#344 Josh Dalton – Transcript

Ben Nash
Hey guys, Ben Nash from the XY advisor team and today I’m pumped to be here with Josh Dalton. Josh is a principal and financial planner at Dalton financial partners. They’re based up in Brees Vegas and have been going since about 2012. Josh, thanks for joining us.

Josh Dalton
My pleasure, Ben, thanks for having me on the show.

Ben Nash
Mates, I know you got some pretty interesting stuff. So I’m keen to dive into that. But I thought maybe a good place to start is to talk us through the sort of high level version of your advice journey.

Josh Dalton
High level version, hey, well, I say we’ve been in business now for 10 and a half years, we had a big, big Gatsby style party last year to celebrate the 10 year anniversary. Nice. Hard to believe it’s been that long, but year 20, I think it was 2000. So seven to 2012. I was in the Commonwealth Bank, started Dalton financial partners, the beginning of 2012, just after I got married, wife back to me on that God bless her. And, you know, we just we had a handful of existing, we’ll just say, relationships that we could take were this, a couple of counting relationships, and it was probably enough to get us started. And take that chance on is a lot harder. I think back then to get new clients, I’d have inquiries, and I remember that first couple of years, just scrimping. I mean, I’ve got some pretty interesting sort of legacy clients, on the books from those days, because you know, pretty much my only criteria for onboarding you is that you had a pulse. But I’m sure a lot of guys have been through that part of it. And you know, it says that a lot of scrimping working from home, then I went to a serviced office and then a shared office and gradually got my first employee. And I guess we kind of just went along for a few years and maybe five years into it, probably a fairly big turning point was attending one of Jim Stackpole, certainly advice workshops. There’s a plug for Jim, I’m sure they appreciate that. But yeah, that just kind of got me into the whole project management style of financial planning, where we were looking at their whole situation, we were focused a bit more on lifestyle aspirations, it also moved us away from asset based fees to initially a hybrid model, and then a full fixed fee model. And we pretty much doubled our revenue the following year. So it was a real linchpin sort of moment for us. So the way that worked is we just started charging clients properly, we gave them more value. And we also lost a lot of clients that weren’t suitable or profitable in the business, which was kind of weird leap of faith. And it’s just just been kind of onwards and upwards. From there. I guess the industry is moved a lot towards higher net worth. But that was probably somewhere we were always heading, we always wanted to be kind of like a family office type business. And that leads us to where we are today doing full blown comprehensive advice, mainly for high income households, established business owners, self funded retirees, and people receiving large inheritances and compensation payments.

Ben Nash
Nice and how you mentioned the transition from asset based fees to full fixed fee for service and some of the results there that happen. I know, for me, I did that. Probably about two years into my business. And I, I found it quite challenging, because it’s one of those things that when you tell us I think we were charging, maybe point eight or maybe it was 1% I can’t really remember exactly what the number was, but something around that, but there’s a funny thing in people’s minds where they think 1% Sounds like not much, but $3,000 Sounds like a lot. Even if the the 1% Is $5,000 $3,000 still seems like more than that. 1% And you mentioned that you the last a few clients. Yeah. So talk us through that transition, how you tackled it, and how it came together?

Josh Dalton
Well, you make some really interesting points there because sometimes it feels like it’s in the best interest of the clients just to sign them up. And and get things done for him because, you know, maybe you can’t communicate the value but the value is there. And sometimes I think it’d be better to present a percentage based fee because it’s easier to onboard them and that’s the right thing for them. So, I know some firms who’ve got I want to actually back to asset based fees. And I don’t have an issue with them. I actually think if they’re structured correctly, there’s there’s nothing wrong with them. I don’t think that it should be solely percentage based fees, because there has to be some sort of hybrid fixed fee component there. Otherwise, how are you pricing in complexity? How are you pricing in the type of client and the time demands that client has if you’re just basing your fees purely on asset based fees? So coming out of that, it was always a bit tricky, because it would it would test the clients, I guess, in terms of how much they valued your service. And pretty much if I looked back at the list of clients who fell off, they’re exactly who I thought would fall off, people that were always a little bit fee sensitive, and they would switch advisors if we did anything like that. So yeah, looking back, I think it was the right move. But it is a bit of a leap of faith. I also want to say that, I also want to say that you got to get your pricing right up front, because I find it’s so hard sometimes to have that conversation where you’ve mispriced a client so badly. Even if you’ve offered them excellent value, it’s very, very hard to uplift their fees versus a client where you’ve done it from the start, obviously, yeah, it’s also a totally different relationship. Because when I look at some of the clients I’ve got from the early days, where I had to kind of sell them, and it was a percentage based fee, I feel still, they kind of treat us like a bit of a gopher, you know, go go get this, go get that do this. For me. It’s a totally different relationship. That’s very hard to change the dynamic of that relationship once it’s established, whereas, you know, totally different relationship with clients who have come on with the strategic advice proposal with a fee, that hurts a little bit. Those clients tend to respect you a great deal more, it’s a totally different relationship.

