Financial advising with a

S3 EP04 Career Progression in Financial Services with Aaron Hattenbach

03.23.20 | 0 Launch

My guest today is Aaron Hattenbach.

Aaron Hattenbach, CFP®, AIF® is the Founder and Managing Member of Rapport Financial, an independent advisory firm. Aaron has a decade of experience in the wealth management industry. Today, he works primarily with tech professionals in the early stages of wealth accumulation, as well as high net worth clients with a particular focus on physicians and business owners.

In this conversation, we change things up a bit and ask Aaron to share his journey in the financial advice industry. Aaron’s career progression in financial services had him working in 3 very different wealth management and financial advisory models in quick succession. This experience of having seen the industry from different angles gave him the confidence to start Rapport Financial in January 2017 with just 4 clients.


There are so many different career paths available to advisors, and that's part of the reason why we wanted to have Aaron on the podcast. He has learned first hand the need for good mentorship — and the importance of knowing what role you want to play in this industry.

Don’t miss one of our favorite moments, when Aaron shares what he believes are the most important elements for anyone starting out in the financial advice industry. Do your research. Be a planner. Bring your discipline, hard work, and intention. Meet with professionals, ask them questions, and get a mentor to give you direct feedback.

As you think about this conversation, if you are someone starting out, where do you see yourself in Aaron’s story? Are you in a dead-end role that’s not offering enough opportunity and development? Or maybe you are a few years deep and out on your own, missing the community and mentorship needed to scale your firm. What is your next step towards engaging a mentor and contributing to a community of advisors?

Looking for more ideas about growing your practice? Join the Model FA Facebook Community, where you will find expert advice on how to launch, grow, scale, and transform your firm with an incredible client experience. Or, check out our Model FA Accelerator, a premier coaching and practice management program for entrepreneurial financial advisors.

Resource Links

Rapport Financial

The 26 Steps I Took To Set Up And Launch My Own Independent RIA on Nerd’s Eye View

Connect with Aaron

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FULL TRANSCRIPT

Aaron (00:05):

Consumers are getting smarter. They want to work with the fiduciary. Yup. They want to work with a financial planner. Yeah. Many do. Especially the clients I want to work with. They're more educated. They come asking really good questions there. They're not going to just have one meeting and say, okay, well look at my investments and tell me what I can be doing better. They really want to develop a personal relationship with their planner.

Patrick (00:32):

Welcome to the model of Hey podcast. I am your host Patrick Brewer. Today's guest is Aaron Hatton back. Aaron is the founder and CEO of rapport financial, a financial advisory firm in San Francisco, California. Aaron's also joining me here in the Austin podcast studio, so very excited to have him in. And Aaron is also a CFP, a certified fantastic person. Also recently passed the CFP exam, so he is a certified financial planner as well. Aaron, welcome to Austin. It's great to see you. Thanks for joining you on the show. Thanks for having me, Pat. Awesome man. Looking forward to our discussion today. You're fresh off the plane. Ready to, uh, to chat through your, uh, your, your experiences that you've had in the industry. I know that you and I met a number of years ago when I was a wholesaling at dimensional fund advisors slang in the mutual funds and uh, you know, had the opportunity to come into your office at the time and talk to you a little bit about the DFA strategy.

Patrick (01:29):

So I think it would be useful because a lot of the listeners to the, the, the show, I mean we've got a variety of folks. We've got people that are really early on in their career. They've got people that are in kind of a mid stage and then we've got even some large kind of multibillion dollar firms that, you know, tune in. So I think it would be good for you to give us an overview of your experiences, kind of where you started, some of the, some of the things that you've walked through as you've transitioned through various points of the industry and then where you've ended up and you know, we can kind of dive into that along the way. So why don't you give us just kind of a general overview, like kind of how did you get started in the financial advice industry?

Aaron (02:05):

So I love that question because, um, for many of us, there was a pivotal moment in our lives. Uh, it could have happened early in life, could happen in college where we figured out that, uh, helping people with personal finances was our calling for me, that happened in Oh eight. And I was working at the attorney General's office in Massachusetts and, uh, Lehman brothers had just collapsed. And I was tasked with reading a bunch of emails, um, coding them for, for things that I didn't quite understand, but I definitely understood the, the gravity of what was going on and that this was unprecedented. I also saw that, um, a number of investors, institutional investors, uh, people that had their pensions with, you know, a number of these firms were seeing their investments drop precipitously. And it really inspired me to get on the side of the family, the consumer, as an educator, as someone that would protect them from being taken advantage of, from making investments that quite frankly we're not going to grow their wealth.

Aaron (03:17):

Um, so that was really the moment where I, I figured out what I wanted to do in life. It's an interesting time to get started in the industry. I had the same kind of experience cause I was at Vanguard during 2008 2009 and basically went from getting my series six and 63 and it was almost felt like an extension of college cause they like pull you together in a group of 15 people and you're all like in your early twenties and they don't really tell you what's going on. You're just training, you know, you're in training for three months and then you get released to the phones. And I got released literally two weeks before the crash. So probably similar to you. And the next thing I know, I'm taking 110, 120 phone calls a day from people that are looking to cash out their 401k plans and go to cash.

