Justin Castelli, founder of RLS Wealth Management, joins us to talk about what a subscription model looks like for financial advisors, how the role of an advisor will evolve over the next few decades, and why content is king when it comes to getting your brand out.
Transcript
Speaking Logicly is brought to you by ETFLogic, the leading provider of analytics and portfolio analysis tools for financial advisors. No information within this should be considered trading or investment advice.
Scott McKenna:
Welcome back to Speaking Logicly, my name is Scott McKenna.
Emil Tarazi:
And I’m Emil Tarazi.
Scott McKenna:
Today we are joined by Justin Castelli, Founder of RLS Wealth Management. Justin, how are you doing today?
Justin Castelli:
I’m doing great today, guys. How are you doing?
Scott McKenna:
Can’t complain. Living the life in this new world. Justin, obviously pretty well known name in the advisor space, but for maybe some people who don’t know you, why don’t you just give us a little bit of background on who you are and your business?
Justin Castelli:
Sure. Well, my name, Justin Castelli, as you already stated. I’m the Founder of RLS Wealth, RIA-based in Fishers, Indiana, so about 25 minutes outside of Indianapolis. Been in the profession since I graduated college, which was in 2004. So, it’s crazy to think that I’m coming up on 16 years this winter of being a professional. Started my firm five years ago after bouncing around like so many of us in the profession do. Started at an insurance-based firm, went to a bank, spent seven years at a 403(b) company, two years at an independent firm, and ultimately realized that to run the business and work the way I wanted to work, independence, fully independence on my own was the best way to go. So, launched to be able to work with the retirees I’d always worked with, but also be able to work with young professionals as well.
Justin Castelli:
Adopted a subscription model to work with those clients, and then have been loving life ever since. Just recently, hired a young advisor this summer, so there’s three of us now, myself, my director of operations, and then Thomas, our other financial advisor. Then, in addition to being the advisor role, do a whole bunch of other stuff. I’ve gotten into the content game. That’s the big way that I’ve chosen to grow my business and then have also ventured off into helping other advisors, so launched a community called the AGC with Taylor Schulte, which is a private online community for advisors, do consulting when it comes to branding and strategy for content. Then I’m actually working on building a subscription model course on how to help advisors build out their subscription models as well. So, trying to do whatever I can to help our profession move forward and have fun at the same time.
Emil Tarazi:
Tell us more about the content game. I think that’s increasingly important to educate people about how advisors work, but also is also good for marketing. Can you speak a little more about that?
Justin Castelli:
I think going forward, content of some sort, you get to figure out what’s right for you is going to be table stakes. I think everybody’s going to need to have some type of presence beyond just a website. I’ll go back to finding the reformed broker back when I was working at the 403(b) company. I found Josh Brown’s blog and immediately fell in love with it. I was reading it and I just told myself, one day, whenever I have my own company, or I’m out on my own, I want to write a blog. I want to write to try to help educate people. Then I realized through reading him, his stuff, as I kept on reading Josh’s work, I started to like him more and more. It’s like, oh, not only am I able to educate, but I can help people get to know me.
Justin Castelli:
The beauty behind content is it allows you to share your beliefs, it allows people to see you as an expert. You can do Goodwill by educating people who may never become a client, but you’re giving them good resources and good information, but then, from a growth perspective, it allows people to decide whether or not they like you. So, you get to share a little bit of personality and move from being a suit, if you will, the stereotypical financial advisor avatar, to a human being, so you can share your interests and build this relationship with people before they ever become a client. Now you kind of build a fan base, and over time, some of them reach out to work with you. You’re going to be on top of their mind when the time comes for them to want to financial advisor.
Justin Castelli:
Whether you want to blog, whether you want to do a podcast, whether you want to do video, whether you want to do all of them, like I do, that’s up to the individual, but I think you need to pick one thing to be able to tell your story and let people know who you are and what you’re about.
Emil Tarazi:
Yeah, that resonates a lot with us at ETFLogic. We have this platform, powerful data analytics tools, but we view that as not enough. You need to be out there educating the investor public about how to use those tools. A lot of what we do as ETFs, and in some sense, ETFs are, well, they’ve been around since the ’90s, but they’re still new for some people, especially if it’s about getting it into your workflow. Some people are worried about liquidity, some people are worried about factors or themes, and we try to churn out some content in that space, and like you said, it’s education first.
Justin Castelli:
Well, and the beauty behind that is you’ve got a great product, right? How’s anybody going to know that you even exist if you’re not out there talking about it. If you have a great product and you feel that you can help your audience, then you should have no problem telling your story and let people know what you’re doing. At the same time, people don’t want to be sold. If everything you’re talking about is look how great we are, this is our great product, product, product, product, you’re going to turn people off. But if you’re telling me about how I can evaluate factors, or you’re educating me on how I can use ETFs to streamline my process, or how the … maybe your tool works into some of the content, but you’re educating me and making me better, now you’re on my radar, and now when I come up against something where I actually need your product, because now I’m aware of it, you’re top of mind.
