#FASuccess Ep 145: Systematizing Reviews Of Client Tax Returns By Building Software To Automate Them, with Roger Pine

Executive Summary

Welcome back to the 145th episode of Financial Advisor Success Podcast!

My guest on today’s podcast is Roger Pine. Roger is the co-founder of Holistiplan, a new kind of tax planning software for advisors built to systematize and automate the process of reviewing a client’s tax return to find the potential planning opportunities.

What’s unique about Roger, though, is that he previously spent 10 years as a financial advisor in an independent advisory firm where he taught himself computer programming on the side implementing custom technology improvements for his own firm, before deciding to shift into becoming a full-time FinTech entrepreneur himself.

In this episode, we talk in-depth about the Holistiplan software that Roger developed. From leveraging optical character recognition to scan all the relevant information from an entire tax return PDF in just seconds, to converting that information into relevant tax observations about the client’s tax bracket, phased-out deductions or tax credits, and the eligibility for tax preference contributions to retirement accounts, to the forward-looking tax planning tools that Holistiplan is now building to identify the client’s true marginal tax bracket, taking into account all the phase-ins and phase-outs to make better forward-looking tax recommendations.

We also talk about the ever-blurring line between where a CPA’s tax services end and a financial advisor’s begin, the dynamics of trying to balance providing tax guidance and not unwittingly competing against potential CPA referral sources, and why Roger views Holistiplan’s tax analyses as only the beginning of developing a comprehensive expert system that helps financial advisors craft more consistent recommendations across the full spectrum of the financial planning body of knowledge.

And be certain to listen to the end, where Roger shares his own journey and what it’s like to transition from being a financial advisor to an advisor tech entrepreneur. Why he ultimately decided to take the leap despite being on a partnership and succession track in his current advisory firm, and his suggestions on what other advisors can do if they too see an opportunity to develop advisor technology solutions to fill the gaps in today’s marketplace.

So whether you’re interested in learning about the process behind taking an idea for an application and actually bringing it to market, lessons Roger learned when transitioning out of the advisory business and launching a startup, or about his goal to advance the financial planning profession by helping develop “normative practices”, then we hope you enjoy this episode of the Financial Advisor Success podcast.

Michael Kitces

Author: Michael Kitces

Team Kitces

Michael Kitces is a Partner and the Director of Wealth Management for Pinnacle Advisory Group, a private wealth management firm located in Columbia, Maryland that oversees approximately $2.0 billion of client assets.

In addition, he is a co-founder of the XY Planning Network, AdvicePay, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

What You’ll Learn In This Podcast Episode

  • What Holistiplan Is And What It Does [06:34]
  • Where The Idea For Holistiplan Came From [16:18]
  • Technical Challenges Roger Encountered Developing Holistiplan [24:29]
  • What Holistiplan Costs [33:45]
  • How Roger Navigates The Line Between Tax Planning and Giving Actual Tax Advice [43:15]
  • Roger’s Path Into The Advisory World [52:05]
  • What Led Roger To Transition Out Of Briaud [57:49]
  • How Recent Tech Advances Made It Easier For Roger To Bring Holistiplan To Market [1:10:43]
  • Roger’s Views On Starting A FinTech Business, What Surprised Him, and What He’s Learned [1:22:49]
  • What’s Next For Roger And Holistiplan [1:35:50]
  • What Success Means To Roger [1:44:28]

Resources Featured In This Episode:

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Full Transcript:

Michael: Welcome, Roger Pine, to the “Financial Advisor Success” podcast.

Roger: Happy to be here, Michael. Thank you.

Michael: I’m really excited about today’s episode. We are just a few weeks out here now from our XY Planning Network FinTech competition. It was something that we launched a couple of years ago just trying to give more of a platform for technology firms that are building cool new stuff for advisors, particularly serving next-generation clients, where just you really have to be efficient because their dollars are often smaller and the revenue per client is often smaller.

And you guys, you were running a firm called Holistiplan that was a finalist for the FinTech competition and then won the FinTech competition for what essentially is a piece of software where you just give it a client’s tax return, the whole 50- or 100-page PDF or however long it is, and it does computer things on it, in about seven seconds, it gives you an entire tax summary report, all the stuff you need to know, a whole bunch of planning opportunities that jump out based on what they’ve got on various line items.

And I just saw it the first time it came up and was like, “Oh, holy crap, this is just cool. I’m now excited about the future of advisor technology because this is cool stuff.” So wasn’t surprised at all to see that you won the FinTech competition. But I just was excited to have you on the podcast and talk about this cool tax planning tool thing that you guys created. And I know you came out of an advisory firm, so you’ve lived this and made a thing for all of us. And so I’m just excited to talk about this thing of magical tax planning software.

Roger: Yeah, absolutely. Yeah. When you create a brand-new product that’s never existed before, the concern is always, are people going to understand what it is when you invent a new category and a new product? And what’s been really fun for us is people get it right away. When they see it, they get it. “This is what I do, but it does it faster.” So it’s been a lot of fun. And FinTech was fantastic. Thank you for that opportunity. Had a great time at XYPN Live.

Michael: No, absolutely. We both lived this having built AdvicePay of how hard it is when you’re starting a technology company for the advisor space in particular, which is still kind of a small niche space relative to like making direct-to-consumer software where like 100 million people can buy your software. The challenge for most firms is that it’s just really hard to get the word out about what you’ve created. We had a little bit of a head start with AdvicePay because I kind of have this blog that has a few readers.

Roger: I’ve heard of it. I’ve heard of it. Yeah.

Michael: Yeah, we had a few ways to get the word out a little bit more and faster. And so part of the goal in making the FinTech competition was just, let’s use this growing XYPN platform to try to create a platform for software companies that don’t necessarily have a big marketing budget to go do advertising and conference sponsorships and the rest and say, “We’ll create a platform where you can get some media exposure and early advisor exposure and try to figure out like, ‘Does anybody actually want to buy this? And will you pay us for it? And do you really find this valuable? And what else do you want to see so we can make the solution better?’”

Roger: Yeah. Well, and it fits the brand. It fits the XYPN brand. I was really impressed with the people there. People were trying new business models, trying new technology solutions. And so of all the places to host a competition like that, I think XYPN was a perfect fit. So it really worked well.

What Holistiplan Is And What It Does [06:34]

Michael: Well, thank you. So tell us a little bit more about just this software Holistiplan. I’ve described it as magical tax planning software, so that’s maybe not the most articulate solution. So having actually made this thing and it is your baby, talk to us a little about the software, what it does, what you were setting out to do here.

Roger: Yeah. In its current form, it does kind of what you said, which is, it starts with a tax return, a PDF tax return. And we still have to ask our clients for that. But then we the advisor can upload that into the software. The software then is tasked with reading the tax return and extracting information that it needs from that tax return off of Schedule 1, Schedule A. Kind of going into the back and looking at some of the other more obscure forms. Then we run a set of algorithms, which I only learned recently is that’s what an expert system is. It’s called an expert system, where you take a bunch of data inputs and come up with some observations or outputs. Yeah, and we spit out a report that kind of says, “Here’s some of the key figures on the return. Here’s some…” We’re not going to call them recommendations. They’re observations, actionable observations to talk about with the client. And it’s kind of a one-pager that really quickly gives advisors another touchpoint with their client. And we should be all doing tax return reviews anyway. That should be a staple part of our service.

And then we kind of…just because people were asking for it, we built a projection tool as well. So then you can take those observations and say, “Okay, well, now let’s run some numbers for next year. Let’s take that capital gain or let’s not, let’s do that Roth conversion or not. What’s going to happen with my self-employment income?” And so really, at the moment, the idea is it’s an end-to-end tax planning tool. It starts with a document and ends with a deliverable to give to clients.

Michael: Very cool. Very cool. And so can you talk a little bit more about just what do you get as the output? What exactly am I handing over to a client? I saw it on the screen because I was sitting in your demo at the FinTech competition. It’s always a little harder to describe software output by audio podcast, but can you try to help people understand like what is it outputting? What is it ultimately producing? Or what am I going to put in front of my client exactly?

Roger: Yeah. So originally, when we first started, it was just that list of observations. It was just a bullet-pointed list that said, “Hey, you’re in the 15% bracket, consider a Roth conversion,” or, “I noticed that you itemized and you had charities, you might want to double that up and take the standard in alternating years.” That’s where it started. And then we were just listening…

Michael: Which are still good actionable items right there. Just, “You’re in a tax bracket, consider a Roth conversion. You’re doing charitable giving, you’ve got an opportunity to bunch the deductions.”

Roger: Yep. And that’s still there. So that’s still at the bottom of the report. But people were saying, “I also just put in front of my clients, ‘Here’s the marginal tax bracket that you’re in. And here’s where you are with respect to Medicare Part B premiums if you have escalated premiums due to your income. And summary information about which…there’s a number of tax,’” I wouldn’t call them loopholes, “‘Tax incentives that are based on your modified adjusted gross income.’ And so we kind of list out, ‘Okay, well, you’re in the phase-out for this particular thing, but you’re over the limit for this and under for that.’”

And so really, if I think of the real estate of the page, probably two-thirds of it is just kind of summary information that is just less scary-looking. A tax return is pretty much the most terrifying piece of paper that a…they have to make their own invoice for the biggest check they write all year. So they hate that thing. And so just even if you had no recommendations, if you just gave them a way to read it and understand what was in it in a palatable way, that’s value-add in and of itself. So yeah, that’s about two-thirds of Holistiplan.

Michael: That’s a good point, just, I don’t know, translating tax return into English is kind of a piece of this unto itself. So I guess, so part of this is just, let’s reflect back where people are like, “Hey, if you didn’t actually realize what tax bracket you’re in, just, here’s a list of the tax brackets and a little arrow next to the one you’re in.” Which is not the fanciest thing, but a lot of clients don’t actually realize where they are and have never visualized where that stacks up. And your output just shows them a little graphic with a little arrow like, “Here’s the bracket you’re in right now, and here’s what that means about your marginal tax rate.”

And I was struck as well, you had I think just all kind of the standard things that just we all otherwise have to remember like, “Okay, is this client over the Roth contribution threshold or the deductible IRA individual contribution threshold?” All these different phase-out items that I know you had summarized on the report as well. So it just says like, “Yep, you can do a Roth conversion, or a Roth contribution,” or, “No, you can’t. You are in the phase-out zone for your qualified business income or not,” and just listing those things out. So again, people just start to see like, “Here’s all the actual stuff that’s impacting my tax situation and where I stand.”

