Will McKenna: Hello and welcome to the PracticeLab podcast, where we talk to top advisors about what makes them successful, so that you can apply those lessons in your own business. I'm your host, Will McKenna, and our guests today are David and Evan Coles from WMBC Financial, based in Irvine, California. 

David and Evan are brothers who work alongside their father, Scott Coles, who started the firm in 2003. Together, they've developed a truly fascinating approach that they call human wealth planning. This service incorporates not only financial planning, but also a proprietary wellness assessment in an effort to create a more holistic plan for clients. 

So in this episode, you'll learn how David and Evan worked with a think tank to develop their proprietary human wealth tool,  and the way they set up pricing this service, which is based on client net worth rather than assets under management. You'll also hear how they target other family-owned businesses. They'll give you some useful tips for working successfully with those clients. So let's dive into this episode of the PracticeLab podcast. 

Will McKenna: David and Evan Coles, welcome to the PracticeLab podcast. 

David Coles: Thank you. It's good to be here.

Evan Coles: We're really excited.

Will McKenna: Great to have you guys — really looking forward to this conversation. And you know, in many ways I like to start these, David, by just helping our audience understand a little bit about you and your business. So why don't you  describe your practice as it stands today?

David Coles: Absolutely. WMBC was founded in 2003 by Scott Coles. And since his start in the investment industry in the early 80s, he was very focused on financial planning. And as such, WMBC was founded with that desire to be a planning-centric firm. WMBC has three distinct services that we offer: intentional investment management, insurance and human wealth planning. Our investment department manages just over $100 million. And our human wealth planning department is forecasted to consult over $150 million in net worth in 2021. We perform in-depth financial planning for the vast majority of our clients. And we work very closely with high net worth individuals with a specialty in family-owned businesses. We've got a team of two advisors, an insurance specialist, an investment specialist, our creative director — Evan, here with me — and one other advisor assistant.

Will McKenna: That's a great overview. Thanks, David. And I want to come back to a couple of things you mentioned. Family-owned businesses, very interesting niche, and we want to return to that. Evan, why don't we talk about this intriguing idea of human wealth planning? And I know this is one of the things that makes you guys unique. Help us understand: What is human wealth planning, and why is that important?

Evan Coles: Human wealth planning really is a tool to help our clients realign their relationship with their finances. Our financial relationship is extremely complicated. And I think part of it is because of the way that we hold money and how it operates in our life. And so, a lot of times, we'll have this tendency to treat money as purely an objective thing that's extremely logical and void of emotion and feeling. When in reality, our behavior with our money is motivated by a lot of emotion. So human wealth planning provides structure for an advisor to navigate touching those very sensitive, subjective areas of people's lives and provide some tools to take that subjective data or that emotional data and infuse that into the financial plans. Human wealth is our tool for bridging that gap between someone's experience of life and their monetary or material resources.

Will McKenna: One of the things you did was work with essentially some Ph.Ds to help put this idea together. It's based on some principles around wellness. Your finances and money is one part of your wellness, but there are other elements. Can you talk about the science behind this?

Evan Coles: We teamed up with a think tank consulting agency called NEF, the New Economics Foundation. And so we found their body of work, and what they've been doing is, over the past couple of decades, working on subjective well-being science and trying to understand the research and developing a model that could be used to then create metrics of well-being. And so their main focus is more on the government level. So they, back in 2005, were commissioned by the U.K. government to create one of these metrics of well-being for the government to use alongside GDP, to really gauge the impact that their policies were having on citizens. You know, we were so inspired by this because, in our industry, the ruling metric is rate of return — how much money am I getting off my money? But that misses that money is a means to an end, right? So again, with human wealth, we're trying to realign people's perspective in relationship with money. So that has to come to the way we measure our success with that money. What's key about this is the tools that we've developed, bringing social science and commercializing it, and creating tools out of it and client experiences with it. So we worked with NEF so that when we sit with clients, we can gauge whether the systems we are developing and implementing in their lives, if it's really having that positive impact in these clients' lives.

