Less than 1% of financial advisors are both CFA Charterholders and Certified Financial Planners. Keith Beverly, CFP®, CFA, and managing partner and CIO of Grid 202 Partners, is part of that 1%. On this week’s episode of YAFPNW, Hannah and Keith discuss the evolution of Keiths’ firm (as well as the profession), how his firm serves clients, and what he’s doing to grow the number of diverse advisors in the future.

Psychology and passion for investment

What inspired Keith to go for both CFA and CFP credentials? To start, he knew he wanted to be in wealth management since he was in college. And in high school, he wanted to be a psychologist before he decided to enter business school. 

“The idea of someone sitting on my couch and telling me all their problems and me helping them solve them…it always appealed to me,” said Keith. He saw financial planning as a profession that could marry both of his interests and still allow him to help people.

After getting his MBA and working in various investment management or financial planning roles, Keith set up his own RIA…and was the only person in his class to do that. “Everyone was smarter than me, obviously,” Keith quipped. “It was definitely tough.”

However, he doesn’t regret taking this route right out of high school. Not only did he gain an appreciation for being an entrepreneur, Keith also gained valuable experience serving his clients. Valuable experience he may not have had access to if he had joined a larger company out of school.

A team approach to clients

Since Keith started his firm, Grid 202, the clients he serves have changed over time. What began as a fee-only firm catered to “do-it-yourselfers” has grown into lifelong clients across professions like healthcare professionals, attorneys, corporate executives, and professional athletes. Plus, over 40% of Grid 202’s clients identify as a person of color. 

“Looking at the industry and where we were, especially when I started the firm, I didn’t see how I could serve that demographic in a meaningful way when I was coming out of business school,” said Keith. 

But now, Grid 202 has grown into a team of advisors that has about 50 years of experience in the industry collectively. That experience is put to use when building relationships with new clients by using a team approach: at least two advisors work with every new client, based on the client’s goals or background.

Supporting new financial planners

Outside of Grid 202, Keith has also spearheaded initiatives around new financial planners and growing the number of diverse advisors in the profession. His outreach arm, moXY Financial, works with other advisors to mentor and support newbies who may feel lonely and isolated when trying to study for exams or start their career. As one of fewer than ten African-American advisors in the country, Keith knew there was a need for such a support system. Instead of just talking about the problem, Keith put his passion and ideas into action, which is more his style anyway.

“I’m not a big talker, “ Keith said. “I like to see myself as a more of a doer than a talker.”

Despite how he describes himself, Keith had even more interesting and inspiring stories to share in this week’s episode of YAFPNW. Be sure to tune in and listen to the full episode!

 

 

 

What You’ll Learn:

  • How Keith realized he wanted to be a financial planner
  • Keith’s educational journey
  • How his clients have changed over time
  • The experience of starting your own firm
  • Keith’s team approach to serving clients
  • The future of Keith’s firm
  • Thoughts on minorities in the profession
  • What moXY Financial does
  • Keith’s advice for problem solvers and new planners
  • How the profession will change in the next 20 years

 

Show Notes:

In this episode of YAFPNW, we talk to Keith Beverly, CFP®, CFA:

Stay up to date with Keith on LinkedIn and on Twitter at @KeithBevCFA.

 

Show Transcript

Episode Transcript


Hannah: Well, thanks for joining us today, Keith.

Keith: It’s a pleasure to be here, Hannah.

Hannah: So I am so excited to have you on the podcast today. And it’s kind of crazy to me that I haven’t had you on yet. But I’m glad you’re here now. But you are a CFA, you’re CFP, you have your MBA, you have a writing practice right now. But I’m curious. Did you know… Especially in terms of your designation, did you know that that’s what you wanted to do from the beginning of your career?

Keith: I knew from the time I was a junior or senior in college. So I knew I wanted to be in wealth management. I knew that I want to do financial planning and investment management, and I just saw that those were the two credentials that were most respected and most admired in the field and I just said I’m going to get them. And I didn’t really think much… I didn’t read much else into it other than that, right. And I just said I’m going to be doing financial planning if I’m going to manage assets for my clients. I need to have those two credentials. I didn’t realize that the combination would be fairly rare in the industry 10 plus years later.

Hannah: Did your university have a strong financial planning program? Is that kind of how you found out about financial planning?

