#FASuccess Ep 134: Positioning A Family-Owned Advisory Business For The Next Generation Of Growth, with Andrew Altfest

What You’ll Learn In This Podcast Episode

• How Andrew Came To Work In His Family's Advisory Business [03:17]
• How Andrew Is Positioning His Firm For The Next Stage Of Wealth Management [14:37]
• How Andrew's AI Solution Fits In The Existing Fintech Stack [23:44]
• What Andrew's Firm Does For Their Clients [34:47]
• How Andrew's Firm Services Next-Gen Clients [44:26]
• What Andrew's Firm's Service Offering Looks Like For More "Traditional" Clients [51:30]
• Andrew's Own Path Within The Firm [55:01]
• How Andrew Tied Advisor Compensation To Client Satisfaction And How He Restructured The Firm's Organization [57:15]
• How Altfest Measures Employee Engagement [1:12:24]
• What Andrew's Ongoing Professional Development Looks Like [1:16:02]
• What Andrew's Role Looks Like Today [1:21:28]
• Andrew's Advice For Advisors Starting Their Career [1:30:58]

Resources Featured In This Episode:

• Andrew Altfest
• Altfest Personal Wealth Management
• eMoney Advisor
• Absolute Engagement Client Insights
• Nexa Insights
• CFP Certification
• Gallup Q12 Employee Engagement Survey
• Schwab Executive Leadership Program
• G2 Leadership Institute

Full Transcript:

Michael: Welcome, Andrew Altfest, to the "Financial Advisor Success" podcast.

Andrew: It's a pleasure to be with you, Michael.

Michael: So, I'm looking forward to the discussion today. We've had a couple of guests on recently that have talked about the dynamics of not just following the advisory firm path but doing in the context of family firms in particular. And so our last guest was someone who started a firm with a sibling. And I know you've had an interesting path in coming into a firm that your parents founded originally and incredibly well known and respected firm in the industry, Altfest Personal Wealth.

How Andrew Came To Work In His Family's Advisory Business [03:17]

And so I'm really excited to have you on the podcast I think not only talking about just what it's like to go through a 15 to 20-year journey of starting out at an entry-level in a firm and climbing all the way up through the ladder to the point that you become the president of the firm, but also what that's also like when the people you're trying to take over from happen to be your parents as well. And just I would imagine a whole other level of complex dynamics between trying to move up the ladder and get promoted and doing it with parents who still remember what it was like when you were in diapers, which is sort of odd, awkward thing in a performance review.

Andrew: Yeah. As I've grown older, I've come to reflect more on my experiences working at Altfest Personal Wealth Management and working for my parents. And I'm actually a...I'm a student of family businesses, and I enjoy learning about family businesses and... They say there are a couple of things that make family businesses like ours successful. One of them is that the values of the founders of the business tend to be the values of the company. And the values that my parents have, those were the values that I grew up with. And so I was being primed to be successful in the business without even knowing it.

Michael: It's an interesting point, that just when you're growing up in your parents' household, any other business owner doesn't get to instill their values in their employees until the employees take the job and start it. You got values from day one because it's your mom and dad and you're growing up in that household with those values.

Andrew: Yeah, exactly. And from the standpoint of hiring people, there's plenty of really intelligent people, but it always comes down to the cultural fit. And so the cultural fit for me and for Altfest, it's very aligned. So the things that I grew up with, they're also our values here. I grew up with my father telling me and my mother telling me, "Think for yourself. Don't just be a consumer of information. Really have an opinion, analyze it. Don't take things for granted." That also leads to success on the investment side, and it leads to success working with clients.

Michael: I was going to say, those are...like, "Have an opinion, don't take things for granted, analyze it," like, good general words of wisdom in life, also particularly effective when you're a portfolio manager. Those are quite well-aligned values about what you have to do to be successful with investments.

Andrew: Yeah. And I grew up with the... I remember long car rides with my parents in the back seat with them, two financial advisors growing their practice, hearing about the challenges and the issues that they were working through and just listening and observing and saying, "Hey, one day I hope to be able to contribute." And there are other values. Like, we are value-oriented investors. My father, when we would go shopping, he would take us to sales and he would say, "Hey, you see this Ralph Lauren shirt, you can buy it at Ralph Lauren or you can go to Sy Syms," which existed at the time when I was growing up, "Or Century 21, and you could buy this thing in some bin. It will be all wrinkled and at the bottom of a bin for 80% less than you can buy it at the store." And so, that's another core value that I learned. It's amazing now to think about how all that's affected me since I was very little.

Michael: Now it sounds like he's just literally trying to train and inculcate you into value investing as a small child. Was that actually part of the theme and the thought process? Was this always a destined path? You wanted to grow up and come into the business and your parents wanted you to grow up and come into the business or did you only find this later in life further down the road of saying, "Hey, I think I'm going to go work in that firm after hearing mom and dad talk about for 20-plus years?"

Andrew: No, I came to it on my own. I had a couple of different periods. And the first period was, "This is what I want to do." I remember I started an investment [club] in my high school, and I tried to read Graham and Dodd at like age 15 and I couldn't. But I remember thinking it was really cool. I remember opening the book and trying to go through the pages. And it was a little bit over my head for a 15-year-old. But I loved the industry. And after high school, I had an internship at a large brokerage company. And I would leave high school and would take the train down in New York City to this broker's office and help her out right after school for no money. And I loved working and I loved working on investments. Then when I got to college, things changed a bit and my interests went in a different direction. And I actually...I switched to the liberal arts school at Cornell University, where I went to college, and became an English major. I thought I wanted to be a writer.

Michael: Your poor value investing parents. Like, "We sent him to Cornell and he became a liberal arts English major."

Andrew: Yeah, exactly. I even switched from a land-grant school in...if you're a New Yorker and you go to Cornell, one of the land-grant schools, tuition is less.

Michael: Oh, man, you're just like, you're selling low, buying high here. This is getting rough.

Andrew: But they were great about it. They supported me. And by the end of school, I knew that being a writer wasn't...while I got good feedback from professors, it really wasn't what I loved doing. And so I took an internship at the firm between junior and senior year of college. And then after I graduated from college, I started at the firm. And I didn't know if I would like it. I didn't know if I'd be watching the clock and it would just be a drag. But it wasn't, it was the coolest thing. It was just so intellectually stimulating, all the work and all the learning.

And what was really great about it was, at the time that I graduated school and for the next three-plus years, I lived at home. And so I had this great education because I would work and then I would come home and I would just talk about the markets with my father. And we had to create a rule that starting at 9 p.m. at night, that was it, no work time. You can't talk about work after 9:00. I would keep going. I was like a sponge. I just soaked it all up. So I had this great education over the next few years working under my father on helping him with clients and also working as an investment analyst.

Michael: And I was going to ask, what was that role that you started out with? What did they have you doing initially?

Andrew: Initially, my job was a hybrid between client support and investment analysis. And so I got exposure to a couple of the key parts of the business. Clients love the idea of the next generation. I got a lot of good feedback working with clients. Also on the investment side. I remember the second week I was working, I got a chance to sit through a meeting with Jean-Marie Eveillard from First Eagle. And it was like week 2 of some 22-year-old kid. And I'm sitting there hearing about this really famed, accomplished portfolio manager go through his views and his philosophy. And my father is being generous with...knowing that this was in part an education. And so, I had this amazing exposure, which really we now try to give to all new employees who join the firm. And it was great. It was learning how to practice early and getting exposure and I think how to practice the right way.

