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Financial Advisor Success
Ep 430: Navigating The Fast-Growth Hiring Challenges Of Scaling From Scratch To $5M Of Revenue In Just 7 Years with AJ Ayers
01:30:24
Scaling an advisory firm to $5M in revenue through proactive hiring, specialized training, and efficient systems.
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- [00:02]
A
Welcome to the Financial Advisor Success Podcast where you go behind the scenes with financial planner, speaker and consultant Michael Kitces to hear stories of how leading financial advisors navigated the inevitable challenges that arise on the path to success and get insight from leading industry consultants about how to break through to the next level in your advisory business. And now, here's your host, Michael Kitces.
- [00:26]
B
Welcome everyone. Welcome to the 430th episode of the Financial Advisor Success Podcast. My guest on Today's podcast is AJ Ayers. AJ is the co founder of Brooklyn FI, an RA based in Brooklyn, New York but operating as a fully remote business that oversees 370 million in assets under management for more than 400 client households. What's unique about AJ though is how she and her business partner have navigated the hiring and training and systems and process challenges that come from very rapidly scaling an advisory firm business from scratch to 5 million of revenue in just seven years. In this episode we talk in depth about how AJ and her firm have navigated periods of rapid client headcount growth, with the firm averaging 14 new clients per month in 2021 while having just three planners on staff at the time How AJ decided to hire rapidly to meet this brisk new client Demand by leveraging LinkedIn's Recruiter platform to actively reach out to potential candidates rather than just waiting for them to respond to a passive job listing and how AJ's firm created a training program to bring new hires up to speed more quickly on serving the clients in the firm in their hyper specialized equity compensation niche by incorporating internally produced videos, external coursework and the opportunity to sit in client meetings alongside Brooklyn FI's lead advisors very early in each new advisor's tenure with the firm. We also talk about how serving the equity compensation niche has allowed AJ and her firm to very rapidly attract new clients and then efficiently systematize its planning process and give advisors the chance to get a lot of at bats early on working with target clients how AJ and her partner further streamlined the firm's planning process by creating their own software tool called Gemini to extract data from a client's grant award statements and then analyze the equity compensation history to offer planning scenarios for how to handle their equity grants and how AJ has developed a three part fee model including a complexity based planning fee and AUM fee on investable assets and a fee for tax preparation to ensure that any client's fees best align to each client's actual unique needs and the value the firm is providing in each area and ensuring sufficient revenue per client when some of the firm's clients haven't yet experienced a liquidity event that would even allow them to be served profitably under an AUM only model. And be certain to listen to the end where AJ shares How she and her business partner decided to delegate responsibilities for day to day firm operations, allowing them to dial back their founder work schedules to just two days per week. Why AJ decided to hire an HR professional to serve as a core people person to help the company build culture in a virtual working environment, including by hosting regular in person retreats that the whole team still flies in for and how AJ experienced Imposter syndrome a couple of years into her time in the industry as she realized how much there was to learn about the equity compensation niche, but tackled it head on by earning a series of certifications and designations relevant to the niche and then trying to get even more client meetings to build experience working with her firm's ideal clientele. And so with that introduction, I hope you enjoy this episode of the Financial Advisor Success Podcast with AJ Ayers. Welcome AJ Ayers to the Financial Advisor Success podcast.
- [03:25]
C
I am so happy to be here Michael. Thank you for having me.
- [03:28]
B
I really appreciate you joining us today and looking forward to a discussion around Just like what happens when an advisory firm really starts to grow fast. Because I feel like there's this mentality in our industry like growth is great, more growth is greater. Who doesn't want more? We're finance people. Just put it on a spreadsheet. Compounding at 30 or 40% is much bigger numbers than compounding at 10 or 20%. But like advisory businesses aren't tech businesses. Right? Tech. It's pretty straightforward to rapidly expand how many people you serve. They just all come to the website and sign up for their accounts. The marginal impact is pretty negligible. And not so much for service businesses like advisory firms where we have very real capacity constraints of how many clients an advisor could handle before you have to hire more people, which you can do and like size up the profitability. But if you add a lot of people then you you need systems to attract them and processes to hire them and ways to train them and actually retain them. And if you add a whole bunch of them at once, then you need managers to manage them like people to build the systems and processes to handle a whole bunch of them at once. Which which is businesses can sometimes only digest so fast. The the famous Dave Packard saying was more businesses die of indigestion than starvation. Like we business actually can get into more trouble by going after too many opportunities at once or trying to absorb too much at once than sort of the entrepreneur fear, which is I just won't get enough, enough clients to survive. And just I know you've lived this very fast growth pace. Your business partner, Shane Mason was on with us a couple of years ago. Episode 220. For anybody that wants to go back and listen, I think at the time you were six team members, you were closing in on million dollars of revenue. You'd had some, some fast growth after just the first few years. Now we're three or four years later, it's 5 million of revenue. It's running this year, it's 18 team members, which is a lot of growth really fast. So I'm just excited to talk about, like what it looks like. I mean, I think if I calculator this, this is like 50% compounding growth rates for multiple years in a row.
- [05:37]
C
Yeah.
- [05:37]
B
And not just because I'm like compounding 50% on $100,000 of revenue like I'm compounding 50% on millions of dollars of revenue. So just excited to talk about, like, what happens when business, when advisory business starts compounding growth that fast and like where the challenges crop up between, like beneath the glamour of being a fast growth advisory firm.
- [05:59]
C
Yeah, I think you've just described it perfectly. We can probably just stop the podcast now. I have nothing else to add.
- [06:03]
B
Fantastic, Fantastic. So how did it live out for you though? Well, I guess, like just talk to us about what the growth sequence was since Shane came on back in 2021 and what happened, what this fast growth journey was for you.
- [06:21]
C
Yeah, so since 2021, we've become a completely different firm. And when we talk about Brooklyn Fi, or BKFI as we call it now that I'm the only team member who lives in Brooklyn, we think about Brooklyn Fi as like software releases. So Brooklyn FI 1.0, 2.0, 3.0, and now we're in release 4.0 and we're what's happened between 2021 and now sitting here in February 2025 is harnessing growth that we sort of lost control of at a certain point for sure in 2021 and really 2022, and then kind of reining it back in, figuring out how to grow more sustainably and more comfortably. Our niche at Brooklyn Fi, just to speak a little bit about the firm, is equity compensation. We sort of planted that flag in the sand in, you know, we didn't start that way, but naturally the niche sort of evolved from helping creatives in Shane and I'S network to their spouses who were software engineers and designers at Spotify. And that was sort of the natural evolution into our niche of equity compensation. That happens in really like 2019, 2020. And then we see what we call lovingly IPO bonanza of 2020, 2021. And that's really when we saw this kind of explosive growth, this adding on average 14 clients a month for a staff of three. What at the time was three CFPs was painful and we can get into that more. But really where we're sitting now in 2025 is we're still growing rapidly, but we have a great team in place. You mentioned processes and systems where we can kind of absorb and move with that growth. I like to think of it like, you know, an earthquake proof house where it's, you know, it's on the stilts and the stilts are going to sway in the earthquake and it's going to be okay. The house isn't going to crumble and fall down.
- [08:10]
B
So talk to us a little bit more about how this played out. Again, if I go back and look where we were when Shane joined us in early 2021, you were like 150 clients, six team members, about a million of revenue. Take us back to what actually happened as this fast growth journey got underway since Shane was on in 2021.
- [08:36]
C
Yeah, so in 2021 was the biggest year for IPOs in I think ever, $287 billion in proceeds raised in 2021. Just for context, the next year in 2022, it goes from 287 billion to 19 billion. So all these companies are IPOing. Brooklyn FI says our niche is equity compensation. And if you are going, if your company is going public and you're an employee there, we can help you. We are, we are the firm for you. We can do your taxes, we can build a trading plan. So we're looking, It's February of 2021. We're looking at our fifth straight month of adding 14 clients. We add 24 clients that January. We go, we got to hire a bunch of people. We got to hire bodies who have CFPs who are good at talking to clients and we have to train them in this deeply complex technical niche of equity compensation. So we just kind of rode growth and it's hard to go back in time and realize, think about what choices we made. But we just made choices and said from day one, Shane and I always wanted to build a big enterprise firm. That was always the goal and this was an opportunity. And instead of saying, whoa, let's take care of ourselves, let's take care of our families. We just said, let's go for it. Let's make this work. You said earlier, Michael, about a tech company that has a product, we basically treated the advisory business like it was a product and it could be, you know, replicated over and over again. So we built systems. We figured out how to train a cfp, you know, right out of school in this deep technical niche in, you know, three to six months. So that was sort of. Our focus, was like, how do we scale this thing really quickly? We have this fleet, you know, what we hoped was a. Was a. Was here to stay, but probably understood as a fleeting opportunity to say, is this a bubble of tech IPOs? This is our niche. Can we ride this thing out? Can we make it work and just keep adding clients, keep hiring the right people to serve them, you know, keep delivering that amazing client client experience? I think we were definitely over serving our clients at that time, giving them things they didn't need and giving our planners a lot of busy work. But really, it was just a numbers game. Could we hire fast enough to serve the amount of leads that were coming in the door without exploding? And we eked it out throughout 2022 and 2023, and then 2024 is really the first year where that growth sort of comfortably settles down. We're adding six or seven clients a month instead of 15 clients a month, and we're enjoying that moment.
