In today’s conversation, David Bach is back for round 2!! David is one of America’s most trusted financial experts and bestselling financial authors of our time and previously appeared on Episode 21 for those of you that missed it. Today, we discuss the journey behind his new book The Latte Factor, which has already become an international bestseller. David shares his story of a dinner with Paulo Coehlo, author of The Alchemist and one of my favorites, that led to him finally writing this story after putting it off for over 10 years and why this story is so different from his previous 9 NYTimes Bestsellers.
We also get into why it’s so important for financial advisors to get in front of millennial clients right now, the power of buying your children shares of stock in their favorite companies, key factors that allow financial advisors to sell their firms for huge multiples, and why growth doesn’t have to mean less freedom. I think it will be clear after this conversation that David isn’t just some talking head who only sells books, but really knows our industry at a deep level.
Here are a just a handful of the things that you’ll learn:
- [04:23] We start by talking about why David wanted to use the story format to teach a lesson in his new book instead of simply giving traditional financial advice in a nonfiction book – and how he immediately saw this book’s impact in his own children.
- [08:30] David then shares the story of what happened at the end of a financial education class he taught that revealed the power of The Latte Factor to him for the first time – and why he’s been teaching it for years since.
- [18:19] Next, David digs into the specific financial issues facing the millennial generation. We talk about the massive student debt they carry that previous generations didn’t, the financial services companies that are actively courting millennials, and why every advisor who doesn’t plan to retire in the next ten years needs to be building relationships with their clients’ children and grandchildren if they want to continue managing their wealth.
- [26:12] David then tells the story of how his grandmother, on her deathbed, taught him to take risks – and how this moment changed the course of his life and career forever.
- [35:58] We then dig deep into how certain financial services firms have been able to sell for massive sums, strategies financial advisors are (and aren’t) using to grow their practices, and why powerful, proactive marketing strategies that are trainable, scalable, and saleable lead to great success.
- [46:29] This leads us to talk about why our industry has done such a terrible job of training people how to present information. We talk about why people have been saying for decades that seminars or other marketing strategies don’t work anymore – and what’s really going on when someone complains about this.
- [48:30] Next, we explore how to overcome the limiting beliefs holding financial advisors back to get results, the beauty of building a business on your terms, and why becoming a CEO doesn’t necessarily mean less freedom.
- [01:00:07] We end our conversation with David’s advice for young advisors – and the power of running an independent business of your own.
- [6:45] Why a trip to Geneva to have dinner with The Alchemist author Paulo Coehlo led to him finally writing The Latte Factor after putting it off for 10 years and facing resistance from his publisher.
- [13:45] How The Latte Factor is positioned to reach people of all ages – and why it makes such an effective graduation gift.
- [18:35] Why it’s so important for financial advisors to get in front of millennial clients right now, and what successful millennial-focused firms look like.
- [24:35] The reason David buys his kids stock in companies they’re interested in, even when these companies don’t succeed, to get them thinking like investors.
- [31:25] The surprising responses David has received from readers.
- [36:35] The key factors that allow financial advisors to sell for huge multiples, and how to cultivate an environment that positions advisors to succeed at very high levels.
- [51:45] The importance of constantly testing and refining your marketing funnels to maximize performance.
- [54:15] Why some advisors don’t need to market in order to continue running a thriving, successful business – and why growth doesn’t mean less freedom.
- [57:45] Why you sometimes need to stop working with clients – and the importance of doing this to preserve and maintain company culture.
SELECTED LINKS FROM THE EPISODE
- The Latte Factor: Why You Don’t Have to Be Rich to Live Rich
- Smart Women Finish Rich
- The Alchemist
- Clarity Money
REVIEWS OF THE WEEK
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Welcome to this episode of the Elite Advisor Blueprint Podcast with your host, Brad Johnson. Brad’s the VP of Advisor Development and Advisors Excel, the largest independent insurance brokerage company in the US. He’s also a regular contributor to Investment News, the Wall Street Journal, and other industry publications.
[00:00:23] Brad: Welcome to the Elite Advisor Blueprint, the podcast for world-class financial advisors. I’m Brad Johnson, VP of Advisor Development at Advisors Excel and it’s my goal to distill the best ideas and advice from top thought leaders and apply it to the world of independent financial advising.
In today’s conversation, David Bach is back for round 2. David is one of America’s most trusted financial experts and best-selling financial authors of our time. He previously appeared on Episode #21 for those of you that happen to miss it. Today, we discuss the journey behind his new book, The Latte Factor, which has already become an international best-seller. David shares a little-known story of a dinner with Paulo Coelho, author of The Alchemist, one of my all-time favorites, that actually led him finally writing this story after putting an offer over ten years, also why this story is so different from his previous nine New York Times best-sellers.
We cover that as well as a number of other topics including why it’s so important for financial advisors to get in front of millennial clients right now, the power of buying your children shares of stock in their favorite companies, key factors that allow financial advisors to sell their firms for huge multiples, and why growth doesn’t have to mean less freedom. I think it will be clear after this conversation that David isn’t just some talking head who only sells books but knows our industry at a very deep level. You’re going to pull a ton from this conversation.
Okay. Before we dive into the conversation as I just finished reading David’s book, I’m going to share how to get a free copy of The Latte Factor for you listeners out there who would like to give it a read. So, here’s what to do next if you’d like your free copy. Number one, all that I ask is that you leave an honest review out on iTunes for our show. You can visit the link BradleyJohnson.com/iTunes to make it easy or if you’re listening on a mobile app, just scroll down. Number two, once you left a review, just drop us an email via email@example.com with your iTunes username and a mailing address and we will drop you a copy in the mail as a thank you. That simple.
[00:02:21] Brad: Also, all the additional show notes, books mentioned, people discussed as well as a full transcript of the show can be found at BradleyJohnson.com/58. So, that’s it. As always, thanks for listening and without further delay, my conversation with David Bach.
[00:02:41] Brad: Welcome to the Elite Advisor Blueprint. I have special guest, David Bach, back here for round 2.
[00:02:46] David: It’s fun to be with you, but this time we’re like sitting next to each other.
[00:02:49] Brad: I know. Now, it’s the real deal. We’re actually in the same space.
[00:02:50] David: Now, we can give a real bro handshake.
[00:02:51] Brad: Yes.
[00:02:52] David: I’m sitting here in a conservative blue business look. This guy here looks like he just got off the boat from Italy.
[00:03:00] Brad: Well, this was actually just rocked for the first time at the Kentucky Derby. So, you got to get a little louder out there.
[00:03:06] David: It’s so good. Good to see you.
[00:03:09] Brad: Well, good to be here. Well, let’s dive in. Today, we’re going to be talking about the Latte Factor which is your just-released book and you’ve already sold a ton of copies. I was hopping on Amazon and it’s already at the top of the charts on there.
[00:03:22] David: It’s been out one week. Instant international and national bestseller. It is number 2 on the Wall Street Journal’s list today and all bestsellers, Publishers Weekly, USA Today, Inc. Canada so we’re super excited. What‘s happening with this book a little different than my previous books is that again this is really short and it’s a story, not a classic self-help nonfiction book. People are reading this book in like an hour and they’re having such an emotional response to it that they’re turning around buying like books for their friends immediately as gifts. So, this turned out to be a huge graduation gift already.
[00:03:59] Brad: I was going to ask. So, I literally just finished it this morning and we had a bunch of graduation gifts. I was like I wish I would’ve finished it last week because it would’ve been every single one of my graduation gifts.
[00:04:09] David: Still it can be a second graduation gift.
[00:04:10] Brad: But I’m going to circle back around.
