#FA Success Ep 355: Scaling Worksite Financial Planning As An Employee Benefit For The Average Worker, With Brad Arends

Resources Featured In This Episode:

• Brad Arends
• Intellicents Inc.
• Intellicents Bionic Advisor
• eMoney
• Salesforce
• Schwab Intelligent Portfolios

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Full Transcript:

Michael: Welcome, Brad Arends, to the "Financial Advisor Success" Podcast.

Brad: Thank you. Thank you. I'm flattered to be here.

Michael: I'm excited about today's conversation and getting to talk about this what, to me, is an interesting ongoing convergence of what historically were some very separate channels of what kind of the wealth management end of the business did for individual consumers and what the retirement plan business has done in the world of small and large businesses on the 401(k) side. I feel like for a lot of the past 20 or 30 years, these were really separate channels.

One of the big focal points for folks in the wealth business was we would work with retirees and pre-retirees because nobody could manage the money or give any advice as long as the money was held in a 401(k) plan. And retirement was like this grand transition rollover event where all of a sudden, the money was liquid for the first time and an advisor could manage it and work with that household. And that became a place where so many of us focused.

And now we seem to be transforming into this world where more and more retirement plan advisors saying, "Wait a minute, we've already got the 401(k) plan. We already have a relationship with the plan participants. Maybe we should be doing more of this wealth management stuff to them directly."

And I know that you've lived a lot of this journey coming from the retirement plan advisor side with many decades in the business in the retirement plan world and morphing into the wealth management side. I'm excited to talk about what that evolution looks like, and I guess just understanding, because so many of us who listen to this podcast have spent our careers on the wealth management side, what it's like on the retirement plan advisor side, and how different it is or maybe not to come from retirement plan business into the wealth management business.

Brad: There's no doubt that convergence is happening really between retirement wealth and health. This is not something that came into being over the last year or 2. It's really at least 5 or 6 years old and it's in full force right now. It is for a number of reasons.

I would say, first of all, the economics. As a retirement plan advisor, we do have intimate conversations with participants in retirement plans. And yet, we've consistently walked away from that in the past. And on the other side of our economic side is there's been dramatic fee compression in the retirement plan space, not just with recordkeepers but also for advisors. I mean dramatic fee compression. And so, it was looked at as a way to replace some of that lost income that all of us have seen.

How Brad Dealt With Dramatic Fee Compression In Retirement Planning [06:47]

Michael: So, help me understand a little bit more on that end. Just, in the wealth side of the world, the industry has been talking about fee compression for certainly 10-plus years because we're now more than a decade out from the infamous launch of the Betterments and the Wealthfronts of the world that were supposed to obliterate advisor fees down to 25 basis points. Even before that, just the rise of computers and internet. There's been a discussion out there for a while of fee compression is inevitably coming for the wealth managers.

Yet in practice, it's basically been nonexistent for 20 years. Some advisors charge outrageous fees and they have struggled, but if you look at industry benchmarking studies on the wealth side, the median advisory fee was 1% last year and 1% 5 years ago and 1% 10 years ago, and 1% 20 years ago. It has not moved at the median level.

How has that been different on the retirement plan advisor side? We talk about fee compression for wealth, but it isn't really happening. What did fee compression look like in the retirement plan world as it seems to have really played out there?

Brad: Well ironically, it's started on the recordkeeping side. And on the recordkeeping side, there was what we called revenue sharing, which was fee sharing from mutual funds used to fund a 401(k) plan. And the awareness that was happening really caused us, as advisors, to look at that because that money was extra money to the recordkeepers. And we, as an industry, felt compelled that we needed to go and get that money on behalf of our clients. And we did that.

And as a result, we, the retirement plan advisor, reduced recordkeeping plans significantly. And our clients were really, really happy about it. But then they said, "Okay, what about your fees?" Yeah.

Michael: While we're on the subject of compressing fees...

Brad: Yeah, that is what happened. We ended up taking all these plans out for bid from a recordkeeping standpoint and I mean the significant fee reductions... I mean, by significant, I'm talking over 50% and sometimes it was a 60% to 70% reduction.

Michael: So, what were those costs? I mean, from what to what? That's because the retirement plan used to get 1% and now it got 50 or 40 basis points? Is that the scale or are the numbers all different in the first place?

Brad: Well, the recordkeepers, generally, you had 2 camps. You had the recordkeepers that would charge a per-head fee.

Michael: Okay.

Brad: And then you had recordkeepers that would convert that into a basis point fee. And then you had recordkeepers, which was probably the vast majority, do a little bit of both, kind of a mixture. And then they had... And those were the fees that they put in their contracts. And it mentioned nothing about this revenue sharing that was coming in from the mutual funds. And that was going to be anywhere from 25 to 35 basis points. Significant. And they kept that money, the recordkeepers did.

Michael: So, what ultimately drove the shift? Because I'm trying to remember. I think it was 2010 that the Department of Labor started doing some of their new retirement plan fee disclosure rules. Was that the catalyst that started putting the focus on this or did the market kind of get there independently on its own?

Brad: Well, that wasn't the beginning, but it just stretched it and it just went everywhere. The best advisors learned about this, and we started being advocates for our clients that really that were coming out of plan assets and really, that should be put back in the plan.

Michael: So, that was that was the whole domain when the 408(b)(2) disclosure started coming out and so you're beating the drum like, "We got to get the disclosure documents and then we're going to pour over them and scrutinize them and we're going to find the dollars for you to save you, Mr. and Mrs. Plan Fiduciary, on all these costs. That became the focal point.

Brad: Exactly. And the Pension Protection Act just made it real. It forced it. Where we were going out and, from a competitive standpoint, we would go in and we would tell a prospect... we'd ask the prospect whether or not they knew about this revenue. And uniformly, they would say no. And we would say, "Well, let us do a study." And we would show them how much money was coming in. And without question, the plan sponsor wasn't happy about it. And secondly, would then hire us to do it for them. And the Pension Protection Act just made it a legal requirement.

Michael: So, I'm struck by that interesting effect, retirement plans have their own dynamics around how fiduciary duty laces in and the impact of ERISA fiduciary that the regulators didn't actually have to come in and say, "We're banning all these rev share agreements." They just made everybody disclose them and then all the fiduciaries came in and fee compressioned it out of existence all by themselves anyways. Maybe that's oversimplifying. But I feel like that seems to be how it played out, because there was a "fiduciary overlay" to this, I'm putting air quotes, all the regulars had to do was start creating some of these mandatory disclosures and force the information out there. And then the marketplace started doing its thing.

Brad: And what the Pension Protection Act did is it really forced the advisor to ask these same questions of plan advisors. And we ended up having to benchmark our fees. And as a result, fees have come down in an enormous way for retirement plan advisors.