- [11:06]
B
So I want. I want to hang out a little bit more. And just what. What happened when this, like, I guess, hockey stick sort of growth starts kicking in in 2021? Because you said, like, suddenly we're doing 14 clients a month, which is more than 150 a year. And you. I think you started the year at 150. So we're essentially staring down a, like, hundred percent growth. Like, what happens when the business doubles and you've got three CFPs, which is not unreasonable at all. To serve a client base of 150 with some ongoing growth, but gets a little crowded when it's like five new clients per month indefinitely, no break, plus serve all your existing.
- [11:49]
C
Yeah. And also, you know, knowing that with our. With our niche, we. There was this lag in expertise. You know, in 2022, it was really hard to find a CFP who had that equity compensation experience or even that tax background. Now it's become a lot easier because the niche, I think, has really exploded and taken off. So now it's actually easy for us and we see equity compensation experience on resumes, which is so wonderful to see. So, yeah, it was really a numbers game of we got to hire people quickly to fill this need.
- [12:20]
B
So tell me how you tackled that. When the growth starts to ramp up the way that it did, who's doing the hiring? How do you find them? How do you list them? What's the hiring process? How did it work when you went, oh boy, we need to start getting a whole bunch of people through real quick.
- [12:40]
C
Yes, that's a great question. A lot of the hiring was done at that moment by myself, by Shane, by John, who at that time was growing into this director. John is our managing partner now. At that time, he was our lead planner growing into the financial planning director role. At that moment, we tapped into the LinkedIn back end. We had recruiters pitching us and saying, we're going to take 15% or 20% of the first year salary for these people. And I thought, I need to hire six people in the next three months. I don't want to pay that. I'm going to do it myself. You'll notice this theme throughout this podcast. So we bought a LinkedIn recruiter subscription, which is for recruiters. I think it cost at that time, $20,000 a year. And I would post the job on LinkedIn and I would go in the back end and I would message a bunch of CFPs who had mentioned the word tax and financial planning somewhere in their LinkedIn profile. And we were fairly successful at hiring that way. Our current director of financial planning, Caitlin, I remember the moment I saw her face pop up in that LinkedIn backend and she had a CFP CPWA. And I thought, wow, we gotta get this person. And basically recruited her myself, interviewed her, and because we were moving so quickly, it was job post goes up, interviews are happening within a week or two. I think we were sending offers within the month to CFPs, and then they were getting clients within the next month. So it was this just like very quick, fast turnaround. And I think that's kind of how we've always operated at Brooklyn Fi, which is, there's a problem, there's urgency here. Our clients need something. What can we do to serve them and what can we do to meet their deadlines? Which, you know, burned us out eventually. But it really did help add, you know, fuel to that fire of growth.
- [14:24]
B
So I. So I guess I'm just wondering, like, you're, you're going through this Fast hiring bot LinkedIn Recruiter search bare for basically anyone with CFP who has tax and equity comp and just what you're like direct messaging them to say, hey, if you're looking for an opportunity, we're thinking about switching firms, we have this position open. Just like cold messaging them.
- [14:50]
C
Yes, exactly.
- [14:51]
B
So these weren't necessarily people who are, are, were job searching for your ad like you were outbound to say we're hiring.
- [14:59]
C
Yeah. And I think, you know, we hired, I think it was five or six CFPs in the calendar year of 2021. And I think, you know, most of them came through our outbound messaging. Maybe one or two of them, you know, found us through the LinkedIn posting, you know, on, on monster.com or indeed or one of those sites where it got cross posted. But for the most part it was us doing that proactive reach out. And when you're hiring that quickly, just like when you're onboarding clients that quickly, not everyone is going to be an amazing long term fit. And that's unfortunate. Especially when you have client relationships and you're handing off your client relationships to someone, if they're not there a year later, that's going to cause friction with clients.
- [15:38]
B
So I'm curious, what peels people out to be willing to make the, the switch? Lots of advisory firms talk about struggles and finding talent. At the end of the day, you got a lot of people relatively quickly with what sounds like frankly a much more outbound process than most firms which post a job ad on various sites and wait to see who responds. I'm assuming you still had a lot of people who weren't interested to get to the few who were. So what, what defined people who were willing to move or what did it take to offer them or say to them to get them interested in the conversation?
- [16:18]
C
I think it was a combination of two main things. One being that we are a remote firm and have been since March 15, 2020, when New York City shut down our coworking space. So that promise of remote work forever. At some point we may have an office. I'm not saying we never will go back, but really it's a promise to our current employees that you will always have the opportunity to work from anywhere in the world as long as there's a stable and safe Internet connection. So I think that appealed to a very specific type of person. And the second thing is the opportunities to work with the type of clients that we work with at Brooklyn FI, you know, our average client age is 37. It ticks up basically one year each year, 35. And just that promise that when you come on board, you get to serve clients right away. You get to talk to clients about the issues that they're having as a 32 to 45 year old of getting married for the first time, having the first kid, buying their first house, going through a liquidity event, being the first person in their family to be a millionaire before the age of 40. So that kind of exciting client relationship is appealing to a lot of people, especially folks who had maybe been languishing at a firm where they were working with retirees who were passing away and they were dealing with the grieving spouses. That's a certain type of burnout. So we kind of offered a different path.
- [17:38]
B
And the roles where you were hiring are these salaried roles, are these percentage of revenue roles, because it sounds like you weren't necessarily hiring people to do traditional business development. Come to our firm and build your client base per se. You've got a fire hose of prospect activities coming at you because you've got a brand and equity comp in the biggest year in the history of IPOs is it feels like a different kind of advisor job opportunity than a lot of other firms out there. Because your problem wasn't we've got a platform, go, go find your clients. Your problem was we literally have too many client opportunities coming in to handle. We need people who can hit the ground running.
- [18:22]
C
Yeah, absolutely. I mean, yeah, these were our salaried roles. We now do have a revenue share which I think we put in place around then in 2021. So, yep, salaried position, great benefits, generous PTO policy, work from anywhere. And yeah, you absolutely do not have to do any business development whatsoever. I think actually we did not have a business development reward system in place until one of our advisors said, hey, I want to bring my best friend over, but is there any incentive for me to do it? And we thought, oh yeah, we should probably come up with a program and patch something together that I actually couldn't even tell you what it is at this moment. I. I don't know. So, yes, it was the promise of you don't have to do any business development. You know, now where we're sitting in 2025, we actually are starting to train our existing CFEs, our existing advisors in the sales process. So now they do have an opportunity to do some business development. But yes, most of the leads are just coming to the firm and then they're getting farmed out by John and I, who do all the sales calls of is this person a good fit? Who on the Two on the roster of our cfps has capacity right now, is this a good personality fit, etc.
- [19:30]
B
So I guess I'm curious if you're willing to share like what, what kinds of salary were you setting or even like percentage of, of revenue comp. Like just what did it take to actually get people and talent on board at that point?
- [19:46]
C
I mean we, it depends on who we were hiring. Honestly we, at that moment we had to, because of the growth, we had to be hiring experienced CFPs who could jump right in and be able to serve clients. So those salaries, you know, based experience ranged from kind of on the low end, 100,000, on the very high end, 200,000. And it was just what experience do you have? Basically how quickly can I give you 50 clients? Was a good measure of what the salary was going to be. With the promise of these big long career paths with lots of opportunity to grow to join a firm like Brooklyn Fi, you have to be excited about not just this year and not just what you're going to get out of the firm today, but how you're going to grow with the firm in the next two to 10 years. And that was sort of the promise.
- [20:34]
B
So how does growth work when roles are heavily salaried? I mean in, dare I say, like traditional world and in air quotes, I mean growth is you get more clients, you have more revenue, you get a slice of a bigger pie and your, and your income's growing. So how is it structured in your world?
- [20:52]
C
Yeah, so we have a revenue share and so the advisors that have the more experience and the, the higher type, the lead advisors have a larger percentage of the revenue share. And so that's been fairly successful. Honestly Michael, in the beginning the revenue share didn't really click and there were some struggles and conversations with yeah, I'm working 60 hours a week, it's year end planning season and I don't feel adequately compensated for the work that I'm doing because the revenue share is quarterly and it's only been going for, it's a new program, it's only been going for two quarters. But now that we've had it for three or four years now, it is a bigger part of folks compensation and that's sort of equalized out and been a good incentive to stay and to keep serving clients.