Justin Castelli:
The same thing for financial advisors. There’s the opportunity to educate. We know financial literacy in the US is not very good. Take it as opportunity to help fix that, position yourself as an expert, and then build that audience. I think it’s smart. I like to look outside of finance to get my inspiration, and I’m looking at tech, I’m looking at direct to consumer brands. What are they doing? How are they building these huge brands? I don’t know if you guys have been following the company fast. Matthew Kobach from the New York Stock Exchange doing their social media when he worked for them, and they just launched their product and did a bang out job. Built all this excitement, build this huge following for a one-click checkout, and it was all done through social media and content and engaging.
Justin Castelli:
I look at that and I’m like, why can’t we in finance do the same thing? Now, I know bigger corporation’s compliance kind of limit some of that, but why can’t we put measures in way that instead of it being about the corporate world and the corporation and the bigger company, it’s not about the individuals who are actually going to be … or it becomes about the individuals who are going to be helping the clients, whether that’s Scott or whether it’s an advisor with their potential clients. Make it about the individual, and what from owners, and I think bigger corporations need to realize is, it’s okay for your team to have personal brands. It’s good. I think it’s good, in fact, because if it’s good for them to build their presence and their brain and their reputation, at the end of the day, that’s going to feed back to your business.
Justin Castelli:
Instead of it being about the company, instead of it being about the CEO, or the founder, make it about the individuals, elevate your squad and let them shine. Because if they’re shining, that’s going to be good for your business, and it’s hard for the old school advisors and business owners to come to grips with that.
Scott McKenna:
Yeah. That’s funny. We actually discussed this a little bit in one of the previous episodes, talking about the fact that advisors aren’t able to have something like a Google review, right? Yelp, you can … every restaurant has a Yelp page. If you’re going to go out to eat, you’re going to go and look at the ratings and see other people’s reviews. But there’s a lot of regulatory challenges that block people from doing that. Do you think that the bigger firms need to take a step back and try to allow for a little bit more of that personal brand development, or do you think they really have to be so on top of it to make sure that there’s no violations to [inaudible 00:08:24] regulations, because it’s kind of a tough position to be in, right?
Justin Castelli:
Yeah. I’m optimistic. I think that people are inherently good people. I don’t think most advisors are going to go out saying things that they shouldn’t be saying. I think that the bigger corporations should allow … I would operate under, we’re going to allow you to develop your brand, tell your story until you prove us wrong, until you show us that you’re not capable of doing it responsibly, then we’re going take those rights away. I would rather give you the rights and then have to fix that. That could backfire at some point. I also think if the business model of the firm is more about taking care of clients and doing the right things when it comes to clients, as opposed to a sales environment, eat what you kill, I also think you’re going to attract a different type of individual who’s really going to use this platform as a way to educate and do better and build a brand rather than try to get the next sale.
Justin Castelli:
I think if we changed the business model a little bit, and that incentivizes people to do things for the right reasons, as opposed to making the next dollar, that, that might make a little bit easier. Now, going to the independent space, we have a little bit more flexibility. Technically, I am my chief compliance officer, whether that’s a good thing or bad, but being independent, that’s the rules. Technically, you can have Yelp reviews, you can have Google business reviews, but I’ll tell you to check your compliance officer. But what I have read him and told is, you as the advisor just can’t solicit those. You can’t ask people to leave a review, but you can let people know that that’s allowed, and then they can go. Because it’s on a public forum, you can’t control that, it is okay from the regulatory standpoint, as long as you’re not incentivizing people to do that.
Justin Castelli:
Taylor Schulte has done a lot of great research on that, on his Experiments in Advisor Marketing podcast, and he’s actually talked about kind of how you can go about doing it, but we are able to kind of build that presence. You just have to be careful about how it gets built, but then it is out there. But I do think that is a smart thing to do because if people search you and you’ve got reviews up on your Google business page, that’s not a bad thing.
Emil Tarazi:
In your experience, which platforms are the best ones out there for outreach for distribution of your content for lead generation?
Justin Castelli:
I’m going to take the financial advisor answer of everything. It depends. Should I max out my 401k or my Roth? Well, it depends. When it comes to the channels, it’s going to depend on who your audience is. If you’re working with retirees, then I would say Facebook might be the place to be. But if you’re working with young professionals, maybe it’s Instagram, maybe it’s LinkedIn, if you’re working with a specific niche like doctors, like where do doctors hang out? That’s the channel that you’re going to go to. There is some thought that needs to go in where you want to distribute it. I love Twitter. I’ve made a lot of great friends. That’s how I know Scott is from Twitter. I don’t look at Twitter as a business generator at all. It’s a place for me to network with other advisors, see what other people are doing and learn.
