#FA Success Ep 327: Growing To $1B By Standing Out With Marketing The Competition Can’t Mimic, With Marc Horner

Resources Featured In This Episode:

• Marc Horner
• Fairhaven Wealth Management
• Bear Brothers Financial Advisors
• Million Dollar Cup of Coffee
• Blend Out: From Ordinary To Irresistible: How Advisors Can Market Like The Greatest
• David Bach's The Latte Factor
• Zig Ziglar

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Full Transcript:

Michael: Welcome, Marc Horner, to the "Financial Advisor Success" podcast.

Marc: Great to be with the legend, Michael Kitces. Thanks for having me.

Michael: Oh, my pleasure. I'm really looking forward to today's episode and talking a little bit about...I guess I would say marketing at a high level. But I'd come across kind of your firm and your story a couple of years ago and was both sort of fascinated and amused, as we'll I think share more in a few moments here, that I find there's an interesting phenomenon in how most advisors market, that we tend to take this marketing approach that sort of starts with this fundamental perspective of whatever you do, don't upset or piss anyone off.

Marc: Right.

Michael: Everything always has to start very kind of middle of the road, neutral. You never discuss religion or politics anywhere in your financial advisor world or marketing. You've got to be careful about even the jokes that you make because someone can take offense. We always start very much as in the middle and safe as we can and then from there, we try to find someone that we can connect with. And there's only a few people out there I find that even sort of think about an opposite approach. Robert Sofia of Snappy Kraken wrote a great book last year called "Blend Out", so the opposite of blend in, all around this idea of, look, when everybody else is trying to blend in and not say anything to offend anyone or disrupt anyone, it basically...consumers can't tell them apart. If you want to stand out, you have to blend out, as Robert sets it up. You've got to take a stand for something or say something that someone notices and remembers.

And so, I'd come across, a few years ago, this sort of wonderfully humorous, satirical website Bear Brothers Financial Advisors. So, we'll put a link out to this in the show notes as well. This is episode 327. So, if you go to kitces.com/327 , we'll have a link out to this. So, Bear Brothers Financial Advisors is essentially a parody financial advisor website. It kind of looks like a financial advisor website, Bear Brothers Advisors. It's got a nice logo at the top, a picture of a couple walking on the beach, a bunch of pictures of...I think of it like the stock photography where a slightly elderly gentleman...

Marc: I think they're more frolicking, Michael. They're frolicking on the beach, yeah.

Michael: Frolicking on the beach.

Marc: Yeah.

Michael: The slightly older gentleman who's carrying his wife on his back. We've all seen that stock photography. And then you start reading the website and it says, "Bear Brothers Financial Advisors, we're committed to our success." I said, "Wait. We're committed to our success. It doesn't say your success, it says our success." And then you read the captions under the pictures of the husband giving his wife a piggyback and it says, "When you're financially secure, your wife will refuse to walk too." And then the caption says, "An independent survey shows that more of our lady clients get piggyback rides from their husbands than those with any other firm." And it's like, "Oh, my gosh. This is a sendup of every single one of our financial advisor websites that has a little bit of this kind of stuff."

And so, the whole website is just incredibly amusing. Eventually, you get to the end and it says, "If Bear Brothers Financial Advisors is not your cup of tea, you might want to check out the true professionals at Fairhaven Wealth Management." And then it has the sales manager of Bear Brothers saying, "Fairhaven Wealth Management, I hate those guys." And so, I looked at this in this world of...okay, we're all trying to blend in and not say anything to offend anyone, and you have made the ultimate parody of the most horrifically stereotypical salesy-oriented website there is with even all the check out your financial professional at FINRA BrokerCheck disclosures at the bottom.

And so, I just wanted to really start the conversation today in understanding what exactly goes through your head to make a website like this as a...you are a business owner that employs many people, that has many clients and many millions of dollars. This isn't just sort of out there on a lark, you run a business. Fairhaven's a real advisory firm that hopefully gets clients who are turned off by Bear Brothers Financial Advisors. Where does it come from to make a website like this to market yourself?

Marketing And Differentiating Firm Culture Through Fake Advisory Firm Parody Commercials [08:35]

Marc: Well, thank you for that introduction. There's also 6 videos. But so, I think that comes from...well, number 1, not taking myself too seriously. So, we talk about a lot in the office that we take our jobs as financial advisors seriously, but we desperately try not to take ourselves too seriously. I think most of the public doesn't quite appreciate what goes on behind the scenes in the big...well, wide range of firms, but I came from...I started my career in the big firm world. So, I had firsthand experience, after 14 years being in that environment, what that world can be like. And although some of the website stuff and the videos and things are outrageous, every single one of them is based on an actual circumstance.

Michael: Yeah, I'm reading through this. Bear Brothers is determined to drag you through our process, size you up, pass you off, and create a cash cow. Your advisor will help guide you to make the right decisions for Bear Brothers. And it's half comical and half like, "Yeah, that's basically the whole fiduciary thing we'd all be talking about. This is a way more amusing way to put it out there. But yep, that's what we've all been railing against." But you made this website. You made a fake financial advisor website that says it and puts it out there. So how does this turn into a parody advisor website?

Marc: Well, so that inspiration came from Saturday Night Life. So, I don't think I can make an actual reference to the video that I'm talking about, but I think most of the audience will remember Andy Samberg and Justin Timberlake's ode to 1970s music with the Christmas gift. But when I saw an interview where both Andy and Justin were talking about to really take that to the next level, they thought they needed to produce a song that you took away the lyrics and the song actually had a good baseline to it, and it was music that you would actually listen to. We walk around here also saying there are no half-measures. If you're going to do it, do it. And so, if you're going to produce a website, if you're going to go through a professional casting, which we did to shoot those videos. If you're going to hire professional actors, then that needs to be housed on a professional website.

And so, I'm thrilled that people enjoy it and I get feedback all the time from people within the industry that say, "You hit the nail on the head. This is exactly what's going on in far too many places." And I've got...truth be told, I've got hopes to strike a deal with Disney+ or Netflix or something like that. I think there's plenty of material to do something online, a running series.

Michael: Running series on the pain and horrors of bad financial product sales.

Marc: Absolutely.

Michael: So, help us understand this from the broader perspective. Is this literally marketing for the firm? Was this a growth engine or was this just a thing to put out there because you wanted to say your 2 cents about the issues of the industry and do it in your own special way? What did this turn into?

Marc: Yeah, so from a marketing perspective, you can talk about things that you do for your clients. You can also talk about things you don't do. And I'd say from a marketing perspective, we use this as this is who we're not. So, we do an outstanding job of connecting with our female clients. In fact, our very best client relationships I would characterize as female-led. And so, I've struggled with that in trying to intentionally capitalize on that because when I've talked with some of our clients about that and that being a competitive differentiator, and it's just naturally who we are, it's not intentional, they've struggled with giving me feedback about how you really take that to market because it just sounds creepy to say to a professional woman that you've just met that, "And oh, by the way, we do a really good job of working with women." That's the stuff that restraining orders are made out of.

Michael: Yeah. It may be true given actual client relationships, but it's kind of awkward to say.

Marc: It's totally awkward. But they look at the video and we know how to handle the ladies from the Bear Brothers Financial Advisors, which is what the title is...

Michael: Yeah. I'm looking. Literally one of the titles of the video is "We Talk to Women: We Know How to Handle the Ladies."