- [21:33]
B
So is it blended now like part salary, base, part revenue share?
- [21:37]
C
No, the base salaries are, we have career tracks that have salary bands based on designations. Basically once you get your cfp, you get a nice bump and as you move through the career tracks, your revenue share percentage goes up as well. And just to say now when we were going through that period of time, wild growth, we like we did have to hire, we needed to hire these experienced advisors. Now we have a homegrown program where we're looking for folks who already have their CFP or you know, have already passed the exam and just need the experience, are maybe have one or two years of experience at an advisory firm through internships or associate roles and who really want to become advisors quickly. And that's our promise now. So we're at this moment with this growth level in 2025, not actively looking to hire fully formed advisors who have 10 years experience. We're looking for those folks at the beginning of their career who want to learn equity compensation, who want to become a client facing advisor on a super fast track. And we're seeing the results of that happen. Right now we've got James and Melanie Engage who all started as associates, who all now have client relationships less than a year into their tenure at Brooklyn Fi, which I just think is cool because they've gotten that real experience and then they get to actually apply it. They don't have to wait five years for an advisor to deign to give them a client or two or let.
- [23:00]
B
Them into the meetings because you still got a active inbound flow which means you still constantly have to add new advisors and lead positions to take on a manage client relationship.
- [23:13]
C
Exactly, exactly.
- [23:14]
B
Can you tell us more about what the, like just what this talent, I think is like homegrown talent development program looks like? I mean what do you do for these relatively new folks? CFP exam plus limited experience. What do you actually do for them to get them up to speed quickly?
- [23:32]
C
Yeah, so we have built out a pretty intensive training program that comes from basically John and I built that in 2020 when we needed to hire folks so quickly. It was like how can I teach someone the ins and outs of AMT and incentive stock options in six weeks? So we've, it's a lot of videos, it's a lot of writing. We send them to mystockoptions.com they've got a great training program too. So we kind of borrow from that and they're just in client meetings, they're observing, they're learning. It's a very collaborative approach. There's a lot of sharing of knowledge between our more experienced advisors and our newer associates. So it's this we built out in this tool called Trainual, which is awesome. So it's a lot of videos A lot of me and John just like walking through spreadsheets of, you know, here's how we did this tax projection and here's this really interesting case, you know, in case this ever comes up. So, you know, a lot of it is self guided training that has taken, you know, thousands of hours of our blood, sweat and tears, if you will.
- [24:35]
B
So is there a cadence for this?
- [24:38]
C
Yeah, there's, it's basically, you know, a one month plan and there's like a 90 day plan. So in the first month, here's the milestones we expect you to hit. And at three months, here's kind of where you should be. But what happens in reality, Michael, is just that people just start absorbing it because they're in the meetings. And our, you know, more senior advisors are just so generous with their, their time and knowledge sharing that it just kind of happens. But yeah, I would say, you know, a person out of college who's got a year or two of advisory experience could come to Brooklyn Fi and be client facing in, you know, as little as a year. That's, that's our goal.
- [25:10]
B
And when, when they're in the meetings, what are they doing? Are you literally just paying them to sit there and listen? Do they have, do they still have some responsibilities to the meeting or the client or the lead advisor?
- [25:23]
C
Yeah, so they do a lot of the preparation. So, you know, a client date, we get, we get a lot of client data because equity compensation is so data heavy. We need, you know, records of exercise history and tax, you know, tax returns and what have you. So yes, the associates are doing a lot of that prep. The prep gets supervised. And then in the meetings, yes, sometimes we are paying them to sit there, but for the most part, especially for the newest associates, it is very training focused. There's a post meeting recap download. How did that go? What did you learn? So I do think you're absolutely right to say that sometimes there are associates just sitting in meetings observing. And it used to be that they were taking notes, but now with amazing AI tools, notes get taken by the robots and the meeting gets perfectly summarized and notes get sent to clients afterward anyway.
- [26:13]
B
Well, that's why I was wondering as well. So are you using some kind of AI meeting notes tool?
- [26:18]
C
Yes, we are. We're using Zox, which has been really fantastic for us, both for discovery calls and prospecting, but also for client meetings.
- [26:26]
B
Okay, just add curiosity. Why zox? I mean, did you like look at others and that was your winner? You just found them and seems great and off it Went.
- [26:36]
C
I'm going to be honest with you, Michael. I used to do all the tech demos. I used to know every single tool out there and I love technology and I love automation and I love building systems. I have taken a large step back from the day to day operations. So I know that Caitlin, our financial planning director, selected Zox, and I have no idea why, and I trust her.
- [26:56]
B
So does that change how training and development works for your associates? When they're not doing meeting notes and recaps anymore?
- [27:08]
C
They're taking their own notes because they're learning. And we're hiring people who, you know, very obviously display a desire to learn quickly. So I don't know how much it's changed their, you know, need. They don't, sure, they don't need to be in the meeting, but from our perspective, they need to be in the meeting because they need to experience it and, you know, watch how a more senior person reacted to a client's question. Whether they took the notes or not is irrelevant. Hopefully they retained it and then can tomorrow get that at bat to then be the lead advisor in the meeting with that senior advisor kind of sitting in the second chair, ready to take over if needed, because it's their first client meeting. So there is a little bit of role swapping where one day you're the second chair in the meeting and you're observing and you're taking follow ups and you're opening accounts while the meeting's happening, but then you will have the opportunity as an associate with your handful of 10 clients to be the lead in that meeting. But having that more experienced CFP to fall back and kind of guide things if the client has a difficult question or you lose your train of thought, which we all do.
- [28:13]
B
I want to go back a little bit more into this fast growth phase because you said, look, the fast growth came, you went and hired fast. You did, you went outbound. You found people who thought it was appealing to, to, you know, be in roles where clients come to you and you can hit the ground running right away and you get to, probably for a lot of those hours, you get to work with people close to your own age than your parents, your grandparents age. So. But you also said when you hire that fast, not everyone sticks and that it burned you out eventually. So I'd, I'd love to hear more about how this like, continued and played out as the hiring growth continued as you were trying to keep up with all this.
- [28:59]
C
Yeah, I think it kind of was a natural, you know, natural selection, both with Clients and advisors. You know, we were also such a young firm. You know, Shane and I started the firm in 2018. Neither of us had ever worked in a wealth management firm at all. We were trying to figure it out. So I think we lost a lot of trust with certain employees and clients for sure. And just like, oops, we made a mistake that was the wrong way to do this. So as the growth kind of continued, we just got more honestly at bats. When you take 300 clients through complex tax projections for their IPOs, by the 300th time, you've systematized it. And it. It takes 30 minutes instead of three hours. Shane and I have spent the past four years developing our own internal tool called Gemini, which basically replaced all of these insane spreadsheets that we built to track folks equity compensation and every exercise and every sale. So once we brought on this tool, that sped things up. We learned a lot from our employee complaints, honestly, you know, hey, we're over serving these clients. You know, this process is too involved. You know, I'm working too many hours. These. You know, my client book is, yes, I only have 60 clients, but it takes me so much longer to serve all these clients. How do we change this process? So, you know, we worked really hard to scale what is just a lot of meeting intense advice. So that's been. I think really the secret to that growth was let's do the same thing for every client. Let's make sure every client experience is the same so we can repeat it and we can train someone quickly on it and that the advisor feels mastery of the process and then feels a lot more confidence delivering the advice.
- [30:56]
B
And I guess there's an aspect that goes with this that because all your clients have the same profile, because everybody's coming for an equity comp conversation, that's your positioning in the marketplace that like it. It. It gets easier to say, let's do every. Let's do the same thing for every client because every client actually has the same profile in the first place.
- [31:18]
C
Exactly. Yeah. I mean, Michael, you told us to do a niche in 2017, and we listened.
- [31:24]
B
That was like the early days of this podcast. That's excellent.
- [31:27]
C
Yeah. I mean, truthfully, you know, the. The way we built Brooklyn Fi was listening to podcasts, reading books and saying, that sounds cool. I mean, Shane and I would change the business model every week after we listen to your podcast because we'd hear someone say, oh, this software is really cool, or you should charge this way. And I think, honestly, there was a lot of whiplash. With our employees in those early days of wait, we just got used to this process and now you're changing it. So I think as a business owner and as what is so much in Brooklyn, Fi's DNA is like, this is cool, this is innovative. Let's try it and see if it works. And sometimes this stuff didn't work. And I think that created this. Yes, it helped with the growth and a lot of the things did work and when the growth happened, we had a lot of good things in place to sustain it. But yeah, it was messy. For sure, it was messy in those years.
- [32:18]
B
So which parts didn't work as you were trying and iterating?
