#FA Success Ep 365: Scaling Expanded Advice Services To 100+ Team Members In A $5B AUM Enterprise, With Rob Nelson

Resources Featured In This Episode:

• Rob Nelson
• NorthRock Partners
• Foundation X
• Sammons Financial Group
• Guggenheim

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Full Transcript:

Michael: Welcome, Rob Nelson, to the "Financial Advisor Success" podcast.

Rob: Thank you, Michael. I'm excited to be here. And, Michael, thank you for everything you do for our industry. I've been looking forward to this podcast.

Michael: I appreciate it. I'm looking forward to the conversation today as well and getting to nerd out a little bit on really scaling up large advisory businesses and the dynamics that come as we start expanding our services. I feel like there's been this trend out there, we're seeing more and more over the past couple of years of advisory firms going beyond, not just the traditional portfolio management, because we're doing more financial planning advice, but even beyond portfolio management and financial planning, advisors going deeper into tax, going deeper into estate, doing even more accounting work if they've got small business owners, getting more and more specialized in services beyond that traditional financial planning realm.

And for a lot of advisory firms, we make those steps one step at a time. "Hey, I've been thinking about having us do tax preparation for our clients, so I hired a CPA and they're going to do 127 returns for our clients this year", or, "We think it would be neat to start doing estate documents for our clients and my business partner is also an attorney and he's technically got a separate law firm, and so we do a thing back and forth with the clients, but the clients can get their estate documents done all basically under one umbrella". And it's a lot of kind of, "Hey, we're doing this thing for a segment of our clients. We hired a person to do that".

And I know you have been living this journey, but at a whole other level of size and scale, you do this with well over 1,000 clients and billions of dollars and 100-plus team members. And so I'm really interested and excited to talk today about what it looks like when you try to start introducing and then scaling these sorts of expanded service models. And you actually have to scale them with multiple people doing the thing in a department for a lot of clients on a systematized basis and what that journey looks like as you scale up those portions of the business.

Rob: Yeah, it is a journey. And probably for the rest of my career, we're going to have our list of the next 10 services that we want to expand and think about for our clients, but you hit on the key things, it's I'm always thinking about, can I scale it, and can I be amazing at it? And if it can't be both, we're not going to do it, then we'll continue to outsource it. But for us, over time, it's been simply from the beginning. For over this last 30 years, it's just, what are the pain points of my clients? What can I provide from a value proposition for them that makes sense in giving the concentration of everything that we want to do, yes, in a financial advice, financial planning, or just, period, advice in general? And so this is always on our mind and happy to talk about it.

What NorthRock Partners Looks Like Today [06:22]

Michael: So, I think to kick off, just help us understand the advisory firm as it exists today.

Rob: NorthRock Partners, our company, we're based out of...home base is Minneapolis, but I think we're doing work out of 45 states right now as an organization. So, our clients are pretty dispersed across the country. Of course, we have concentrations of clients in Minnesota, Chicago, Los Angeles, San Francisco, Arizona, New York, Boston, and so on. But we're doing work across the country. A lot of our clients have moving professions. They're corporate leaders that are getting relocated, professional athletes, and so on. And so we've continued to build around them. But NorthRock Partners, the organization, we have $5 billion of direct assets. We've been on a pretty fast ride of growth here. I think just in 2017, we were at $1 billion. So, we've been growing pretty quickly.

We're kind of getting prepared to double in size again over the next 24 months as we continue to grow. And a lot of our organization is just responding to the growth of our clients. Our clients are coming to success. And from the beginning, we've always just built services around them. And so as we're providing support to our clients, I mean, our business was built on a lot of...we work with a lot of corporate employees, corporate leaders.

If we're working with a corporate employee, most of our corporate employees are directly depositing their paychecks with us. We're providing them the right stream of income on a monthly basis. We probably have 50 clients who pay all of their bills. The majority of our clients, we pay some of their bills. We're hands-on on all banking activities, especially lending. We'll run all lending activities from A to Z. We do tax preparation. We file taxes in all 50 states. We manage all lines of insurance, life insurance, disability, long-term care, property casualty. We're very hands-on on employer benefits.

