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Why You Shouldn’t Fear Specialization With Adam Cmejla

As the financial planning industry shifts from selling products to selling advice, trends indicate that things are going to be considerably different in the future. While it may seem counterintuitive, when selling your advice, the more targeted you make that group of prospects, the faster your book of clients will grow.

On this episode of Elementality, Reese welcomes Adam Cmejla who talks about his niche journey and the success his firm, Integrated Planning & Wealth Management, found serving a highly-specialized group of optometrists. Adam explains why the greater clarity you can give your message, the better you can define your reach. Find out why discovering the right niche for your advisory skills may be the way to go as you prepare for your firm’s future.

 


Podcast Transcript

Adam Cmejla:
We built the airplane as we were flying and… Developing this niche. And that’s where… When I talk to advisors that are so hesitant about breaking into a niche, I just, I ask them to trust me and trust us. Someone like yourself, other advisors that…

Reese Harper:
[laughter] It’s so hard though.

Adam Cmejla:
That the narrower you can take that message, the narrower you can craft that, the clearer you can define your avatar qualitatively and quantitatively, I promise you the easier this businesses is, the greater your reach and the less geography matters.

Abby Morton:
Welcome to Elementality, I am Abby Morton, CFP and producer of our podcast here at Elements. I love being a financial planner, but I know it’s a challenging profession as well. That’s why the number one goal of our show is to help you prosper as an advisor as you better connect with your clients. We know your time is very valuable. Plan on a good return when you spend it here with us.

Reese Harper:
Welcome to another episode of Elementality everybody. Super excited on a Wednesday here, glancing out at the flowers. We’ve got bright skies, blue skies, little snow cap mountains. And I get the privilege of interacting with someone who I’ve known for a while and admired the quality of his practice, his niche market, his content creation, his friendly demeanor and good humor, even on occasion. I’d like to welcome to the show, a first time guest, Adams Cmejla. Adam, welcome to the show.

Adam Cmejla:
Reese, thanks for having me. Checks in the mail for all those accolades, thank you, sir. [laughter]

Reese Harper:
People don’t realize that people pay big money on the show. There’s only three people listening right now, Adam so… It’s… You’re actually doing us a favor.

Adam Cmejla:
Is one of them your mom? No. [laughter]

Reese Harper:
My parents, and then my son, he’s 12. Like, “Dad, you have a podcast, I’m gonna start listening.” It only lasts for about a week and then he’s burnout and it goes to two… Two listeners.

Adam Cmejla:
It blew… So we have two daughters right, 11 year old and a four year old. 11, excuse me, don’t even remember my kids ages. An almost eight year old and a four year old, and the first time they heard 2020 Money on the radio or on the car like, “Dad is at you?” “Yeah.” “What are you doing?” It blew her mind to hear dad on the… On the “radio”. [laughter]

Reese Harper:
That’s so cool. Yeah dude, totally. Let’s just do a little bit of background. You and I have, I guess we interacted a few times digitally.

Adam Cmejla:
Yeah.

Reese Harper:
Just Zooms and phone calls and stuff, but we’ve never met in person ’cause we met kind of during COVID and I don’t think…

Adam Cmejla:
Yeah.

Reese Harper:
Anyone was really traveling a lot at the time. I’m sure at this… Probably within the next 12 months we’ll get together in person because conferences eventually lead people meeting up at some point.

Adam Cmejla:
We’re planning a week, we’ll be in PC in the second week of July, so I’ll touch base.

Reese Harper:
Oh nice, that’s awesome.

Adam Cmejla:
And I’ll be out there for a week.

Reese Harper:
I wanna tell… I think it’d be interesting for the audience to sort of know how two people meet each other and why they meet up. [chuckle] Like what brings two people together and why you’re… You’re curious and interested in meeting somebody. I don’t remember if I reached out to you or if you reached out to me but…

Adam Cmejla:
No, it was me. [laughter]

Reese Harper:
I’m sure it was something interesting that I reached out to you about, or that I remember talking to you about. And I… Maybe you can tell a little bit of back story about how you remember us meeting. But I just remember really being impressed with at the time, when I started a boutique advisory and kind of went niche and said, “Let’s go after the dental market and just kind of focus on that.” There wasn’t a lot of people going after really tight niches, especially niches that aren’t gigantic. Dentistry, surprisingly not enough, to those of you who are listening. It’s not like the… It’s a… In terms of in the medical market, physicians dwarf dentists in terms of just the sheer volume. We’re talking like…

Adam Cmejla:
Right.

