Just finished MJ’s book, and I am not sure if my plan is Slowlane or Fastlane. I think maybe a bit of both. Would love to get your feedback.
So, a quick synopsis: I am a Certified Financial Planner at an independent fee-only investment advisory firm. I have a website that pitches the service that I offer: comprehensive financial planning for a flat fee (currently $600). I differentiate myself from my competition – primarily insurance agents and stockbrokers – by my focus on financial planning and my ability to be objective. To wit, my firm does not sell any commissioned products and I am getting paid for the financial planning, so my conflicts of interest are minimal. I utilize Google AdWords to drive traffic to my website. The plan I put together for clients recommends a passive buy-and-hold investment strategy that just about anyone can implement on their own. But I also make clients aware of peer-reviewed academic research about an active investment strategy that has historically outperformed buy-and-hold with much less downside potential. Typically about half the clients I present plans to prefer the active strategy to the passive strategy and ask me to manage their portfolio in that style for them. I charge them a fee based upon a small percentage of their assets under management to do so.
It seems to me that the first half of this equation, financial planning, is Slowlane. I am selling 8-10 hours of my time for a $600 flat fee. The second half, portfolio management, is much closer to being Fastlane. It is scaleable in that I will spend the same amount of time providing portfolio management to 1 client as I will to 100. And, by the way, the investment strategy I use does not require a ton of my time to follow. Further, I typically only need to meet with clients once a year when I am managing money for them, so while the portfolio management fees I collect are not 100% passive money, it does not take a huge time commitment per client. When all is said and done, I think I can personally handle 360 clients (2 a day, 4 days a week, 45 weeks a year) with a minimal supporting cast. If the average client has a $500,000 portfolio and I charge 1%, that will provide me with $1.8 million in annual revenue. Plus, I will have built a business that I can sell to another advisory firm for a 2-3x multiple if I wanted.
The biggest problem is that it takes time to build up to 360 clients. Even if my marketing system is really cranking, I probably cannot put together more than 90 or so financial plans a year. And if half of those result in portfolio management clients, it will take 8 years to get to 360 clients.
There are, I believe, two ways around this time constraint. First, I could just become the CEO and Portfolio Manager of the firm and hire other Certified Financial Planners to put together the plans and meet with the clients. I could even expand beyond my current locale and make the business regional or even national. Of course, this is a lot more administratively challenging and would tie my time up in other ways.
Or second, I could simply try to work with individuals with more assets for me to potentially manage – maybe by building a specialty practice working with entrepreneurs, for instance, since as MJ informed, most penta-millionaires made their money as entrepreneurs. I also have some ideas as to an investment strategy I could use to start up a hedge fund, and attract the really big money, but that is probably more of a “windshield wiper†project for the moment.
So, any thoughts? Am I on the Slowlane, Fastlane, or some weird amalgamation of the two? Maybe what I am doing is an example of Intentional Iteration?
So, a quick synopsis: I am a Certified Financial Planner at an independent fee-only investment advisory firm. I have a website that pitches the service that I offer: comprehensive financial planning for a flat fee (currently $600). I differentiate myself from my competition – primarily insurance agents and stockbrokers – by my focus on financial planning and my ability to be objective. To wit, my firm does not sell any commissioned products and I am getting paid for the financial planning, so my conflicts of interest are minimal. I utilize Google AdWords to drive traffic to my website. The plan I put together for clients recommends a passive buy-and-hold investment strategy that just about anyone can implement on their own. But I also make clients aware of peer-reviewed academic research about an active investment strategy that has historically outperformed buy-and-hold with much less downside potential. Typically about half the clients I present plans to prefer the active strategy to the passive strategy and ask me to manage their portfolio in that style for them. I charge them a fee based upon a small percentage of their assets under management to do so.
It seems to me that the first half of this equation, financial planning, is Slowlane. I am selling 8-10 hours of my time for a $600 flat fee. The second half, portfolio management, is much closer to being Fastlane. It is scaleable in that I will spend the same amount of time providing portfolio management to 1 client as I will to 100. And, by the way, the investment strategy I use does not require a ton of my time to follow. Further, I typically only need to meet with clients once a year when I am managing money for them, so while the portfolio management fees I collect are not 100% passive money, it does not take a huge time commitment per client. When all is said and done, I think I can personally handle 360 clients (2 a day, 4 days a week, 45 weeks a year) with a minimal supporting cast. If the average client has a $500,000 portfolio and I charge 1%, that will provide me with $1.8 million in annual revenue. Plus, I will have built a business that I can sell to another advisory firm for a 2-3x multiple if I wanted.
The biggest problem is that it takes time to build up to 360 clients. Even if my marketing system is really cranking, I probably cannot put together more than 90 or so financial plans a year. And if half of those result in portfolio management clients, it will take 8 years to get to 360 clients.
There are, I believe, two ways around this time constraint. First, I could just become the CEO and Portfolio Manager of the firm and hire other Certified Financial Planners to put together the plans and meet with the clients. I could even expand beyond my current locale and make the business regional or even national. Of course, this is a lot more administratively challenging and would tie my time up in other ways.
Or second, I could simply try to work with individuals with more assets for me to potentially manage – maybe by building a specialty practice working with entrepreneurs, for instance, since as MJ informed, most penta-millionaires made their money as entrepreneurs. I also have some ideas as to an investment strategy I could use to start up a hedge fund, and attract the really big money, but that is probably more of a “windshield wiper†project for the moment.
So, any thoughts? Am I on the Slowlane, Fastlane, or some weird amalgamation of the two? Maybe what I am doing is an example of Intentional Iteration?
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