Is Your Plan to Fund Your Retirement Based on the 4% Rule?  

Plus, how advisors can attract new clients, improve AUM and retain clients for the long term.  And should you consider a Donor-Advised Fund? Ric answers a listener's question

Ric Edelman: It's Friday, September 13th. Hey, did you know that the 13th of the month falls on a Friday more often than any other day of the week? We're just bound to have bad luck. I want to talk to you about something much more important than that.

On today's show, the 4% withdrawal rate, donor advised funds, and a great conversation with top financial advisors about how they are building and managing their practices for success.

But first, the 4% withdrawal rate. This is a truism in the financial planning and investment management community. Financial advisors routinely say to their clients, and have for decades, that when you're reaching retirement, you should plan on withdrawing 4% of your portfolio per year, if you want your money to last as long as you do. You don't want to run out of money in retirement, and a 4% withdrawal rate will help make sure that that doesn't happen. Well, is that true? Because if 4% is actually too high a number, then you run the risk of running out of money before you run out of life. So that's a bit of a problem.

Well, right now, interest rates are pretty low, and what you need to realize is that the lower that interest rates are, the less potential they have to rise in a recession. If the 10-year Treasury Note drops to 1.5%, its price would rise by about 20%. But in 1974, when interest rates were so much higher than today, that drop in interest rates caused treasuries to rise 50% in value. Two and a half times more than they would rise in a scenario identical to that today. But that is part of the challenge.

We need to recognize that the 60-40 mix, the traditional portfolio of 60% stocks, 40% bonds and a withdrawal rate of 4% per year, has been based on historical data. And the historic data has all been when interest rates have been substantially higher than where interest rates are right now.

And a new academic paper just came out and it says that because interest rates are so low, meaning the profit you're getting out of the bond portion of your portfolio, because it is so low relative to historic standards, you shouldn't plan on withdrawing 4% a year to have your money last as long as you do in retirement. You should withdraw only 2.26% per year. That's a huge reduction compared to what people were expecting. Well, is it legit? Is that what you ought to be doing? Really? Well, the conversation I think is a little more complicated than either of these scenarios are suggesting.

The approach that I always used to take when I was a practicing financial advisor and what I taught my colleagues to do, was to simply say we're not going to try to evaluate this over the next 20 or 30 years because who knows what's going to happen in the economy and the financial markets during that period of time. Instead, we're going to evaluate it annually for each of our clients. We're going to look and see what's going on right now.

And what do we expect to be going on over the next 12 months? And not just in terms of how might the stock market perform and the bond market perform, but how might the client perform? In other words, we want to take a look at what's happening in the client's lifestyle. Are you spending as much money as you used to be spending?  Might expenses come down next year or frankly, could it get even worse and expenses might rise dramatically next year. Say you've got a big one- time expense. You need to buy a new car or you're going to take that anniversary trip to Europe or who knows what. Or you're going to pay for a child's wedding or incur some other major one-time expense.

Simultaneously, is health changing with the client? That may have a big impact on how they spend. Maybe a lot of out-of-pocket medical expenses, or on the other hand, they're going to cancel the trip they were thinking of taking and saving that money. So, what's going on in the client's life?

And simultaneously, what's happening with the client’s attitude about the financial markets. Very often as people age, they get more and more conservative in their willingness to spend. That often needs to come with an attendant reduction in how much they're withdrawing from their portfolio.

So we would take a look at it each year and make adjustments as necessary. If the stock market is booming after all, and the market's enjoying a 20% gain, I don't think we have to limit ourselves to a 3 or 4% withdrawal rate in the face of that. But if you've got a major market decline, like back in 2008, well, we wanted to cut our withdrawals to zero, because who wanted to sell low?  And that's what cash reserves is for, to tide you over when you don't want to make any withdrawals at all.

The point is this. There's been a lot of conversation over the past several years, due to the decline in interest rates, as to whether or not the 4% withdrawal rate is sustainable. My point is you should never assume that it is…or that it isn't. You should evaluate it on an ongoing basis and do it in the context of your own life. That I think is the most likely to lead to the best outcome.

Hey, I got a question from Jim in Miami, and here's what he asked:

Jim: “Ric, I attended an event on estate planning where a community foundation talked about endowments and donor-advised funds. Are they worth considering for estate planning?”

Ric Edelman: Yes, Jim, both of these are worth considering.

Let me explain the difference between an endowment and a donor-advised fund. An endowment is a fund or an account that you establish. This is a legal entity so you've got to go to a lawyer and you're going to pay thousands of dollars to establish an endowment and you contribute money to the endowment to fund it. You have to hire a management team to run the endowment for you. Often people do it themselves or they hire money managers or attorneys or accountants to assist and the endowment is a nonprofit entity, which means you get a tax deduction when contributing money to the endowment. And then when the endowment distributes money, it has to distribute to other charities. This is how it maintains its nonprofit status.