Will McKenna: That's great. I love this idea of metrics of well-being. And I want to return to that. It's very interesting, because we do tend to think about rates of return and benchmarks and things in our industry. But this is a perhaps a broader idea. David, let me bring you back in because I think there's an interesting story of how you guys as a firm even got to this idea of human wealth planning and what spurred that on. So take us back a little bit and talk about how you came to this approach and what that journey was like for you. 

David Coles: Sure. So I started working at WMBC about 13, 14 years ago. When I started working there, Scott was very adamant that I learned all the different aspects of the business. And so I would go sit in different departments to understand them. And, you know, we went to many conferences across the nation over the years. And hearing the struggles that advisors face and looking at where the industry is trying to go, seeing the way different practices are set up. And you know, for years, I heard the concerns of fee compression, introduction of technology and artificial intelligence for investment management. I remember showing this triangle, which at the bottom of it, it had resource management, and you work your way up the triangle to goal-based planning, and up to the top of fulfillment. And tha leader saying to advisors, “You need to work your way up this triangle. You can't spend your time in resource management. You need to go up to planning and fulfillment.” But no one really had an answer to that. They just said you need to work your way up there. And that's how I started thinking we need to improve planning so that we can have the space for those things. And how do we do that? I really began to think about how does that happen? I remember thinking, “I don't know how I'm going to do this by myself, and I needed some help.” And that's when I reached out to my brother who was living up in San Francisco, and I said, “Hey, man, I know you have nothing to do with the financial industry, but I've got some ideas that I'd love to run by you and see if you'd love to come down and help us make this a reality.” I'm grateful that he did. And it has been an incredible journey working with him with Scott and various scientists throughout the world to create this product.

Will McKenna: OK, so that's a good overview of human wealth planning. It's part of a four-step process that Evan and David use with clients. Step one begins with the human wealth questionnaire that they developed with the New Economics Foundation. It includes questions not only about client attitudes toward money, but also provides a picture of their health, their social connections and community involvement. Steps two, three and four will sound familiar to most advisors, since they include reviewing the client's financial picture, developing recommendations and then implementing the plan. They take clients through this cycle on an annual basis, so they can see changes year over year and the progress they're making toward their financial goals, and their broader life goals. As Evan says, "It's not just a service, it's a practice." Now, you may be wondering, as I did, if some clients push back on this idea of providing so much personal information, so that's what I asked David, in this next part of the episode.

David Coles: The interesting thing about it is, you do have certain people that go, "Wow, this sounds amazing!" and gravitate towards it. And other people that kind of stand back and say, “Hmm, I don't know about this.” And rightfully so, you know, there's different strokes for different folks, as you say, but you know, we've even had some clients that have come in and said, “You know what, you've been my advisor for years. This sounds a little off to me, but I'm gonna do it. I'll go forward with it and see what it's all about.” And as we get into the discover/well-being area, it's incredible to see how they start to open up and they start to see this in front of them and go, "Yeah, I understand that does look like me, and this is why." We've had people say, “I'll do this, but I don't know what you're going to get out of me because I'm a very private person.” And as they start digging in, they start opening up about their family and their past — why they are the person they are. What we have found is if someone gives it the opportunity, they walk away going, “Well, that was a nice discussion. You really do have some tools now to create something for me that's meaningful.” And we understand that this might not be a process for everybody, and that's OK. But the people that have walked through it have been very surprised or very happy about it.

Will McKenna: Let me follow up on a couple things we were talking about earlier. The first is your focus on a particular type of client: family-owned businesses. And  tell us about that. Why is that your focus? What are their characteristics? How does that work for you and the practice?