Michael: So, it started that recordkeeper business got squeezed. Then it rippled down to the retirement plan advisors advising on the plans as well. So, I think you said the recordkeepers saw as much as 50% price cutting. How much did it show up as an advisor with retirement plans? How did that fee compression play out for you?

Brad: It did a couple of things. Number 1, it forced us to move to a flat fee in many instances, where the industry was uniformly pricing on basis points. It forced us also to look at the services that we were delivering for that fee because it could vary depending upon the advisor and depending upon the services that the plan sponsor wanted.

So, for example, for a $50 million plan that just had an advisor really handle the fiduciary side of the plan, which would be 4 meetings per year, 4 meetings with an investment committee, and it was not unusual for that fee to be 6 figures. Today, if you're only working at the plan level, that's probably a $40,000 flat fee. And maybe less. There may be advisors that come in less.

Michael: So, a similar 50-plus percent price compression, at least at the high end. Because at some point, someone's just coming in and saying, "Yeah, I appreciate all the work you're doing, and we have a lot of dollars at stake but come on. You're meeting with us 4 times a year. I can only pay you so much in an hourly rate or an hourly equivalent. Even if we're going to get the in-between meeting work and all the rest. This is just adding up to too much."

So, does that mean most of the fee compression came at the high end, at the larger end? It was the large plans that said, "I appreciate you don't charge a whole lot of basis points but our plan is so large that it's still adding up for a whole lot of money for only 4 meetings a year. Y'all need to change this."? Is that where the pressure compression was showing up the most is the high end of the market or up and down and everywhere in between?

Brad: It was everywhere, literally. It didn't matter the size of the plan. It was everywhere. Now, if you were an advisor like Intellicents, we have some clients where we only work at the plan level. But the majority of our clients hire us for participant services. We don't, or the plan sponsor doesn't use the services of the recordkeeper. We go in and we do all the employee education and advice, actually, there.

And that will allow us to keep our fees not at where they were but that will add significant time that we have to spend there. And generally, we can recapture that fee compression if we do the participant services.

Michael: With the caveat, we can recapture the fee compression by doing a whole bunch of additional work. You're not... You don't get to recapture it for free. You get to, "Okay, if go do more things for the plans, at least we can earn our way back to the fee that we had before but we have to do all this additional stuff to justify it now."

Brad: Now, in practice, Intellicents was doing it before. We'd always taken the approach that we would be the ones that were the best at employee education and advice. So, we had consistently done that. But I would say that our legacy plans, we didn't have as much fee compression as our new plans. When we were going out to bed it was just a new game. And then it was like, okay, who's... It felt like a race to the bottom. It really did. And it resulted in fee compression also on the employee education and advice space.

Why Brad Decided To Refocus His Business On Private Wealth [18:58]

Michael: So, help us understand a little bit more in that direction at least for where the business was historically, and then we'll come to what I know has been a lot of transformation for your firm and the industry overall for the past 5 to 7 years. But if we're going back to early 2010s and prior, you had said you're in so many of these conversations with retirement plan participants in the first place. I think you said, "We have a lot of these intimate conversations with participants already."

But you'd consistently walked away from that business in the past. It was like the retirement plan industry overall had walked away from that industry in the past. So, help us understand more. For all of us in the wealth end, it's just that's what we're trying to do is get in front of people and having to make conversations about money and charge fees for advice.

So, what was it about the retirement plan business and space that made people walk away from that business even as they were having some of these conversations? What was that historical blocking point?

Brad: I would say that we were nervous. We were nervous that it could be deemed a prohibited transaction by the Department of Labor.

Michael: Okay.

Brad: Even though it was uncertain, there was all this talk about if you're going to be a retirement plan advisor, it would be a conflict of interest if you're also going out and selling additional things. And we were nervous about it. I'm not saying that there weren't people that were doing it. There were. But many of us felt that we just needed to kind of sit on the sidelines on that issue until we actually got the word from the Department of Labor that we could actually be involved in both of those transactions.

Michael: So, when you're already trying to thread the needle of not trigger fiduciary issues when you're a big firm selling proprietary plans with proprietary products inside of your retirement plan, maybe you figured out how to manage that balance in a standalone 401(k) world. But the moment you then go and say, "Oh, let's also do wealth advice and we'll cross-sell more of our company's proprietary funds to these plan participants," you're just opening up layer upon layer of fiduciary liability that they did not want when they were coming to it from a less fiduciary, more proprietary world in the first place?

Brad: Well, it was an advantage for us. Where the wirehouses and independent broker-dealers were just beside themselves and went to Washington to try to get this changed, we'd always lived by those fiduciary standards. And so, for us, our biggest headache was developing the technology so that we can prove that everything was in the participant's best interest.

If we were rolling them out of the plan, how are you going to prove that it was truly in that participant's best interest? And just, we had to develop those systems from a tech standpoint and a compliance standpoint to make sure that we didn't have issues there. And we could prove it.

Michael: So, for those who aren't familiar with just how that kind of, I guess, documentation compliance works, what did you have to do? I mean, how do you prove that it was in the client's best interests?

Brad: Well, we built ours in Salesforce. We did it internally. We were just fortunate to come across employees that had a lot of experience with Salesforce, which was our CRM. And if 1 of our advisors works with a participant and 1 of our retirement plan clients is working with them and makes a recommendation to pull the money out of the plan and into an IRA, that system that we built within Salesforce requires them, before they can get paid or actually do the transaction, to provide the proof that this was truly in the advisors...or in the participant's best interest.

And that included going out and comparing costs of the IRA versus leaving the money in the plan. It's mostly that, quite frankly. 

Michael: So now, catch us up in the context of your business. So, you'd been, I guess, in the retirement plan advisor world for a long time. You're watching these fee compression forces swirl around where fee rates are getting chopped by it sounds as much as 50% on opportunities in a relatively limited number of years. So, I was going to ask, what did you do?

But I guess, first, just take us back. What did the retirement plan business look like? What was your business at that point, as you're staring this down and figuring out what's the future of our company in this environment?

Brad: Aside from fee compression, we were extremely concerned about what was happening to the average 401(k) participant when they left the plan. I'll tell you a story. My largest client, we obtained that client in 1986. We actually put their 401(k) in and we did all the employee education, which was not just mandatory group meetings but one-on-ones. We gave advice.

And so, this was probably 10 years ago. I went to 1 of the quarterly meetings. And the CFO of the client, who was a heavy manufacturer, very, very blue-collar, he started the meeting out. He was chair of the plan investment committee. And he said, "Brad, you've done a fantastic job getting our employees to retirement." And I'm just beaming ear to ear. And then he goes, "But then you abandon them and somebody from some broker comes in with a beautiful brochure on this index annuity that has 350 basis points of internal expense and probably 10 years of surrender charge." And he said, "In one transaction, he destroys 25 years of your work."