Aaron (04:01):

And I'm tasked with at the age of 21 to be like, well, I don't think you should do this, but, uh, I don't know the exact reasons why minus the fact that you're gonna miss out on some compounded wealth. I think I stopped maybe five out of 5,000 people that called. So you probably had a similar experience like trying to educate people and make sure that they, you know, kind of, you know, at least understood what the outcomes were for them if they weren't educated. Yeah, I think your experience was probably more pragmatic than mine in terms of dealing directly with investors that were panicking, um, precisely what we teach our clients not to do. And so I was dealing more on the insurance, um, and uh, lending side, uh, with consumers that had been taken advantage of by some of these lenders, these predatory lenders, uh, new century Fremont, some of these names that obviously no longer exist in the marketplace.

Aaron (04:53):

Um, but also some of these insurance companies that would sell insurance policies to another insurer. And then the consumer was essentially trying to utilize the services of the state to, uh, get the insurance company to enforce that policy and pay the consumer. So, I mean, I was seeing people losing homes, um, you know, not having claims paid on a car insurance policy. And it was, for me, I was learning how to communicate with the consumer and be empathetic. What was the next step for you after that? So fast forward a bit. Graduated into the worst economy in 2009 and I wanted to work in personal finance, but nobody was hiring in personal finance. Nope. You know, it doesn't matter whether you went to Harvard, Santa Monica college, doesn't matter across the spectrum. Nobody was getting hired by any banking institution, RIA, a trust company. And so what I did was I took an internship with Bernstein for 15 an hour.

Aaron (05:53):

Oh yeah. Which is now the California state minimum wage. Oh, this is in California too. This isn't counting. You are basically, there's no way you could even afford to live. No, I live with my parents like any millennial, so it's fine. Hey, it's all good. He brought me to this point here now, but I'm with your parents with school, you're going to get out of there. So it's still still cheap, Brett. Um, but anyways, you know, that internship allowed for me to see what a wealth management firm did day to day, uh, from the investments, the client service, uh, the different roles that you could play in an organization. And I think that was huge for me in figuring out what indeed I wanted to do in the industry. Did I want to be the, the back office guy doing the ops? Did I want to be the client service guy?

Aaron (06:38):

Um, did I want to be the lead advisor? Um, and, and really by being exposed to all these different roles in a formal internship program, I was able to see that eventually. My goal was to get to that lead advisor role, manage a book of business, have my own clients, be emotionally invested in my client's financial futures. But I realized that, you know, you can't just do that right out of college. You can't even do it within a couple of years of graduating from college and be successful. You really need to find mentors in this field, which is so hard. Probably need a mentor, a mentor to definitely need to make mistakes. Um, I haven't met anyone who is successful in this business who has not gone in with ambitious hopes and said, well, this is going to be a great move. And it turns out to be not so great of a move, but it teaches you what you really don't want to do.

Aaron (07:33):

Um, which, you know, in any industry you really want to narrow down the focus to. Are you going to be the ops person, the admin person? And I, I don't want to oversimplify it, but I think figuring out what role you want to play in the organization is something that if you can learn early in your career, you're way ahead of your peers. Yeah, I agree. So when you had that experience that you know, Bernstein and realize that you needed to seek out a mentor, is that what you did and then you started to kind of move in the path of trying to become a lead advisor? Was that the next step for you? I wish I could say I was that smart and had that foresight, but, uh, in actuality I was just looking for full time employment. Okay. I was still living with mom and dad, um, you know, wanted to be able to lead my own life.

Aaron (08:20):

Uh, fortunately had paid off all my student loans, so didn't have that weighing on me. But I'm a pretty ambitious person by nature, so I didn't want to be sitting around and twiddling my thumbs, uh, applying for jobs online. So I took a role with a small RIA, um, in West LA. It was run by a solo practitioner. He had been in the field for about 30 years. Really smart guy, very personable, felt like we could get along. And he hired me for a three month trial period and he said, look, you know what, if this works out, I am happy to offer you a full time role as associate. It worked out. I ended up running his entire firm, um, really an interesting role as your first job out of college. First full time job out of college, running a wealth management firm. But uh, he had promised me a mentor and failed to deliver on that.

Aaron (09:15):

And so after two years and running his firm and learning all the ins and outs from an operations and investment management standpoint, I felt like I still wasn't getting the mentorship that I really needed to get me to the eventual goal of being that lead advisor. He wasn't taking me to meetings, he wasn't showing me how to prospect. He really was kind of running this as a side hustle, as kind of like a, I'm moonlighting and going into retirement and I've got this pool of 40, 50 million that I got paid 1% on and I just, you know, remarried and got this trophy wife. I want to just go have fun. And I've got this young guy who's willing to work 12 hours a day for, you know, pretty, fairly low wage in our field and he doesn't complain and he gets the work done and makes me look good.