David Coles: What we found is that a family-owned business has a lot of this emotion tied to it that perhaps a different type of business or corporation setup may not have. We experienced that ourselves. We've gone through a lot of the ups and downs and working through issues that arise as being family members in a business. And so we feel this kind of connection with other family-owned businesses. You know, a father with a son who's coming up in the ranks to become president of the company. And when do I give him ownership? How do I give my son what he needs, or my daughter what she needs, in the business? Because she's earned it. But yet, I have three other children that may not be in this business. And in my estate plan, how does that work? How are they going to feel comfortable knowing that this child is now going to own the business, which may be the bulk of our inheritance? How do we work through those feelings? So being that it's emotionally charged, our process holds space for those things, and people tend to enjoy that as a family-owned business.

Will McKenna: That's great. And I think you've touched on some interesting points that relate to your own situation, right with, as you said, a family-owned business with a father and two sons. Maybe take us into some of the client examples that help bring your process to life.

David Coles: As a client example, we were referred into a client who had a very successful business, family-owned business. The son  just became president of the company. And the father and his wife were looking for some planning. They had very different views on what they wanted for their retirement and for how they wanted their assets structured. And they both had their own fears; they kind of bumped heads. And they went through advisor after advisor after advisor and couldn't find somebody to work with. And what we showed them of our human wealth process really resonated with them, especially with his wife, because she felt, "I'm heard now. And now that I'm heard, I'm willing to step forward and start making decisions on what we're going to do.” And so as we went through this process with them, the entire family started to feel very comfortable with how everything was going to be laid out, and everybody's feelings were accounted for. So it was a wonderful process to go through with them. To me, what's the most fulfilling thing is when a client comes back to you and says, “Oh, my gosh, you guys have done something amazing for us.” Their Board of Directors, you know, we sit in on their meetings, and a member of their Board comes and says, "What you guys have done is nothing short of a miracle. They have not been able to do anything for years. We've sat here stagnant." And so it really is attributed to that human wealth process.

Will McKenna: That's great. Evan, let me bring you in and hear maybe some examples from your side of the business.

Evan Coles: Focusing with life transitions, we had a client, it was another family, more young, professional, very career-driven, and oriented, very successful. But when we went through the discover/well-being part and looking at his profile, you know, things that were suffering, right, he was getting good career success. Financially, he was secure. But his vitality was just dropping very dramatically, right, because all he was doing was working. And so he was starting to experience a lot of pain in the body, you know, also community and social engagement, you know, was suffering, because there was just this focus in the accumulation of the resource. Wanting the resource, wanting the resource. So that was a big revelation, big insight, when we sat down with them to see that, and talking through different things like recognizing that success and career and success and work is fueled by vitality in the body. And if we stopped taking care of the body, our performance at work is going to suffer. So one of the things we started planning with him for was a career change. How can he move into a career that allows that greater balance and engages him more, you know? And so that's what we were setting up for. And we began to develop financial systems to establish a cushion, you know — so they would have financial resources to draw on while he made this switch — as well as starting to pay attention to his community, and what steps could be taken so that he feels that support, too, as he makes this shift. And so we just recently started their second cycle of human wealth, and were able to go through discover/well-being again, and to look at what was last year and what was this year and to see the growth in the social area and the vitality area and just satisfaction was huge. And it was so impactful for us too to see that and for him to come to us and say, “Thank you, I could not have made this transition without you guys being there.” That's exactly where we want to be. That's how we want to operate and have that sort of impact with our clients.

Will McKenna: That's a great story. That's got to be very gratifying for you guys and the firm to connect with a client like that and help them through that kind of change. You know, this kind of service that you're providing is very holistic and is very in-depth, and obviously requires a way to think about your compensation and your fee structure. Tell us about how you've arranged your pricing and your fee structure and why you've set it up that way.