Marc: Which is ridiculous and offensive, in my experience anyway, you show that to a female professional that's been in the business world, that resonates with them immediately. And that if we're prepared to call that out, we've said, we've communicated, "Hey, we understand that that's a bunch of B.S. that goes on out there and wearing pink ties to show that you know how to serve the female niche." All this stuff, all this language is just ridiculous. But calling it out like that shows somebody that that's not how we act, and it avoids the "We do a good job of working with women" conversation.

Michael: So, do you show this to prospects? Do you send prospects here? Is the idea that the prospects who might be searching around the world find their way to this and then find their way to Fairhaven when they realize this is not a good firm?

Marc: Yeah. Yeah, so actually you're touching on 2 items right there. One is, absolutely, in the appropriate circumstances. I'm not sure that we lead with the Bear Brothers stuff. But as a potential new client is getting to know the firm, to share that with them as, "Hey, this is part of a reflection of the culture of the firm." So absolutely. But what I think we don't do...what we need to a better job of is integrating more of the stuff that we've produced in our YouTube page, the Bear Brothers site. We've got another website called the Million Dollar Cup of Coffee that's gotten some traction for us. Those are independent websites right now from the Fairhaven site. And so, what's going to get done here this year is get those various assets integrated more directly in the core website of Fairhaven so that they're more easily discovered.

Michael: And so now I've got to ask. So, what's Million Dollar Cup of Coffee? Is this a sendup of the whole David Bach, "If you just stop buying the cups of coffee, you can retire a millionaire?"

Marc: So that's what it is. So that's basically where our marketing approach started. So, when I was planning to go independent, it took me about 3 years of doing the due diligence before I finally pulled the ripcord on making the jump. But back in the wirehouse world, I've long had intern programs for the bulk of my career. And so one of my interns...again, back in the wire world. I wanted to work on a financial literacy program designed for young people. And so, we put together this 20-question survey, shared it with our clients, and asked them...and CPAs and attorneys and asked them to pass it along to people that were anywhere from kind of sophomore in high school to maybe 30 years old. And it was 20 questions that asked about financial literacy, how would they consume it, all sorts of feedback. And I remember the intern said to me, "Should I go look at what the big firm," I'll leave unnamed, "that the big firm that we're at, what they're doing?" And I said, "Absolutely not because whatever it is that they're doing is not working. So let's go talk to the end consumer and find out what they want and then we'll design a program based on that feedback."

Well, we had over 500 people fill out that survey and that formed the backbone of our...it was a blueprint of the marketing that we started doing. So unfortunately, when I was in the wires, I couldn't do anything with it because compliance and attorneys would've killed it. And so, I think it was 6 months after I kind of got my legs underneath me after I had made the transition to independence, I took that information and started...which basically said it needs to be on demand. I'm not going to go sign up for a 90-minute webinar. It's got to be 3 minutes long. It's got to be video-based and it cannot have any jargon in it whatsoever. And, the lead line in the survey was if we showed you how to save the equivalent of an expensive cup of coffee a day when you start when you're 20, that would make you become a millionaire. And we called it the Million Dollar Cup of Coffee Survey. We got feedback. Feedback in the survey was that they love that analogy.

So, I just started shooting videos 6 months going into the independent world. I wrote the scripts and then started sharing them. And I'd love to tell you it was some McKinsey whiteboard plan that I knew what the results were going to be from the beginning, but shame on me. What I found out was...you know what? Forty, 50, 60, 70-year-olds, they also like hearing things in short video form with some animation, with maybe a little bit of sense of humor and no jargon. And I just...so we just ran with that from getting that feedback. So again, it was not...there's no business school credit here. This was experimenting, trying to have some fun, willing to take a risk, and then listening to the feedback from your target audience.

Michael: So, I am struck. Just the way that you pursued this, that... "Hey, I've got this idea around a new thing we could be doing." In this case, it was around financial literacy. But "I'm going to make a questionnaire and send it out to clients and CPAs and attorneys and related professionals and try to get hundreds of people to answer my 20-question questionnaire to figure out what I'm going to go make or go do." I'm struck by that. I think most of us would say we're very client-centric and client-focused in what we do. We're trying to show up and do the things that clients want and appreciate so that we can get paid for our advice and grow our business. But I pretty much never hear of an advisor that says, "Yeah, I was thinking about a new initiative, so I made a 20-question questionnaire and sent it to hundreds of people and then gathered all their feedback and used that to figure out what I was going to do." It sort of sounds straightforward and obvious. Yet, here we are and none of us do that. So where did that come from?

Marc: Well, I suppose that came from an understanding that I've had from the...well, you know what? I suppose I can trace that back to probably Zig Ziglar and a marketing class that I took in college that I remember a Zig Ziglar-ism being if you help enough people get what they want, you can have everything that you want. And so, having an orientation that the way that you advance yourself is you advance others. And I would say that that thinking runs through what we try to do from a marketing perspective, what we try and do from a business development perspective. Yeah, and thinking about others before you think about yourself. And I would say it does seem to me to be rather straightforward that if you're trying to get somebody's attention and you have the opportunity to ask them, "Hey, how could I get your attention?" You should go ahead and do that and listen to what it is that they tell you.

Michael: But I guess just you don't get trapped in this world of, "Okay, I asked 500 people for their opinion and I got 500 opinions." Well, that didn't help.

Marc: Yeah. Yeah. No, you can get trapped in that world and I think that's been a struggle for me around advisory boards or something like that. So, you can get trapped in that. I tend not to ask a whole lot of opinions in ways that are going to set me up if a disagree with that opinion to then irritate or alienate somebody because I didn't run with their idea. So that survey that we did...again, we got 500-plus people to fill it out. In no way did we implement everything that all 500-something people said. But I distilled what the bulk of the feedback was. And then it's got to line up with who you are personally. So, if you're not out there being true to yourself, people will see through that in a second. So, you need to be genuine and believe in what it is that you're doing and why you're doing what you're doing. And then I would say just kind of let the chips fall where they may.

Michael: So, coming back for a moment to Bear Brothers. So, I guess just the other thing I'm wondering on a high level, just how do you get comfortable putting something like this out there? Are you not worried that some people are going to be offended by this? Not even necessarily the industry folks that are offended but any time you start engaging in satire around...particularly some of the gender dynamics you have here, "An independent survey shows more of our lady clients get piggyback rides from their husbands than those with any other firms." I get it. A lot of us have seen the stock photography. It's kind of a fun sendup, but I'm sure someone's going to read that a different way and not like the sentiment or the comment or the choice of words. Do you worry about that? Because it seems like it's hard to take...to be as edgy as this and not be expecting you're going to get some flak for it.

Marc: Yeah, so I don't. I don't. I don't worry about it. Another one of the videos that we've done that we humbly titled "The Best Introduction to Wealth Management Ever Created" and that was a video that we did where in it…one of the scenes is I've got somebody dressed up in a chicken suit pretending to be a financial advisor. And then in another scene, I've got a groom and a bride, full tuxedo, full wedding dress and she ends up kneeing him in the groin. And the public relations person that we were working with at the time were on set.

Michael: This is your wealth management intro video of a married couple kneeing someone in the groin?