Justin Castelli:
But I think if you have an audience that spends time on Twitter, it might be a way for you to do it as well. So, it really comes down to who you’re trying to reach, where are they at, and how are they consuming? I think the other question is not just the channel, but the type of content. Do you want to write? Do you want a podcast? Do you want a video? I like doing it all because I’m weird and I love this stuff in the first place, but I also know that I can have an avatar that I want to work with, ideal client. But within that avatar, people consume content in different ways. They could fit that professional, they could fit that mindset that I want to work with, but some people would rather read, some people would rather watch, some people would rather listen.
Justin Castelli:
If I need to be on Instagram, but I can put a combination of audio and video and some reading as well, I’m hitting my avatar no matter how they might consume content. I know it ends up seeming like it’s a lot of work, but I just posted a video or a picture on Twitter before we hopped on of my video studio. It’s not very much. It’s a camera, it’s a halo light, and that’s it. I edit and I move. If you really believe in this, and this is how you’re going to move the needle for your business, you’ll find the time, and it’s not that hard. We were talking about editing podcasts. I chop off the beginning and the end, put the intro outro, and unless there’s something bad, it stays in.
Justin Castelli:
The same thing with my videos, so you can go back and find videos where I’ve sneezed, I forgot my words. I’m not going to start over, and I’m not going to edit it out, and the cool thing about that, when we think about building brands, our personal brand, those types of things bring a layer of authenticity to it. People see you as a human and that you do make mistakes, but it doesn’t fluster you. You can operate under pressure and you keep going and you bounce back real quick. I just think it allows people to relate with you a little bit more, because who doesn’t stumble over their words, who doesn’t make a mistake? If you can see me, I’m real and people identify with it.
Emil Tarazi:
Nice. I like it.
Scott McKenna:
Going back to your avatar, how have you mapped out your ideal client?
Justin Castelli:
It’s been a process. When I started my firm, I go back and forth between niche and niche. I can’t decide which way I want to go. I’ve said niche forever, but then I’m hearing it’s supposed to be niche. I was anti niche. I wanted to show that you could build a good business, not having to dial in. Part of the reason I’ve realized is there was not a avatar at that time that really excited me that I was so passionate to work with. My avatar was, do I like you? Are you somebody I want to work with, somebody I enjoy being around? Great. There’s a way for me to work with you in my business. We just recently did a rebrand when I hired Thomas, and we spent a lot of time thinking about who we want to work with going forward, and who do we want the firm to grow with?
Justin Castelli:
I want to make sure that … I want to work with people that excite me. Today, what excites me are other creative entrepreneurial people that want to take charge, they want to write their own story. The messaging on our website, and our avatar today, it’s not a profession, it’s not even an age, it’s more of a mindset. We want to work with trailblazers, creatives, entrepreneurs, people that want to write their own story, and they want to live like a non-traditional life. They want to start a business, they want to go on sabbaticals, they don’t want to be confined to a 30-year career and retire. They want to leave an impact. One of the latest things that I’ve kind of come across is that we want to help people avoid regret.
Justin Castelli:
We don’t want our clients looking back saying, I wish I would have done this, but I didn’t because I didn’t know if I could afford to. Let’s figure it out and let’s build a plan because that lets us do some more creative planning that’s more fun. Figuring out how much to save in Roth and doing those things, that’s important, but I get way more excited about like, how do we build this business? How do we make it so that you can quit your job so you have more time at home with your family because that’s more important? That’s going to take some creativity. That’s going to take some sacrifice, but we can build that, and if we do it properly and you achieve that goal, I think you’re going to live a happier life, and you’re not going to have those regrets.
Justin Castelli:
I don’t have that definition of a profession, it’s more of a mindset. That is some ways harder to identify, but I think, through the language we use on the website and the language we’ll be using in our podcast and other things, it’ll resonate with those people that understand that, which will attract them to us. If it doesn’t resonate with them, it’ll just go over their head and it won’t be anything that’ll excite them.
Scott McKenna:
Got it. Can you walk me through your processing, onboarding a client? Specifically, obviously we’re a portfolio analytics company, so what we’re most interested in hearing about is a little bit about your portfolio construction processes. Maybe if you could walk us through the process, all the way from prospecting to onboarding, what does that look like at RLS, and maybe some actionable takeaways that other advisors might be able to take on since I know you consult other advisors too.
Justin Castelli:
We’ve spent a lot of time lately, and when I say we, I mean, Darlene, my director of operations, automating as much of the process as possible, because we want to try to streamline things, and also with our subscription model, we’re trying to make that as efficient as possible, which allows us to keep the fee we charge clients down low because we’re efficient. Get to know meeting, we schedule that, we wait to hear back if they want to move forward. If they say yes, then a series of emails that gets kicked off through … we use ConvertKit. Darlene has gotten real good about using Zapier’s as well. A lot of these companies we use are connected by Zapier’s, which kicks things off. If somebody gets entered into Wealthbox, our CRM, that kicks the Zapier off to put them into ConvertKit, which kicks them off into this email thread.