Michael: And I think it's important...I guess both reminder and challenge I think for a lot of advisory firms, that in the early years, in the early days and stages of hiring someone on board, that a lot of what you can do for training and teaching is literally just giving people exposure. Letting them sit in on client meetings, letting them sit in on investment meetings, letting them sit in on wholesaler meetings or meetings with managers, and just, as it sounds like your parents did for you, just giving people the opportunity to absorb all that stuff because there's so much to learn in the early years of the business.

Andrew: Oh, yeah, definitely. And just figuring out what you don't know. The internship that I had in college was writing up summaries of the investment philosophies and processes of the different investment managers that we invested with. And just that alone was...that was part of the internship. Just that alone was amazing. It was like, "Well, what does this all mean?" And it's something that every opportunity with an intern now or with an entry-level employee, they all want to learn. And if you provide these opportunities, they really appreciate it. It's much better than just working on trading or other entry-level-type functions. It makes the difference.

How Andrew Is Positioning His Firm For The Next Stage Of Wealth Management [14:37]

Michael: So fast-forward us a little bit to today just so we have a little bit more context for the firm overall that you're in now as it exists today.

Andrew: Sure. So we at Altfest, we are just a little shy of 40 people. We manage north of $1 billion. We work on a fee-only basis, primarily with high-net-worth individuals. And we have a separate practice for young professionals in which we waive our investment minimums. And we have a huge investment in technology. And we're doing a lot of exciting new things that...I'll give you an example. Just of those a little under 40 people, a number of them are working on the R&D side. So we have a big investment in the future.

Michael: All right, so I've got to ask about that then. So what does it mean to be on the R&D side in a wealth management firm?

Andrew: So we have investments in a number of new areas. We're very proud of our accomplishments and where we are today as a firm, but we think that the next 35 years are going to be quite different than the last 35 years. And so we have to be practicing not like it's 1995 but like it's 2019. So we're investing in wealth management. Everything that we're investing in is coupled with technology. And so whether it's wealth management for our clients, additional services for our clients, or it's reaching new clients and doing that in a very modern 21st century way. Also in investing in new investment strategies, investing in technology, meaning these are all things that these people are working in.

Michael: So, can you give me an example or two of what this looks like? A new area that you're investing in and researching or delving into?

Andrew: Sure. So let's talk about the way I envision the future. We think that it's going to be essential for all of us in the industry to have a very clear and differentiated value proposition as providers of a premium wealth management service. And the way I see it is you can get a robo at nothing, which will rebalance your portfolio, or you'll get a robo plus a CFP at 30 basis points or around there, or you can work with a wealth management firm and pay more but get a ton more value. And so we are doing so much more these days for our clients, providing so many more services that our clients are asking us about. And to do that and to gain scale, you need to have just a huge investment in technology.

And so I'll give you an example of a client that I'm working with today. We were talking about his finances and lo and behold, we noticed that he had a mortgage that had a balloon payment in a couple of years, an interest-only mortgage. And this wasn't one of our agenda items, but it was like, "Hey, you've got a problem, let's talk about this. Let's figure out what to do with this." And we ended up helping him to refinance into long-term fixed-rate financing. That was the best option for him. Those types of opportunities, those types of things that we do for our clients, those are things that separate us from...very clearly separate us from robo competition and other low-cost entrants and...

Michael: Right, that are only focusing on the portfolio itself and aren't going to tell you about why you should not put more in your portfolio and fix your mortgage instead.

Andrew: Yeah. And to be able to do...to provide those services, you have to be investing in technology. That's the only way. And you have to be both automating all of the things that are unimportant that we do. And then also we have invested significantly in building technology that will allow us to identify these types of opportunities for clients. And we think that we're on the verge of another renaissance in our profession. We talked about Altfest, and we've been very influential in the fee-only movement. My father, Lew Altfest, was one of the founding members of NAPFA and the movement to retirement planning and providing retirement planning to clients. And now I think we're at the same point in which there's going to be yet another move to provide in financial planning, and we'll be providing...will be that financial advisors will be providing wealth management to their clients. And it's going to be a renaissance in the industry going forward. Kind of the same...similar to the one that we've had and been riding the waves of for many years.

Michael: So when you talk about investing in technology to identify these kinds of opportunities like mortgage refinance scenarios that we're not necessarily always actively looking at or talking about with clients on an ongoing basis, is this...does that mean you're trying to use more financial planning software that's going to track this? Is this a like, you're building your own technology tools that gather and scrape client information and do a monitoring process? How are you actually trying to execute and do this?

Andrew: Yeah. So we've developed our own technology that combines big data with artificial intelligence. And it's like in the industry, while there are more options today, we're so far behind. The industry is like we're still in the Stone Age. It's still like...we're still partying like it's 1999. It's 2019. And in other industries, there's driverless cars coming, and the technology, the AI that's coming into our profession has been minimal and not well received and [has] disappointed people. There's just this great opportunity today in a world of big data to just do so much more for clients. So nothing was out there that we needed. We didn't need another CRM or portfolio accounting software, another Monte Carlo engine. So we went ahead and built it ourselves.

Michael: So it's like an alternative for CRM or it's like a tracking thing on top? What are you creating?

Andrew: So it uses AI. So let's go to the example of...go back to this mortgage example. In the case of the mortgage, I had to identify this manually. I had to come up with a solution. It was quite inefficient to have to do all this work. These types of opportunities should be...these types of recommendations should be at our fingertips. In the software that we've developed, these types of opportunities are presented. And Michael, I love the industry. Both my parents are financial advisors. The software that I built is going to be available broadly. I'm hoping to really make a difference, not a buck. This will be available to all financial advisors.

Michael: Meaning you're eventually going to make it a software separately available, other advisors can license, use it in their firms as well?

Andrew: Yes.

How Andrew's AI Solution Fits In The Existing Fintech Stack [23:44]

Michael: So I guess I've got two questions around this. One, just help me, I don't know, visualize how this fits around my existing technology stack. Like if I've already got a CRM system, I've already got financial planning software, are you replacing one of those? Am I going to buy and log into your software in addition to one of those? Are they pulling data from that stuff? Where does this fit in?

Andrew: Well, this is something that's different. We're not replacing the CRM. We are integrating. We are making it very easy. But it's something that's in addition, because there is nothing that's solving that pain point.

Michael: Like, it's pulling in financial planning data. Because to me when you start talking about areas like mortgages, we type that in our planning software at some point. We don't necessarily type in that it's interest only and the due date and when the balloon payment triggers so that something can remind us in a few years to have that conversation with clients, but it's sort of some of the same data. So am I thinking about that right? You're going to just capture, I guess a deeper level of financial planning data in the separate tool that you built so that the software then can prompt me for things like, "Hey, that client coming up is probably going to need to do a mortgage refi soon because their balloon payments can be coming due?"