Aaron (10:04):

So, you know, um, it works for me and for, for, at least for me, it didn't work after two years of seeing no growth potential, bringing in some of my own client and relationships and feeling like I was, I had hit kind of the peak of my learning curve. So you obviously moved on from that, I assume. Well, so like any unhappy professional, I started interviewing, walking across the street in century city to a number of RIS, uh, banks. Um, really anyone that would take my resume. In fact, it was still not easy to get a job. And so I would actually hand deliver resumes and my dad, who is kind of old school told me you should send your resumes with a a read like they have to sign off when they receive your package as a way of forcing them to actually accept your resume.

Aaron (10:58):

Um, and maybe that'll get to the top of the stack. Now, I didn't have any connections. My parents aren't wealthy. Um, they weren't owed any favors. And so I was really going up this with really no network, just brute force and saying, Hey, I'm willing to work hard for little money and here's what I'm looking for. I just want to be groomed to eventually do what you do. And I want to do it in a professional manner. I want to build a successful practice. I won't really want to love what I do day in and day out. And I didn't understand that financial planning was a profession. I still thought it was investment management because I was working for older advisors who didn't know it, who didn't know better. They weren't trained to certified financial planners. And I, I think there's something to be said about early in your career.

Aaron (11:44):

Go to a firm that's going to sponsor you for those licenses, who's also going to sponsor you for the CFP and it's going to teach you the art of financial planning because that's how you're going to a really good client base. Most of those firms are by nature going to be a little bit smaller, right? They're going to be more on the independent side. And so there may be less opportunities depending on kind of what exactly you're looking for salesperson. So we'll get to all that and your story, but sure. I don't want to steal your thunder here, so, okay. You're in century city, you're walking around, you're handing out your resume, you're getting some nos. Did you get a yes? I finally got a yes. And it was from an advisor that is well respected, continues to be well-respected in the community. I'm involved in a lot of nonprofit work.

Aaron (12:24):

Um, I, you know, I, I asked around and he's very well known in the, in the Jewish scene in LA and everything checked out that this guy was a total mench and I'm very much wanted to bring a board, someone as a succession plan, uh, someone that they, that he felt he could mentor to eventually succeed him in working with his clients and his clients children. Um, he really sold me on that vision when he hired me. Uh, it also helped that I worked with Schwab as my primary custodian and that's where he had all of his client assets. So after a number of conversations, it seemed like we were on the same page. Um, I asked for a slight salary bump from my previous role, which was really nothing. And he said, totally fine. I wish, and I wish I could go back in time, but I don't, I didn't really have any professional advocates who could say, Aaron, this is what you should be asking for in this type of role.

Aaron (13:24):

Or this is, you know, here's the salary range for a client service associate. Um, I really went in blind and I was excited, exuberant about the opportunity to work with this all star in the field. Well-respected, a great book of business, about 25 clients, over 500 million in assets, which we would get to that point. It started at a smaller amount, but in effect, I saw this as a way to learn how to be the lead advisor and learn the soft skills of the field. And so again, this for the second time in my, in my, in my short career, I found myself hitting the peak of my learning curve. And after going through and meeting with prospective clients, meeting most of his clients and learning the soft skills, I felt like, okay, uh, there's, there's more to this art of, of it, of it, you know, advising people beyond investments.

Aaron (14:19):

How about the insurance? How about the estate planning? Um, you know, how about the retirement planning, the stock options. There's so many areas that I was completely unexposed to for two and a half years and I felt like I was looking and watching movies and black and white. Meanwhile, my peers were watching films in color and I felt like, okay, the art of pitching investments is eventually going to die off. Yeah. So how am I going to prepare myself to build successful practice for the 21st century and for the next generation of clients? Well, it's not going to happen there. Yeah, yeah, for sure. I still remember because like I said earlier, that's where you and I met was when you're at that role and the way that we met was I was cold calling people at Hightower trying to get meetings with the, the advisors there.

Patrick (15:11):

And the interesting thing that I noticed is one, I was probably the only person at dimensional at the time that was cold calling cause I was bored. So I was like, all right, I'm not taking any of these warm calls as let's, let's up the difficulty level furnace. But most firms that I called, I couldn't really get the decision maker. Like I'd get an admin and I did screened out or I get something. But every single pretty much for the most part, like every, every adviser at Hightower, since it was investment focus and they were used to taking cold calls with wholesalers and those types of things. Like they, I would actually get a principal on the phone and they'd be like, what are you looking for? Like, why are you taking my call? Like I was just confused from my side of the table, which is advisors to aren't really that interested in talking about investments because they've moved past it.

Aaron (15:55):

So I was kind of confused that they were interested in talking to me because it was such a shift from what I was used to with consulting with the RAs and even the independent broker dealer community where they're like, I don't want to talk to me. You know, wholesalers, I'm more worried about, you know, this and marketing and everything else. So it was just a shift for me, which I found somewhat surprising. Well, it's interesting that you say that is if you look at the average Hightower advisor and they look at their makeup, most of them come from UBS, Merrill Lynch, Morgan Stanley. They're used to meeting with wholesalers and having Monday morning meeting or meetings sponsored by Prudential. So for them in the coffee cart and all the functional tea sandwiches, you know, the spread. Uh, so they're used to that. They're used to getting phone calls.