Justin Castelli:
It’s very automated. We just have to do one thing to trigger it, but they’ll get an email that says, we’re excited for your planning meeting. We’re glad to be working with you. Here’s a link to write capital for financial planning. Please go in, create your profile, put in as much as you can, and here’s a video to how to do that, and here’s how to link up your accounts. Here’s a link to Riskalyze, to your risk tolerance. We’ll review that. We’ll have a discussion over that. Then another video of me welcoming to the family, if you will. Then a few days later they’ll get another email that will have some questions that we want them to think about, along with a checklist of things we want them to bring to the meeting.
Justin Castelli:
I mentioned George Kinder, when we were talking about the phone going off, he has three questions in his life planning process we’ve kind of taken and made our own versions of them. We want them to think about that ahead of time so we can really spend some time talking about that in the planning meeting. List of your 401k statements, wills, trust, all these things, upload them ahead of time if possible, so we can review them, and then we have the meeting. The first meeting is really just about learning more about their goals, spending a lot of time talking about those questions and really figuring out what is this client’s purpose? What are they trying to accomplish in life so that we can go back and crunch the numbers to build out a plan to help them lead that way.
Justin Castelli:
Then we go back, we crunch the plan. We have another meeting where we go over it. Then in that meeting where we go over the plan is where the investments would come in. It depends on the relationship that we have with the client. I mentioned we have a subscription model that has one portfolio that we use with our wealth management clients, your traditional assets under management relationship, we do a different portfolio construction. Now, they all have the same fundamental beliefs. When I started the firm, using DFA, I believe in small cap, I believe in value despite what’s been going on as of late, so we use DFA funds with some ETFs as well with our wealth management. Our young professionals subscription models are just ETFs, but they have the small cap, they have the value, they even have a momentum tilt into them.
Justin Castelli:
The way the portfolio construction is for young professionals, Riskalyze score determines which model portfolio you go into. Again, the goal of the subscription model is to scale things down and make it more efficient so we can deliver a great relationship, but cut out a lot of the deep dive we do with our higher price model, if you will. It’s basically core ETFs with a couple of outliers that give us the value, the momentum and some global stuff in there as well. Then with my wealth management clients, the core right now is still DFA, but we’re actually getting ready to transition away, not because of performance reasons, but just replicating that strategy with ETFs that lower the cost, is the main reason for making that transition away.
Justin Castelli:
Then I do, with my retirees, have a sleeve of the portfolio that we use, five ETFs, use Meb Fabers favors IB portfolio book as the blueprint for it, but it’s a 10 month moving average, tactical strategy, if you will. I look at, at the end of the month, is it above or below its 10 month moving average. If it’s above, it stays invested for the next 30 days. If it’s below, it goes to a short term bond fund, and we just use total stock market, international XUS, emerging market, small cap, and then real estate. Then that way, those retirees, when the markets are good, if we go through another 11-year bull market, we don’t have to sacrifice growth for safety.
Justin Castelli:
But if things are real bad, we’ve transitioned over to a more conservative portfolio. We have ample liquidity to meet their retirement needs and they can sleep easier at night. I like this strategy because it’s not my gut making the decision. I’m letting the triggers tell me what I need to do. For any advisor that’s thinking of adding a layer of complexity like that, it is a layer of complexity, but it is fairly simple. It’s five funds, black or white responsive what I need to do, and it’s once a month. Now, no tactical strategy is ever going to be perfect. There are times where we do get whipsawed, but by and large, the last couple of years, it’s moved my clients more conservative when I would want them to be. We miss a little bit of the snapback, but then we get back in for growth mode. It hasn’t had a negative impact on the expectations of the portfolio.
Emil Tarazi:
That’s a really good overview. It’s really interesting to hear sort of how your process works. I’m curious how you handle, if a client comes to you and tells you they really want to invest in Tesla, what do you do? How does that fit into portfolio construction, and do you tell them, well, wait a minute, I’m going to move you too far away from your target allocation, or do you entertain it? I’m curious how that works.
Justin Castelli:
My first question to them is why. I want to know why do you have a reason that’s valid for us to do this, or do you just have FOMO? If you have FOMO, let’s talk about that. I’m not opposed to it. I don’t want to get in the business of having a thousand individual securities amongst all my client’s portfolios in trying to keep an eye on that, but I also don’t want a client to become disengaged because I won’t let them have some Tesla. We’ll talk about the reason why. We’ll see if it makes sense and they understand the risks of it. How can we make that fit in, and what’s an amount that’s appropriate that doesn’t blow up the plan. If they just want to have some Tesla to say they have some Tesla, let’s take a couple of thousand dollars, buy a few shares and you’ve got your Tesla, and I’m going to put the responsibility on you to tell me when you want to sell it.