Keith: Not at all. So I came out of undergrad in 2002. So coming out of undergrad, most of my peers went the Wall Street route, so went to the big name firms and did sales and trading or more institutional management and there weren’t many of us that were interested in personal financial planning and working on a private client side. But for me, back when I was in high school, actually, before I decided to go to business school I wanted to be a psychologist, right. And the idea of someone sitting on my couch and telling me all their problems and me helping them solve them in the course of an hour and feeling good about myself and them walking away happy and content, it always appealed to me. But I always had this passion for the financial markets. So I just saw financial planning as a way that I could marry both of those interests on the psychology side, and then this passion for investment.

Keith: So when I came out, I came out 2002, and sat for and passed the CFP exam a year later. And from my knowledge, knowing that kind of came out of the programs that I went through, I was thinking about financial planning at the time. So we didn’t have tens of financial planning programs like we do now across the country. It just wasn’t on the radar for those of us who were finance majors who were interested in going into the industry.

Hannah: Isn’t it crazy how much the profession has changed over just not that long of a time period?

Keith: Tremendously, tremendously. Yeah.

Hannah: So you graduate and I know that you ended up going and getting your MBA as well. Did you go straight into getting your MBA program or what kind of triggered you to do that?

Keith: So I started my MBA program in 2009. So I worked for about six or seven years in varying roles. Well, always investment management or financial planning related. So I worked at a bank coming on, a rotational program, an independent financial planning firm in Pittsburgh, then a larger independent fee-only firm in Columbia, Maryland, for about two and a half years and then did equity research at The Motley Fool before going back to school. So I had 6 or 7 years of experience. For us, there wasn’t us by the time I decided to go to business school. So part of the thinking was my wife, who’s a native of Oklahoma wasn’t a big fan of the city life, so being in DC metropolitan area. So the thought process was for us move somewhere that’s a little slower, more conducive to her appetite for just kind of the standards of family living.

Keith: In North Carolina, Georgia were the places that were high in all these and we settled on North Carolina because they also have a very strong pharmaceutical healthcare industry here. So my wife, who’s the brains of the family has a PhD in Molecular Medicine. So we figured with the Research Triangle Park here, she’d always be able to find something. Which has been the case. So it’s worked out well for us.

Hannah: Your firm right now is in the DC area. So did you move back to DC then?

Keith: We’re headquartered in DC, and I spend a lot of time in DC. But we live in North Carolina. So we go back and forth. I go back and forth between DC and North Carolina. As you know, so many firms these days work remotely and a lot of our clients, I’d say we spend a lot of time working remotely universally with maybe half our clients and for us the location is important, having a presence in DC is important, but we’re fairly agnostic about where we can actually serve our clients.

Hannah: You’re getting the best of both worlds.

Keith: Yeah, yeah, so I mean I was born and raised in DC. So as you know, just being in this industry, relationships are everything. So for our demographic, which is largely emerging professionals, so high income Gen X and Gen Y type of households. There are a lot of those folks in DC that are in my national network, and North Carolina has been a good place for us to grow as of late. But definitely those early years when you’re really trying to get in front of your core demographic and grow your relationships, grow your business, having those close personal relationships makes a big difference.

Hannah: Once you graduated from your MBA program, is that when you started building your own practice?

Keith: Yeah, yes, I set up my own IRA, hung up my own shingle right out of business school. I was the only person in my class to do that. And everyone was smarter than me, obviously. It was definitely tough. And when you have to come home to your wife and say, “We’re not going to take the six figure opportunity we have on the table, I’m going to set out on my own and do something.” You start second guessing yourself a few months in when clients aren’t coming on board faster or as quck as you would have liked them to. But I wouldn’t change it. I think it definitely gave me an appreciation for just how difficult it is to be an entrepreneur. But also over these past several years, I think we’ve developed some great insights as to how we can serve the clients who we do serve in, and if I was at a larger company working with ultra high net worth clients exclusively, which is what I would have done if I would go the private way coming out of business school with some of the firms that were recruiting at my school, you wouldn’t develop that same technical expertise that you just get just serving the people who are coming on board as clients, right?

