The Why Behind Our Process: The Sequoia System Explained

Every advisor has felt it — a client comes in with a specific question, a pressing concern, or a tactical problem they want solved immediately. Roth conversions. Social Security. Investments. Insurance. And the instinct is to answer it.

But what if answering the question first is exactly what leads to a worse outcome?

This episode breaks down one of the most important frameworks in Root’s planning philosophy: why great financial planning isn’t about solving the presenting problem — it’s about following the right order of operations. The Sequoia System isn’t just a process. It’s a way to ensure that every recommendation is built on the right foundation, in the right sequence, for the right reasons. 

James walks through how to explain this system to clients in a way that builds trust instead of friction — especially when clients want to jump straight to tactics. From defining purpose first, to structuring income, to designing portfolios, to layering in tax and protection strategies, this episode shows how each step becomes a constraint for the next — and why skipping ahead often leads to optimizing the wrong thing.

The deeper lesson is one every advisor needs: tactics feel urgent, but strategy determines outcomes. And the best advisors know how to guide clients back to the process — without dismissing their concerns, and without losing momentum.

If you want to run more structured meetings, create better client outcomes, and communicate your value more clearly, this episode gives you a repeatable framework for doing exactly that.

Listen in to learn how to lead clients through complexity — and why the order of your process is one of your greatest advantages.

--

Advisory services are offered through Root Financial Partners, LLC, an SEC-registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. Viewing this content does not create an advisory relationship. We do not provide tax preparation or legal services. Always consult an investment, tax or legal professional regarding your specific situation.

The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.

Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements

Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.