Aaron (16:39):

Um, whereas the RIS for the most part have always led at least in recent times with financial planning. Um, and as a result, there's less investment focus and they want to spend their time on things that they find to be productive and value add. Yup. Many RIS use dimensional, they use low cost ETFs because they are fiduciaries. And so for them it's not about the free lunch, it's about how can I maximize my time so that I can give each client more of my time and also have the time necessary to grow my practice if I'm looking to do so. Yup. And so what you probably figured out from calling a ton of Hightower advisors is most of these guys are reformed brokers. They wanted to go to a less conflicted model that's not not conflicted. Okay. Yup. And they want me to go to a less conflicted model.

Aaron (17:30):

And uh, they still wanted to have that, that investment focus. Uh, and they just wanting to be more independent in of nature, want to be business owners and have autonomy. They didn't want to be a constricted by a compliance department that would say, well, if you get a client gift that's $101, you know, you're, you're breaking the law. Uh, so a lot of the advisors leave that wirehouse system and they're not ready to go fully independent. They want to put the training wheels on and they want to explore what being independent is like. You know, we take for granted, having been on the independent side for a number of years, that it is a tough transition because a lot of the, you know, the wirehouse doesn't train you to be a business owner. It trains you to be a salesperson and to go out there and bring in business to feed all the rest of the middle office staff and the insurance professional estate provide all the, you know, mortgage, you name it.

Patrick  (18:25):

Yup. And so it's a different role on the independent side. And I think for them it's a, a transitional move. And you've seen this, I mean PAG, natto carp, there's some pretty big teams who used Hightower for a six or seven year period and eventually went the fully independent route because they learned how to do this completely on their own without needing a firm to kind of implement their operations and select their research providers. Yeah, for sure. No, it's interesting. I mean there's so many different options available to advisors and that's part of the reason why I wanted to have you on as you've kind of seen a lot of the, the underbelly of the, and not to say that it's a bad thing, it's just some of these providers are great and like high tower is a great firm. They die, they do great work.

Aaron (19:08):

Um, but you've just seen so much of it. So family office, small family office advisor who, you know, let's say using it as essentially a pension and in retirement you see what you see. Sure. Annuity, it is what it is. Then we've got another situation where, you know, you're, you're doing mid back office stuff, you don't know what deal to negotiate. He's not going to tell you otherwise. He's happy to, you know, recapture the value and pay you what you asked for. And then before you know it, you're a couple of years in and you're noticing that you're not developing, at least the, you know, to the point where you're able to stick around. You're not being, are you the act of succession plan at this point or is it not really happening? Like what was the, it's a gray area and I think that for the advisors listening today, um, any firm or advisor that's going to promise you the business down the road, uh, without a written agreement, it, I would just not rely on that.

Aaron (20:02):

I would immediately run out of the office and then I'd set it on fire. Exactly. So what I found to be interesting was in my first role I picked individual stocks, individual bonds and build portfolios and was very active in that, uh, which kept me very busy, but I didn't realize that, that I really wasn't doing much like a value for my clients. I thought I was because I was picking dividend paying stocks and writing these one page commentaries. Then the next role was picking fund managers and, and, and doing operational due diligence on them and talking about how this active manager because they're concentrated with their bets could outperform an index. And what I didn't realize from the get go was it's as simple as just go low cost ETFs and focus on financial planning. Yup. Because I didn't work with a financial planner in essence.

Aaron (20:54):

Um, so it took me to the pit stops along the way. We're talking 2010 to 2014 so four years. So really focusing on the investments, getting to know clients, getting to like develop the core soft skills of an advisor. So, for instance, your initial meeting with a prospect, identifying, you know, do they have work with a current advisor, what are they looking to accomplish? Really just kind of profiling the client and then coming back with suggestions on, on enhancing or improving the plan. Um, so I was getting good at that structure of meeting one meeting to close or meeting one to three, you know, uh, crickets and, and, and being ghosted. Um, and understanding that it is a numbers game. But what I wasn't learning was the art of financial planning, which, you know, I can't emphasize this enough. My relationships with my clients, uh, that, that started off as financial planning clients is way deeper than the investment management clients that we essentially were babysitting money for in prior roles.

Aaron (21:56):

And I also just didn't get a lot of satisfaction from just picking funds. Well that's because you know, once you realize what the game is, you know, you're not adding a ton of value with picking funds. So, I mean, that just kind of transfers onto you and you're just like, ah, I don't really know why I'm doing this, so I can get that. Yeah. So what we ended up, so you did you end up leaving Hightower and then moving on to what was the next step from there? So I had what my former boss manager would call a quarter life crisis and decided that a clown, well, there were a couple things. That's why you're dressed this way. Yeah. With my cashmere sweater and my, uh, cloud soccer shoes. Uh, so, so on a more serious note, one of my dear friends was diagnosed with testicular cancer.