Keith: So if you’re working in ultra high net worth space, you’re not going to build up your acumen when it comes to student loans, right, as an example. It’s been good, been good. So we’ve now managed to grow the firm and grow relationships and have a strong presence in the markets that we are targeting right now.

Hannah: Number one, who are the clients that you serve? And then a second question is how has that changed over time?

Keith: That’s a good question. So when I first started out, so we were fee-only at the time and I was doing a lot of individual plans for people who were more do-it-yourselfers. And I say over the years that’s evolved into working more so with people that are going to be part of the firm for the long term, which is… Historically when I decided to get into the industry, I always like the idea of having these lifelong clients where I’m going to be your advisor for the next 30 years and I’m going to be with you as have your first kid and as they go off to college and going to graduations and weddings. Like that was how I envisioned my life and why this was a great, great field to be in. So the do-it-yourselfers and one time planning engagements, although it did help with cashflow in the early years, wasn’t really the type of practice I wanted to have long-term.

Keith: So over the years, the practice has evolved to really trying to present and offer a family office type approach to folks that don’t have the assets or the wealth to actually have their own family office. So concierge service to ultra high income doctors, dentists, lawyers, MBAs, the value vast majority of our clients are in one of those buckets and over 40% of our clients identifies people of color. So that was something else where looking at the industry and where we were, especially when I started the firm, I didn’t see a way where I could serve that demographic in a meaningful way when I was coming out of business school.

Hannah: And so are you charging like a subscription fee? Like how are you charging your clients?

Keith: So assets under management and retainers. So it’s a mix. So it really depends on the relationship. Typically, what will you find is it’s somewhere in between 1 to 2 percent of gross income or assets, just given… We don’t charge based off of gross income. But just given the profile of what makes sense for the level of service that we’re providing and the different offerings and the people that were spending time with and how we’re serving them, that’s usually where most of our relationships fall.

Hannah: I know you said that you started doing is like one off plans for people, but have you always kind of had that AUM and retainer model? I mean, since you’ve had your firm?

Keith: No, I’ve always charged based of AUM but retainer-fixed fee has been more these past couple of years. So just looking at how the industry has evolved and now you have people that require a lot of time and you have people that have high incomes and coming up with a price point that makes sense for all parties really, over the past couple years has been an area that we’ve decided to make that available for our clients.

Hannah: So when I go to your website and I look at your “about” you have like a full team here, which is really cool to see.

Keith: Mm-hmm (affirmative).

Hannah: I’m curious, so you graduated from business school, was that 2009?

Keith: Yep, came out 2011. Started 2009, graduated 2011.

Hannah: So I’m curious about your firm trajectory because we had a lot of people on here who talked about how they went on their own to start their own firm and they talk about how kind of that difficulty of the first couple years. So I’m kind of curious how is the growth of your firm looking back? What does that look like for you?

Keith: That is a great question. I know there are a lot of these charts you see and illustrations, you see of the path of an entrepreneur and there’s a bunch of zigzag lines with a general upward trajectory. I feel like that’s kind of how my path has been. So in the early… And it’s also been because of different iterations of model and who I’m going to serve and how deeply I wanted to focus on a particular niche. And it took me a few years to figure out. I’d say in the very beginning, I was set on the idea of serving everyone. And regardless of income, regardless of assets, I wanted you to have access to a highly credentialed qualified financial advisor.

Keith: And that’s what I was focused on those first couple years. The problem becomes when you’re looking to build a business is how does it scale and is it sustainable? And also the types of relationships you want to have and the dynamic you want there to be between you and your clients. So in those early years, doing a plan and charging several thousand dollars for it, it makes sense so you can keep the lights on and start to grow and generate cash flow but it becomes unsustainable when you look at doing… Unless you’re doing tremendous amount of volume or unless you’re going to start raising your fees or your hourly rate. So for me, where we are now is a great mix because I believe truly that our clients are getting great value for what they’re paying us. But they’re also in it for the long-term.

Keith: So over time we’re going to start to get some of those benefits that you’ll see from… That you see at the larger companies that have achieved massive scale. So that’s where we are now and it makes sense for the demographics we’re serving.

Hannah: I talked to a lot of new planners, whether they own their firm or not. But there’s this definite desire, like how do we bring financial planning to a person at every household or to different demographics who might not just be the high end earners where everybody should have access to financial planner. So I’m curious, in your journey… I don’t know if the question is how did you reconcile that? And kind of what are your thoughts on that now?