Why would you give money to an endowment instead of directly to the charity? Well, you may be donating so much money that you don't want to give all of it to charity all at once.  You may want to dole it out over a period of time. Maybe you haven't identified which charities you want to support. So, by dropping the money into an endowment fund, it buys you time so that you can make your decisions more over a long period without having to do it right away. but that raises a related question.

Why don't you just keep the money yourself and donate to the endowment later? Well, you certainly could do that. But what if something unexpected happens like you suddenly die? All of a sudden, none of the money will go to charity unless you've made other stipulations in your will and estate documents.

And there's another element to this as well. If you leave the money in your estate, and it grows in value, you're going to incur the taxes on an annual basis on that. If you sell the asset, you'll incur those taxes, too. If you donate the money to the endowment now, all the future growth is within the endowment tax-free.

So it's a more efficient way to have the money grow for the benefit of the future charities. But like I said, endowments are expensive to create, expensive to maintain and operate. And this is why people generally don't create endowments unless we're talking about millions of dollars, tens of millions, hundreds of millions, even billions of dollars.

This is why Bill Gates has an endowment, and many other rich folks. What about the rest of us, who don't want to go to the cost and expense of dealing with that? Well, enter the DAF, the donor advised fund. Schwab has one, Fidelity has one, Franklin Templeton has one. You'll find them available at a lot of firms and with a donor advised fund, they're really pretty cool. They work similarly to endowments, but without all the paperwork and expense of creating them and managing them. You simply transfer money into the donor advised fund. If you have a Schwab account, you can move shares of your stocks or bonds or mutual funds or whatever over to the DAF.

If you have a Fidelity account, you can slide it over to the Fidelity DAF, and so on. And when you do that, you get an immediate tax deduction for moving the money into the donor advised fund. Once the money is in the donor advised fund, they will offer a wide variety of investment opportunities. You can invest the money in any one of a number of ways from a 100% cash to a 100% stocks and everything in between. 

And the money sits there and grows tax free until you decide who the money should be given to. And at that point you simply instruct Schwab or Fidelity or Franklin where you want the money sent. It has to go to a charity, but other than that, the choice is yours. Their expenses are pretty low in line with typical mutual fund fees. There are lots of independent DAFs as well that aren't affiliated with any particular firm. Their fees tend to be even a little bit less. and it's a simple, clean, easy way for you to do this. Now, again, why wouldn't you just give the money directly to charity?

Well, it's because you haven't really identified who the charity is. It could also be useful in your tax planning. I'll give you a very common example. Entrepreneur owns his company and he sells it and he sells it for a big windfall. That's going to produce a really big tax, but he plans on donating the money to charity.

Eventually he just doesn't know the which charity to donate to. So, the year that he sells the company, he transfers a part of those proceeds into the donor advised fund. This way he is an offsetting charitable donation against the income from selling the company avoids the big tax headache, sets up future charitable opportunities.

So, there are lots of examples of how Donor-Advised Funds are available and useful. And they are increasingly popular for all these reasons. So, talk to your financial advisor and your tax advisor to determine which course of action is best for you. Just donate to charity directly on an annual basis or establish a donor-advised fund or establish an endowment, all three are great choices.

You can send me your question as well, just send it to AskRic@TheTruthAYF.com. The link is in the show notes.

Coming up next, a conversation about how to attract new clients and AUM secrets to time management, managing teams, how to break through a firm's bureaucracy and get things done and clever ways to build and deliver long lasting client relationships.

Ric Edelman: The following conversation is with Meredith Mowen, Managing Director and Portfolio Manager at 1919 Investment Council, and Jason Noble, Financial Advisor and Partner at Prime Capital Investment Advisors from my Wealth Management Convergence held back in March.  

Welcome onto the stage, Meredith Mowen and Jason Noble. I want you to share with everybody how you do what you do. And Meredith, let me start with you. You have something that you refer to as the ideal client profile. What do you mean by that? And how does it work?

Meredith Mowen: So, we've spent a tremendous amount of time trying to determine who is our ideal client in terms of what do they value and what are they willing to pay for. Is it advice? Is it investment? Is it a combination of all of that? And I think that that really helps you to narrow your focus when you're gathering assets and you're looking for the right families or individuals to work with, because that way it is a mutually beneficial relationship where they're getting what they need and we're able to deliver what their expectations are from their advisor.

Ric Edelman: And in your case, who is that ideal client?

