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Build Your Perfect Firm

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Macduff View Drop Down
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    Posted: Jul/14/2021 at 9:57pm
I'm early on in the process of building my RIA. I'm just shy of 5mm in aum, 20 ish clients, and growing fairly quickly. Surprisingly, growth really hasn't been a huge problem. I've worked my ass off the last few years laying the groundwork and building relationships, which are now paying off. Right now I'm a one man band, like Newbie. I'm looking forward though and I don't have any intention of staying small. It's funny, I had always thought I wanted to build a 30mm solo shop, make a good income, and live a fucking fantastic life. Now that I have my own place and I'm growing, my goals have changed. I think I actually want to build a business, vice a practice.

To that end, the high level overview is that I want to build a firm focused on working with high earning millennials, particularly those with equity comp. The firm will provide estate planning (via contract attorney), tax prep (via contract EA or other), and financial planning in-house. My plan is to have advisors handle ~90 clients apiece, with a paraplanner to support them. I want clients to be clients of the firm first, then of the advisor that's working with them. I plan on paying advisors well, but a salary. I don't want entrepreneurs, I want service advisors. 

I already have the estate planning attorney contracted and I'm working on the tax-prep side. Long term I want to focus on rainmaking and working with a small number of relationships, while pushing the rest of the relationships to my junior advisors. I don't need to make $1mm per year, I'd rather build enterprise value right now.

Anyway, this is a lot of words to bring me to my question: if you were to build your perfect firm from the ground up, what would it look like?
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newbieRIA View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote newbieRIA Quote  Post ReplyReply Direct Link To This Post Posted: Jul/14/2021 at 10:47pm
What did you do to get those original 5 mil of accounts. 

Why not just do that a lot till you have 30 mil , then build the business you want.  Just a thought, it’s about surviving first.
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bc2051 View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote bc2051 Quote  Post ReplyReply Direct Link To This Post Posted: Jul/14/2021 at 10:47pm
Is it possible you could make this a long-term goal and still keep it as your vision or whatever but gobble up some retirees assets a little quicker to hold you over?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Family Man Quote  Post ReplyReply Direct Link To This Post Posted: Jul/14/2021 at 11:24pm
Funny enough, you pretty much just described the exact firm I want to build.  My biggest challenge is that I’m at a wire and can’t make the jump for a few more years.  Even then I feel like it’s going to be a challenge to put infrastructure into place quickly due to having a decent size practice.
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luvindy View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote luvindy Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 12:12am
Yeah I mean you need to take some clients that aren't "perfect" while you grow so you have enough perfect clients to decide when its time to stop growing. That's my contribution. Good thread though.
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gregsanberg View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gregsanberg Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 5:08am
My long-term vision is similar. Focus on strategy, marketing and the business overall. Spend $ to make $ with 20% of revenue going to marketing expense and then hire great people to handle the ongoing relationship with some service people to handle more admin activities. Very very few client relationships for me long-term.

Pay people well, build their client base for them and make them never want to leave. Focus on making the pie bigger and long-term enterprise value. Be a real business owner, not self-employed.

30% profit margin on $5,000,000 or $10,000,000 of revenue is a pretty good day when it is self-managing. Not to mention the equity value of $15,000,000+
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Post Options Post Options   Thanks (0) Thanks(0)   Quote WarPig Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 7:18am
I really struggle with what I think the perfect practice is, as many of you can see.  In the end, it all depends on what you want to build.  Here is where I stand.  This week.

200m AUM
Me handling 50 relationships or less
My "planners" handling the rest
250k min.