[00:04:12] David: This will be an evergreen book. I think this will be an evergreen gift book, every graduation, but like people are buying it for Father’s Day because it’s a gift book and it’s designed to help really from millennials to baby boomers learn how to save and invest. I intentionally wrote it to reach young people and young people are reading it and my 15-year-old just read this book cover-to-cover on a plane flight and he turned to me and said like, he’s never read any of my other books like he’s 15 and my books had sat next to his bed for all these years with dad harassing him and then this book he reads to cover-to-cover on a plane flight and we’ll talk about some of the lessons in here but he really turns to me and says, “Dad, this chart back here starts at 19. I’m only 15. I can save $5 a day and if I do this, I’m going to be a multi-multimillionaire.” I go, “I know, Jack.” He’s like, “Well, then let’s do this like how do I start?” And so, that lesson at 15 is a complete game changer for him.
And his nine-year-old brother, James, who saw that he had read it, he turned around and has read this book and he goes to school and starts talking to his teacher and the third grade Patrick about why Patrick needs to get going on his investment plan and he goes in and shows Patrick the second chart in here and he comes home, he says, “You know, dad. I taught Patrick today why he needs to get started here.” And then he says, this is at breakfast, his mom’s outside the door hear it. He says, “Dad, I don’t have a latte factor because I don’t drink coffee.” I go, “I know.” He goes, “I have a V-buck factor.” Now, for those of you who don’t have young kids, you don’t know what a V-buck is, V-buck is digital currency inside video games like Minecraft. So, he’s nine and he’s already got the metaphor. He goes, “I spent so much money last year on these games.” He’s like, “I don’t even play those games anymore. I wish I had that money back. I would invest it the way Zoe Daniels learned how to invest.” But he’s nine so he’s got his whole future that can be changed as a result of those simple little lessons. I didn’t expect a nine-year-old could read this book. That got me excited.
[00:06:13] Brad: Well, to me, that’s the power of how you laid it out. When I first dove into it, I was expecting your other books and then I was like, “Oh, this is a story.” It’s a parable to basically teach a lesson and I’m going to give you a great compliment here because I know on the last time we had a conversation about Paulo Coelho and The Alchemist being one of your favorite books, to me, this is almost an Alchemist-type tale around money.
[00:06:36] David: That was my goal and my dream, and in 2012, I’ve been wanting to do this book for 10 years and for 10 years I was at Random House for forever. They didn’t want me to change. They didn’t want the story. They wanted me to stay in the nonfiction realm. And so, I’d stop writing books and I had a chance to go have dinner with Paulo Coelho so I told my wife, “I’m going to go to Geneva to have dinner.” She’s like, “You’re going to go to Geneva for dinner.” I go, “Paulo Coelho, like this is my writer idol. He wrote a book called The Alchemist and sold 100 million books around the world.” So, I go to dinner with Paulo. We closed this restaurant down. We then go to the bar. We closed this bar down and right before he was getting ready to leave, he turns to me and he says, “So, David, what is the book that your soul desires to write that you have not written?” and I proceeded to tell Paulo, “I wanted to write a book called The Latte Factor that can do for money what you did with The Alchemist that will translate all over the world, that will teach especially young people they’re richer than they think, they have more strength than they know, and their dreams deserve to come true.”
He turns to me and he says, “Well, David,” he holds my arm like this, he goes, “Then you must write this book,” which gives me chills to this moment and he leaves the bar and I was with Brendan Bouchard and he’s like, “What did Paulo just say?” And I tell Brendan. He’s like, “Dude, you got to write this book.” And I come home, and wife goes, “Well, how is dinner with Paulo? What did he say?” I go, “He says I should write The Latte Factor.” She’s like, “I’ve been telling you to write The Latte Factor for 10 years.” I go, “Well, now Paulo told me I should write it.”
[00:08:11] Brad: Yeah. Now, he just stacked the pressure on.
[00:08:12] David: I dedicated this book to Paulo. I also dedicated it to Oprah because The Latte Factor I taught it on her stage. It had a huge impact and reached tens of millions of people and then, of course, my wife I got to dedicate it to because she’s believed in this the whole time.
[00:08:25] Brad: Out of curiosity, I mean The Latte Factor, the beauty of it and we talked about this last time, it’s an easy analogy to remember. How did that come to be? Are you just sipping on a coffee one day and you’re like, “This is it?” Or was it like a conversation with a friend?
[00:08:37] David: No. It happened with me teaching in an investment class. So, I used to teach a four-week investment class like in the very beginning of my career we’re talking like the 90s here and at the end of the fourth week because I’m getting ready to as buyer as you go, “Do my close.” I’m getting ready to close down a four-week workshop that’s eight hours long. Homestretch. I learned lessons. Never take question at the end of a home stretch. I’m taking questions and a young woman named Kim raises her hand in the back of the room and says, “David.” She didn’t ask a question. She makes a statement. She says, “This class has been great. I’m obviously one of the younger people in this room,” because it was a room of mostly retirees and she says, “But I can’t do anything you’re telling me. You’ve been talking about doing – I can’t pay myself first. I don’t have the money to save and so none of this stuff works for me in the real world.” Those are literally the words she used, “None of the stuff works for me in the real world.”
Well, that was a bad thing to hear at the end of class. So, I was a little stumped and I said, “Kim, where do you work?” Kim happened to work at the GAP, not in retail. She had a corporate job in San Francisco. I said, “Kim, I know that GAP has a 401(k) plan. Are you using it?” She said, “No, I just told you. I can’t afford to.” I go, “Okay. We’re just going to stop right now and we’re going to figure out how to find you money. Is everybody okay, I mean the class, helping Kim find the money?” Everybody goes, “Yeah. Sure. Fine.” I go to a blackboard and I start going, “Let’s just go through your expenses. In the morning, Kim, what do you do in the morning?” I know they got coffee at GAP because I see. I’ve been there before. “You drink that coffee?” She goes, “No.” It happened that she has a Starbucks cup on her hand and it’s why. She goes, “No. I go to Starbucks.” I go, “Oh.” Early 90s there’s only a couple thousand Starbucks like this is a new concept. I go, “So, let’s take a look at what that cost,” and I put it on the blackboard. She’s getting deep with that. I just walk through her expenses. And by the end of walking through her expenses before we got to lunchtime, we had shown her how she already wastes like $15, $20. And I said, “Kim, look how much money we found,” and she said, “Well, what’s your point?”
[00:10:39] David: And I said, “Well, my point is if you can trade the coffee for free at the GAP and bring an apple, don’t go get a snack downstairs, bring an apple to work like I’m just trying to show you how to find the money. Let’s just show you what $10 a day in your 401(k) plan at the GAP could be worth. You are in your 20s so let’s just take this out and show you the math.” Well, the math was her being worth well over $1 million. So, she looks at this. This was all done in live time and now she’s kind of frustrated truthfully. She goes, “Are you trying to tell me my lattes are costing me $1 million?” And that one of the guys who’s retired in front of the room turned around and goes, “Lady, that’s exactly what he’s trying to tell you. You have a latte factor.” And she’s like, “Oh.”
So, the class ends and from leaving the classroom to walking to her car, every single person in that classroom is talking about this and they’re talking not about their coffee. They’re talking about their own latte factor. So, immediately it’s a metaphor like my son figured out at nine it’s a V-buck factor. People are walking to their car talking about this stuff. Gives me chills now thinking about it and my assistant looks at me and she says, “David, you need to teach the latte factor from here on out. When you talk about paying yourself first in compound interest, this is a metaphor that people will get.” And so, I just kept doing that. I’ve put it in every single book ever since.
[00:12:05] Brad: It’s a cool story. That’s the power to getting out sharing ideas and letting them iterate over time and then just, I mean, that would never have come out had you not been teaching class after class after class.
[00:12:15] David: You know what, being out in the real audience with real people is where all the best stories come from. I’ll give you a classic story from last week. You want a new story that nobody’s heard?
[00:12:24] Brad: Yeah. Let’s hear a new story.