And it was true. It was happening all the time. In fact, that client, in 1 quarter, had $15 million leave the plan as in-service distributions. And it went 100% into an index annuity that paid a 7% commission.

Michael: Wow. So, you're watching commission-based insurance agents basically raid the plan assets and not even waiting for retirement, getting people with in-service distributions.

Brad: Yeah, exactly. And these are not people that had their own outside fee-based advisor. They're not. This is the American worker. It's the 99% instead of the 1%. And we just became extremely concerned that this was happening. And so, when we looked at it, we said we didn't feel that the private wealth business was going to come down and work with those people.

Because a lot of the private wealth advisors would have minimums that were 7 figures and here you had distributions of $150,000. And who was going to work for them? And was it going to be the fee-based advisors that lived by the fiduciary standard? We just didn't see that happening.

It wasn't going to be the employee benefits advisor. They had no desire to do it. And the commission guys were the people that we were worried about. And that's where we saw all the pillaging going on.

And so, we sat back and said, this system is broken for the American worker. I think we can fix it. We have the investment knowledge to be able to do it. Now we just need to get into the private wealth space. And that's what we did.

Michael: So, this is 10 years ago. Just roughly, when or where are we in the evolution of all the fee compression forces that were starting to roll through the retirement plan business?

Brad: We made the decision in 2015. The decision was, number 1, we're going to sell... We were an independent recordkeeper at the time. We were a big 1. We had 120 people that worked in that division. And we had made the decision to sell that side of our business. And that gave us the bandwidth to focus on getting into private wealth. Because we were not in that business.

Why Brad Decided To Sell His Retirement Recordkeeping Business [30:18]

Michael: So, help me understand I guess the sizing, overall, for advisors who aren't familiar. What... How big was the recordkeeping business? I don't know if you measure that by revenue or plan assets or number of plans. What did that business look like?

Brad: Well, we had 120 employees. Did all of those just do a retirement plan recordkeeping? No. We also processed section 125, flex plans, which kind of went hand in glove with 401(k). And we also had our own HSA that we were doing the recordkeeping and we also did the advisory work on that. And then we were processing payroll for our clients. So, we were very complicated. Extremely complicated. There weren't very many independent recordkeepers like us. We had clients in 48 states.

Approximately 80% of our revenue was coming from the advisory side on the retirement business, where we were the fiduciary advisor for mostly 401(k) plans. And then about 20% of our business, we have a separate division that does group insurance.

Michael: So, wait. So, 80% of your revenue came from the retirement plan advisory side. That's the revenue that was overlaid on the bookkeeper? That was the bookkeeper side of the business, that essentially was 80% of the overall business?

Brad: No. The recordkeeping side, in the beginning, when we got into that business, it was a stepsister business. It really was. And we basically only record kept the plans that we sold. But then in the mid-'90s, I made the decision that we were either going to sell that business then or we were going to have to expand our marketing. And we made our recordkeeping services available to outside advisors. And we had some huge advisors that used us to do recordkeeping for them. So, that business grew to be about 3 times the size of our advisory business.

Michael: Okay.

Brad: And then we sold that business effective December 31st of 2015. That left a business that was about 80% of the advisory business was retirement and about 20% of the advisory business was on the group health. Group benefits, we called it.

Michael: Okay. So, I guess I'm just trying to understand. So, before the sale of the recordkeeping business, that was the main channel of the business. It sounds like this was 75% recordkeeping, 25% was all the advisory and group insurance combined.

Brad: Yes.

Michael: Then, you sold off 75% of the business and kept the other 25% core, which was mostly advisory at that point. Am I understanding that right?

Brad: Correct. And we had about 20 employees.

Michael: All right. So, just walk... So, you went from a business that was 140 team members down to 20?

Brad: Yes.

Michael: All right. So, walk me through that a little more. How do you get to a decision to say, "I predict the future, let's sell 75%, 80% of our business off"?

Brad: Well, we structured the businesses as separate companies. A lot of independent recordkeepers didn't do it that way, but I made the decision early on that these were going to be 2 separate and distinct businesses. And we even had diverse ownership of those 2 businesses. And I did that because I didn't know what was going to happen long term, and I thought that by doing that, that would give us options when it was time to make a decision such as selling part of the business.

Michael: Interesting.

Brad: Why did we sell that side of the business? We had outgrown our technology. We were using basically a desktop technology and we had grown to the point where we needed a lot more horsepower. And that technology was going to cost us millions of dollars. It was going to cost us millions of dollars not only just for the software but then we would have to spend another couple million just getting it programmed. We knew what system we wanted to go with but the thought of spending that kind of money on that, it just was not palpable.

Michael: In the face of immense fee compression at the same time. So, just to be clear, we may have to spend millions of dollars to modernize our tech while we get hammered on fees every single year.

Brad: Yeah. We were making money. We were. You don't make a ton of money in recordkeeping, but we were making money. But it wasn't...

Michael: So, what does that mean in a margins context? What's the margins of a recordkeeping business?

Brad: I would say 20% tops.

Michael: Okay.

Brad: And you have to have a big stable of clients in order to generate a 20% EBITDA.

Michael: Okay. So otherwise, you're living with EBITDA in the teens and then facing all this pressure to make these immense reinvestments into the business.

Brad: Exactly. And then all of a sudden, we got an offer. Really, it was an inquiry. It was an inquiry from our biggest competitor in the upper Midwest and that was a large bank. And I knew the person that ran their retirement division. And he just called me up and said, "Brad, you've got a great business. Please consider us if you ever want to sell it." It was very low pressure.

And we had 3 owners of that side of our business, and we sat down and decided it wouldn't hurt to see what we're worth, what they would pay us. And frankly, that price came back a lot higher than I ever thought we would ever get. Every year, I do my own personal financial statement and it was double what I had carried that as an asset on.

And so, we just sat there and said, "holy cow!" In the midst of all this stuff that's going on, somebody's willing to pay us that much money for this business. And so...

Michael: Does that make you pause? "What do they see about my business that I don't see? What am I missing here?"

Brad: Well, to some extent, yes. And that is that there is a... No one in the retirement business has really ever sat down and said, "Okay, what is the economic value of a participant?" But you can bet Fidelity's done that.

Michael: Yeah.

Brad: You can bet Empower has done that. You can bet that Schwab has done that, in principle. But nobody… I was very experienced in that side of the business, and I can tell you, when we had our conferences, when we had our think tanks, we never talked about the value of a participant. That is not the case today.