Reese Harper:
Millions compared to hundreds of thousands. And in my market, specifically kind of the private practice dental market, there’s not a… That’s the minority of the dental market. The majority of the dental market works for another… Works for another dentist. In your case I was just really impressed that you kind of one, had the courage to go after optometry because it’s a smaller kind of nichier niche within the physician market. And you also really built out a robust service offering and positioning and marketing, and you just put a lot of effort into building your firm. I could tell you had a big heart and were caring a lot about this… The customers. So I just really appreciate that and remember feeling like, “Man, this guy really knows what it’s gonna take to survive the next 20 years.” [laughter] That’s… And that’s kind of what made me smile. I think there’s a lot of people that don’t see how big of a change is coming.

Adam Cmejla:
Yeah.

Reese Harper:
It’s… There’s a big change coming and I just don’t… I think the industry is gonna look much different in 15 years than it does now. Anyway, I remember that. Curious what your response to that is, and also curious what made you reach out or what made us connect at the beginning from your memory.

Adam Cmejla:
The way I look at that, I tell advisors my biggest… My only regret in the focus in working with optometric private practice owners is that made that pivot 13 years in the business. My only regret was that I didn’t do that 11 years prior. And the other way that I sound is that if you told me that I had to give up the niche and go back to being a generalist, I promise you I would quit this business. I do not have the energy, I don’t have… I drank my fair share of coffee and COVID accelerated a lot of this, but the days of…

Reese Harper:
Are you throwing coffee under the bus right now?

Adam Cmejla:
[laughter] I love me some coffee.

Reese Harper:
Okay, I was gonna make sure, are you telling me I can’t do that anymore?

Adam Cmejla:
Absolutely not, absolutely not. No I… I… To save my earn credibility, I’m going to not describe my coffee addiction in detail because it’s through. [laughter]

Adam Cmejla:
This idea of what it takes to build an advisory business and what this industry turning profession and we can maybe unpack that a little bit more if we want, because I do think there is a very distinct difference between the two. Between an industry and a profession. But I had… I had come across you and your… In your firm, because I was originally gonna build a dental firm. My uncle’s a dentist. He sold his practice five or six years ago. Has worked with a bigger firm based in the DFW area, which I’m sure you know who that is, right? [laughter] And when I first got into this business…

Reese Harper:
Cain Watters.

Adam Cmejla:
Cain Watters, exactly.

Reese Harper:
Yeah. Yeah.

Adam Cmejla::
When I first got into the business back in late 2007, went full time in 2008, I thought, “Hey, who would I want as an ideal client?” My uncle came to mind, dentist, and the family is successful. So I interviewed him, “What were the things that you liked about your advisor?” And he’s been with them for a long time. So he kind of gave me from his perspective what his experience was, what he liked, the value that he saw, and it just kind of evolved from there. So always I had this seat in the back of my mind of working with dentists and that evolved, and then I’d throw physicians into the mix because I ended up getting an introduction. And then I started going down the path of working with pharmacists with CVS, because I would cold… I had… I was like a bus route, I had mapped out in Indianapolis the shortest distance to hit the most CVS stores where I would drop off this informational packet and thinking that I wanna work with CVS pharmacists. And so I had… And then I’d have an optometrist here and there. So I had a specifically generic niche very early on of working with optometrists, dentist, pharmacists, and physicians.

Adam Cmejla:
But the problem with that is as soon as you get momentum in one area, you lose it in the other. And so I did that basically game of whack-a-mole from a niche standpoint, for the better part of a decade, trying to just gain traction. And I’d bring on a dentist here and I don’t know exactly how I came across dentist advisors or across the website, but I remember thinking like, “Holy man, I want that website.” Like, “That is just awesome.” And your approach at that time of compartmentalizing and calendaring the planning experience where you’re not feeding clients a buffet of information all at once, twice a year. Instead you’re giving them like Tapas snacks over the course of the year, incrementally and you’re focused on one item this month and next set in this month. That just really, really resonated with me.

Reese Harper:
Yeah, cool.

Adam Cmejla:
And I cold called your firm. I talked to Justin and Justin and I… Don’t yell at Justin, but he spent a couple hours with me one time over a course of a couple conversations.

Reese Harper:
Nice.

Adam Cmejla:
Just learning a little bit more about what you had done at… Dentist Advisors, that growth…

Reese Harper:
Well, we do tell all of our employees to make sure and help the industry improve.

Adam Cmejla:
Right.

Reese Harper:
So take as much time as you need. Anyone’s calling…

Adam Cmejla:
Yeah, so…

Reese Harper:
Yeah, we do.

Adam Cmejla:
I was grateful.

Reese Harper:
Well it’s kind of serious, but we’re kind of like… It’s cool that he was… It just shows he was…

Adam Cmejla:
He was great. Yeah.