Andrew: Yeah, that's right. And we have the data. You're right, we have the data, but we just have the data. What are we doing with the data? It's like the financial planning went from 1 to 1.01 because we took mint.com and kind of had a proprietary one that we could show to clients and let them get a better understanding of their expenses. But what do we do? What do we do with that data? It's like a presentation tool. So we have the data but we don't have the recommendation. And so that's what I'm working on. And if there are any people out there who are listening who would like to be an early user of the software, they can contact me, I'm [email protected]. But anyway, it's quite exciting and...

Michael: Yeah, we'll put links out so people can follow up with you as well. So this is episode 134, so if you go to kitces.com/134 and you want to try out or become a future beta user of the software when they make it available to others, then you can get in touch with Andrew.

So Andrew, does that mean the firm actually went and literally hired tech developers? As part of your 40-employee headcount that you've got some software developers as RIA employees or does this happen separately or somewhere else?

Andrew: We have a whole development team that works full-time on this and I did not include them in the 40 headcount. So we have a whole development office and people who are experts in artificial intelligence. And I think as part of the...we've been working so hard for so many years on professionalization. I know that's what I've spent part of my time helping the firm with. And as the industry, we've professionalized our companies and hired COOs and done all these different great things. I think as part of the continued professionalization, there are going to be more firms who are working on their own, working on coming out with software, investing in their own investment strategies. And fortunately, there are a lot of firms who have the budgets to do this, and who better to understand our needs than us.

Michael: Well, it's always amazed me that when you really look at the software in the advisor landscape, an astonishing amount of it is what I call the homegrowns. And I mean that in kind of an affectionate sense. But so much advisor software today originated from basically, advisor has problem, advisor can't find solution, advisor gets aggravated and makes own software solution, other advisors hear about it and want to use it, advisor now has software business on the side. That's the origin of Junxure CRM, of Redtail CRM, of Orion, of Tamarac, of tRx, of iRebal. A huge list of our very popular advisor software today in most of the categories, a huge portion of the software was just, "Couldn't find a solution, made it for ourselves, and then it was so needed that it turned into a software company."

Andrew: Yeah, it's how do you understand, it's not even what people are asking for, because if you ask them what they need, you would probably find some slightly better version of what's already out there, but it's kind of like, well, what are they not asking for but really do need? And the only way that you're going to...to know those types of things is by having experience in this problem yourself. And so I think it's, advisors are...we as advisors are very...rather than trying to...for the next innovation to happen to consumers on the retail side and then adopt it, that's kind of like what we historically see. Robos came out for the retail side, should advisors take the robos? That kind of stuff. What I think will happen going forward is it will be like, "Well, this is actually what...this is the innovation that we need for our profession as advisors, and we're just going to go out and build it."

Michael: I'm intrigued as well that...I feel like this is something that I've heard from a number of firms over the years that have said, "I'm so aggravated, there's no software to do blank," whatever the blank thing is in our firms. "I wish there were software to do this. There's not, it's really frustrating." Not very many, though, actually then go to the next step and actually try to build it. And so I'm just...I'm curious, I guess, what those conversations were like at the firm when someone actually puts on the table like, "Hey, let's spend hundreds of thousands of dollars every year to buy a bunch of our own developers to make a thing from scratch and hope it works out." Just from a practical perspective, how does that come about where someone says, "I'm willing to make that level of investment to hire a development team to build our own custom proprietary technology?"

Andrew: Yeah. I think it's like any other investment, right? It's, how do you prove that actually, this is something that's desired? What's the potential of this? It's really like any other investment that you would make in the firm. So if you go and you show that there are enough people that have this...experiencing this type of problem or would want software like this and if the potential is big enough, then I think the investment becomes easy.

Michael: And so does that mean as you were coming into this, this wasn't just a, "Hey, I think we can get a little bit more productivity and efficiency in our firm if we make this thing?" It sounds like you were building it assuming from the start that this is actually software you want to build and sell to other advisory firms. Altfest Personal Wealth might be the first beta user or like the test lab, but were you going into this from the start anticipating that, "We're going to end out making this into a software company that also sells the software to others, this isn't solely our thing for our firm?"

Andrew: Yeah, from the start, that was the case. I don't think that if you build your own technology, you mentioned some homegrown tools, I think when you have something that you are building for yourself and for no one else, it becomes very difficult to continue to maintain it. And I know some people do and they're happy and they have their own recipe for what they do and like that, but I think to build technology, you have to build it. And if you want to solve your own problem, it makes Altfest, the work we do for our clients so much easier and adds to what we do, but it's, you have to be able to sustain it by having other advisors use it as well for it to be a good ROI.

Michael: Yeah. Well, it's an interesting framing. I feel like, well, A, I think that was the story for a number of firms that ultimately decided to take their homegrown solutions, spin it off and license it to others. And to me, even at a higher level, Commonwealth announced last year that they were taking their whole Advisor360° platform that they built internally for themselves and they're spinning it off and making it available for not only the, I think it's roughly 2,000 reps at Commonwealth, but 9,000 more at MassMutual. And they basically came out and said at the time like, "We built this great technology stack, and it's incredibly highly rated and it's very well received by our advisors, but we just can't amortize the development costs effectively over "just" 2,000 advisors as successful as they are," because Commonwealth has one of the highest average production per rep numbers in the industry.

And so they outright said like, "We saw that the software development and maintenance costs were just going to become prohibitive and several more years of compounding unless we amortize them over a wider base." And so they took their proprietary software and made it not proprietary but also licensed to others. And so now they can spread the cost over way more advisors and are apparently now are really fired up to invest more into the business again. So it's an interesting dynamic that even for firms that start out with their own technology, at some point it becomes tempting to sell to others just so you can amortize the development costs over more users, more base, more people who are paying.

Andrew: Yeah, I think that's...it's necessary to operate that way. And the more people who use it, who use the software, the better the software will be as well. I think you get great insights from other users, and particularly when it's an AI-based software program.

What Andrew's Firm Does For Their Clients [34:47]

Michael: Well, very cool. So technology side, help me understand a little bit more about just the firm overall. So you said about 40 employees, $1 billion-plus under management. How many clients is that across the firm, or at least roughly?

Andrew: We have over 600 households that we work with.

Michael: Okay. So kind of average client size is right in there at $1.2 million to $2 million each, so, fairly affluent group overall.

Andrew: Yeah, we're a little bit...so our AUM is around $1.3 billion. And yeah, so we're a little over $2 million on average per client.

Michael: Okay. So talk to us about what you do for them. Because I know the firm has evolved quite a bit. As you mentioned earlier, your father was one of the early pioneers, the RIA and fee-only movement and one of the founders of NAPFA. So you've been at this for quite a while. The firm overall has been at this for quite a while. So talk to us about what the...I guess, what the offering looks like today. When I become an Altfest Personal Wealth client, what do I get? What are you going to do for me?

Andrew: It's a great question, and we have...the way we see it is that we want to do everything. Man, don't you know anything about segmentation?

Michael: Yeah, we want to do everything for everyone. If only that was always profitable.

Andrew: So we even have a program today for young professionals and the next generation of our clients. And we are doing planning for them as well. We're doing full wealth management. And so while the service offering for someone who's paying a lot more, you could help them execute. Let's say the mortgage example. Let's say for one client you're actually going and shopping mortgages, for another client that let's say who is a young professional, you might just provide the advice and help them, point them in the right direction to execute. But we're providing full wealth management to our clients across...really across the spectrum.