Keith: Well, I reconciled it now with the way the firm is structured, right, so we have two senior advisors, so myself and our president who came on board last week, Camilla McDonough, collectively we have about 40 years of experience in the industry. So each of us about 20 years. And then we have two associate advisors who have four or five years of experience in the industry. So the way we approach the new relationships or new clients, existing clients, is we definitely adhere to a team approach. So for each new client so the firm is going to be at least two advisors that are working with that client.

Keith: And depending on where they are in their stage of life, it might make sense for me or Camilla to be the primary advisor in the relationship or it might make sense for James or Tiffany to be the primary advisor on relationship. So the way I’ve kind of thought about this over the years is when you do want to serve everyone but you recognize that there are certain business limitations to doing so, then you still do have a business to run, you still want to provide great value and service to everyone who comes through your doors. But it might not make sense for me to work with a law school student who just graduated from law school and is really focused on debt management and the basics of starting out as a high income earner and getting on the right path financially.

Keith: That might be a client that’s more suitable for James or Tiffany but for those that are on the… Who just became partner and are thinking through what is partnership going to look like, what their buy-in is going to look like? How they should approach this added income and more complicated tax situation? Like that would be more of a client that’d be appropriate for myself or for Camilla. But having within the firm resources and an advisor who’s going to meet that particular client know where they are and provide great value is where we are now. And that’s not… Back almost 7 years ago when I first started out, I was trying to serve all of those people and it just becomes unwieldy after time.

Hannah: You mentioned that you just brought on a new president of your firm.

Keith: Yes.

Hannah: Why did you do that? I mean, I don’t hear people bringing in somebody like that usually?

Keith: Well, if you look at industries outside of just a financial planning firm, it’s pretty common. Right? So you have a firm, you have a board of directors, a lot of times you have a passionate founder, that’s very good at one particular thing, but then ultimately, you bring in a CEO who’s going to manage what the initial founder has developed over the years. So I’m a MBA, Camilla is a MBA, we have I’d say a more broad understanding of business outside of just our field and for me and where I see the firm going and opportunities I see there ahead of us, she just made a ton of sense and then is really the ideal fit to lead the firm and to take us where I think we should be going the next couple of years.

Hannah: So what’s striking to me about your answer is how so many people are saying that I’m the right one to take the firm where it needs to go. And you’re bringing somebody else in to help guide that. And I think that’s a really interesting and really powerful kind of viewpoint.

Keith: One of my strengths and weaknesses is that I’m very self-aware. So I know my limitations. I know what I’m good at and where my strengths are, and I think we complement each other in a great way.

Hannah: Oh, that’s really neat. So where do you see your firm going from here?

Keith: So we’re in 2020, growing aggressively, bringing in other advisors who are predominately multi-credentialed advisors, that’s something that we pride ourselves on is having advisors that have at least two credentials or grad school or something. So a lot of folks we work with are dorks. So we pride ourselves in also being dorks. But bringing more advisors like those advisors who are comfortable working with households of color, who are thinking about how they can holistically serve clients and deliver great value. Also with more of a SRI ESG bit to them. And just doing a great job for our clients. Just doing a great job for our clients and building on some of the institute relationships that we developed and some of the institutional clients who we’re serving right now.

Hannah: You’ve done a number of initiatives around new financial planners. Is there a particular reason why you’re so passionate about this demographic?

Keith: Yeah, so I mean when I started in the industry, I just came out and I said early 2000s, and for the most part, the industry hasn’t budged probably when it comes to advisors of color. And even whenever I look at the firm now I see the past two to three years I’ve just started to think bigger about my role and what I can and should be doing in industry. And I’ve just come to the conclusion I have to be more involved, I have to be more visible, I have to be in a position where people can see me because if I was coming out again, coming out of business school, if there was a firm like my firm now that existed when I was coming out of business school, I would have just joined that firm.

Keith: I’m saying when I was coming out of undergrad, but for the most part, those firms don’t exist for a myriad of reasons. And we just have to be resolute in changing that. So I’m trying to not just talk about change, just talk about diversity and grooming and mentoring, sponsoring younger advisors, but actually putting some actions behind my words. So I’m not a big talker. I like to see myself as a more of a doer than a talker.