We have a charitable arm called Foundation X. So, if a client is a charitable client and charitably inclined, we're going to run all charitable giving on their behalf. All investment assets, 95% of our clients, we have oversight of their entire balance sheet of investments. So, when they log into our website or our app, they're going to see all assets as of last night's close or last evaluation date that includes 401(k), deferred compensation. We custody everywhere.

So, we're going to log in, we're going to trade in the 401(k), we're going to manage the deferred compensation plan, and so on. So, we're managing all investments, directed private investments as well. Legal and estate, also hands-on. Internally, we're managing all of the estate plan from A to Z. We'll do everything but draft the documents. Biggest reason that we're not drafting documents is the uniqueness of having it needing to be drafted out of each state that the client is located in as an organization and so on.

So, it's just as our clients have kind of anything that's going on in their life, executive compensation, we're managing the stock option, corporate compliance, holding limits, and so on. So, in the spirit of working with a client as they have life happening, we tend to be at the center and you end up with these strong personal relationships. Kind of the uniqueness and probably one of the best things about our business model is, because you're supporting the clients and all of those aspects, our communication with clients tends to be pretty often.

If you have a corporate employee let's say that they have a $4 million of investment assets and 2 children and we're helping them from all aspects of planning, they're probably interacting with our office every 2 or 3 weeks because a big expense happened and they need some money pushed into the checking account or it's benefit time or we're doing their taxes or we're making a tax payment on their behalf or we need to update an estate plan or they got a notice from their 401(k) provider and they're forwarding it on.

And so you end up with this strong level of interaction. And of course, what ends up as you're responding to those needs and following up with clients, and every person that I feel is interacting with our clients or clients are going to like and enjoy the interaction, you build these very strong levels of trust and important personal relationships.

And from our standpoint, having strong personal relationships allows you to have better advice, you know the client, you know what makes them tick, you know what's important for them from a priority perspective and you can really tailor that advice given not just the financial side, but the personal side in working with them, but that's the quick version of our business model and supporting clients. That's a corporate employee, but it's that same version of that if we're working with a professional athlete or if we're working with an entrepreneur, we're going to be leaning in on whatever their planning needs are.

Michael: So, how many clients is it for this $5 billion asset base?

Rob: Yeah. Right now, our number of clients is 1,500, but that's a little deceptive where we probably have about 700 clients that we kind of consider personal office clients, meaning that we're collectively managing all aspects around them, kind of almost a family office-type of approach but then we probably have 500 clients that are our clients' kids, parents, siblings. So, like, for some of our best clients, a strong part of our value proposition is supporting the next generation and their planning needs as well, but 700, 800 clients that we're providing kind of that deep comprehensive support as an organization.

Michael: Okay. So, when I think about $5-plus billion and 700-ish clients in the core before you get the add-ons, if I napkin math that, that's like $7 million per client. Does that feel like the right neighborhood? Obviously, there's a distribution around that, but is that kind of typical midpoint client for you?

Rob: Yeah, it might be a little bit less than that. Yeah. We have... Like, a big part of our business is clients that have complex needs that have more than $20 million. We have a lot of those clients. But I would say, if I would just take the average, it's probably in that $4 to $6 million range, is a very typical, but our fastest growing part of our business is…those that are complicated.

A quick example on that is, it always sounds great when you've got a large list of professional athletes, but probably more than half of our professional athletes are just getting going, they have less than $4 or $5 million in investment assets, they're just kind of coming into it, they're in first contract, and so on. So, they're growing. They have all the complexity of somebody that has $10 million. They just don't have $10 million yet. So, that's what makes our client base a little more unique.

How NorthRock's Team Structure Enables A High-Touch Service Model, Scalability And Client Retention [12:59]

Michael: So, then, what does this look like from the team end? How many team members are there at NorthRock doing all the stuff that you're doing?

Rob: Right now, we're almost at 140 team members, growing fast. We're about to go through a growth moment here at the end of the year as we have a large firm joining us as an organization. And how we think about the team and the structure is...well, what I grew up with was that strong personal relationship, you're that advisor sitting across the table from the client. And that's still the core of what we are. You want to keep the relationship simple. You want to know the client. But behind the advisor, we break out all advice by teams.

