Q&A with Paul Sydlansky of Lake Road Advisors
A conversation about going independent and scaling your business using the Betterment for Advisors platform.
Paul Sydlansky is the founder of Lake Road Advisors, an independent, fee-only financial planning firm. He has worked in the financial services industry for over 20 years. Prior to founding his firm, Paul worked as a relationship manager for another RIA. He also spent 13 years at Morgan Stanley in New York where he was a senior level manager in the institutional equities department. Paul is a Certified Financial PlannerTM, a member of NAPFA and a member of the XY Planning Network.
Q: Tell us a little bit about your practice and the factors that you think have contributed to your success in growing your RIA.
Lake Road Advisors is an independent, fee-only financial planning firm. We specialize in working with mid-career professionals who have young families and that's been developing over time as our niche. Right now we have about 100 client relationships and manage roughly $60 million in assets. We have offices in upstate New York and in Long Island.
We launched the firm in 2016. Before that, I was at a RIA where my views, goals, and values were not in line with the firm owners. For me, launching the firm was about sticking to my views – simplifying things for people, making things easy, and really focusing on what adds value to my clients. And for the niche that I work with, it's having somebody who is an accountability partner – somebody to bounce ideas off of, who can worry about all these things that generally folks don't have time to do, but they realize are super important. Focusing on those clients’ needs and making their lives easier has really led to our growth.
Q: What were the biggest hurdles that you encountered when you were initially growing your practice, and how did you navigate those?
Starting from scratch. I had a non-compete at the firm I left in 2016 so I had to start with nothing. Planning out my runway was difficult. I think for anybody who's thinking about starting their own firm, it's always going to be longer than you assume – if you're budgeting, I recommend you assume the worst and then add two or three times that in terms of how much you need. That was very difficult for me, starting from a position where really all you had to focus on for the first year or two was growth and making sure that I was developing enough of a client base to make the business viable.
I was lucky that we had some good growth to start with and now my challenges are all different. But that was the biggest one – making sure that financially I had enough runway, I could still live the life I wanted and support my family while I was doing it, and making sure I was doing things the right way.
Q: What role has Betterment for Advisors played in your growth over the last few years?
When I was at Morgan Stanley, I was in private wealth management for a couple of years, but I spent the majority of my time in prime brokerage working with hedge funds. So I came into the financial planning business with a kind of skewed view of investments. I'll be honest, I believe in hedge funds and alpha creation and the ability to outperform. And as I've evolved as an advisor, I've really done a 180 and realized that for the majority of people, trying to chase alpha is not really going to change their life.
What's going to change their life is focusing on blocking and tackling their cash flow, their spending habits, their balance sheet, not making silly decisions, creating good habits.
Of course, we'd all like extra return. But I think the pursuit of that is going to be fruitless for most, and for the majority of people, having a simple, low cost, diversified portfolio just makes sense. So the firm I was at was an active manager and I saw firsthand what a disaster that was, to try to manage 800 individual portfolios and do things like tax-loss harvesting or rebalancing.
It was just a nightmare and they spent a ton of time doing it. And in my opinion, it didn't really add much value to the end user because the manager was actually underperforming a lot. So for me, Betterment was number one given that the platform is easy to explain to my clients.
Most of my clients obviously understand investing, but they don't want to spend too much time on it. Betterment allows me to do that. It's straightforward. They have one page in the app where they can click to see their performance and really quickly understand. It keeps things super simple. I don't spend any time on things like rebalancing, I don't spend any time on things like tax loss harvesting. It's all automated. And I know that frees me up to do things that actually will add value to clients.
Q: Is all of your AUM at Betterment or do you use other custodians as well?
Yes, so the majority is – I have a portion of it that is with Vestwell on their 401(k) platform.
I have no other partners – it's all Betterment for my individual clients and then for my five clients who are on the 401(k) platform as well, that's the other system I'm using.
Q: How does Lake Road position Betterment for Advisors to its clients?