Marc: Exactly. Now that one we use as a lead-in too. So, either people are going to like it, or they aren't. And so, the PR person that we were working with at the time...we're shooting this video in the office and she pulls me aside and says, "You can't have somebody dressed in a chicken suit doing a video about financial planning. You're in the money business," and said something similar about the kneeing in the groin thing. And so, I said to her, "Well, this is what we are doing. There's no way we can out-Schwab Charles Schwab, so we are not going to have pictures of a couple strolling down a moonlit beach as their demonstration of retirement. I'm fairly confident Schwab is not going to have somebody in a chicken suit, so we're going with the chicken suit."

Michael: So, just leaning into that whole dynamic of we're going to be different because we have to be different. Because if we're not different, we're basically just competing against other firms who are even larger and even more focused on not being different and they can do that because they can also afford Super Bowl commercials. But we're not going to be able to compete with the megafirm by showing up, more or less, the same way they do.

Marc: Exactly. Yeah. I think that it's that. We're going to choose to fight the fights that we can win or have a chance of winning. I think being just boldly genuine about who you are is incredibly powerful and it's more fun. Probably that's at the top of the list. It's incredibly more fun. If Mark Cuban would back our firm and pay and we could get enough money to get a Super Bowl commercial, we would just freaking kill it. And so, I did the...

Michael: The Bear Brothers would have their first Super Bowl commercial. How that’s going to turn out, I can see this now.

Marc: Absolutely. Absolutely. We would...exactly. We'll leave James Gorman in the dust. But I was doing a talk on this a few years ago and somebody asked me in the...it was an FPA event. Somebody asked me, "Well, how do you measure whether it's working or not?" And I flipped back in the deck that I had gone through to the slide that showed the growth of the firm and I pointed to...I didn't say a word. I pointed to the slide, and I got a nice reaction from the crowd. But in 14 years in the wirehouse, I went...by myself, went from [$]0 to 80 million in assets. And then we had our 8-year anniversary, I haven't done the numbers yet, but the year before, 2022, we finished 7 years in the independent world going from [$]80 million to over a billion. And so, that tells me what we're doing is working.

Fairhaven Wealth Management As It Exists Today [27:16]

Michael: So, help us understand, then, just the advisory firm itself as it actually exists today.

Marc: Yeah, so I resigned from the wirehouse at 9:30 in the morning on a Friday. At 11:30, I was signing paperwork to buy my first practice. So, we've acquired 5 advisors in the 8 years that the firm's been around. At 2:30 that Friday afternoon, I was on my first client appointment to transition my clients out of the wires into Fairhaven. And by the time my head hit the pillow on the following Monday, I visited with all...or maybe 38 of my 40-something clients, and away we went. So, the firm has grown from, again, me by myself to now 22 people. And again, 80 million to finish 2021 at over a billion. We gave some of that back last year. But yeah, the growth has come from...basically a third, a third, a third, organically, recruiting advisors to join the firm, and then doing acquisitions. And how we think about the acquisitions as far as growth goes is we use the acquisitions to basically help advisors or give our advisors the opportunity to participate financially in those acquisitions. So, when we've done the 5 acquisitions that we've done, the bulk of those clients have been reassigned to...because all those advisors have been in some sort of retirement mode or another. And so, some are entirely exited from the firm and 1 is still here.

But there needs to be a succeeding advisor to take care of those clients. And so, we use that client opportunity to attract advisors as recruits. And so, I personally work with very, very few of those acquired clients. And so, the idea there is that the client-to-advisor count stays down. That's good for the clients, that's good for the advisors, and that's good for the firm. In our firm, I'm the one that does the inorganic stuff, so that frees me up to focus on the inorganic growth of the firm and the marketing initiatives. And so, if you can do things that benefit the clients, the advisors, and the firm and rinse and repeat that, that's got some power to it.

Michael: So, you said about a billion dollars for the firm, 22 people. How many clients is it?

Marc: 450.

Michael: Okay. Okay, so a typical client's a multimillion-dollar client or just dividing assets and the client count? So, you're working with a fairly affluent clientele?

Marc: We are. There are outliers on either side of that midpoint, but yeah, yeah.

Michael: So, I guess, then I've got to come back and ask once more. No multimillion-dollar clients that see Bear Brother intro and the intro video with the guy in the chicken suits on the homepage of your websites, no clients that have seen this and expressed concern or negativity or outrage or anything else? Is there no negative feedback or you just don't care?

Marc: Zero. Well, no, I do have to listen because I'm capable, just like the next person, of going too far. But so, I do need to listen. But no. No. The negative feedback was from that public relations person that we've since parted ways with because she wasn't on the bus. And in fact, it's been the opposite. We've had...I've had a number of our 8-figure clients say to me directly, "We love what it is that you're doing. It is so refreshing." And one of the quotes that just warms my heart is...so an entrepreneur, a businessperson totally understands what it is to take risk and stay up at night worrying about stuff. He said to me, "It is so fun to watch what it is that you guys are doing." So, did you see the movie, "Private Parts" with Howard Stern?

Michael: I don't think I...nothing against Howard Stern, but no, I don't think I actually saw "Private Parts".

Marc: All right. Well, there's a great scene in that movie when the manager of the radio station is trying to get Howard Stern fired, and he's talking to the research guy who's given him all the numbers. And the research guy says, "Okay, the average Howard Stern fan listens for 2 hours and the most common reason they give for listening is they want to see what he's going to say next." And then the manager says, "Yes, but I want to know about the people that hate Howard Stern." And then the research guy says, "Good point. The average Howard Stern hater listens for six and a half hours." And then frustrated, the manager who's trying to get Howard Stern fired says, "But if they hate him, why do they listen?" And the research guy says, "Most common answer? I want to see what he's going to say next."

And so, we think about that from a marketing perspective in terms of delivering a client experience. We want our clients to stick around to see what we're going to do next. And it's not about Sharpe ratios or we're going to move from 9.2% to 9.6% in small-cap international allocation. It's none of that. You've got to take care of that, you do need to deliver a quality product, but if you can deliver to clients a memorable and maybe even...I don't know about...but entertaining experience as part of their financial advisory life, that's some power.

Michael: So, what does the actual service offering experience look like from Fairhaven? Are you trying to be as edgy and out there with services provided as you are with the marketing of said services?

Marc: Yeah. I would say what we try to do from a financial planning perspective is pretty much the exact opposite. We are trying to be boring and give a down-the-middle kind of experience of...I was talking about this actually with a prospective client today, that we're in the keep-people-rich business, not the get-them-rich business. And so, from an investment perspective, again, I would characterize what we do as pretty down the middle. We talk about...from a planning perspective, we talk about identifying risk that needs to be taken and avoiding risk that doesn't. So again, it gets pretty dry pretty quickly compared to the Bear Brothers. We do try to be a comprehensive solution. So, we're talking right now about doing an acquisition of a tax firm to be able to do tax work in-house. We've got a Medicare and social security specialist on the team. One of our advisors specializes in 401K and cash balance plans. One of our advisors has got a group health insurance practice. And so, we do try to be...one of the advisors is an attorney, as much as it pains me to use the A-word.

So again, we do try to deliver a comprehensive set of solutions to clients, but yeah, keep the "edgy, not afraid of failing" on the marketing side of the house and be, I'd say, decidedly more conservative and deliberate on the financial planning side of the house.

Michael: And you don't have a gap, a disjoint, a, "Wow. You guys sure are boring with your financial planning given how cool your marketing was." Just maybe I'm projecting, but does that show up? "You guys were so edgy on your website, I thought it was going to be different as a client."?