Roger: Right. And we as advisors, we know where to find that stuff, and we kind of take it for granted that we do. It’s spread out over multiple pages of gobbledygook that the marginal tax rate is not on your return anywhere. It’s not listed anywhere. So, all these sorts of pieces of information are just really terrifying to look at for the client. And even though we know where they are, they’re a pain for the advisor to collate all into one place, and especially if we’re going to try to put together a deliverable for the client. So that was the idea is let’s get it all in one place that’s at least mildly pretty-looking so that we can have a meaningful conversation without just flipping through thousands of pages of a document they literally probably hate more than any other document in their lives. Yeah.

So that’s the report piece. And then like I said, you can kick that over into a projection piece, which we didn’t really anticipate having to build, but people were saying, “Hey, can you take this data you’ve read in and kick that into…” I won’t name the other products, but there’s other products that do tax projections. And those other products, as far as we could tell, did not have the ability to import data. There were no APIs or even Excel-based uploads. So we kind of built…

Michael: Yeah. I’ll own it. We’re a firm that uses BNA’s Income Tax Planner and have for a long time. And it’s a pretty darn robust solution for just analyzing a client’s prospective tax planning situation, but whenever we’re going to do it, someone has to manually key in all of the data about the client’s current income and tax situation. And granted, we’re doing forward-looking projections, so sometimes you want to key a few of your own things. So you’re trying to figure out like, “Well, what if I do a $50,000 Roth conversion next year?” So you have to key some stuff.

Roger: Yes, that baseline information.

Michael: But we key everything. You have a piece of software, and a tax return is mostly electronic now, why can’t we make these things talk together to each other? But no one does. So we have to enter all that data manually.

Roger: Right, right. So yeah, so we ended up building that. We didn’t anticipate having to do that, but then we did that. But I’m glad we did, because now it’s really is an end-to-end. You can take the past, which is the existing document, you can look at the present, which is, “Here’s what we see from it,” and then you can kick it into the future, which is the projection tool.

Michael: Oh, I like that framing of like, the past is summarizing just like where they stand on taxes. The present is your observations, all these things like, “Hey, you’re in a 15% bracket, you could do a Roth conversion. You’re itemizing deductions, maybe you could bunch them together.” And then the future is these forward-looking tax projection tools.

Roger: Right. Yeah, yeah.

Michael: So are you guys building something at the depth on the projection tools end of what like BNA Income Tax Planner and CS Planner and a few of those alternatives do right now, where you can plug in all the gory details of client’s tax situation, get a really detailed projection in the future of, “Here’s what happens if we do this strategy or that tax strategy?”

Roger: I do not anticipate us ever getting all the way to 100%. Like oil well depletion rates, I don’t think we’re going to do that. But certainly…

Michael: Right. Yeah, I guess you can get pretty deep if you really want to go all the way down that road, right? At some point, you’re just literally creating tax preparation software that just happens to be future-looking?

Roger: Right. Yeah. So on our roadmap are things like, we need to make sure the QBI calculation is in there. We need to make sure AMT, at least a rudimentary version, is in there. And then it’s our job to tell the user that says, “Okay, you’ve reached the boundary of what this product is able to do.” But it’s kind of an 80/20 rule. And again, we listened to what people were saying. So I have a very prominent button at the top of every screen that says “tell us what you think.” And if people were saying QBI, all right, QBI moves up the list. We’ve got to get that one done this week. So we’ll never do it all, but I think we can get to a point where we can do most of what an advisor needs to do for quick and dirty analysis.

Where The Idea For Holistiplan Came From [16:18]

Michael: So how do you get to the point of building something like this in the first place? Where exactly did this come from for you? Are you a background of doing technology and computer programming kind of stuff? Like, “Hey, I’ve got this problem in my practice, damn it, I’m just going to make my own thing.” Or did that come about some other way? How do you get to the point of making what is not exactly simple software, not only because tax planning is complex, but you’ve got to teach a computer how to find and pull out numbers from what could be like a 500-page PDF and know exactly which number is the right numbers to pull. So what was the path and journey to making the software in the first place?

Roger: Okay. So it’s a long and sordid tale, but we’ll go there.

Michael: All right.

Roger: So I did study engineering in college, but my computer programming didn’t go much beyond like, “This is what a if statement is, and this is what a for loop is.” But I would say about six or seven years ago, I take my New Year’s resolutions very seriously, and one of my New Year’s resolutions, I don’t remember the year, was, “Okay, I’m going to learn how to make web apps.” It was just something I wanted to learn how to do. We had some needs internally within the firm. And so I really worked hard on that. And I ended up going through a process and just getting better over the years. And we built a lot of software within our firm that we still use today. By the way, I’m going to use “we” a lot, even though I don’t still work at Briaud Financial Advisors. We’ll get there. But it’s just going to happen where I’m going to say “we” even though that’s not me anymore.

Michael: And what kind of web apps were you making?

Roger: All internal, but ways of, say routing trades through the firm, for example, or our billing system, creating invoices and stuff like that, tracking, pulling payments and stuff like that. That was all stuff that I over the years built. I kind of used Briaud as my mad scientist laboratory to kind of build this stuff. But eventually, I had the skills to be able to spin up pretty rapidly prototype products. So that’s where the ability to do it came from. Now, the actual…what led me to actually building it was really almost two years ago now, I really started thinking about, “What can we do to really make financial planning super scalable?” And the motivations for that were many. Part of it was like, if we don’t do it, Amazon’s going to do it or someone else is going to do it. But also just, that’s a really interesting problem, I think. How do you make financial planning just wildly scalable?

And so I took a leave of absence from the company that ultimately became permanent, but I really wanted to tackle this problem. And so I had a year in the wilderness. Idea number one was, I’ll use a…it’s pretty old technology, but very scalable. It’s called a book, right? You write a book one time and you charge 20 bucks each time. And everything you know about financial planning, you could put in one place. And then you could get that out to thousands of people. It turns out that writing a book is not fun. Everyone who’s ever told you about it tells you it’s not fun. And so I quickly realized that there was a good chance I would have no fun and make no money doing that. So I pivoted pretty quickly out of…

Michael: Yeah, book writing is also not terribly lucrative is one of the things you usually hear from people who write books, 0.1% of them make New York Times bestsellers that gets decent sales, and almost everybody else makes no money.

Roger: Yeah, yeah. So that fell by the wayside pretty quickly. But then I thought, “Okay, let’s…how do you build something that would help consumers…?” So then I thought, “Okay, let’s…instead of a book, let’s go to like a web-based application, where, unlike a book, I can insert and remove content. If someone has children or no children, I can modify what they see. They don’t need to see the chapter on estate planning with children if they’ve got no children,” that sort of thing.

So I spent probably about half a year working on a website that did some of that stuff. What I found was, and again, this was direct-to-consumer, while I was really intrigued by this idea of a kind of choose-your-own-adventure-style product, I found I was spending all my time building educational content. So for example, you and I threw out a few things earlier when we were talking about oh, yeah, if you double up your charity into alternating years and take the standard deduction, you and I know what that means, and our listeners on the show are going to know what that means. But if you were to try to explain everything behind that to someone who you have never met, you can’t even look at them while you’re explaining it to tell if they’re nodding their head yes or they’re lost. And so I was creating all this educational content, which again, wasn’t quite in my wheelhouse. It wasn’t what I wanted to do.

So now we’re coming up on the end of 2018, and it was New Year’s resolution time again. And I wrote to my study group, “Look, my New Year’s resolution for 2019 is I really need to figure this out or just quit and do something else.” And so I said, “Look, I’m going to scrap the direct-to-consumer thing. Let’s use that same decision engine technology,” which now I know is called an expert system, “And let’s point that at advisors who don’t need all that educational content. They need the efficiency and the completeness of having that decision engine there.” So fortunately for me, that got one of my study group colleagues, Kevin Lozer, pretty excited, and he said, “Hey, I want to join you with this.”

So in February, we started kind of working at this Holistiplan idea, which originally was just going to be a huge decision engine or expert system where you just enter as much information as you can about the client and it spits out some observations for you. And that’s where we started. That was February. Kevin had the great insight of…I was building all these prototypes, and I said, “What about this screen where you entered all this information?” And he’s like, “I’m not going to enter that information. You just gave me a screen with 150 boxes on it. I’m not going to do that.” And I was like, “Well, maybe your client will.” He’s like, “I’m not going to ask my client to enter that stuff.” And so that’s when the idea of reading in the documents came from, the OCR piece. And it just kind of went from there. So yeah.

Michael: Very cool. Very cool. And so is Kevin a technology person or are you still primarily the technology person, you’ve just brought your technology skills forward even further by now programming this to a much greater depth?

Roger: Right. Yeah. So I’m in charge of all product development. Yeah. We do have one contract programmer helping with some of the optical character recognition stuff, but otherwise, the site has been built by me. And it kind of looks like it in some places. And Kevin, who still has clients, he still has an RIA, Kevin’s running more of the customer service-type stuff now and chasing all the various things you’ve got to chase when the business starts to take off.

Michael: Yep. Customer service and sales and marketing is usually the dynamic for technology firms. Someone makes the product and someone gets people to go buy it.

Roger: That’s right. And that was pretty quiet until XYPN Live came along, and now it’s been…his job has gotten a lot busier. Thanks to you all.

Michael: Yeah, it certainly…as we’d said earlier, it certainly made quite a splash at the conference when you just actually like feed in a client tax return, wait all of about 7 seconds, and it’s spitting out all this detailed information and insights from a 100-page tax return. It’s like, yeah, it would have taken me a little bit longer to go through the tax return than what your software just did.

Technical Challenges Roger Encountered Developing Holistiplan [24:29]

Do you have problems where, I don’t know, the software can’t follow it? How perfectly standardized are tax returns and how people fill them out? Because to the human eye, right, like, hey, whether you write 50000 or 50,000 or whether you put the dollar sign in front or not, our brains pretty quickly translate there’s a $50,000 line item there. But you’re writing software, you have to explain to the software each of those things. And whether $5000 and $50,000 and no dollar sign 50000, you have to teach it all those things are the same number. So has that been a challenge for you guys? Is there still issues with just, boy, this software would be a lot easier to write if people made tax returns more standardized, or is it standardized enough that actually that’s pretty easy now?