Transcript

Explaining The Sequoia System

SPEAKER_00 0:00

Welcome back to another episode of the Root Ready Podcast. I'm your host, James Cannol. Root Advisors, one of the things that you are going to need to know how to do, of course, is explain our Sequoia system. One, because you should understand fully how the system works and why it was designed the way it was. Two, clients are going to want a compelling reason why this process is going to be uniquely designed to help them meet their goals. And three, clients are going to have a tendency to want to start with what's top of mind for them, even if that's not where we should be starting. So in today's podcast, what we're going to talk about is why is Sequoia system designed the way it is, how to articulate it in a way that's compelling to clients, and how do you start to pull clients back in if they're asking really good questions, but questions that you need to first address other parts of the planet first before you can fully answer. So before we jump in, a quick recap of what is a Sequoia system. Sequoia system is the order in which we do financial planning for clients. Clients are going to come to you. They're going to have questions maybe about insurance, maybe about what do I do with my 401k, maybe about I need to do Roth conversions, maybe about can I retire? Your clients are going to come to you with whatever problem, whatever pain point is top of mind. So that's the perspective that clients are coming to you from. People aren't reaching out because they're saying, I need a fully comprehensive financial plan to help me check every single box of my life. No, typically it's there's a pain point. Do I have enough money? Do I have enough insurance coverage? Am I going to be able to retire? And so that's the thing they're going to want to have addressed first. But Sequoia system isn't this process that says, hey, what's on your mind? Let's start with that. It's this process that says there's an order to things. There's an order of operations that we've seen be far more effective when your planning is done in this order. Meeting number one is our kickoff meeting. That's all about defining your purpose. What do you want retirement to look like? What's most important to you? What do you value? What do you fear? Those are the types of things we're going to talk about in our kickoff meeting. We're not going into the financial planning or strategies yet. We first need to know what we're planning for. Second meeting is our income meeting. This is where we're going through your retirement cash flows. Can you retire? Can you support your income needs throughout retirement? What does this look like for when you can retire, how much you can spend, really helping you define your retirement readiness? Third meeting is the investment meeting. What is the right portfolio makeup that's going to help you support that? After the investment meeting, we have the tax meeting. After the tax meeting, we have the security meeting, which is broken down into two parts. One is insurance coverages and one is estate planning. I'm going to go into that in more detail in one second of why is this laid out this way. But here's what I want to start with. Whatever people, whatever your process starts with, shows you where your value is. If the firm starts with investments, what that's telling you is what's most important to them is the investment piece. And this isn't a bad thing. Look at mutual fund companies or ETF companies, whether it's Vanguard or dimensional funds or iShares or whatever, if you go to them, they're going to be talking about their funds. That's great because that is their value prop. Their value prop is the way they manage these portfolios. If you go to someone that works in an insurance company, they're going to be leading with insurance. They're going to tell you build your plan based upon insurance and protection. Now you can agree or disagree with that, but what that's showing you is that's what their value prop is, is their insurance. So why don't we do that? Why aren't we leading with investments or tax strategy or insurance planning? It's not because we don't think we are top class at all those things. It's because that's not our value prop. Our value prop, our mission, in fact, is to help our clients get the most out of life with their money. Notice which word comes first in that mission. It's the most out of their life, your life, what we're building for you, that's our value proposition. That's the strategy. All these financial tools, all these financial strategies, those are simply tactics. So we don't ever want to find ourselves in the position of we are optimizing the tactic at the cost of the strategy. It's the whole concept of you won the battle, but you lost the war. The war is the strategy. The battle is a tactic. So what is our value prop to our clients? It's that they're going to live better lives. The sign of a good financial plan is a life well lived. We want to be the guide that helps that. That is why step number one in our process, in our Sequoia system, is our kickoff meeting, our purpose meeting. Until I can fully define and understand what you're actually trying to accomplish, what success looks like for you, which is going to be very different than what success looks like for me, and very different from what success looks like for the next person. How on earth can I help you craft the right financial strategy if I don't know what we're actually optimizing for? We're not optimizing to save you tons of money in taxes. We're not optimizing to perfectly allocate your portfolio to the most growth-oriented asset classes we can. We are using those tactics to support what we're actually optimizing for, which is that life well lived. So that's very important we start with that. Because what we start with first, we say, how do we optimize that? And then that becomes the constraint for the next thing. So what do I mean then by that? What does that mean by that becomes the constraint? Well, if you share your vision with me, and then our next meeting is your retirement readiness meeting. Well, how do I optimize your retirement readiness and take this to the extreme? I tell you, don't ever stop working, save every dime you possibly can, spend super, super frugally in retirement, never enjoy any of your money. That's gonna optimize your retirement if I'm purely looking at it from a Monte Carlo score, or if I'm purely looking at it from the standpoint of what's gonna let you die with the most amount of money. Now we say that sounds absurd, of course, but in practice, we do a little bit of that. In practice, the temptation is to do a little bit of that. How can I make the numbers look best? Your value isn't a financial planner, a retirement planner. The retirement plan simply supports the vision the client has for their life. So start with that vision. That becomes a constraint. Because then in the next meeting, in the income meeting, as we're going through the retirement planning, we're saying, how can we fully optimize this, controlling for the constraint of the purpose and the vision they want to live? Yes, I could show this plan works really well if all you ever do is spend$2,000 a month in retirement. But that's not going to get you anywhere close to what you want to do. So, how good can I get this plan? What can this look like given the