Reese Harper:
He had a willingness to care, which I think is cool.

Adam Cmejla:
Yeah. And to be… To be fair to him, and I don’t want every advisor listening, like I don’t want Justin be inundated now with a couple hundred phone calls. I… [laughter]

Reese Harper:
Yeah, all good.

Adam Cmejla:
But so that was…

Reese Harper:
He’s screaming at them all now probably.

Adam Cmejla:
Yeah, right, right. That was kind of the short abridge version, if you will, of how you and I got connected or how Justin and I got connected, then somehow he brought you into the conversation. You and I have shared a number of Zoom calls. But I do think that what you did with Dentist Advisors, what we’re seen more and more advisors do from a niche standpoint define…

Reese Harper:
What you’ve done…

Adam Cmejla:
Yeah. What we’ve done with optometry. And so all that to say, “Yeah.” I looked at dentistry, it’s like, “All right, there’s Cain Watters, there’s you, there’s… There’s a number of firms here in Indianapolis.” I couldn’t find one firm for optometry. And do you talk about numbers, according to the BLS, the latest, the Bureau of Labor Statistics, the NAIC codes, there’s 38,000 optometrists.

Reese Harper:
Yeah.

Adam Cmejla:
About 11,000 private practices around the country. So I did the math on it, we have effectively repelled 99.997% of the general population.

Reese Harper:
Yeah.

Adams Cmejla:
Which is awesome because the narrower that I’ve taken this message, and you can appreciate this as well in your experience, the narrower you take that message and define who you’re messaging to, the easier this business becomes. Which is why I would quit the business if I had to go back and be a generalist pounding the pavement, networking, cold-calling, doing whatever it might be.

[music]

Reese Harper:
We go back to when you were first thinking about it, did that feel big or did that feel small? How big did 11,000 private practice owners and 38,000 optometrists, how big did that feel?

Adam Cmejla:
So I didn’t even do that math. A little… Small little anecdotal story just to illustrate the mental and emotional journey that I went through to eventually get to the point of I… Our firm right now will only work with optometric private practice owners that have been in practice for at least five years doing 1 million in top line revenue or within five years of selling their practice. That is our niche within a niche within a niche right now.

Reese Harper:
Yeah.

Adam Cmejla:
But I didn’t start out that way. The way in which it happened in… So Limitless Advisor Coaching Program, I’ve been involved with since 2018. I’m working in collaboration with Stephanie Bogan right now, full disclosure. Blah, blah, blah. But my point doing that in the first year of being involved in that program at one of our retreats, just by happenstance, Stephanie said… And take for example, Adam works with optometrists and she stopped. She didn’t say, “Optometrist, pharmacists, physicians, and dentists.” She didn’t complete my… What I thought to be as a niche at that time. And I wanted to complete that sentence with her. I went, “No Steph, Steph, I also work with dentists.”

Reese Harper:
But I don’t… Don’t tell… Yeah, but I also work with the business owners.

Adam Cmejla:
Exactly. So it was that scarcity mentality. Even… Even just the thought of…

Reese Harper:
What year was that roughly? What year…

Adam Cmejla:
That was 2018. That was 2018.

Reese Harper:
Yeah.

Adam Cmejla:
And so even at that time the… The scarcity mentality I had, I didn’t want to isolate myself as an… As an advisor that only worked with optometrists. I felt like I needed to have those there until I did the math, Reece. And then I realized that, okay, there’s 38,000 optometrists. If I built a practice that served 150 of them, do I think that out of a pool of 38,000, if I’m very clear on my messaging on what we do, who we do it for, how they experience it, and the value that we deliver, could I attract 150 relationships out of a pool of 38,000? Yeah, I could. And then as we built out that service model and as we… With every rep that we got, we learned where we provide even more value, we started to refine down who we can add even more value to. And that’s why… That’s when we realized that, “Gosh, we really work with practice owners.” And then we’d bring on a couple of practice owners and we have this experience saying, “Wow, look at these practice owners that have A, B, C and D.” Qualitative and quantitative. I was like, “Wow, we can really do that.”

Adam Cmejla:
And you just refine that niche. So We built the airplane as we were flying and developing this niche. And that’s when I talk to advisors that are so hesitant about breaking into a niche, I just, I ask them to trust me and trust us. Someone like yourself, other advisors that…

Reese Harper:
[laughter] It’s so hard though.

Adam Cmejla:
That the narrower you can take that message, the narrower you can craft that, the clearer you can define your avatar qualitatively and quantitatively, I promise you the easier this businesses is, the greater your reach and the less geography matters.