Roger: It has been incredibly challenging. And I don’t think we’ll ever 100% get there. I’ve learned a lot about OCR, that’s optical character recognition, I’ve learned a lot about OCR over the past six months, and it’s just really, really hard. That’s all there is to it. I think the legal profession has a similar problem, right? They have these discovery periods where they need to read through millions of documents. And I’ve been kind of learning about how they handle OCR in that industry, too. And a lot of times the OCR is your first step, and then it falls back to a human being. And that’s what we’ve been doing. So when it fails, and it does fail sometimes, then it gets kicked into a manual queue. And we’ll enter it in. And that can be, instead of seconds, that’s minutes for it to get in. So we’re having to build infrastructure to be able to handle that.

But hopefully, it is true that the more returns that we see, the smarter the system gets. Because just like what you said, the more we see this case or that case and we see patterns, we’re able to anticipate those patterns and then the next time those go through. But I will say it is extremely challenging to get this thing. And I don’t think it’ll ever be 100%. So people going into the product need to know that there is a very good chance, especially if they dropped it on the floor and then stepped on it and then scan it in on an angle, yeah, that’s going to get kicked to a manual queue, but then our job is to try to turn it around quickly.

Michael: And so you actually have a support thing for that? If the software tries to read the tax return and can’t read it, it’ll send me a message that says, “Yeah, your tax returns kind of smudged. It looks like you spilled coffee on it. So we’ve got someone who’s going to analyze this manually and we’ll get back to you in hours instead of the seven-second thing. But we’ll turn it around to you. We just have to dig deeper?”

Roger: That’s right. Yeah. So they’ll get a pop up that says, “Look, we need to look at this a little more closely.” Sometimes it reads in, but then it has a low confidence score. And so we have to kind of go back and look through it.

Michael: So OCR is actually at a place where it can say like, “I think this number is 50,000, but I’m actually not positive because it was kind of smudgy and I can tell there’s dirt on it. So someone actually double-check this and make sure I didn’t OCR it incorrectly?”

Roger: Yeah. The OCR software, pretty much all the packages available do give a confidence interval, not just for the page, but every single word or number that you read in, it’ll give you a confidence score on them.

Michael: Oh, interesting.

Roger: That’s not to say that it’ll give you 100% confidence and it’ll be totally wrong, because that happens too, but they can give you some indication as to how well it thinks it handled it, absolutely.

Michael: Interesting.

Roger: Yep. The ones that fail, I think of them like when I drop off my dry cleaning. I drop it off at 9 in the morning, I get it by 5 p.m. And I know that I could iron my shirts faster than the seven hours that it takes to get my shirts back, but the fact that I can drop it off, go do something else and then know it’s going to be there at 5 is still very valuable to me. And so…

Michael: Oh, absolutely.

Roger: …I don’t think the fact that some of them fail negates the value of the software. Just load them up in the morning and then take a look at them after lunch and they’ll all be there for you. So I think the time-saving is still there, but the instant gratification for some returns just won’t be there, unfortunately.

Michael: Well, but I have to admit, there is a difference between, I don’t get the instant gratification because I load it up and it detects that my tax return is a smudgy, crappy scan, so it’s got to turn back to manual and I’ll get a response later today or tomorrow, versus I put it into Holistiplan and it gives me analysis and recommendations, but it turns out there was an error with one of the scanned numbers and what it’s spitting back to me isn’t incorrect.

Roger: Yeah, that’s my nightmare. I don’t like that situation.

Michael: Oh, that’s a nightmare for us on the advisor end as well.

Roger: That’s not good for anybody. Yeah.

Michael: How do you handle that or think about that? Right? Because from the advisor end, if I have to back-check every single Holistiplan scan to make sure the numbers are actually right and I’m doing a manual check on the tax return anyways, I’m starting to lose my time savings now. Maybe you’ll surface the ideas a little faster than what I could have done by actually typing up page by page, but I’m losing some of my efficiency. So how are you guys trying to tackle that or how do you think about that as a challenge? Because you’ve lived this from the advisor side.

Roger: Yeah. And that’s why we have to have good tools on our side that identify is it a scan or is it not? Is it on an angle or not? What sort of confidence levels are we getting back? And so, we have pretty good information on our end as to whether it attempted to put mistakes in front of the advisor or not. And when that happens, they don’t even have the ability to click on that report. I don’t let them click on the report when there’s a chance the numbers are wrong. That gets pushed to manual queue. We take a look at it, and then only after we’ve looked at it is it released for them to do it.

Michael: Oh, interesting. So in essence, you’re at least protecting against the “I served you up a wrong number” by just setting the threshold really, really high on what it takes to actually pass through automatically to the advisor. If the software detects at all that this might be a little out of whack, it just doesn’t take much to kick it over to manual review so that you’ll make sure that you don’t serve up wrong information.

Roger: Right, right. And again, that’s another thing that’s getting smarter with time, too. It was one thing to just read in the numbers, but some of those numbers interact with each other, right? The Schedule D number on…on Schedule 1, where we talk about capital gains, I can’t remember what line it is, but that references Schedule D. And so if the OCR reads two different values for that field that should be the same number, it’ll flag that. So we’re able to start to build in more and more intelligence as we go along for more error correction.

Michael: Right. All those internal consistency checks, every single time a number on a sub-schedule feeds up to a master schedule, you can check on both ends and just get an automatic second verification about whether the first number you scanned was right or not.

Roger: Right. So that’s what’s been fun about the whole process is finding those things and just making it smarter and smarter over time, kind of iterating through. Part of the joy is just finding those little treasures that make it better each time.

Michael: And I guess the first primary message is, everybody should do their tax return using electronic software and save the PDF that it gives you. So there’s no scanning at all.

Roger: Yeah, yeah. We’re starting to see some statistics on what numbers are embedded PDFs versus scans. We expected it fully to be like 80% or like the pure beautiful return straight out of the software right out of TurboTax or whatever. We thought 80%. It’s more like 60%. But I think over time we know the direction that’s going to go. It’ll be more and more electronic.

Michael: And I suspect just scanning quality and focus will continue to get better as well.

Roger: I think so. Yeah.

Michael: And I’m presuming then if God bless you get one of those people that still do their tax returns by hand, that’s just, “Yeah, we ain’t doing that?”

Roger: At the moment, no. I’ve only seen a couple so far. There are some OCR libraries, I think the Amazon library. These days now, you don’t have to roll your own OCR. There are some API-based OCR libraries.

Michael: Oh, interesting.

Roger: I think the Amazon one claims to be able to handle handwriting. But I’m going to be honest, that’s probably going to be pretty low on our list to try to tackle.

Michael: There comes a point where I would rather encourage clients to not do tax returns by hand than figure out how to read their handwritten tax return. Like, “I’ll tell you what, I’ll just buy you a copy of TurboTax, how’s that?”

Roger: Yeah, no kidding. Yeah.

What Holistiplan Costs [33:45]

Michael: And so what are you envisioning the pricing is for software like this?

Roger: That has been a learning experience for us because we really had no idea. What we originally started with was, like most software-as-a-service models, we have a monthly charge. But it’s been moving annual. More and more people were like, “Give us an annual amount.” So we have it metered right now as of us recording this on this very moment. Who knows what it’ll be in five minutes. But for 150 returns, it’s $849 a year. For 300 returns, that’s your kind of sizable ensemble firm, it’s $1,499 a year. And if you want to go above that, way above that, we’ve kind of had some talks about some enterprise-level-type arrangement.

Michael: Yeah, happy to talk to you if you want to do more. Okay. But I’m thinking of just in my head, so 150 returns for 850 bucks, we’re talking $5 or $6 per return is essentially what this comes down to. Which to take an advisor on my team who might have spent 30 to 60 minutes at $30 or $50 an hour all the way up to several hundred dollars an hour for a senior advisor’s time, like 5 bucks per return to save me an hour is kind of a crazy big cost savings if I was actually really drilling into looking at tax returns in detail in the first place.

Roger: Are you suggesting we raise the price, Michael?

Michael: Well, no. Maybe. But it’s an interesting double-edged sword to me. Because just when I think about this in the marketplace, so there’s…well, so there’s some firms that are probably CPA-style firms doing tax planning who would already pour through the tax return in detail, but if you just serve it up to them faster, it’s just a flat-out cost savings and a great value for them. If anything, maybe it’s too low for them because they literally will bill out their time. And if you save them an hour, that’s like an hour they get back to bill someone at a couple hundred dollars.

Then you get wealth management firms who maybe aren’t doing tax preparation, but they do a lot of tax planning. They have to get up to speed on their clients’ tax situations. In the past, they would have maybe given this to a paraplanner to look and write a tax summary so that they can include it as a page of the plan, and now they’re just going to grab the whole Holistiplan page output instead. And this is still saving me like an hour plus a paraplanner time at whatever, $30 an hour, give or take something, and it costs me 5 bucks a return. So this gets to be good economics.

I think the challenge, though, is there’s only so many firms that like to open the tax door. And for the rest, to me, the fascinating thing about the software that you’re creating here is you’re effectively trying to create a new category, right? We’ve got financial planning software in general. We’ve got portfolio management software and all the rest. The tax planning software is just kind of a nascent category right now because we’ve got things like CS Planner and BNA Income Tax Planner, but not much. And I think, frankly, most of those are pretty dated tools that, as we already discussed, don’t do things like “Just take the information from my tax return so I don’t have to type this,” which you guys have built.

So you’ve got a fairly nascent category with some firms that just suffer through this because they’re hardcore tax planning-centric firms, and then a whole bunch that either don’t take the time, don’t have the knowledge or expertise, don’t want to go there, and a non-trivial number of I think broker-dealers in particular that have spent 50 years writing on the bottom of every single page of every report “This is not tax advice. Don’t construe this as tax advice,” who maybe even would be afraid of these kinds of tax analyses and observations that someone may interpret as advice that they were trying not to give.