[00:12:25] David: So, I was just out in Atlanta. I just did a big event with Mark Lloyd. We had over 550 people at our first Latte Factor event. Huge job by the way. A lot of advisors are watching this but he got 91 new appointments from the event that we did. So, I go and I do CNN in Atlanta and I’m in the makeup room. So, when you’re in the makeup room, inevitably makeup ladies have time to ask you lots of questions. This sounds so weird but it’s true. The woman doing my makeup says, “Well, what’s your book about?” Then I start telling her. She says, “Okay. Well, can I ask you a question? What investment should I put my money in? Like what mutual fund or stock should I buy?” And I go, “Well, let me ask you a question. And I’ll go on the show and talk about paying yourself first one hour a day of your income. Do you use CNN’s 401(k) plan?”
She says, “Yeah.” I go, “Okay. Without you telling me how much you’re putting aside, let me guess how much you’re putting aside.” Now, this is a big makeup room actually. This is the biggest groom room I’ve ever seen for a TV show. Now, everybody’s listening. There was like four other people in their chairs. Everybody’s paying attention. I go, “I’m going to guess that you are saving 3% to 6% of your income.” She goes, “How do you know that?” I go, “Because the average American that’s what they say. They say it’s somewhere between 15 minutes a day to 30 minutes a day of their income.” She goes, “You’re right. I’m saving 6% of my income.” I go, “That’s not enough. You need to save an hour a day of your income.” And I started explaining to her that’s 12% of your gross income. And she says, she acts like Kim from 20 years ago, “I’m a single mom with two kids. I can’t afford to.” Now, it happens to be there is a latte from Starbucks sitting on the counter. The Starbucks in the CNN headquarters is one of the largest I’ve ever seen. There were 75 people in line at Starbucks when I went up the headquarters escalator to where I was going.
[00:14:25] David: I said, “Listen, I don’t know if you need to give up your cup of coffee. What I know is this. You can’t save 6% of your income and be in financially great shape. You won’t be. You’re a single mom with two children. You have to figure out how to save another 6% of your income which is 30 minutes more. So, whether it’s giving up your coffee or something else,” and she says to me, “Are you sure?” I go, “I’m positive. This is what I’ve been doing for 26 years. I’m totally positive.” And I go, “Let me ask you a question.” This is like my new story. I go, “Let me ask you something. Let’s be honest right now. If the CNN executive team comes down here in five minutes and tells all of you in this room that you can either take a 6% pay cut or you can pack up your makeup and go and you’re done, what would you do?” She looks to me and she goes, and everybody’s listening now. She goes, “I would figure it out.” I go, “You would, right? You’d stay. You’d figure out how to cut your expenses by 6%.
I’m telling you to not be forced into it. I’m telling you to proactively go increase your savings which by the way an extra 6% will cost you 6% of take-home pay. It’ll cost you 4% because it’s pre-tax money.” So, she’s going to hate I’m turning this into stories probably but that’s the beauty of live stuff. So, she says, “You know, I just need to get married.” And I go, “No! That is exactly not the answer. In fact, in The Latte Factor, Zoe Daniels learns that a man is not a plan and your solution is never going to be someone else. Your solution is going to be you. You need to fix your financial life. You don’t ever want to be dependent on somebody else.” And as we walk away, the producer says to me, “I read your book 2 days ago and I’ve increased my 401(k) plan by 2% already.” And I give her a high five and I’m like the book has worked and then I go to the next producer.
[00:16:18] David: The next producer says, “You’re here because I read Smart Women Finish Rich and I’ve been maxing out my 401(k) plan for years now over 10 years because of you and my 17-year-old daughter she’s getting this book because this simple stuff changes your life and, David Bach, you changed my life with Smart Women Finish Rich and then I do my interview and I’m like, “This is why I do what I do.”
[00:16:39] Brad: As you go into that, I’m just thinking I’m like if there’s ever been a time for this book, we were just talking before we went live on millennials like how they’re the worst. Of any generation financially, they’re the worse off right now and a lot of our advisors that are working with retirees and I’m like I don’t know if the event from Mark was around educating their clients’ children, retiree’s children and grandchildren, but I think that is the potential with this book because we got so many of these like the greatest generation that they actually were very frugal and now you’re seeing the exact opposite of that where everybody wants what they want right now and they don’t want to wait or sacrifice for it. So, where do you see that going? Obviously, you just had an incredible event with Mark Lloyd. And I’m sure there’s future events planned. Where do you see that kind of fitting with people working with retirees?
[00:17:26] David: So, this is a great – Mark’s a great example, right? So, we get to the State of the Economic Union. He came in and talked about the economy, shared principles from this book. He talked about retirement too, but I basically drilled the message home like, “You guys worked so hard to give money to your kids. What you really can do is give them some financial education which is hard to do so just give them this book and have them read it.” So, as I sign books, I basically sign books for everybody’s kids and grandchildren. So, clients were there with their friends, but I sign these books almost inevitably for the children and the generation of baby boomers, a lot of them did everything right but they also didn’t come out of school with all this debt. So, they know like they know what their kids are going through and they’re worried about it like they see their kids not getting married because they see their kids not bought a home yet. And so, everybody knows that help is needed. The question is always how do you help?
So, I mean, look, I just hope honestly this whole story is going to go help a whole lot of people but what I’ve told our advisors is you’ve got to get in front of the millennial clients right now because if you don’t, they’re actually opening account somewhere else. So, most people who work here are millennials. So, I’ve done speeches for all of our employees. I basically got 100 something employees here to increase their 401(k) plan within five days of me speaking. We’re like 118 people. It cost Cody and me a bunch of money because I got all of these millennials to go save more money like they were saving 8%. I’m like, “You need to get it to 10. You need to get to 11. You need to go to 12,” and people went immediately and made changes. And you know what’s interesting? A lot of those people work here, they have accounts with what I would call millennial-focused firms. Turns out I happen to be investors or advisors to like Acorns. Acorns is a great example of a millennial-focused firm. It helps you take your change, small amounts of money, and invest it online.
[00:19:23] David: Acorns has opened over 5 million accounts in 36 months, all young people opening small accounts. This firm has now got a valuation of over $850 million and the last investor in the deal was Comcast which is CNBC which they reportedly put in a $100 million because everybody wants to get in front of millennials. I was an investor and advisor for Clarity Money. That’s a financial app that targeted millennials like a Mint.com but it was millennial-focused. It was bought by Goldman Sachs last year because Goldman Sachs is building a millennial-focused bank called Marcus. So, what I can tell you as an advisor is that everyone is coming for your client’s children. Now, if you’re retiring the next two or three years, if you’re a financial planner then you don’t need to worry about this but if you’re building a business to be out 10 years or longer, you better get a relationship going with your client’s children and grandchildren.
And the way you start that relationship starts with first recognizing that you need to and then coming up with a very systematic approach. I just spoken in front of all of our people that are here today and I said, “You guys honestly you should buy these books by the bucketful and every time a client comes to your office you should sign the book for their children and you should say to your client’s kid, you should say to your clients, because like you should know your client’s kid’s names, you should know where they are. If the kid’s in college, you should say, ‘How’s he doing with student loans? Do they need any help? Let me sign this book for them. I’ll mail the book to them by the way if you want. When they come back from school for the summer let me meet with them. If they’re getting their first job, let me help them with their 401(k) plan.’ But your client should leave with these books for their children and their grandchildren.” That’s a start. But you need to have a relationship with these kids because I’m telling you what is going to happen is your clients are going to die. The kids are going to have accounts somewhere else and they’re going to click a button on their iPhone and that money is going to go poof.
[00:21:23] David: If you think you’re going to show up for the funeral or when dad’s sick in the hospital and then build a relationship, you’re going to be too late. This has never been an issue until now. I mean I’m second-generation in this business. The Bach Group has three generations of families like it’s got grandma. It’s got kids. It’s got grandchildren. There’s never been anybody competing for these younger people’s accounts, but they are now, and the race is on.
[00:21:50] Brad: Well, yeah. I mean just probably 5, 10 years ago if a client passed away, the kids need to come into your office to see you to kind of settle things up. Now, as you stated, everything’s on an iPhone app. Click. Account’s gone.