Ben Nash
Yeah, totally. I’ve gone through a number of different sort of iterations on our pricing. And as you say, every time you had that conversation with clients, you Yeah, it’s it’s a challenging one. And that’s something that’s always been a thought a thing that makes me think that buying a book of clients, that sounds like a total nightmare to me, because I feel like I just have to have that conversation 100 times with someone that’s bought into one model, and then you changing the model on them. And we actually just did this recently, and while probably about just over 12 months ago, and realize that for our more complex, sort of higher end clients that we were pretty significantly under charging for the level of complexity and the level of support that we were delivering. And we ended up close to doubling our fees, which were already about 1000 bucks a month. And yeah, for those conversations with clients, it’s it is a real challenge, because they’re, they’re used to paying at some level, whereas for our new clients that come through now, when they fit into that bucket, we just say, well, this is your bucket, and then they understand they they buy into it or they don’t. But when they choose, then that’s just the choice that they’ve made. And you just sort of follow the bouncing ball from there. Yes, Josh, what have been some of the biggest shifts for for you guys, you’ve been in business for 10 years, you mentioned one thing there around the pricing, but what have been the other shifts for you guys.

Josh Dalton
In regards to other shifts, I’d say that over the last five years, we’ve really moved away from a focus on on assets under management to more of a firm that’s focused on strategic advice. When I talked to some other planners in the industry, they still can’t get their heads around that we might be charging, you know, a client 25 to $30,000 a year for advice, but they might only have $50,000 in total assets under management. Because the the advice might be more around structured, sort of planning around estate planning and business planning advice, and getting themselves organized and getting cash flow heading into the right buckets. So they might just have a really big income, but no assets to really play with yet. So there definitely has been a big move away from traditional financial planning. And that’s provided a bit of a challenge because when you know, you go out there looking for other advisors, they’re used to that more traditional sort of model. And to go back to your point around the buying books thing. I totally concur with that as in just wouldn’t make any sense to me at all. Because how do I even know if I like these people? Why would I pay for somebody? And then I find that I paid for somebody that I hate working with? And you know, on our sort of model, you know, this is this is a bit of Jim Stackpool sort of stuff is that, you know, our successful conversion rate for us is probably two out of three clients. coming on board. And he always said to me that if you’re signing up everybody, you’re probably too cheap. You know, if you’re, if you’re signing up a very low percentage, you’re probably either too expensive or you’re not delivering the value clearly. But, you know, traditional models focused around winning clients and I still have, have had experiences where I’ve lost a new client, because somebody’s come along and discounted to win that business. And obviously, they weren’t the right sort of client for me in the first place. But I just think that’s crazy. And it’s going to come back and bite you in the ass at some point.

Ben Nash
You know, I think if you’re competing for price sensitive clients, you’re always setting yourself up for for challenging conversations. And I was fortunate to have a good mentor early on in my my business career, and I had a client that we did heaps of work for, though there was so much work, there was a wind up of an SMSF. And there was personal debt, and there like all this stuff going on, and we bent over backwards to work with this client. And then they they ended up exiting and I, I’d priced the services because I wanted to, I wanted to do something that was going to be reasonable and affordable for them in the position that they were in knowing that I could knowingly myself that I could deliver a ton of value. And then I could see the potential for them for us to build a good long term relationship. But when they left, I realized that I’d done all of this work and hadn’t been appropriately compensated for it. And the piece of advice that I got from omental, is to say, don’t, you got to make sure that you’re always charging commercially, so that if someone does walk away for any reason at all, that you’re not, you know, pissed off with yourself or pissed off with them or, you know, bothered that you haven’t done the right thing. And ever since that point, I’ve I’ve always priced accordingly. We, we don’t do discounts. And I’ve had we work with a lot of people that work in tech sales, and, you know, they’re they’re generally pretty shrewd, shrewd sort of negotiators, and you get the odd one that would press us pretty hard. But we, yeah, we don’t discount for for anybody, everybody pays the same price. And that way, we know that no matter what happens, at least we’re charging appropriately, which is something that, you know, you get a lot of peace of mind in particularly as business grows, and you’re working with more and more people.