Reese Harper:
You’ve heard me a lot talk about functional jobs and emotional jobs. And the functional jobs of financial planning are continuing to sort of be gobbled up by fintech over time.

Adam Cmejla:
It’s commoditized.

Reese Harper:
Yeah. The emotional jobs of financial planning or financial consulting or financial therapy, they’re very… I would say they’ve been augmented even more in the last few years. With more choice the people have and the more financial information they have, the more they seek confidence, they wanna feel confident, they wanna feel comfortable, they wanna feel organized, they wanna feel something, they wanna feel something. And that’s usually why they’re hiring a financial advisor, if they’re coming to you, they’re really lacking some kind of emotional confidence, some kind of emotional security, some presence, some sense of anxiety that they have, you’re solving that. However, the functional jobs, they’re still there, even though clients are hiring you for that emotional reason, the functional jobs are still present. You just have to invest money, make recommendations, talk about debt, talk about savings, talk about spending, talk about taxes. And I feel like that when you get into a niche you start to discover new jobs.

Adam Cmejla:
Oh, 100%. Our value proposition to anybody that’s working with an advisor, if they schedule a triage call with me and I’m having a conversation to determine whether they’re a fit for our firm or not, and they’re already working with an advisor, I’ll say to them, “Dr. Prospect, the difference between our firm and any other advisory firm that’s in the country is that what they view as world class planning is table stakes for us. The difference between our firm and every other advisory firm is that we know what strategies and situation… What strategies and concepts to consider for your situation proactively before either you or your advisors thought to think of them.”

Reese Harper:
The thing that made me start Elements was actually something that you’re just highlighting. When you meet with a client you’re telling them, “Hey, other people are not gonna be able to anticipate or preventatively treat you as well as we can.” I can see the future of an optometrist, I know all the choices the optometrist is gonna make. In a simple way that would be preventative, financial care in a sense.

Adam Cmejla:
It’s the difference between being an author and a storyteller. An author is someone that can think ahead of the curve and write the narrative as they see fit. A storyteller is someone that’s already… Just telling you what’s already been written. And that I think, is the mark of a great advisor to quote Gretzky, big hockey fan, even though I’m kind of licking my wounds that the Penguins got knocked out. But Gretzky would anticipate and go where the puck is going, not necessarily where it is, or certainly obviously not where it’s been. And that’s what advisors do… That’s what great advisors… Not even really great advisors ’cause I don’t wanna… I don’t wanna paint myself as I’m God’s gift of financial planning, I’m not. But…

Reese Harper:
We both know that’s true.

Adam Cmejla:
What’s that?

Reese Harper:
We both know that’s true.

Adam Cmejla:
Nice, well played. [laughter] We’re really good at what we do, obviously.

Reese Harper:
Yeah.

Adam Cmejla:
But what I…

Reese Harper:
You’re very skilled and you’re very well educated in the needs of your customer.

Adam Cmejla:
There’s been an interesting observation that I’ve seen in our work with our niche. And I think any other advisor out there that has sharpened the saw in their niche, if the reflective will observe this as well. And that is that the amount of additional information that we as a firm know about optometry isn’t an excessive amount of information, but it’s just the right amount of information that makes all the difference in the world to our clients. And that’s what… As advisors contemplating the niche, if you’re in that or if you’re feeling that out and trying to go the Ready, Fire, Aim approach like I did and like you did where, I have this idea let me execute on it. Then refocus, reevaluate, reengage and kind of just refine that down through the funnel. If you’re in that, Ready, Fire, Aim or Ready, Aim, Fire mode, and you’re stuck in that aim capacity, you don’t have to get it perfect the first time, it’s okay to learn on the fly, so to speak.

Reese Harper:
Yeah.

Adam Cmejla:
And as I told our clients in the beginning of building the optometry space, we would ask for candid feedback. It’s okay to be vulnerable, guess what, you’re a human being, so are they.

Reese Harper:
Yeah.

Adam Cmejla:
They appreciate that feedback, it helps you serve them better, don’t be ashamed, don’t hold that… Don’t hold those cards close to your vest. Be honest and authentic with your clients and use that information to not only serve them better, but then build out the service model in a way that’s gonna serve future generations. Our whole goal is to have positive impact at scale in the profession of optometry, period full stop, that’s what we wanna do.

[music]

0:18:53.7 RH: You know how there’s a just a endless fee debate in the industry and it’s…

Adam Cmejla:
No. I thought we settled that.

Reese Harper:
Fee only. And I’m… I used to feel like in the first three or four years of my career, man, I was obsessed about fee differentiation. And I think it’s a reasonable thing to be concerned about because if you don’t have anything else to differentiate around, like…

Adam Cmejla:
In the absence of value, everything comes back to cost.

