Today marks the one-year anniversary of my departure from Merrill Lynch. So, I’ve decided to write about the experiences I’ve had over the last year while starting my business. It’s been challenging, to say the least. I knew it would be hard, and I tried to mentally prepare myself for the work, but I’ve never done anything like this and the mental preparation was not enough. From a series of communication errors with the company that handled my registrations to delays due to questions from the state regulators, and from mismanaged expectations to a hurricane, my business took flight from a very rough and rocky start. Here’s the story of my first year since leaving Merrill Lynch and starting Respire Wealth Management.
I learned a lot during my seven years at Merrill, or “Mother Merrill,” as it’s affectionately called. I learned that the job isn’t all investing. In fact, it’s more about the people—the clients. However, Merrill was going through some pains after being acquired by Bank of America, and I entered during the upheaval. The rules of the game were changing all the time. During the first couple of years, the minimum account balance was raised from $100,000 to $250,000. Later they decided to change how we’d bill fees. I found myself shifted from office to office, and from line of business to line of business. I mentioned to a colleague that I felt like I was constantly running to catch up. The other issue was that, no matter where I was, I felt like my compensation and goals were structured in a way that did not incent advisors to behave in the clients’ best interest.
I’d considered leaving to start my own firm in 2015. I reached out to custodians for RIAs and to independent broker dealers. I learned about the differences between the two. The broker dealer would have a structure like Merrill where I’d lose a significant cut to the firm for providing me with basic business infrastructure, and I’d be subject to the same potential changes to goals and payouts that don’t work in the clients’ best interest. Or, I could start my own RIA which would be all mine, with my own fee structure, open architecture where I could choose my technology providers and record-keeping, and where I’d be a fiduciary 100% of the time. The Registered Investment Advisor structure would cost more up front. It would also give me more freedom, but I’d be held to a much higher regulatory standard. The RIA structure kind of says “put on your big girl pants, take care of your clients, do what you think is best, but be aware that you’ll be taking on more liability.” In 2015, I didn’t take the leap. I continued with Merrill and kept thinking about freedom.
The general advice I got from friends and mentors was that I would be trading one set of problems for another. But, I couldn’t stop thinking about leaving. I was only supposed to be on the road about one week a month for work, and that had turned into two to three weeks a month. I have a ten-year-old son, and the time I was spending away from him was eating away at my heart. I got to keep my reward miles and points from the work travel for some amazing vacations, but that didn’t change missing out on things like dinners at home and bedtime stories. Then, in January 2017, I was realigned at Merrill again, and some stuff happened that I can’t discuss here that had to do with getting an office. I decided at that time that I needed to act and get out. I got the ball rolling. I started getting quotes from compliance firms to handle my registrations and documents, talking to custodians (the people who hold clients’ investments on behalf of RIAs), testing research technology, and thinking about my name and branding.
When I first decided I was going to leave, I had to tell my husband, Jeremy. He was, amazingly, very supportive. In November, we had used some Marriott points I had from work to book a trip to Hong Kong for spring break, which was in March. I had to take calls from potential vendors with a 13-hour time difference, holding some of those calls at 10:30 pm. By the end of March 2017, I had decided on my vendors, built my business plan and completed my cost projections, I also did another projection. I projected our household income and expenses, and I determined that if I didn’t have any clients, we’d be broke by December. We just bought a new house in October 2016 and had increased our spending. In October 2016 I had no idea I was going to make this pivot and give up a six-figure salary. That projection hit me like a ton of bricks. I showed it to Jeremy, and he was, again amazingly, cool with it. We’d make it work. Surely, I’d have clients by December.
By May 2017, just ten days short of my seven-year anniversary with Mother Merrill, I was at a place in the registration process where I had to give my resignation. I was leaving a corporate client event in Baton Rouge and called to tell them I was leaving. I had great relationships with management and colleagues and received lots of calls and well-wishes. It made me feel great about my future and the possibilities.
My grandfather had just passed away two weeks before, and I’d taken some time off to go to North Carolina to see him before he died and to attend his funeral. I got to spend time with him, talk to him, be by his bedside when he took his last breath, grieve with my family, and attend his funeral. Then, I went back to work, knowing that soon, I’d have to resign. It was a lot to process at once, but I couldn’t change it, and so it just was. With my new freedom, I spent the next few weeks working on my business start up from NC, while also helping my grandmother get the estate in order and tie up loose ends. I made several trips to NC that summer to make sure she didn’t have to face it alone, and I was grateful that I had the freedom to help.