Josh Dalton
Yes, yeah.

Ben Nash
Josh, what have been some of the things that haven’t changed for you guys?

Josh Dalton
I guess, you know, when I started this business, I can’t quite remember what it was called, I think was called the grant study. And this was about this, this old Harvard study about, I believe, in a tracking these sort of Harvard graduates over their careers and what happened and, and, and if you’re familiar with the grant study, yeah, a long time ago, but I remember it was part of my philosophy, and probably something that stuck. And then when they look back, they talked about in their careers and lives, what was important, and it was always a relationships. So I think, although I’ve been guilty of shiny object syndrome in the past, and, and thinking about scaling up and all that it’s always been important philosophy to me to be important to a small group of people, adding a lot of value to a small group of people rather than adding a little value to a lot of people. That’s why we’ve kind of stuck with this whole boutique approach of, hey, everybody here knows your name. Everybody has a sort of custom strategy here. We’re picking the sort of clients that our our service offering matches. And that probably hasn’t changed from the start. Obviously, we had to just take what clients we could when we began, but it feels really good now to be able to, I mean, 70% of the inquiries that we get at the moment, we turn away. We are looking to partner up with probably a younger firm or maybe a sole trader who’s looking for potential referral source where they want to deal with young families and young accumulators we had we had a deal recently that fell through that was with another young financial planner who didn’t end up being the right fit for us, but hopefully we can find the right person. So just trying to stay true to that model of high level of service boutique, smaller group of clients. That hasn’t changed since the start.

Ben Nash
I like it. And obviously that’s where the industry is heading. I think as technology picks up more of the heavy lifting of the the other elements of what we do. Talking of relationships, though, you mentioned to me offline that was one of the elements of your your comprehensive advice offering that you do or that you have done is mediating like separations and relationship breakdown. Talk to me about how that all came about.

Josh Dalton
That’s so tough area, because when you look at fasciae, they actually use it as an example of one area, that’s a clear conflict of interests. If, if, if a client who was a couple is separating that you can only really represent, you know, one of those couples, but I have had a situation before where I’ve still got both clients under advice, because they were, it was fairly amicable. And it was more about, hey, we agree, it’s 5050. It’s more just working through who gets what assets. And he was the business savvy part. So he wanted the, obviously the business and assets that would support that business, and she wasn’t into finances at all. So she just wanted the most passive forms of assets. And both clients agreed that at the end of the day, but I mean, before that will happen, they were prepared to lawyer up, who knows where that would have gone. But I do believe we probably saved somewhere between 50 to $100,000, in legal fees, when you look at both sides of that transaction. And currently, I’m doing another one. And and it’s a client when I took them on, because we do a lot of 12 month engagements where we’ll just do comprehensive advice, get somebody set up, and then send them on their way. Some clients prefer that. And these guys came to see a source couple of years ago, and we did the whole shebang for them got their finances all sorted out, set them on their way said see again in in five to 10 years. However, you know, she come back to me one of the clients and said, Well, you know, separating, we’ve been living apart for a while. And we’re just going through the process with lawyers at the moment, I need your help around as a relatively large estate, a lot of investment properties and and she said I need your help to kind of figure out what I should be taking out of this, which assets I should be targeting, what can I afford to keep? And we ended up engaging services. And part of that was ended up being mediation because I had a decent relationship with the partner. But in the end, when I contacted him, I reached out to him. He said, You know, I definitely want to limit legal fees. Josh, I don’t want to I’m not greedy, I only want a certain amount. From the separation, can we can we catch up and keep this informal. So I basically come to the coffee shop as her I’ve made it really clear to him that I’m representing her. But she’s obviously not in an emotional state to meet one on one with Him. They haven’t talked for a long time. But rather than getting really messy and going back and forth between lawyers, because they’re already kind of booking in this sort of structured mediation. We’re just trying to keep it fairly informal to start with, and see if we can get fairly close on the splits that they both want. And that minimizes a lot of this back and forth. Because now you could spend $1,000, on just writing to a lawyer and a lawyer writing back, just a really simple conversation that can overcome that.