Marc: Yeah. So, I'd say where the edginess comes in in the client experience is that, with all humility, we're fun to be around. But no, I think we're...again, back to this notion that we take what we do seriously but not ourselves too seriously. I think that makes for a nice combination of competence and comprehensiveness of what we do professionally and fun to be around.

How Advisor Teams Are Compensated And Structured Within Fairhaven [36:24]

Michael: So, describe for us I guess the team structure. You said there's 22 people. You've got a couple of different specialists as well. I'm not sure if they're a specialization and an advisor or if they're dedicated specialists.

Marc: It's a bit of both.

Michael: Okay, so just can you paint the picture of the 22-person organizational chart? How are you guys structured as you're closing and are sitting right at a billion [dollars]?

Marc: Yeah, so we've got…I think it's probably 7 administrative people and then 3 operations/trading people. So, our trading...none of our advisors do their own trading. That's all consolidated.

Michael: Okay.

Marc: Then we've got 9 advisors and whatever's left is going to be a dedicated specialist. So that's the mix. The administrative and operational pool, no one is assigned to anybody from an advisor perspective. We work as a team. Of all of our administrative people, we have 2 that are full-time. Everybody else is part-time. They arrange their own schedule, so I don't have to deal with that at all, just with the caveat that we've got no fewer than 3 administrative support people in the office at any one time. Actually, we just made...I guess it's last year now, but we made our first advisor-in-training hire. So that was out of our internship program. So that's a young woman from North Central College here outside of Chicago. That's in Naperville. And she's going through the financial...our version of the financial advisor-in-training program. So that's a new role. So, she's doing mostly financial planning work, but we've had her involved in prospective and existing client meetings from the beginning.

Michael: So, for the other 9 advisors, are they all in a lead advisor position? Do they each have their own clients or are you a multi-advisor teaming structure? How do the 9 work?

Marc: Yeah, so they've all got responsibility for their own clients, which are a mix of, literally, clients that they have developed directly on their own and then, how we talk about it is, firm-assigned clients. So that's going to come from those acquisitions that we've done. And so, there is a single point of contact for all clients as far as an advisor goes, but how we think about financial planning, how we run the investments is very firm-centric I would say. So just about any advisor could step in if needed and then the administrative staff knows all of our clients. And again, no one administrative person is assigned to a particular advisor.

Michael: So, I'm struck. You make a distinction between clients that the advisors have that they got and firm-assigned clients.

Marc: We do.

Michael: So, is that just...what's the impact of that difference? Does that tie to compensation or agreements or just kind of an internal note of who brought what?

Marc: Yeah, no, no.

Michael: How does that show up?

Marc: Yeah, it flows directly to compensation. So having grown up in the wirehouse world where you had to develop business or you were shown the door with no cake parties or anything...it was middle of the morning, you're walked out, and people left behind you are fighting over your stapler. Coming from that world, I have a deep appreciation for the difficulty of business development, and that I believe it should be rewarded. And so, for advisors that develop their own business, that's 1 grid or comp level. And then for business that has effectively been turned over to them to take care of and do a good job with, that compensation is at another level, which is lower. And then we blend those 2 together. And for our...we've got one of our advisors who has declined to participate so far in any firm-assigned business. And absent that 1 advisor, anywhere between 25% and 50% of the revenue that an individual advisor is responsible for is coming from the firm.

Michael: So, as a baseline comp for advisors, are they all variable comp? Is everything percentage of revenue or is there salary plus some combination that blends together?

Marc: Yeah, so for all the senior advisors, it is entirely variable comp. And then for our advisor-in-training that's been hired, she gets a salary plus a quarterly bonus.

Michael: Okay.

Marc: Yep.

Michael: And so how big is the difference between the 2 comp levels? How much higher is my payout rate if I sourced it versus if I didn't?

Marc: Yeah, no, yeah, no. I'm happy to share the numbers. So, if an advisor...and I'll explain the rationale. So as far as our overall comp plan goes, in a directly sourced business for an advisor, they are paid cash comp of 60% of that revenue, so 6-0.

Michael: Okay.

Marc: Then firm-assigned clients are paid 25% with an incentive that if they double the assets, not double the fee...don't change the fee. If they double the assets, then that moves from 25% to 40% of revenue. Then comp also includes fully paid for firm health insurance, dental, life, disability, and vision. That's all paid for by the firm. And then there are no technology charges or locker-room fees or any sort of nickel-and-dime stuff. Technology's all...the computer...all the rest is all paid for. And then we've got agreements with the advisors that say if they ever part ways with the firm that their clients are their clients and the firm's clients are the firm's clients. And if they disagree with that and try to take some firm clients, there are specific formulas about the penalties associated with that.

Michael: And can you at least give us a neighborhood of what kind of penalties? How do you scope this? I've seen some firms that are basically...if you leave, you can buy them, but you have to buy them at an above-market rate because we were not planning on selling them until you forced us by leaving and taking them.

Marc: Right.

Michael: Others hand it in more of a legal consequences context. How do you handle what penalties look like if they do try to take a firm client, an actual firm-assigned client?

Marc: Yeah. So, I will confess that I have not read the agreement in the last couple of years. We have not had any advisors leave. Frankly, I'm not sure why they would. But my memory's telling me it's something like 2 times trailing 12 revenue and it's open season for all of us. So, if an advisor wants to compete with us for firm-assigned clients, then we'll be competing with them for their clients. But the first advisor that we hired, experienced, very, very experienced person. In the 8 years that he's been with the firm, his compensation has quadrupled in 8 years, which I am thrilled to see that happen. So that goes back to one of the recurring themes about...how I think about business is if you can...or one of the ways that I think about business, if you can figure out ways to lift others, you will have a consequence of lifting yourself. So, I'm thrilled that the way that the structure's working benefits, again, benefits clients, benefits the team, and benefits the firm.

Michael: So, is there anything that gets...I don't know, applied back against their compensation? I'm thinking relative to the wirehouse world. You may have to cover a portion of the comp for your assistant or your operation staff overhead sometimes. Sometimes there's allocations like that. Is there stuff like that that comes back out of their comp?

Marc: There is not. The firm carries entirely the freight of the office, the operations, and support staff, the benefits. They all get fully paid for health insurance. That's all paid for by the firm. So back to that rationale. What my...as far as the grids go, what my research in leading up to starting the firm showed me was that, in general, an advisor looking to start their own practice could, in general, expect to net something in the 60s percent in terms of a margin. And now that dependent, of course, if they were going to work out of their basement and have their dog as their assistant, then that margin was going to drive higher. And likewise, if they had the Taj Mahal for real estate and a staff of 50, that margin would go lower. But a reasonable, legitimate business with legitimate office space, legitimate technology, legitimate staff that an advisor could expect to be in the 60s. And so, what…

Michael: I just think about relative to industry benchmarking studies, most firms end up something in the 30% to 40% of overhead expenses. Usually, a higher percentage when you're not as large yet because just staff costs are lumpy when you hire your first assistant. So, you could run as a solo and absorb that overhead and net out 60 to 70 points, or you can work here at the firm, and then you don't actually have to manage and deal with all that stuff, which takes a mental toll and other stressors for those who want to run on their own. And so, I'm envisioning some advisor who's listening who runs a great, lean practice and is doing 75 or 80 points or more. Cool, that's if you want to build your own thing and just, I'm presuming in practice, just you're getting the folks who don't necessarily want to have to build all that infrastructure and the rest. And says, "If I can get most of the net without needing to do all of the rest of the building, staffing, hiring, office, tech, and the rest, cool, Marc. You do that. I'm going to get me some clients."