And so, I will tell you, in 2015 when we sold, we weren't thinking of it in that way. We were not thinking of it in that way.

Michael: But your buyer was and that's where the offer presumably came from?

Brad: I suspect that. I suspect that, yeah. I suspect that.

Michael: How do you break the news internally like, "Hey, I just want to let you all know, 80% of you are going to be leaving shortly, but the other 20%, we're totally building for the future"?

Brad: Well, the good thing about it is 1 of the reasons that we were comfortable with this is they were going to keep everybody, and they were going to keep the office in the same place. And so, it wasn't going to be something where they were going to take all this business and move it to their location and process it with their people. They wanted us because they had sights on expanding out of their current footprint and they couldn't just do it out of their location. And in fact, they wanted somebody that had a strong presence and was economically sound in small town USA, because we could do it cheaper.

Michael: Interesting. So, relative to, I just think the traditional view of the news comes that a big firm's acquiring your company and everybody's sitting around waiting to find out who and how many people are getting laid off from all the proverbial cost synergies, that wasn't the tone in the context of the deal here. This was someone who was actually really excited to have your people and your offices and your locations and invest into them because it was a growth opportunity for the buyer.

Brad: Correct. The only person who got let go was the CFO but I hired him to stay with our business, the advisory side. So, everybody came out square there. And even though it was a shock, we had in mind, when we were considering this transaction, the best interest of our employees. And the buyer lived up to that.

The Failures And Success Brad Experienced While Resetting The Vision For His Firm [39:34]

Michael: So, you get to the other side of this deal. You've suddenly gone from 140 team members to 20 with what now, it sounds like, is a pretty focused business into working with these plans doing just the advisory side, the investment consulting side, and supporting them on some group insurance as well.

So, I guess just talk to us about setting the business vision, resetting the business vision. I'm struck like, now all of a sudden you have fewer people than you've had in 20 years and more money in the bank account than you've had ever. And a fresh opportunity to decide what to do next.

Brad: We put that business plan together. Ironically, we had never had a business plan, yet we grew to this company with 140-something employees. We just worked hard, came up with a few good ideas, and weren't afraid to be a pioneer. We were not afraid to adopt things before other people did, like getting into 401(k), things like that, putting our own HSA together. We did a lot of that there.

I think that's always been a key thing to Intellicents. And we've kept that pioneering attitude to this day, really. It's not unusual for us to enter a new service before others see the opportunity there. And so, when we did this in 2015, we actually put a business plan together and said, "Who are we going to be now?" And we made up our mind that we were not just going to be a regional advisor, but we were going to try to expand our footprint. And by expand, it was saying, there's no reason we can't go national. And so, we put together a plan to not only have good organic growth but to also do inorganic acquisitions. We also put in that plan a business plan to get into private wealth.

Michael: Okay.

Brad: Now, I can tell you we failed 3 times before we finally got it right. When we decided to get into private wealth, we knew we had all of these participants. At the time, it was 50-something-thousand participants that we were the advisor on. And so, they were going... We had warm leads into 50,000 participants.

And we thought all we have to do, we've been communicating to them for years, we could take our same investment philosophy and apply it to individuals. And even though that may have had merit, what we didn't understand was a service model of private wealth. It was just totally different, and we had no idea how we needed to put that together.

And we also thought that this was just going to be an investment sale and we were wrong there. This is a financial planning sale. And so, for example, when we decided to get into this, I thought I could convert a 401(k) advisor to also take on private wealth clients. I couldn't do that, but we were unable to deliver A-plus service on the private wealth side.

Michael: So, the advisors that were doing plans and talking to plan fiduciaries and the investment committees and such, couldn't also be the advisors taking on private wealth clients directly.

Brad: Not and deliver an A paper on it. And we always say we want to always put out an A paper and we were not putting out an A paper when we went that route. I don't know. We collected some clients, but we were not successful. And it wasn't until 2018 that we stumbled across a father-son duo that had a sustained business based on financial planning, which we hadn't even thought of until we found them. And we approached them about being our solution. And they turned us down. They turned us down and it was...

Michael: You approached them to be the solution meaning you wanted to refer and partner with them, or you wanted to acquire them?

Brad: No, we wanted to acquire them.

Michael: Okay.

Brad: And they would help us build this new business. And the reason they said no is that they were with a broker-dealer that they'd been with for 30-something years. And the father, which was the patriarch of the business, he had a lot of friends there. And just, it didn't feel right to him. He wasn't ready. There was nothing inherently wrong and just, he was uncomfortable. And so, we parted as friends.

Now, the son delivered that message to me. And I'll never forget the son said, "Brad, I know that someday the 2 of us are going to work together." That was his parting comment when he was giving me the bad news. And I didn't really think of it at the time. But 2 years later, I called up and his name is Matt, and I said, "Matt, I'm just calling, checking up to see how things are going." And he said, "Brad, this is a timely call. I'm glad you called. We would like to sit down and talk to you." And 2 months later, the deal was done.

Michael: So, what had changed? 2018 to 2020, 2 years later, is this COVID stuff unfolding and moods have shifted, or was other stuff under influx?

Brad: What had changed for them is there was new leadership at their broker-dealer. And all of a sudden, the friends that they had there either retired or just went in a different direction. And they weren't happy about that. And so, that brought them back.

Michael: Okay.

Brad: Now, they had a very fascinating business model, and this is the reason I really was attracted to them. They had their own RIA. Well, actually, the broker-dealer was their RIA. But they had about 1,200 accounts and about $1.5 million in top line revenue.

Michael: Okay.

Brad: There were 2 advisors, father and son. They had 3 full-time employees that were all licensed, but they had no sales responsibility. Their job was to basically be a relationship manager, to be able to process trades, RMDs, just really help the producers in getting the stuff off their plate so that they could go out and find new clients and service the clients they've got.

When we looked at their financials, I remember they had $1.5 million of top line revenue, and they had $300,000 of fixed expenses. So, they had $1.2 million of advisor comp. You know what the average account size was?

Michael: No.

Brad: $300,000. Not $3 million. $300,000.

Michael: And so, you're looking at this and saying, "Okay, these are good economics," right? If you've got $1.5 million of fixed expenses, heck, if I pay these advisors $300,000 each, it's still $900,000 of expenses and I have a 40% profit margin, looking at this from the business owner end. I got a 40% margin on $1.5 million of revenue working with mass affluent middle market clients.

Brad: Well, I thought about that. But really what I thought about more was, I was thinking, that's the American worker. That's my 401(k) participant that everybody else says you can't afford to work with them in private wealth. They had the secret sauce. They had the recipe for how to make a boatload of money on the American worker.