[00:22:05] David: And the kids didn’t have money anywhere else. So, today, the fact that they’re opening these accounts with other firms and, look, I’m investing in these other firms so I know what’s happening. That’s why these firms are going to ultimately be bought up by financial service companies. We’re talking about United Capital here and something like the smarter firms are filling out the funnel. You can’t afford to go, “Well, millennials don’t have money. I can’t be with them now.” I’m not saying you have to prospect millennials as an RIA. I’m saying as an RIA, you have, first of all, a fiduciary duty to care about your clients and love your clients and if you love your clients then you got to love on their kids. And if you don’t have a relationship with their kids, you don’t really have a relationship with the client.
[00:22:46] Brad: Yeah. I’ve seen it especially in the last two or three years our very top offices guys like Mark Lloyd they are now creating a client experience so part of the firm is they manage their assets but their retention is they create these amazing experiences out like I can think of one of my offices out in Washington, he rented a movie theater and they did a client event but it wasn’t for his clients. It was for the grandkids. And he said, “Be a rock star grandma and grandpa on us. We’re bringing the theater. We’re going to have a great time.” To me, that’s just another version of what you can do here is let’s not just have fun with our grandkids. Let’s teach them how to be financially independent and literate which is totally and completely underserved right now. So, a way for an advisor to completely start to bridge that gap by creating an educational experience. I mean, what grandparent doesn’t want that for their grandkids, right?
[00:23:37] David: They all wanted it and a lot of times they just don’t even know how to start the conversation which is also whereas the advisor you come in and show them. Well, here’s the book but here are some lessons you can teach them. My grandmother helped me buy my first stock at age 7. I told that from the stage as Mark. Here’s what she did. Here’s how she taught me and I walked them through exactly how to do it with their kids. I’m like, “How many of you think you could do that? That took three minutes to share with you.” And they’re like, “Yeah.” There’s 500 people raise their hand. “Great. So, go home and do that with your grandkids.” And then as I’m signing books, a bunch were coming up to me and saying, “I did that. I’ve already done that but great idea. I need to do it with all the grandkids.”
[00:24:12] Brad: And, by the way, is McDonald’s still your favorite restaurant? Or have you advanced?
[00:24:14] David: No. I know you’re going to react.
[00:24:18] Brad: But the lesson I took from that was for a kid, that’s the bridging the gap of, “Oh, this is what a stock market is. I’ve got this tiny little piece of this company that I show up and I give my money to.”
[00:24:30] David: And so, you’re telling the story because you know from before but for those who have never watched like the story is my grandmother helped me buy my first stock at McDonald’s at seven. But the lesson was there’s three types of people, those who work here, and she went through why that’s a difficult way to make a living, minimum wage, and how hard that is and why I need to go to college, study, not work for minimum wage because it’s hard. Second thing she said to me is you can be a consumer, somebody who comes here and spends money. That’s what most people are. Third person comes here and as the investor who owns the place and investors get rich. Seven years old. She is like, “This is how you play monopoly for real.” So, she taught me how to buy a McDonald’s stock and that changed my entire thought process.
My kids today, we live across the street with Shake Shack. So, Shake Shack’s public so my kids own and that’s where we go. They don’t go to McDonald’s. They go to Shake Shack so they own Shake Shack stock and they own Amazon and they own – I’m buying them stock and things that they’re excited about, some of which by the way are working and some aren’t. Like, when Snapchat came out, my kids are on Snapchat. It’s not on Facebook. Snapchat stock hasn’t done well but they’re learning these lessons and they’re thinking like investors at the age of 9 and 15. And that’s like three-quarters of adult. If you can get your kids thinking like an investor at a young age, that’s what changes their life.
[00:25:51] Brad: Yeah. I want to go to your grandmother because one of the most important lessons out of this book is the very end.
[00:25:58] David: By the way, as I hold this coffee just know I didn’t have to pay for this. I got it at Advisors Excel.
[00:26:04] Brad: The free Advisors Excel coffee, which isn’t a bad risk by the way. I’d like how you ended the book and I don’t want to get too deep into the fiction story because it is a story so I don’t want to ruin the ending for people but what I love here, so for those that are checking on video, basically the end is a little interview with you on the lessons your grandma gave you, Grandma Rose. And to me, it has to make you proud that she since passed but her legacy lives on here and a lot of those lessons that she taught you when you were little that led to what you do today. So, can you share just a little bit about your grandmother? I mean it’s probably tough to do her justice in a minute or two.
[00:26:41] David: No. Totally. I mean, there’s an underlying theme in this book that it’s not about the money. It’s about living your soul’s purpose that our job while we’re here in life is to truly identify what it is our soul wants to do with our life. When Zoe Daniels is 27 that’s coming to work and she is coming through The Oculus. It’s this incredible $4.5 billion development above the Fulton Center and the Freedom Tower subway station and there’s an LCD screen that is over 600 feet long. It’s like a football field. And she sees on the LCD screen, “If you don’t know where you’re going, you might not like where you end up,” and she comes up from underground. She takes an escalator up to by her office. She works in the Freedom Tower, One World Trade Center, and she sees people mourning at the 9/11 memorial.
Now, she’s seen, she has walked by these people for six years because it’s next to her office. She’s never really seen it meaning like she’s not taking it in. She’s busy going to work. On this day, she sees that and she goes she sits on a bench and she goes, “Where am I going with my life?” Which is ultimately what begins her journey to self-discovery. So, you go to my grandmother where my grandmother’s story is weaved in here is that my grandmother on her deathbed, I was finishing Smart Women Finish Rich, dedicated to her, and I asked her, “Do you have any regrets?” And she went through them with me and she had five. She can remember them all the way back to being a teenager. And she said to me, “It’s not my specific regrets that matter here today. It’s why I have them.” So, she said, “The reason I have these regrets is that every one of these regrets I came to a fork in the road where I had to make a decision. Do I take risk, can go for what is really the thing I want to do in my life or the dream could possibly be?”
[00:28:44] David: She knows what she wants but she knows it’s going to turn out. It’s what you really want. Or do I take the safe road? I came to a fork in the road. She is like, “Everyone comes in the forks in the road. You’re going to come in forks in the road. I’m sitting here today 86. I’m going to die. I’m not going to leave this bed.” I’m like, “You are.” She’s like, “No, I’m not. I’m not going to leave here. I’m dying and I’m telling you because you are young. When you come to these forks in the road there’s going to be a moment inside you where you got somebody, you got the young little boy inside you, a young David that wants to go take the risk that wants to go play. You’re also going to have a big boy inside of you, the big David that’s going to say, ‘No, we probably shouldn’t go that way for all the different reasons we shouldn’t go there.” And she is like, “It’s not going to be just your own voice. It’s going to be other people’s voices. It could be your spouse. It could be your parents. It could be your boss. It could be society,” and she’s like, “I’m just telling you right now so that you don’t end up where I am, when you come to these forks in the road, you need to take the risk. You need to listen to your soul. You need to listen to your little boy.”
And she told me, “So, I hope that you will and share this with other people.” I went back to my office. It’s in the book by the way. I went back to my office. Actually, I broke down crying in the garage because I was a financial advisor at Morgan Stanley and my soul no longer wanted to be one. My soul wanted to go out and write books and teach people about money. And I didn’t know that was impossible to make a living doing it. But I told myself in the car breaking down in tears and we’re in the Theater Square where my sister still to this day where the Bach Group still lives, I would figure out a way within three years to leave Morgan Stanley. Great job. Great career. Love my clients. But try to go from my dreams of teaching a million, at the time, a million women to be smart with money. That was my mission. That was my dream. No idea how I would do it, but I ultimately did it and it led me to move to New York knowing no one and build a career teaching people about money.