So the interesting question to me and where I think you get price point sensitivity to figure out is how many planning opportunities can you open up for firms that might not have actually done tax planning in the past because they didn’t have the expertise or the time, but man, you give me a piece of software and upload it, in seven seconds I get a cool report that gives me a whole bunch of planning opportunities to add value to my clients, yeah, I’ll do that. That’s good economics, right? I only need one client where the software points out like, “Hey, did you realize this client has like $20,000 of interest at a random bank? And if you do the math, based on current interest rates, that means there’s like $100,000 or more over there. You might want to go touch base with them and see if you can find that money opportunity.” Right? It takes so little to turn this into a huge ROI because you find new planning opportunities, uncovered assets, just things that save the client hard tax dollars where they say, “Okay, no, I’m really happy with my advisory fee because you’re saving me more than the cost of my fee.”

That to me has always been the strong opportunity around tax software, in particular, is it’s one of the few things we do where it’s really easy to point to how much money we saved or created for the client. That’s hard on the investment end because I can’t take credit for a bull market. And I can say, “You would have done dumb things with your money without me,” but I can’t really prove it because it’s a counterfactual. But I can point to a like, “Here’s what your tax bill was going to be. We did this analysis, here’s what your tax bill is going to be instead. I saved you this much in hard dollar cash with this tax planning.” And it only took me seven seconds because actually, I just handed it to Holistiplan and told me what the key observations were, and then I delivered it.

Roger: Yeah. And I’ll tell you, it’s not just for existing clients. I know, at least back in my advisory days, for prospects, it was like magic. You would tell them in an initial meeting, “Bring a tax return in.” This is a tax return that their CPA has already looked at, and probably the other advisor across town has looked at. And if you can come up with a few observations, which invariably we were able to do in that prospect meeting, it was like magic to them. Because again, they hate this document, and the fact that someone can, in a matter of minutes, look through this thing and come up with something that saves them money, it’s huge, really huge.

I will say, though, we were talking about the business case for a really huge firm, I think that is really…they’re thinking in labor-saving terms, yeah, efficiency. But at the smaller end of the market, and we do actually have a monthly plan at 75 bucks a month, and we have some discounts available. That’s for your smaller firms who they’re maybe less interested in the time savings, but for them, the value is access to that checklist. They may not have built that infrastructure yet of a comprehensive checklist that looks at everything on the tax return. And they can get that out of the box. So I was noticing at the conference, actually, that I was getting different reactions based on the size of the firms as to what was really appealing to people.

And I hope that we can deliver both. I really want the checklist to be as smart as any advisor. If we can be as smart as all the advisors on the platform, then we’ll be smarter than any one advisor on the planet, because we have the collective wisdom of everybody involved. So that’s kind of my long-term aspiration is how can we use this tool to become a way of kind of standardizing and expanding on what we can deliver for our clients? I think that would be even bigger than even the efficiency gains.

Michael: Yeah. And I can imagine, at some point, you make a web-based widget of this. As an advisor, I put it on my website. I tell my prospects, “Just go to my website, upload all your tax return.” And we’ll start giving you some ideas immediately about what you can do to open up the relationship with them. It’s like, “Oh, and by the way, I just got a giant pile of information about my prospects. They uploaded their tax return as a prospect.” Tax returns are a good prospecting tool if you can create enough value that prospective clients are willing to hand it over, because there’s just so much information on the tax return, right? You get such a window into their economic situation.

Roger: Yeah, totally. Yeah, that was actually our original…we still have the code buried deep down inside the product, but our original idea for the product was exactly that, which is media advisor. I send out a blast email to all my clients that says, “Hey, if you want me to do a tax return review, just upload it at this site.” And when the client uploads it, the advisor gets a notice that says, “A new return has come in.” And then you can call them within like five minutes and say, “Hey, thanks for the return. Here’s some observations.” I think that’d be super slick, especially for prospects. We got away from the client uploading it, so now the advisor still has to upload it. But one day, I think that would be a really cool way to interact with clients to say…and not just tax returns. Anyone who wants me to review your auto insurance, it’s auto insurance review month, go ahead and upload it. And not everyone will take you up on it, but the 20% who do, cool, I’ve got a whole list of things I can talk with you about right away. So that’s what keeps me really excited about the product is the promise of doing stuff like that.

How Roger Navigates The Line Between Tax Planning and Giving Actual Tax Advice [43:15]

Michael: So here’s the part I’ve got to ask, though. You made this comment earlier like, we should all be doing tax return reviews anyways because there’s all these value-creation opportunities. But I feel like one of the things that increasingly has become a struggle in advisor world in recent years is where you draw these lines between being a financial advisor, being a CPA, doing tax planning, giving tax advice, just giving tax guidance, which is like a euphemism for “it’s advice, but it’s not, so don’t sue me for it.” We have all these nuance terms now that are starting to crop up around just how much tax stuff are you supposed to do or can you do or is it appropriate to do as an advisor who’s not necessarily a CPA or an enrolled agent? And so I’m just wondering, again, I know you lived this inside of a firm as well, but how do you think about that line or where to draw that line of what should an advisor do and what is beyond the scope of an advisor to do?

Roger: From my perspective…we were in an ensemble firm, and when we were doing tax returns, we were doing reviews. We were using the collective wisdom that had been built up over a number of years in that firm. So I honestly felt very comfortable delivering, we won’t use the word “tax advice,” but delivering tax observations to clients that they could then talk with their tax professional about. I felt very comfortable doing that. And I think the very fact that we kept finding stuff…we would find errors on returns. I don’t know what your experience is, but our error rate on when we look at returns prepared by professionals was as much as like 30% to 40%. And that’s a real value-add. And so to not do it I think is an incomplete service, frankly.

But that’s a problem. Some people just don’t have the bandwidth to be able to do that and then expand that out into all areas of financial planning. And so that’s why we need tools to help us do that more efficiently. And I really love the idea of what my friend Dr. Nathan Harness at Texas A&M normative practices. The more our profession has normative practices on how to do a tax return review, that helps us be more efficient. It helps us be more consistent in the product that goes out to clients, and probably, in the long run, will probably protect us as advisors. Because if we say, “Hey, look, I’m just following the normative practice. This is how you do it. This is how you do a tax return review,” and I’m just doing what everyone else does, that probably would protect us the way it does in other commoditized areas of what we do as financial advisors.

Michael: That to me has been the gap in our advisor world for quite a while now. And I think particularly with CFP Board’s new fiduciary standard rolling out next year, where ultimately one of the key things that defines whether you met the obligation for fiduciary standard, it’s actually not really about the outcomes, it’s about the process that you followed, right? The way a doctor avoids being found guilty of malpractice when a patient dies on the operating table is there’s a very clear set of standard operating procedures around, “Here’s how the procedure is supposed to be done. Here are the known complications and risks. Here are all the steps you’re supposed to do along the way.” And if you followed the protocol and an unfortunate outcome occurred, the professional isn’t liable. We just recognize that sometimes unfortunate outcomes occur, right?

In our advisor world, the most obvious one is like, as long as you followed, you crafted an appropriate investment policy statement, you followed the investment policy statement, the fact that the market went down is not your liability as the advisor, because you had a process and you followed the process, and it was a defensible process.

And what struck me in our financial planning world is frankly, the moment you get out of investment stuff, there actually really aren’t any normative processes established that you can say like, “Well, I looked at these 11 line items and these key areas of the tax return. So I did my duty and due diligence in creating tax observation. Sorry, I missed that one other thing. But that’s not a normal thing you would have to look at.” And we just don’t have that framework. It actually worries me a little with the CFP Board standard coming that if someone says that advisor didn’t follow a fiduciary process around tax planning or insurance advice or something like that, I’m not even sure how you judge what they did to figure out what is the accepted practice so that you can then figure out if they deviated from accepted practices. The cool thing around Holistiplan is you’re going to kind of set those practices. Because frankly, once you automate it for a couple of dollars a tax return, there’s really not a good excuse for anybody to do less than that.

Roger: When we started on day one, it was whatever was in my brain and Kevin’s brain, but over time, we’re starting to incorporate… I just put in an update two days ago based on some change to the language on how we handle Roths from one of our subscribers. I was able to put that in and now every single subscriber gets access to that good idea on how we talked about Roth conversions. And so again, that’s what really gets me…I like the OCR thing. That’s a cool parlor trick. But really, when it comes to really changing the profession for the better, this idea of not just the efficiency, but the consistency and completeness of what we do. To be able to go home at work and say, “I did a fully complete job on that tax return review. I don’t think I missed anything on that,” that’s a really good feeling. And if you can validate that based on the fact that all these other people have contributed to that process is really exciting to me. That’s what gets me excited about Holistiplan.

Michael: Yeah. Well, and that’s the thing that I think gets really interesting when you start thinking about solutions like this in the context of a larger firm. We go through this at Pinnacle because there’s 15-odd advisors in various capacities at the firm. And candidly, one of the most nerve-wracking things as an owner, as a partner in a multi-advisor firm is sitting around wondering like, do all 15 of these advisors do the analysis either the same way, the right way? Do they all do it consistently? If I gave the same tax return to all these different folks, would they all come up with the same conclusions? If I gave it to one of our newer associate planners, would they do the right analysis? And if not, who’s over-the-shoulder-error-checking to make sure that they did it right?

Because again, there’s not a lot of standardized process around how to do things like analyze a tax return. And so the striking thing to me around software like this once you’re in a multi-advisor firm is I know everybody’s going to get the same consistent, thorough analysis because the software did it. Now you have to figure out what to do with those observations. So I don’t think that undermines the value of an advisor. Your value is not reading a tax return and spotting an unusual number, your value is what are you going to do about that? What are you going to recommend to the client? What is the planning opportunity or strategy that emerges from it? But at least knowing that every return gets thoroughly vetted and read and evaluated is a pretty big deal if you’re a multi-advisor firm and you worry about things like process consistency and advice consistency in the first place.

Roger: Right. And similarly, I said this in our presentation at the FinTech competition, but same thing goes for someone who’s just starting out. If you’ve been in business for three months, how can you be sure that…and if you’re a solo sitting in your basement just starting out, how do you know if you’re…? You don’t have a checklist. Right now in your firm, I know in my old firm, we would combat that inconsistency problem by building processes, detailed checklists, templated reports and stuff like that. But that takes years to build up that infrastructure, right? You’re basically building a Holistiplan for your firm. If you’re just starting out, that infrastructure is very hard to build. I was really glad to see that at XYPN, y’all were helping people build that infrastructure. You’ve hired someone to kind of take people through creating a financial planning calendar and a process. Because it’s such a great idea because that can take years and years for people to do. And in the meantime, while you’re learning, are you learning on your client’s dime? Is that the right way to do it?