Meredith Mowen: So, we went through this wonderful exercise and we gave them SALY (same as last year) and someone else at 1919. And really, we're looking for individuals or families that have a bit more complexity in their financial profile. So, they may be two young professionals with aging parents and younger children where there are a variety of pools of capital. So, there may be trusts involved. We have a lot of competencies around managing trusts. There may be retirement assets. There may be 529’s, individual taxable portfolios. And our ability to look across those various pools to identify where is the best place to house certain assets.

Which is the first basket that they would go to for liquidity versus [00:14:00] longer dated assets? What's includable in their estate? What going to get a step up in basis? There are so many different factors that we try to help them work through, in order to make these determinations and then craft for them an asset allocation that is more likely than not to achieve their objectives.

Ric Edelman: Well, how do you then either establish or obtain the competencies that you need to be able to do this? And at what point do you say, enough, I've achieved enough, now I'm going to outsource or rely on others for these things.

Meredith Mowen: So that really goes to the evolution of our industry, where I think maybe if you went back 20 or 30 years ago, there were the trust companies.

I grew up in a trust company, so we had trust officers and we had investment professionals. In our industry now, I think that it is good to have enough knowledge about these various aspects of our industry.  I think someone else said it, there's been so much good information to know enough to ask all the right questions, but also to know enough when you need to bring in an expert, a subject matter expert.

So, we have financial planners in-house. We have an attorney who's very knowledgeable in trusts and estates and tax. But we're also very, very close with our clients’ CPAs and their lawyers, so that we're part of their trusted team. I kind of think of it like a board of directors. You have different competencies.

So, we're able to get them started on the conversation. They'll sit down with a drafting attorney and be ready to actually execute. Others have talked about providing information to the accounting teams. So that they're ready to immediately start preparing tax returns and then share that information with us for future planning.

Ric Edelman: Did you have this ideal client profile from the beginning?

Meredith Mowen: I think it has evolved over the years where I think there are times in all of our growth phases where, and this is going to sound awful, you'll just take anything because you're trying to grow. But then you find over time that sometimes what we think is very valuable, isn't really valued by the client. And that's when you have a less engaging relationship.

Ric Edelman: So, what do you do when you finally wake up one day and realize I've got a bunch of people in my client base that I don't want to be clients.

Meredith Mowen: So, we rarely fire clients, but others have talked about this too, where you may transition that relationship to a younger associate that is more focused on the immediacy of the needs that they have, and they don't have the complexities that some of us who have been in the trenches a little bit longer are able to address.

Ric Edelman: Or if you don't have that available, then it means you might have to go hire someone to be the recipient of those clients.

Meredith Mowen: Correct. And I think what we've done organically is that we identify younger colleagues as people we really want to focus our training and our attention to. And I don't think any of us would be sitting here if we weren't the beneficiaries of someone else's largesse over the years.

And so where I am today, one of my most important goals is to work with my next generation and help them develop the skill sets. They're all smarter than I am, but they still need to understand trust. They still need to understand how to have a nice dialogue with an 80 year-old. It's very different than having a conversation with a 55 year-old or a 35 year-old.

Ric Edelman: So Jason, to what degree would you say what Meredith described is similar to your practice or very different?

Jason Noble: I was smiling and laughing because I agreed with practically everything you just said. And I'm kind of wondering what am I going to do to add value to this conversation at this point?

I do a diamond approach. So, I'm the senior advisor. There are two lead advisors and then we have an associate advisor. So, the associate advisor, as they build up their skill, they're able to move into the lead advisor role and we could create another Diamond team. We found that we could handle about 300 million under that kind of organizational structure.

And I work with those that are my ideal client. And out of 225 relationships that we serve right now, really I work on a regular basis with about 40. My mentor told me to fire 80% of my clients. And I said, no, I'm not going to do that. I'm going to hire people and create jobs. And it means less money out of my pocket, right? But, how can I then pay these advisors part of the revenue, allow them to grow under this umbrella that we've created, so that I could go after my ideal client.

Ric Edelman: So, you're AUM model, what are the average assets of your 225 clients?

Jason Noble: It's around $1,400,000 on the day.

Ric Edelman: Okay. And the 40 that you spend most of your time with?

Jason Noble: They're coming in on average around $4,500,000.

Ric Edelman: Okay. And that's why you're spending more, they're just more complex.

Jason Noble: Well, more complexity, and we believe two heads are better than one.  So every meeting that we have, two advisors are in that meeting. And to your point, like when we have a meeting with an attorney, I have one of the associate advisors or lead advisors go to that meeting. What a better way to learn than to actually be engaged in those meetings. Now, after they go to five meetings with accountants or five meetings with lawyers, then they get a quiz with me to make sure they understood what they just heard. Does that make sense, what I'm doing there? And I'm getting them experience by actually being a practitioner of our beautiful, wonderful industry.

Ric Edelman: So, you're really at the stage of spending a lot of your career, not really serving clients, but in managing teams that serve clients.

