behind me do better, right? All because I just took the time to explain what I needed and what would be helpful. And I also had the ability to go listen to other people and give that feedback. So I think that’s one of the biggest things you can do. The other thing is just constantly…be willing to constantly learn. I think this is a never-ending process. There’s always going to be something to learn.

What Success Means To Scott [01:48:28]

Michael: As we wrap up, this is a podcast about success, and one of the themes we always talk about is just the word “success” means different things to different people. And so you’re off on this incredibly successful track and building the business and up to several hundred thousand dollars of revenue in just a few years and building this deep planning process to help clients find whatever their success is. How do you define success for yourself at this point?

Scott: Yeah. For me, it goes back to my third question, which is for me, I want to be the best father, the best husband, the best advisor and the best friend that I can be. And I say that knowing that every day I can do something to get better. That’s how I view success. It’s making sure that my time, money, energy, and talent goes towards those things.

Michael: Well, very cool. I love it. I love the focus. I guess that’s the point of going through the process, you help bring that kind of clarity and focus for yourself.

Scott: That’s it.

Michael: Well, very cool. Thank you so much, Scott, for joining us on the “Financial Advisor Success” podcast.

Scott: Thank you, Michael.