Hannah: You mentioned that we haven’t seen either in… In financial planning, we haven’t really seen… Like you said, it hasn’t budged. The numbers of minorities in financial planning. I’m just curious what your thoughts are and why is that?

Keith: There’s a variety of reasons. There’s a variety of reasons. So let’s take Camilla, for example. So her as a prime example. So over 15 years in industry, predominant working with ultra high net worth clients. She was managing about $3 billion in her last role as an advisor, and ultra high net worth clients from 20 million to I think 400 million or so between individual households and institutions. And over her years working at the firm she was with and having 100 clients, never had one client of color, one black client, right. And I think there are a lot of advisors where there’s this trade off between financial stability and working with households of color. And then there’s this also… There’s this misconception that advisors of color can’t work with households outside of our community as well. Right.

Keith: So I have white clients and I enjoy with my white clients. I like to think my white clients enjoy working with me because they pay us well to serve them. And I know other advisors who predominantly work with white clients because they’re in socio-economic demographics where if your minimum is $10 million in investable assets, the pool from which to choose from amongst black and brown households is going to be extremely slim. So 99% of their clients are usually white households and assuming their clients love them because they’re paying them even more than our clients are paying us. So yeah, I think that’s part of it, just the some of the misconceptions around who advisors can and should serve. Then you also have just institutional barriers and systemic racism that you have to deal with as well.

Keith: So one quick anecdote, I was working with an advisor who’s based in Silver Spring and I’ve actually worked with him for about a year or so, at a broker-dealer. And he was telling me when he first came into the industry, there was a two-year program that he was joining.

Keith: And the hiring manager for this particular program told him that he had one year to prove that he deserved to be in the program where the other people who were part of the program had two years. So he literally had to be twice as good to stick around and he did and he managed to build a successful practice over the 20, 30 years has been at that firm. But this wasn’t in the ’60s or ’70s. Like this was in the ’90s. Right. So this was fairly recently. But you see those types of stories, you see those types of anecdotes. I think that at some of the larger firms, you see that there isn’t a support system there and the firms are in some cases, they’re genuine and how they’re addressing the issue, I’m thinking others they’re more paying lip service to it, but it’s a pretty complex problem. It’s a pretty complex problem.

Hannah: Even on your bio, you say that you’re one of fewer than 10 African-American advisors in the entire United States who has both the CFP and CFA. Like it just seems crazy to me.

Keith: Yeah, I mean, the other advisors are more in the institutional side. So we have a LinkedIn group, follow us. When we go in and I see someone has joined our ranks, I’ll just add them to the group and everybody will go in to say hi. But yeah, I think the path for a lot of the folks that have bought the CFA and CFP, at least in my experience is more get the CFA first. And that might be somebody who’s more in the institutional side, and then maybe they’re doing some work with all types of clients and they say, “Well, let me try out the CFP because I think this background could be helpful as well.” But a lot of people who were in that particular group are moving on the institutional side.

Hannah: So you moXY Financial, can you tell me a little bit about what that is?

Keith: Yes, moXY is effectively my outreach arm, so what I’m looking to do help to grow the number of diverse advisors. So we have an initiative, I called it 20 by 2020 initiative. I started it back in 2016, I believe where one day I was just sitting around and said, “Look, there aren’t enough black CFPs, what am I going to do about it?” I said, “All right, I’m going to help 20 black and browns get to CFP by the end of 2020.” I like to call it 20 by 2020 initiative. And that was that. So I had a vision and then said I’m going to somehow again not just talk about it but actually be active in doing something about it. And initially it was a few people who I knew who were in my circle who I’ve been mentoring fairly informally but I was helping them with the exam and going out and finding that, “Okay, I can help you. We can go to Starbucks every Sunday and I can help you talk through. We will think through strategies for how to pass the exam.” And then be an accountability partner.

Keith: But you also need to pay for the test. You pay for the study materials. Well, maybe I can get some my friends to help out with that. So we started pretty small with one or two people initially and now we have a cohort model where we have Saturday sessions every other Saturday for prospective CFP candidates. And I think more than anything, we’re giving them a support system. And using a positive peer support environment for them to be motivated to stick with the curriculum and to work hard and do questions and just be dedicated to passing the exam. Because a lot of times it can be really isolating and lonesome especially if you’re someone of color where you might be the only black or Latin X advisor at your firm and you don’t know how supportive your manager is going to be or whoever your supervisor is to you wanting to go and pass the exam.