[00:30:40] David: And the lesson in this whole book has nothing to do with me. It has to do with you. Next time you come to a fork in the road who will you listen to? The big boy or the little boy? The big girl or little girl? And what’s happening with people reading this book because it’s so emotional is quite frankly a lot of people are crying and relating to this book and they’re in tears thinking about what they could do with their life, both men and women. I just did an event at The Oculus. I did a book event at The Oculus. I gave away 500 books. And I had a gentleman come up to me I’m going to guess he was in his 60s. Super handsome man, very well dressed up and he said, “I came three hours to be here. I read your book. I want you to know I actually cried.” He’s a big guy like over 6 feet tall and he said, “I’m going to make major changes in my life and I just wanted to come here and thank you because this little book woke me up to the fact that I still have a lot of time left and I need to not have regrets.”
And he gave me like a shake and kind of like a bro hug and I was like there’s no age at which we should stop going for our dreams and then another woman came up to me at that same event and she said to me, “Did you know,” because I talk about leaving Morgan Stanley and taking this risk. She said, “Did you know that it will all turn out?” Because now it’s all turned out, right?
[00:32:06] Brad: Yeah.
[00:32:07] David: And it was funny because there’s a bunch of people around her listening and I go, “No, I didn’t know. That’s why it’s the risk. If I had known it was all going to work out, then it would’ve been the safe road.” My wife and I are getting ready in 60 days to move in Florence, Italy which is like a complete amazing insane cool thing that we’re about to do that we came up with this dream to take our family abroad for a year because Jack’s going to be a sophomore. It was my last window of opportunity to take him abroad for a year before he has to buckle down and get serious at his school for junior/senior year and we’re so excited about it. There’s a lot of risk involved in what we’re about to do. And we’re going to Florence not knowing anybody and we’re leaving our home and we’re leaving our friends and there’s work issues and like but that’s where the gold is. And so, I’m hoping it’s funny because even like we just did a radio show in Megan Center, “Are you going to podcast or anything from Florence?” I’m like I might because I wanted to take people on in the journey so that they kind of experience this thing that we’re about to do.
[00:33:09] Brad: Well, and I know you’ve traveled to Italy multiple times. I was just thinking as I read that into the book because you kind of share that with the readers. I’ve got a spot so I took our family over last summer, one of the coolest, to Italy. I mean, just everybody’s family, right?
[00:33:25] David: Everything about it is cool.
[00:33:27] Brad: I’ve become a better parent in Italy but there’s a little café that overlooks that famous bridge with all the shops on it in Florence.
[00:33:33] David: Ponte Vecchio.
[00:33:35] Brad: So, we’ll make sure I get you back because it was this little hole in the wall we found and we just had a little espresso over there.
[00:33:40] David: I’m 200 yards from Ponte Vecchio.
[00:33:42] Brad: Awesome.
[00:33:43] David: It’s like from my apartment I can see the Ponte Vecchio from the window. Yeah, just let me know.
[00:33:48] Brad: So, why Italy? Why did you choose Italy?
[00:33:50] David: Italy has always been my favorite country to visit. I’ve been all over Italy but we kind of said, “Okay. We can go anywhere in the world where we want to go,” so we made a process of elimination where we didn’t want to go and then we kept coming back to Italy. I was like, “You know, honey, I love everything about it.” I love the people. There’s a different way of life in Italy. I love the energy of the people. I forgot I love the food. I love the culture and I’ve never been anywhere in Italy that I didn’t really enjoy. It’s a very easy country to travel around. And then we chose Florence because it’s just one of the greatest cities I think in the whole world. It’s also a nice city but it’s not too big. I live in Manhattan so it’s one of the smaller cities and I want my kids to be exposed to the arts. My younger son, James, I think could be an artist and I think what an amazing thing for him to be nine years old and being arguably the center of our culture possibly in the world in Florence and so if I can just inspire him through that also more. And then my wife and I are like, “Where can we just have a whole lot of fun?”
[00:34:52] Brad: Yeah. Decent wine over there I hear.
[00:34:54] David: Decent wine over there. Yeah. As the kids are going to school and mom and dad are playing.
[00:34:59] Brad: I love the analogy of the fork in the road because I think on my side getting the ability to have a lot of conversations with advisors that they’re entrepreneurs. They’re independent financial advisors. They’re running businesses and the beauty of financial services business you can build it however you want. A good example, Joe Duran, United Capital just sold to Goldman Sachs within the last few weeks almost an 18X multiple.
[00:35:24] David: Yeah. Another way to look at this is it’s a little over 30 million per billion because people get so confused by these different multiples, but these businesses are selling for somewhere between 10 million to 30 million a billion. And I’ve known Joe for some time. He did a phenomenal job of executing. I know where you want to go to this conversation. I think it’s so smart that Goldman bought United Capital.
[00:35:51] Brad: Well, let’s talk to this because as I look at a lot of our offices, that’s their dream. At least the dream is to have the freedom to be able to do that if they want. They might never sell but, hey, I want the ability that I can sell if I want to. Well, guess what, Goldman Sachs did not buy United Capital and say, “We expect Joe Duran to be their managing assets.” He built this business in a way where he was a CEO, teams, systems, philosophies, asset allocation. So, you’ve spoken with a number of our advisors. They’re very, very successful in their own regard but what are the key factors that allow these types of multiples that Goldman was able to pay for United Capital versus the typical advisors out there selling for a 2X to 3X multiple?
[00:36:32] David: Well, first of all, I’m going to be careful I’m not speaking for Goldman that I don’t know or say why Goldman did what they did. I’m going to tell you why I think Goldman bought United Capital because I just talked about it from stage here in our training event. Goldman Sachs has always been a bank for high net worth individuals like high net worth is typically been let’s call it over 20 million. Certainly over 10 and that’s been the rarefied air of these certain firms like the Goldman Sachs, investment banking that leads to these higher net worth clients. That segment is very small. Now, there’s been a fortune made in that segment. That’s been the business of the Goldman Sachs but, and I’ve been talking about this for 10 years and now it’s clearly been recognized. The bread-and-butter in this business is not the high net worth client. The bread-and-butter in this business is the 30 million strong of mass affluent delegators.
So, a mass affluent delegator is someone who is a client who wants financial advice, who now today more than everyone is working with an RIA. They want to work with the fiduciary. They’re fiscally conservative. They’re not looking for home runs. They’re not watching a stock trading show like Jim Cramer that reach retirement and they want to have financial plan, the holistic-based advisor, their money managed professionally. They’re not looking for home runs. They just need their money to last their lifetime. That mass affluent delegator’s account size is between 200,000 to 2 million. That happens to be very much the type of client that our advisors are with. That’s who our clients. AE Wealth Management now has over $7 billion on its platform in 36 months. We didn’t go out and buy anyone by the way. Joe Duran’s United Capital is a rollup. They went on and bought all these advisors. So, why did Goldman buy mass affluent delegator business? The reason is they know they need to go and get into the next level of pockets because there’s more of them and usually they’re very profitable as clients and they’re loyal. And then you go, “And why did they buy Clarity Money? And why they’re building markets?”
[00:38:37] David: Because they also know they need to get all the way down to the bottom to the $5 account. So, what the new CEO, what they’re doing is they’re building their funnel, reverse funnel really because most advisors start small and try to get bigger accounts. Goldman starts with big accounts and is working their way all the way down to the account where the guy opens up a $5 money market account with markets online. 2.4% right now, the highest yielding money market account, online. They’re running the highest paying CDs online. So, you go, “What do I need to think about as an advisor when I see this?” First thing you think about is the competitors are coming out. There are going to be more people competing for mass affluent delegator client. You need to be racing to get these clients in the community. Good news is there’s so much opportunity. I mean, we have advisors now a part of this team, Advisors Excel, AE Wealth Management that you know this, but I think people are having a hard time believing this, we have advisors that are raising 100 million a year now in net new assets.