Aaron (22:40):

I had another friend that had passed away, not have close friend, but another friend from high school that had passed away from cancer and all American athletes in three sports at Santa Monica high school where just to play one sport means you're a pretty good athlete. Um, even golf. So, uh, anyways, I had a moment where I was just really unhappy. It was sitting in my office and Pat and I have taught, we've talked about, uh, I had an office with no windows and was really just wondering like, what else is out there? Like what am I missing? I'm 25, but uh, there's no guarantee that I'll make it to 26. I've saw this with, with friends who unfortunately were taken from us far too soon and decided, you know what, I'm going to give him three months notice because he is a great guy. Yeah.

Aaron (23:28):

And I don't want to leave him with the short end of the stick and I want to make sure that we hire someone to replace some of the functions that I played that were pivotal to allowing my partner to run his practice. Um, and purely from an administrative operational standpoint, you know, we weren't going to be training someone to attend meetings with him and close new business because that was not the role that I initially signed up for. It's just with something that I grew into. So I took my bonus, I took some savings and I decided I'm going to go backpack the world for an indefinite period of time and uh, booked a one way ticket and met my friend in Rome with a 43 liter backpack and said, okay, let's go have this experience. You know, maybe I won't have this opportunity ever again.

Aaron (24:20):

Um, it's probably not the most responsible thing to do. Quit a job without having something lined up. But I knew that I needed to re hit the reset button and figure out what I needed in my life and my, it might've been a complete industry change and career change, but I didn't want to just impulsively just grab the next job available without doing some soul searching, millennial soul searching. Here we go. I'm three and a half months later, uh, parents were asking, where are you a surprise? It took three and a half months. It took three and a half months and I think I learned more in that three and a half month period backpacking solo for two thirds of it, um, about what I was looking for in life. What my mission was, where I wanted to be geographically and came back refreshed with a game plan.

Aaron (25:15):

Um, which led me to taking a job with a FinTech company in San Francisco called lending club. Are you familiar with it? And familiar. They actually lend me some money to remodel my first condo back in the day. So, and I paid them probably one of the few, you were probably like an a or B. I think I was a B plus at that point. So maybe I invested in your loan. You may have packaged together my loan. I paid off, I paid my bills, I got my $25 back, $25 a principal at lending club. So I take a job with lending club as an account executive on the small, uh, on the loan sales team.

Patrick (25:50):

Hey, model FAS. I know you're enjoying this conversation, but I wanted to take a quick break to talk to you about the model FAA accelerator. This is a unique collaboration between us and you where we help you build a financial advising practice that you can be proud of. We focus on the foundational concepts around how to pick a niche or a specialization, how to price your services, how to construct an offer that people are going to buy and then how to market it and sell it in a way that will get people to sign on the dotted line and become clients of your firm all while giving you the information to scale and set up workflows and operational processes that will allow you to reclaim your time and build a practice that doesn't run you. So if you'd like to hear more about that, go to www.modelfaa.comforwardslashacceleratororwww.modelfaa.com hover over, work with us and click on accelerator. Hope to see you in the program.

Patrick (26:39):

And that's where I learned about the difference between annual percentage rate and an interest rate. So I did learn some things there in the month and a half I was there, which I'll get to, uh, but I was pitched the role in the following way. This would be a role where I would be able to educate consumers on responsible borrowing. Let me, let me stop for a second. That was not the role that I was in for the month and a half that I was there and, and I was not the only one. The entire team that I was on was eventually booted and there were some serious sec regulatory violations going on where we're calling and, and giving in bunny quotes, investment advice, um, in a way that's so roundabout that we can avoid essentially giving what would be deemed by the regulatory bodies as investment advice. So if I were in your shoes, I may and using vague language and I felt going home everyday after making 120 cold calls to borrowers, ranging from someone who is a professional and a borrower, you know, maybe 7% interest rate to 35% interest rate.

Aaron (27:51):

They've asked everyone and anyone for money and they got denied by everything except for lending club at a 35% interest rate. I just felt like I wasn't actually doing what I was set out to do and what I really wanted to do, which was helping people. Got it. And so I thought take a role at the organization, prove my worth, and they'll transfer me. Well, this was a month and a half, two months before the IPO and they had zero interest in, in organizational changes. They just wanted to pump up loan volume as they were going public to get a higher valuation. And I was young, naive, 26 years old, 27 years old. And I thought take a role at an organization and then they'll move me. But it was shortsighted. And the good news is, is that I moved to the city, I wanted to live in San Francisco after all that travel realized I wanted to be somewhere metropolitan somewhere I could walk.

Patrick (28:48):

Um, and San Francisco had always been pitched as a, as a great innovative place for entrepreneurs and I just needed a change of scenery. Yeah. So you left lending club and where did you land after that? So I did some consulting for about a couple of months and then landed on my feet at Merrill Lynch. Now it's really interesting. Most people start their careers at a wirehouse and eventually go work for a family office or an RA complete opposite. And I don't understand, I mean there was no logic to what I did other than bad job market, uh, difficult circumstances. And I had to in some cases take theF only offer available to me on the table. Yeah. Life, life. But the Merrill Lynch experience taught me a set of skills that I use to this day and I'm forever grateful to them for that. They gave me an opportunity to get back into the industry that I realized was right for me into a position where I could be the lead advisor.

