On Gratitude and Coin Flips

When I started my financial planning practice, I was told by the regional director for Waddell & Reed that the 4-year survival rate on a financial planning practice was about 13%. Somehow, the math and probability of that number didn’t stick, and I went ahead and launched the practice. Today, I have a practice and live a lifestyle that I am blessed to have. I am blessed not only to be among the 13% of survivors but to have lasted more than twice the length with no signs of slowing down. In fact, of the peer group of RIAs directly managing under a hundred million dollars of client assets, our five-year growth rate is more than twice that of the average of the top decile of our peer group. In that, we are also truly blessed.

Today’s writing is a reflection on the improbability of having gotten this far. If you’re interested, read on, and if not, have a great day. Before you go, let me say thank you for reading. I’ll be on hiatus for the next four weeks as I get married, have a honeymoon, and all that good stuff. But don’t worry, I’ll be back in late October with more educational content and thought pieces!

The 13% Survival Rate – 4 Flips

Cerulli Associates recently released a study that claimed that the survival rate for financial advisors in the first four years was 25%. At face value, this seemed like a marked improvement from the 13% stat I’d heard when I got started. Yet, the reason for the differentiation became clear after a few minutes: The 25% was a marked improvement not because entrepreneurship had gotten easier but because they were including employee advisors. That meant that the survival rate of 13% was well in place for new firms and that the survival rate for employees hovered in the 30-40% range. Why the attrition? Because most positions in the financial world are, to this day, sales jobs. While I was starting my own practice as a firm owner under Waddell & Reed when I got started on my apartment’s coffee table, there was no doubt that it was still a sales job, much as any entrepreneur’s first job is to sell the goods or services they provide. Reaching the 13% survival point over four years as a financial advisor is so improbable, but it’s not a simple drop from 100% survival for years 1-3 and then a sudden cliff at the fourth year. The curve is actually 60%, 38%, 24%, 13% over the first four years. The real killer is what’s called the “Sophomore Slump.”

The Sophomore Slump is an almost unavoidable issue in how people start their practices. Most firm owners or advisors with a sales responsibility will immediately go to their natural network to find clients to start: mom and dad, family members, former co-workers, classmates and roommates, neighbors, and anyone they know. This group alone can keep them busy for the first several months of their practice. But by the end of their first year, this natural market will be essentially tapped out, and now the advisor has been left with no “easy” new clients and will have to rely on their marketing. Many have failed to do any other marketing in the first year, and so by the end of the second year, only about 1/3^rd are left standing. By an utter miracle, I survived the Sophomore Slump. I started my practice in July, and between the first anniversary and November of the same year, I didn’t bring on a single additional client. Not a single planning fee, investment dollar, or policy sale to help keep the lights on. It was only by one errant referral, an ex-coworker referring his girlfriend’s father who lived in a completely different state, that the lights stayed on.

To give you an idea how how improbable the survival rate over the first four years is for a financial advisor, among even the low success rate of every other form of entrepreneurship, the odds of being successful as an entrepreneur are about equal to flipping a quarter “heads” four times in a row. It’s possible, it happens, but it’s rare. To be here practicing as a financial planner, I am incredibly grateful, not only to the clients who have made it possible but for the sheer improbability of clients becoming clients at just the right time more times than I can count.

Inverse Gold Digging – Infinite Flips

My fiancé and I have a joke: She’s not marrying me for the money. While today I’m an incredibly privileged and comfortable 1%er among 33-year-olds in the United States by income and net worth, our relationship certainly didn’t start that way. To put it in context, my fiancé in the first three years of our relationship never made more than $50,000 a year, and in the first three years, she out-earned me by $30,000, $40,000, and $15,000, respectively. There was even a point during a Christmas visit to her family in Missouri when I was so broke and in credit card debt that she literally had to pay for all of the gas, food, and groceries on the way there, at Christmas, and on the trip back. Yet even as I planned to take the practice fully independent in 2019, with the barest hint of reliable and consistent revenue on the horizon, she stood by me as for several months, my income dropped to zero and my recently paid off credit card bills began to stack up as we waited for the state of Colorado to approve the registration of the firm. Her faith in me paid off.

Last year, after six years of standing by me, bending her schedule around the insanity that is an entrepreneurial calendar, forgoing trips and holidays and vacations we could have enjoyed together as a more stable and employed couple, I was able to propose with a flawless 2-carat engagement ring, and I was utterly blessed for her to say yes. Next week, after 18 months and 11 days of planning, I will be blessed to call her my wife.

The probability of finding a special someone to share your life with is as mathematically improbable as anything comes. I can’t begin to calculate the number of coin flips it takes to find someone patient enough to date you when you’re more than broke, who is kind enough to put up with your weird personality, and who loves you as unconditionally as one must to be my fiancé. To hang on for almost eight years until you’re fortunate enough to have a fairytale wedding is truly something special. All I can say for the matter is that I cannot begin to express my gratitude for the improbability of the outcome.

A Small Bit on the Future – The Flip Come to Pass

Beyond the ramble of the business and my love life, I want to share a small bit of the future with those of you who’ve read this far. As mentioned, I’m getting married next week. The venue isn’t half bad.

From there, we’ll be setting off to explore New Zealand, including a visit to the Lord of the Rings sets and traversing the famous glow worm caves.

And finally, taking some time to simply relax in the paradise of Bora Bora in French Polynesia.

All of this ends up coming out like a brag, but really, I simply want to share a singular thought with you. None of this has been possible without you. My friends, my family, my clients, my community. Everything we get to experience, every step we’ve gotten to take thus far, has been the outcome of your support and confidence. So all I can say, from the bottom of my heart, is thank you.

P.S. To the clients, please be kind with Emily while I’m gone, she’s holding the fort on her own!