Most advisors don’t raise 100 million in a career, but we have people that come on board here six, seven, eight years ago. Mark Lloyd’s a great example. He is doing like 10 million in net new assets and now he’s doing over 100 million. And we have a lot of these advisors because you’ve created a system here and this culture here that really helps these advisors grow because people like you who are like in the trenches with them coaching them on how to build their business.
[00:40:03] Brad: I think it’s interesting. There was a little kind of fireside chat last night with Joel Johnson, another one of our top clients, and I think the upper echelon, yes, we’re in financial services but they see themselves almost like a marketing company that happens to play in financial services and just serve their clients at a very high level where I think a lot of times and I’ll talk to specifically in the RIA space, very successful RIAs whether 250, 500, a couple of billion plus that I’ve had conversations with. They’ve gone the acquisition route. They think that’s really the only way to grow and also, they don’t really understand marketing. I’m just being real here. I mean no shots at them but when you sit there and you’re like, “Wait a second, you could have an active marketing funnels like live events?” that you’ve done a few over the years, right?
[00:40:46] David: Yeah.
[00:40:47] Brad: TV, radio, and actually at 3:1, 5:1, 7:1 ROI is at some of our top offices so I could actually 7X my money while growing the assets faster. That just doesn’t really compute with a lot of them.
[00:41:02] David: This event we did on Friday it had over 500 people in the room marked at 92 first-time appointments with families. Not just one person. When you’re talking to – I say never use the term buying units but it’s a family. Mainly two first-time appointments on Friday and not mentioning review meetings. Most advisors don’t get 92 prospect appointments in a year but what I do with Mark I’m now going to do 10 times more. I’m going to go around the country to the markets like Seattle, Chicago, LA, Phoenix, then Ohio with all advisors probably have to work with you. And we’re going to be just nine more times in the next two weeks. And every one of these advisors are going to have probably I don’t think they have exact similar success but it’s the same exact model. They’re hosting me. We’re going to go to an event about the economy and the Latte Factor. They’re inviting their clients. They’re getting their clients to bring friends and we have some prospects coming and they’re going to get a bunch of goodwill on it and find a bunch of new assets and get a bunch of new clients.
All that’s proactive marketing. That’s not sitting at home and hoping somebody calls you with the referral. It’s all proactive marketing. Proactive marketing is what builds real businesses that have real value. Joe Duran went out as a proactive marketer and built a business to buy up these businesses. So, he took all these different RIAs, re-bought them, repackaged it, rebranded it, turnkeyed it, made it pretty, came up with the technology, built the platform so that he had a much bigger thing to build and sell. And then he goes back to, “I’m going to hone what do I need to do. Everything I talk about today is got to be a trainable, scalable in order to be sellable.” So, everything you do needs to be is it trainable? Is it scalable? Is it sellable? You never do something once. It needs to be built to be done a thousand times and you need turnkey solutions for everything. So, turnkey for marketing, turnkey for the asset management, turnkey for the service. Our advisors who got every part of the process systematized, turnkey, and dashboard.
[00:43:04] David: When we talk about private equity who’s basically funding all these acquisitions, the first thing private equity does when they buy these businesses, first of all, everything’s over in a dashboard because the book of business is sitting inside a dashboard where you can go in as private equity and look at every single aspect of the business. First thing they look at our KPIs, key performance indicators, and they look at your KPI and they drill down in the KPIs to figure out what’s causing you to acquire a client? How long does a client stay there? How much more money do they need to spend to acquire more clients? What can they clean up inside this dashboard? And I just said a lot of that quickly. Most advisors don’t even know what KPIs are now. Now, you as a coach you drill down on your advisors and KPIs in the first 90 days. Am I wrong?
[00:43:49] Brad: Yeah. There’s nothing more frustrating than somebody coming to you and needing help and you can’t even give them help because they don’t know anything, any aspect of their business, any of the numbers. “Okay. So, I need help with my seminars.” “Okay. Well, what was your ROI last year?” “Uh.” I mean that’s typically what I get. So, that’s a lot of what we do is we actually help them put the KPIs together first and now we can make educated decisions. My saying is let’s use math over emotions and so many of these advisors that, “Oh, my last seminar was horrible,” that they don’t have the math.
[00:44:22] David: And it’s also the funny thing is, and I say this in this book it’s just math and it’s basic math like you just said what’s your ROI at the seminar. Our advisors, the Joel Johnsons, or pretty much everybody who’s doing well inside our group, they know what it is costing to bring somebody into the room, we’re talking about seminar specifically, what is the cost to get this person to sit at the table in that seminar? What is the cost to get that person physically into the office? What percentage of those people do I close therefore what does it actually cost me to acquire that client? You have to know all of those numbers because it makes it much easier for you to both invest in your business and also what we talk all the time here is doubling down. Because once something works and you know it’s working, you know your numbers, you can double down and you can triple down. One of our advisors were saying to me and he’s like, “I had $1 million in my bank account.” And I’m like, “Well, I can take the million dollars. I’m going to buy a piece of real estate with it. I can take a million dollars and can put in the stock market. Or I can take the million dollars and I can just put it back into marketing.”
He’s like, “I know in my marketing I’m getting a 3:1 return on my marketing dollars right now.” It’s like I’ll be lucky to make 10% in diversified portfolio. So, he’s like, “If I just suck at my marketing and I can get a one, I mean, that’s 100% return of my money.” So, as an example, and I won’t say who this advisor is. This advisor went from doing radio because there’d be a lot of radio here to help advisors do radio to doing television because this advisor saw one of our other advisors succeeding in television in Arizona. So, because we have a community, he reached out to her and said, “Will you walk me through how the television is going?” He is now doing three TV shows. Did one TV show and started working. Now, he’s in another TV shows. So, now he has three TV shows and he’s like, you know, it’s all working. It’s not all working necessarily 3:1 but it doesn’t matter because it’s all working, and he knows his KPIs. So, he’s going to have just a huge year this year.
[00:46:22] Brad: Yeah. Two things there that you hit on that I think are really important. Number one, I don’t know how many times I’ve heard it over the last 10 years. Seminars don’t work anymore and Joel Johnson he’s one of my favorite people, does a lot of coaching for us. He goes, “It’s not the seminars don’t work. If seminars don’t work, it’s you don’t work,” and he says that kind of jokingly, but the truth is our industry has trained people horribly how to present financial information. I know we can go along…
[00:46:51] David: Look, I came to this at 1993. My dad built his entire business doing seminars. Crazily enough, one of the advisors who was here because I talked to my father from stage just came up and said, “I took you guys to class in Walnut Creek, California 26 years ago.” I have to tell my dad that. But when I came to this in 1993 people said seminars didn’t work in 1993. I’m like I don’t know. We’ve got a wing in his office. My dad’s the biggest producer in the office. All he’s ever done is seminars. So, I just started doing seminars because that’s how my family booked the business. People are like, “Seminars don’t work, direct mail doesn’t work.” Worked just fine for us. My family today The Bach Group has $1.1 billion for management. You look at people that are AE Wealth or Advisors Excel, the bulk of them do seminars over and over again. Now the difference is they don’t do one or two or three seminars. They don’t even do 10 seminars a year. They’re doing 20, 30, 40, 50, 60, 70, 80. Joel Johnson is doing over 100.
Now, it’s not necessarily the individual advisor doing it. They might have also built a team. They might have professional people doing these seminars, but they have a constant proactive marketing machine. And I am telling you the more seminars you do, the more money you raise. And I don’t think anybody does seminar training quite frankly better than we do here.