If I had to go back in time and try to build that at the start.. I probably would have failed. Here are some basics I think any firm focused on growth should follow:

At least 10% of your revenue is spent on marketing
Don't do $20 per hour jobs.  Find a good assistant and watch compounding happen before your eyes.
Add clients.  Not assholes or time sucks.
Don't listen to the industry experts about building a business
If clients are below 100k .. the need to DCA at least $250 per month or they are not worth your time.
Build model portfolios.  Not custom.  Scale everything.
Surround yourself with FAs that are at your level or above.  Build relationships and masterminds to help you grow.
Have a sales process
Have a service process

...and lastly, as you grow and get to scale.  Some of the people (clients and employees) you brought with you might no longer be a good fit.  Breaking up will be hard but life is that way.  We've all left friends behind and it'll happen with your business relationships as well.
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indysomeday View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote indysomeday Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 7:38am
Do you guys have an income level where you think it makes sense to pivot from taking anyone/anything to building the perfect practice? I get the immediate response to Macduff because he just said he has $5mm aum so he's certainly not there yet. But where is that point generally? 
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WarPig View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote WarPig Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 7:43am
Originally posted by indysomeday indysomeday wrote:

Do you guys have an income level where you think it makes sense to pivot from taking anyone/anything to building the perfect practice? I get the immediate response to Macduff because he just said he has $5mm aum so he's certainly not there yet. But where is that point generally? 

This is a good question.  I used to have a "dream board" in my office.  Basically a bunch of stupid pictures and shit I want to accomplish.  One thing I can tell you, it's a moving target.

I wish I had set a minimum earlier but it's a fucking thrill when someone says "yes" no matter their size and I'm an addict.  

I think a better method would be looking at clients based on future potential.  I wish I had turned down the 64 year olds with 84k 5 years ago and taken the 52 year olds with 12k and a 401k with 235k I couldn't touch.  

Hope that makes sense.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Moraen Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 7:47am
Originally posted by WarPig WarPig wrote:

Originally posted by indysomeday indysomeday wrote:

Do you guys have an income level where you think it makes sense to pivot from taking anyone/anything to building the perfect practice? I get the immediate response to Macduff because he just said he has $5mm aum so he's certainly not there yet. But where is that point generally? 

This is a good question.  I used to have a "dream board" in my office.  Basically a bunch of stupid pictures and shit I want to accomplish.  One thing I can tell you, it's a moving target.

I wish I had set a minimum earlier but it's a fucking thrill when someone says "yes" no matter their size and I'm an addict.  

I think a better method would be looking at clients based on future potential.  I wish I had turned down the 64 year olds with 84k 5 years ago and taken the 52 year olds with 12k and a 401k with 235k I couldn't touch.  

Hope that makes sense.

This is good advice. When you do this, money just shows up.
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missionshooter View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote missionshooter Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 8:26am
Warpig provided gold in his response.

I am building my dream practice after years of grinding.

Eventually I will work with my top 20% producing 80% of the revenue and let a junior handle the rest.

I will also give him all the PITA clients even if they are in the top 20%.

I want to work with the EASY people who are clueless and appreciate everything I do, while making 1-2mm.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Hacksaw Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 9:21am
Pretty much the same as WarPig - except I didn't have a "Dream board" because I'm not gay.

Actually like Greg too, except I have a different growth plan.  I'll always keep a handful of clients that I actually like, but otherwise run the business side with other advisors doing most of the servicing.  Build enterprise value and worry about fielding offers in 10+ years
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Hacksaw Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 9:24am
Originally posted by indysomeday indysomeday wrote:

Do you guys have an income level where you think it makes sense to pivot from taking anyone/anything to building the perfect practice? I get the immediate response to Macduff because he just said he has $5mm aum so he's certainly not there yet. But where is that point generally? 

MY initial was $10mm (paid all my bills), then $20mm (paid bills plus extras), then $30mm (paid bills, extras, and really whatever I wanted).  Once I hit that, I changed my focus for what I wanted it to ultimately end up being.
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indysomeday View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote indysomeday Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 9:29am
yea, that's kinda where i'm at. i've got about $40MM AUM now, and just kinda starting to hit the point where i'm questioning why i took on some of the clients i recently took on, but the point about the 55 year old with $300k+ in an active 401k makes me feel better about it, because that's the kind of stuff that i'm looking at my book thinking wtf? did i do that for?
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B24 View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote B24 Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 9:45am
Originally posted by indysomeday indysomeday wrote:

yea, that's kinda where i'm at. i've got about $40MM AUM now, and just kinda starting to hit the point where i'm questioning why i took on some of the clients i recently took on, but the point about the 55 year old with $300k+ in an active 401k makes me feel better about it, because that's the kind of stuff that i'm looking at my book thinking wtf? did i do that for?

