Trio of Friends Generate Wealth With Financial Advice

This transcript was generated from the episode audio and may contain minor errors.

[Music]

Welcome to Side Hustle School. My name is Chris Guillebeau, your host, every day telling you a different story of someone out there who is creating personal freedom for themselves, typically through the form of an income-generating project. Now today we're actually gonna talk about three people, three friends, who invest in an effort to escape the rat race. When they do that, they bank a good return by offering strategies as online financial advisors. This is all about robo-advising, which is a relatively new invention, takes advantage of technology to offer customers low fees in what is traditionally an expensive market of financial advising.

So there's businesses like Polaris, Betterment, and Wealthfront, you may have heard of a couple of those, they're operating in this space, trying to take a slice out of the multi-trillion dollar investment funds industry. Well, today you'll hear about some side hustlers, this trio of friends, in fact, who decide there's room for them too. Trio of friends generate wealth with financial advice. That story is coming up after this message from our sponsor. [Music]

Michael McDermott and two of his friends, Evan and Grant, had a desire to leave their jobs and work on something they were more passionate about.

Each of them also had these corporate jobs that came with suits, ties, conference calls, and cubicles. Michael worked in operations, Evan in finance, and Grant in marketing. The jobs came with salaries and benefits, but something was missing, inspiration and drive. In fact, they viewed those suits and cubicles as symbols of imprisonment, a nine to five jail cell for the next four years, unless, of course, they made an escape. In an effort to shorten that timeframe, the three friends would talk about investing during sessions at the gym.

They figured that a solid investment plan could emancipate them from long commutes and office politics. However, something interesting surfaced during their research. Very quickly, they realized that the average person has no idea about long-term investing. They either don't wanna know, they find it too complicated, or they simply get bad advice. Michael, Evan, and Grant believed that effective investing offers a realistic path to getting rich slowly.

And they were adamant that everyone should be armed with solid advice. Thinking quickly, they put down a deposit on an idea. It was an opportunity they saw could become a side business and possibly something much more. While their original goal was to learn as much as they could about investing, they now felt like they knew enough to offer some sort of product or service to those wanting to do the same. They noticed that most errors people made with investing were human errors.

They would invest emotionally, usually in the wrong stocks or bonds, and then get out of the market at the wrong time. Or worse, they wouldn't invest at all and end up without any savings. Michael, Evan, and Grant envisioned an online platform, commonly called a RoboAdvisor. This is similar to a traditional financial advisor, but the service is offered online only. There are no offices, no extraneous staff, and minimal overhead.

By forgoing those expenses, they could allow low investment commitments while keeping their own costs low. They were confident they could plug customers into solid long-term investment strategies, ones that would generate significant returns without them having to monitor the markets or make too many decisions themselves. The best part was that all three could combine their skills and work on the project together, which they decided to call Polaris portfolios. They also agreed that the business should be self-funded, which meant no outside investment. They'd have to remain resourceful and solve problems in a cost-effective way, but the lack of funds meant they could keep control.

They built the first version of their website on Weebly, a free platform, and used LegalZoom to incorporate. They also needed to obtain certification to become qualified advisors. After that, they invested $3,000 of their own money for any ongoing expenses, which made for a total of around $4,000 in startup costs. Not surprisingly, their first few customers came from family and friends. Polaris pricing was set at a flat 0.75% of a customer's total investment per year.

So 0.75%, that's less than 1%, in other words, with a minimum starting amount of $500. This meant that fees could be as low as $3.75 per year. These initial clients took them through the first year and allowed them to update their offerings to better serve future customers. Now it was time to compound their efforts. But in their second year of operations, the guys realized that pitching to customers one by one, especially with those low minimums, was not a recipe for success.

It simply wouldn't scale. So they decided to aim for profitability by changing their approach to target local banks and credit unions. If they were successful, then these financial institutions would do the work of selling Polaris to their existing customer base. Success with this approach was a lot like investing itself. It worked, it just took a while.

Sales cycles with banks and credit unions are long. Winning them over required many meetings and educational phone calls. But gradually, by forming strong bonds, they managed to convert a few of them to resellers of the Polaris Portfolio Service. Through these partnerships, their customer base continued to grow. They're now in their third year.

They've created enough interest in their side hustle that they will withdraw a solid five figures in profit, and hopefully much more to come. In fact, Michael, Evan, and Grant are going all in on Polaris. Their hope is to continue to keep compounding their efforts, all while improving services for customers. After investing their time into escaping traditional employment, the three friends are starting to see dividends. [Music]

So if you ever thought that a financial advisory firm couldn't start on a side hustle budget, well, here's an example of three people who've done just that.

I especially like how they started with the free version of Weebly. So Weebly, like a lot of platforms, has a free version with some limited features, and then you can pay for a version that's probably more appropriate for you in the long term. Well, eventually, they upgraded, and they're paying a couple hundred dollars a year for it, which is still, of course, very affordable. But they started with the free version to put that off as long as possible. And they made each page, writing all the content.

They talk about how it took a lot of time, a lot of rewriting and redesign, because the website, in this case, is especially important. I mean, a website's always important, of course, but really critical in the case of communicating trust and authority. Why should I choose to put my investments with this company and trust the strategy that they have, et cetera, not just for the end user, but also for the banks and credit unions that they're essentially selling through now. They also mention in their notes to us that they use 99Designs, or at least they started with that, to get their logo. So these are just like really bootstrapped tools and resources to start something that, you know, pretty much everybody else would think, "Oh, you have to have a lot of capital.

"You have to have debt." Or, "If you don't have debt, "then you have to have significant investment "on the front end." And they had neither of those things. So good for them. There's always more than one way to do something, or at least there often is, and that's why I try to present all these different stories to you every day. Okay, inspiration is good, but inspiration with action is better. To find the show notes for today's episode, including links to Polaris and anything else I mentioned, just go to sidehustleschool.com/1055.

That is 1,055. Thanks so much for listening. I'll be back again tomorrow. My name is Chris Guillebeau for Side Hustle School. [Music]

From the Onward Project.