Justin Castelli:
We’re going to be in agreement of this. I’ve logged into my CRM, so there’s trace that we’ve talked about this. I’ll still keep an eye on if I see something crazy, but this position is on you. I don’t know if I’ll ever go to the point where I will tell somebody, “Hey, go set up a Robinhood account for that and let’s move $5,000 over and knock yourself out.” Maybe I would in the future, but right now, I’ll just incorporate it, and I’ll just take it from the appropriate fund to try to keep it in line. For Tesla, I would take it out of the total stock market fund and put it in there because it maps over that way. I wouldn’t take it from an international, I wouldn’t take it from small cap to fund that position.
Justin Castelli:
That way, the overall allocation still stays kind of in, but most of my clients aren’t wanting to do that. They hire us, so they don’t have to think about it, but I have a few. Personally, I enjoy those conversations. When I first got into the business, the investment side is what I love the most. But I also know I’m not a portfolio manager, so I don’t want to do that too much.
Emil Tarazi:
Great. You used the word disengagement, and that’s interesting to me because if a client wants to be part of how his investments are working, you don’t want to say no, you want them to have a stake in it and follow what’s going on.
Justin Castelli:
Most of the time, what they want to do is nothing crazy. They want to feel like they’re participating in that. Even if it’s one or two shares, then that makes them feel good and that keeps them in their plan. Then to me, that’s successful. If I say no, and then they deviate, and again, they disengaged and they don’t follow their plan and now they’re not on track anymore, just because I wouldn’t let them own a couple shares of an individual security, then I’ve done a disservice. I’m not going to let them do something that’s going to blow things up, but I’m also not going to keep them … it’s their money. I’m not going to keep them from doing something that makes them happy, and maybe makes them pay a little bit more attention and maybe they become a better investor because of it.
Justin Castelli:
It’s all about finding that balance, I think. Now, I know there’s advisors that would say, “No, this is the way it is.” I can’t argue there’s anything wrong with that, but I just feel like, in a situation like that, I’m not going to allow it to be a position that causes harm. Then I also don’t have to worry about if Tesla keeps on blowing up, then coming back, being mad at me that I kept them because they could have made some money, because they’re going to be calculating what they’re missing. Then if it goes south, I’ll be a good advisor and I won’t throw it in their face. I’ll just smile when we talk about that Tesla piece.
Scott McKenna:
Yeah. That’s interesting. No, we’ve had a lot of advisors who’ve come across that issue, that’s why Emil asked, when it comes down to their clients, they’re like, oh, I want to buy a Tesla. We’ve had that where this guy was like, “I don’t want to just throw a lot in there.” We actually created a tool to help them with that. So, you can find ETFs with high exposure to it, so you can still get a little bit of exposure. Then on the other end, you can say like, if your client’s like, “Oh, I want to be in Microsoft.” Well actually, if you’re in all these ETFs, you actually have, in that whole portfolio, 15%, 20% of a Microsoft exposure, so that’s a huge amount. It wouldn’t be wise to put even more in.
Justin Castelli:
Sometimes that’ll work and sometimes they just want to see that hole, and they want to feel like they’re a part of the ride. Again, if it’s not an amount that’s too detrimental to the plan and you have the conversation, educating them on the risks and the what ifs and you talk about some risk management measures, say, okay, if it drops 20%, let’s get out, I view it as an opportunity to educate. Our clients come to us because we have expertise that they don’t have. Talking through that, educating them on why, after you get done talking to them about all the stuff we need to do to make sure it’s not a bad decision, they might decide it’s not worth it. Like, okay, I’ve got it in my fund. You showed me it’s a top 10 holding. I have exposure to it. I don’t want to worry about it. Let’s not worry about it. It’s okay, I have it. I think it’s an opportunity to educate as well.
Scott McKenna:
Overall, it seems like your strategy for your businesses, automation and streamlining everything. Is there anything though that is nearly impossible or impossible to automate?
Justin Castelli:
The personal connection, the FaceTime with clients, which is why the whole robo-advisors and Vanguards and the Schwabs of the world, and what if Apple comes into it? Doesn’t scare me. Maybe I’ll come back in 20 years and look back on this and be like, oh, I was so foolish. But I think that there’s a component of what we do with our clients that is emotional and behavioral and relationship-based that technology can’t take away. For some clients, they don’t need that. They have the expertise, they have the desire, they can do what they need to do with the software and the technology that’s out there, and that’s great. But I think, by far and large, most people will want a person to at least be quarterbacking it. I know that a lot of major surgeries, they’re using robots to do it, but there’s still a doctor there in case something goes wrong, and the doctor is still overseeing it.
Justin Castelli:
That’s where I think things keep going. We have technology that can do things better for us, but I’m still there making sure that it’s going into what my clients need, and helping my clients figure out what they want. I think that the big thing that can’t be automated is just, it’s the FaceTime, it’s the personal connection. I do think there are some things that you can bring additional FaceTime that you can automate. I think you can leverage your content to give more touches throughout the year and your clients feel like they’re talking to you a lot when they’re not, and you leverage a video that you record and email to your clients, you leverage a podcast that they get to listen to. So, they’re seeing you, they’re hearing from you, they’re getting your thoughts, but you’re actually only still seeing them two or three times a year. I think you can enhance it, but we’re never going to get away from that personal connection, I think, but otherwise, everything can be automated.