Reese Harper:
Yeah. And I’m like…

Adam Cmejla:
Or differentiated value, I should say. Maybe that’s a better way to say it.

Reese Harper:
I think the industry right now is struggling to know what it really does. What do we really do for people? Do we manage their money anymore? Do we do Monte Carlo Simulations and forecasts? Do we print binders? Do we just talk to them when they call? Our value is fluctuating right now because FinTech has eaten up a lot of our functional jobs and we’re scared. And the industry is kind of nervous and worried. Some people like you have created an incredible value proposition, independent fee structure. I honestly don’t know what your fee structure is. I don’t really care. If you’re an AUM only shop, whatever.

Adam Cmejla:
We can… I can share it if you want.

Reese Harper:
We will talk about that in a minute.

Adam Cmejla:
If you really need to know.

Reese Harper:
Yeah. We’ll talk about that.

Adam Cmejla:
Sure.

Reese Harper:
I’m just like, “It doesn’t matter to me, really.” What matters to me is, certain fee structures lend themselves to certain customer types and certain customers prefer certain types of fees. And if I want to service this customer that builds the watch, I’m gonna have to have a fee structure that accommodates that customer. Now, if I want the customer, that’s like, “I don’t want to touch anything. I don’t want to touch it.” Well, then you’re gonna have to pay a fee structure that’s kind of like what Reese paid to…

Adam Cmejla:
It’s become easier with that, yep? Yeah.

Reese Harper:
[laughter] You’re gonna pay a lot for that because Reese is gonna emotionally take on your entire financial burden for you. So you asked me the question what’s been happening at DA, I’m like, “It’s just been recently finally with getting Elements to a place where it doesn’t… They can just show up and look at the screen and give advice. That we’ve been able to offer customers that previously we couldn’t offer services to access… ”

Adam Cmejla:
At scale.

Reese Harper:
To a value competent advisor at scale. I mean, and it’s not cheap. We’re making good money at it. When someone shows up and for $595 has an hour-long consult. And my new associate advisor is just sitting there, looking at the screen and responding to this DIY customer’s questions, but all the data’s up there, we didn’t do any prep, the client did all the prep.

Adam Cmejla:
It’s just…

Reese Harper:
Just sit there and go. And it’s zero marginal cost for me. I’m not increasing my marginal cost. I didn’t… He’s not prepping, he’s not paying. We already have the cost there. He’s gonna pick up extra revenue, 30% of the revenue, 40% is I think what we pay on the consult fees right now. So they’re getting hundreds of dollars for that interaction. We’re getting the profits right to our EBITDA without any commitment to sort of burden the emotional care of that client.

Adam Cmejla:
Yep, yep.

Reese Harper:
And prep and the management and all the CPA and attorney interactions. I just think these are different customers. I think that the advisors who can say, “You know what, AUM is not threatened by hourly and fixed fees.” Not really the same as AUM and these are different value propositions that accommodate different customer preferences. And if a customer wants high amounts of service with high touch and high access to a professional with no time-tracking and maximum response time, you’re gonna have a fee structure that’s gonna have to be commensurate with that. And if you want…

Adam Cmejla:
Different doesn’t mean right or wrong.

Reese Harper:
Yeah. And I’m like, “Dude, be an advice-only planner that only does whatever or build a firm that has four fee structures and services, every segment of your niche.” And you’ll just have different customers paying different types of fees for different services. I can’t deliver the same service on a fixed rate as I can on an AUM schedule. I mean, on an AUM schedule, it’s all kind of like ski-wampus. It’s kind of like, “Well, you gotta have a fixed. I have a fixed base. And then I can pick up more as the AUM grows and I can reduce my base.” But certain customers want higher amounts of service than what their AUM can justify. So they gotta pay a fixed fee.

Adam Cmejla:
Yep. They gotta pay a fee.

Reese Harper:
If they wanna pay $12,000 a year to be able to lock in some kind of future price that I can hold for a lifetime, it’s just gonna… I know I’ve spent a lot of time on this, I want your reaction, but my feeling is, “Look, there’s lots of different fee structures. Keep evolving them, keep trying new ones, keep matching them up with customers and match different services to those fee structures. But don’t assume your firm has to have one fee schedule.”

Adam Cmejla:
Correct, correct.

Reese Harper:
You don’t currently need that. And you just can offer more.

Adam Cmejla:
Yeah.

Reese Harper:
And find a way to let people pick. And…

Adam Cmejla:
Yeah.

Reese Harper:
That’s been tricky for me.

Adam Cmejla:
Options.