Michael: Yeah. Very cool.

Roger’s Path Into The Advisory World [52:05]

So talk to us more about kind of your path of how you came to the advisor world. You talked a little bit about kind of the deviation away from the advisory firm and into Holistiplan, but how did you get to advisor world in the first place? Was this a like, “Always wanted to be an advisor when I grew up, became an advisor,” or what was the journey for you?

Roger: I think like most people, I didn’t know the profession even existed. I studied engineering in college. I spent all my 20s as a consultant in the energy business. A lot of stuff on trading and risk, a lot of oil and gas-type stuff. But the way I got into the profession was my wife, Natalie, she knew about the profession. She knew that there was such a thing as financial planning because her mother, Janet Briaud, founded her firm in 1986, Briaud Financial Planning and then became Briaud Financial Advisors. So, Natalie, we were living in London at the time. We were living abroad, and Natalie was working at a hedge fund and doing some investment banking before that.

But when we contemplated moving back to the U.S., she was studying for the CFP. She was going to try working at this business that she had grown up knowing about. And so she was studying for the CFP. I don’t know how it works now, but with the College for Financial Planning, they would mail like a big stack of books for each module, right? And so we would get those, and I was just kind of looking over her shoulder. I was like, “Hey, I’ll take a look at this.” And I started reading them, and then I just really found it really fascinating. And so it reached a point where I would get ahead of Natalie. And they wouldn’t send you the next round of books until you took the unit exam. And so I’d be like…

Michael: “You’ve got to take the exam. I want to read the next book.”

Roger: Yeah, exactly. I was getting on her case to take the exam so I could get the next round of books. Yeah. So when we moved back to the U.S., she joined Briaud. I spent one more year in energy. I was commuting to Shell in Houston. But I took the CFP exam even before I started working. I’d taken the CFA, so I didn’t have to do the education, although I had read all the books, like I said. And then, yeah, I joined in the fall of 2008, which was kind of an eventful time to join a financial planning firm. But yeah, I spent 10 years there in that firm. So yes, it was my mother in law, who founded the firm, and my wife and me. We were all working there. And we had about 13 employees total.

Michael: Interesting. And what was your role there when you came on? Were you doing investment analyst kind of stuff because you had your CFA as a background or were you targeted at the client-facing side?

Roger: Paraplanner.

Michael: Okay.

Roger: Yeah, I started out in the mailroom. I was supporting advisors.

Michael: Well, you were the son-in-law, so…

Roger: I was the deadbeat son-in-law. They had to put him somewhere, right. Yeah. So I started as a paraplanner. And that was a great way to learn the ropes. And I eventually became an advisor. Natalie and I bought into the firm. We bought half the firm. And then we were partners with Janet at that point and running the firm with our own set of clients. And I was there for 10 years. And that’s a whole other podcast, I’m sure, about succession and family succession. But we spent those 10 years going through that process you hear about at conferences, which is how do you take the firm that centers around a charismatic founder to a truly ensemble firm? And we went through all those ups and downs over the years to get to that point. When I exited, that was really something that we achieved. And that’s something I’m very proud of.

Michael: So just I am curious about this journey. So how do you end out in a firm where you’re kind of heir apparent to be the successor, heir apparent with your spouse to be joint successors, and then you go a different direction, you’re not at the firm?

Roger: Yeah. So that took a lot of soul-searching, because we were certainly on a path where the idea would have certainly…the easiest route would have been Natalie and I eventually buy out the rest of Janet’s share, and then we’re running that firm and bringing on other partners. Just I was really intrigued by this problem of efficiency. And deep down, I think I wanted to start my own thing. It is very satisfying to take an existing business and take it to another level. And I think we successfully did that. But I always kind of had this thing eating at me to try to start my own thing. So I’d be lying if I didn’t say that wasn’t part of it. But it took multiple years to admit that to myself and get to that point.

And then exiting the firm, when you’re a partner in a firm and you leave, that is disruptive to everybody involved, for sure. And when you’re married to one of them, that’s disruptive as well. So it was certainly not an easy thing for any of us to do. But now that…sitting where I am now, looking back, I’m glad for everyone’s sake that we did that. I’m having a lot of fun doing Holistiplan. And I think the firm has reached a higher plane by having deadbeat son-in-law out of the way. So I think ultimately, it was good for everyone. But yeah, oh, man, it was tough. It’s tough to make a change like that for sure.

What Led Roger To Transition Out Of Briaud [57:49]

Michael: So talk to us about just, I don’t know, the journey of how you come to that conclusion to make the change. Because this is an area that I’m fascinated by. I’ve long found just one of the differences between the really successful folks and the rest is, a lot of times the really… Everybody has some dreams and things in their head that like, “Wouldn’t it be cool someday if I did blank?” And a subset of people like you just somehow get to the point where you actually pull the trigger and make that leap. And for most, the rest of us, we just kind of think about it for the better part of our lives but then can’t quite make the leap, take the risk, do the transition. So what was it that was going through your head or the process of trying to figure out like, “Am I really going to make this leap?” I think it’s hard enough for most just to move away from a firm. Never find a firm that’s family, a firm that you’re buying into with your spouse. That’s a particularly complex question and discussion, I’m sure. So how do you get there?

Roger: Yeah, I have to acknowledge first, there’s enormous privilege associated with the fact that we had a steady income, we have our health and all these things that otherwise would have made it challenging to make that leap. I have two kids, if I had two kids and we didn’t have, say, the income that Natalie gains from being with the firm, it would be very challenging to say, “Okay, I’m going to go try three different things before I land on something that works.” That would have been very hard to do. But if I roll the clock back, it probably started…deep down in my brain, when I said, “I’m going to learn how to make websites,” I knew that that would be a skill that would be valuable for the company.

I still maintain that any firm that reaches, say 20 to 30 employees needs to have a full-time developer on staff. And I kind of anticipated that one day being a thing. But probably deep down I thought, “I’m just going to…this is me buying an option for the future to be able to create something.” And I continued to work at that and get better at that. And then when the opportunity arose, I was able to capitalize on it. But it helped that I had supportive spouse, and we financially were able to make that leap.

Midlife crisis, man, it’s a powerful thing. You start to hit 40 and you’re like, “I’ve got to make a choice.” And it’s not fair to anyone else involved for me to just coast. It’s not fair to me, but it’s also not fair to the people around me. It’s not fair to the people who are employees of this firm who are counting on me to be fully engaged for the sake of their careers. So I had to decide. And when I looked at what I wanted to be doing from 40 to 50, I decided I wanted to try something new, and I wanted to do it in software, where I can create something really quickly and interesting.

Michael: Interesting. And how do you break the news?

Roger: Let me think back to that. We had one employee who kind of had a quarter-life crisis, not a midlife crisis. But he exited the firm to go on a mission trip with his family. And he gave like nine months’ notice. Which in a way is very helpful, but in a way is kind of like, “Man, what do you…how much do you invest in this…?”

Michael: Yeah. So it’s like, “I appreciate the advance notice,” but at some point, like four months into the nine months, you’re kind of dead man walking, because you start transitioning duties off that person right away when you know they’re leaving. Then at some point it’s like, “Appreciate you’re still here, but why exactly you’re still here?”

Roger: He did it for all the right reasons and…

Michael: Oh, absolutely. Yeah, it’s a very good thing to do, but just…

Roger: Absolutely.

Michael: …when kind of think about that playing out, that really is sort of a slow-motion exit.

Roger: Yeah. But that really got me thinking like, “Okay, what would it…” Because in the back of my mind, I was thinking, “Okay, I need to think about this midlife crisis that I’m anticipating.” And so I kind of had it in my head for quite a while. Fortunately and unfortunately, when your business partners are your spouse and mother-in-law, when they’re family, they are rooting for you on a personal level, even if it is detrimental to the business potentially, right? If they were arm’s-length partners entirely, it might have been very different. But they knew that I had been thinking about this. And it took me a year to really get to the point where I was ready to do it.

But yeah, they were supportive because they were family. And that helps. When your business partner is family, you can cut past a lot of the…there’s other problems associated with it. But it’s easier to trust the motivations of the other people. And it’s easier to judge the values of the other people involved, which is really, really helpful. Because a lot of times, that’s what causes a partnership to break down. And so the fact that we trusted each other, and they knew that I was coming at it from a place of, “Look, I want you guys to do well, but I need to do this other thing.” It took a long time, but we got there. Yeah.

Michael: And so how did you structure it? You kind of mentioned earlier this like leave of absence. Was it that you didn’t just quit? You sort of said like, “Hey, I’m going to take a year off and figure out this thing. And if it works, I may not be back. And if it doesn’t work, I’ll see you in a year. I’ll have scratched my midlife crisis itch and then I can get back into this advisory thing again?” Was that actually how you were setting it up with them? So I think it’s an interesting way to frame it in an otherwise like a hard conversation. And I’m sure for a lot of people that have similarly thought about this of like, “Well, what if I walk away from my partner opportunity or being a partner at that point and my thing doesn’t work out and then I’m just unemployed, having walked away from a really nice opportunity to be a succession planner in a successful firm?”

Roger: I wish that we had something more structured. That’s certainly advice that I would give people is to really figure that out. Because the way we kind of did it was I certainly transitioned all my clients to other advisors in the firm. But it was, we kind of left it as well, I can still help with other things, and we can kind of transition…we can ease out of the firm. Which I think was kind of like what we talked about, the dead man walking syndrome. I think that was exactly what ended up happening. We didn’t call it a leave of absence. We didn’t call it a sabbatical. We called it…I don’t know what we called it, “Roger is going to go work on another project, but he’s still here helping where he needs to.” That was messy, and it didn’t need to be like that. And I found that once we eventually said, “Okay, Roger is out…” My wife works there. She might bounce an idea off me now and then.

Michael: Sure, sure.

Roger: I still have signed a confidentiality agreement. But I’m officially out now. And I think that’s been better for everyone. So I would definitely…for someone in this situation, figure out the boundaries of what’s in and out of scope, and do it rather than one foot in, one foot out. That’s bad for everybody. Hindsight. We didn’t know when we did it, but I certainly would not just say, “Hey, we’re going to figure it out, but I’m going to go try to work on some other projects.” I think I was hourly. I don’t even remember. I went from a partner in the firm to charging the firm hourly. And like, “Am I going to total up my time?” Then we went to a monthly. And it’s just not clean. It didn’t really work well.