I've obviously had this conversation tons with different advisors. Everybody seems to be hesitant to partner with Betterment, saying – well, aren't they your competitor? Absolutely not. Because the way I view it is Betterment is a partner and a technology platform.
So that's how I position it. First and foremost I say I'm a registered investment advisor. I am not a bank, I am not a broker-dealer. I've partnered with another firm who can allow me to leverage a system that really buys in perfectly to how I believe investing should be done for almost everybody.
So for me, I position Betterment as a partner, as a technology solution, and I don't see it as competition.
Q: How do you price your offering and how do you communicate your firm's pricing to your clients?
Great question. What I do is tell the client one all-in price because as everybody knows, pricing can be confusing, and I try to just be as straightforward as possible.
For anybody under a million in AUM, it's 1.25%. And again, usually it's a half a million minimum of assets. And the way I tell that to clients is that ultimately, I have a set amount that I'm trying to make for the firm, and a percentage does go to me, and a percentage goes to Betterment. My fee is for the planning work and obviously helping with the investments. And then part of that fee goes to Betterment for the technology and for all the tools that they're providing us to use. But I like to present it as an all in fee. And in addition, I have breakpoints. So if a client hits a million, that all-in fee drops to 1.1%, and then so on.
I also have another offering where I have clients who have no investment management. It's just straight planning. And for those clients, it's a flat $5,000 a year. They are not on the Betterment platform, but it's another way for me to work with young families or folks who have assets tied up in their business and don't have the assets to manage right now at this point in their life.
I'm up front with clients and say, “I only have so many seats on my bus.” I have one other gentleman who started working with me late last year. And so now that we have 75 relationships, ultimately I'm looking to try to make $5,000 minimum on each one of those seats because I know the amount of planning work we do. I know how many touch points we have, how many meetings, how many calls, how many zooms, how many visits. And so for me, that's kind of the minimum where I want to be with the amount of service that we're going to provide, the relationships that we're looking for to grow the business.
Q: Are you typically using Betterment’s investment portfolio? Are you using different portfolio strategies for clients?
Right now I'm using Betterment strategies for the majority of clients. I thought about creating my own portfolios but for the amount of time it would take me to research and keep on top of it, it just didn't seem like I was adding any value there. In addition to the Betterment portfolios, I've used the BlackRock portfolio, one of the income generating portfolios for a client where it was appropriate.
Q: Aside from Betterment for Advisors, what else is in your tech stack?
I use MoneyGuidePro on the planning side and my CRM is Wealthbox. I've been using Riskalyze and I've been really happy with them in terms of storing and having an IPS, and it's a great conversation starter and just a way to explain risk a little bit better to clients. I use Calendly. I think most people probably use something, but Calendly has been a huge time saver for me, for my business.
Q: What are your client acquisition strategies?
I've been pretty lucky in that when I look at the tracking of where my clients have come from, they've been pretty evenly split from a lot of different sources.
The first has been friends and family. Another one is current client referrals. And a third one has been networks or traditional centers of influence like lawyers and accountants.
In terms of marketing, I write a blog. I have over 100 blog posts now and while it was tough to do, it's a really good marketing tool. I answer questions on it that I hear all the time from clients and prospects. So if a client or a prospect reaches out I can tell them I just wrote a blog post about that.
I also started to do some videos. Creating awareness and really connecting to your niche or your target market is huge. I went through the exercise of figuring out exactly who I want to work with and with everything I do from a marketing perspective, I try to speak to that person. That’s really been a driver of growth.
Q: What would you tell advisors who might be skeptical of using a platform like Betterment or something similar?
You need to think about your practice and where you add value to your clients.
I do believe that there are folks out there for whom active management can make sense in some instances. But I think you really need to figure out how you're positioning your firm for the future – is it the planning you're going to focus on or is it the investment management?
Where are you going to add value? What's going to differentiate you from other advisors?
If you think that you're going to be focusing on planning and the relationship and accountability and all that type of stuff, choose something that automates other work for you. Because you going in and clicking a button to rebalance does not add any value and it just takes away from other things you could be doing.