And we've decided that, going back to the way I see it, that we are providing not just investments, and for a young professional, not a robo offering, but we're providing customized wealth management. And how that materializes and how that takes shape will depend on where the client is as far as are they at more of an introductory level or have tens of millions of dollars with us. But everyone gets the same analysis on the full spectrum of planning issues that are important to them. And so that's how we see it. I see it quite differently than the number crunchers, because I think that that could be...that this type of model could be very profitable as well as long as it's done thoughtfully and it's...you have the right technology behind you.

Michael: So how do you think about that in terms of, I guess either service or pricing, right? The challenge for most firms, particularly that have grown over the years in the AUM model is that it's hard to do this profitably for young clients because they don't have A to M, there's no assets to manage, so assets under management model is very problematic for them. And when firms are used to an assets under management model, especially with multimillion-dollar clients, just the revenue you generate from a young client, even if they're going to pay fees outright is usually an order of magnitude smaller than what you can bill multimillion-dollar households.

So how is the firm handling this in practice? Are you just setting a flat fee or a minimum fee? Are you just taking them wherever they are and saying, "Hey, it's okay if they're not profitable now because they'll grow with us in the long run?" How do you look at serving next-generation clients and, as you're putting it, not just doing an investment-only robo offering, which at least we can do pretty efficiently, you're in there for full wealth management, which is the time-intensive, labor-intensive, harder-to-be-efficient thing with clients that don't necessarily have sizable assets as an AUM firm?

Andrew: Right. Yeah. So we charge a minimum fee, and we also charge a parallel AUM fee. It's not two fees on top of each other, but it's the greater of the minimum fee, which is just over $2,000 in year 1, or the AUM fee. And so what we're providing to them is provided in a way in which the work is streamlined, which is, of course, done efficiently for all of our clients. But it's also, the types of people who might work with our younger professional clients are some of our earlier career advisors, really smart and talented people. But they'll be more likely to be in the same situation as the clients that they're working with. So that also helps too, rather than having a principal-level advisor work with someone five years out of school, someone who is in more of a similar situation to them. So that makes it more cost-efficient as well, because, of course, those people are paid differently.

Michael: Right. Just practical reality, if you're pairing next-generation clients with your next-generation advisors who haven't grown as far up the income and salary or revenue scale, how ever you pay them, from a firm's perspective, your costs to service those clients is lower because literally they're being serviced by advisors whose own salary requirements are not as high yet because they're a little bit earlier stage in their career than a veteran principal with 20 years of experience who has much different income expectations.

Andrew: Exactly. Yeah. And that's really been the...one of the things that's really been key for businesses like ours is that we've grown with our clients. And I work with one client who, she started us in the early '90s and grew with the firm. And that's, I think, what has in part led to success of many firms. And so I don't think you want to...I think that you don't want to stop doing that. You want to have great long-term relationships with so many different people who...including the next generation of clients. It's like if you look at the children of your clients and you're wondering if they're your clients. If they're not your clients, then what does that say about the longevity of the relationship that you have with that family? And so I think that it's something that if you're in it for decades, like I'm in this for decades, I hope to be working where I am for many, many, many more years, I think it's a great long-term investment to be offering this type of service.

Michael: And so were you building this specifically with an eye of, "Hey, we want a way to serve our next-generation family members of the existing clients profitably," or was this intended to be just an overall offering for anybody who's young and wants to pay and finds value in the service, parentheses, "We can also do this for the children of our existing clients?"

Andrew: It's really for the next gen and also for other people who today fit our ideal client profile. So for example, we have a practice we specialize and increasingly so within different segments, one of them being healthcare. So we work with young healthcare professionals or early-career healthcare professionals, and we've had early-career healthcare professionals that we've worked with who have hundreds of thousands of dollars in student debt with virtually nothing saved. And we take them. We would take that person, have taken that person on as a client. And we help them with their student debt as well as all of the other issues that they have, which are often not investment issues.

So we won't work with everyone. It has to be someone who we think in, let's say 20 years, 30 years would be a great client of ours, a great normal early retiree or getting close to retiring client. And so that's kind of how we decide. There's no hard and fast rule. And we enjoy working with a lot of different people, but that tends to be who we're working with.

How Andrew's Firm Services Next-Gen Clients [44:26]

Michael: And so for that young doctor with hundreds of thousands of dollars of student loan debt who comes in and says, "Okay, I'll pay your firm $2,000 for this wealth management service," what does that person get? When I come on board and I say, "Okay, I'm going to be a client of Altfest Personal Wealth as a young doctor," what happens next when I say, "Okay, I'm ready to sign up?"

Andrew: Yeah. So, of course, we're going to agree on what the most pressing issues are and what needs to be tackled. But we tackle a lot of different things in that person's life. We get a lot of people who are in their...who are just starting families, and we're helping them with cash flow planning, saving towards multiple goals, buying a home and saving towards retirement and paying down debt or analyzing their student debt. We're helping them create an estate plan for the first time so that they can have guardians for the children and life insurance. It's a lot of the things that people in those situations need. So it's reinterpreting wealth management for the needs of those clients.

Michael: And so, are you doing, like, a standalone comprehensive plan? I come in, I go through a three-meeting process with you. What actually happens when I say I'm coming on board?

Andrew: Yeah. So we tend to have a couple of meetings with people initially, and then there's an agreement, and the agreement is, "What's the work that we're going to perform?" And then it's always like, man, there's so much to be done. I am susceptible to this myself, just like, I want to do everything for the client in one minute. But it takes...it's a very extended process of helping the client maybe as far as...usually it's cash flow planning that is done first, and then it's...and investments if that's relevant for that person. And usually, there's some investments. And then there's doing additional work over time for the client. And I think a clear understanding of when things should be done is helpful. But it takes quite some time and it always depends on the client, how engaged the client is. People are busy with their kids and jobs and...you know how it goes. It's just everyone's a bit different, but it tends to unfold over quite a period of time, given how much work there is to do.

Michael: And so, do you parse this out by nature? Like, "We're going to do this many meetings in year one. We're going to do this many meetings in year two" and structure it that way. How do you work through all this giant list of stuff that tends to crop up?

Andrew: We have an open policy with our clients, and so we're constantly in touch with them based on how they want to be in touch. Some people want to be very frequently in touch and some people don't. We want to meet with people at least once a year at the very minimum. But there's so much back and forth between advisor and client often that it's less of a set meeting schedule and it's more like, "Let's get this done." And if we need to have meetings along the way to go over a deliverable, like we're reviewing a new client's stock options with...it's a choice between founders stock and non-qualified stock and incentive options, and trying to figure out what the best exercise approach is. And so we'll set a meeting to review that.

So it's just, it's a lot. It's kind of like a combination of a meeting and then there's just so much back and forth. And that's what it is now in our age. I think in the digital age, it's like you better be able to communicate through technology, through video, through email, through, pretty soon we'll be doing more texting. You better be able to just be constantly engaged and kind of take it outside of the meetings.