Michael: So, what was the distinction? Just on your end, what were they doing different than... I'm sure you were looking at other firms as well who didn't have the same kind of compelling economics with the same average client. What was this firm doing or had figured out that you weren't seeing elsewhere?

Brad: This is my impression, and I didn't know it at the time. But my impression was that the other firms that we were looking at had minimums of 7 figures, generally at least $1 million. These guys didn't look at it that way. These guys said, we can make a lot of money off the American worker, remember, average account size is $300,000, with 3 licensed people. Basically, the metric was another licensed person for every $500,000 worth of revenue. And then we can make money off of those people and take a financial planning approach to these people also. They were doing financial planning on every client there.

Michael: And so, how does that differ for, I guess, just the way you look at and think about the economics of the business in the retirement plan advisor side? Are these just completely different alien numbers or is this similar just a different channel? How are you looking at these given what you've lived for your whole career on the retirement plan advisor side?

Brad: Well, we were concerned, as I told you with the story about the client, we were concerned about the fate of the American worker. We had the feeling that we were getting the American worker to retirement but then we weren't getting them through retirement. And yet, we had a lot of pressure there because we were told that we wouldn't be able to afford to work with those people. And this proved that we could. This proved that we could hire young CFPs to work their way up by working...by doing all the day-to-day work on these clients to free the senior CFPs to go out and service existing clients and attract new clients to join.

And so, it gave us... From an economic standpoint, it was at that point that we started to think about, okay, how... I don't... It sounds so coarse to say, how are we going to monetize the American worker, because we really weren't thinking about it that way. But I will tell you that... Had to be Thanksgiving of 2018 or '19. During that break, I asked my CFO to give me a whole bunch of data on our clients, and that data included a number of participants and revenue.

And I took that break and I sat down and I figured out how much money we were making on each participant if we were the 401(k) advisor on the plan. And then I did the same thing for group insurance. And then I sat down and estimated what it would be coming from private wealth if we were dealing with low account balances there.

And what I found is, at least according to our internal data, that if we had all 3 of those things, we were going to average about $3,200 per year on that client.

Leveraging One-Page Financial Plans To Engage 401(k) Plan Participants In Financial Planning [53:19]

Michael: Interesting. So, that becomes your potential, basically, revenue per client, revenue per plan participant opportunity. So, how does that... Can you break that down for me a little bit more of what's the contribution as their retirement plan advisor? What's their contribution doing employee benefits? What's the contribution doing private wealth?

Brad: It was $190 for 401(k). It was right at $200 per participant for group insurance. And then remember, our average account balance was $300,000 once this team joined us. And I used a hundred basis points on $300,000, so that'd be $3,000. So, you add it up and it's right about 3,500 bucks. And for the first time, I sat, and I looked at it and I said, okay, this makes it pretty clear what I need to focus on here, economically, for the firm. I had to get into private wealth, and I had to do it profitably and I just stumbled upon the team that was going to get me there.

Michael: Well, it's an immense revenue driver growth opportunity just when I think about it in that context. You're going from a world where you can generate $400-ish per plan participant by providing them their 401(k) services and covering their group insurance needs. And, oh, by the way, if you can do some financial planning advisory work for them, it gives you 7x the extra revenue.

Brad: It does.

Michael: Just, that's a really big multiplier. I think for almost any business, if you've got a relationship with a client that you're serving and there's a thing you can also offer them that would be 7x revenue, it's pretty tempting to go there. That's a big motivator.

Brad: Well, I'll tell you what it allowed us to do, is we said, "Okay, now how are we going to get access to all these participants in a meaningful way that the employer is going to be happy about it?" And we decided we were going to make financial planning an employee benefit. And we've been successful doing that.

We looked at almost every 401(k) plan today has some fashion of financial wellness attached to it, generally by the recordkeeper. In fact, most recordkeepers have just beautiful parts of their website that deal with financial wellness. I mean just beautiful. But less than 10% of the people ever go out to that part of the website. They just don't go out to it.

And for the most part, from a competitive standpoint, all recordkeepers today have to have that component. But if you actually go and get the data, which I encourage every advisor working on 401(k)s, go get the data on how many people are actually hitting the landing page, how many participants are hitting the landing page for that financial wellness. And it will be under 10%. And then you...

Michael: Well that's just hitting the landing page. Then you got to get to how many log in and do something in there. I'm presuming that's just worse.

Brad: I actually said, then ask how many did 1 click in, and it was 40% of the 5%. It was extremely low. And so, even though that employer could check the box in saying, "I've got a financial wellness plan," the engagement was next to nothing.

And so, we knew that we needed to get in front of the participants, and we needed to teach them about financial planning. And then, COVID hit, quite frankly, and kind of pushed this even harder. Because all of a sudden, COVID hit. And all of a sudden, it became really, really apparent to the employers that their employees were financially unhealthy, dramatically. They didn't have a budget, had no idea what their net worth was, had never heard of the maximum loan or debt load they should have. Never thought about having an emergency savings. The only death protection they had was the 1 times revenue that their employer paid for in their group life plan and they weren't on track for retirement. And this was all happening at the same time.

And we said, okay, we need to go out with a new message to our 401(k) participants and that is, you cannot fix tomorrow's money, meaning the problems in your 401(k). You cannot fix tomorrow's money problems when today's money is a mess.

And so, we went out and developed employee education pieces on those 5 things, budgeting, debt load, emergency savings, life insurance protection, and retirement readiness. And we put separate group meetings together there.

We also created what we call a foundational financial plan. And really, I'm going to give credit to eMoney. eMoney gave me this idea. eMoney is who we chose for our financial planning software. I was sitting down, and I was thinking, "Okay, how can I get something in the hands of these participants, every one of them, without asking them for any information?" I'm going to get that information from the employer and the recordkeeper.

I need name. I need address, since I'm going to... And I'll explain that later. I needed birthdate. I needed wage, and I needed account balance and deferral percentage. And with that, I could create a foundational financial plan that would give that person an idea of what a budget should look like. It would give them an idea about what his maximum debt load should be. It would give them a range of what his emergency savings account would look like. It would give them a range of how much life insurance they should have. And it would give them an idea of where they needed to be today to be considered on track to have a successful retirement.

Michael: So, name, well, just because you've got to know who you're talking to. But birth date because that gives you their age. Account balance and deferral percentage, so you can project a balance. Wage, so you've got some sense of earning power which gets you towards budget, debt load, emergency account.

Brad: Yeah.

Michael: And I think you said location, so I guess you can do cost of living.

Brad: We wanted to be able to print out on 1 big piece of paper, which ended up being you fold it and you've got 4 pages there. And we printed that out. And we first gave it to them at group meetings.