[00:48:08] Brad: Well, I mean, it’s all been built on a map. I mean Josh Jones took a two-year sabbatical to go watch 100 live events and actually surveyed the audience. Why did you set the visit? Why did you not? So, it’s based on actual real data. The other thing that I run into a lot with RIAs that I think that’s worth capturing here is sometimes the lens you view the world through based on how you grew up in this business can really be a limiting belief for you because I think a lot of times I’ll say seminar and the first instant reaction is, “Oh, there’s a guy two blocks over. He’s just pitching this product and makes me sick to my stomach,” and the truth is when you look at our top-performing advisors, the only thing they’re selling at their events is holistic planning. It’s like how can any client come in and get upset like, “Wait how dare you build a holistic financial plan where I’m covered for income and investments and tax planning?” And so, I think sometimes your own lens as an advisor based on your previous beliefs or experiences or the guy down the street you didn’t agree with can get your own way of growth. Have you seen that to be true with just how advisors will sometimes write off certain marketing aspects before they ever really examine them?
[00:49:17] David: Yeah. I mean, like when I came to the business, I had learned that the fast way to be successful is to model the masters that everything is figure-out-able but I don’t have to figure it out because somebody else already did. So, I didn’t start at the bottom. I went to the top. I went out and interviewed like in my case I went out and interviewed 10 people who were doing $1 million more at the time and it was Dean Witter before it became Morgan Stanley. So, the beauty of being young was and this was before there were all these networking groups, I just reached out to advisors and I said, “Can I come out and be with you for a day and learn how you built the business? Can I come watch you do your seminar?” And they were all for my firm and I went on and I went to a couple, I went to a Bill Good Marketing Conference. I saw one guy in Texas was raising 100 million. Even back then it’s insane but he was raising like $100 million a year from seminars. I was like, “What?” And he said from stage, “Do you want to come out and see how I do this? Anybody is welcome to come to Dallas to see my program.” I was a kid. I got on a plane and went to Dallas to go see what he did. Modeled him.
So much of what I created was from learning what other people did that worked and modeling it. You go back to like that’s been the secret sauce of Advisors Excel and AE Wealth Management. You got all these great people in a room and then they share. Mark Lloyd, yes, when I had dinner with him on Thursday, he’s like, “David, everything I’m doing I learned it from somebody else. You know this but like we have these events that are super powerful that we have some of the advisors who created their own mastermind groups after the event is over. It’s like you go through some of these people in these mastermind groups, it’s just one rock star after another and these guys are spending an extra day to a day-and-a-half sharing what’s working. It’s also important about like what’s working now, not what worked five years ago. We always your prospecting is the key and prospecting has to evolve.
[00:51:10] David: So, I’ve been teaching a version of Smart Women Finish Rich now for two decades. Our advisors have the latest version of it. It’s called Smart Women Smart Retirement. No products there. It’s a completely experiential-based seminar and we have advisors who again people go, “Oh, women seminars don’t work.” Well, our advisors are getting some cases 2, 2.5 times return on mail. So, 200 basis points return on mail. They’re all getting more people to the women seminars than the men seminars.
[00:51:39] Brad: Which by the way, I got to stop you right there. Like I have been in the direct mail business consulting on that for over a decade. Industry average is about 50 basis points or half a percent so 4X more.
[00:51:50] David: Right. And even, by the way, the ones that are getting 1 to 1.25, it’s twice what they were getting on their other seminars. And what’s working for a lot of our advisors is no longer as direct mail. It’s digital marketing. So, we have advisors who are doing both, digital marketing and direct mail and now they’re getting 100 people that want to come to a seminar. We have advisors where the amount of money they’re spending to market the seminar is now filling three seminars. Well, you learn how to teach a seminar well and you get that many people in front of you, you start to get a whole lot more business. We have people who were in really difficult markets in terms of direct mail and now digital marketing is working so well filling their events, they’re no longer doing direct mail. Now, I don’t know if in a year these Facebook ads will pull us in. What I know is because we’ve got so many great advisors that are testing everything, we find out what’s working and then we help everybody double down on it and we also if something’s not working then we tweak it.
[00:52:52] Brad: Yeah. It’s interesting because sometimes you can’t see the forest from the trees and just growing up in this culture of sharing in a bunch of rock star advisors that are incredible marketers. Sometimes you don’t realize that that’s very different but I had a conversation with Dave Callanan who was talking with one of our TD Ameritrade reps, works with two or three the biggest RIAs in the country and when we started sharing, “Here’s how many assets are raised organically based on these marketing funnels each year,” their jaw dropped because that’s not the norm in the financial services space.
[00:53:24] David: No, because, look, all you got to do is go pull a Schwab’s RIA, sort of they do every year and I don’t think anybody does a better job of doing analysis of the RIA industry every year than Schwab. And they basically, look, the hundred-million-dollar more RIA and you pull every single year and 75% clients come from referrals. Over 100 million. If you’re an RIA with $100 million or more, inevitably the answer is referrals which means that that RIA has no marketing program in place. When someone tells you their whole business grows from referrals, they don’t have a real marketing system in place because you can’t write a check and know how many referrals you’re going to get. So, there are things you can do to systemize your referrals, but you can’t have KPIs on referrals. So, most RIAs get to a certain point where they’re only growing for referrals which can be okay by the way. If you’re not looking to be in a fast growth mode, there can come point in time where you don’t need to keep marketing because the thing is it’s a choice.
There are a lot of great advisors right now and all they need to do is really do a good job of managing their book of business. They have reached that point where they’re like, “I have enough revenue. I have a good team. I want to have more of a life. How do I do that?” That’s a good question to ask too. So, it’s not a one fit solution for everyone and we have advisors here that say, “We’ve got the full spectrum now. We’ve got the advisors who got one assistant, and works out their home, and has huge profitability and says, ‘I don’t want to have a team.’ And then we got the teams that are going to 20, 30, 40, and 50 employees where the advisor is no longer the advisor. They’re really the CEO of the business.”
[00:55:03] Brad: Yeah. I think once again to the beauty of our industry is you can build whatever you want to build. Here’s the fork in the road. That can go this way or that way, but growth does not have to mean less freedom and I think sometimes that’s the thing a lot of advisors think. I don’t want a team. That’s way too much work. If you truly start to move into a CEO role, you can actually have more freedom. Joel Johnson, good example. Two months of vacation last year and so he’s built a business where he is not required to be there and so I think that’s some of the fun things that we get to see behind the scenes and to your point on how much marketing is involved I like to say in my chair I’ve got the benefit, I have an accelerated learning curve. I’m seeing trial and error test all over the country 85, 90 of the top performing financial services offices in the country I get to see the common themes that work, the common things that don’t, and then we just source and share best practices. And because of that, advisors keep growing and scaling and it’s a beautiful thing to see.
[00:56:01] David: It’s positive peer pressure.
[00:56:03] Brad: Yeah.
[00:56:04] David: And one thing I would say too is that because we are very open here like Cody said today, it was a great line where he said, “You’re getting to see the front stage,” where like the person gets on stage and Joel Johnson with his $300 million and you didn’t see what it looked like the last 10 or 12 years, and I think it’s important to say like none of this just goes like it’s not like this. Now, some advisors really is two or three years and they completely change your whole business. Usually, there’s been a decade of time that went into this massive change where the advisors are going from working with clients to being the CEO of their business. But the weird thing is a decade goes by like this. It’s like I always say when I do training, “Are you going to be here? Are you going to be in the business 5 to 10 years?” Inevitably, if anybody’s coming to the year, the answer is yes, right, because they’re not going to be in business 5 to 10 years. It’s probably not if you can keep growing. But if you’re looking to keep growing, part of what you should do is ask yourself like, “What do you want your life to look like in 10 years?” Because then you can build the business to help you get your life there.
What do you want your life to look like in five years? I would tell you as advisors you need to be asking, what do you want your life to look like in 12 months? Because the common denominator among a lot of advisors is they actually have a pretty crappy life. This is an industry that actually takes a lot of work. It’s a great business but it’s a hard business. You work with clients. There’s a lot of emotional energy that goes and work with clients. You have death, you have divorce, you have families. There’s a lot and the market. There’s a lot of stuff that’s beyond your control. And it’s heavily regulated so there are challenges with this business, and I think the advisors that do the best in it learn how to balance having life while having a business. I would say if you love your clients then you can love your business and you can love your life. Loving your clients is a big thing too because you’ve taken on the wrong clients then your business is miserable. Well, one thing is we teach is how to get rid of those clients because sometimes the thing that you can do the fastest to improve your life at work it’s fire the clients who don’t deserve you.