Jason Noble: 20 years of experience…the only thing I've ever done, is be in this industry.  11 of those years I was a direct manager and supervisor. So, going to being an advisor, I could no longer be a hypocrite, right? I actually had to practice what I preached instead of just preaching it. I just never lost that passion for helping and training, being that teacher at heart. But it was also building out a scalable practice that is repeatable, sustainable.

A good friend of mine just passed away at 45 years old, leaving behind his wife and two kids. He was an advisor. There are people in this room I know who knew him. There was no succession plan. There were no next steps. I picked up a lot of clients because it was in my local community. They called in one day to do an end of the year review, and there was no one there to take the call. That will not happen with my organization.

Ric Edelman: Would you, Meredith, share Jason's viewpoint that it's really all about building and managing the team?

Meredith Mowen: Absolutely. And again, when you think about the nature of a relationship, the easiest new business to get is what you've already earned. So, you want to keep the subsequent generations of a family, and I think that the best way to do that is to show them a team that resonates with them.

I think that the next generation of the clients that I work with, they appreciate the knowledge and the experience that someone who's in her early sixties can bring to the table, but they also don't want to run into that experience where, am I going to have to go get my own person? We want them to know that person's already here and that person is already engaged with the family.

That person is learning about not just the industry, but about your family. What are their values? What are they trying to achieve with their investments? What's the name of their dog? Are they cat people or dog people? I mean, these are things that really cement the relationship and what we've also found is that those tight relationships also generate a lot of referrals.

So, some of the families I've been working with the longest are the ones that say “Oh, you need to be working with Mary and her group. They're great. They're wonderful.” And that's a wonderful way to develop new business and new relationships.

Ric Edelman: So, is it really all about team at this point? The notion of an advisor just being solo and handling soup to nuts with a client? I mean, they may have support team, admin, not necessarily client facing or certainly not advisory facing like you. Is that day gone?

Jason Noble: I'll answer that question. Before I do, I position the associate advisor and the lead advisors as the growth advisors for my clients’ younger children, as I'm working with more of the retirees and business owners. And so that segmentation helps. And I'll talk about a wealth transfer conversation that helps me drive a lot of revenue and business to get to the next generation. If we have time.

Ric Edelman:  So, you’re using the team as a conduit to ensuring intergenerational clients.

Jason Noble: Yes, multi-generational and intergenerational, but I also team with other financial professionals. Like there's a financial professional who's really good, in my opinion, at exit planning. And that is not my strength. My strength is more on the personal wealth. He’s out of Cleveland, and I'm in Charleston, South Carolina. And he has enough money to buy a plane ticket if he needs to. And we also have enough money to pay for Zoom and we do the virtual meeting, and we work as a collaborative team.

Ric Edelman: How'd you find each other?

Jason Noble: At a conference? It was by invite only. And I was lucky enough to -- they must've sent it to the wrong Jason Noble--but I showed up anyway and we just hit it off. I think that's something that's missing within our industry. Like when I was starting out, it was all sole practitioners. Doing split tickets was not a fun thing. And then if you were working at a firm that you had a senior advisor, you're giving up 50% of the revenue for them to sit in one meeting? No, it just created this awful taste in my mouth. So that's why when I brought on these advisors, I made sure that they were partners within the organization, to grow within the organization. And to find their own ideal client. My ideal client is extremely different than theirs.

Ric Edelman: So this guy in the Midwest is helping you with your clients. Is he ever bringing you in to help with his?

Jason Noble: Yes, there's things that I'm able to do on my platform that he's not able or doesn't want to do. And that's where we were able to find some synergy.

Ric Edelman: And to that extent, Meredith, you talked about working with other professionals. How do you establish those strategic partnerships, or are you relying entirely on internal staff colleagues?

Meredith Mowen: So, internally, we have a number of our colleagues that are financial planners. I referenced that we do have an attorney who works out of our New York office, so he is our immediate go-to guy for trust and estate planning, as well as he has his master's in tax accounting. So he has a very high level understanding of the taxes associated with wealth. But then on top of that, we have a relationship with an external insurance person. And when someone says, well, what about life insurance, we'll partner up and get a full review on that. And again, if she thinks it's a great policy that should stay in place, she'll say so.

If she thinks it's. She'll say so. And then that leaves it up to the client to determine what next steps they may take as a result of that.

Ric Edelman: Does she refer her clients to you as well? Or is it more one way?

Meredith Mowen: It's more one way where we are now. And that's something that we can work on going forward as it relates to our relationships with accountants and attorneys, I think that most people would tell you that for COI’s (Certificates of Insurance), it's a difficult relationship and it does tend, for me at least until more recently, have been more of a one way. And I don't feel badly at all about that because my goal is to bring to the client the best advice possible. It's wonderful if I can get a referral back from an accountant, but it's more important that I know that my client is in the best position and most capable hands. Now, more recently, we have been getting some beautiful referrals from an accounting firm that we've worked with for ages. So far, the experience is going to vary across our different offices. But I haven't really seen a whole lot of positive traction from the trust and estate lawyers.