Emil Tarazi:
Yeah. Well, let’s take that thread of automation technology, and I’ll also add to it changes in the regulatory landscape. Also, demographic changes, the average age of the advisor is trending downwards, as are the clients and investors that those advisors work with. I guess my question to you is, looking forward 10, 20, 30, maybe 50 years forward, what’s the role of the advisor? How do you see it change?
Justin Castelli:
I think the role of the advisor is going to evolve to be more of like a life coach. That may not be the right term, but I don’t think that financial planning itself is even going to be enough. We’re still going to be there to coordinate the financial plan, but we’re going to need to be bringing more value to the client, and I think it’s going to be deeper relationships. Going back to my avatar, financial planning software can run the numbers. It can come up with the projections, it can tell you if you’re on track, but a financial planning software is not going to think outside the box, or help you figure out what it is that you really want out of life. I think that that’s where the advisor is. I think the advisor becomes more of a consultant, more of a guide, as opposed to do this and this is the projections because that’s going to be done.
Justin Castelli:
I think there’s ways to enhance the relationship beyond the financial world. One of the things that I really want to crack, I’m a big believer in community, in building communities, building out an online community platform for our RLS Wealth clients. On this online community, if you’re a client, you get access to it. You don’t have to use it, but there will be nothing financial on it. Compliance reasons are one of the reasons, but I also want it to be a way that I can drive value to my clients, enhance their lives beyond money. So, it’s going to have sections for mindfulness and meditation and entrepreneurship and productivity. As I think about the people we want to grow with, what are the topics they’re interested in and let’s bring resources, let’s get them together to communicate, so I’ve also given you a community of like-minded people for you to hang out with and learn from, in addition to the financial planning work that we’re doing.
Justin Castelli:
Maybe it’s not community, maybe you incorporate wellness into your relationship with your clients. So, you’re doing the financial planning, but now you’re looking at a health component to it, because health is a very expensive component of retirement, and how can we minimize that? I think there’s ways to add value outside. Maybe it’s deeper tax planning, but the financial plan itself is not going to be enough. Now, I do think we have some time because so many financial advisors don’t really do financial planning. They say they do, but they’re still investment focused only. When I say financial planning, that means you’re analyzing cashflow. You’re talking about insurance, you’re talking about estate planning, you’re talking about tax planning, retirement projections are there. It’s everything. It’s not just, here’s a document that says you need to invest this way. It’s going deeper.
Justin Castelli:
That’s why I liked the life planning approaches. When you incorporate all those things along with what the client is really trying to build out a life, it’s more of a life plan as it is, just a financial plan. Let’s build the life you want, let’s align your dollars with your values and your goals, and that’s different than just a financial plan. I think it’s going to move more of that direction.
Scott McKenna:
Do you see that being, like the subscription model that you’re running right now that it’s more, you pay a monthly fee and you get these things, or is it going to, an hourly rate like you pay a lawyer or?
Justin Castelli:
I think it could still be all of the models we have today. I think that the subscription model is good for young professionals because they may not have the assets to be managed, to be charged on, which is why I’m doing the course. I don’t think that any one model disappears, I think AUM will continue to live. Now, I do think that it may become more balanced. I think we may see more flat fee, whether that be, it becomes a flat fee divided monthly, so it’s a subscription model or it’s an annual flat fee, I think that may become more of it. I think the AUM model, we’ll start to see caps at how much the AUM fee goes up to. So, we’re charging 1% up to a maximum fee of X. I think that may become … because I think clients are going to become more aware of fees.
Justin Castelli:
As we see the compression on the investment side, I think the compression on the advisor side becomes well, what are you doing this year that makes your fee 10% more just because the market went up. I think that there’ll be maybe a leveling of the field there. I don’t really love the hourly model. I think that there’s a right situation for it from time to time. I offered it when I first started. The main reason was I didn’t want to tell anybody I couldn’t help them. They didn’t have the assets. The subscription model didn’t make sense, but they valued help, they wanted it, so I could do an hourly plan. But ultimately, I want to build long-term relationships, and not even just from a building revenue for the future of my business, I want to work with people that I’m invested in time and everything and energy, and the hourly plan just doesn’t afford that.
Justin Castelli:
I also think that clients are less likely to call with questions that might actually have a big impact on their plan because they don’t want to pay like they would pay for an attorney or for a CPA. How many times do you sign something that maybe you would want to run by an attorney, but you don’t because you don’t want to be billed for it? I think that that happens on the hourly model. I think that more people will go to the subscription model. I hope so. I think AUM was still live. The way that we’re structured, it kind of steps up. We’ve got a robo-advisor, if you will, that I don’t really market that hard. It’s just there, but it’s basically investment-only, real cheap, 35 basis points. You get the model portfolio our subscription clients get, but to differentiate ourselves, we do want to give you something.