Aaron (29:50):

Yep. So it was a roundabout way to finally land to that lead advisor role and it's just like, let's briefly walk through the experience at Merrill Lynch for those that are curious about what the wirehouse space looks like. Maybe they were there years ago and now they're independent or they're considering the wirehouse. Like what was that experience like? It is, especially post B of a Merrill merger, it is very much the type of place where you need to buy into the enterprise and be a champion for the company if you want to be successful. Okay. What does that mean for somebody who doesn't understand the term, like buy into the enterprise? Like what does that mean mean to you? Yeah. Um, for coming from the independent side, I wanted to just do one thing and do it very well. And what it meant was you've got to be a generalist and you've got to know when to hand things off to your internal partners.

Aaron (30:42):

Now it's one thing if you build an organization and hand select the people that you're working with and you get to farm that workout off to them. It's another thing to farm the work off to Merrill Lynch employees that are salaried that you know, you're low on the totem pole as a solo practitioner with under 10 million in assets and so you bring them something, it's going to go to the bottom of the pile. And what I found was it was not a good place for a solo advisor starting the industry or even mid career to build a practice because you were basically being taught to sell the enterprise, but you weren't able to do it effectively because the firm wasn't providing the resources and they weren't providing the incentives to the internal partners to support someone like me. So I didn't have an associate, a client service person.

Aaron (31:33):

I shared a client service person with 15 other advisors and she wouldn't pick up my calls. So how am I supposed to get new account documents done when I don't know that Merrill Lynch internal systems, they had some funky technology that was like 1980s Fortran coding and how am I supposed to learn all of that while trying to hit a very difficult monthly nut to just keep my seat, not even to make extra comp, but just to keep my seat. Wow. So what ended up happening, I mean, I know that, you know, I know the end of this story, but how long were you there and like what, what, what was that kind of the end of the experience like? So we call this the Merrill Lynch PMD fraternity. And I run into some of these guys all the time. They hired a couple hundred people for my position and there were three of us were Manning after about 18 months.

Aaron (32:24):

Wow. And we're talking people with JD MBAs, people from healthcare, uh, like health tech sales, like executives who decided they wanted to go into personal finance later in their career, even CPAs who were unable to hit the aggressive numbers that Merrill Lynch was, was asking of program participants. And so there was a, there was an expiration date constantly on my mind as I was going to work every day, cold calling, trying to drum up business, but deep down not feeling like I was going to be building a career there. And so why would I want to bring someone, a board to immediately leave and say, well, that firm wasn't very good to me. Yes and I sold you on it as a client. It's just not a good experience. And I, and I was thinking for the first time in my career, I started thinking long term, you know, it finally dawned upon me that I should be thinking about the next 10 2030 years instead of just thinking about month to month, how do I just bring enough assets in, enough revenue in.

Aaron (33:27):

And so I wanted to run a fee only practice and that's just not possible. It's possible but it's very, very difficult to do in the wirehouse system because you probably have some production requirements around products that aren't fee only, you know correct. Lending and you know other proprietary products that you probably need to mix in and consumers are getting smart. They want to work with a fiduciary, they want to work with a financial planner. Many do, especially the clients I want to work with, they're more educated. They come asking really good questions there. They're not going to just have one meeting and say, okay, well look at my investments and tell me what I can be doing better. They really want to develop a personal relationship with their planner. And so Meryl taught me a couple of things, but most importantly they taught me how to sell business development, business development skills.

Aaron (34:15):

They've got one of the best sales training programs probably in any industry that they have poured so much, so many resources into. And you know, they gave us a list of, of reading that we were required to to do. Um, I had never been through a formal sales training program before and so I felt like if I want to be a lead advisor, I have to know how to sell. It's true and build rapport. Yeah, I talk about that a lot. I feel like the number one skill set that you probably need in order to get to a sustainable point is sales and business development. You need to be able to get people to like you really quickly. You need to know how to take that attention and turn that into, you know, people signing on the dotted line become a clients or else it's going to be fairly difficult to do really anything.

Aaron (34:59):

You know, yesterday, yeah. Sales has a negative connotation. Uh, but I do think what we're doing is educating, educated edge education based selling is really what we're doing consultative. And so I think Meryl definitely emphasized that they didn't teach the investment side, but it's okay. I came with that background already, but they really taught people how to create a system, um, to, to build out their own system of, of prospecting, of developing a lead gen, um, uh, system, uh, for lack of a better word. And you know, essentially how to get that pipeline to producing the clients. Um, which gave me, and also, I mean adds that the name brand, which I know doesn't have the positive emotions that it had probably in the eighties, nineties, and early two thousands. But if you're going to strike out on your own, it definitely helps to have a big brand name on your resume.