- [32:26]
C
I think just growing that quickly and not having the at bats of hiring, we were doing our own hiring. I think that was a mistake. That's a regret that I have. I don't think I'm awesome at hiring. I wish we had brought in help to do that. I don't think I was very distracted. I think I had 100 clients of my own. I was running the financial planning department, running half the business and doing a lot of the hiring for the advisory team. So I had too much on my plate and I was pulled in too many different directions and that didn't work. Meanwhile, Shane is running, we also have a tax practice. We're preparing taxes for all of our clients as well. He's doing the same thing over there. It was kind of these two mirror businesses under one roof where we're trying to hire tax managers who out of school cost 50% more than a CFP because that's the market for tax talent. So that was another challenge that we had. Honestly, I think the big change that happened was Shane and I sitting down and going, we have to delegate a lot more of this. So as soon as we started delegating, things started to even out a little bit. And Shane is a master delegator. I've learned so much from him. Unfortunately, in those first couple years he was doing a lot of delegating and I was picking up a lot of those hats and I was wearing all those hats. So as soon as I started to take those off, that's when we really saw some smoothing out of the. The rockiness.
- [33:55]
B
So you, you said like you weren't good at the hiring, but you did get a lot of the people in to like fill these roles with outbound efforts on LinkedIn. So I mean, it's like you were filling the roles and growth was happening. So what, what wasn't working?
- [34:15]
C
Honestly, I. It's Hard to say that things weren't working. It was, it was awesome. You know, it was, it did feel very much like a, a tech company because we were seeing this incredible growth. It's that Star wars pod racing meme where it's like it's working. That's what it felt like. I can't sit here and say it was terrible and it was so hard. It was honestly awesome, Michael, going through that growth. Shane and I were having a great time. There were very late nights. Certain other relationships suffered because we poured everything we had into the business. Our personal health suffered. But you know, in terms of what the business was doing, it was working and there were missteps here and there, but it did feel like we would make. We made a lot of good decisions and we were able to pivot really quickly when something didn't work. And you know, Shane and I have kind of this unlimited well of, of work ethic that we just kept pouring on the fire and it, it worked.
- [35:13]
B
So what like then what drove the. We have to delegate more of this. If it's working and it's going well and the growth is happening, what was forcing the change?
- [35:27]
C
I mean honestly, that was always the plan. The plan from day one was to build an enterprise firm that did not rely on Shane and I to run it. We didn't name the firm after ourselves at all. The plan was always for us to build a enterprise business that could also function as a lifestyle business. Shane and I would always joke that by the time we turned 40, you know, we'd be out of the business, which is still potentially on the table. I'm 36, he's 37. So it was always how do we build this thing? How do we get really good at all these things? And then as soon as we master something, we teach someone else how to do it and we back away from the business.
- [36:09]
B
So help us understand more of what that vision is. I mean, is that a we want to just be able to sell the business and exit by age 40 or no? No, we would continue to own it and get the dividends. We just don't want to have to be in the business running it day to day.
- [36:28]
C
That remains a very wide open question. And that's kind of what Shane and I focus our time on now honestly is we have this sort of unwritten goal of becoming a billion dollar firm. You know, can we go from zero to a billion dollars in less than 10 years? And that's does at this moment where I'm sitting feels attainable. The group Chat between John, Shane and I is called one Billy or bust. So we kind of always have that goal in our crosshairs. But the goal for Shane and I is just to do something challenging and hard and we've been working on that. So the idea of exiting at some point is appealing to me. I think my identity as a business owner, I'm definitely not ready to let go of that. So it could be an exit at some point. It could be an internal succession plan. That's something we're exploring. So you know, I'm in the office right now two days a week. I'm doing some sales calls, I'm doing some internal meetings, meeting with our department leads and the other three days of the week I'm meeting with anyone I can both, you know, advisors who want to join the firm either as employees or potential roll ups. We're looking for people who understand our vision, understand the platform and want to be a part of it. And then also on the other end, what are folks ideas for what we've built? What is Brooklyn FI 5.0 look like?
- [37:50]
B
So then, so then talk to us more about this transition you said you went through in early 2024, which it sounds like is when you. I started more purposefully or intentionally saying we're going to dial down our time in the business. Like what, what. I mean, what did you actually change? What did you do? Who, who took over? What?
- [38:15]
C
Yeah, I mean the first thing we did is I said to Shane, I'm putting a calendar block on my, I'm blocking off my calendar on Monday and Friday. Do you want me to block yourself too? That was, which is we are not available on Monday and Friday. That was the first step. You know, the change came about because we had leaders in the business that seemed ready to take over and you know, had kind of hit a ceiling in terms of what they were doing. And we just kind of looked at each other and said, let's maybe they're ready, maybe they're not. Let's give them a shot. So John became managing partner in 2024 and Shane and I said, we're not available on Monday and Friday. That then became Monday, Thursday and Friday. And we just kind of, we promoted a few other folks to department leads and just stepped away and said, you guys got this. We're here if you need us. We're the board. But you know, you have the tools, you understand our vision. You're going to check in with us at least once a week to make sure we're following the vision. But we trust you. Let's see what happens.
- [39:16]
B
So, all right, so many questions here. So just help me understand, like literally what are the seats like? You walk away. You and Shane are mostly walking away. The business is now headless. Who is literally running the business? Like, what are the job titles of the people who are still around doing this?
- [39:35]
C
John Owens is our managing partner. And John Owens effectively runs the business. John was a fantastic hire who had basically who was running a financial planning department at an RIA in Michigan when he joined us in 2020. And he thought we were crazy. I think he still thinks we're crazy, which is fine, we are crazy. But he's learned how to put up with us. And John had actually worked in an ria. John knew how to scale an AUM business. But John had also sort of been through a, I don't want to say failed succession. Just the opportunity wasn't there for him. So he was looking for an opportunity with a path to ownership. And we promised that, you know, when he came on board, so, you know, four years later or really three and a half years later, we said, okay, John, you're ready. And he stepped into that role. And then we have our tax department and our financial planning department. So those department leads are also on our leadership team. So it's really the three. It's our managing partner and our two department leads who run the business as it stands.
- [40:34]
B
And so all the tax related stuff rolls up to tax, all the advisors roll up to financial planning, and then John has the business overall.
- [40:43]
C
Exactly. Yeah, exactly. So kind of the three of them make a lot of decisions. We have a department leads meeting once a week that Shane and I attend. But we try to keep our mouths shut. I have a hard time doing that, but I do try to stay out of it and only offer my opinion when it's asked for. And that's been hard for me. Honestly, Michael, I have a lot of opinions about things and I've had to sit on my hands as I watch decisions get made. And you know, I haven't yet had to speak up and say I don't like the way this is going. You know, I quote, unquote, veto it. So it's, it's been going pretty well.
- [41:14]
B
We're, we're a year into it, so. So now they meet once a week. You and Shane attend, but you try to stay silent. What else, like what else happens in just the, the leadership and management of the firm between what they do and where you and Shane are still involved or not?
- [41:39]
C
There's Not a ton of big leadership decisions to make anymore. We're a relatively young firm, but we went through so many iterations that it's kind of, I don't want to say status quo, but the big decisions that are getting made now are we need to hire a person, but that decision gets made at the beginning of the year in strategic planning. So we're involved in that decision. You know, changing raising prices, that's something that would get made. We kind of would all collectively make that decision together. You know, if an employee leaves and we need to replace them, I'm not involved in that process at all. You know, that's the department lead who's going to, you know, ask our HR specialist to find and source that person and they're going to make that hire. We have built career tracks that have salary bans. So it is kind of plug and play leadership, if you will, because we've gone through it before. So, you know, big decisions were involved, but I can't really think of a big major decision that had to get made in the past year that we weren't. That was a surprise, if that makes sense.
- [42:41]
B
Because the whole point is, like, we've set the strategy of who we're going after and how we get them and what we do to serve them and how we charge them and what the compensation structure and career tracks are. Now it's, as I say, just like that's belittling what still is, like the complexity of the role. It's just execute this strategic plan and do all the things that need to be figured out day to day, week to week, month to month to execute on the systems and the plan.
- [43:11]
C
Exactly. We know our business model, we know our target client, we know how to serve them. We have good systems and processes in place. I think when Shane and I were running things, it was like, let's rip it up and start again or let's try this. And we've made a commitment to not rip it up and not change things without more thoughtfulness and more analysis and a slower rollout. So I think that's helped a lot. Yeah, it's implementation of the vision and obviously problems come up and John's role is massive and he does a lot of things at the high level and also is in the weeds. And we're trying to get him out of the weeds. But yeah, it is a little bit. It's working. You know, the tracks are laid. You just gotta, you know, add coal to the fire.
- [44:00]
B
And then I thought I heard you say there's a Like there's an annual strategic planning meeting or process as well. How does that, how does that work in your firm?