Michael: Yeah. It's an interesting point to me that just the whole nature of, I'll call it the traditional approach. We meet with our clients once a year or twice a year, whatever the hard concrete number is. They come into our office and sit across from us, that when you look at this, particularly in the context of next-generation clients, some combination of their comfort with technology overall to communicate by a wider range of means and just the sheer scheduling constraints. Like, good luck getting a meeting scheduled with dual-income couple who's got several children and while they're shuttling them around to karate and gymnastics and soccer games. It's just so logistically hard to get them in.

I know that struck me even in the context of our firm. I never realized how much flexible time our retired clients have to schedule meetings until I tried to schedule meetings with clients who were still in their 20s, 30s, and 40s with younger children. And now living through it with young children, that just finding the time for my wife and I to go to a meeting together is torturously difficult. Usually one of us has to hand off so the other one can watch the kids, because even babysitter logistics are challenging. And so all of those alternative mediums like, "Hey, we're going to meet via video," or, "We're going to communicate with email," or, "We're going to communicate through texting even," those are meaningful touches. You might actually have a lot of communication and touches and interaction and advice moments with next-generation clients, it's just a whole bunch of it might not be the traditional meeting.

Andrew: Yeah, exactly. You have to find a sitter and you have to... I was working with a young doctor, and speaking of doctors, they're among the busiest, right? This doctor worked out of state, lived out of state, and we were having a video conference call from his hospital cafeteria. And he had the Bluetooth on so people couldn't hear what we were saying, but he couldn't...he also didn't want to share details out loud with the other people in the cafeteria. So he was using the message box to send balance information, and we were screen sharing. That kind of technology is great. If it were 10 years ago we'd be on the phone and looking over some report or something. It becomes very important to be able to communicate easily with people who are incredibly busy.

What Andrew's Firm's Service Offering Looks Like For More "Traditional" Clients [51:30]

Michael: So contrast this is for us with your, I guess I'll call it your traditional clients, the more early retiree or fully retired, your average $2 million client. What does a relationship with those clients look like as contrasted to what you do for next-generation clients?

Andrew: Yeah. So it really comes down to what their needs are, how they're different. If it's an older client, perhaps we're talking to the client about estate planning and we're talking to the client about retirement planning. And if it's an earlier career client, perhaps we're talking to the client about cash flow planning and setting a first initial financial plan, putting that into place. And it really goes by the need and the preference of the client. It could be more in-person for clients who are getting closer to retirement, it could be more digital for other clients. Everyone has different preferences. Sometimes it's very hard to paint everyone with the...it can be very hard to paint everyone with the same brush. In our business, it's a customized, personalized business. It's like, how does this person want to communicate and where, how frequently, with who? But you can make some general characterizations about people in their careers...in the stages of life that they're in, what they want.

Michael: And so, are you delving into full financial planning software and producing comprehensive plans is standard for clients or is it more flexible to whatever it is they want to cover? You may go there or you may not.

Andrew: I think we always want to...sometimes you can want to do more than the client wants. And it's like, "Well, we can help you with this, this," and they're like, "Yeah, I'm okay." We're always willing to help our clients, and we have the full-service offering. But it's trying to figure out, what's the most important thing to the client? Often it's we want to balance investments with financial planning. And that was a huge reason for the software, the retirement planning software we use and the digital manager was to have more of a well-rounded planning versus investing experience. And so it's often updating the client's retirement projections. It's going over their investment portfolios. It's talking to them about their taxes if that's of interest. It's a combination of different things.

Michael: And did you say you have your own retirement software as well as your digital manager tool?

Andrew: No, no, no, we use eMoney for retirement and the digital manager tool.

Michael: And have you guys actually set a name yet to the digital manager tool when it comes out or is that still to be determined?

Andrew: We have a name. Michael, I'm going to have to make you wait a little bit for it. It's still early. So I'm going to add some suspense, but you will be one of the first to know.

Michael: Sounds good. We'll probably cover it in our monthly FinTech coverage when you're ready to announce it out there.

Andrew: Sounds a good deal.

Michael: So give us context to the broader evolution then of your path with the firm. So your parents got going, correct me if I'm wrong, back in the '80s, they were I think very early to the RIA channel. So the business is going for 20-odd years then you show up on this path. You went from essentially investment analyst to now serving as the president of the firm. So how does that evolve for you personally as a career journey? How did you go from investment analyst to president?

Andrew: Things just evolved organically. I remember, I would have been working for a few years and there was a leadership team meeting, and we were just...something was being discussed, some business planning issue, and I was called in to give my opinion. And I guess they liked what they heard because once I was called in, I kept being called back into those meetings. And I knew at that point that I wanted to make more of an impact on the management of the firm, but I wanted to learn more. So I took 16 months off and I got my MBA here in New York, at Columbia. And I basically got an MBA in Altfest. I was like, "Let me learn and take classes and keep notes about things that can improve our firm."

Michael: It's got to be interesting going through MBA education having already been in the firm for several years and then literally reflecting back what you're learning in classes against what you do in the firm since you already had gone down that road for several years.

Andrew: Yeah, it was a really special opportunity just to be outside as a student. It's like the same experience you get when you're at a conference and you step away from your work and you get to listen to people share their views. And it's like you get that for well over a year with incredibly smart people.

How Andrew Tied Advisor Compensation To Client Satisfaction And How He Restructured The Firm's Organization [57:15]

And I set out a plan that was really focused on further professionalizing the firm. And it was coming back to the firm, which at that time had been set up as a...into different functional departments, investments and financial planning. Our employees were on straight salary, there weren't any career paths. And I reorganized the firm, or I led the reorganization of the firm into wealth management teams. Our focus is on our clients. And we felt that that was the best way to serve them, and created very well defined and structured career paths that had a lot of what you can call leverage, where it had great, smart people doing junior work, assisting the more senior people, and the accountability to clients, how we evaluated ourselves. What are metrics for advisors? What are signs of success that we're doing a great job for our clients? We started doing these in-depth engagement studies for our clients, where we would monitor their satisfaction and other things that would define an engaged client. And that became part of contributor to people's bonuses and service, how well they're servicing their clients.

Michael: Wait, that's an interesting one. So you're tracking a measure of client satisfaction and then tying it directly to bonuses and compensation for the advisors?

Andrew: Yes. Yes. And we still do that.

Michael: So how do you measure that?

Andrew: We want to know how well we're doing for our clients in satisfaction in general. How well is Altfest doing? And how well are the people...how happy are you with the people who you work with? And so we literally just ask, "How happy are you with the advisor that you work with?" And we look at satisfaction scores. And the higher the satisfaction, the more compensation one gets.

Michael: So is that an email or is that like a phone call? Do you have a third-party survey firm that goes out to all your clients to get these client satisfaction ratings? How do you literally gather these kinds of scores?

Andrew: Yeah, we've been using Julie Littlechild's firm, which was before Advisor Impact and now I don't remember the new version of her firm that she just reintroduced.

Michael: Absolute Engagement platform now.

Andrew: So that's the one. So we use her firm. She has a good template. We customize it to what we want to measure, which becomes different for when we're doing it, depending on what we're thinking about doing for clients at that particular point in time. "Would you like us to help your children?" Etc. And we get a huge...really high response rates. It's not like a SurveyMonkey where it's like, no one's filling this thing out and you have to bribe them with a Starbucks card or something.