constraints of what you want life to look like? So once we've done that, once we've done the income meeting, that becomes a constraint for step three, which is the investment meeting. If you're just getting an investment proposal from a financial advisor based upon filling out a risk tolerance questionnaire, your financial advisor is doing it completely wrong. They're separating your portfolio from its actual purpose. The purpose of a portfolio isn't to give you the perfect risk-adjusted return based upon your responses to a 10 question risk tolerance questionnaire. That's how a lot of people used to do it. If you're listening to this, I hope you're not doing that because that is not adding any value to your client. Where the value actually comes in is saying, how do we now construct a portfolio, engineer a portfolio that fully is designed to support your cash flow needs? So your cash flow needs, your retirement strategy, that becomes a constraint of how do you design your portfolio. What does that actually look like? Well, when I run through your retirement projections, one aspect of that is I'm gonna be dialing in when should you take Social Security? How much do you need to pull from your portfolio each year? What accounts should we be pulling from first? That's gonna give me a very clean understanding of how much do you actually need from your portfolio each year? Because if you're gonna retire and you're gonna spend$8,000 per month, let's say, not all that needs to come from your portfolio. Maybe some is coming from your social security income. Maybe some is coming from your spouse's social security income. Maybe some is coming from a pension. Maybe that's not even even each year. Maybe you have bigger expenses upfront in retirement because your mortgage isn't fully paid off. These are your go-go years, you're spending a lot more. Maybe Social Security hasn't started yet. So you might have uneven cash flows, uneven income, uneven expenses, but the planning process helps us to understand how much of those cash flows needs to come out of your portfolio the year you retire. What about the year after you retire? What about three years after, four years after, five years after? That is directly informing how we construct the portfolio for you. That's directly informing how much we need to have in root reserves. Root reserves is our way of saying your portfolio doesn't exist in isolation. It says that when we look at your financial plan, your cash flows that we review in your income meeting, we need to fully protect the next five years of potential cash flows you'll need from your portfolio. So it's not just a blind 60-40 set it and forget it. It's not a blind 80-20, set it and forget it. It is an intentional amount that's pulled directly from your cash flows, Mr. and Mrs. Client. It tied into our root reserve portfolio to say this is our protection, this is our safety net that says there will absolutely be downturns in the stock market during your retirement years. And the downturns could be as severe as 30, 40, 50% in the growth portion of your portfolio. You don't have the luxury, like you once did, of just writing that out, of waiting that out. You need to have some portion of your portfolio allocated in a way that's not going to be drawn down, 30, 40, 50% when the rest of the market is doing that. That's what we're going to put in root reserves, a very intentional allocation that allows us the freedom and flexibility to use a growth allocation for the rest of your portfolio. So you can start to see if we don't start, if we don't first have those cash flows dialed in, which we lock in in our income meeting, how on earth can we construct a portfolio that supports those? Your portfolio does not exist separately from your financial strategy. It needs to be one and the same, but the cash flows becomes the constraint for how you're designing that portfolio. So that's meeting number three. After that, the next meeting in our Sequoia system is the tax meeting. Now, I don't think enough people appreciate this. Here's why we do that. Let's assume that you go through the first three steps of this meeting and I go through the first three steps of this meeting because we're both retiring. Now, based upon my risk tolerance and my cash flow needs, I want a very, let's say, very conservative IRA account. You, on the other hand, have a very aggressive IRA account. Now I'm going to use an extreme example here just to illustrate how this is going to impact the tax meeting. Let's assume that my portfolio is so conservative. It's such short-term, high quality, fixed income, I might only average, it's called 4% per year growth in my IRA account from now until RMDs. Let's assume we're both 60. So we both have 15 years until RMDs start. You, on the other hand, have all equities in your IRA, partially because of your financial plan, partially because of your risk tolerance, whatever the reason is, your portfolio, let's just assume, for the sake of illustration, it grows at 10% per year, whereas mine grows at 4% per year. So this, of course, is no guarantee or prediction. I'm just using this as an illustration. But let's assume that you're that other person and you have$2 million in your account, and I have$2 million in my account. And when I say account, I specifically mean IRA. The difference is yours is invested very aggressively. Mine is invested very conservatively. You are going to get 10% per year growth over the next 15 years. I am going to get 4% per year growth over the next 15 years. Again, this is zero recommendation. This has nothing to do with investment allocations or recommendations, just as an example. Well, if neither of us are pulling money from our IRA, let's assume we have brokerage accounts or other income sources that we're living on, and that money just grows. Well, by the time the RMDs hit, my$2 million IRA is going to grow to about$3.6 million. Your$2 million IRA is going to grow to$8.3 million. That's an enormous difference. You can start to run the numbers in your head of what will RMDs look like on a$3.6 million IRA, they'll be pretty high versus what will RMDs be on an$8.3 million portfolio significantly higher, more than double what mine would be. So if we are doing tax planning simply based upon the value of an IRA, or simply based upon, okay, if you have an IRA, fill up a random tax bracket, we're missing the entire point. If I can't first project out what's the average growth rate of my IRA versus your IRA, then as the advisor, you're going to give us the same advice, even though we're going to have very different experiences. This is why we can't do the tax meeting until we fully understand what the long-term implications of the allocation of our portfolio and how that will lead to different income sources, either because of the income from the portfolio directly or because of things like RMDs. You can't do that until you have the basis for understanding what's the growth rate that we're going to use in this projection. Now, I'm just using Roth conversions as a simple example here. But this goes the same. For what type of income are we going to be projecting? Maybe all the clients' money's in a brokerage account. Well, what's the tax makeup of the dividends, the interest, the capital gains they're going to receive? We're not going to know that until we've had a chance to understand in meeting three