Keith: So giving them that support system, given them that camaraderie, and built in help has been the focus of these past years so.

Hannah: That’s so cool. So number one, I just think it’s amazing what you’re doing. Number two, and I said this earlier, I just love how you’re seeing a problem. And then you’re just starting to take action to help solve it, even though… I mean, you didn’t know where you’re going to get the 20 people, you just kind of started.

Keith: Yeah, it’s been helpful that… And I guess the age we live in, when you go out publicly announced that you’re going to do something, if there are people that share that passion, share that commitment to that same course, it’s pretty easy to rally the troops now too. So The 20 by 2020 Initiative is a prime example. So Gary Coleman has been instrumental in really helping to take that initiative to the next level. And he’s taught the CFP exam for 15 plus years and has literally taught over 5000 students over the course of him teaching over the years. And that initiative wouldn’t be where it is now, if it wasn’t for him. And I think that’s part of my philosophy or approach to problems now is identify people who are just as passionate about the course as I am and not necessarily try to do everything on my own.

Keith: So that’s something I’ve learned over the years is that sometimes you just have to be okay with accepting help and letting people know that you need help and then finding out how you’re best going to integrate different pieces.

Hannah: It’s really great advice. Yeah, that was one of my questions for you is, what’s your advice to somebody who sees a problem and is just trying to figure out what to do?

Keith: First piece of advice would be do research and figure out if anyone else is working on that problem. That’s my honest piece of advice. I think far too often, people say, “Oh, I want to help grow the number of women advisors in the industry or in tech.” They go, “Okay, I’m going to start a nonprofit, and that’s what I’m going to do.” Okay, well, that’s noble, I mean that’s commendable. But are there people who have already thought about this problem and been committed to in some shape or form that are also genuine and earnest about solving it well? Maybe you should just get involved with them.

Keith: And instead of starting your own firm or starting your own organization. So I think for me, I didn’t see a viable way where I could work with the clients who I work with in the way in which I’m doing, right. So having this very strong commitment to professional standards and credentials and being able to work with people that are millionaires and those who are nowhere near being millionaires, There weren’t enough firms that were… And then the firms who are going to pay me market salary, don’t have that type of flexibility in their business model.

Keith: So it almost became a necessity where if you want to work with a physician couple making half a million dollars, but only has no $20000 in assets, but they’re saving $150000 a year, and over time, they’re going to be million dollar clients, to me in my 30s, that didn’t seem making an investment in that household now, and growing with them over time is a good business decision for a firm that’s a multi-billion dollar firm, that has a pent-up demand for households with that have several million dollars of assets, it might not make such business sense. So my first piece of advice… I’m getting back to your question, my first piece of advice is look and see if there’s anyone out there that is already doing what you’re doing and maybe partner or collaborate with them.

Keith: And then outside of that, if you don’t see someone or you think you can do it better, we all think we can build a better mousetrap. You think you can do it better, then start and be diligent and work hard, but don’t be afraid to reach out and find additional resources, additional help, as soon as it makes sense to do so.

Hannah: So you’ve been in financial planning for 20 years now, and you’ve kind of touched on this already, how you’ve seen the profession change. And then I’m also curious, what do you see in the next 20 years?

Keith: My daughter is working on a… She has an assignment at school that we were working on yesterday. And it’s a financial literacy packet that she was given that she has to complete. And it was back in 2000. I’m looking at the date because she was asking me about certain questions about commissions and stock broker, I’m like, “What are you doing? What is with this?” I looked at the date on it, it was 2007. And they were talking about commissions on different products and whatnot. So I mean, the initiative has definitely evolved a lot over the past 20 years, I think from being less of a transaction-oriented profession to being more of a service and advice-oriented profession, which I think is good and that’s where we should be headed.