But then, we had clients saying, "I want you to send this to the home." Our clients loved it. They just loved it even though it wasn't actually perfect. Because that's all the data that we had. But it was getting that employee to think and say, okay, I haven't done anything on this. And it got them to... And the employer liked that a lot, especially during COVID. They were looking for things to help their people at that time, and that just became a differentiator for us.

We've been able to get new 401(k) clients because we give their participants that foundational financial plan.

Michael: So, how are you developing this, though? Because these are not usually the kinds of inputs you can automate into eMoney to create a one-pager. Are you adapting eMoney?

Brad: We built it internally.

Michael: Or you just started building your own input output…

Brad: We built it. It's a spreadsheet technology. And we built it ourselves.

Michael: So, you built it yourselves in spreadsheets. Good old Excel. Bless Excel's heart.

Brad: Yeah. Yeah. We did.

Michael: Okay.

Michael: So, what… Because you're on the plan. So, I'm presuming, you can get some kind of export…proverbial CSV file or equivalent. You can get some kind of export from the recordkeepers and plan administrators to get the data because you're the advisor on the plan, so you have access to the data. So, you get an export of the data from them and then you can just drop it into a spreadsheet template and start creating these one-pagers for all the play on participants.

Brad: Yes. The recordkeepers will only release that if the client instructs them to do it, which they all do. I get data from Fidelity, which is probably the hardest ask there. We can get that data. And our clients want us to have it because they want that report to go out.

And on the back page of the report will be a picture of an Intellicents CFP that says, "If you want a comprehensive holistic financial plan," which would come from eMoney in our case, "Call Devon. Here's your advisor."

How Brad Structures Financial Planning Fees For Retirement Plan Participants [1:03:16]

Michael: So, interesting. So, the idea here, I just want to make sure I understand the flow, so you go to the client for you, which is the employer, and say, "We want to offer this financial education offering one-pager for your employees. So, if you'll sign this to grant permission for the information to be released, we'll download the information from the recordkeeper and the 401(k) plan administrator. We'll generate these reports for your employees, and we'll make it available to them. We'll send it to them, or we'll do a group education meeting," or whatever it is.

The employees then get the one-pager, so the little the packet. You get to do an educational moment then. At the end of that or on the back of that report, then says, "And if you want to go even deeper..." Because let's all acknowledge, this was a first-cut report with some general information but not super detailed. "If you want to go deeper and figure out how this really applies to you individually, an Intellicents CFP is available. Just call Devon at this number," and there's Devon's smiling face at you and his phone number.

Brad: Exactly.

Michael: So, do you charge the firms for this? Are you getting paid for any of this or ultimately, this is a value-add for the plan and it gets you in front of people because ultimately then they can become clients and you'll get paid further down in the process?

Brad: We're charging. And we've had success. We have some employers that have paid 100% of our cost. Some employers have paid a part of it.

Michael: And what's the cost? How do you price a service like this? Because this is very different than traditional planning for how we charge the client.

Brad: Yeah. Believe me, this has been an ordeal for us. Because we knew what we charge from a retail standpoint if somebody walks in an Intellicents office and says, "I want a holistic comprehensive financial plan. How much is that going to cost?" And our street price is 2,400 bucks.

And so, with that, I went to our clients. I tested this with my clients. And I said, "Because you're a 401(k) client of ours, we're going to cut that fee in half down to $1,200 per financial plan. And if we get your group insurance or if we have your group insurance, we'll take it down 50% again." And so, we'll give a financial plan for $500 to $600 dollars per participant if we had all those other businesses.

Michael: Okay. So...

Brad: And we were the only endorsed financial planner that they offered. I didn't want to be on a list of area... I wanted us to be the endorsed provider.

Michael: Right, because otherwise, you're getting them fired up about financial planning to go pick someone else on the list.

Brad: Yes.

Michael: That's not good economics at that point. So, help me understand, though, the pricing of the plan. Is that for doing the one-pagers that you're creating or that's for the plan-plan if they will take action off the backs of the report?

Brad: That's for the plan. The comprehensive plan coming out of eMoney.

Michael: Okay. So, what about just the one-pager part? Is that also a separate charge? Or that you'll do just for marketing purposes for getting out there in the first place?

Brad: It is today. In the beginning, we just tested it for free.

Michael: Okay.

Brad: And today, if we're going out, that is a $10-$12 per participant fee.

Michael: Okay.

Brad: And that includes mailing it. We tested all of this, ironically, on some of our bigger clients because they tended to be the most courageous, I think.

Michael: Interesting. So, you have some plan... You have some firms that might be paying $200, $300, as much as the full $500 per employee who wants to take advantage of it to get a full-on financial plan taking them through an eMoney process that they have bought up to because they went through the initial one-pager education and said they wanted more.

Brad: Correct.

Michael: All right. So now, I have lots of questions that are following on for me from this. So, what kind of conversion do you see? I'm thinking of this in marketing funnel terms. But if a firm puts, whatever is, 500 employees through the initial one-pager financial education process, how many of those 500 people are going to come on and do a plan with you? Is it 1% of them? Is it 10% of them? Less or more?

Brad: The answer is it depends. It depends on a couple of things. The employer's got to back it. The employer has got to go out and endorse not only us but the whole concept of financial planning and how important it is. And secondly, if they want us to do it all digitally in terms of communicating the plan to them, you're going to get less than 5% of the people initially to do much.

But if you put us in front of employees and do group meetings, and when I say group meetings, ideally, they'll be mandatory on company time, and then you will increase that dramatically. And then if you can also do one-on-ones, your success will be a lot greater.

I'll give you an actual idea of what to expect. We were worried that we could out-kick our coverage here. And I have to give credit to Empower here. Empower is doing this. Empower is doing financial planning as an employee benefit and they're doing it for...

Michael: That was part of why they bought Personal Capital was to gear up both the tech and the advisor depth to be able to do this.

Brad: And they're hiring tons of CFPs today. They have Lockheed Martin as a client, that does this. And Lockheed Martin, they paid for it by increasing their administration fee in the 401(k) by $15 per person per year. So, what they did is they effectively said, "If you pay an extra $15 per year," for all, I don't know, 34,000, 35,000 participants, "we'll give you a dedicated team of 3 experienced CFPs and they will provide financial plans for anybody that wants one. Anybody. It's anybody.

Michael: Right. Because at some point, it's essentially the financial planning equivalent of the prepaid legal model, where a relatively small fee for every single person in the organization and we'll give "unlimited access" to the lawyers for whatever legal they need. Because the reality is, only a small percentage of people actually need it in any particular year. And so, as long as the plan is big enough and law of large numbers takes hold, then you can actually predict utilization pretty consistently and staff it accordingly.