Reese Harper:
So I’ll just acknowledge that’s been really hard. I haven’t implemented it perfectly. I’m not even as actively involved as Justin and Ryan and Matt and everybody who’s doing it every day. I’m just kind of like… They’re probably listening to this going like, “You had… Easy for you to say, bro. We’re the one trying to implement all this.” But I am doing it in my private clientele and it’s working and I’m seeing it across firms that use all types of software. Elements does something a little unique in that I think it provides a faster, speedier way to get to value quicker with financial vital signs instead of…

Adam Cmejla:
Yeah.

Reese Harper:
Simulations.

Adam Cmejla:
Yeah.

Reese Harper:
But I don’t think it’s like… I just think we’re kind of using the wrong language. We’re arguing over fees as if it’s right or wrong, instead of different services.

Adam Cmejla:
Just acknowledge different strokes for different folks.

Reese Harper:
What are your thoughts about all of that, man? I’m just curious how you’re… What that makes you feel and think about?

Adam Cmejla:
Well, I think this goes back to something I mentioned in the beginning of the conversation, where part of the evolution that we as… Let me just use this overarching definition of financial service professionals.

Reese Harper:
Okay.

Adam Cmejla:
Are shifting from an industry that dispenses products to a profession that dispenses advice. And I feel what has happened in the advice side of that relationship is that, as we’ve shifted from the industry of products, we have still blurred the waters, blurred the lines of what is, depending on whatever your investment philosophy is, there is a commoditized scalable solution that you could bring in to manage the investments. I just personally don’t believe that any one advisor can add so much value on just investment management, to charge a significant premium fee without financial planning, if you’re coming to me, and that’s what our industry used to be, you needed an advisor because the online brokerages, the forums, we were the information, the knowledge and the wisdom, all packaged up into one, and we were the gatekeepers of giving you and selling you, for lack of a better word, the product, hence an industry that manufactures something.

Adam Cmejla:
I think of an industry as, hey, we manufacture product and we sell product, versus now the capitulation of that, the other end of that spectrum is, think of your CPAs, think of your attorneys, think of your consultants, just use that overarching theme, the advice is the product, it’s intangible, to your point about the relationship. Yes, you still have to do the science of financial planning, they’re still the computations, they’re still understanding the right type of insurance, the right type of investment risk, and what’s your retirement draw-down strategy, and how do you minimize taxes and max it, like all of those financial planning things you have to do, you’ve gotta have the technical chops, but a lot of that has been commoditized, as you mentioned, by different technology solutions, but the art of the relationship is the sweet spot of where a financial advisor, a financial planner on the advice side of that spectrum really shows up. Can you meet a client where they are emotionally, financially, intellectually, communicate them with an effective message that empowers them to take action, not what you do, it’s not what the advisor does, that significantly moves the needle and demonstrates value, it’s what the client is empowered to do, because you are in their life.

Abby Morton:
Hey, it’s Abby. Are you on the hunt for ways to grow your book, speed up your planning process and better serve your rising star clients and prospects? Then it’s time to find out how Elements is helping advisors like you all across the country, modernize their approach to financial planning. To chat with us, go to getelements.com/demo, and we’ll show you how elements can help future-proof your business.

Reese Harper:
I’ve presented many versions of fee schedules to clients, as probably you have too. And I’ve tested a lot, and I’ve got a lot of young skeptical advisors at my firm who are like, “Dude, we really should just go to a straight fixed fee,” and the more we keep testing this, the more the truth of how the AUM model is that it makes it harder for people that are younger to get started, and it just makes it easier for them to get started later. And the people who can afford a higher fixed fee, they’re typically people that are more successful and people that have a little bit higher incomes and people that are more… They have, in my experience at least, they have a tolerance for paying a fixed fee to save money because it actually…

Reese Harper:
It’s a cost savings mechanism for them, but there’s a lot… We’ve never really had a problem of servicing the top 1% of the market, that’s always been an easy thing for us to do, the hard part for me. And where I get a lot of fulfillment from is, we just launched a membership program, it’s a one-to-many kind of like a membership program where for $79 a month, like an employer could pay to give their employee access to phone calls, they gotta pay that 500 plus bucks for that interaction, but some people, that’s all they can afford, and my advisors are sitting there going like, “Well, I don’t got anything to do between 2 and 3 PM today, maybe I could knock that out, make a little bit extra money.” And I just find that if we’re not careful, we can, by eliminating our ability to use AUM as a possible source of currency that we can monetize for fees, it does… If we lose that, it does force you to a place where you have one less currency available for customers direct.