Q: How do you answer questions from clients that want to have positions that aren't part of the Betterment models, such as single stocks? What do you tend to say to them?
Yeah, that's a great question. So I think that goes to fit upfront. I have a conversation upfront about my investment philosophy and how I don't really believe in holding individual positions.
Ultimately, we do work with some executives and they have restricted stock and individual positions and options and you can't get around that. So what I tell people is if you're going to have individual stocks, by all means have a Fidelity account. Have a Charles Schwab account. Have a Vanguard account where you can do that as long as you want to trade it on your own and you're doing it outside of what you’re doing with me.
Q: As an advisor who's also a business owner, how do you keep up with compliance as you grow your business?
When I launched my firm, I launched with XY Planning. They helped me get up and running, but I outgrew it and needed a little bit more help. Since I'm in New York, I had to be SEC registered.
I work with an individual who basically opened up a compliance firm that helps folks like us – the smaller size advisor. So I have an individual lawyer who helps me with the compliance. Because I'm still on the XYPN platform, I also use something called Smart RIA that's like a CRM for all of your tasks and all the things you have to do for compliance.
And the other thing is, my business is super simple because of the nature of the investing. For anybody who's done the ADV, a lot of the questions are around investing and advice and things like that. My investments are so simple and so vanilla that I think because of the reduced complexity, it makes compliance a little bit easier.
Q: Do you have any advice on how to coordinate your IPS with the Betterment portfolios?
As part of my onboarding process, I make people go through the risk process. I use Riskalyze which connects with Wealthbox. So I check a box, and once a risk score is in Riskalyze it flows to Wealthbox, and it populates a field for me so I can see the score when I pull up the client.
And then on top of that, when we start building out their plan in MoneyGuidePro, we have the ability to make sure that that score translates to Money Guide Pro. It’s not perfect right now, but it goes between those different systems.
Q: The transition to remote work has been a popular topic. How have you adapted to that? Is there anything new or different that you're doing to connect with clients and prospects?
No, remote work has honestly been completely seamless. From a system standpoint, I worked from a home office already.
From a marketing perspective, it's really made me realize how important your online presence is. Everybody knows your website and blog and all that is important, but I started doing video too because I feel like it's a better way to connect with people.
I've been using something called Loom, and I also took a class about how to do videos and best practices. Before I meet a prospect, if somebody reaches out online, I will send them a quick 20-30 second Loom video saying: Hi, I'm Paul. Thank you so much. I'm really excited to meet you, if you could just prepare this and that for our meeting, and so on. I've been told it has been really positive because people feel like they know you before they talk to you.
Now I'm trying to incorporate it into my client service process too. So every once in a while if I have a follow up task, I can send someone a quick video and say, hey, it's Paul, we took care of that Roth conversion, you're all good to go, have a great day. Little things like that, I think those are going to be more important going forward. Seeing people on Zoom can be tiring, but getting a quick short video from somebody, a friend or somebody who's helping me with something, it's really nice versus an email. So I do think for me and my firm, it's going to be more focused on video, leveraging that and using that as a way to connect.
Q: One last closing question: What advice would you give to new advisors who are just starting out?
Aside from making sure that you have enough cash to weather the storm of the ups and downs, I think the other thing is making sure if you have a spouse or partner, whoever's going to be there with you, that they're bought in.
Aside from the financial stress of starting something new, don't discount the emotional ups and downs you go through on a day to day basis. Having somebody who's supportive and who can be there in the good and the bad is very important.
Your emotions go all over the place and it's still that way. As an owner, I don't know if it will ever change. I think it's leveled out a little bit but I still want to grow. If you would have told me when I started where I’m at now, I'd probably be really happy. But now I want to get to $100mm or $250mm. I'm thinking about my firm and what people I need to help me get there.
So I just think having support at home from that person and making sure they're bought in is huge. Because if you don't have that, it's probably going to be difficult to do it.