- [44:11]
C
You know, we've been on the EOS system for years. We've sort of like we've picked and chosen what we want out of it. So we do weekly Pulse meetings, we do quarterly traction meetings and we kind of do follow the EOS system of make a list of all the issues that you have throughout the year. We do it quarterly and at the end of the year we look at the big issues list and we have this kind of two day leadership on site meeting. We fly everyone in and we kind of say, okay, what are the big problems in the business that we need to solve? How do these relate to our one year goals, are our five year goals and our ten year goals and what's going to be the priority for this year and who's going to be in charge of fixing that problem or creating that opportunity? So it really happens once a year and it's relatively the EOS model. We've added our own bits and bobs to it.
- [45:03]
B
And so which parts are you and Shane involved with? Their leading versus what John and the department leads are leading.
- [45:14]
C
Shane and I are truly just support for what they need. So for example, this quarter we do have rocks, which is part of the EOS system. Shane's rock is related to developing COI relationships. So that was something that John and Caitlin and Dan, the department leads, came up with and they asked Shane to come in and really start to develop those relationships. I have a rock related to honing our sales process because HubSpot categories need to get updated. So it is a little bit in the weeds and I basically volunteered to take it off John's plate because he's got enough going on. And that sounds like a fun project to me. So we really are just at this moment here to support them and what they need.
- [46:00]
B
And then I've got to ask, how does this work from just a dollars and equity and compensation perspective? Did, did you and Shane take yourselves off the payroll when you went through this shift? Did you change your comp? I don't know if it matters if you're the only equity holders because you're going to get the dollars either way. But how are you thinking about compensation in the business versus profits of the business as you go through this sort of shift?
- [46:30]
C
Yeah, so we're structured as a partnership. So in the beginning it's a 5050 partnership between AJ and Shane. John bought into that partnership last year. Our department leads will Shortly be buying into that partnership. So, you know, there's no, we don't have salaries. There's, you know, in terms of getting distributions, we've somewhat regularized it so we can pay our mortgages and whatnot. But for the most part, you know, the compensation is based on profits and you know, because of various tax reasons there's no guaranteed payments or anything like that. But that's worked for us.
- [47:03]
B
So there's not even any guaranteed anomaly salary or quotes, guaranteed payments like you, you and Shane just flat out split, split the bottom line of whatever's left after everything's done. That's your compensation in, on and around and everything for the business?
- [47:20]
C
Yes, effectively, yes. You know, in terms of, of day to day, there is a monthly bank account transfer, but that's just to smooth things out.
- [47:28]
B
Just literally like for cash flow purposes, you smooth the distributions. So how does that work for someone like John who comes in who I'm presuming was salaried and now is on the partner table?
- [47:42]
C
Yeah, it's complicated, but it's one of those things that we could have overcomplicated it, but instead we sort of use the same model that we have, which is there's some form of distribution that he's going to get every month, you know, related to his ownership stake.
- [47:59]
B
Okay. And he had to, I guess, accept or be in for. I'm not necessarily going to be in the stable salary category anymore once I'm on the ownership table instead.
- [48:11]
C
Correct? Exactly. Yep. And that's an interesting thing about ownership, right. Is a lot of folks, not everyone is cut out to be an owner because they think, oh, you know, well, ownership, my compensation is going to go up, I'm going to get more. But, but we're really looking for folks who want to be an owner and understand that there's risks involved with that and if we have a bad year, their compensation will go down and it's not guaranteed.
- [48:32]
B
So you made the transition, I guess almost a year ago. So I guess wondering how is it going? How's it going compared to what you thought it was going to be?
- [48:44]
C
Well, in terms of the firm, it's going great. I think John and department leads are doing an excellent job in leadership. Shane and I check in on us, make sure we're doing okay because it's been very difficult to go from my identity being I am so busy running this business that I don't have time to take your phone call. And all I'm thinking about is this business. All I'm thinking about is clients 24. 7 to. Oh, John's got it. The business is running smoothly. What am I going to do with my time? So I've been struggling with. And I know Shane has been too. What is my identity as a business owner that doesn't work so much in the business. And you know, I've been filling my time with, you know, I still do sales calls. Shane and I do our weekly podcast, the liquidity event. So there's some prep for that, you know, still two days of meetings in the business. We've been working a lot on this tech product we built called Gemini which basically is a download of all the Brooklyn fi financial planning equity compensation advice into this cloud based tool to do tax projections for folks who have stock options. So that's been five years in the making and we're just getting ready to bring that out to other advisors. Basically. Shane and I have been collaborating on our next business, our next thing and, and just meeting as many people as I can. I have time to go to conferences finally. I love going to conferences. I love meeting people. I always get something out of a conference, whether it's a person, a new software tool, a tidbit of advice. So just having the brain space to get out of the business yet still contribute to the business has been going pretty well, I would say.
- [50:35]
B
And Gemini is. It sounds like a software you're ultimately looking to sell to other advisors. Like other firms that do equity compensation that ostensibly need the same tools that you needed and built because they're doing equity compensation as you did.
- [50:50]
C
Exactly, exactly. You know, we started building it initially we were actually going to build it for other advisors. Then we realized, you know, the, it was such a. There was so much knowledge and so many, you know, needs and wants and bells and whistles to put into the tool that we just decided to build it for ourselves first, work on it, use it. And we've been doing that for the past three years and now we finally feel like, oh, it's ready. Can we share this with other advisors who are in this niche? And this niche is, I don't have numbers, but I would say exploded. Like I was saying earlier, it was always difficult to find advisors who even kind of understood what incentive stock options were. Now there are so many firms also planning the flag in the sand and saying our niche is equity companies compensation.
- [51:37]
B
Very cool. And so can you explain a little bit more about what the software is and does for advisors who may be in the niche or thinking about the niche and trying to figure out what type they Need.
- [51:50]
C
Yeah. So the goal is that it replaces the six hours it would take to understand someone's equity compensation history. Because most folks don't just come to you and say, I have one little grant of Google stock and I've never, you know, I've been selling it every time it vests. Most of the time it's a lot more complicated than that. So the tool, you know, will read a PDF from, you know, Schwab or Morgan Stanley. It will, it will, you know, it will analyze their entire history of grants and exercises and sales. So basically we have this history. We're tracking the cost basis, which is really important for understanding what our tax impact is going to be. And then it basically creates two different scenarios for how to advise the client on a diversification strategy. Scenario A, we want to diversify with paying 0amt for our incentive stock options. Scenario B, the client is comfortable with paying $100,000 of AMT for incentive stock options in a five year diversification plan. What are the exact trades they could make over that time? So it takes information. The algorithm is able to prioritize different wants and needs and planning goals of the client. And then the deliverable is you get this trading plan, for lack of a better word, that says, hey, client, on this date, sell these many shares from this lot. And here's what the tax impact is going to be.
- [53:19]
B
Very cool. And it sounds like it all builds and starts around document extraction to read the statements that they've got to get the information in there and start building the scenarios. So you also just avoid the raw data input we all otherwise go through as you're just knocking through 11 tranches of equity pieces that they've gotten in various segments over time.
- [53:48]
C
Exactly. And it's not perfect. It can't read every single statement from every single provider. But if you can get it into a CSV, it can read it. And we're working on every time there's a new provider or every time Morgan Stanley changes the way that they organize equity, we got to update the software, which we are, we need it to be up to date for Brooklyn Fi. So the idea was it'll be up to date for other advisors too. You'd asked earlier, how do we train advisors in this deep technical niche? Well, with Gemini, the idea was because, yes, you need to understand equity compensation to use it, but it makes decisions for you. So it's a lot faster for an advisor to understand how to give equity compensation advice without knowing the ins and outs and without having the hundred at bats with Clients and understanding what happens when you accidentally advise a client to generate $250,000 of an AMT bill. How does the client feel when that happens? You can't do that with Gemini because that's bad adv, depending on the client situation.
- [54:53]
B
So then paint the picture for us of just what the advisory firm looks like today.
- [55:01]
C
So we have 405 client households, 18 team members. About half of those work on the financial planning team and the other half work on the tax team. It's very collaborative. So because our niche is equity compensation, tax is a big part of that. So you know, each client gets a cfp, but there's also a cpa, you know, or a tax expert who's kind of behind the scenes doing tax projections as needed and preparing returns. So the teams really do support each other. So during tax season, the financial planning team is very supportive of the tax team. During year end planning season, or really just the back half of the year, the tax is really supporting the planning team. And you know, our goal is to, is to get folks in client, client facing roles as quickly as possible. So like I said, we have some, we have three associates now and our goal is to get them, you know, fully as senior planners or lead advisors as quickly as we can. We know.
- [56:00]
B
How many lead advisors do you currently have?
- [56:04]
C
We have seven lead advisors.