Adam Cmejla:
Well, AUM has been around basically since the foundation of our country. So it’s not going anywhere any time soon. I think I heard this, I think Kit just talked about this story, and if it’s inaccurate I’ll blame him. What is it, Northern Trust Company in Boston or Boston trust or New England trust or whatever it is, basically paid a percent of the assets for people that were going back to England or whatever. My point is, AUM is not a new pricing schedule, obviously, what we’ve done, what has worked well, and I think to your point, this is understanding your avatar of who you do your best work for, what are the quantitative characteristics of that individual and how do you meet them where they’re at, and marry that as best you can with the firm that you wanna build, we’ve broken out, we have a financial planning fee and an investment management fee, two separate services, two separate fee structures. For our practice owners, our financial planning fee is $2500 onboarding fee, 695 a month, like clockwork. And we’ve been doing that for four years, and we’ve had two clients that have transitioned out, everybody else has been just…

Adam Cmejla:
It used to be 595. We weren’t hearing no, we went to 695, we’re hearing no a little bit, but that’s why I identified it in the beginning, we do our best work with practices that are doing at least a million in top line revenue and have owned for at least five years, or they’re within five years of selling their practice because that type of avatar aligns with the fee schedule that we’ve put in place, the economics of the practice, and then assets under management, separate fee schedule starting at 75 basis points for the first million.

Reese Harper:
Do a little bit of just… I don’t know if… I didn’t, I’m sure you’ll be… If you’re not comfortable sharing this, it’s totally fine, you can just let me know. I just wanted to do a little bit of demographic. People are listening, going like, what size… What size is Adam’s firm and how many people work there, and how many clients does he bring on? Are you comfortable bribing your firm just generally?

Adam Cmejla:
Yeah, so I’m the founder of the firm. Went RIA back in 2017. I have a full-time lead advisor remote down in Texas, John Bohnsack, teaches a CFP program at Texas A&M, is a phenomenal planner and full disclosure, I guess to peel the onion back even further. Part of bringing him on was, I think you’ve done the same thing as well, or to an extent, transitioning all but a handful of the relationships that I was serving over to John as the lead advisor, so I think we have… It’s like 130 some households that we have as clients between AUM and financial planning fees, we’ll be close to breaking a million this year in top line revenue, and then… Yeah, and then I have full-time office manager, Cathy.

Reese Harper:
So one full-time office manager, two advisors, and then talk to me about the number of new clients that you could bring on this year and support, where is capacity at? Where’s John’s capacity, whereas you don’t have an interest maybe in adding too many new clients, but maybe you’ll add some at the high end, I don’t know.

Adam Cmejla:
So we’re recording this middle of May 2022, we’ve added 11 clients here to date, our goal this year is between 30 and 36 clients, we’re on pace to do that. That’s gonna be our target. Last year, we did 24 households. Those are just kind of the metrics at that financial planning fee schedule, and then like I said, AUM is separate from that, and we’ll have clients that are either… I think we have one client that is putting in, I think it’s $31,000 a month in just DCA into the brokerage account. People… It doesn’t matter. I don’t know, I’m dancing all over the place here, but… And this is gonna sound like a hyperbole, but I don’t care about the AUM… We’re profitable, I know the AUM is there. If it’s not, given the income that they’re making, then candidly, we’re probably not the best fit because there’s a lot going on there, or maybe we have our work cut out for us.

Reese Harper:
I don’t… I don’t even… Honestly, that’s a little of… It’s of some interest to me just because I’m curious how many people at… What’s your average age of your customer would you say? Are they 40, are they 45 are they 30…

Adam Cmejla:
It’s a little bit of a bimodal distribution, now we’ve got a good chunk in their late 50s, or early 60s. I think we only have… It’s under a dozen that are actually in RMD phase.

Reese Harper:
Okay, yeah, still a lot accumulating mostly…

Adam Cmejla:
Yeah, it’s a little bit of a bimodal distribution, we’ve got a good chunk in the 30s and early 40s, and then another chunk up in the 50s and 60s. From an enterprise value, there is growing… There is the free cash flow of the firm is projected upwards. So let’s just say that.

Reese Harper:
And do you keep track of how much of your AUM is net new from just your existing book, so is it like, Hey, if we bring on no client this year, our AUM might grow by like X or something, there’s a percentage there that a lot of… Actually, PE and acquisition firms track, I don’t know if you’re familiar with this, but like that revenue, internal revenue growth is interesting, I think my guess is that you’d be pushing pushing 10% or overdone it. Where does that land for you guys, do you know?

Adam Cmejla:
I’m just pulling up O’Ryan right now to see if I can give that number off the cuff of what we’ve had.