Once I’d resigned, I knew I still had several weeks of waiting to process and finalize my registration. I had TONS of travel miles and points saved up from traveling for Merrill. So, we had a number of vacations during the summer of 2017. I referred to this as “explorking,” a combination of exploring and working. Before I knew I was quitting Merrill, I’d used United miles to buy a round trip ticket for a June 2017 trip to the UK, where we used to live. So, in mid-June I spent a week staying with our old friends in the English countryside, laptop in hand, drinking coffee, working in the garden, taking time out to see the local places and people I’d missed, and to walk around the villages and towns.
I was counting on being open for business by the third week in June. I knew I’d need a work space, so I went ahead and signed a lease and started paying rent for an office about three miles from home, right across from NASA’s Johnson Space Center. However, due to a communication error between me and my compliance company, the new date moved to the second week in July. I still had “we’ll be broke by December” looming in my mind, and now I was locked into a lease on office space.
Jeremy needed to use some vacation time, so we decided that we’d take a short trip to Mexico City using Southwest miles and Hilton Honors points . . . Might as well before I had to buckle down and start opening accounts, and anyway we’d get free meals and wouldn’t be using a bunch of electricity or water at home. So, we rationalized, it would actually be cheaper for us to be on vacation. I spent the mornings in the Honors lounge, working on my laptop and taking conference calls with my vendors, then spent the days exploring with Jeremy and Liam, our son.
I got a peculiar call while we were in Mexico City talking about my registration, but with the name of a different advisor and firm in Dallas. I was supposed to have my registration approved by the next week, so I was confused by this. I called my compliance company. In some crazy mix up, someone else’s information had been mixed with mine, and sent to the state regulators instead.
I pictured two employees at the compliance office walking through the hall carrying manila folders, running smack into each other—papers flying everywhere. Then, they’d both reached down and scrambled to pick the papers up again, apologizing profusely, trying to get all the papers back into their respective folders. On they would walk from the point of collision, going about their days, and processing our respective files with the state regulators without double-checking.
When I called them, they assured me that I’d be ready to open with only a two-week delay, which would now be the end of July. Again, I thought “we’ll be broke by December.”
We returned home on July 5th, and I was in a stall-out. I couldn’t move forward. I wasn’t permitted to market or advertise investment services. Everything I needed to do was done, and yet, I couldn’t take on clients or earn any money. The only thing I could do was maintain lines of communication with my old clients and let them know the process. Several of them had called and emailed me, and most are close friends and family. To top it off, we’d booked a vacation with my in-laws to go to Puerto Vallarta and stay in an all-inclusive resort the first week of August. When we’d booked that trip, I’d thought “The business will open in June. I’ll have a month and half of work and accounts under my belt and a week off won’t be a big deal. I can take any work with me, and my phone works fine there.” But, here I was, now looking at an opening date that was three days prior to our departure for Puerto Vallarta.
I decided I would try to cancel the trip since I’d need to hit it hard right out of the gate so that we wouldn’t be broke by December. Then, an hour later, before I called to cancel, I was contacted by the state regulators to say that they didn’t understand my fee schedule and couldn’t yet approve my registration, but that they’d schedule a call to discuss it within the next week, and I’d be approved within two to three weeks after the call, contingent on a resolution of course. The business wouldn’t be able to open until the second week in August. Our trip was already booked back in March, and it was to an all-inclusive, where again, we get food! So, we left for Puerto Vallarta.
My registration was approved while I was sitting in lounge chair by the beach with my laptop. I immediately initiated in-processing with my custodian, TD Ameritrade Institutional, which takes one week to set up. I was in the office, and ready to rock, setting up appointments with clients the Monday after we got home, August 14th, 2017. Finally, I could make some money and my pipeline of clients and assets was looking good. Maybe we wouldn’t be broke in December.