Ric Edelman: They're above it all.

Meredith Mowen: Well, maybe. Until they retire then.

Ric Edelman: So, in building your team, are you hiring them or just receiving them from the firm?

Meredith Mowen: So, I'm very fortunate that my office is in Baltimore and that is where our operational area is. And so many of the folks that have joined our team in Baltimore have actually started in our operations area.

Ric Edelman: They come to your team internally.

Meredith Mowen: Yes. And while they're working in our operations, not only are they learning about the guts of the operation, but a number of them have also been starting their CFA (Chartered Financial Analyst) programs and other designations. So, when we have an opportunity to hire and I can pick up a young person who's already finished their CFA or they're on level two or three and they know our business, they understand the workflows, I think that's a huge win.

And I think it also sends a really constructive message across the firm that our goal would be to organically grow our professionals from within. Some of the other things that we do – two of the gentlemen on my team came from operations -- one of them now works on a program with Morgan State University and he's done a lot of workshops on investment with them. So we're also looking at how can we leverage our role in the community to organically grow financial professionals. And that's been a really exciting opportunity as well.

Ric Edelman: And where are you getting your teams from, Jason? Are they provided to you by the firm or are you doing the hiring?

Jason Noble: No, I do the hiring, but the firm has to approve. And I want the firm to be involved. And there may be something that the CEO notices that I didn't in the interview process. I like going that team approach.

Ric Edelman: So what is the format? You're choosing someone, taking it to them for veto…or are the fundamental HR team doing the initial screening and then sending to you finalists?

Jason Noble: The HR team will do the screening, the initial screening if they like, then they will send over those candidates to myself. I will do initial screening for those that are there locally that I got introduced to by other financial advisors. I mean, they say Wall Street's only seven blocks long, right? So, if you don't know the other advisors in your local community, get out there and start to meet them.

Also, really good intel about how they set up their office. Right? But I share ideas, what we're doing right now. And people will share back really good ideas with you when you share ideas with them.

Ric Edelman: So speaking of that, talk about how you each work with your teams. How do you set priorities? How do you keep them focused on what really matters?

Meredith Mowen: That's a really great question because we always laugh and say that we come into work in the morning and we have in our mind an idea of what we would like to accomplish during the course of the day. And within five minutes, everything is blown up, right? You get the phone call and everything is off.

But what we try to do is every Monday morning we meet as a team and we review our calendars to see what we have, what we're doing, which assistants might have more meetings that they're supporting and someone else has fewer. So there's, well, how can I help? We look at where we stand as it relates to the time of the year.  During tax season, we act as agent for trustee in a lot of situations. And so we're shepherding about 45 fiduciary tax returns. So, keeping an eye on where are we with our tax reporting as it gets to year end. Where are we on RMDs? It's just, it's an ongoing dialogue.

Ric Edelman: Do you have systems in place. Say you're dealing with RMDs. That's something you've got to do with every client. So is there a checklist? Here's a list of every client and here's their current status and blah, blah, blah. Is it formulaic like that, or is it more seat of your pants? Who have I not thought about lately?

Meredith Mowen: So. I have the best. And I'm not going to give anyone her name because you'll take her away from me.  We have the best administrative support colleague. She worked 23 years for a law office that had a lot of our mutual clients. So, she came aboard and already knew a lot of our people. Well, she is a spreadsheet-driven individual. So, the first thing she does at the beginning of the year, she downloads every IRA account, everybody's date of birth. She then gathers the data from the custodian in terms of what is the RMD and she maps it all out. So, by February, we have a list of all the RMDs. And then a lot of them know to reach out directly to her and tell them whether they're doing qualified charitable distributions, take a check, the timing of the check, they will tell us what the withholding is.

It's a science. And she's also the one who shepherds all these fiduciary tax returns. So, she has spreadsheets for everything. She's just magic. And that's what helps keep the other portfolio managers in the group organized, because I don't have to worry about that.

Ric Edelman: Does anyone else in your practice have access to these spreadsheets? Do you know where they are, if she’s hit by a bus?  

Meredith Mowen: If she's hit by a bus, we know where they all are. From a technology perspective, we've made a tremendous amount of progress from keeping things stored on our own personal drives, to using Box where everything is uploaded into Box and she'll send us those spreadsheets. So, I keep it right on my desktop.

Ric Edelman: Why not use a shared document?

Meredith Mowen: Because she doesn't want anyone to touch it. It would have to be read-only. Oh, no, no, no. She doesn’t want anyone to touch it.