Reese Harper:
Oh, that’s cool man. You have your data like I wouldn’t even…

Adam Cmejla:
No plug for O’Ryan but it’s the most expensive tech that we have in the business, but it’s the heartbeat of everything, right?

Reese Harper:
There’s not room for, in this industry for too many large tech platforms, and they’re definitely one of the biggest, so they got a lot of devs that work in there.

Adam Cmejla:
Yeah, so again, full disclosure, here to date, we’ve only had one and a half million of just ongoing contributions coming into the firm.

Reese Harper:
I wanna disclose this ’cause this is news, this is really news to me, I think the benefits of this approach that you’re taking, your revenue growth’s amazing. Your profitability is amazing, we really care just about revenue and overhead, and you’ve obviously managed a boutique, beautiful lifestyle firm that…

Adam Cmejla:
I don’t care what you make, I care what you keep. So either the end total, what I would consider like owners, owners net… EBOC is a term that we hear in our profession, Earnings Before Owners Compensation, so what does advisor… What does advisor Adam as both working in the practice and on the practice… What do I take home? Yeah, it’s a really healthy number, and I’m grateful for that, but my point in saying that, what I’ve appreciated about the fee model that we have is, have we seen… Again, full disclosure, anybody can look it up in my EDV, so it’s not like I’m hiding any AUM numbers, we’re at like 48 million right now, but we’re at the point where our financial planning fees that we’re collecting are superseding what we’re collecting in AUM fees, and so because of that…

Reese Harper:
Yeah. It’s an interesting… It’s a very interesting model…

Adam Cmejla:
Market declines don’t impact like… I don’t want advisors ‘ sweat and bullets about their revenue at a time when clients need them the most, and I wonder if advisors are truly being honest with themselves, how many of the advisors out there are like the cobblers kids have no shoes, where they haven’t done their own financial plan, they haven’t stress-tested from a financial modeling standpoint, what is the amount of revenue decline that their practice could go through and still be operational before their sweat and bullets about how much equity or how much income they can harvest out of the practice at a time when their clients need them the most. So that’s where I looked at it from a business model as well, selfishly, does this fee model, does this fee structure work from just a business management standpoint and a risk management standpoint, to have multiple diversified streams of cash flow.

Reese Harper:
I’m just getting notified by the team here that I have a hard stop right now that I am late for, and it’s gonna sound…

Adam Cmejla:
Part two? No I’m just kidding.

Reese Harper:
Yeah, but man, I could go for another few hours, I’ll just wrap this part by saying, the reason I’m digging into this metric, guys, is if you can show a high net… ’cause Adam’s got a healthy net new flow of assets to total AUM, but the interesting statistic that he’s got is like, look at what… How stable this revenue is look how he’s closer to… This is what a… More than 50% of your revenue towards fixed fees does for your… The stability of your business model, it’s amazing to have that kind of… The stability of fixed fee plus some of the upside of AUM, if you can get to where you can have both of those components working, where when clients get really big, you give them some kind of reward, like, Hey, you know what, I can waive that fee now, that fixed fee, we’re kinda getting to a place, which I don’t know if you do or not, but that may be something that you don’t even wanna consider, and it’s fine if you don’t, but like some of my clients as they’ve gotten bigger and they’re paying us quite a bit, that’s something we can kind of look at and re-price at the higher end, ’cause I don’t need the excessive margin on the high end, I got a reasonable margin the whole time…

Reese Harper:
And that’s a different choice.

Adam Cmejla:
There’s so much that I would love to unpack and that if we had the time to do it.

Reese Harper:
Let’s schedule it again man, I don’t wanna lose my conversation with this appointment. For those of you who are tuning in, just thank you so much for joining us, Adam’s been really generous with his time and we’ll just look forward to having you again, sir, thank you so much for all you’ve done for the industry, you’re sharing great info and you’ve just been a good positive voice for a lot of people so thank you very much.

Adam Cmejla:
Thanks Reese, I appreciate the opportunity of being here.

Abby Morton:
Next time on Elementality…

Reese Harper:
Most people don’t have awareness of what they should be asking about, and they don’t have awareness of where their own pain is, and what you have to do is you have to expose that to more people, and if you as an individual can expose the pain to more people, then they hire you, it’s no different from a financial advisor or a wellness coach, or a doctor or a lawyer, the more they can expose their knowledge in simple terms, the bigger their funnel gets and the more clients they have.

Abby Morton:
You can learn more about the Elements financial planning system at getelements.com/meet, and schedule a time to speak with one of our friendly financial planning experts. Elementality’s executive creators are Reese Harper and Matt Glaser. Elementality is produced by Abby Morton and directed by Jordan Heins. Have a good one.

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