Ben Nash
And how do you charge for something like that?

Josh Dalton
Well, we have a fairly detailed pricing model now. So we work on different blocks of advice. So you know, we’ve got standard sort of charging for things like superannuation, investments, insurance and estate planning. With things like these more unique situations, we just kind of give our best estimate of what times involved but we normally quite a range. So I’ll normally quite to the client. So this is your fee based on this much time. And the client will normally try to work towards keeping it to that much time. So they will do their part. And if it blows out, we just reserve the right to to increase our range.

Ben Nash
Interesting, and how long? How much time and what would it cost to do something like that generally.

Josh Dalton
Look, once you’ve been through it a few times, it’s not too bad. But I mean, in terms of the component for, I guess, reviewing her entire financial position and a little bit of mediation between the parties. I think her total fee for the 12 month engagement was about 19,000. The mediation was kind of a bit of an unknown because it was unknown at the time whether he would actually come to the table with me. So the fact that he has will probably expediate things a little bit.

Ben Nash
It sounds like sounds like a really interesting piece of work to work on for sure.

Josh Dalton
Well, he just beats talking about Super insurance every day.

Ben Nash
What do you mean, Josh? What are you guys focused on as a business at the moment?

Josh Dalton
Moment, it’s, it’s been interesting, because we have three advisors in the team. And we’ve been trying to push to that fourth, we we did hire our fourth advisor in 2021. But unfortunately, it didn’t work out he wasn’t the right fit for us in the end. So we’ve kind of changed our model this year to more support the advisors in the group already by handing off a lot more work. To the associates getting a bit more focus on supporting advisors and freeing their time up. I think, yeah, our focus at the moment is probably the next step in terms of growth, and just becoming a lot more efficient. As a business. There’s a lot of processes that have caught up with us, so to speak, where they’re sort of legacy processes that we haven’t dealt with. And then all of a sudden, their Invoicing is just taking forever or claiming non concessional contributions for clients at the end of the year is a nightmare, because we didn’t have an orderly process, because before it was just a handful of people. All of a sudden, all of a sudden, it’s 50 to 100 people and it’s like what so a lot of it at the moment is probably ironing out a lot of efficiencies, I’ve got a really good team at the moment, really happy with the team, and the the culture here is really good. And once we get those efficiencies sorted out, we’ll probably look at the next step in growth for us, which is probably to find that that fourth planner,

Ben Nash
it’s amazing how quickly your processes get out of date in just just general costs of doing things that we’ve actually just recently implemented a monthly look through it at our processor to just tackle them each in turn. And it’s amazing how many things come up that in a relatively short amount of time, you say, well, that steps changed, or that thing doesn’t need to be there or this other bits missing now. It’s, yeah, it’s it’s, it’s tricky to keep up, we’re fortunate in that we only really have four main processes that drive almost all of our activities. But even then, it’s, it’s it’s one of those things that you you can’t you can’t stop focusing on it. Otherwise, it just sort of gets away from you.

Josh Dalton
I think this is the challenge as well with like, if we’re a business that operated on a bit more scale, and we had more limited services is it’s a lot easier to, to lean up and get our processes, right. But because there’s so much customization with these clients, we do, we do charge a premium for that. And we make them aware that they’re being charged a premium for that. But there’s a lot of non standard sort of tasks or things that pop up that are brand new, that are presenting real challenges.

Ben Nash
Josh, what would you say? What’s been the most challenging part of your journey in business?