Marc: Exactly, I'd say with the added caveat or with the added benefit of if they participate in the...because this math I did just do. But if they participate in the firm-assigned bucket, if I take their total compensation...so what goes to their checking account and load in the benefits and assume for rent and things like that and then apply it to their advisor-developed revenue number, they're into the 80s in terms of total value relative to the revenue that they've developed directly.

Michael: And how do you think about capacity for advisors? Is there some point where they're done on the number of clients or at least they're done on what the firm is assigning them for clients, "you can go get more of your own if you want and you get a good payout for it, but you're at the okay level, so we're not giving you any more firm-assigned clients." Are there thresholds or targets like that that you think about?

Marc: So, yeah, there's really only 1 advisor in the firm that's in the category or in the circumstance I think that you're referring to. So, the numbers that I've seen from the industry is something like 100 to 125 clients or something like that is where the typical advisor should probably max out at. And so, the running conversation I'm having with him is to think about doing what I did when I first started in the business back in the wires. From the beginning, I did not want to build a practice that had 1,000 clients. I wanted to build a tighter practice. And so, what I did for my 14 years in the big-firm world was whenever I got some business development done, I was going after clients that were above my average. I bring in... that client came in above my average. I would then immediately go back to my client list, go to the bottom of the client list, and then partner with another advisor in the office to say, "Here. You take these 2 clients and go take care of them. Give me a split back. And they're all yours." And so, I guess from the beginning of my career in this business, I've been doing what it is that we do...we do a version of that basically at Fairhaven.

Michael: So, every time you take a new one on, you take one above the line, you let 1 or 2 go below the line, but you would try to send them to another advisor that would still give you some kind of split rep code in the BD world.

Marc: Exactly.

Michael: Share a portion of the revenue back since effectively at that point, you're kind of doing a mini-partial sale on the value of the client relationship for an earnout if I think about it from a business capital transaction.

Marc: Yeah, yeah.

Michael: You'll get the client. You pay me the referral, solicitor, lead gen, partial earnout, whatever you want to call it. But then you're always growing your revenue because you're adding one above the line when you subtract below the line. So, the revenue of your book should grow. And you're actually getting partially paid on the ones that have come off the book at the bottom.

Marc: Exactly.

Michael: But then just you can...revenue keeps growing and you don't have to grow the number of clients and feel like you're drowning.

Marc: Exactly.

Michael: Do you ever get stuck with the just...I know for a lot of us, the ones at the bottom are often the ones who've been with us the longest because they joined us back then when we didn't have any minimums so we could take anyone that we could get. A few of the really early ones grow big. A lot of the really early ones don't. So, did you ever have issues or concerns of some of the ones below the line might've been with you a long time and now you're asking them to leave and step off the bus?

Marc: Yeah. So right. That can be a hard conversation. In the Fairhaven world today, I'm not going anywhere. So still here, just being serviced by part of the team. And I'm a big fan of being candid. And so, to let them know, "Look. You're going to get more attention and more service from X, Y, Z person. I'm not going anywhere, and we can talk whenever we want to, but this is going to be better. It's going to deliver you a better experience." And so, I would say just getting out and just saying it. And so far...

Michael: Which is the hard thing to say. They get…It is hard to actually sit across a client and say, "Yeah, the truth is I'm going to connect you with Jim in our office because Jim's going to give more attention and better service than I do." That may be true, and it actually makes the client feel better, but you have to actually say that with a straight face about yourself, which is hard for some of us.

Marc: No, you do. You do, you do, you do. Back to that sincerity and being genuine. The opposite gets sniffed out immediately. So no, you need to mean what it is that you're saying. But so far, I have not had any clients throw the proverbial glass of water in my face and storm out of the office. They've understood that.

Michael: So, you kind of talked about what happens at the high end. You can do the one-on, one-off sort of thing or one-on, two-off if you've gotten too far already and kind of right-size the client base while you still grow revenue. How does it happen at the other end when advisors are getting started? How do you ramp them up initially to get them to a reasonable number? The challenge, always and forever, of percentage revenue payouts, it's really hard when you're getting started because 60% of 0 is 0.

Marc: Right. That is a very tough one which I don't have a good answer for at the moment. So, I have distilled...I had this folder that I'd carried around with me for the entirety of my career of clippings and notes and things about business development and overcoming objections and time management and all this other stuff. And we actually put all that together into a formal team handbook that we use for both our internship program and for the...our 2 most recent hires are younger people in the industry. And so, I've put that together as a tool to try and help them in growing their own practices. But it is...that is a tough order to fill. Developing a financial advisory practice from 0 has not gotten any easier. And I don't know that there is an easy answer to it. It's just hard freaking work.

Michael: So, are all the advisors who are with the firm all people who had already gotten going to some extent and had some clients or revenue already?

Marc: They had. They had. I think other than the 2  that I'm thinking about, I think it was something like $30 million or something like that was going to be the...was the size of maybe the smallest advisor that joined us as a recruited advisor. So, they had enough going and were professional people that the firm really helped them in getting them more clients and more revenue to take care of. And then they've grown from there.

Michael: So, you're not necessarily hiring advisors from scratch into this. This might be an advisor that...I've got [$]30 million. It's pretty good dollars in revenue, but now I'm really whacking that threshold where I have to start hiring more people and getting a bigger office space and building all this stuff, and I don't really actually want to do that and deal with that. So, if I call Marc at Fairhaven, I give him 40% of my revenue, he solves my problems.

Marc: Exactly. Exactly.

Michael: And that's kind of the recruiting transition and structure?

Marc: Yeah, right. I'd say in a nutshell. People that have not run businesses I think would be surprised at how much work goes into getting a website developed, getting marketing materials put together, hiring staff, going through compensation reviews, building out an office. All the things that...and I'm just scratching the surface of all the things that go into running a business so that a person...so that an advisor can be out there in the front lines talking to clients, having meetings, and then going home and not worrying about any of that other stuff.

How Cold Calls Helped Marc Acquire Firms And Develop ‘Protective Puts’ For Outside Practices [57:27]

Michael: So, what's the difference for you between recruiting and acquisitions? Because you've talked about both, but what's the difference between acquiring a $30-million advisor and recruiting a $30-million advisor?

Marc: Probably just age of the advisor. In both cases, we're looking for similar things. We're looking for a similar philosophy from a financial planning perspective. We are looking at a similar philosophy from an investment perspective. We're clearly looking for somebody that's comfortable with our approach to marketing. In fact, that is the lead on any of the acquisition or recruiting conversations that we've ever had. The first thing that I say to people is, "Well, here. You've got to go watch one of these videos because if you're not comfortable with this, that'll end this conversation immediately because that's not changing."

So, personality fit. When people come into the office that are considering joining the firm, the first person that I ask an opinion of is our receptionist. And she's not shy about what she thinks.

Michael: So, what literally is the difference between recruiting and acquisition for you? Recruiting…you don't get paid anything. Just I'll get your revenue and then you get 60% of it back and that's the deal and the split and I make the decision if that works for me based on my own cost and overhead, and acquisition is some kind of capital transaction with a big old check? Is that the distinction here?