- [56:07]
B
Okay, so I'm just like rough mathing in my head with seven leads and, and 400. So client households, like 50 or 60 clients becomes your capacity just given like the intensity, complexity of clients?
- [56:25]
C
Yes, I would say that we are what we think capacity historically has been, 85 clients per advisor. I think I have a hypothesis that we can push that up to 100 with Gemini with being able to serve more clients with a, with a portal. So right now at this moment we have capacity in the system. Right? We have capacity to bring on these 14 or 15 clients a month that we're currently signing.
- [56:54]
B
Okay, and, and is that still the pace that you're at? You're still at 14 or 15 clients per month kind of volume.
- [57:01]
C
After a lull in 2020, first half of 2024, we are back up to that, that, that number that seems to feed, that seems to be a good number for us.
- [57:12]
B
Okay, and, and what does this add up to in terms of, I guess overall revenue or AUM for the fall.
- [57:22]
C
In terms of revenue last in 2024 we did 4.2 million in revenue. This year we're hoping to do 5.2 in AUM, we just crossed 370 million. But the way our fees work is most folks, because not most, but a large portion of our clients because they have equity compensation that's concentrated in one private company or public company, they are paying us a retainer fee until they can hit, you know, our AUM until they can hit a million dollars in AUM. So AUM right now makes up about 40, 45% of our revenue. By the end of this year it'll probably be about 50%.
- [58:04]
B
So can you break that down a little bit more in how the, how the fee model works in this client segment? Like I'm hearing retainer fees but then also AUM at some crossover. So can you just break this down for us a little bit further?
- [58:19]
C
Yeah, so actually this year we, we switched up our, our fee, our service offerings slightly. So historically we've basically had one model which is you come to our website, we have a calculator, you kind of do this self service of how much your fees are going to cost. They range between $6,000 and $15,000 for planning plus a tiered AUM fee as well. And then certain breakpoints. At $500,000 of assets under management, your annual financial planning fee gets cut in half at 2 million or yeah, at 2 million. Historically your entire financial planning fee goes away. We also included tax preparation in that, but for 2025 we have changed that. So our kind of model that's worked for a while, we're still going to have that, we're going to call it startup and that's going to be for professionals focused on building wealth who maybe haven't hit that liquidity event and they're going to still go through the fee calculator. There's going to be an annual fee based on complexity. But we've actually now we're going to separate out tax. So there's going to be a separate charge for the preparation of the tax return. So it's an opt in. You don't have to have us prepare your tax return if you don't to want want. And this is a great fit for folks that have less than a million dollars in investable assets. Once you have a million dollars in investable assets, you are more of a fit for our core service offering which is sort of that more established professional who's maybe already gone through a liquidity event, maybe is a little bit older and they just go straight to the, they only pay that AUM fee. They don't pay that separate fee, sorry, the planning fee. And if they want their taxes prepared, that would be a separate fee. And Then, then for our clients who have had significant liquidity events or inheritances, they're a good fit for our elite offering, which is for anyone with $10 million and above, there's additional services that they get and then the taxes are included at that level. That's sort of like our kind of pilot for limited family office services.
- [60:09]
B
And what kinds of other services are you putting into the elite tier?
- [60:12]
C
We are still working on that, Michael. Some things, some ideas that have been, have been kind of batted around are, you know, annual in person life planning. You know, we're, we're a big believer in George Kinder's life planning philosophy. So, you know, what else can we provide to these clients who just have different needs? You know, obviously their tax needs are much more complicated. So we kind of just throw that in. Whatever you need will handle it.
- [60:36]
B
And so for the under 1 million clients that have their standalone fee, do you still set an AUM fee for the investor investment portion or is the idea your retainer fee only assets are included until you get to a million dollars, then you switch to AUM only and the planning fee is included?
- [60:59]
C
Yeah. So assets are never included. So it's the base planning fee plus any assets that there are to manage. And you know, we did make a switch in 2024, which we used to say anyone who wants advice can just pay the planning fee. And if you don't want us to manage your assets, no problem. And we found that after a year or two, eventually the assets might. Last year we made the decision to say that if we need to manage the assets for you to work with the firm, we want you to be all in on us because we're all in on you.
- [61:30]
B
So can I ask then, what is the AUM fee at the startup tier? If you've got a separate planning fee for the planning work and a separate tax prep charge for the tax work, what do you charge for the. I guess called like just the investment management sleeve. Even though they can't do that. Investment management only because they have to be a full relationship.
- [61:51]
C
Yeah. So it's 1% on the first million and after a million they move on. So it's a little bit complex, but it's actually pretty straightforward. So it's three separate fees, which is kind of confusing to explain in a discovery call. However, I think the secret sauce magic of Brooklyn Fi is that we just put everything on our website. It's there and we have videos of us explaining exactly what to expect. They get a bunch of emails explaining it. So even though it's complex. By the time they hear me say it out loud in a discovery call, they've already heard it three times. So it doesn't feel that complex. Once in a while they don't watch the videos and I gotta explain it and it gets a little confusing. But most of the time they already know what they're gonna pay by the time they get on the discovery call.
- [62:33]
B
I get the principle of like three, three services, three fees. Like we do financial planning and there's a planning fee based on complexity. We help your portfolio and there's a 1% AUM fee for the portfolio and if you want us to do the tax return, there's a separate tax plan tax prep fee.
- [62:47]
C
Yep. And like, you know, everyone listening to this podcast, we talk about fees all day long and I don't know what the right, right one is for us, but this one so far, you know, two months into the year after, you know, saying it 40 times so far it seems to be making sense and prospects are getting it. So I think we might have landed on one that's going to work for at least the next year, but no promises.
- [63:09]
B
And, and what kind of fees do you charge on the tax preparation side?
- [63:12]
C
So we just started rolling this out and Basically it's a $1,200 minimum for regular complexity returns and then a couple hundred dollars get added on for significant, if there's more than one state to file, if there's significant equity compensation complexity, if there's any foreign issues, rental properties. We thought a lot about this because we don't want tax preparation fees to be a barrier for someone to not sign up with brooklynify. This was a, you know, you were asking about how decisions get made. This was like a debate between, you know, our head of financial planning and our head of tax and our head of tax rightfully saying we needed to be, we need to be paid fairly for the great work that we're doing. This is a $5,000 return. Why are you charging $1,200 for this? And us going, I'm not going to let a $5,000 return be a barrier to me signing this $40,000 a year revenue client. So we kind of landed on this, this, let's price under market slightly, let's get paid something, but let's leave it open ended enough that if there's a situation where we're doing, you know, 24 hours of work for someone, we can charge accordingly.
- [64:18]
B
And then how do you set the planning fee?
- [64:20]
C
So the planning fee, it's, it's truly just a few sliders for complexity. So it's, it's a base fee. And then we say, you know, if you've got stock options, it's an extra $1,200. If you've got RSUs, it's an extra couple hundred dollars. So basically, if you're a couple, it's an extra $2,000. It's an art, not a science. And it's kind of just we. The script in the call is, hey, you've already seen the fee on the website. I'm going to pull up the calculator right here. You told me you've got some RSUs and there's two of you here. So your fee is going to be, you know, 7200 for the year. And you know, we just take that number divided by 12. It's a monthly fee that's paid from your checking, your credit card. And that's. I've. Michael, I've said those words like 500 times over the past two years. So it works pretty well at this point.
- [65:08]
B
So what are the other, are there any other big factors that shift the fee besides single versus couple has options or RSUs at this point?
- [65:17]
C
No. We found, you know, we've edited the calculator dozens of times over the years. We used to say, you know, if you've got foreign issues, but now we've taken that out because we can charge that on the tax return. Self employment income is another big one. 1. We also have an accounting firm, so we also offer outsourced accounting and bookkeeping to our clients because we found that was a weird natural niche progression of someone who has a liquidity event and has an exit from their tech company. What are they going to do? They're not going to go get another job at a tech company. They're going to start a business. So how can we continue to serve that client? Let us do your bookkeeping. Let us do your business tax filing for you. And a lot of our clients have side hustles too, so that adds a little bit to the features fee as well.
- [65:59]
B
Okay. And in practice, I think you said that These start at six grand and can get up to about 15.
- [66:07]
C
Yes. At the moment, if you turn on all the sliders, you can get up to 14,500 for a year or about 1200amonth. Okay.
- [66:16]
B
And once you get to a million dollars of assets, the planning fee just vanishes and it's just straight AUM at that point.
- [66:23]
C
Exactly. Yep.
- [66:24]
B
Okay. Like again, I have to overanalyze any everything does it mean like, don't you end up with some big step back when someone goes from like 900,000 and a planning fee to a million dollars in no planning fee?