Josh Dalton
Trying to it’s probably goes back to the question you had before around the whole growth story. And, and, and change changes in the business over time is when people used to talk to me about culture. I just thought what is that it’s not even like relevant, and it isn’t relevant when you’ve got two or three people when there’s like 10 or 12 people in the group all of a sudden, the biggest challenge the last few years being culture. And, you know, I noticed that started to creep in when I had started to see little conflicts, little little fires starting in my team where people weren’t getting along or weren’t on the same page. Or maybe I did something wrong, and I didn’t realize and they were talking about it. And that’s become a massive focus in the last two to three years is trying to get team culture right. I’ve also seen people kind of come and go from the business where they were really good fit initially but then I guess they kind of, I don’t know, it was maybe time for them to move on or without grown their particular personality or style in the business, it just didn’t work for the business anymore. So I have to say that that’s been a huge challenge in terms of managing people, keeping people happy, knowing when it’s time to maybe turn over some stuff. And just the general dynamic, what’s going on in the workplace, at the time, and animals always been a fan of that saying that, you know, the fish stinks from the head. So also, just kind of being aware of my part in how the culture is playing out in the firm in any particular period of time.

Ben Nash
Yeah, it’s funny, in a growing business, in particular, our business coach has this saying where it’s like, you know, the bus is moving in the direction. And, you know, over time people get onto the bus. And sometimes people need to get off the bus, because a business can’t really stand still. So things need to grow, evolve and change. And sometimes you’ve got great people, great workers, but just the business changes to the point where it’s no longer the right fit, they don’t want to be doing that sort of work, or they don’t want to be doing that work in that way, or, as you say, so it’s it’s difficult when that happens, because you don’t always notice it. And they don’t always notice it either. Until it can sometimes turn into an issue, and then it’s an issue.

Josh Dalton
And I don’t know if other like startups feel this way. But the way I felt when I started was that retaining staff was was a sign of success, that people wanted to stay with you. And you know, I always had this ideal that, hey, these people will be with me forever. But then you start to realize, you know, that everybody’s I guess got their own interests at heart at the end of the day. And you have to respect that. And, yeah, sometimes it’s not a bad thing to actually have a little bit of a bit of turnover.

Ben Nash
Absolutely. Josh, my last question for you is, if you could go back to your 2012 self day one about to roll out the shingle and give yourself one piece of advice, what would it be?

Josh Dalton
Probably the price correctly from the start valuing yourself, charge what you think you’re worth. And you know, for those new guys out there starting, it’s scary to charge an appropriate amount, but you got to remember, for the for the people that you’ll lose your more than make up for those guys with the with the correct pricing on the clients that do come on board, and buy into your value and your proposition on your story. So I guess I would say to myself, just to back myself, you know, realize how much I guess the pricing model has an impact on the entire trajectory of the business. And yeah, I think that’s probably the building block for a solid financial planning business.

Ben Nash
Wise words there. But if I could just add one thing, it’s charge what you think that you’re worth, and then add 20% Because you’re always undervalue, undervalue that, and I know from, like, Dino talked about all the pricing conversations that we’ve had over the years, and you’re always so nervous about that pricing. But you realize that someone says, like, until someone says yes, and then it’s just the price. And then, you know, a year later or a couple of years later, you realize that you still probably weren’t charging enough, either. So I think so much of it comes from the way that we think about the pricing and value or our perceived that we can’t charge five grand or 10, grand or 20, grand, or whatever that number is that often, it’s just our blocks as opposed to something that’s actually based on our value.

Josh Dalton
Totally agree. And I think that’s where a mentor is important. Because you won’t always see that when you’re starting out. You probably need someone to pull you in line with with reality and what it takes and also get you thinking about, you know what signing these clients up at this price means in three years time for your business.

Ben Nash
Absolutely. Well, Josh, thank you so much for sharing your story. You mentioned before that you’re that you are potentially looking to partner with someone around that that’s looking to work with younger accumulator families. What’s the best way for someone that that is interested to learn more about that?

Josh Dalton
Yeah, just hit me up on my email or actually just send it to the office email admin. Dalton FP, that’s da l to nfp.com.au. We are capable of generating quite a high volume of referrals given our our online presence, our Google ratings and so forth. We do get a lot of inquiries. And you know, it’d be nice to be able to send them to a planner that we trust. that wants to specialize in that market. Whereas at the moment, we’re kind of just turning those clients away. So I’d rather refer them and perhaps there’s some sort of partnership arrangement that could be figured out there that would include some mentorship as well. For any young aspiring up and coming planners.

Ben Nash
It sounds like a great opportunity. Yeah, so thanks again for sharing your your insights May good luck with the next stage and look forward to hearing about it in the next chat.

Josh Dalton
Thanks for having me, Ben. Appreciate it me.

Ben Nash
Cheers, guys. We’ll catch you next time.