Michael: They pay you well, you would think they kind of have an incentive to actually respond to the survey at that point.

Andrew: When it comes to wealth management, thankfully, it's serious. It's like, "Please tell us how you'd like to...we can better help you. And we're going to use these answers to do actionable things for you." And of course, we try to mail it. We mail, we email. But we get close to half of our clients who are filling this out and providing...I think like 90% of them provide their names. So we can use that information to tailor our services to what our clients want and hold ourselves accountable to our clients.

Michael: I've been fascinated by this whole direction that Julie launched her Client Insights as part of the Absolute Engagement platform. There's another firm out there I know called Nexa Insights that's doing a similar thing. That, I don't know, on the one hand, it sort of embarrasses me for our industry that this is novel and new, but like, "Hey, what would it be like if we actually just asked our clients on a periodic basis how we're doing?" It's a really straightforward thing. There's, well, now even industry-specific survey tools to help facilitate it. But so few firms I find have ever done that to be able to track, not just how are they doing in particular, but I think especially for larger firms. When you have 5 or 10 advisor teams out there and 9 of them score well and 1 of them scores poorly, you find out pretty quickly if someone on one of the teams is not up to snuff with the rest because it shows up in the feedback scores if you bother to ask the questions and get the feedback.

Andrew: Yeah, it's so worth doing. And it's such valuable information. And if you have anyone who's unhappy about something, you can follow up with them and fix whatever issue there is. People should be able to define the way that they work with us. And it's just this is their way of doing it. Like you ask, "What are you deciding to do for a particular client" And if a client says, "Hey, I want to discuss tax planning with you or socially responsible investing," then that's what we're going to discuss. It's kind of like they're setting their own service experience with us.

Michael: Very cool. Very cool. I love that that became systematized and to the point that you tie it to advisor compensation. So I guess at the end of the year there's just some translation thing like, "If your average score was 8 out of 10, you get this bonus. If your average score was 9 out of 10, you get this bonus. So try to do good work for your clients and keep your satisfaction scores up?"

Andrew: Yeah, exactly. It's one of the inputs for their incentive comp, and it's a great coaching opportunity. It's really helpful data to have. That's practical but like you said Michael, probably doesn't get implemented as much as it could.

Michael: So you said you started restructuring advisor compensation, right? Tying bonuses incentives to things like client satisfaction. You also talked about restructuring I guess away from departments and into teams. So can you talk to us a little bit more about what that looks like now? Did you blow up departments entirely and every team has an investment person, the planning person, and a lead advisor? Is there still some departments but some teams? What does this look like in your firm?

Andrew: Yeah, so we said that we want all advisors to have a baseline of financial planning knowledge. And so everyone was required to get their CFP designation. And we then said, "Who are the people who want to participate on the investment side?" We have CFAs here and we also have dedicated investment analysts, but there are people who want to have a hand in the investment portfolio and follow segments of the markets. And then there's some people who want to work on another side of the business. Maybe it's life insurance planning. We have someone who's working on that. So it's kind of longer we've had to play this out, because it's been some years now the more we've tweaked it and said, "We should start with the person."

I'm not such a big fan of absolute structured, like, bureaucratic career paths. I think you have to say, "What does this person want? How does this person want to develop? What is this person interested in? And then where are the opportunities at our firm?" And we're doing so many things that there's... I haven't run into a situation yet in which the person's...the advisor's interests are not aligned with our firm's strategy. That we haven't been able to find a place for them to work on things that are not, let's say non-traditional to their career path.

Michael: So what constitutes a team at this point? Who's on a team? How is it comprised?

Andrew: Our clients have an advisor who's their first point of contact, and then there is a more senior advisor in a strategic role who will be available to the client, and do the client want to bring them into...bring that person into something or the person is often in the review meetings with clients. And there could also be in some cases yet another secondary advisor who is available.

And then there's a...we have a whole team of people who are helping on the operation side but also on the financial planning support side. Very recently we created a position called a financial planning specialist who's focused on doing technical work and is on...that person's on the path to being an advisor. It's really cool. It's like maybe I start out at Altfest doing operations and trading and then I get my CFP and then I'm immersed in technical work even before I start speaking to clients. My job is to do planning and underneath the supervision of someone more senior, and then by the time I'm an advisor, I'm already a financial planning genius. So it's pretty cool from that perspective this new addition that we have, and helps our advisors work with more clients as well.

Michael: Interesting. So a team essentially becomes a lead advisor, possibly a senior advisor in a more strategic role. So the mentoring opportunity, the chance to have one of the principals or partners in, having them in every meeting, some operations side person to support, and then a financial planning specialist that supports them on kind of the technical grinding work that has to be done for clients.

Andrew: Yeah.

Michael: And so is there an investment person on this team as well or is investment still separate and centralized unto itself?

Andrew: Investments is centrally handled. And I would say the exceptions, the customizations that are happening, which happen a lot, we have hundreds of portfolios, those are the ones that the advisor is working on. So the advisor is speaking to the client, explaining our views to the client, understanding the client's preferences and customizing the portfolio. But the investment decisions, we have 10-plus people who work on the investment side of things who are making the decisions, including the analysts, people who are spending time as analysts. And we have a Portfolio Action Group, which are...there are five of us on that Portfolio Action Group. And they're setting strategy for the portfolios.

Michael: Portfolio Action Group. Is that like the functional equivalent of an investment committee?

Andrew: Yeah. You could say it's the equivalent of an investment committee that operates very quickly, as opposed to...

Michael: So like when an urgent decision has to be made, market volatility or concern about some investment that you hold. When people have to come together to make a decision, this is the people you put in a room to make a decision fast?

Andrew: Yeah, that's right. So our Portfolio Action Group is the steering body that sets a strategy.

Michael: And so, you went and got your MBA, you came back to the firm, started implementing some of these changes. So I guess I'm just wondering like, how does that go over with the rest of the firm when like, "Oh, God, he went to MBA school and came back and now all these things are changing." How do you put through that kind of change in a firm that was already around what, 25 years at that point?

Andrew: There's some things that you should do and then there's some things that you do do when you're early in your career. That was one of those moments where I was like, "Man, I could have done this better."

Michael: What happened? You got backlash from the stuff you were trying to do.

Andrew: Yeah. It's one thing to have the leadership team's buy-in, it's another thing to do a lot of individual work with people at the firm. And so when this was happening, maybe 10 years ago, it was like, "Yeah, this is great, but it probably would have been better to incorporate people's feedback early on so they get their buy-in." And so people like the system, but it was like, at the same time there was less buy-in. There was like, "Mentally, I like the system, but man, I should have had my voice heard because now I have to operate in this system and I would have preferred to shape it." So that's one of those things you just...you learn, and you've got to learn from your mistakes.

Michael: Yeah, true enough. True enough. It's, I think, particularly one of the challenges that a lot of us go through as business owners. That we start on our own and our actions only impact us, and then maybe we get a little bit bigger and actions may impact a few employees, but they tend to be lower-level employees who just kind of have to take the gig and what the boss says sometimes. At some point, though, you grow the firm larger, you get more employees, you get more good employees, you have more choices about where to work, and all of a sudden this whole like actually taking stuff to the team and getting buy-in begins to really matter or you really can upset people and they'll just walk. And turnover is expensive.