So, we have an investment team, insurance, tax, banking and bill payment, legal and estate, and charitable. And every one of our clients has one of those team members assigned to that client. So, as the advisor is getting prepared for a meeting, they're going to be collaborating with each of their advice team partners and getting prepared. And kind of one of the benefits of that is you have 2 sets of eyes, a lot of times more than that, but 2 sets of eyes on almost any component of advice that's going in front of the client, the advisor leads it.

And so as we build the organization, I'm building my investment team, I'm building my tax team, I'm building my legal and estate team, and so I also view that we have a scalable organization, meaning that right now, over the next 2 months, we're going to be adding an organization that has $1 billion of assets and very like-minded advisors, I know exactly how many tax professionals I need to build on. I know exactly the number of investment professionals. I know I need to add an attorney and so on.

And that's kind of how we think of it is building components of advice because what happens is, is when I add those 2 additional tax professionals, what ends up happening is the tax team gets better, and then that has an impact on all of my clients. And so we're very motivated to grow the firm because the growth is designed to get us better every step along the way, otherwise, we wouldn't grow. And that's kind of the secret to the success of building this model that creates scalability, but also creates quality.

Michael: So, what were the teams again? I'm just trying to process through. There were a number of teams there.

Rob: Yeah. You've got investments, insurance, tax, banking and bill payment, legal and estate, and charitable.

Michael: Okay. So, as I think about a high level like the advisor sits in a very relationship manager-oriented chair and these 6 departments become their, I guess, both internal resources, but it sounds like even beyond that, there will be a person from each of these departments assigned to any particular client, so from the client end, I've got, for me, a 7-person team, my advisor, and someone from each of these areas that I may be engaging in who all get to know me and my situation. Am I thinking about that right?

Rob: Close. Yeah. If you have a comp... let's go to a client that maybe it's more straightforward...a client that has $4 million of investment assets. Their relationship might only be just with the advisor, a dedicated client service person, and then they likely will have some interaction with a tax professional throughout the year as they're doing tax planning. The investment planning would be led typically by the advisor. Even though the advisor might be collaborating behind the scenes with the investment team member, the advisor is going to be front-facing, the advisor would be leading the insurance component, the advisor might even be leading a good chunk of the estate planning conversation, if not all of the estate planning guidance, before the attorney comes in into it and so on.

But as it gets more complicated, you've got a $30 million family and they're starting to get into more complex estate planning, now we might bring in an estate planning professional or now we might bring in the investment lead into the relationship just to have it where the client can hear it firsthand and have more technical components of advice and lean in with the advisor. But the spirit is to try to keep the...a lot of our clients, we're trying to simplify their lives, not make it more complicated, and so that's the spirit of it. But it's really having team members lean in as needed based on what's the complexity of the client's situation.

Michael: So, how many clients does an advisor support in this structure?

Rob: Yeah. The reason I pause on that is because it depends on the complexity of their client base. I would say, on average, every one of our advisors has a path to have less than 100 clients, and almost all of them do have less than 100 clients because, again, the idea, you're doing a lot for a client. There's a complexity, there's a comprehensiveness, a true comprehensiveness to the advice. And so you want them to know, be accessible to the client, and so on.

So, now we have advisors that have an average client that's $20 million or $30 million, they're going to work with maybe a dozen or 20 clients. And then we have some advisors that are kind of up and coming and their average client size is $800,000 or $1 million. They might work with 130 clients, 140 clients depending on the situation and what's going on. But the idea is, is that every advisor is going to know their clients well, likely is going to have under 100 clients in general, is how it's set up.

Michael: So, how do you figure out where those thresholds are? I get it conceptually, if you have more complex clients, you don't need to have as many of them, but then you do that across lots of advisors in a large enterprise firm where you have to figure out some policies and procedures to oversee this and make sure everyone's getting their fair client count. How do you figure out in practice? Do you track hours? Do you look at revenue productivity? Is there something else? How do you actually figure out, does my advisor have that many complex clients or are they just not taking enough of them?

Rob: Yeah. And let me know if I don't answer the question on this, Michael. But where a lot of it starts is every time we have a prospective client come to the firm and I'm having that conversation or one of our leaders is having a conversation with their prospective client about who they are and what they need from a financial advisor and so on, I tend to think of identifying the right team or the right advisor in 2 fronts, one is who's the right advisor from a competency perspective? Who's going to be able to keep up with this client situation and is the right fit? And then I'm also thinking about it from a personality perspective, who's going to be able to have a lifelong relationship that represents his client, who they are. And that's the spirit of setting up these lifelong relationships.