- [66:39]
C
Yep. Like I said, it's not perfect. There is a, there's a, there's a 50% discount on the planning fee at 500,000. So yes, there are clients that are caught in this weird gray area for a couple months or sometimes a year or two, but it works for most of our clients. And when we get into those situations, we basically just talk to the client about it and say, here's what's going on. Your fee is going to go down a little bit, but it'll go back up once you start contributing, once you have that liquidity event. It happens rarely enough that it can be a custom conversation when it does.
- [67:13]
B
I guess just in practice, when your clients are working at upwardly mobile companies where they're upwardly mobile and accumulating more equity comp over time, like your, your client doesn't creep from $900,000 to a million and set you back in fees. Your client goes from 900,000 to a million because then it's 1.1, 1.2, 1.5 and two years from now they're at 2 or 3 million. So nobody really cares about the fact that like, no one from the business cares about the fact that like there was a billing cycle or two where their fee stepped backward before they outgrew it anyways.
- [67:46]
C
Exactly. And we've always tried to be innovators in every way that we can be. And I've had folks at conferences or folks that I've met going, you're way undercharging for your services. Why are you including taxes? Everyone's going to poke holes in everyone else's fees. That's fine and I welcome that criticism. And we've at times struggled with having our margins be compared to a straight AUM shop. We've absolutely struggled with that. However, the goal of Rachel Naf I is to be the firm that you go to if you have equity compensation in the future. Because we're really good at it and we're going to be your one stop shop for all these things. So if our margins are not where we want them to be in the first six years of business, that's okay. This is a long term play. Our clients are young. There's billions of dollars of equity in these private and public companies sitting in our clients on their balance sheets that we haven't tapped into yet. So that's Kind of this like exciting moment of like, I don't care if we're charging them $1,200 or $1,600 for their tax return. I just need to get them in the door. I need to establish their trust. I need to deliver them amazing service for the first two years. I need them to tell all of their friends in their Slack panel at work what we've given them and that's the long term play.
- [68:57]
B
But I, I would think as well, like by the time you've got effectively three separate fees for three separate services that are, that are coming together, like, do you still feel like margins are pressured in the business at the, at the fee levels that you're charging?
- [69:16]
C
They're not pressured, no. I just think in terms of like traditional AUM shop industry benchmarks that get thrown around, they're not where I would like them to be, but we're absolutely going in the right direction.
- [69:29]
B
And so is that like, do you feel like the fees, the fees are too low, the services are too high, the efficiency just isn't there yet. I mean, you'd mentioned earlier concerns of quote over servicing clients.
- [69:44]
C
Yeah, I think it's, it's a little bit of both of those things. It's a little bit of the fees being too low. We just raise them and then a little bit of that over servicing just being, you know, in a year or, you know, we, we have these deadlines. It's year end is when we have to make these moves and decide, you know, are we going to exercise these options at this time time. It's a lot of labor intensive tax planning that has to happen. That requires seasoned professionals, both CFPs and CPAs. So, you know, does everyone need a tax projection every year? No, they don't. Should we have clients opt into it? Should we identify, you know, our top third of clients who need one and should we provide that? So it is a little bit of, I think there's a lot of efficiencies to be had and John is excellent at finding those and working on them. So that's a big, big initiative for him this year is how can we figure out how to continue to serve our clients in the best way possible, but just not over deliver or create busy work for our tax team.
- [70:38]
B
And then how do these team dynamics work when you're all remote? I mean, I think you said you're Brooklyn Fi, but you're actually the only person in Brooklyn, which is, and I'm.
- [70:48]
C
Only in Brooklyn 45% of the year. Also it's Remote culture, you know, we haven't mastered it. I think we have a fairly good remote culture. We try to get everyone together, the whole team, we try to get them together at least once every two years. And then we have these mini team retreats. Planning team gets together in New York every summer for our big client event. And then the tax team goes somewhere warm in December for their kind of tax plan, you know, getting ready for tax season retreat. We were just in Phoenix with the tax team in December, which is a lot of fun. And, you know, we're bringing the whole team into New York this August for like BKFI camp. BKFI we're calling it. So we're going to bring everyone upstate to this lovely boutique hotel and we're going to go canoeing and play horseshoes. And I'm super excited about that. And I'm super excited, Michael, that I don't have to play in that retreat. That was a really great, great hat to delegate. Jessica is going to knock that one out of the park, I'm sure.
- [71:45]
B
So I'm curious how just team communication and collaboration happens on a more day to day, week to week basis to keep everyone synced up when you've got this planning team and tax team that can work jointly with clients. I feel like a lot of advisory firms have struggled to varying degrees in staying productive and engaged when everybody's fully remote. So I'm just really curious how day to day, week to week, team members collaboration actually works.
- [72:17]
C
Yeah, I mean, mechanically, most of it happens in Slack and on Zoom. So a lot of Slack conversations, a lot of private messages back and forth, a lot of Slack channels. You know, hey, can I, can we hop on a quick Zoom? Can we hop on a quick huddle through Slack? So, you know, our folks are, if they're not on a call with a client, they're probably in a meeting or you know, an impromptu meeting with another colleague. It's not perfect. I think folks are a little bit disconnected. I miss working in an office. I miss that feeling. But the company culture is we're in Slack. Show us photos of your pets in Slack. What did you make for dinner? Did everyone watch the Super Bowl? We do things like fantasy football challenges and right now we're in the middle of a step challenge. Who can get the most steps per day? So that keeps people engaged. I think investing in a human resources professional was a little bit overdue for us because that was just kind of left up to Shane and I to be like, oh, we should have a company party. Let's Hire this company to do a virtual trivia game or something. And now someone's actually strategically thinking about that, how to improve that remote culture.
- [73:29]
B
Oh, interesting. So what's the role that you hired? What's that seat?
- [73:35]
C
It's a. Yeah, it's a people person. I forget what her title is exactly. But she had experience both at a rapidly growing tech company and a law firm. So a service business. And just that was really appealing to us because we are a pretty fast paced culture. But we're at the end of the day, we're a service business. So the role was, you know, you're in charge of, you know, basically kind of whatever John needs in terms of running the business. You know, John doesn't have the capacity to review our health plans. So that's. It's really just taking care of the employees, making sure they're engaged and, you know, handling issues when they inevitably crop up.
- [74:16]
B
Interesting. And how big were you when you decided to hire this role?
- [74:21]
C
We were 17 people.
- [74:24]
B
Very cool. Very cool. And I guess this person also has the, the culture of slack, the team retreats, all of that as well.
- [74:35]
C
Exactly, yeah. And kind of special projects also. I think we were hesitant to hire that role because we're a small team. So things like, hey, if we're going to repaper all of our clients to bring them up to this new fee schedule, is that something that this HR operations person could handle? And the answer is yes, as long as they have capacity. I think the job description was very clear about special projects. And yes, here's the job description. But the last bullet point of the job description was also you may be asked to do special projects vaguely related to HR at certain points. So be prepared and excited to handle that.
- [75:12]
B
Very cool, Very cool. And then what do you actually do when people come together for these retreats? How long are they? How do you structure them?
- [75:24]
C
Usually it's three or four days and three or four nights. It's hard with the travel day. There's usually a travel day on either end sometimes. We used to have these kind of intensive working sessions and then we just realized that people just want to come together and hang out. So it's mostly just having fun. There might be a quarterly presentation from the leadership team about how we're doing to get everyone riled up about our growth. But this one that we have coming up is going to be, you know, hiking and eating together and, you know, sharing skills. We do a lot of karaoke on our team retreats. That's kind of a thing. Shane Hates karaoke, but I love karaoke. So usually there's, there's a night or two of karaoke at some point.
- [76:08]
B
That's an interesting framing that it started out more presentation and at the end when they're remote, they just want a chance to hang out together.
- [76:16]
C
Yeah, and I think, you know, we, we over planned them previously. We always try to include some sort of active service. We had a retreat in Los Angeles a couple years ago where we did a beach cleanup that was awesome except that we had to take an Uber across Los Angeles which took an hour and a half. So it's a lot of trial and error. So I'm just excited to have everyone together in one spot to hang out for a few days. That's really the goal. We'll probably have a photographer come and take some portraits. That'll be a good deliverable from the retreat. But mostly the goal is, is just like get to know each other, have fun and you know, create those, those work relationships.
- [76:55]
B
So as you reflect back on this faster growth journey, what surprised you the most about path of building an advisory business?
- [77:06]
C
The fact that I'm still alive. Michael, honestly.
- [77:11]
B
You made it sound so fun that you're just like. You and John are just like rolling and pivoting with, with all of this.