Marc: Yeah. So, the acquisitions have varied. There have been some that have been big old checks and others that have been…just worked out over time. So, they've all had their own flavor, I'd say, to them. So, some advisors have been looking for the...they want to get paid right now, they want to transition their clients and a year later, they want to be gone and retire doing something else. And then the other end of the spectrum, we've got an advisor that's been doing his own thing for a long time and as part of his step towards retirement, he wanted to get integrated with the firm, get his clients comfortable with the firm, his administrative assistant comfortable with the firm and is planning on kind of slowing down just over time. And then the...so the recruits, the recruited advisor, there's been some level of dissatisfaction wherever they were looking for a new home.

Michael: That's what makes you change. That's why you're in the market. So where do you source them? Where are you actually finding advisors looking to sell or be recruited?

Marc: So, 4 of the 5 acquisitions are a result of cold calls.

Michael: Of cold calls?

Marc: Cold calls. Cold calls.

Michael: Who do you cold call and where did your cold-call list come from?

Marc: There's a Bear Brothers video on that too. So, yeah. That's how I developed business when I was at the wirehouse. I added it up one time. I've sent out 67,000 invitations to seminars during the course of my career at the wirehouse. I don't have 1 client to show for that effort, not even a former client. So, I'm 0 for 67,000 on seminars, but the phone worked. And so, I'm comfortable with that. And so, what I was doing...back to that 3 years of preparation and leading up to going independent, I would cold call RIA firms in greater Chicago. And this was the script. "My name's Marc Horner. I'm calling from X, Y, Z wirehouse. I've been in the business for 12 years and I'm going to be in the independent world one way or another, probably sooner rather than later. And I would love to be able to come by the office and get some feedback from you about what it is that I need to do in order to be prepared and what lessons that you've learned and to try and get myself ready to go as quickly as I can."

Michael: So how many people or how often did people actually say yes to this? "Okay, I guess I'll do lunch with you, total stranger man."

Marc: More times than not. More times than not. So, if I got somebody on the phone...I'd say that's part of the beauty of our industry in my experience. Financial advisors in my experience are incredibly generous with their time and sharing. It didn't always result in some lunch or some big deal. It frequently...it was maybe a longer conversation where they threw out some ideas and you might want to go look at this, you might want to go join the FPA and get to know some people there. But no, more times than not, people were helpful in what it is that they...what counsel they shared with me.

Michael: But how did these turn into acquisitions?

Marc: Yeah, okay. So going to that. So, one of these cold calls… I stayed in touch with that person. We developed a document called the Protective Put, which is a succession planning document that's 2 pages long that basically is a free insurance policy for an advisor to protect the value of their practice. And so, it's an agreement that says, "I agree to pay your family X percent of the revenues of your firm if you choose to exercise a protective put or if something happens to you, that I'm going to work with your administrative team to take over those client relationships so some value can be preserved, again, for your family." So, the cold call led to then getting together for breakfast periodically. Then maybe we played golf from time to time. Then I went independent, stayed in touch with them. That then morphed into the go-ahead and signing the protective put which then morphed into, "You know what? I think maybe I'm just going to join the firm just outright and just skip ahead with all this stuff and simplify my life." And now he's in Florida for 3 months.

Michael: So, the protective put, this isn't an advisor who works with you?

Marc: Correct.

Michael: This is a stranger or a prospective firm you might acquire that you call them and say, "If something happens to you, I will buy out your firm I guess I'm noting...on a percentage of revenue basis." So, I guess strictly speaking if the clients don't come, you're not actually obligated for anything although, obviously, you want to buy it so the goal is to keep the clients.

Marc: No, exactly, exactly. I would sign 1,000 of them today because there is...no money exchanged hands unless revenue is flowing.

Michael: So, what's the percent? How do you strike that deal?

Marc: Yeah. So, that was 5 years ago. So, I want to say it was 20% of revenue for five years or something like that. So completely at a total discount to what a firm might otherwise be valued at. But again, in that scenario, somebody's either dead or...

Michael: Well, yeah. If you're dying with your boots on, your alternative is a hard 0.

Marc: Exactly.

Michael: When you're gone and everything's out. So, if you're planning on riding off into the sunset anyways, I guess just anything's better than a 0. And you won't be around to have to deal with it, so someone else's problem. If they get my spouse and kids anything more than the 0 I was going to get, that's a pretty good deal if I wanted to just maximize my income by staying an advisor as long as I can.

Marc: Exactly.

Michael: Okay. Interesting. And so, you said you've done multiple acquisitions. So again, the early ones, the cold call was, "I'm thinking about going independent and leaving a wirehouse. I'd like to get some feedback from you in order to be prepared and lessons you've learned and so forth." So, what are you doing now? What's the cold call now? Is it this whole protective put conversation? You're cold calling for protective puts?

Attracting Acquisition Partners And Differentiating By Self-Publishing A Financial Planning Magazine [1:06:06]

Marc: Yeah, so we typically aren't leading with that. And the whole pandemic pretty much killed our...or delayed, postponed our work there. I'd just gotten back on the horse recently on the inorganic stuff. And so, what we lead with there is we started self-publishing our own magazine a few years ago. So, I just can't stand the canned newsletters, slap your logo on it, and some joker is writing something about some article. To me, that's just a complete waste of time and money. So, we started doing our own magazine which is organized around various financial planning topics. It's photo heavy. My sister and her husband are both professional chefs, so we've got a recipe in there for professional chefs. And so, we try to make it...like everything else that we do, we try to make it have some level of enjoyment. And so, we use those to send those to advisors that we might want to get in front of to talk about succession planning. So, to try and put in front of them immediately, "Hey, this is one way in which we're different."

Michael: Oh, interesting. So just to literally say, "Hey, this is something we produce for clients. Thought you might be interested if you ever wanted to work with a firm like ours. Just this is a way that we show up unique and different." I get Ken Fisher's messages sometimes too because apparently, I live in a decent ZIP code, but do you just start sending it to people? How do you explain it to them?

Marc: Yeah, so we don't explain. Yeah, so we don't explain it. So, we put a handwritten note. We're huge fans of writing handwritten notes. That's how we do a lot of my client meetings is via handwritten notes or client reviews. Pretty much what you said, "Thought you might find this interesting, and it's a way we differentiate ourselves." That goes in the mail. We also started cold mailing those magazines to our Wheaton, Illinois, and Glen Ellyn, Illinois, ZIP code. And so those go out to...I think that mailing list is 3,000 households in Wheaton in Illinois. So, the whole rumor that print media is dead, do the opposite. Do the opposite. If everybody's putting out pictures of couples running on the beach, give them the Bear Brothers. Do the opposite to try and stand out.

Michael: So just how do you produce said magazine? You didn't talk about a magazine publisher on the staff org chart.

Marc: No. So, we self-publish it. So how we round out the content is...so our branding guy developed our logo, coordinated the artwork in the office, takes care of the website, he assembles the magazine. The content we get from...either we self-produce or we partner with various organizations. So, the general outline of the magazine is going to be...there's going to be a financial planning topic, an investment topic, something on healthcare, something on entrepreneurship, something philanthropy, the recipe. And then what we do is we reach out to clients to say...so on philanthropy, we reach out to clients to say, "Hey. Do you have a favorite charity that you would like to have profiled in a magazine for free?" And they say yes and then introduce us and then we connect with another organization. They go ahead and either send us the article that they would like to have written or we work with local college students to do the ghostwriting for us, and then we have the entity that's being profiled send us a bunch of pictures, and then our branding guy lays it all out and sends it off to the printer, and away we go.