David Coles: Yeah, we definitely have stepped away from the traditional assets under management fee. And starting out, I believe, is our why for that. You know, as an advisor, we're told to be client-focused, to be client-driven. However, our prevailing fee structure charges solely on assets under management, and that incentivizes the advisor to just gather assets. And really, a light is shown on only a fraction of what we do as an advisor. A lot of the creativity and more time is spent in deeper understanding, is put into these comprehensive financial plans that an advisor does. And so in an effort for us to reduce our conflict of interest, our fee structure starts for human wealth planning, being charged on a client's net worth. That way, we're not concerned with, “How am I going to get paid if they don't give me their assets to manage?” So that's how we charge human wealth. And also, you know, as you do planning, the complexity of an estate, as it grows, the complexity of it does as well. And so that's why our fee will grow to match that complexity.

Will McKenna: Yeah, that makes a lot of sense. In many cases, these business owners have a large net worth but not necessarily a large investment account. And so this allows you to continue to serve their needs while still earning your fee. Can you give the audience a sense of the details of this? Is it, are you charging a percent of net worth, or what are the more specific mechanics of it?

David Coles: We did a lot of research in the time that we spend doing comprehensive planning for our clients. So we broke down a fee and structure and said, you know, with clients between a net worth of $2 million and under, we put in about this amount of time. And this is what the hourly rate is for us to be profitable. And so we just took that and said, here's a fixed quarterly fee for this range. So a client that has a net worth of $20 to $50 million is charged $5,000 a quarter. A client that has $2 million and below is charged $1,250 a quarter. So that's how we set it up because of the time frame that it takes for us.

Will McKenna: When I asked David and Evan what's next for them and their business, they talked about a two-phase approach to expand their human wealth practice. The first is to add more advisors to their firm, and train them in the finer points of human wealth planning while continuing to perfect their process and their technology. The second phase will be to explore licensing opportunities, so they can offer human wealth planning to the broader population of advisors who may be interested in using this approach in their business. If you want to learn more about it, check out their website at WMBC.financial, that's WMBC.financial. And we'll include that link in our show notes. Now, let's jump back in and ask David and Evan to offer their final thoughts and some guidance for fellow advisors. 

Let's wrap this up with key messages that you want to leave with our audience. What are the two or three takeaways you want them to think about?

David Coles: Don't be afraid to have a system or a process that really fits you that you feel comfortable working and you believe in. Because we don't have to always fit into the mold that is set up. The wonderful thing about this industry is that we have the opportunity to create something that is meaningful to us. So don't be afraid to have something that's meaningful to you. I think another thing I could say is don't be afraid of the future and technology and where the industry goes. Embrace it. Embrace the growth that's happening, the transition that's happening, because that is all part of life. Life is constantly changing, industries are constantly changing, and there's going to be opportunities in them if we just take a minute to pause and look at where is the opportunity that I can grab on to?

Will McKenna: That's awesome. Evan, what about you?

Evan Coles: Yeah, just take courage. And don't be afraid to take risks. Scott has been an incredible example, I think, to us on how to be an entrepreneur and to live by your principles. Here at human wealth, we're definitely swimming upstream. This is a new way to do business in this industry. This is a new way to charge fees in this industry, but someone has to dig down the banks of the river so that the water can start flowing that way. You know, we've talked to other advisors, there's got to be forward thinkers, people willing to expend the energy to break down the banks so that the rest of the industry can flow that way. Take courage, you know, let's get after it. There's a new world to be built, and we can be a part of it through our businesses.

Will McKenna: That's a great place to end. Thank you guys so much, David and Evan Coles. It was great to have you on the PracticeLab podcast.

Evan Coles: Thank you so much. We appreciate it.

David Coles: Wonderful to be here.

Will McKenna: OK, so that wraps up this episode of the PracticeLab podcast. Special thanks to David and Evan Coles for coming on the show. Thanks also to my colleague, Tyler Furek, for connecting me with them. If you liked what you heard today, please hit the subscribe button and consider leaving a rating and review, since that helps other advisors find the program. PracticeLab is brought to you by Capital Group. You can find all our episodes at practicelab.com. I hope you enjoyed what you heard today, and I look forward to joining you on the next episode of the PracticeLab podcast.

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