Andrew: Yeah, it really is. And there's so much that we do on the employee engagement side. We're very proud that we just got named one of the best places to work by InvestmentNews. And we measure employee...just like we measure client satisfaction, we measure employee engagement. We do multiple studies throughout the year. The first thing I did when I got named president was go and have lunch with every single person at the firm to figure out what we can be doing better for the firm. Managing an employee-focused firm because employees are our assets. They're the lifeblood of the organization. And it's, just like managing clients, it's managing effectively employee relationships. We're very lucky to have some great people, but it takes... To your point, turnover is very expensive. It takes forever to find someone. It's just the fit has to be right-aligned with our culture. And to lose people is costly. So we're very employee-centered.

How Altfest Measures Employee Engagement [1:12:24]

Michael: So you mentioned there that you actually measure employee engagement as well. So can you talk about that? Is this similar to the client engagement metric? You're sending emails around to the employees saying, "How well engaged do you feel with your job here at Altfest" and they give you feedback? How does that work?

Andrew: Yeah, we do two types of employee satisfaction reports. We use Gallup for one. Gallup is well known in this and they can provide benchmarking information. And so we use Gallup. What's missing, though, is you need to have open-ended questions, right? How can we be doing things better? Etc. So we use SurveyMonkey to gather feedback from employees. And the leadership team goes over that feedback. We also have started best practice committee...different committees and one including best practices committee, where people are making suggestions. And we go over that. We talk openly about what the feedback is, and we act on people's feedback. And it's kind of like shaping your experience just like clients can shape their experience with us and employees can shape their experience with us as well.

And all this stuff has to be so personalized. One person's hot-button issue is not another person's hot-button issue. So you have to really sit down and take the time to get to know what matters most. Is this person focused on moving up quickly? Is there something else that's driving this person and tailored to that person? If you take the time to do that then you're pretty much doing a lot of what you need to do.

Michael: Very cool. And so that Gallup report, I'm assuming that's their Q12 Employee Engagement system? That goes out once a year to employees? You just, "Hey, end of year, time to do the survey feedback" or do you do it more frequently or do you tie it to performance reviews? How do you actually mechanically send this out and do this?

Andrew: We definitely do it once a year, but we also do the satisfaction survey that has open ended-questions as well. So that's a second time. And then we do an employee technology survey, which tends to be joined at the hip with satisfaction because if employees aren't happy with your...if you ever want to understand why it's good to make an investment in technology, one of those reasons is definitely to keep your employees happy. So we're constantly looking at people's satisfaction with the technology we have. Those are the three surveys we do.

Michael: Very cool. And the employee technology survey, is that about overall systems, like, "Hey, do you like that we use eMoney Advisor for financial planning" or is that more personal, like just, "Do you like your computer workspace and does it boot up sufficiently fast?" That sort of stuff.

Andrew: It's all that, right? It's like, "How happy are you with our systems? How happy are you with the support that you get?" Due to feedback we decided to hire full-time IT consultant in-house, which has been working very well. So it's a great way to understand when it's time to overhaul your systems as well. A few years ago we set out to be in the top 1% of RIAs when it comes to technology. And taking a look and seeing which programs needed to be replaced, for many, the satisfaction...the frequent technology or periodic technology satisfaction reports were very helpful.

What Andrew's Ongoing Professional Development Looks Like [1:16:02]

Michael: So talk to us about ongoing development as well. Well, as you said, you did your MBA, and I think you were also one of the early people in Schwab's Executive Leadership Program as well a couple of years ago.

Andrew: Yes. The MBA was really helpful high level, and then I was like, this executive program came about and Schwab did a great job with it, but I was wondering, "Do I need this?" It's more business education taught by MBA teachers. But it was very helpful. It's very practical. Executive education programs are really worth the investment.

Michael: So can you talk about just like, what does it cover? What do you do in the Schwab Executive Leadership Program?

Andrew: Sure. Well, first, let me give credit to Schwab for the Gallup study, the Schwab program. I actually pulled that from Schwab, from their program. And I understand that Schwab uses it as well. You have different classes. One of them, for example, was a positive leadership class taught by a Michigan Ross School professor who has a very interesting way of looking at employee management and employee culture, company culture. And there was marketing innovation. There was a human resources class. You learn on a more practical basis. And then you are also learning from the other people in the program. So it's very much participatory. One of the study groups I'm in came out of that program. So I'm still learning today from those people as we share what we're doing. So it was a very practical, worthwhile program to attend.

Michael: So how long does this run? Is this like you go out for a workshop for a couple of days and they go through these: positive leadership, marketing, innovation, HR categories?

Andrew: It ran for a while. And you fit it into work. So it's not...the scheduled time wasn't too onerous. You have some assignments that you have to deal with.

Michael: So you're not just all out on site for a couple of days as like a workshop.

Andrew: Oh, yeah. To be clear, it's done remotely. And you have remote calls and electronic platform. And then you do have a meeting at the beginning and at the end in person where you travel to be on-site and in person for more education and meeting time. But it's mostly done from your office. You can decide how much time you can afford to put in. We're all adults.

Michael: So if you've got two different in-person trips, how long does it take to go through the program?

Andrew: My recollection is it took about a year to go through the program.

Michael: Okay. So that's a long commitment. That's not a just, "Hey, I'm going to go out for a weekend executive leadership thing."

Andrew: Yeah. No, it's not a weekend thing, it's more involved. It's like mini...a bunch of mini classes that unfold over a year.

Michael: So how do you compare MBA school versus Schwab's Executive Leadership Program?

Andrew: I think MBA school is, you're trying to learn the fundamentals of a business, right? You're taking accounting and corporate finance, and you're taking strategy and all these foundational core classes and then you take electives specialized to your need. I took my Altfest MBA electives. This program is super practical when it comes to HR and managing employees. For example, the failure that I pointed to with regard to getting employee buy-in before we reorganized our firm 10 years ago, that type of information like consensus building is actually covered in Schwab Executive Program.

Michael: Things that would have been useful to learn in MBA school.

Andrew: Right, right, right. So they're a great combination together.

Michael: Interesting. Interesting. And how do you find or do the program? You just get to sign up? Was there a cost? Was there an application process?

Andrew: There was a cost to get into the program. There is also...Schwab identified me as being someone who could benefit from this program. So I was approached and then I had to apply as well. I had to go through some evaluation process. And luckily I was accepted, but I think reaching out, raising your hand and saying, "This sounds interesting, could help me as I become a leader at the firm." I think raising your hand to express your interest is the way to go.

Michael: All right. And we'll include a link out to this as well for maybe people who are curious further. So again, this is episode 134, so if you go to kitces.com/134, we'll have a link out to the Schwab Executive Leadership Program. And I know I think TD Ameritrade has partnered with Philip Palaveev's group to do a G2 Leadership Institute program as well. So there's now one or two of these out there.

What Andrew's Role Looks Like Today [1:21:28]

So what does the management of the firm look like today? You're in a president role, what does a president role mean in the context of a $1 billion advisory firm?