Our client retention tends to be 99%, 98%, and it's because you're building a foundation of a relationship, but it's also, they've got the right advisor for their future advisor that can grow up with them, is how we think about it. And then in addition to that, we're closely working with our advisors, managing their team structures. I've been doing this long enough and so have my senior partners that have been working with me to recognize you have an advisor that has $1 million of revenue that they have oversight and they have 1 staff person.

We can see the number of clients that they're serving. You can see the effectiveness and the efficiency of their schedule and you know how many team members that they should have. And sometimes if they are leaning on too many team members, then there might be a growth or an education moment where we need to develop them from components where you're gaining efficiencies.

So, some of it's practice management of knowing where they're at and what they should be. And then, of course, listening to the advisor. What are their pain points, if they're running at capacity? With the advisors, you want them to enjoy this too. You want to have an amazing relationship with the client, but you want the advisors to enjoy the experience, want the client service team members to enjoy the experience with the clients as part of the process. So, there's a practice management component that's a big part of our business and continues to be a big part of our business, but it's really connecting the right clients with the right team.

Michael: So, when you talk about, like, are the advisors, do they have the right number of team members? Are they relying on too many team members or the team members too much? So, help me understand more. I guess, what does that mean? What is an advisor team in this context? There's pods of advisors that have direct support, but you've got this teaming framework across the 6 departments. So, I'm just trying to visualize, like, what does an advisor team mean in your world?

Rob: Yeah, that's a great question. So, let's go a little bit... Let's say you have an advisor that's a little further along in their career and they have $3 million of revenue, they're working with 90 clients. That advisor might have 3 client service team professionals supporting them in their relationships. So, we'll have the advisor working across all 90 relationships, leading the advice, and then they'll have a 1 client service person appointed to each one of those clients, but they might be working across 2 or 3 client service people to get all of the work done.

It's also very common where the advisor might have what we call an advisor partner where there's a senior client service person or a junior advisor that's supporting the advisor on kind of day-to-day advice for the client. It's more straightforward advice. So, the client calls and has a question on their 401(k), the advisor partner might answer or might respond to that, or they have a question in regards to a change in their employer benefits, or they want to go through an investment more specifically, if it's more simple advice, you might have team members jump into that with the client.

Now, those people are going to know the client well. Those are people that are in client meetings, interacting with the client along the way. But my point there is you have $1 million of revenue, you might only have 1 client service person because that's all you need to get the work done. When you have $3 million revenue you've got more...the work tends to follow the revenue. You've got clients that have more complex needs. They tend to have more interaction with the firm and you have more people needed. I wish it wasn't that way. You wish, at some point in time, you just wouldn't need to continue to add the team members, but the work always does follow it as clients' lives get more complicated. And so that's kind of the team that's working hand-in-hand with the client.

And then the next level of team that's working with the advisor is what I mentioned before, is each client is being assigned to one of those advice team members. And those are actually uniquely assigned to the client based on the complexity as well. So, it won't be the same investment team member across the same client base for that advisor because certain investment team members are made for $30 million clients, and then there's certain investment team members that are made for $400,000 clients.

And so we even segment the components of advice into the advice teams and that's become very efficient. It's actually, from a client-side, it keeps it simple, and for the advisor, they're just working closely with their client service team on a day-in-day-out basis and supporting the clients and then whoever's assigned to the client and supporting the advice.

Michael: And all these dynamics around, as I think of judging complexity, I don't mean that the negative version of judging, just making determinations of capacity and assigning team members and assigning the specialized team members based on complexity. Who figures out how complex the client is? Who makes the calls about which advisors get which resources and which clients get assigned to certain expertise team members based on their complexity?

Rob: Yeah. I'll jump around a little bit on that. That probably comes at it from 2 or 3 different angles. Each advisor is looking to grow their practice as well. And so the advisor, let's say you're an advisor and your primary clients are corporate employees and your average client size is $2 million in assets. And so you're working with clients that have some straightforward needs from a planning perspective and then they get referred into somebody that has $30 million and it's an entrepreneur, it's a small business owner.