Yeah, I think everyone needs to take the younger clients with decent 401K balances (that are still adding), even if they are years away from retirement (or 59.5).

Even if you are "content" at your current size, you always have to replace clients that die/leave/deplete assets, and every younger client with a decent 401K you take on NOW, is one less client you have to prospect for in the future.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote gregsanberg Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 9:48am
I think it depends on what you want to build. If you want to be solo and make good money, then become super efficient, work very little, stay solo or maybe an assistant. Maximize time off and profits.

If you want to scale and build a business, then get your personal income to where you need/want it to be and then reinvest deeply into your business. Marketing and people. Take profits, but keep reinvesting. Over time, continue to pull yourself away from day to day, don't be the constraint on anything and long-term work towards an equity event.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote bc2051 Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 9:49am
Whether it’s in your head or on the dashboard of your truck like warpig, what does your dream board look like now? I talked with a couple guys and it’s hard to stay motivated. I’ve got all the toys. Kids college is already taken care of, etc.  Just fear?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gregsanberg Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 9:55am
Purpose
I know it sounds new age, but I like the work we do for clients (even though I don't love working directly with clients) and I like growing advisors (because our industry sucks at it) and I like making money to be able to help others financially when things come up and I like the competition of it all of getting better and being better vs. stagnant.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote luvindy Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 9:58am
Originally posted by indysomeday indysomeday wrote:

Do you guys have an income level where you think it makes sense to pivot from taking anyone/anything to building the perfect practice? I get the immediate response to Macduff because he just said he has $5mm aum so he's certainly not there yet. But where is that point generally? 

I used to think this was $100k or $200k/yr. Now I'm clearing around $850k/yr and I hardly feel "done".

I think in my case, I am trying to eliminate long term debt, which puts more pressure on cash flow than if I had none. I'm also under 45 years old, so I figure if I can be well on my way by 50 to being totally free of debt, I'll be in pretty good shape while I'm still young enough to enjoy it. 

My point...as others have said, the bar on "perfect" seems to keep moving higher because in my case anyway I seem to feel a need to add complexities to my life every few years.
8/31/12,Sportsfreak:
"If Barak wins this election, or appears to be clearly winning, we are all fucked. Market will tank big time."
Dow 13,090 S&P 1406
5/23/13 UC:Dow 20k before 20% crrectn Dow 15,
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Post Options Post Options   Thanks (0) Thanks(0)   Quote bc2051 Quote  Post ReplyReply Direct Link To This Post Posted: Jul/15/2021 at 10:05am
Originally posted by luvindy luvindy wrote:

Originally posted by indysomeday indysomeday wrote:

Do you guys have an income level where you think it makes sense to pivot from taking anyone/anything to building the perfect practice? I get the immediate response to Macduff because he just said he has $5mm aum so he's certainly not there yet. But where is that point generally? 

I used to think this was $100k or $200k/yr. Now I'm clearing around $850k/yr and I hardly feel "done".

I think in my case, I am trying to eliminate long term debt, which puts more pressure on cash flow than if I had none. I'm also under 45 years old, so I figure if I can be well on my way by 50 to being totally free of debt, I'll be in pretty good shape while I'm still young enough to enjoy it. 

My point...as others have said, the bar on "perfect" seems to keep moving higher because in my case anyway I seem to feel a need to add complexities to my life every few years.

BOAT!

Your latest complexity 


Edited by bc2051 - Jul/15/2021 at 10:05am
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