Andrew: I'm in the ideal job. I am working on what I love doing. I love growing things, I love building things and improving things, and I love working with clients. And that's what I do. So all these things that we're working on, let's say the strategic initiatives, these are things that...many of these things I oversee, whether it's how we reach out to new groups in our specialization in different segments of clients or we're starting a new investment strategy for our clients as well. It's a round-the-clock job, but it's kind of like the job where your hobbies have intersected with your work. And it's like the position that we all want to be in, that I wasn't always in but am in at this point.

Michael: And so what does the structure at the top look like overall? Is there a leadership team and the president is on the team? Does the president run the leadership team? Organizationally, what does that org chart look like at the top and how does a president role fit in? Because I don't see very many advisory firms that have an identified president role. So I'm wondering what that looks like in practice.

Andrew: Sure. So we have a leadership team. It's a six-person leadership team, and I'm certainly very active in driving the strategy for our firm, but it's a participatory system. People vote on what we're working on and shape what we're working on. And above me, we have my father, who is the CEO of the firm and is incredibly active in the firm, as active as he's ever been. And the leadership team consists of people who've been...everyone's been at the firm for over 10 years. We have people who've been at the firm even longer than me outside of my parents. And it's just a group of very smart people who we're all trying to do what we do better.

Michael: So what surprised you the most overall about trying to build your own career in the advisory business as you look back over 16 odd years now?

Andrew: I think one of the things when you work at a family business, is that you kind of tend to have done everything. I think I probably started working here when I was 14 filing papers. I've been working in...worked in the operations side, I've worked in the investment side, the client advising side, leadership position. And it's kind of like, well, what do you love to do? What's the best fit for you? I was acting as the COO for many years. That actually...that's not really my love is the administrative side of things. I'm very lucky that I work closely with someone who does love doing that type of work.

And so it's kind of like, the most surprising thing has been where I've found my passion and where I have just been able to position myself. I started out on the investment side and I moved later to doing more financial planning work. I got my CFP four years ago. Don't quote me, something like that. I really enjoy the wealth management side of the work as well as the investment side. I love investing. And it's kind of like just seeing how things have come together in a very entrepreneurial, client-focused role.

Michael: What was the low point of your career or the journey for you?

Andrew: The low point. Not fun memories were coming out of business school in 2008 with all these plans and heading into the financial crisis. That certainly...it wasn't a high point. So good lesson and being flexible. It's like, now we have to work on client communication and put everything else off. So that stands out as one of the low points. And just again, the job of kind of putting out fires of the day-to-day, that type of stuff is also not really...that's not really my love. You've got to find time to, like they say, work on the business. And that's how my role has changed.

Michael: So what does a typical week look like for you at this point?

Andrew: A typical week is a combination of working on these different initiatives. Let's say I'm working on the development of technology. We have a huge rollout of doing more work within healthcare and defining a unique service for reinterpreting financial planning for healthcare professionals, helping to shape that and helping to launch and do campaigns in a very forward-digital way to these different audiences. We've hired salespeople recently for the first time.

Michael: What does that look like? You hired salespeople on a fee-only firm.

Andrew: Yeah. One of the things about our industry, we're always looking within our industry for the best solutions, right? And that's great. We're in these study groups and go to these conferences and we try to find what's working for someone else. But in my opinion, you've got to look outside the industry. And so while sales is unusual within the RIA space, there's some people who are using salespeople and doing a great job, but it's not as usual. I think people should be focused on...there's some people who do a great job working with clients and then there's some people who are...love to bring in new clients. We tried the "grinder-minder-finder" approach, where it's like advisors grow into business development officers and are doing more of the rainmaking like would be classic law firm, consulting firm, banking. And it just, that was something that didn't work for us. And so now we're doing something quite different.

So how does it work with salespeople? Salespeople are...they need to look different than you. It can't be, "Hey, I'm hiring the guy that I could use as a wealth advisor for an outbound sales role." You can't do that. So it's people who are different, they fit the culture differently. Some of them are much louder than us but they are very good at what they do and expressing the value proposition and helping to understand client's needs and bring them onboard. And I think that as we professionalize and continue to professionalize, that dedicated salespeople are the future. Particularly because, look at all these firms that the founders have brought in all their business but now are going through succession planning. To me, it's inevitable.

Michael: So the challenge to me that I hear about so often from firms that try this is, "But the client tends to bond to the advisor." So if the advisor isn't out there selling their services and their value in the relationships so that clients can bond to them, then they just end out forming a relationship with a salesperson who then says, "Oh, no, no, you don't work with me. You're going to work with that person over there." And the client says, "But I wanted to work with you. I like you. I was getting to know you." Is that just not a problem for you guys? How does a salesperson establish a relationship and get a prospect only to hand them off and not actually work with any of those people and not have clients get upset in the process?

Andrew: I think it has to be clear from the beginning as to how the client is going to be served, and so if you...the advisors or wealth advisors are brought in very early in the process.

Michael: So they, like, sit sidecar in approach meetings. They just didn't have to originate the meeting because the salesperson did?

Andrew: Yeah. They might not be in meeting one but they're in meeting two and are solving the client's problems. And it's quite clear that, "This is the person that...this person is competent, understands...I've explained what my needs are from the beginning and I've become confident and I decided in part to work with this firm based on who the people are in front of me." And the transition becomes a lot easier. And if they're having the salesperson check in on how things are going, there's nothing wrong with that either. But it's clear how the service is working.

Andrew's Advice For Advisors Starting Their Career [1:30:58]

Michael: So what advice would you give to younger advisors looking to start their career in a firm today? I guess in a parents' firm or otherwise. As you look back, what do you know now that you wish you'd known then that you could tell 23-year-old you about this journey?

Andrew: I would say that it's a great opportunity to come in to learn. And that I've had many careers in the 16 years that I've been at the firm. I've had multiple careers. I've done so many jobs to find the one that's best for me. And they've all made me a better leader because I understand the business in every aspect of the business. And I would say to that person to move around the business, find what you like. It might not be you think it's going to be. And understand your role within the business. Have a role that's different than your parents have. I think that that is incredibly important. One of the reasons that it's worked out great for me is that we all kind of do different things at the firm, my father, my mother, and myself. Carve out a role that's different for you than what the other family members are doing, and move around and soak up all the information. And you have an amazing opportunity to be, let's say a change agent and improve the firm. And you're already starting out with the values that have made the firm what it is.

What Success Means To Him [1:32:46]

Michael: So as we wrap up, this is a podcast about advisor success, and one of the themes that always comes up is that even the word "success" means different things to different people. So, you've certainly had what anybody would objectively call a successful career trajectory and path. You went from entry-level analyst to president of a $1.3 billion firm. But I'm wondering for yourself, how do you define success personally?

Andrew: It's one of those things I've also had to work on because I'm a competitive person and I want...you want to do so much. I think success for me is building on the foundation and the legacy that was created by my parents, and taking that legacy that is a client-first organization that has very strong values, and building on those to make the firm so much better and to make it vibrant and last for...and flourish for many, many years to come. And so that's how I define...personally define success. I define client outcomes, which is highly aligned with our core values. It's about building on the legacy that my parents created.

Michael: Well, very cool. Thank you again so much for joining us on the "Financial Advisor Success" podcast.

Andrew: It was a pleasure, Michael.