[00:58:10] Brad: And your employees love you for that because you’ve now protected that office culture that you’ve created.
[00:58:15] David: Love you. And then you can build a business from the day going forward which is we’re not going to take clients that aren’t nice. We know what kind of a client we want. We know in the first meeting if that client fits that model or doesn’t and we’re going to have a screening system. You guys have a screening system. You don’t take on advisors here who are nice. We’ve gone out and have the dinners where by the end of that first dinner where we narrow it down. Well, by the end of the dinner like if someone’s had too much to drink or someone’s rude to people, we all notice. We’ve had conversations where someone’s come through and two or three people saw that person like that person shouldn’t even get through the next three days. That person doesn’t belong with us. That’s not the right culture and you guys bring, that’s why everybody shares by the way because we have an advisor culture that everybody is they’re all nice humble people.
[00:59:06] Brad: And it’s almost shocking to people the first time they come in because typically the large producer that other groups is the one that has the cards close to the best and has an ego and it’s kind of like the littlest people where here is the exact opposite and it’s just been really cool to see that evolve over the years. But it’s because everybody’s learning and growing from each other so everybody’s super thankful to the guy that’s sitting right next to him in the training.
[00:59:31] David: You got to never – also, it’s so important to like not forgetting where you came from. Right?
[00:59:36] Brad: Yeah. Self-awareness.
[00:59:37] David: Yeah.
[00:59:38] Brad: Oh my gosh, self-awareness is so important in life, in general, let alone our business but all right. I want to close here. You’ve been super grateful to give us some time and I know you’re in the whirlwind tour here, so I want to close with a couple of different questions. I asked some philosophical ones last time so we’ll switch it up a little bit on you, David. If you could look back and let’s say give yourself young David just entering financial services and maybe you’re on this kind of a whirlwind mentoring tour that it sounds like you took, what advice looking back now would you give yourself or maybe a young financial advisor just starting out?
[01:00:14] David: I really wanted to give my family to leave Morgan Stanley and go independent and open up an RIA. I wanted us to have our own RIA. I wanted the Bach Group to leave the Morgan Stanleys, right? And my father didn’t want to do it and there was a point at which I had to let that fight go and so I can’t say I regret. It was the right decision for me to just leave and go build a media company and I don’t actually think it would’ve been possible to convince my father and my sister. My sister is still there. So, like she’s still at Morgan Stanley but I think I knew the right road was to be independent was to have an RIA. So, here I am again back in business and I am co-founder of an RIA with $7 billion on the platform. It’s a great business. It’s a better business if you’re outside these wirehouses and these boxes. Everything that you and I are talking about cannot be done inside these bureaucratic firms.
So, like if you’re watching this and you happen to – and I’m not picking on Morgan Stanley. It’s just it’s the reality of the system. You’re not going to come over here and be able to do a radio show, do a TV show, do these kinds of seminars, have a website, nothing that entrepreneurial advisors can do can be done inside these big box wirehouse firms. And so, for me, my soul couldn’t handle the ceiling and so I got myself out of that box and I’m glad I did it when I did it. Now, it was a great life that I left. It was a good business and still a good business but I think I would tell anybody who’s young, the sooner you be independent, the sooner you can build a business that looks like what you want to look like and the sooner you build a business that’s independent, you have a business with real enterprise value. Now, today though the big firms are buying all the businesses from the advisors in order to keep them from leaving but the business is still worth more if you build it right and you’re independent.
[01:02:14] David: And then, more importantly, I just think it can be a whole lot more fun. If you’re an entrepreneur, you know what, not everybody is an entrepreneur. If you’re not an entrepreneur and you can work within the confines of these firms then it’s okay for you. It’s knowing who you really are.
[01:02:29] Brad: Well, it’s the advice your grandma gave you, the fork in the road, and I’ve talked to a lot of advisors where they know, I mean, in their soul they know but it’s the riskier not as easy at the beginning. Once you build the business can actually be much easier than the previous world but…
[01:02:47] David: My sister will never leave I’m sure at Morgan Stanley so Morgan Stanley you have nothing to worry about. I’m sure my sister will never leave. And it’s not a criticism of her. She knows what she likes to do. She likes meeting new clients. She likes her office. It’s been on the same place for 25 years. She’s happy. But I would say wherever you are in life if your soul is asking you to do more than you’re doing then listen to your soul because it never goes away. Like, if you have a voice inside of you that wants more, usually that doesn’t go away.
[01:03:14] Brad: Well, Jeff Bezos I think his famous kind of ideology is regret minimization. He’s like, “I don’t want to live life and be on my deathbed and have multiple regrets.” So, he’s lived it that way and he’s taking a lot of risks. They worked out well for him but I think that’s a good way to look at life.
[01:03:30] David: That’s finally why I wrote this book because I was like if I don’t write this book, I’m going to regret it and if I don’t write the book soon, I’ll never write it.
[01:03:36] Brad: Yeah. Well, I’m glad you did it. It’s a great book.
[01:03:37] David: Thank you.
[01:03:38] Brad: So, let’s wrap. Thank you so much. I think round 2 was even better than the first one. The first one is great.
[01:03:43] David: Well, it’s cool. It’s nice being face-to-face like this, right? And you are like the first person here in this organization that came to me to do a podcast. So, you were early on the podcast thing. Now, you’ve got a huge following.
[01:03:55] Brad: Yeah. Well, it’s get great guests on and it works out well. So, thanks, my friend. Enjoy Italy.
[01:03:59] David: Yeah. Good to see you. Thank you very much.
[01:04:01] Brad: All right.
[01:04:04] Brad: Thanks for checking out the latest show. On to this week’s featured reviews. This week’s first review comes to us from user CailteK who says, “My Focus Tool. Five stars. When I started as an advisor, I listened to this podcast for ideas of how to grow and my practice grew, as well as my skills as an advisor. I still listen to keep my skills sharp and hear what’s going in our industry that may be important to me. My clients have access to all the same information I do, this podcast helps me to provide that extra piece to provide value.” Thanks. I love to hear that this podcast has helped you on your journey as an advisor. And you know it’s true that as information has become more readily available to not only you but your clients as well, I see a theme from our most successful advisors out there that it’s key to be a lifelong learner and constantly stay at the top of your game. So, it’s great to hear you’ve learned that early in your career. Keep up the good work. I promise it’s going to serve you really well.
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[01:06:04] Brad: Kenny, that’s a strong review. I appreciate it. I try my best to keep bringing in an eclectic guest list that I know can keep you guys on your toes and bring a different perspective to financial advisors out there so glad to hear the show’s hitting home for you. Hopefully, some ideas from the show have helped you show up as a better advisor to your perspective clients and can serve them at a higher level because that’s what it’s truly all about. Thanks for listening in.
Okay. As we wrap this show, thanks again for those of you who have taken the time to write a quick review. I love reading each and every one. In fact, if you’d like to connect on a more personal level, give me a follow on Twitter. My account is @Brad_Johnson and let met know you listen to the show. I’d love to continue the conversation there. And for those of you that have interest in diving deeper or figuring out how you may be able to have our team help you implement many of the ideas shared on the show, my day job happens to be consulting financial advisors from all over the US on how to grow their business and design a practice that serves them versus them serving it.
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[01:07:44] Brad: Thanks for listening to this episode of the Elite Advisor Blueprint. For access to show notes, transcripts and exclusive content from our show’s guests, visit BradleyJohnson.com. And before you go, I’ve got a quick favor to ask. If you’re liking the podcast, you can help support the show by leaving your rating and review on iTunes. Not only do we read every single comment, but this will help the show rank and get discovered by new listeners. It really does help. Thanks again for joining and be sure to tune in next week for another episode.
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