Ric Edelman: Anybody see a problem with this?

Meredith Mowen: It's a shared document, but it's read-only. Because she doesn't want someone to inadvertently suggest that an RMD has been made that hasn't. That would be a sad thing.

Ric Edelman: Doesn't it concern you that she has such control?

Meredith Mowen: Not really.

Ric Edelman: How old is she?

Meredith Mowen: Oh, she's in her probably late fifties, early sixties.

Ric Edelman: Get back to me in ten years.

Meredith Mowen: Oh, I'll be one of the clients in ten years, I hope.

Ric Edelman: Jason, respond to everything you just heard Meredith describe.

Jason Noble: Gina Wickman wrote the book Traction: Get a Grip on Your Business with EOS Systems. (Entrepreneurial Operation Systems) And we have a traction board that goes into our 10-year vision, it goes to 3-year vision, 1 year out, and then it goes into what are the rocks vs. the issues that we need to really tackle. And we have that meeting on a quarterly basis.

We then do an update meeting on a monthly basis, and we do a daily meeting at 8:30am every day. We did this morning. I won't be there tomorrow, but the meeting still will be had, and I will get the notes and takeaways from that meeting. And then we do a repeatable, sustainable process. We have a process for prospective clients and we have a process for onboarding once they decide to move on.

Every single morning, we all check all the processes to make sure who is supposed to be on is doing the action. And if it's on you, make sure you do the action. I don't need anyone to tell me what my week looks like. I could do that on Friday the before. I don't do that on Monday morning. I just do that on Friday to prepare for the next week ahead.

And there's things that need to be done in preparation for those meetings. We will do, in the beginning of the year, a one-page report. scoring their financial life on a scale between one through ten. We call it the clear picture analysis. And there's five different areas: cashflow, assets and liquidity, retirement forecasting, wealth and lifestyle protection and legacy wealth.

You don't need an economics degree to understand that10 is good. Let's monitor and maintain. Number Two: Let's get to work. And then they're able to see how every single year their numbers are improving. through the relationship and guidance that we are providing them and the relationship that they're taking action on.

For instance, like, we will put in big letters, like, yes or no, did they actually do an estate plan? Did they get it? They see no there, and it's the same conversation as the year before. It's like, hey, is this the year that you want to do this? Or what do I have to do? Can I pick you up and take you to the attorney's office?

I'm willing to do it, but I will charge you an extra fee for that though. ‘Cause I'm not a chauffeur. They will then want to see their numbers improve through the psychology of finance, right? They want to see that number on wealth and lifestyle protection go from like a 6.5 an on that scoring system up to an 8.5.

They would want to see that. And they're able to see that when they take action on their finances. So it motivates.

Meredith Mowen: I should point out, we do have a client we call Turbine, but it is a CRM (Customer Relationship Manager). So, everything that we're doing on a spreadsheet is documented in a searchable relationship database. So, she uses the Excel, but everything we do is codified within a CRM.

So, if we need to run a management report, it's all in the system and that includes charitable gifts and checks and transfers between accounts. It's all within a centralized database as well. But her secret sauce is in how she manages the workflow.

Ric Edelman: Which makes sense.

Meredith Mowen: Yes.

Ric Edelman: So you've talked a lot about the teams and the functionality and the processing and ideal clients, et cetera. But, but talk about your own goals. You said you've got a 10-year, 5-year, 3-year, one year, one day.

Jason Noble: My goal is to double every three years, double revenue, top-line revenue.

Ric Edelman: And so doubling revenue can come in one of two ways and come from more clients or more assets per or combination of. Do you care?

Jason Noble: We're not that particular. We already have a high share of wallet because we're able to manage 401(k)s and 403(b)s.

Ric Edelman: So, chances are you need more clients then.

Jason Noble: So, when you have that high share of wallet, you could always be surprised. And that clear picture analysis that we do, they start to raise their hand going, okay, well, you're missing this. Well, you didn't tell me. So, we're able to find and identify assets that way. And then it's through client acquisition. So, we grew about 76% last year and we were elated. I'm trying to be humble, because this is humbling already just being on stage. Okay. But a 76% growth rate when our growth rate is around 33.5%

We had a phenomenal 2023 and it was by focusing on our niche market. If we want to get into a new niche market, we identify six people within that niche. And what can we do to find our first six?

Ric Edelman: Why six?

Jason Noble:  Through studies of momentum and herd mentality. If you have six optometrists, for instance, in your local area, you're going to be known as the person who helps optometrists. And that's how we will start in the niche.

Ric Edelman: So, you won't talk to the first until you've identified the other five.

Jason Noble: What we're focused on is let's get six. So, we may do a campaign to go after 25 in that space. And with our closing ratios, know that we should probably get to about six.