Justin Castelli:
We have a monthly newsletter we’ll send out via email. We’ll allow them to send questions in via email that we can answer in a video, but they don’t really have any access to us. We don’t do a plan. But that’s a way to get in and we can help out a little bit. They can have their portfolio taken care of. Then the first level of the subscription model is $150 a month after the one-time fee to get started. Then if you want investment management, it’s the 35 basis points, so it matches the robo-advisor. 150 a month really is designed for a single young professional or a married couple with no kids. Then it jumps to 300 a month, because now we’re getting deeper. The relationship deepens as you move up the ladder. Then at 350 in AUM, you transition to the AUM model 1% world.
Justin Castelli:
You can see there’s a progression of how we can help you along your life as it gets more complicated. You don’t pay for services I don’t think you need at that stage of life. As it gets more complicated, yes, the fee goes up, but yes, you pay more, and then you transitioned to the AUM model, which most people are most familiar with. I think we’ll see more of those things. I think it makes sense. If you’re building a business for the long-term, young professionals, the millennial world, they’re the ones that stand to inherit $68 trillion, I think it is, in the next 30 years. I don’t think you want to wait until that happens to try to get them as a client, because if I’m working with them today and I’m building a good plan for them and I help them improve their situation, I give them attention when no one else would, and again, I do good work, when they inherit whatever they inherit, maybe I’m overconfident, I don’t think they’re going to leave me.
Justin Castelli:
I don’t think they’re going to leave any advisor that worked with them when no one else would, did good work for them, helped them build and make progress and now they have all this wealth. I don’t think they go leave for the higher price model, because now all of a sudden, they want this proceed. I think they’ll be loyal to the people who helped them get where they were, and now you have this inheritance that they received and now it’s in your firm. Then the final thought on that is, if you already have older clients and you want to build a firm that lives beyond yourself, you’re thinking about legacy planning for your business. Why not have a subscription model for a young advisor, who’s your succession plan, that can work with your clients, kids, and grandkids? Now, they already know the firm, they already have somebody to work with, and if their parents and grandparents pass away, they’re already there, and it already stays in. I think that that builds the long-term plan for your business, if you’re thinking that way.
Scott McKenna:
Yeah. I was just going to say, it sounds like that model you’re able to get in and start developing the relationship a lot earlier, which just gives more time for that seed to grow into a big tree once they get to a certain level of wealth, right?
Justin Castelli:
Yeah. I just don’t think you want to wait. I think you want to be ahead of the game. I’m a big believer in doing things for the right reasons and being genuine. Yes, that’s the long play. You hope that that’s what transpires. I don’t think you go into offering the subscription model. I don’t think you go in to finding a way to work with young professionals, just to get the inheritance. I think you do it because you know these people want help, they need help, you can make an impact on their life. Then the icing on the cake is you’re positioning your business down the long-term to be the beneficiary of these inheritances that come.
Emil Tarazi:
What else should we talk about?
Justin Castelli:
Anything you want. I’ve done multiple podcasts. I enjoy them. I mentioned, I like doing this stuff, so content has become a hobby for me, and I’m just so lucky that my hobby also feeds into my business. I started All About your Benjamins, the podcast about four and a half years ago now. To be honest with you, it’s kind of tapered off. Part of that is, it doesn’t feed into the growth of my firm the way I would want it to, but the reason I started is, it was a way for me to have cool conversations with people that probably wouldn’t talk to me any other way, and it’s allowed me to meet people I look up to and have relationships now with them, so it was real cool.
Justin Castelli:
But now that I’m getting more intentional with the growth of the firm, I want to make sure that the content we create feeds into our growth initiatives. Thomas, the advisor I hired, we recorded his first episode. He’s got two more pre-ones to launch, and is just going to be call The Long Game because that’s the name of his podcast or his blog, and that podcast is going to be centered around information for young professionals, and really highlighting people who have followed their dreams and taking risks and the positives of that, to try to encourage people to think about what is it you really one, and then how can you chase that? Then hopefully, some of those listeners realized that we could be the people who could help them figure out the finance side of things and build the plan to help them go.
Justin Castelli:
The podcast that I want to start, and kind of the planning phase for, I’m just going to call, Money and Purpose. It’s just going to be short conversations, maybe a few interviews just about finding your purpose in life. What makes you ticks, and then how can you make your life centered around that and the benefits of it. That one will be more of a broader audience. Thomas’ will be folks focused on young professionals. I used to have a podcast called Reversion to the Mean that a friend of mine from Twitter and I started, kind of like Animal Spirits, Ben Carlson and Michael Batnick. We were just talking about some headlines and kind of have fun with it. Again, he got busy with his work, I got busy with mine, it didn’t really feed into what we were doing.