Michael: And so eventually that just culminated in, “All right, I’m just going to make a clean break.” Which was okay because you had gotten some sense of where you really wanted to go with the Holistiplan business. You were ready to dive into that?

Roger: Yeah. Yeah. I needed it too, right? Guys like you can run like 10 businesses at once. Man, I don’t have that kind of…

Michael: Yeah, I don’t recommend it.

Roger: I don’t have that kind of brainpower. So I needed to focus as well. So I needed to kind of drop some other things. I was on a lot of boards in town, which when you’re part of a financial advisory firm, that’s part of your ground game.

Michael: Oh, absolutely. Yeah.

Roger: But when you’re writing code in your basement, being on boards and stuff is not advantageous. And in fact, it just takes away from what you need to do, which is focus on the creativity. And so just I kind of had to reprogram how I even organize my day and organize my life around a very different type of business.

Michael: Interesting. I think there is an effect there as well. It’s kind of the old, was it Cortés burning the ships. For anybody that thinks around taking a leap, one of the biggest challenges I find for most is taking those leaps are scary. So we often try to somehow hold onto something, hold onto the past for safety. It’s like a life preserver, “Hey, if this doesn’t work out, I can always go back to this other thing, because I didn’t actually entirely let go of the old thing. So I’m keeping the door open.” And it seems like a prudent, rational thing to do. But if you don’t go all in on the thing you’re trying to take a leap and create, you usually don’t end out creating it.

Roger: Totally. Yeah. And we have such a side hustle culture right now. I never heard the word “side hustle” until about five years ago. You’re totally right. I think that’s kind of like the accepted wisdom now is “start your dream as a side hustle and get paid to do it in off-hours.” But then you end up not doing any of the things well. Now, again, like I said, I can say that and I can go that route because I had the privilege of being financially secure from the business. I recognize that not everyone can do that. But if you can, it really is true, focus. People say follow your dreams, but it’s like, the reason you’ve got to follow your dreams all-in is, otherwise you can’t focus on it, because you’re doing all the other stuff.

Michael: Yeah, it’s an interesting challenge of just figuring out…and I get it, as you noted, not everybody can just take a cold leap in a new direction. You’ve got to build up to it, at least a little bit, if only to get a little bit of revenue or dollars flowing in the new thing so you can economically make the leap. But if you’re going to ease into it, at least initially, I think at some point, you still have to define the parameters for yourself of, “What am I just going to take the leap?” Because if you, particularly with the startup business, if you wait to take the leap until it’s really, really comfortable and the business has a whole bunch of revenue already, I can virtually guarantee you have now severely compromised the growth of what your business would have been. Because if you got it to that much in revenue by doing it as a part-time side hustle, imagine how quickly it would have grown if you actually went all-in on the darn thing.

Roger: Absolutely. And your competitors, if you’re in a category with competitors, it’s not their side hustle. That’s what they do all day. So every day they get up, and they’re working on that thing that you’re only working on between 8 p.m. and 1 a.m., it’s going to be hard to win there.

Michael: Yeah. At some point, they’ll say like, “Oh, that looks like a totally cool idea. We’re going to take our full-time staff and produce in three weeks what you spent a year on, and then we’re going to do your idea.” Capitalism is a beautiful thing sometimes, but not always when you’re on the receiving end of it. So at some point, you…I do think it’s interesting dynamic that, as you said, side hustle has kind of become such a thing. If you want to pursue your dream, start it as a side hustle and build up to it. And I don’t think that’s bad advice for a lot of very practical economic reasons, but even the people I know that have done that successfully, virtually all of them waited far too long to make their side hustle their main hustle and compromised a huge amount of their actual business growth opportunity in the process. Because you don’t realize how much more you can grow your business when you’re actually all in on it until you’re all in on it.

How Recent Tech Advances Made It Easier For Roger To Bring Holistiplan To Market [1:10:43]

Roger: Yeah, that’s true. Yeah. And I’ve seen that this year, for sure. And the good news is, especially…I’m talking software now, but… So now I’m going to kind of refute what I said earlier. In software, at least, the idea of building software as a side hustle I think is a lot easier than it might have been, say four or five years ago. Because of software as a service, because of things like Amazon Web Services, it’s so much easier to bring a product to market. Had I come up with the Holistiplan idea honestly…honestly, the hard part was just coming up with the idea. But building it, I guess I could have done as a side hustle, because it is so easy now, not easy, it’s so much faster, especially with lean startup-type methods, to bring something to market. So it kind of depends what industry you’re in, I guess. But that’s what’s really blown me away is how quickly some of these tools allow you to scale up a business. If the idea is there and if the product delivers, those tools are unbelievable. Prior to XYPN, I anticipated needing more server space. And so literally in one minute, I was able to quadruple the size of our server.

Michael: Yeah. You just go to AWS and you just grab the little slider and drag it up. And like, “Congratulations, you now have more server power.”

Roger: Imagine that 5, 10 years ago. That just blew my mind.

Michael: Where you actually need your engineers to spin up more servers. Or 20 years backward, you go to the conference and if the software is really popular and people are interested in it, it’d be like, “I will totally mail you discs with our software in like six weeks as soon as we finish the next run and package them and mail them out to you.”

Roger: Yeah. And good luck with updates or anything like that.

Michael: That was software distribution not that long ago. Boxes with disks that you’d mail out, and then you could only do software updates every year or two. Because the raw costs of mailing all the CDs or discs was horribly expensive to maintain the software.

Roger: Yeah. And some articles have come out following the FinTech competition about advisors creating software products. And I think that’s a huge contributor is just, it’s the tools allow us to spin something up so much more quickly than before. It’s going to give advisors, those who are willing to make the leap and have some of the ability to code the product, the ability to bring stuff to market quickly. You’re going to see stuff at FinTech next year… We didn’t exist until February. Kevin and I did not start building anything until February. And then September, we’re demoing a product. And we have nationwide distribution because all you need is a browser. That’s an incredible development that I think is going to fundamentally change the way… The stuff that we’re going to be using five years from now as financial advisors is going to look totally different from today. And we don’t even have a clue what it will look like.

Michael: Well, and I think it’s often underappreciated just how much of the software in our advisor technology space are basically, I call them “The Homegrowns.” And it’s virtually always the same story, the same formula. Advisor has struggle in their business, can’t find any good software for it, says, “Darn it. I’m going to make my own tool.” Makes it, uses it, friends hear about it and say, “I want to use that software in my firm too.” Starts selling the software to friends, and now you have a side software business. And that was Junxure, Redtail, ProTracker, Orion, Tamarac, iRebal, tRx, TradeWarrior, RedBlack, Tolerisk, Hyperchat Social, our AdvicePay platform. And just the number of tools in our space that are homegrowns is kind of stunning when you actually go back to the origin stories for most advisor tech tools.

And I think it just comes from the fact that our businesses are complex, our problems are kind of specialized. And you really need someone in the business who understands the problems intimately, right? As you lived being in a firm for 10 years and feeling the pain day-to-day, week-to-week, month-to-month, year-to-year about what a pain in the butt it is to review a client’s tax return before you say like, “Darn it, there should be software that makes this less painful.” And then you go make that exact thing.

Roger: Right. And we’re small enough that the huge enterprise companies… When I was a consultant in my 20s, I worked for SunGard, which is a huge…and our implementations at these energy companies would be millions and millions of dollars. And so there’s a lot of big money trying to create products for those industries. But for us, we’re just not big enough for them. And so software as a service is really I think going to change what we’re going to see as a result.

One book that Kevin and I both talk about a lot in our business, there’s a book called “Eat People,” which is kind of a provocative title.

Michael: “Eat People.”

Roger: “Eat People.” I can’t remember the name of the author. But it’s one of these like, rich guys comes up with a book on his philosophy of life and some business advice.

Michael: Well, we’ll find it and put a link to it for anybody that wants to know more about “Eat People.”

Roger: Yeah, I’m not endorsing the book, I’m just saying it had some provocative ideas in it that were helpful for us. But one of them was, if you have any desire to build a B2B software company, just look at what people have already built in-house. Because if a financial advisor or anyone has gone to the trouble of building… We all have that Excel spreadsheet. I know that everyone listening has that Excel spreadsheet that has 18 tabs on it. We all have it. And why? Because there was a hole in the existing functionality of whatever we’ve licensed. And so we had to build that spreadsheet. And for a lot of us, that was tax. But if you can build that thing that businesses have spent their own money to build in-house when that is not what they do for a living, that is going to be a product that’ll take off. And I’m sure there’s tons of little pockets like that still out there in financial planning firms that are ripe for someone to come in and make a really valuable product for them.

Michael: Yeah. That was ultimately our story for AdvicePay as well. We took all these pain points that firms had around trying to get paid for financial planning fees and getting paid by check and handling the check and processing the check and clearing the check and reconciling the check. And then if you’re a multi-advisor firm, figuring out who gets which check. And if you’re a broker-dealer, you’ve got to verify that the plan was delivered before you cash the check. And just all these things that firms basically did with spreadsheets and really bad databases. And we just made a piece of software that solved the problem.

And obviously, you have to build it and execute it well if you want anybody to buy the software. But if you execute it well and you solve the problem, sometimes it’s pretty amazing how quickly growth can come. Because, particularly when you’re working with businesses of any size, kind of in that enterprise world, we are in an environment…while I think the whole dynamic of robots replacing advisors is very grossly overstated, robots replacing all of your back office staff is probably pretty true. And from a business perspective, the moment I can take software and replace what a human staff member does at a fraction of the time in what at the end of the day is an extremely repeatable process, which are the things that are conducive to software automation, you get there pretty quickly.

I think it’s why today, as much as we talk about like, is everybody going to have to merge with a big firm in order to survive and the challenges of economies of scale, if you just pull out any actual industry benchmarking study and you look at the success of high-income solo advisors today, solos are exponentially more profitable and successful than they were 20 years ago. Like, the technology isn’t killing solo firms. Now you can run as a solo with a bunch of software what 20 years ago would have taken you 3 part-time assistants to do all this stuff that you don’t have to do in your firm anymore, because you just click a couple of buttons as the business owner and poof, you’re done. I’ve been fascinated by the opportunities of technology to solve a lot of back and middle-office problems for firms, even though I don’t think it’s much threat to the front office side of facing clients.