But our goal is to get to our first six as fast as possible in that niche.

Ric Edelman: Will you then tell them all that of the others who are clients?

Jason Noble: We will do an event for just those six and say, “Hey, bring people that you like.”

Ric Edelman: You’ll take the six to dinner and have them invite friends.

Jason Noble: And then I go, if you don't like them, here's a business card of another advisor down the street. And they know, I'm looking at growing my business, but I want to work with people that do exactly what they do.

Ric Edelman: Do you have similar growth goals, Meredith?

Meredith Mowen: We would like to grow at a rate faster than our clients are spending.

Ric Edelman: Got it. So you have net growth in the practice.

Meredith Mowen: Correct.

 

Ric Edelman: So, how are you doing that?

Meredith Mowen: So our approach is slightly different. We have two primary channels for developing new business. One is the good old fashioned way of one on one conversations, reaching out to people. We have some dedicated new business officers and their goal is to meet with centers of influence and meet with wealthy individuals within the community and start to develop a network for referrals.

The other is we are on the Fidelity platform, and so that has been very successful for us, quite frankly, and because of how we're positioned on that platform, we are getting larger, more complex relationships. That is really where we add that value…where things are complex.

If you're not paying attention to your assets every day, things can get out of hand very easily. And so that's where we do really resonate with someone who has had the good fortune of being named as a trustee. And they realize that being a trustee is a great honor, but they're also completely out of their league.

They don't know what the requirements are. If they can put that on our firm to help them act as agent for the trustee, they can go on about doing what they really are passionate about or raising their families or travel or what they want to do. So, our approach really is one of make sure our current clients are very happy, and are sufficiently happy that they'll refer others to the business using that platform for a more of a mass exposure.

And then, as I said, also it's important for each of us in our various offices to be part of building that brand. And we do that through our community engagement. So to the extent that I sit on a couple of boards, you get to rub elbows with people that will say: “So where do you work?”  Oh, okay. I've never heard of you guys. And then you give them the elevator speech. And then hopefully through your contributions and participation on these boards, if someone in their network is looking for an advisor says, I'm really not happy in my current situation, we may be top of mind because of the experience that they've had with us individually.

Ric Edelman: So is there anything fun, unique, different, noteworthy in terms of client events or client swag or just something that you think is worth sharing with everybody that you do that's pretty cool?

Meredith Mowen: So, we probably have to reorder them. But at one point there was this huge baby boom. And we ordered 1919 onesies that we could send to grandparents and parents when they had a baby, everybody gets the Yeti cups and the bags. But we thought, what better way to really think about why we do what we do is to send them a 1919 “onesie.”

Ric Edelman: That is a clever idea.  Jason, anything?

Jason Noble: For anniversaries over 30 years, we do send out a gift. It’s like a New York Times bound book, and it shows the front page of every single year on their anniversary.

We don't put any branding on it, we just send it out unexpectedly, and it sits on their table, and we've gotten phone calls from that, from their friends that came over and saw this wonderful idea, and they're like, who got this for you? Oh, the financial advisor.

For babies, we buy this book with their grandchild's name. And it makes a story out of the first letter of their first name. We went away from branded. And I'm not being, by any means, critical of any branding. I think it's a good way to do that. I'll do branding for an event at my office. But if I'm given a gift, it won't have my name or my entity on that gift whatsoever.

I let them speak about what they feel they got out of that special thing that they received from us.

Ric Edelman: If it has your brand on it, it's not a gift. That is a clever idea.  Jason, anything?

Jason Noble: That's right. It's called a reward.

Ric Edelman: Think about the sweater that your aunt gave you. Her name's not on that sweater. You might want it to be, but her name's not on that sweater.

And yet every time you wear it, you'll remember who it was who gave it to you. So you're right.

Meredith Mowen: One other thing we do is every year at year end, we do a gift, a charitable gift on behalf of the firm and our clients. And we have a group that decides where that gift should go. And so historically, we've done Doctors Without Borders, we've done Feeding America. I mean, just any number, looking at the landscape and where the need is.

Ric Edelman: A single charity is selected each year. Have you ever had any client pushback about who you chose? In today's environment, people are just so quick to take exception.

Meredith Mowen: You have to be so careful. We do try to be very thorough and thoughtful about that.

Ric Edelman: As opposed to, for example, giving them a list of charities like here are five. You tell us who you want to earmark.

Meredith Mowen: That invites a level of complexity that is difficult. So again, we do try to be very thoughtful. We do the GuideStar review and make sure that they are very reputable and we change it every year.

Ric Edelman: Josh said earlier today that his biggest challenge in running the firm was compliance. Talk about compliance operations, bureaucracy, just how do you get stuff done,

Jason Noble:  You treat everyone with the respect that they deserve from the receptionist to the CEO.