So we always start with clients. So, to start with clients, their company wants to get profiled in a magazine. And then we'll produce an isolated PDF for them to put on their website, say, "Hey, we're appeared in the Fairhaven Journal." So, yeah. It tends to...I don't know about write itself, but we draw from a bunch of different resources in order to fill out the content for the magazine.

Michael: How often do you create these and send this out?

Marc: 2 times a year.

Michael: Okay. So, it's not like you're grinding on this on a monthly basis to meet a publishing schedule?

Marc: No, no. And so there, again, consistent with the Million Dollar Cup of Coffee survey, I asked a handful of clients when we were thinking about doing this. I said, "We're thinking about publishing our own magazine. Some come out monthly and some come out quarterly." And it's pretty funny listening to clients to then say, "Who cares what other people do? I don't want to read a magazine every month. Once a year sounds like too little. Four times a year sounds like too much. Why don't you do it 2 or 3 times a year?" And so that's what we do.

Michael: And so, I guess not a ton of pages? This is a 20 or 30-pages kind of thing? I'm just envisioning sort of 2-page spreads on all the different areas.

Marc: Yeah, they end up being about 40 pages long, each of the magazines.

Michael: Okay.

Marc: Lots of pictures.

Michael: Okay. And then just what does it cost to do this? How do you literally print and mail a magazine because I'm assuming you don't want to do that internally and have someone stamp and address a couple of thousands of these.

Marc: We pay our branding guy…you know as far as the cost goes, we pay our branding guy $36,000 a year. The producing the magazine...so when we cold mail 3,000 copies and then we'll produce another 1,000 for the...so we're printing 4,000 magazines. I think that's around 12 grand to get that done.

Michael: That's not a big number.

Marc: It's not that bad.

Michael: That's printing and postage and just all of it?

Marc: I think that's just printing. And then I think postage is on top of that. So probably postage is probably going to be another 3 grand. So probably printing and mailing 4...printing 4,000, mailing 3,000 magazines is probably something like $15,000. And then the branding guy is just...he's on retainer. So, he doesn't bill per project. Yeah.

Michael: So, and so there's a service you use where you...branding guy sends them a...it says here 40-page PDF. It's probably not literally a PDF. A 40-page digital file and you just send a file and a big, old list of addresses, and they do all the rest.

Marc: Exactly. Exactly.

The Surprises Marc Encountered On His Journey [1:13:27]

Michael: So, as you look back on this journey, what surprised you the most about building a billion-dollar advisory business?

Marc: Yeah, there have been so many surprises along the way. But the first practice that I acquired, after his employment agreement was done, he filed for unemployment benefits against me. So, I talked to 2 employment attorneys both of whom said...both of whom independently said, "Okay, number 1, I'd never heard of somebody selling a business and then turning around and filing for unemployment against the person or company that bought their business. So that's a first. Number 2, even if you knew he was going to do this, there's nothing you could've done to prevent it because you can't put that language into a contract. And number 3, we can't take your case because you work in Illinois which is so employee-friendly that you're going to lose. So, we understand if you want to defend yourself, but we cannot charge you for this."

So, I ended up defending myself and I lost. So, I had to pay unemployment benefits to somebody that I bought a practice from. So that was 1 surprise.

Michael: So, what did that...do you remember, what did that cost? What did that add to the purchase price of the business?

Marc: I ended up making it awash because part of the deal...part of his deal was a seller note.

Michael: Okay.

Marc: And so, when I got the unemployment notice filing, I called him up and I said, "What's going on here?" And he said, "Well, I need more money. I'm open to ideas." To which I said, "Well, I'm pretty sure Walmart's hiring down the street, so you can probably go be a greeter down there." And he didn't like that. And so, then I told him, "Well, I still have your note here that I've got to pay out. I'm just taking this out of the note." And he said, "Well, you can't do that." And I said, "Watch me." And so, we ended up going to mediation and I got the note reduced. So, it ended up being a wash, but again, who would've thought that's what happens or that's what can happen when you buy a practice?

I'd say the thing that, 8 years into this, that I'm still stunned at is how...I've got a lot of friends in the wire world. I cannot believe that more of them have not made the jump. I just can't...I understand it if somebody's maybe in their 60s and it's just not worth the hassle, "I'm going to see this through." But if somebody's an experienced advisor and they're in their 40s or early 50s, I don't understand it. The opportunity in the independent world, the freedom, the flexibility, the fun of being able to go out and try things that you couldn't even think about trying in the wire world is so...it's intoxicating in the independent world. That more people don't...more advisors don't pull the ripcord, I just do not understand. So, I'm surprised, totally surprised at that.

Michael: Any guesses from your end why so many do stay? You did spend 14 years on that side before the independent side.

Marc: Yeah, I did. I did. So, in hindsight, they do a really, really good job of getting you to drink the Kool-Aid that you're in the best firm and that if you think about going independent, get used to changing the toilet paper and swapping out the printer ink cartridge and all this other stuff that you don't need to worry about right now. So, they do a very good job of pumping the advisor world full of that thinking. So, my guess is it's a combination of that, and then the status quo is always easier, and a little bit of the fear of the unknown. So, my guess is it's those 3 things.

The Low Points Of Marc’s Journey [1:17:58]

Michael: So, what was the low point for you on your own journey through this?

Marc: I've not in 8...again, in 8+ years, I have not had a single moment where the thought has floated through my head, "What in the world have I done? I need to get back to the big-firm world immediately." So that thought has never floated through my head.

Michael: Was there a low point in the prior world that helped spur or led you to this outcome?

Marc: Yeah. So, I didn't...in my own move, I was not running from something. I was running to something. So, I am thankful. I am very thankful for my experience in the wires and what I learned. It gave birth to the Bear Brothers, for crying out loud. So, but I'm very thankful for the...and the relationships that I've got there. And so, I really...there was not any sort of I was forced to do things I didn't want to do and I have to live in a fiduciary world. There was none of that. It was I just saw and continue to see far more opportunity, freedom, flexibility in the independent world than the captive world.

But I would say a low point has been…I'd say being frustrated with the legal system that, unfortunately, I've had a couple of experiences, the filing for unemployment being one of them where what's going on is just so blatantly not right and there's nothing to be done about that. It's, unfortunately, just the way that it is. I didn't have to deal with unemployment claims when I was at the wirehouse so I didn't see any of that stuff.

Michael: Right.

Marc: And so, I've gotten to...being out on my own, I have gotten the chance to see some of what goes on in the...what can go on in the legal world and it's incredibly disappointing. So, but yeah. As far as my move to independence, there's no chance I'm going back. I absolutely love what it is that we do.

Michael: I'm just chuckling from your comment earlier. No, it's not true that when you go independent you have to deal with all the ink cartridges and scrub the toilets, you just have to deal with the bogus unemployment claims.

Marc: Exactly. Exactly. I might trade the toilets for the unemployment claims. Yeah.

The Advice Marc Would Give To His Former Self And Younger, Newer Advisors [1:20:40]

Michael: So, is there anything else of what you know now living in the independent channel that you wish you could've gone back and told you 10 years ago when you were starting to think about this?

Marc: Well, there's that phrase that I think I've heard a million times that "I wish I'd done it sooner." I looked really hard when I... I made a move from 1 wire to another in 2008 when the old financial crisis was going on, and I looked really hard to going to the independent world at that time and I just didn't have the stones to do it in 2008 when the financial world was coming unglued. And so, I think it's easy to look back 8 years into it and think, "Well, no, I should've done it then." But I don't think that's reality. That would've been incredibly difficult to do in 2008. So, I don't think the whole idea that I wish I had done this sooner really flies.