Aaron (35:58):

Yeah, no, it's true. It's true. So you ended up leaving Merrill and then did you go right into asserting your own firm? Yeah, and so this is where I think a lot of advisors struggle in the wirehouse system. They, they place too much emphasis on compliance. They're concerned about, okay, well there's so much being taken care of for me at the wirehouse and I'm concerned that this is going to eat up a lot of my time. It's going to be very expensive. And there, there's just a lot of misinformation being floated around out there. Uh, which is why I turned to Kitsis. Um, and, and obviously to some of the other resources out there for advisors, uh, when setting up my own shop and, and uh, this is, this is a difficult undertaking. You're not going to know everything from day one. You're gonna make a lot of mistakes.

Aaron (36:48):

You should want to make sure that you're, you're not making a punitive mistake that's going to, to, uh, hinder your growth or your potential down the road. And so, um, as I was at Merrill, I was planning my exit in a very under the radar type of way to not bring attention. I also made sure if what I have left to, to thank the managers at Merrill and to really leave gracefully and follow broker protocol and, and, and to not, you know, burn any bridges because it's too easy in our business, especially when you're dealing with money. People get super, super sensitive. So I, you know, I've set up my firm, um, I actually gave a little bit of, of, of a cushion of time, um, in order to, you know, not necessarily ruffle any feathers. And then I invited my clients to this new experience with rapport financial, the firm that I had built, um, but really had been building since the high tower and concentric days, uh, with all that knowledge.

Patrick (37:51):

Um, so it wasn't like I was doing a startup impulsively. I had thought about this for six, seven years. And so how, how old is your RA now? I was like two years old. Three years old. Started the firm in January, 2017. So hitting the three or months coming up. So how have things been going? I mean like what, what are some, I guess words of wisdom that you can share with folks that are maybe a year or less than the journey or maybe kind of still earlier on thinking about at some point going independent, starting their own business. I would say number one, get the certified financial planner designation, CFP, get the CFP, get it done. It's a huge time commitment, but once you've got that done, you're going to have much more confidence in selling. Okay. And you're, I felt I was at a disadvantage not having it and I was having to make up for it by going above and beyond.

Aaron (38:41):

Now that I have it, I'm certainly going to continue to provide the service that I provided the last three years. But I would say get your certified financial planner designation. And then within the firm you're working at, build up a small client base that is loyal and trusting. You don't need a huge client base to get started. I started with three, four clients and now I'm at 30 plus turning down business left and right. That doesn't fit with my business model. And, um, I don't think I'm anything special. I just think that, you know, I'm a planner by nature. I'm disciplined. I went into this with, with intentionality and, uh, did my homework, I mean called you early on to say, what are you using for performance reporting and for CRM. Some of the technical issues that I wasn't aware of, um, or that I was aware of, but I'd used at bigger firms that had significantly higher budget.

Aaron (39:36):

Yeah. And so I think, you know, the, the, the things that I wouldn't part on a, on a adviser who's going to set up their own shop is keep your contract short, definitely seek out help. Okay. And, and, and now I, I'm actually involved with the model FAA as a lead coach. Yup. I do believe that I could have avoided so many mistakes early on had I had some handholding from someone who had done this before, um, and could point me in the right direction. They could ask me good questions about my particular focus and, and what I wanted to build in 10 years and could steer me towards the right software. Um, could help me implement best practices from day one and, uh, you know, it, it would probably save me a lot of time and headaches. Yeah. But, uh, I really do think that, um, a lot of advisors who go at this on their own without help, they're going to really struggle.

Aaron (40:33):

I think part of what I've noticed is, you know, a lot of advisors that are going about going independent now it seems, uh, it seems easy in the sense that you can register a company, set up state registration, get some tech and kind of go at it. Um, but there's certain mental things that happen, right? So the focus, which you mentioned the vision, the creating a strategy for business development and marketing. You know, once you have traction scaling your infrastructure so you can create capacity and a lot of advisors think that you can get there just through community, like just by collaborating on a Facebook group or asking a question to a group of 10, 20 150, you know, 500 people. But really what I've seen after creating our own community within the model, if they, which is great, I think community's a fantastic way to, you know, share wins, share losses and get feedback thing.

Aaron (41:20):

It's, I wish I had a little bit more direct feedback on some of the things that I was doing. So I felt more confident actually, you know, making that decision and moving forward and securing that momentum. Absolutely. I would say that looking back three years to, and then fast forwarding to where I am currently and looking at my client experience from like step one to implementation to collection of, of important data. It's very different and I'm constantly evaluating and poking holes in my overall strategy to sit to, to see if I can be a better advisor, um, to have a better client experience where there's less friction, um, less I have to rely on the client to deliver me information and, and a more intuitive experience. So I would say it took three years and, uh, it took a lot of meetings with, with various types of clients.

Aaron (42:17):

But for someone who gets started, I would want to have conversations with, with a professional who has done what I've done to be able to say, okay, well here's what I did, but let's, let's get a little bit more context on your background and what you're looking to accomplish. Um, just like, you know, we do with our clients and then essentially we can help build that from, from day one instead of you painfully going through the experience of like reiterating every year and changing up the playbook and then eventually burning out. Um, so what are your thoughts on that? I mean, you kind of started with this lead advisor mindset of you as you've been the lead advisor. Have you transitioned into a position where you're like, you know what, I actually enjoy building the business more. Are you still like, Hey, I really enjoy working with these clients.