What the advisor would be able to do is do one of two things. They would be able to refer that to another advisor that specializes with entrepreneurs that can handle more complexity, or they might bring that advisor in as a partner in the relationship and still continue to be the lead. And they would be able to make that decision on their own and we're okay with that. That's one way.

Or a lot of new prospective clients are coming direct to our firm. They might be coming through me or other senior advisors that are... they're no longer working directly with clients. And then we would take the responsibility of identifying, as I mentioned, getting to know, having a meeting or two with a prospective client, what their needs are, who they are as people, and are we the right fit for them as an organization? And then identifying that they're the right team for them as a whole. Those are the 2 common ways that we're connecting clients with the right team members, but sometimes it's also going to be led by the advisor that's onboarding.

Michael: So, as you go through this structure with these specialized departments supporting running insurance and tax and banking and bill pay and charitable, and those domains that we don't always typically get into as financial advisors, at least not at an implementation level doing bill pay for clients, how does the fee structure work? Do clients pay a core advice fee and then a la carte for add-ons? Do you wrap it into one? Are there adjustments? How does this price?

Rob: Yeah. For us, we try to keep it simple for the client. And about 2/3 of the time, we do set up the fee as a percentage of clients' total investment assets, no matter where they're held. And then all services just wrap up into that. So, if you have a client that has $4 million of investment assets, let's say that their total fee is 0.9% or 0.85%, there wouldn't be an additional fee for tax. There wouldn't be additional fee for us to handle cash flow planning or insurance support or to help them on managing their estate planning or handling the day-to-day charitable gifts and so on. Everything is incorporated into that fee. The only time they might have additional fee is where we have an attorney drafting documents or something like that. So, that works the majority of the time.

The other third is where we charge just a fixed fee. It's a set fee based on the scope of services. An example that I just mentioned is you have an up-and-coming professional athlete. They just got their first contract. They have $400,000 of investment assets. They're living in multiple cities. They're working in multiple cities. They have all the complexity of somebody that has $5 million or $10 million of assets. They just don't have it. And so we might set up a fixed fee based on everything that we're delivering because you just know the complexity, you know how it should be priced, and we'll set a fixed fee until maybe the assets grow and we can change it over to a variable.

That percentage fee, when we're charging that, it tends to be on a sliding scale. As a client's assets grow, the fee as a percentage will go down a little bit. The work doesn't grow proportionally, typically with assets, but the work does follow and does grow. And we've had a fee schedule that's, for us, is I think we've had it in place for 15 years, something like that, that does work. And we continue to monitor and maintain it to make sure that it does line up from a complexity and scope, but that's the general way of how we think about pricing. We're trying to keep it simple.

Michael: So, where does that start for you? I know a lot of firms actively debate, like, should these assets under advisement fees that cover a wide range be lower or different than a traditional AUM fee where you're hands-on managing the portfolio? So, where do you set this fee schedule? Where does it start? Where does it break point down to for you?

Rob: Yeah. For our clients, it'll be anywhere from 1.25% to 0.5%, is the range. Normally, as it goes over $30 million of assets, that's where we start to gravitate towards. 0.5%, 0.6% is pretty common as it goes. Same thing, we have clients that have $50 million where you've got them at 0.7% just because the work is following it where you're negotiating with the clients, but that's kind of the spirit for us. We have a very transparent fee, and so the client can see it and they can feel it.

And then for us, the most important part is they can see and feel the fee. They can also feel the value proposition, and those two need to add up. And so, for us, making sure that we're being fair with the client, we've set up an appropriate price based on what the value proposition that's being delivered. And right now, it's just the fee, our clients are very complimentary and we don't get a lot of pushback on it.

Michael: Well, I'm struck. The fee schedule you're talking about is not significantly different than where I think just most advisors are in general. We have fees somewhere between 1 to 1 and 1/4 [%] at the bottom end and we get to break points around 0.5% at the upper end. And it sounds like from your perspective, because of the breadth of what you're doing, you may have assets under advisement, you may not be directly managering them in a custody relationship, but that doesn't particularly change fee structure for you. It's a holistic offering, don't really care where your assets are. We'll help you with them wherever they are. This is our all-in-fee structure to do that.