On August 23, nine days after I opened for business, and before my first accounts had even received transfers, the weather forecast showed that the remnants of a tropical system were beginning to redevelop just north of the Yucatan Peninsula. Several forecast models showed that it could strengthen to a strong hurricane before making landfall somewhere near Houston. Strong tropical systems don’t threaten Houston but once every five to ten years. So, I didn’t have all my hurricane supplies for the season. Often, we get these warnings and the storm fizzles out or changes direction and it’s a non-event. But, I decided that it was a good opportunity to go to the store and stock up on my way home from work anyway. Apparently, everyone else did too, and it was absolute mayhem. The water aisle looked like a hurricane had already been through. Most of the batteries were gone. The canned food aisles were decimated. Nothing was certain. This thing could still change track. I decided to put off finalizing my stocking of supplies and slowly built it up with a few visits to other grocery stores and the local CVS and Walgreens. On August 24th the schools announced a closure for Friday, August 25th to allow teachers, staff and families time to prepare their houses. I announced that my office would be closed on Friday. It became apparent that we would not have landfall in Houston, but instead it would be further southwest, down the coast. This meant we’d have what meteorologists refer to as the “dirty side” of the storm—the part with all the rain and wind.
On August 26th, we awoke to widespread flooding in and around Houston. Some of our close friends’ homes were already under water. My family members were fine, but as I reached out to friends I found that my former compliance manager from Merrill was in a panic. She is from the Midwest and isn’t used to these kinds of storms. I told her I’d come get her and left my house. I drove a couple of miles and discovered that she and I were literally separated on two islands of land with deep flood waters in between. On Saturday night record flooding came again, but this time with constant tornado warnings, causing alarms to sound on our home security system and phones all through the night. I could travel one mile in one direction and half a mile in the others. My island was smaller on Sunday.
I couldn’t get out or do much of anything, but I felt helpless. 911 was overrun with calls and people who needed rescue couldn’t get through. The Coast Guard had set up a separate number for overflow calls, but that too was over-burdened, and people couldn’t get through. Some friends and I organized over social media and started using our network of boaters and a website that was built during the storm by a man in another part of Houston. I think it was initially named Houston Harvey Rescue, but is now Crowd Source Rescue. (You should look it up. It’s amazing what these guys did in a matter of hours between performing boat rescues.) Those of us who couldn’t get out, but were safe and dry with working electricity, ran dispatch from our homes, calling people who’d reported themselves as needing rescue to see if they were still there, then getting boats out to them and marking them as rescued. Then on to call the next and dispatch another boat. Sometimes I’d have to make decisions, telling one person that I couldn’t get a boat to them because their home only had a foot of water, while instead dispatching a boat to a house where the family had climbed to the second floor and the water was still rising. When people didn’t answer their phones, I felt stress and anxiety. A local creek had risen so high that one man couldn’t be rescued due to the strength of the water, but he was safely in his top floor. He couldn’t get through to the Coast Guard, which had helicopters. He called me after the storm to thank me for calling to check on him, and to say thanks to my friends who stopped by to get an update on his status from his window throughout the flood.
The rain continued for days, and I was unable to get to my office until Thursday, August 31st. Schools remained closed for two weeks. Clients who’d scheduled appointments suddenly were unavailable because everything they had, and the insides of their houses, were being scrapped and placed by the roadside. From August 31st through September 18th, my office hours were part time. The rest of the time I lived in old t-shirts, jeans, and a pair of old sneakers, helping where I could.
I opened one new account during the weeks that we dealt with Hurricane Harvey. It was beyond anyone’s control. All I could do was pick up the pace moving forward: one meeting in a week, then two meetings in a week, then one meeting in a week, then three meetings in a day. I was picking up steam and losing steam and picking up steam. I felt like I was pulling a car uphill, losing ground, then moving forward, then doing it again. Eventually, I found my groove and people started coming in and opening their accounts. By the end of November, I was at three times my goal. I’d far surpassed where I intended to be, even if I’d started the business in June as planned. We wouldn’t be broke by December.
Clients are easy. They appreciate advice and need help. They’re grateful for it. Investments are easy (for me). I’ve been exposed to this since I was a kid, and I’m comfortable with making recommendations and trading. Once I figured out TD Ameritrade’s Veo system, opening accounts and doing transfers became easy—a hell of a lot easier than at Merrill.