Keith: Over the next 20 years, I think… And people have talked about this, but I do think that what you’ll see is more services offered at firms and firms probably losing some control over pricing and having to be more competitive on pricing but offering more services. So I mean for us… And that’s something that even for the demographics we serve, we’re not working with… Even our primary client isn’t a whole giant network, we are working with folks that can appreciate that they can go to one firm and they can have their investments managed, they can have their taxes coordinated with their investments and they can get advice around estate planning and do it all with one company, with one firm, as opposed to working with multiple entities to get all that done. So I think making it easier on the client by providing more services and having to be competitive on pricing is what we’ll see moving forward.

Keith: And then obviously, incorporating technology into every aspect of what you’re doing and being as efficient as you possibly can.

Hannah: With that model, are you seeing client turnover or is it really they come in and they stay with you?

Keith: So to answer your question, yes. So I think more so than a traditional firm, where under the traditional AUM model or type of firm, so there has been some attrition, but what I’ve noticed is that the attrition tends to occur when there’s a life event or there’s a significant change to their financial circumstances, right. So I’ve had clients that have left the firm after they bought a house that I probably wasn’t a fan of them buying in the first place. And they buy a house, and things are tight, and instead of them being in the position where they were previously, where they were maxing out retirement plans and saving their accounts with us, now that money isn’t there and things are tight. And it’s hard for them to justify the fee with where they are financially. So I would expect that that’s probably a common thread for clients to go for advisors who are working with clients under a retainer model, especially for demographics that are… Where there are going to be material changes and life events that are going to have serious financial implications.

Keith: So for us, there has been more turnover than we would have anticipated but there hasn’t been much. I’d say that in a given year maybe 5 to 10 percent attrition, where I’d say most larger firms is probably 95% I think is what I see when I talk to other firms, other comparable firms.

Hannah: Yeah, it’s interesting. And that’s what I’m hearing more and more of people who were having to write a check every month and they-

Keith: Yeah, yeah. Yeah.

Hannah: Yeah, so it’s just an interesting… The different characteristics of different models.

Keith: Yeah. And for us, I mean, the way we frame our value proposition and the people who are working with us over time, our retainer clients will transition to AUM pricing. So on the front end if you’re working with clients who are doing a good job of growing their wealth and really, on the fast track to generate wealth aggressively over the next 5, 10 years, the value’s there, so that you’re probably underpricing your services in those early years and then getting to a state, or a level within four or five years where the numbers start to make more sense.

Hannah: So I’m kind of going off on a tangent here, but I’m so curious especially for new planners who are listening to this, how do you have the conversation with your client when they buy a house that you weren’t recommending for them? That you weren’t quite so happy with as you’ve said?

Keith: One, you want to make sure that you have a very strong… You want to have notes and a strong record of your view and your stance on that particular decision, right? So everything documented to the tee. But it’s difficult. It’s difficult, right, because psychologically, as planners you always have the conversation between the right thing to do financially and then reconciling the financial with the emotional and psychological. And for a lot of people, maybe you’ve never… Say that you never lived in a household that you owned. So maybe your entire life you’ve… Parents and whoever your guardians were were always staying in apartments. So you never… You potentially will be the first homeowner in your particular family. Right.

Keith: So you can tell someone, “Financially speaking, I don’t think you can afford this house.” But sometimes the financial decision is superseded by the emotional which is. “Well, I have the potential to be the first homeowner in my family, right?” But that’s where being an advisor is interesting and why in opinion you asked… A couple seconds ago you asked where I see the profession the next 20 years, I think, those types of conversations and that dialogue, that back and forth, is where you add value as an advisor and that’s something that can’t be automated away. And what can be automated ways some of the rebalancing and some of the technical aspects of our job, but those conversations and helping clients to contextualize a decision is really where we as advisors earn our paycheck.

Hannah: For the new planners entering this profession, what would be your advice to them?

Keith: Get great experience. So this is some advice that was given to me when I was internship on Wall Street. The manager who I had that summer said, “Focus on your experience early on in your career, and the money will welcome.” So that’d be my biggest word of advice, and to be frank is one of the things that worries me about the profession is that I think there are some advisors who want to skip a step and go out and start working as advisors and bring clients without the experience and the expertise, especially in the early years of your career. If you focus earnestly on building out your skill set and your knowledge base, the money and the accolades, all those things will come.

Hannah: Well. Thank you so much, Keith. I really appreciate you joining us today.

Keith: Thank you, Hannah. This has been great. I appreciate you having me on today.

Hide Transcript

Join FPA