Patrick  (43:05):

So how has that process been going for you as you've kind of built this thing out over the past three years? Yeah, so living in San Francisco, you see a lot of companies that started with a couple of co-founders and have grown to thousands of employees and have become unicorns and eventually exited through an acquisition or an IPO. I originally thought that that's what I wanted and I think I was definitely, um, glamorizing a lifestyle that that really is not glamorous. You know? I mean, you watch Silicon Valley and, and, and it pokes fun at, at many of the, of the unexpected twists and turns of entrepreneurship. And so what I discovered over the last three years of running a practice is I love being the lead advisor. I love building new client relationships. I am good at building financial plans, but I'd certainly like to outsource that functionality eventually to someone else.

Aaron (44:07):

Um, I'm good at the operations and admin cause that's how I started in the industry. But yeah, I don't enjoy it. Um, so w what I would love to focus on is ultimately growing the enterprise. Um, but, but staying lean, not hiring a huge staff, perhaps hiring a couple of virtual assistants and maybe an associate planner. Paraplanner um, but you know, I think originally, you know, it was a very different narrative that I was, that I was telling myself and I think it's very, very over-hyped, you know, essentially like, can you build yourself a good practice, work with the people you want to work with, pick the clients you get to work with because that's the beauty of running your own firm and not take on tremendous, a tremendous, you know, staff that comes with headaches and, and other issues that, that, you know, essentially you're not trained to, to handle.

Aaron (45:05):

So as this has come full circle, I've realized I wanna I want to build more relationships, I want to grow the firm, but I want to do it responsibly. I want to eventually hit a certain amount of clients, then hire an associate planner and then move on and, and you know, and seek out other opportunities. And that's why I'm now a coach for the model FAA. Um, I really want to help advisors navigate the complexities of, of setting up and, and operating a practice. Um, and I want to do that in tandem with advising a group of clients. And so, um, yeah, I, I think my story is, is not too dissimilar from a lot of advisors who get started and say, I want to build a massive enterprise and then realize it's over overrated. Yeah. And I think you just in summary, I mean we spent an hour kind of chatting through all the various positions that you had to come to the conclusion that it's really, I mean, being a lead advisor is really a decision and there's paths to get there a little bit faster and if you stumble on it, you can get there accidentally.

Aaron (46:12):

Like you can get there through trial and error and you know, doing some of the things that you did, which weren't necessarily wrong, right? They taught you a lot of skills that you needed to run your own practice and got you to the point where you're at today. But I think the moral of the story is there might be a faster way to get there, right. With less, better aligned incentives and you know, a more proven process. So I think that's ultimately what you know, we're trying to do is educate folks that you don't have to necessarily make mistake. Serbia payday lender, you know, or, or, or work for two planners who are not really planners. They are just stocks and bond salesman investment guys. Yeah. And that's not your fault. And it's not an N plus you got that cool three and a half month trip out of the deal.

Patrick  (46:59):

So there's that, um, which maybe I need to do. That sounds pretty cool. But, um, either way, I think there's a lot of ways for people to find a better path in the industry. So that's kind of the mission and that's why we're excited to have you, uh, on the model FAA squad. So Aaron, thank you for sharing your story. Uh, as I said earlier, I think you've kind of seen every single aspect, you know, re prism of the industry and for all the listeners in the show notes, we're going to include a link to one of the blog posts that Aaron wrote through, uh, the Kitces,

Patrick  (47:29):

the nerds Eyeview blog that talks about how to start your own RIA. I think this is a really great article. It's the number one ranked article if you search start your RIA or start in RIA on Google. So check that out. If you're thinking about going independent. And then just, I guess, final words of wisdom. Is there anything that you would want to impart on a financial advisor who is, you know, let's say considering a change or just kind of, you know, look into, to move their way towards independence either now or in the future?

Aaron (48:00):

Cold email, in fact, cold call, they'll admire that and they will actually give you some of their time. It's true. But, uh, I would say don't go at this decision alone. There are tremendous resources available for free. I mean including this podcast as one. And um, really, you know, take a look in the mirror and really think about what your skill set is and what you want to do with your career. And if that means being an elite advisor, great, it's going to be tough and you're going to have to take your home, your work home with you constantly. But it is so gratifying to, to have your own client base that said, for others, you're going to be better off being, you know, an associate advisor or working in ops. There's nothing wrong with that, but figure out what you're good at. What you enjoy doing, what gets you up in the morning and follow that.

Patrick  (48:54):

Great advice, man. Thank you so much for coming on the show. Traveling to Austin for wearing the clown suit. I don't know why you decided to do that. The little nose. It's really freaking me out, but we made it through the hour. So again, and congrats on the CFP before you were just, as I said, a certified fantastic person. Now you are a certified financial planner, so hopefully we'll look forward to having you on the show again, but appreciate your time, Aaron. Thank you.