Yeah, for an advisor starting fresh in the business, could I have skipped over my wirehouse experience altogether and just started in the independent world as an advisor? And I'd say the answer is a definitive absolutely not. I needed that environment to get started, get some experience to then build to the next step. So, I don't know that...I don't know what would...sure, I've made some...we've hired 2 social media marketing companies and wasted a bunch of money on that. Been complete failures, both of them. So, I'd love to have that...

Michael: Did you find a 3rd that worked or did you give up on social media at that point?

Marc: So, the 3rd swing I took at it was to go ahead and hire somebody full-time to do it in-house, and, unfortunately, we had to let him go because it just wasn't getting the...the cost did not...the results did not warrant the costs. So, he did...I told him...and it was a very difficult conversation. This is somebody I went to college with, I've known for a long time. I hated every second, yeah, I hated every second of the conversation. But I told him of the 3, he did the best. It's just not additive enough to warrant the expense. So, yeah.

Michael: Because you're just literally looking up here's how much new client revenue we source from our social media activities and here's my salary plus benefits to pay you to do this and the math just wasn't working? Were you getting some results and it just didn't add up enough or were you just not able to figure out how to move the needle on social media at all?

Marc: Very, very little. Very little. Yeah, very, very, very little results. And actually, LinkedIn sent me over the edge when I was on the fence of making this decision. I got one of these emails from LinkedIn, just a general email not to me personally. But it said...it was making the argument for how important it is to post more than once a month. And I read the email and we posted 5 times a week. And so, we were way more active than what they were advocating. And so, I read that and thought, "Well, if I can dial it down to once or twice a week, I'm still way ahead of what they're advocating."

Michael: So, their email to try to get you to do more actually made you feel like you had permission to do less?

Marc: Exactly.

Michael: Probably not the intention of their campaign but hey, that's why you've got to be careful how you do it.

Marc: Right. So yeah. Plenty of decisions that I'd love to have to do over again but again, in hindsight, I think that was the...those were the right decisions to make at the time. And you can't walk through life trying to make decisions knowing what the outcome is going to be, you've got to step to the plate and make decisions with what you know at the time.

Michael: Right. So, I'm curious what your advice would be to younger, newer advisors coming to the business today. Would you advocate young people getting started today to go to the wirehouses to start their careers there as you went and found so foundational?

Marc: Yeah, so actually I deliver this speech to our intern class every single summer. I started my career in the commercial banking industry out of college. And so, I went through a training program there where they rotated you through retail banking, retail lending. I went to the credit analyst school and so learned how to underwrite loans for businesses, work with business owners. The banking business to me is...or for me anyway was a fabulous foundation and the banking industry is infinitely more forgiving than...and tolerant than the traditional financial advisor world. So, for young people coming out of college, I think banking is a fantastic place to start.

Michael: In what kind of job or role?

Marc: Yeah. I'd be inclined to be heading towards some sort of path that's got you working with business owners. So, if you can develop experience early in your career being comfortable working with businesspeople, I am confident that will serve you well in a role as a financial advisor down the road if you choose to go that way.

Michael: Does that mean trying to find a financial advisor job at a bank that has business owners or are you talking about other banking roles?

Marc: Yeah, actually I'm talking about not financial advisor stuff. So, if a young person coming out of college...again, what I tell our interns is if you...the exposure that you got here and your experience at Fairhaven makes you think that a financial advisor role is something for you, I think you've got to go 1 of 2 directions. Either go to a commercial bank. Don't go to be a financial advisor. Go to learn about working with businesses as a banker, as a lender. Learn what debt means for companies. Work in capital lines of credit and term loans and mortgages and home equity lines of credit.

Michael: This is kind of like being a mortgage officer or being a commercial lending officer…

Marc: Commercial lending officer. Absolutely. Yeah, learn about the world of money starting there or find a firm...again, we made a hire out of our intern program and we're not holding her to production goals or anything like that. We're making the investment in her that I think she has what it takes to be a financial advisor longer term. I think finding that role is a lot harder than going to find a job at a big or a community bank as a commercial lender. Start there and then make the transition into the financial advisor world maybe after you've had a handful of years of experience in the financial world in banking.

What Success Means To Marc [1:28:19]

Michael: Interesting. Interesting. So, as we wrap up, this is a podcast about success. And just one of the themes that always comes up is the word success means very different things to different people. And so, if someone has built what anyone would objectively call a very successful billion-dollar advisory firm, how do you define success for yourself at this point?

Marc: Well, I'd say a couple of different ways. My fundamental thesis about moving to the independent world was that there was more opportunity there and that I felt like...the grid at the wirehouse, in round numbers, is 40% of the revenue that an advisor develops, is what they're compensation is. And so, 60% of the revenue, the firm is making decisions about. I felt like there was more opportunity in the independent world and that if I was in charge or largely in charge of making decisions about what to do with the revenue in terms of creating an experience for our team, for our employees, for our clients, that I could do a better job making those decisions for my small world than the wirehouse management in New York was making for me. Rightfully so. I don't think anybody in New York spent any time worrying about Horner in Chicago. But I would say 8 years in, that thesis fundamentally I think has been proven true. And along the way, we've created a culture that, again, the firm pays for 100% of the benefits for our employees, that our employees describe as a...one of my favorite descriptions from the team is that they've described our culture as one of mutual appreciation.

And so, creating an environment that...where the team feels rewarded, where the clients are giving feedback that we're fun to watch and that, so far, I've been able to do that without sacrificing relationships at home. If I make it to this summer, this will be a 30-year wedding anniversary for my wife and I, and we have 4 kids. The oldest just started working here. So that that's been done, that business stuff has been done without sacrificing the family stuff, I think about success in those ways.

Michael: And how does the business stuff come about managing that much family stuff along the way? 4 kids is not a lightweight load on top of everything else you're talking about here.

Marc: It's not, it's not, it's not. But our daughter, our oldest...we've got 2 boys, 2 girls. The oldest...our oldest, our daughter just, again, who started working here, 5 years ago, she played college volleyball and she was a freshman at a school in Ohio. And my wife and I...so 5 years ago would've been 3 years into building the...into starting the business. So, 3 years in we didn't miss 1 college volleyball game of her time there. Either me or my wife, mostly both of us were in attendance at every 1 of those volleyball games even though that school is 5 hours away. And so, I'd say the answer, though, to the question is to make it a decided priority that no matter what's going on in the business, even if you've got an unemployment claim that you've got to fight, you're walking out the door in order to get on the road to go see your kids play volleyball. And so, you've just got to make it a hard priority.

I saw something recently on Netflix about...1 of the founders of Netflix talked about how Tuesdays at 5:00 were always his date night with his wife and that that was well known from the start of that business, that that was well known that on Tuesdays if somebody had some issue that they needed to talk to him about at 4:30, they better be comfortable getting it done walking alongside him as he was going to the parking lot because he just...he kept that date night promise. So yeah, I think you've just got to be intentional about that.

Michael: Very cool. Very cool. Well, thank you so much, Marc, for joining us on the "Financial Advisor Success" podcast.

Marc: Great being with you, Michael. I love the stuff that you do. I love...been a big fan of yours for a long time. I had to sort of pinch myself when I got the invitation. It's great being with you.

Michael: Awesome. Thank you. Thank you, Marc.