Roger: Yeah. When I think back, I said in my 20s I did a lot of consulting work. It was a lot of software implementations, and there was these big SAP and the huge enterprise software products. And I think that Apple, the idea of just thinking about apps, the idea that software could be small, that has helped us as well. Because that allows you to…instead of buying one huge SAP that does everything, and in turn does nothing at the same time, for $10 million, you can cobble together this best-of-breed approach and experiment with, I’m going to call it the appification of enterprise software, it really allows, especially solos, to kind of… There were people I was meeting at that XYPN conference who were doing amazing things with automation in their firms. And it’s stuff that the big boys would never be able to go back and do. They’re built in a way where they couldn’t undo the things that they have. And those XYPN advisors built it based on these little Lego blocks of smaller products that kind of talk to each other. And it’s really exciting. I was really amazed. Yeah.

Michael: The annoying part is like, you get a box of Legos and you have to put them together to make a thing. We try to give them Lego guides as it were. But the cool thing is like, at the end of the day, you can make whatever you want. That’s, again, part of why I’m so upbeat about the potential of smaller and solo firms, just the technology gets more flexible and more capable every year to just build exactly whatever efficient tools and things you need for your firm to be super focused and efficient at whatever it does.

Roger: Yeah. Yeah, that was evident from the people who were there at the conference, for sure. And again, these are all kind of smaller products that are more specialized in what they do. The challenge is yes, getting them all to talk together. But the tools for doing that are a lot better than they were before, because I think that… When I think back to my 20s, everything had to be so proprietary. I remember we were trying to…I was working at the Italian National Oil Company, and there’s multiple divisions and none of them wanted to talk to each other. And the software packages, I remember sitting in meetings, no one wanted to expose the API of their software to another software company, because they felt like that was a trade secret. We were all trying to hide it and keep it close to the vest because we want to get the whole organization.

But now, APIs are out there on the web. You can just sign up for…it’s so much easier now. That just the mindset of how software should interact with each other has changed. That makes it also easier to…this appification idea. That’s been really fun as a developer. Plugging into things like Stripe for our payments, plugging into MailChimp for automated emails. The tools are really, really intuitive and easy to use. It’s really fun. We’re just scratching the surface of what we can do with this stuff.

Roger’s Views On Starting A FinTech Business, What Surprised Him, and What He’s Learned [1:22:49]

Michael: Yeah. So for someone that’s now taken this leap and gone down the road of trying to start an advisor software business, what do other advisors not understand about what it takes to actually start an advisor software business? For those people who are listening, like, “I’ve got a tech thing that would help other firms. I want to do this too.”

Roger: Yeah. I think my situation might be a little unique in that I invested that time all those years ago, and actually being able to be my own developer, instead of having to contract it out. I’m trying to think how much more difficult it would have been for everything to be a conversation with some external developer. So I think there’s probably some people listening who they may be scared to try it on their own. I’ll just say to them there are tools to rapidly prototype your own product. Now, you can then turn it over to somebody who knows what they’re doing, that’s kind of the stage we’re in, to try to make things prettier and stuff like that. But the core functionality, I was able to build very rapidly with some of these tools like the Django framework, things like that. But if you believe in…there’s this whole lean startup methodology where you iterate your product. You put out your minimum viable product and kind of iterate it as you go. I have some moral problems with that, because I don’t like the idea of putting out a subpar product.

Michael: Well, that’s why you’re supposed to get like the minimum viable product.

Roger: Viable product, yeah.

Michael: It does actually have to be viable, ideally. And it’s probably a good point because there are folks out there I think that have adopted that lean startup mentality. And they don’t just try to create their minimum viable product, they create a thing that’s so minimal, it’s not a product.

Roger: Right, right. Yeah, just create a landing page. And if you get 100 people to sign up for your newsletter, then you even start building the product, stuff like that. But what I will say about lean methods is you can start with your friends and family. The way you described it was really smart, which is I’m going to scratch my own itch. This is going to be something I can use on my own. I can test it within my own walled garden of my clients. And then I can reach out to my network of friends and just have them try it. Our first 10 or so clients, subscribers let me say, were all beta testers. And they were free. And they’re still free. They’re not paying me right now, because that was valuable to me for them to use the product. And a lot of the great ideas were not our own. The idea of a client-facing report, we didn’t come up with that. Someone was like, “Hey, I need something to show my client.” Like, “Oh, okay, good idea.”

Michael: “All right, I’ll go make that. All right. Yeah.”

Roger: The projection tool, we had no plan to make that. And so I think you don’t need to be a lone genius in your basement coding up the whole thing and then it comes into the world fully formed. You can iterate the product. You have to earn the trust of your users, but you can iterate the product with them and build something that they need. And again, the tools allow you to do that. You couldn’t do that with shrink-wrapped software. You couldn’t iterate a product because you’ve got to mail out a disc every other week. But now you can do that. And so that’s my main advice is start with a prototype, and then a minimum viable product and get people to look at it. Because the wisdom of crowds is going to be smarter than whatever you come up with on your own for sure.

Michael: What’s surprised you the most about trying to go this route?

Roger: I’ll tell you what surprised me. Coming from a financial advisory world where admittedly, your clients are… If you have a group of clients who understand what you’re about and you’ve kind of worked with them over the years, that’s a really great relationship you have with them, and one that is very meaningful. And I think that’s why a lot of planners stay in the profession. And I did not expect in software to have any sort of relationship with the people who are subscribing to it, right? I just saw it as, oh, now I’m in this faceless, mindless numbers game where I’m just going to get credit cards and charge the credit card and you get bug reports. But I was really amazed at XYPN actually people coming up to me and saying, “Hey, we use the software.” And people were actively rooting for us to do well in that competition, for example.

And so that’s been really fun is to, even for something as cold and not human as software, I think you just involve financial planners in anything. It’s just an amazing community. And so that’s been really fun is just how supportive everyone’s been. People giving us great ideas. People telling us how…they were proud of us for winning the competition. That was really a surprise, and a welcome surprise. It’s been really fun. And so we just have to figure out a way as we grow, if we hit 500, 1,000, 10,000 users, how do we continue to make it feel like we belong to something that’s important and is meaningful and is moving the profession forward? I’m sure it’s similar thing with you and XYPN. It was really cool to see that you’ve created a community of people who collectively see themselves as building something that’s bigger than themselves, even when it’s a for-profit venture. But you can have that. And I should have known that from when I was a financial planner with my clients, but I did not expect it with software. And I was pleasantly surprised by it.

Michael: So anything you wish you’d done differently as you look back through the process so far?

Roger: Not so far, but we’re only a few months in. We’re still figuring it out. I will say one thing that we should… Well, I’ll give you one thing. So Kevin and I, we are business partners. He’s based in Virginia, Northern Virginia. And I think we do a good job of communicating and working together. We spent one week together in Virginia in early August just to kind of get ready for XYPN and just clear some stuff out of our backlog. And it was like the most productive week in my life. It was amazing.

And so I think working with a remote business partner, the face-time is valuable in ways that it’s really hard to describe. We’ve got all the best tools, we’ve got Slack, we’ve got email and phone, but just sitting in the room with your business partner. So in hindsight, we probably should have gone to once a month as we were just launching. I think we can go to once a quarter now because we’ve kind of gotten in our groove and we know which lanes we’re in. So we probably should have done that earlier. We probably would have been further along.

Michael: Interesting.

Roger: I’m sure I’ve made like a million other mistakes, Michael, but they haven’t manifested themselves yet.

Michael: Yeah, it takes a while for these things to manifest. Yeah. Well, and I think, again, it’s a version of the, your business only goes so far when it’s a side hustle, right? When you’re working on it at 8:00 at night and then Kevin already went to sleep and doesn’t get back to you until the next day, and then you work on the thing the next, next day, stuff kind of drags out. You can only work on things and get so much done quickly. And then suddenly you put everybody in the room together and they’re just all in focused on that thing, and zoom, amazing how much more stuff gets done once you’re actually able to focus on it or focus on together as business partners.

Roger: Right. Especially on stuff like tax, the brainpower required for some of the… I’m working on QBI right now, and there’s a short form and a long form of the calculation. And doing that by yourself after the kids are in bed, that’s rough. That is rough stuff, man. And so I’ve kind of put a cry out to help for Kevin to kind of help me walk through it. And yeah, financial planning, any creative discipline, and financial planning is a creative discipline, and software design is as well, the more brains that you get in a room up to a certain point is always better. You’re always going to come up with better answers if you get a few more brains, ideas in there bouncing off each other, up to a point, and then you need to go off and do the work. But in any profession where creativity is part of it, and software and planning are both those, it’s helpful. Just be in the room with the people. You’ve got to do it.

Michael: So any advice you would give to advisors who are not techies and not going to spend the next couple of years building their own software, web apps to self-learn the programming that you did? For the advisor who sees the gap. There’s a thing. I know it needs to be created. I want to make it for my firm and then I can sell it to others. I’ve got my homegrown software idea, but I’m just not a software techie person. What would you tell folks that are in that camp? They want to make the software but they don’t have the tech background that you built for yourself.

Roger: So I think the goal is a prototype. And prototype one is probably on a piece of paper, or maybe it’s in your head, but prototype two is probably Excel. And that might be within the capabilities of this person that we’re talking about. But then yes, once we’re starting to create a web app that’s built in code, there are some really good… For the OCR thing that we’re building, that’s a very specialized type of programming. You need very specialized knowledge to do that. I was looking at universities, I was looking all over the country, but there’s a site called upwork.com. And you can put stuff out there, and you just have to wait. You’ve got to be patient, because the first five or six people are going to be trash.

Michael: If they’re that available and respond that quickly, it probably means they’re not actually very highly employed?

Roger: Exactly. But we got this guy, and I’ve used it for a couple other little projects, but we got this guy who he’s been working on projects reading labels off of food products. And when you think about the challenge of that!

Michael: Oh, God, the bottles are curved.