- [77:17]
C
Yeah, no, I mean, what surprised me is the, the people, honestly. You know, Michael, we didn't even touch on this, but I'm a, I'm a severe career changer. You know, I was a music journalist seven years ago. I was writing album reviews for obscure Polish punk bands. And then I started a podcast about personal finance because I was interested in it. And that's really like my journey. So the thing that surprised me the most about this are the people that I would have never encountered in a million years as a hipster music journalist from Brooklyn. John Owens of Lancaster, Pennsylvania and Shane Mason of South Haven, Mississippi and AJ Ayers of Brooklyn would have never had the chance to meet. So just the smart interested people who want to change the world and want to be financial planners, that's just honestly been the biggest surprise I did. When I was sort of looking at the industry, I was approaching it with apprehension because I had encountered, for lack of a better term, finance bros in my business classes in college and didn't like them. So I thought when I got into finance and wanted to change the industry, I was surprised by the high quality of people in this industry and the high quality of mentors and just how generous people are with their time. And honestly, what I'm Excited about in this next chapter is, is having built something that's noteworthy. I'm excited to be that person because now I have time on my calendar and now I can go to mastermind groups which were not accessible to me before because I just didn't have an hour and a half to just shoot the breeze with someone about business practices because I had six client meetings a day. So the surprise is about people. And also, honestly, Michael, how quickly it happened, it still shocks me. And you've asked me a lot of questions today about what was the growth like. I mean, yeah, I think I blocked a lot of it out because it just happened so fast. And when you're in something, it's hard to take a step back and go, what did we learn? Like what went right? Obviously a lot went right because of where we are now.
- [79:29]
B
Because you, I mean, at the end of the day, you launched what, 20.
- [79:34]
C
Launched in April of 2018.
- [79:36]
B
And so by the time this is going live, you'll be coming up on seven year anniversary and 5 million revenue run rate this year.
- [79:48]
C
Yep, I've got that seven year itch, Michael. So I don't know. Yeah, but you know, I think the surprising part is, yes, we launched in April of 2018, except Shane and I met. Met less than a year before that for the first time ever, decided to take a chance on each other as 50, 50 business partners. And it worked. And of course there have been low points, but for the most part, Brooklyn Fi is a product of two people who love working and love entrepreneurship and had disparate skill sets that worked together. And then we looked to add people to the firm who had skill sets and knowledge bases that we didn't. And that's kind of been how we've operated the business from day one.
- [80:31]
B
So then what was the low point for you on this journey?
- [80:35]
C
Having to learn math. I was an English major, I would say like two years into building the business. I'm in CFP school, I'm getting my enrolled agent exam. I'm trying to learn as much as I possibly can, but I'm in the business and I'm running the business and I'm serving clients and I have crippling imposter syndrome. I'm in a client meeting and a client asks me a question and I don't know the answer yet. I'm their financial advisor. I look to Shane for the answer. I hated that feeling. So really like 2020 during the pandemic, just having to be everything to these clients, but not feeling like, like my Knowledge base had caught up was a terrible feeling for me. So trying to work really hard to overcome that imposter syndrome, building up the confidence to know my own strengths and limitations is kind of just how I got out of it. But I just remember these really awful feelings of I'm in over my head and I don't know the answers to these questions, and I can't. I can't speed up CFP classes and I can't possibly. There's not enough hours in the day to read enough blog posts or listen to enough podcasts to get this knowledge, because I've got these clients that are waiting for me to serve them.
- [81:58]
B
And it sounds like. I guess I'm struck this. This didn't hit you out of the gate. This hit, like, three years in, if.
- [82:04]
C
I'm following the timeline. Well, yeah, like two years in. Because in the beginning, I could say I don't know anything. At the beginning, it was. I'm. I'm here to learn, and, you know, I've got a great work ethic and a love of knowledge. But it was kind of. Once it got going, it was, oh, wow, there's a lot of knowledge here that I. I'm so far behind. I think that's what it was like. Why didn't I start this earlier? I love this career. This business is working. You know, I think, like, going back to what surprised me, like, things just happened so much faster than we ever thought they would. Would. I was supposed to be. We launched the firm in April of 2018. I was supposed to stay at my day job as a music journalist, at least through the end of that year. I quit my job in June because we just had so many clients coming in the door. So, yeah, just feeling like I was inadequate and feeling like I couldn't learn things fast enough was a terrible feeling for me.
- [83:03]
B
Interesting. And for you, the. The overcoming. It was. There was eventually a point where you felt like you'd learned enough that that wasn't the fear anymore.
- [83:15]
C
I guess so. Yeah. I don't. I think it was just, you know, we. We talk a lot about at bats, you know, just doing it over and over again or, you know, having enough client wins, where a client says, you've changed my life, or, you know, that advice led me to buy my first house, or, you know, something amazing has happened that was a direct result of a meeting I had with you. You know, you do that enough times, you get that positive reinforcement. I think that's kind of where the, you know, overcoming that came.
- [83:43]
B
So it Was. It was less the. I feel like I finally got enough book knowledge and more my clients are just telling me good things. I guess I can believe. Believe them when they tell me I'm doing a good job.
- [83:54]
C
Yeah, exactly. Yeah. I mean I'm, I'm obviously very type A personality. You know, I also did get the book knowledge I, you know, at ea, cfp, CSLP at some point. Cep, which is a equity designation. I got my notary license last week because our clients struggle to get their wills notarized. So I thought, let me remove this barrier for you. I'm going to go become a notary so I can show up at your house and you know, notarize your estate plan. You know, I just, I think I do have a bit of that self consciousness about not having grown up in the industry and being an outsider for sure.
- [84:29]
B
So what else do you know now you wish you could go back and tell you from seven years ago when you were just getting in.
- [84:38]
C
I mean, I think that's. This is impossible. But you know, start earlier. I think if I had started earlier, I'd be in a different place personally and professionally. I think the advice I would tell my younger self or tell anyone thinking about starting their own thing or making a big change or level up within a firm they're at is you kind of have to build the next thing while you're succeeding, if that makes sense. Shane and I built Brooklyn Fi while he was running a tax practice and while I was running an editorial department at an online music magazine. We built broughtify nights and weekends and that was kind of the only way. There wasn't this magical moment where that chapter closed and we took time off to build a business plan. It just happened quickly and the best things kind of happen while you're working on something else. So I think I would tell my younger self start earlier. And yeah, for those listening, if you're thinking about making a change, go get that extra designation on the weekends. Start that business plan with the other person at your firm to go break off or go independent.
- [85:58]
B
So any other advice you would give advisors looking to get into the equity compensation world in particular? Just you've now lived it for, for many years. What do folks not know about getting into the space that they should be cognizant of if this is where they want to be?
- [86:19]
C
Yeah, I mean it's. Looking back, I don't regret choosing the niche at all, but it requires a whole other level of expertise expense for all the software you need. You, in my opinion, you have to be able to provide tax services. You have to be preparing the tax return yourself. There's just too many little things that go wrong on tax returns. So my advice would be come join Brooklyn Fi before you try to do it on your own. Because we've figured it out and just know that it's a very rewarding niche. I think watching people become wealthy in their 30s is really cool and being a small part of that is very rewarding as a niche. But the well of technical expertise required and just honestly the margin for error. I have a million stories of us making a recommendation and then the stock price doing something you didn't want it to do and there being a really bad outcome for the client. It's a lot of risk management. It's a lot of, you know, high. Both highly technical knowledge, but also high emotional eq as you're helping folks navigate on paper, one day being worth $5 million and the next day being worth $2 million, that changes things a lot. So it's a different, deeper level, a more chaotic level of financial planning than say working with doctors or something like that. That it's a chaotic niche, if you will.
- [87:58]
B
It's a chaotic niche. So as we wrap up, this is a podcast about success. And just one of the themes that comes up is literally that word success means very different things to different people. And so you're on this wonderful track with the business as you're set to cross 5 million of revenue in seven years, which is just, just astounding growth for our industry. And so the business isn't a wonderful place. Now, how do you define success for yourself at this point?
- [88:33]
C
That's a great question. I think, unfortunately I'm pressured by this industry with this billion dollar number. I don't know where or why that's important to me, but it is, it feels like something that we can say that we were able to achieve at this point. My daily small successes are from our employees and our team members. When someone has success, we have a channel in Slack called Wins and everyone's encouraged to shout out someone else's success. And I just love that channel. So when I see a employee come on board who maybe I've only met for 15 minutes and maybe I've only seen them post about what super bowl team they're rooting for. When I see them get congratulated that they're becoming a planner in, you know, eight months after joining the firm, a full fledged planner with clients, that to me is a sign of success for sure.
- [89:31]
B
Very cool. Very cool. Well, thank you AJ for joining us on the Financial Advisor Success podcast.
- [89:38]
C
Thanks so much for having me, Michael.
- [89:40]
B
Thank you.
- [89:42]
A
One Even more ideas, tools and resources on how to break through to the next level of success as a financial advisor. Check out the leading financial planning industry blog, Nerd's eye view at www.kitsis.com where Michael covers the latest practice management trends and financial planning strategies. And by joining the Members section, you can earn IMCA and CFP Continuing Education education credits along with exclusive member content. Get it all now at www.kitsis.com.