Rob: It is. And that works because what will happen is that once a year, you get a client that says, "Hey, walk me through my fee structure again". And then we walk them through the fee structure. And we have a lot of clients that are in the money management business that are mutual fund managers, hedge fund managers, investment analysts, CFOs. They're smart enough to be able to do this, they just don't have enough time, and we're leaning in, but they'll ask us questions thinking about it from an investment management perspective, saying, "My fee right now is at 0.7% and I've got this money in bonds and I've got this money in cash. And should that be right?".

And then we talk about it and say, "The fee is based on scope of services, and investment management is definitely a big part of what we do, but remember we're going through and we're helping you to put together the plan and that lending strategy. Remember we're doing your taxes and they've been getting more complicated because, remember, Peggy's got that small business that we've been working with, and then we've been very proactive on your estate plan and helping in that. Remember we restructured your insurance and then we're helping you in the property casualty side".

And then the client stops you in the middle of the conversation and says, "I get it. Yep. No, it makes sense. I'm good. Thanks". And so it's just making sure that people understand the depth of what we're doing, and we're always able to point to that. And go back to what I mentioned at the beginning, is we have so much connectivity with clients that you can always show and walk and talk them through what we're delivering and they can feel what you're delivering. And so that helps us to be able to overcome that objection.

NorthRock's Organizational Structure And Hiring Structure For Collaborative Growth [32:46]

Michael: So, what does this look like from, a staff structure, like an organizational chart perspective. You've got a lot of people between the advisors and all these different specialized team areas and just the management and operational overhead it takes to run the business at your size. So, how does this work in just managing the leadership and organizational chart overhead to make sure all the different things that are supposed to happen are happening?

Rob: Yeah. That's probably the most transformational component of what's happening for our business right now because, I'll make it up, but 10 years ago, we maybe had 1 full-time leader. All of us were, I always say, part-time leaders where you've got an advisor that's leading clients and you're leading the client service team, and then you've got another person, you've got a tax professional who's leading a bunch of client work and they're leading the tax business, and so on. But what's happened for us over this last 3 and 4 years that we've been investing in is dedicated thoughtful leadership on every component.

So, each of our advice teams has a leader dedicated that's leading that business and we'll continue to build structure around that. And then now I've got a president for our business named Sean Baenen, who's leading almost all components of the business on a day-in-day-out. I've got a leader of our sports and entertainment, Aaron Ryan, who's got an amazing background in sports. He's leading the sports business.

I've got a person who's leading our hockey business morning, noon, and night. We've got a CFO who just came in. We've got a leader of our people. We've got a leader of our legal, and so on. And so we've been bringing leaders in and we have a leader overseeing our advisors. We've got somebody overseeing our client service, somebody leading our compliance components of our business, somebody leading our marketing.

And so now having somebody waking up in the morning every day thinking about our marketing plan, which used to be me, is kind of a change moment. And that's actually been leading to the acceleration on everything, the acceleration of the growth of our business, the acceleration in the quality, the professionalism. We've been becoming a professional firm, but it's also to the quality of the work, building process and systems. And that scalability element has been the game changer where I can see what's possible of what this can become with excellence. But the leadership aspect is very new to our business, but that's been our approach of how we've been continuing to build our own.

Michael: So, now, though, just take me one step further. That's fascinating. That's so many people. I'm assuming all these leaders don't actually report up to you or you're still going to have 14 direct reports in the really busy week of meetings. How do you structure this? Who reports to who just to keep track of that many leaders doing that many things across such a broad business?

Rob: Yeah, that's a good question. Broadly, I'll try to maybe oversimplify it a little bit, we tend to break it up by the wealth management components of the business and the operational components of the business. So, our president of our business, Sean, who has oversight of all of the organizations that have P&Ls, but he has oversight of more of our operational platforms, so our people, finance, our legal components out of our business, our giving aspects of our business, operations, and technology, he'll oversee that. And then we have leadership structure, that's for what we consider our wealth management or our advice business.

So, the leadership that's overseeing our advisors and our advice teams. And my partner, Todd Moser, oversees those businesses and then has the leader of advisors reporting to him, the leader of our advice reporting to him. And then all of those leaders that have advice responsibilities will be reporting up through that part of the organization, but that's kind of how we're separating the operational components of the business, but also our advice side of our business are how we're breaking up the leadership side.