Roger: Yeah. Can you imagine? And so, that has been really, really amazing to tap into that. And so I would practice actually. I think any advisor, you need to do a new logo or something like that, I get that some people will hire a $10,000 branding company. But there’s also fiverr.com. Hire three or four Fiverr things and say, “Make a logo for me.” And one out of the four is going to be great, and three of the four might be trash, but you know what? You’re out 50 bucks.

Michael: Yeah, the origin of Fiverr was literally all the jobs cost five bucks. They’re a little more pricey now. But as you said, even if they’re 10X the price, if you spend 50 bucks on 2 or 3 people to get one logo thing that’s decent, that’s actually still a really, really, really cost-effective solution, even if some of them don’t work.

Roger: Yeah. And this is all kind of lean startup-type ideas. And by the way, that’s probably one of the first things that goes on the list. I don’t love the book “Lean Startup.” I don’t think it’s a great read. There’s another book called “The Four Steps to the Epiphany” that I think predated “The Lean Startup.” It talks about similar ideas of getting some prototype, minimum viable product out, but get it in front of people as quickly as you can, because they’re going to help you build it.

And so yeah, if you just want to start out, get a contract programmer and build the most basic version of that vision that you have in your head, and get it in front of people. And they’re going to tell you what they want. And your job as the expert is to say, “Okay, that’s crazy. I don’t need the flight simulator built into Holistiplan. But this idea of a client-facing report, that’s a good idea.” That’s your job is to be the curator, I guess, of what the functionality is going to be. And then you can outsource. It’s doable today. It’s very doable.

Michael: And for folks who are listening, this is episode 145. So if you go to kitces.com/145, we’ll have links out to some of these books as well, “Eat People” and “Lean Startup” and “Four Steps to the Epiphany.” So you don’t have to worry about writing the names of the books down as you’re jogging or driving or cooking, or whatever it is that you’re doing as you listen to this podcast.

Roger: Eating people potentially.

Michael: Eating people potentially.

Roger: They could be doing that. I don’t judge.

What’s Next For Roger And Holistiplan [1:35:50]

Michael: No judging here. So Roger, what comes next from here?

Roger: You asked about, “How far do you go on the projection tool?” I think we’re probably at 80/20 right now. I’d like to take it to like 90/10 in terms of the types of scenarios we can handle. So that, we’ll be working on. Later in the year, we’ve got a whole another set of tax returns. I don’t know if you’ve looked at some of the 2019 formats for the 1040, but they’ve changed it again.

Michael: Oh, yeah, I guess that really sucks for your business. Like, one line item that they change and you may have to reprogram a bunch of software to explain what that new number is on that line item and what to do with it.

Roger: Yeah. And I’ve got news for you, it’s more than just a line item. They’ve done some pretty big overhaul. It’s not as huge an overhaul as last year, as 2018 was, but they’re changing quite a bit. I believe, for example, now they’ve given up on the fake postcard thing. So I think we’re back to a page one and a page two the way we used to have.

Michael: All right, that piece is coming past, all right.

Roger: So that’s going to close out the year. But I’ll tell you, I don’t think our original vision for the product went way beyond tax. In fact, our first iteration, we were looking at insurance. But all the concepts that we were talking about, which is a decision engine, gather as much information you can about the client, analyze that information and come up with an intuitive way to present it to the client and observations that are useful to the client, that doesn’t have to stop with tax. Now, we started with tax because there’s so much information in a tax return, and reading it in with software was comparatively easy, but we could do the same things with other parts of what we do as advisors. And so as I look forward to 2020, I’d like to start kind of thinking about how we address some of those other areas of financial planning.

Michael: And so that’s why at the end of the day, it’s not called Holistitax, it’s called Holistiplan. That’s kind of the hints, “We’re not finishing with tax returns, that’s just where we started?”

Roger: Yeah, I think so. Because as we start to bring in other stuff, the recommendation, sorry, the observations can get even richer, right? Like right now on a tax return, I can see that you have Schedule C income, and I can say, “Hey, you might consider doing a SEP IRA contribution” or something like that. Or, “You may consider starting a solo 401(k).” But if I can also pull information in from the portfolio management system and I can see that you actually have a solo 401(k), now I can do something even more interesting, which is… And that’s what human financial advisors do, is we bring all these disparate pieces of information together. We don’t even know we’re doing it, but in our minds is this little algorithm pulling all that stuff in. And so how do we collect all the data efficiently and then use it all in ways that are more and more tailored to the clients? That’s what gets me really, really interested. And I’d love to go beyond tax and do that for a lot more stuff.

Michael: So now to me, now you’re starting to talk about stuff that gets a little closer to replacing some of what advisors do, or at least maybe not the lead advisor, but like, you’ve kind of potentially put some paraplanners out of work now as you gather information, actually formulate observations around not just a tax return, but in theory, a wide full range of financial planning subject matter areas or topical areas, right? You can scan insurance policies, you can scan estate planning documents and start dissecting wills and trusts. So do you view this as ultimately, “We’re trying to replace parts of what advisors do? We’re trying to replace part of what paraplanners do?” Do you not actually see it as competition to advisors in the long run? If all this goes well and it compounds for 5 or 10 years of cool artificial intelligence enhancements, where do you see Holistiplan down the line relative to advisors?

Roger: Well, I think we’re…advisors are already doing these things in places other than tax. My firm had a…to use estate as an example. We had a template estate diagram that we would use to kind of say, “Okay, this piece on the first death is going into this trust.” And we had certain deliverables that were relatively standardized. And we had a checklist for looking through wills. And so all I’m doing is saying, again, find that spreadsheet with 18 tabs on it. And if we can replace that with something that’s more intuitive and faster and never makes mistakes, it doesn’t crash, that’s better for everybody. So I don’t know about replacing human beings, but I think giving them a toolset that they’re already using, but kind of pulling it all together in a way that’s more efficient.

The idea is can we do more with less? I don’t think any advisor is worse off if the software comes up with observations that they would have missed because, I don’t know, they’re tired that day, didn’t get their coffee, or they weren’t looking at those three pieces. You go to a conference and you hear people tell these case studies that are just absolutely fascinating of things they found. We never tell the case study of the thing we missed because we just didn’t see it, because we didn’t see it. But that is happening. We’re all doing that. And so if we’re going to truly be fiduciaries to our clients, we owe it to them to be as complete and thorough as possible, to take in as much information about them as we can.

And our approach with the software, by the way, is we’re just going to give you everything. And some of it is not going to apply to that client. One example I saw recently was, we were talking about doubling up charity into alternating years. Well, I know I have clients who they give to their church every month. That’s part of what they do. And so, the idea of doing lump sums every other year to the church just doesn’t fit the way they…that’s not the relationship with their church. And so it would make zero sense to make that recommendation to that client. And only a human is going to know… well, maybe not. Maybe the software one day could have a box that says, “Are they the type of person who wants to give every month?” And then the software would know. But there’s limits to how far we can take it.

Michael: Yeah. Or it takes the human to say like, “Look, if you’re willing to lump up with your church every other year, that’s great. If you don’t, okay, well, we’re going to replicate that because we’ll put it in a donor-advised fund. And your donor-advised fund can do your monthly distributions. But we don’t need two donor-advised fund if you’re just willing to go every other year.” So I guess that’s where the client conversation then comes back in like, “Okay, we get the principle of this, which is you might generate some tax leverage by doubling up your contributions, but what’s your actual path to do this efficiently?” Well, now we still need the conversation with the advisor to figure out which one fits client circumstances.

Roger: Yeah. I think you’re always going to need a human running the levers, but maybe so. Maybe the nature of how we do business as advisors will change with technology. And I don’t think…if we don’t build it as Holistiplan, someone else will build it. And I’d rather we build it than Amazon build it and just put us all out of business. So I’m at least coming in trying…I’m on the team, at least. So I hope we can deliver that sort of experience. I think it’s doable. But yeah, that’s longer-term. Obviously, we’ve got to get tax totally figured out, and there’s always going to be new stuff we can dig into in new forms. But when I think longer-term, I really love the idea of, what are normative practices across the profession? And some of them are going to be more conducive to automation than others. Reading wills is going to be very challenging for software. It’s not impossible. I’ve already done some research on that. There are some companies that are doing that with say, non-disclosure agreements. There are some standard things that looks for it.

Michael: But it gets messy quickly. Yeah, a lot of lawyers, a lot of different drafting styles. Yep. Yeah.

Roger: Yeah, yeah.

What Success Means To Roger [1:44:28]

Michael: So as we wrap up, this is a podcast about success, and one of the themes that always comes up is just the word “success” means different things to different people. And so as someone who you came into the business, became an advisor, got equity, was on a succession track, what a lot of people work towards as the endpoint of success, and then decided to go in a different direction to find your success, how do you define success for yourself at this point?

Roger: I had a really good midlife crisis I think. When I look back to me as a kid, I always loved building things. I would play with electronics. I would build robots and stuff like that. And everyone was like, “You’re going to be an engineer one day.” And so I went off to college and studied engineering. And all I did was math problems. I was like, “Forget this.” And so then I spent 20 years doing other jobs that were fun and rewarding. Don’t get me wrong. But what I realized was when I was building all that stuff as a kid, I wanted to create, I loved creating things. I loved building, putting things together. And so now I’m in a stage where that’s what I get to do for my job is I get to finally… There’s nothing wrong with the other jobs I had. Don’t get me wrong. But now it’s the thing that fits me really well, and I think always has fit me better than anything else that I did. So to me, that’s success. It’s great to win the FinTech competition, obviously, and to get my 15 minutes of fame, but I’m just really enjoying doing the thing that honestly if I look all the way back to the beginning is what I love doing and was meant to do.

Michael: Well, very cool. It’s a cool feeling when you finally get the alignment that feels like I’m actually doing the thing I was meant to do on this earth.

Roger: Totally, totally. Yep. Talk to me in 6 months, though, we’ll see how it goes after the 10th enterprise contract discussion.

Michael: Yes. And the joys of enterprise advisor software sales is a whole other conversation for another day. But I’m excited to see what the software brings and what you guys can build. Again, I was fascinated with it from the moment I saw it. I see the need. I can already see what you built. This absolutely has relevant application in firms and what we really do. So super excited to see where it goes for you from here. And appreciate, Roger, you joining us on the “Financial Advisor Success” podcast to talk about it.

Roger: Well, thank you. Yeah, it’s been a pleasure talking through all this stuff with you, for sure.

Michael: Absolutely. Thank you.

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