Ric Edelman: Well, then how do you treat compliance?  (laughter)

Jason Noble: I will say I had a really good chief compliance officer at one of my firms, and he would always say, “my job's to make sure you stay out of an orange jumpsuit” and I don't look good in orange, so I've always appreciated that from the compliance standpoint.

What I do is, I don't like emails. The email comes to me and I respond, and they come back with another email. I'm picking up the phone, we're going to hash this out over the phone, and then I'll send the email to finalize it. But when I call them, I'm going to say, just so I understand, what exactly are you looking for at this point? We have 180 financial advisors, and the chief compliance officer told me that my marketing efforts represented 28% of the firm's overall marketing efforts.

So, as you can imagine, me and compliance have a complicated relationship with all the approvals that need to be done. from speaking engagements to whatever. Even this conversation, they were like, what are you gonna talk about? And I was like, I don't know. Like, Ric's gonna throw me questions that I'm not prepared for.

And if anyone's recording this, just send it to my compliance team. Thank you in advance. But what I'm getting at is, you pick up the phone and you get to know them as people. I did send a gift to our compliance officer, and I registered it as a gift. She liked that. She was showing me these pictures on Facebook of cooking all the time, and baking, and I was like, okay, so I got her a thing that she could make whatever, and my wife helped me pick it out, and that's why I knew it was good. She loved it, and she took pictures of it.

Now when there's a compliance issue, she's not sending it to the Charleston office, she's sending it to me, and she knows me. So, it's about building those relationships.

Ric Edelman: So, you treat the compliance team like you treat your clients.

Jason Noble: They deserve respect. They are, at the end of the day, doing their job. We may not agree with the outcome of what they're asking us to do. And when that happens, go to the CEO. Everybody has a boss. And if it's a no, just know it's a “not yet.” See, I picked up notes from earlier.  

Ric Edelman: Meredith, what's your secret to breaking through the bureaucracy?

Meredith Mowen: I guess in some regards I am the bureaucracy. I work on the executive committee. But taking a step back to compliance, I think again it's communication and relationships.

Our firm is much smaller than yours in terms of the number of people. So, we've always had direct access to compliance. And they'll try to come up with ways to formalize workflows. We might push back a little bit because there's a big difference between those who are making the rules and those who have to then operate under them, but again, it's very much a give and take.

As far as the bureaucracy, and I'm not saying this just because Harry's over there sitting in the room, but we are a very flat organization and we have an open door policy and I don't think that there's anyone who believes that they have all the answers. And so, we do like to hear other people's ideas.

How can we make something better? How can we improve on something that we're doing? And then truly take that to heart. We try to make sure that everyone feels as though their voice matters and that they're part of the success of the organization. And so that's how we keep bureaucracy in check…by not really having a lofty bureaucracy.

Ric Edelman: This has been a really fascinating conversation. Give our thanks to Meredith and Jason.

And if you missed our two webinars that we did earlier this week, this is your opportunity to watch the replays. The first one was on the new bitcoin and Ethereum ETFs, which one should you use or both? in which combination? Great information in a fast-paced event.

And the second one was on the coming interest rate cuts. What's going to happen to your bond portfolio? How should you handle your cash with a decline in interest rates? Both of these webinars available to you in replay. The links to both are in the show notes.

I'm glad you're with me here on The Truth About Your Future.

 If you like what you're hearing, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, ,

Spotify, YouTube, and remember leave a review on Apple podcasts. I read them all. Never miss an episode of the truth about your future. Follow and subscribe on your favorite podcast app. [00:48:00]

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Links from today’s show: https://www.amazon.com/Tractiob%20grip%20book

Gina Wickman's book -- Traction: Get a Grip on Your Business: https://www.amazon.com/Traction-Get-Grip-Your-Business/dp/1936661837

9/20 Webinar - Q4 Crypto Outlook: What You Need to Know Now: https://dacfp.com/events/q4-crypto-outlook-what-you-need-to-know-now

9/25 Webinar - Unlocking Alpha in Crypto-Equities and Beyond: https://dacfp.com/events/unlocking-alpha-in-crypto-equities-and-beyond

9/10 Webinar Replay – Bitcoin, Ethereum, or Both? How to Make an Informed Crypto Allocation Decision: https://dacfp.com/events/bitcoin-ethereum-or-both-how-to-make-an-informed-crypto-allocation-decision/

9/11 Webinar Replay – Rates are Poised to Drop, Now What?: https://www.thetayf.com/pages/rates-poised-to-drop-now-what

Wealth Management Convergence 2024: https://www.thetayf.com/pages/convergence

Become Certified in Blockchain and Digital Assets: https://dacfp.com/certification/ 

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