I made small mistakes, and things come up in running a business and getting accustomed to new systems. The fixes are sometimes costly, sometimes complicated and time consuming, and always frustrating. I didn’t understand account groupings on the TD system and accidentally traded two unrelated clients’ accounts together as one. That’s okay. We have systems in place for correcting errors and the clients don’t see any difference in their accounts once the correction is done. I had to eat the cost of the correction. So, it was an easy but expensive fix. I’ve learned my lesson and won’t do it again. I wanted to have a mostly paperless practice, and use Docusign 90% of the time, unless I have someone who’s averse to computers. When I was meeting with my most complex prospect (a lot of separate accounts to consolidate) in October, Docusign took a dump while we were opening accounts. I ended up going back to my office, printing about 200 pages of paperwork, marking them for signatures, then sending them out via US mail with a postage paid return envelope. I’d kept the tracking numbers for the outgoing mail, but somehow didn’t have the return tracking numbers. The client documents were lost in the mail and finally arrived at my office two months later. The whole process was so terrible I thought I’d lose them for sure, but they stuck with me. I switched email servers recently so that I can save money on complying with record retention regulations, and just found late last week that a bunch of emails I’d sent to prospects and clients never left my outbox. So, I’ll have to follow back up with them today and tomorrow. My fee billing method is too complicated (the regulators were right, and I’ve already had to start making changes). In the next few months I’ll probably have to re-paper clients to switch to a monthly schedule instead of quarterly.
These little headaches sometimes feel like huge problems, especially when they stack up all at once. When it rains, it pours. The problems don’t come one at a time. There are times when I feel so stressed out or anxious that it makes me feel physically ill. Then I remember what my life was like before, and I think about my clients and my family. What’s my “why?” Why did I take this leap? This weekend, as I watched the first hour and a half of Berkshire Hathaway’s annual shareholder meeting, and listened to Warren Buffett and Charlie Munger, I was reminded: It’s for the love of the game. I love investments. But, that’s not my only “why.”
First, I took this leap for myself and my family. My work week now looks so much better. I usually wake up at 6:45 am. Most mornings, Jeremy makes Liam’s lunch. Liam dresses himself, brushes his teeth, and makes his breakfast. I drive him to school at 7:40 am and I’m home by 7:55 am. I turn on CNBC and watch the market open. At 8:30 am, I start checking off items on my to do list and status my new accounts, transfers, trades, outgoing money, and paperwork. By lunch, I’ve checked emails and started calling people. At lunch I can go to the gym, do yoga, have lunch with a friend, or lunch at home. On Mondays and Wednesdays, I stop working at 3:15 pm so I can go home and take Liam to gymnastics, then I use the time that he’s at gymnastics to shop for groceries, make dinner, or finish work. On Tuesdays, Thursdays, and Fridays I’m usually done with work by 4 or 4:30 pm. We go for walks, watch movies, work in the vegetable garden, have dinner, sit around and enjoy each other, play board games . . . whatever we want. After Liam goes to bed, Jeremy and I usually have an hour or so to watch one of our shows like Westworld, Billions, or Silicon Valley. Once or twice a week, I might mix it up with some networking or grab dinner with friends. Occasionally, I have to get the laptop out after Liam goes to bed and skip the TV shows to get caught up on work. My life is better now. I get to spend time with my family. I’m not missing anything anymore. That’s my first “why.”
Second, I took this leap for my clients. I wanted to build something that was more transparent, where, if conflicts of interest arise, they’re disclosed. I wanted to control the kinds of information my clients receive and how often. I didn’t want them getting pre-packaged, general, and irrelevant information that came from corporate content writers. I wanted them to get information that came from me. I also wanted to provide them with suitable investment advice, and to be able to provide advice about personal finances to people who weren’t ready to invest. At Merrill we were always looking for “opportunities.” If we met with someone to help them financially, we were expected to uncover what might be there that could generate revenue. That’s not the way we should look at clients. That’s my other “why.”
You might recognize “Respire” as the first part of “respiration” or “respirate.” It comes from the Latin “spirare” which means “to breathe” and “re” which means “again”—“to breathe again.” It actually means “to breathe a sigh of relief.” It’s a relief to me. It’s freedom, even though that comes at a cost. So, when does it get easier? It get’s easier as I learn how to run a business (the hard part) and when I hire help.
What does Respire look like going forward? I don’t know. Right now, I just want to take care of clients, my family, and my advisors, and meet challenges head-on as they come.
This journey is a learning curve. It’s harder than I expected. It takes time to build. I had significant headwinds. One year after quitting Merrill, would I go back and tell myself “don’t do it”? No. Absolutely not. I’d say “Leap. It’s what you’re meant to do.”