Brad: Exactly. And so, they made it seem to us like this was worth the risk here. Especially if we were taking it out to clients that would give us a little grace if all of a sudden, we got behind here. But what we found... I'm talking about my biggest client was 1 of the firms that elected to do this. 4,000 people in a small town, I mean it's like Mayberry, Iowa. And population, 11,700 people.

And we introduced this, but we did it all digitally. They have not had us do group meetings yet. I think they're going to this next year. We did it all digitally and in the first 2 months, we had 70 people ask for a comprehensive financial plan. That's slowed down now but it's still... We've created, in essence, 70 disciples of the process.

Michael: Yeah, 70 new clients at once or in 2 months is not a bad deal, to put it mildly.

Brad: Oh, we were ecstatic. I mean we were ecstatic.

Michael: All right. So, then a few follow-up questions. So just payments-wise, how does this work? Obviously, if the employer is going to pay for it, you've already got payment mechanisms to do that because you're doing the plan consulting administration work anyways. If the plan participants are doing it directly, do they cut you a check for up to $600, or whatever the number is going to be based on what's been arranged, and just you've got this high volume of small checks as you take each plan participant? Because I'm assuming you can't bill the 401(k) plan for it directly for it.

Brad: Well, actually, you can. If it's offered to every participant, it will. If you were only offering it to the C-suite, that would be discriminatory, and you couldn't make that a plan expense. But if you offer it to every participant and the overall per participant fee is considered de minimis, which is generally under $100, then you can make that a plan expense.

Michael: So, the one-pager fee, the $10 to $12 a head part, you can bill the plan then.

Brad: You could.

Michael: Because it falls under that threshold. I'm assuming, though, the $600 financial plan fee, that's too big to fall under the threshold. That's got to get paid outside.

Brad: Correct.

Michael: Okay.

Brad: And we can get it from the participant, or we can see if the employer will do an after-tax payroll deduction for it, which we have some employers doing that. We have a significant employer in eastern Minnesota. They've been a client of ours forever. We have all their benefits. They were an early adopter of this. Let's see. They have 600 employees. They ended up paying 60% of...they treated it kind of like a match. "You pay 40% of it, we'll pay 60% of it."

And in that, we got all the money from the employer because the employer not only paid us but then they payroll deducted it. It's like a subscription type of situation. And we're excited about it.

How Brad Increased His Revenue By Offering Comprehensive Financial Planning [1:14:42]

Michael: So, what does the overall model look like for you, though? In the wealth world, often at the end of the day, we charge something up front for the financial plan. But many firms, the long-term revenue is still made on the advisory side. It's the investment management advisory side. Do you have a similar path here? Or ultimately, there's advisory or other revenue opportunities after they pay their $600 to $2,400 for the plan as a one-time plan? Or just, that's the deal and then it's done, and they can come engage again for a new plan for $600 in the future if they want to?

Brad: Here's what ends up happening. As we go through, we create the comprehensive financial plan, which includes looking at their current investment portfolio and giving them recommendations there. And it's not uncommon for the participant to say, "I've been really happy working with you on the 401(k). Can't you just take this too?"

Michael: Okay.

Brad: And we built from an investment side to do that is we built a branded robo-advisor. But we call it the Bionic Advisor. The Intellicents Bionic Advisor. Meaning it's a piece of technology but it always comes attached to an Intellicents advisor with it. And the technology we used was Charles Schwab's. They have what is called Intelligent Portfolios.

Michael: Yeah, their institutional Intelligent Portfolios offering. Okay.

Brad: Yes. They give an advisor that software to be able to do that as an advisor for free if you have over $100 million custody with them. And we have way more than that on the 401(k) side and so they gave us that piece of technology. And we use that as the primary resource that we would use for that. We had 3 different investment approaches.

We had what I call the low-cost Vanguard approach where it's all index funds at the lowest cost possible. Then we have what I internally call the DFA approach, which is fundamental indexing, and adding some alpha to index funds. And all of those are in ETFs. And then we now have an actively managed strategy that is no transaction fee mutual funds. And that has worked wonderfully. It really has.

Michael: And so, what do you charge for that? Is that a traditional one-ish percent advisory fee model?

Brad: Now, because the employer once again is endorsing us, we'll discount off of that. Our normal fee for a person walking in the door would start at $125.

Michael: Okay. And then...

Brad: For that employer, it's going to be at around 80 basis points because it came to us through the employer.

Michael: Okay. And so, what's the... Do you have a sense yet of what's the typical assets that you end out with, in this model? Because I understand, you're not getting the 401(k) side of them because you have it. But you have it on the retirement plan side, so you only end out with the "other assets" beyond the 401(k). Do you have a sense as to what that adds up to, what that ends up being?

Brad: Well, what surprised us is if you look at the annual revenue coming in, new revenue coming in from our wealth side of our practice, 25% of that is coming off of 401(k) plans today. When we started this, it was 14%. We'd like it to get to over 50%, but it's just a function of integrating this approach into all. We have 350 or 360 401(k) plans. We haven't introduced it everywhere.

I can tell you that earlier this year, we did 6 case studies on clients that have adopted this. And we looked at it and we said, okay, let's look at all the revenue coming off of that client. What does it amount to? And we only looked at the 401(k) side. And so, we looked at that and in every one of those 7, our revenue had at least doubled with the introduction of private wealth. And we had some of them that were up 4x to 5x. And that's in a fairly short period of time.

Michael: Wow. And that's either... That's planning fees and then some subset of clients that end out saying, "Will you just manage everything beyond my 401(k)?"?

Brad: Yes. Yeah. And our average account balance has gone up from $300,000 to $400,000. But the vast majority has been not rollovers. The vast majority has been non-qualified money sitting at a broker somewhere.

Michael: Right. So, what does the business look like overall today? You said when you divested the recordkeeper, Intellicents went from 140 team members down to 20. That was 7 or 8 years ago. Where is it today? What have you grown back to?

Brad: We're just over 60 today.

Michael: Over 60 team members?

Brad: Yes. When we sold the recordkeeper, we had 3 locations. It was Minneapolis, Albert Lea, Minnesota, which is a town of 20,000 about 100 miles south of Minneapolis. That's where our headquarters is. And then Kansas City. We have 12 offices today. Many of those but not all have come through acquisitions. Private wealth last year surpassed retirement for top line revenue.

Michael: Wow. Okay. So, the business is more than 50% private wealth now?

Brad: Well, no, it's 48% private wealth. Then it's 40% retirement and then the balance is group insurance.

Michael: Okay. Okay. Because you're still doing the employee benefit side, group health, group life, all that stuff.

Brad: We are. And that makes it sound like our group insurance has gone down. It hasn't.

Michael: It's just not growing that much.