Michael: Interesting. So, you end out with 3 people at the top, you, Sean, who has all of the operations side of things, so, people, finance, legal, ops, tech, all those core components. And then Todd has the wealth management advice side of the business. So, the financial advisors, the advice teams, because of the depth you've gotten the advice teams, that all rolls up through Todd's side.

Rob: Totally.

Michael: Am I thinking about that well?

Rob: You are. And like every business, we know that we've got 3 leadership gaps. I'm making up the 3 number. But we have 3 leadership gaps all the time. So, as the business grows, what's our next leadership…I know right now that, Todd and I were just talking about this earlier today, is that we need to have a dedicated leader of all of the advice teams, somebody that all advice teams leaders roll up to, not only just for leading those teams, but leading advice.

I want to have somebody waking up every morning, thinking about the entire quality of advice for the complete organization and then driving that across our advisors and our teams. And it's collaborative. So, it's not just... there's so many things in execution of advice that go across teams. You might be doing a tax strategy that impacts the charitable team, the tax team, and the investment team. And so you need those teams working in unison to get the work done.

And so being able to come up with amazing strategies that we can execute across the entire client base is what's next, but we want to have an advice leader for that, or we have enough going on where we should probably have a dedicated COO, and so on. So, we're always thinking about who's next, what's next as the organization gets to the next level. In our investments, as an example, we've got enough volume going on in private markets where we want to have a dedicated leader leading our private market work and so on. And that's just listening to the business of what's the tug and pull as we move forward, but being thoughtful about it of what we can handle or what we can afford.

Michael: Well, I'm struck by this, even as you're talking about it because I think for most advisory firms, they would envision like somewhere by the time you get to 100 employees, you're supposed to be big enough to hire the people you need to do the things you need to do, right? You're supposed to be "there". I'm putting that in air quotes for anybody who can't see in a podcast. Right? If I just get a little bigger, I'll be there. I'll have enough resources to hire the people that I need to do the things that we're doing.

So, I'm fascinated to hear you're framing around this, of, "Oh, yeah, we're $5 billion and all I can see is the 3 leadership gaps that we've got right now, and that basically hasn't changed". I mean, what the gaps are change. You have one and you hire a person, you solve that, and then it's like whack-a-mole. Another is what I'm envisioning. You solve one problem and another one crops up. It's like, "Well, okay, now, apparently that's what we need to hire next".

Rob: Some of it is around leading the business, some of it is around expansion of value proposition. You're listening to the clients and their pain points of what they're looking for and what success looks like in those relationships, and then it's just effectively leading change through the organization and quality. Just for the rest of my career and the rest of our careers, the organization just needs to continue to get better, it needs to evolve with the needs of the clients.

And so the amazing part for us is that you can continue to build efficiencies through technologies and effectiveness, and that helps to bring costs down. You think about what the cost of doing trading or the cost of managing technology across the business is coming down, so that helps for efficiency, but at the same time, then we're expanding our value proposition. And it's also probably why our margins have stayed the same for 20 years. You keep on thinking you're getting margin expansion and it never happens. But I'm at peace with that because our value proposition continues to expand and we've got a game plan for that.

Scaling From $1 Billion To $5 Billion In 6 Years With 3 Primary Growth Channels [40:57]

Michael: I was going to ask how this shows up relative to margins in the business that just you've got a fee schedule that is not substantively different than what most advisory firms do, but you've got all these additional advice teams, you've got all these dedicated leaders across all these different dimensions. They're usually not inexpensive folks to take on those leadership roles. So, how does this work from a margins perspective to be able to maintain margins as you're doing this much hiring into all these areas that other firms often don't have?

Rob: Yeah. The last 24 months, that's been the kind of a grow-up moment for us because, you've seen this before where you're building the business and you're making the decisions shooting from the hip a little bit based on what the needs are and you see the revenue streams and you can see the expenses and you're making game-time decisions, but now, for us, and we have a new CFO who joined us about a year and a half ago, it's been just amazing. His name is Rob Bardot. Now we're focusing on margin targets, and that allows us to be a lot more thoughtful on, "Okay. When are we ready to make the investments?".

So, being intentional about our margins because there's always going to be that need as we move forward. And then that's also going to have an impact on what we can expand from a service offering. You got 2 things that are happening on service, continuing to improve existing services forever, and then also thinking about providing more services that your clients are looking for, but we've got to be responsible for that.