what their investment portfolio needs to look like. And we're not going to know what that needs to look like until we've done meeting number two, which is the cash flow meeting. And we're not going to know what that meeting looks like until we've done meeting number one, just working all the way back to the beginning, to understand what are we actually trying to optimize for. So that's meeting number four, that's a tax meeting. Then once that's complete, now we can go to our security meetings. That is the insurance coverage piece. That is the estate planning piece. Once we have a sense for how all the other pieces connect, now let's protect it. Whether that's estate planning, or we can now project out what's the lifetime projection of your net worth, your portfolio balance going to be? What is this going to look like? How much might you be able to leave to children? Do you want to accelerate some of your gifting because we did all these projections? You're going to have way more left at the end of retirement than you do today. Now we can start baking that into your estate plan. Or insurance coverages. Do you need insurance? If it's life insurance, can you be okay without it? What about property and casualty insurance? What about health insurance or Medicare? These are questions that become far easier to answer once you already have those first four meetings dialed in. So that is why we go through things in that process. It's not random or arbitrary. It's because the first meeting is what we're fully optimizing for. And once we fully optimize for your purpose, next thing we're fully going to optimize for is your income, your cash flow, your ability to create income to meet that. Then once we fully optimize that, we're going to optimize for the next thing. So just to use a couple more examples to show why this matters, I already used the example. If I could make your retirement projections look so good, if I just said don't spend anything and always just keep working, of course that's going to make your Monte Carlo scores through the roof. Of course, that's going to make your graph continue going up when we look at your projected net worth. But that completely defeats the purpose of what we're trying to do it for. Where else does this exist? Roth conversions. I could totally manipulate and totally rework a projection that says, look how much money I could save you in taxes if you just don't really spend a whole lot of your money. You know, you have all this money in your IRA, you've got a little bit of money in your brokerage account. Why don't you just live on a little wee bit of your brokerage account money? Don't spend on your IRA because look, I can run this through my software and show you how if you don't spend it, I can save you tons of money in taxes via Roth conversion strategy. Well, what did that cost you? It wasn't taxes that it cost you. It was your life that it cost you. Because now all of a sudden, you're not taking those extra trips. Now all of a sudden, you're more concerned to spend money because you're so focused on how much can I save in taxes that you let life pass you by because you don't want to spend money on those other things because it's going to interfere with taxes. Well, taxes is not meeting number one because the purpose of a financial planner isn't just to say, I'm here to save money on taxes. The purpose of a financial planner is to say, let's optimize for what matters most. And now we're going to do all these other things too, to the greatest extent possible, until it starts limiting your ability to do what's actually most important. So that's how I'd explain it. Now here's the reality: clients are going to come to you and they're going to come to you with a specific question. Hey, I'm finally reaching out because I just retired. I've got no idea what to do with my 401k. Hey, I just retired and now I need health insurance coverage fast. What do I do? Hey, I just retired. Should I start Social Security an hour later? They're going to jump right into the tactics. It is our job as advisors to redirect back to the process. Hey, that's a great question. We're absolutely going to answer that. But in order for me to answer that, I need to know this thing first. And when you can point back to the Sequoia system and say, hey, in order for me to understand when you should collect Social Security, we first need to go through overall retirement projection. I need to understand how all of your different income sources coordinate. I need to understand what your portfolio makeup looks like. There are actual other things that we need to look at first that are going to be the variables that help me determine am I going to recommend that you collect it early, collect it later, or somewhere in between. Hey, I know you really want to talk about Roth conversions. You saw James's video, you saw Ari's video. That's a really great thing that we're going to look at for you. And we can probably save a lot of money in taxes. But what I want to go through first is these other steps. And sometimes the best thing to do, believe it or not, is actually not to do a Roth conversion. So what I'm committed to doing is making sure we don't end up with the perfect tax strategy here, but at the cost of your portfolio, or only if it devastates your actual ability to do what you want to do in retirement. So this is the process we go through. And in doing so, we're absolutely going to get you a very thorough answer to that. Now, advisors also understand when is something actually urgent? When is something top of mind and understand when to pivot a little bit? To use some simple examples, your client was just laid off. They need health insurance coverage. Jump to that first. Solve the problem first there. Carl Richard just spoke to us and called this the presenting problem. Sometimes the presenting problem is urgent and we need to fix it. It's kind of like that doctor. How do you triage this? Which of these things do we really need to understand? Is this urgent? Do I need to fix this ASAP? Because if we don't, we're not even going to be able to get to the rest of the problems. Or is this something I can acknowledge, empathize with, and show them where in our process we're actually going to cover that? So the goal is to tie everything back to our Sequoia system, but there are absolutely going to be some instances where you need to do some immediate work to address the presenting problem. But if there's one thing I can reinforce as we go through this, it's that tactics always follow strategy. If we optimize for the tactics, we may win there, but the strategic intent is loss or the strategic purpose is a failure. So start with the strategy. That's the client's purpose. That's the life well lived. And then the tactics will naturally follow. So I hope that's helpful. If you're listening and you are enjoying this podcast, please make sure you subscribe on Spotify and Apple Podcasts, leave a review if you're enjoying it. And if you're not already doing so, check it out on YouTube. The Root Ready Podcast is here on YouTube. You can see the video version of this. Make sure you subscribe, like, comment. And if you have a question that you want me to answer in a future episode, go to the Root Ready Podcast.com, submit a question, and I'll look to address it on a future episode. Thanks for listening. I'll see you next time.