Brad: We've got over $1 billion in private wealth AUM. And if you look at the revenue, even though we've got $5 billion in 401(k) advisory services, that $1 billion is producing more sales, and now it has more top line revenue. Our CAGR on top line revenue, since we got into the private wealth business, is 22% per year since 2018.

Michael: Wow.

Brad: And our annual sales since 2018, our CAGR is 39%. In other words, our total sales per year today have gone up an average of almost 40% since 2018. Which, just coincidentally, is when we got our act together in private wealth.

The Surprises And Low Points Brad Experienced On His Journey [1:23:03]

Michael: Right. So, what surprised you the most about this path of building advisory businesses?

Brad: The importance of financial planning. I'll tell you everything we do today in our firm, it has permeated retirement. Obviously, it's the major function in private wealth for us. Actually, our private wealth business, we don't call it private wealth because the average American doesn't think they're wealthy. We call it personal financial management.

But financial planning has permeated even the group insurance. We're including this type of service. In other words, we're including financial planning as an employee benefit not only to our 401(k) sales but also to our group insurance sales. And even though somebody hasn't done it yet, but I really think that we may be asked just to do the financial planning as an employee benefit, and we won't have any other benefits. That wouldn't surprise me. It hasn't happened yet but I think it will.

Michael: So, what was the low point for you on this growth journey?

Brad: The failures. Definitely the failures. It was 2015 when we came up with this. We had the idea before. We just didn't have the bandwidth to do it until we got rid of the recordkeeper. And those first couple failures, we were at a point where we were going to say we're not going to be in this business, or we've got to commit to it.

We committed to it. We failed 3 times, but we persevered. But the failures, oh, my gosh.

Michael: And it sounds like 3 years. Well, I guess 3 years of the failures and the struggles, but the acquisition of the father-son duo that really powered it, that came in 2020. You're 4-plus, almost 5 years in?

Brad: They came in 2018.

Michael: Okay, they came in 2018.

Brad: They came in 2018. And if you look at our financial history, the impact was almost immediate. It really was. Granted they came with 1,200 accounts and $1.5 million worth of revenue. By the way, we bought them, but they were so valuable that we actually bought them with stock, and we ended up effectively merging with them. We used our stock to buy them because we couldn't lose them, quite frankly. We had to keep. They were the secret sauce. They were the recipe.

And I would say some of the other frustrations along the line are growth related. When you look at our growth path right now... I talked about technology a little bit. Well, I brought up technology. But we spent a lot of time on people and money on people, but our tech spend today is close to $700,000 a year. And a good share of that is to service financial planning and personal financial management. So, our tech spend is... To do what we did is not... it's a heavy lift.

And fortunately, I had money. I had my winnings from selling the recordkeeping. And so, I will say that it's not something that...it takes a lot of time. It takes really good people that you have to find. And then you've got to put the money in technology. But you've got to have all of that in order for this to be successful.

The Advice Brad Would Give His Former Self And Younger, Newer Advisors [1:27:08]

Michael: So, what else do you know now you wish you could go back and tell you 10, 20-plus years ago as you were building the business?

Brad: Well, I would have been a little braver and taken a little time and got into wealth management a lot sooner, let me tell you. A lot sooner. In fact, I freely admit that to anybody who asks me, that says, "What's your do-over? What's your mulligan?" And I said I wish I would have gotten into wealth management 20 years ago. I just think about it, and I go, gosh, here I am kind of in the last quarter of my working career and I find this recipe that is going to do a number of things, not only financially for our firm but I literally come to work every day energized by the thought that we're helping the 99% improve their financial wellbeing.

That is what we're all about here at Intellicents and it energizes me to say, here is our just cause. This is what Intellicents is all about, is helping those people.

So, our business plan is really for us to go out and find an area that we currently have no 401(k)-plan penetration at all. St. Louis would be an example if I'm just sticking to the middle of the country. And the 1st thing we would do if we wanted to get into St. Louis would be to find some 401(k) advisor who was worried. They haven't sold yet to OneDigital or CAPTRUST or SageView or HUB, but they're nervous and they know they're going to have a hard time competing with those people.

And so, we encourage them to come to us. They buy into the just cause and they're probably smaller firms. They'd have under $1 million worth of top line revenue. I'd say they'd have somewhere between $400,000 and $1 million worth of revenue would be the targets, let's put it that way. And so, we want to get them.

And then after we give them our platform that we put together for helping their 401(k) business and growing that, then we'll say, "Okay, let's add a private wealth component on site with you in St. Louis." Instead of... We can service St. Louis from Kansas City or even Minnesota. But private wealth is a personal business. And so, we like to put a private wealth person with any place that we have a high number of 401(k) participants.

Michael: So, what advice would you give younger, newer advisors coming into the business today?

Brad: Get your CFP. If they just have their securities license, I would say get your CFP. You can do more things. And if there is any fee compression that eventually does come to private wealth, I think a way to keep your fees higher is financial planning.

What Success Means To Brad [1:30:33]

Michael: So, as we wrap up, this is a podcast about success, and just one of the themes that comes up is, the word success means very different things to different people. And so, you've had this incredible path of building Intellicents to 140 team, then selling about 80%, then rebuilding and almost 3x'ing again over the past 7 years. So, you've had these incredibly successful paths with the businesses. How do you define success for yourself at this point?

Brad: Well, it's not wrapping this current business up, putting a bow on it, and going out and selling it. I feel really good about the sustainability of Intellicents. If I were killed tomorrow, the company will go on. We have some tremendous talent that are in their 30s and 40s. And we happened upon those. Some of them came to us because they were attracted to our just cause. But some of them came with acquisitions.

And for example, the son of the father-son savior of our private wealth business, I had no idea he had the leadership qualities he had, especially for a 35-year-old. Just tremendous qualities that I know that he would be a key component in keeping this business together if something should happen to me.

Michael: And so, success for you is creating the talent opportunities, bringing the talent onto the team?

Brad: And having a sustainable business that can survive me. We have no design to wrap this up, put a bow on it and sell it. That's not... We have this just cause and that kind of sets the tone for Intellicents about fixing what was broken in the private wealth business. The private wealth business, in our opinion, was broken when it came to the American worker.

I went to a Fidelity conference once and the 99%, they called them the underserved. They had no desire or intent to go and solve that problem. In fact, they just said you can't make any money there. You can't make money there. We've proven it that you can make money there.

And so, I'm proud of the fact that we have created a profitable business and we've solved an issue, or we haven't solved it yet, but we have a recipe that we believe will solve the problem of the poor financial health of the American worker.

Michael: Very cool. Very cool. Thank you so much, Brad, for joining us on the "Financial Advisor Success" Podcast.

Brad: It's been my pleasure. It really has. Thank you.