Justin Castelli:
So, it became more of my time, and his time was better set somewhere else. But we actually thought about doing a reunion episode and running it through All About Your Benjamins soon. I think podcasts are fun. It’s a great opportunity. For anybody thinking of doing a podcast, don’t go into it trying to dethrone Joe Rogan and have the highest listener count as possible. Think of a podcast as a way to communicate with people who are interested in what you have to say on a regular basis. How much would you pay to fill a room of a hundred or 200 people on a regular basis to talk to them and they want to hear what you have to say? That’s what a podcast is. Don’t get caught up in the numbers, just get caught up on consistency and doing it and driving value.
Justin Castelli:
Yeah, you want to see the numbers trend up, but don’t get disappointed. I think I read somewhere, if you have like 100 downloads an episode within three months, it puts you top 20%, 25% percent of some of the podcasts. Most podcasts you see on Apple podcasts are dead. No one’s recording anymore and they don’t have very many listeners. It doesn’t take much to be a player in the podcast game. My final thought on podcast is there can’t be too many podcasts. You have a unique voice. You’ve got to think about, what is it that you have to say, who are you wanting to say it to, and no one else is going to say things the way you want to say them. Again, you’re not trying to get everybody to listen to you. You just want a decent amount of loyal people who care what you have to say, and you can build from there.
Emil Tarazi:
Yeah, I say that to a lot of people. I tell them, we live in a golden age of podcasts right now. It’s never been better time to just search for whatever topic you want, and there’s someone chatting about it, and you can learn a ton from it. I guess you’re right. There’s not necessarily $100 million Spotify deal in our future, but we do these things because we enjoy the conversations and communicating about the topics.
Justin Castelli:
You can be strategic with the way you do it. If you’re an advisor, you’re having to work with small business owners, make your podcast kind of like, how I built this, but on a local front. So, interview small local business owners about how they built that, what they learned, what would they share with other business owners? The cool thing about it is you’re giving them a platform to tell their story and bring attention to their business. You’re making a connection with the business owner who is your end client. I almost guarantee that, at some point, what you do will come up in conversation with at least one or two of those guests. You’re going into this saying, okay, I want to educate other business owners, I want to be a resource for business owners, let me highlight other business owners and elevate them so they benefit from it as well.
Justin Castelli:
Then, people are going to make the connection to that you’re a financial advisor that works with business owners, and conversations just come up from that. There’s cool things you can do with it. The podcast doesn’t have to be all about financial planning strategies. I think that it’s better off if it’s not. Be the financial advisor that brings value on something else beyond their mind. They’ll learn from you. Every once in a while you have an opportunity to tweak some financial planning stuff in there, but make it 90% not financial planning.
Scott McKenna:
Yeah. That’s kind of our approach, I feel like with the podcast. Obviously we’ve been going after advisors since the launch of the advisor workflows in January. Really, we just want to highlight financial advisors, their businesses, if we want the advisors who are listening to have actionable takeaways. So, learning how to automate things, how to improve portfolio construction, tax planning, things like that, the whole spectrum, even if it’s not something that we provide value on the platform, we want to add that value to the marketplace.
Justin Castelli:
I think it’s smart. I think, Gary V. says, give, give, take. I subscribe more to the give, give, give, give, give, take. I would rather give a little bit more before I have to take. I have a mentor that told me that. All the content, all the things we do to help educate and putting others first, we’re just making deposits into the bank of goodwill. Then every once in a while, it’s okay to go to the bank and take a withdrawal. You’re doing these podcasts to help advisors learn, you’re doing this to help elevate advisors, because every advisor that gets to come on your podcast is going to share it with their network. It makes me look like I’m somebody special to my clients, that somebody wanted me to come on and talk about something.
Justin Castelli:
Then later on, you go to the goodwill bank and say, hey man, you have this need, we have this product, let’s talk about it. It works because you’re doing this genuinely and people pick up on that. I’m much more likely to have a conversation to learn more about it because we have a friendship, we have a relationship and you helped me, rather than you’re DMing me on LinkedIn all the time about this tool you have. Advisors can do the same thing. I think you guys are doing smart.
Emil Tarazi:
Cool. Thanks for your time today.
Justin Castelli:
Hey, thanks for having me. I enjoyed it.
Emil Tarazi:
Did you want to wrap it up, Scott or?
Scott McKenna:
Yeah, Justin, we really appreciate you having coming on to the podcast today. For those who are interested in learning more about Justin and RLS.
Justin Castelli:
The best place probably is, I’ll send them to justincastelli.io. That’s my website that’ll take you to everything. If you’re an advisor, it takes you to my newsletter. It can take you to RLS as well. That’s the hub to get you to everything, all the blogs and everything. So, justincastelli.io is the best place to go.
Scott McKenna:
Awesome. For advisors who were interested in the Logicly platform, you can go to Logicly, it’s spelled a little funny, logicly.finance/freetrial, and you can get a free trial of our Logicly platform.