But we've come to peace with our current margins. Even though they're lower than traditionally maybe in the industry, I'm okay with that. If I have a margin target, and I'll make it up, let's say you have a margin target that's at 30%, but my business is growing at 30% a year, I'm at peace. I'm okay with that as we move forward as an organization. And we have a range of where we want our margins to be and that we can live within as we move forward, but it's just that we've been very thoughtful about being responsible about it.

Michael: I was going to ask just how margin targets work in your business, in your planning environment because, on the one end, there's just the "as we hire a team, the margins go down a bit, and then as we get more clients, the revenue and the margins go up a bit", right? That's the natural flow of business. But in ours, you get this pesky X factor called the markets that really mess with your margins.

When you have a big market swing one direction or the other, your margins can move more in a week or even a day from a volatile market day than it does with the next many hires that you make. So, it just, I don't know, mechanically. How do you actually set and figure out what your margin targets are and whether they're on track when you've got so much market noise volatility that shows up in those numbers?

Rob: Yeah. Markets, as we know, are part of our life here. And at this point in time, we are subject to what's happening in the markets. But what you're talking about is exactly what we're going through right now. We are going to intentionally let our margins strip down as we go into this next year because we're going through a growth moment. We're targeting that we will next year likely have somewhere in the…$2 billion to $3 billion of growth. Some of it is from organic, some of it is from inorganic growth. And we need to get prepared for that because, like I mentioned before, from a scalability standpoint, I know what the teams need to look like.

So, until those new assets come from growth from either from new clients or from our existing client flows or from the acquisition that we're in the middle of, our margins for the next 5 to 6 months, 7 months are going to be light, but now with having detailed forecasting, yes, taking into account those markets' variance and what they can be from a range. And we know that that can always create additional pain for us. We do the best that we can to be able to live within those ranges and then sometimes intentionally let the margins strip in the spirit of getting prepared for the next leg of growth.

Michael: So, when you talk about margins drifting down, how much do they drift in your world? Is that we're letting them go down 2%, we're letting them go down 10% because we think this is a big growth opportunity? What's normal variance for you?

Rob: Yeah. We could see a 10% reduction in margin. And that's very reasonable to see in this type of year. We were looking at next year and we can easily see $1 billion of organic growth coming our way from…our clients are going through some really great growth moments. And we've got to be able to build around it and be able to keep up with that. And then also from our pipelines for new clients are starting to pick up so we can see the new business that's about to come our way. And then, as I mentioned, we were planning to be more proactive on the inorganic side and starting to add the right types of advisors as we go into next year and getting prepared for them too. And we're having those conversations with the advisors.

Michael: So, now, help us understand further just where all this growth is coming from. I guess, both this $1 billion of pipeline. And I think earlier you'd said you were $1 billion 5 or 6 years ago and you're $5 billion today. So, where is all this growth coming from? Have you been doing acquisitions all along? Is this just sheer client flows? Where's all the money coming from?

Rob: Yeah. Let's go to maybe the 3 primary channels. Our average age of a client is probably below the industry average. So, we've got a lot of corporate leaders that are in their 50s, late 40s, 50s that are coming into a lot of success. We've got entrepreneurs that are in the middle of some big business sales. And so our existing clients next year could save somewhere between $500 million and $800 million with us. And then our new clients...client advocacy is really high. So, you're doing good work, you're following through in everything you say you're going to do. We're playing a role and our clients as they're going through big moments in their life. And that leads to our name coming up in a conversation with a friend and then the phone rings.

And so on the new client side, you could have a $400 million to $700 million of our organic flows coming from new clients, and then being really thoughtful about mergers and acquisitions as we go into the next year. As an example, we have a team that's joining us, they have $1 billion in assets. Really great advisors, total community and culture fit, looking to expand their value proposition, want to do more on behalf of their clients, they want to provide better advice. And so I would anticipate that next year we might have 2 of those happen, a couple of advisors that are individual advisors joining us, and we might have a couple of large firms join us like that.

And so you've got a combination of things leading to our growth, but that's also the spirit. As we go forward and we're adding advisors, we're looking to add advisors that want to master their craft, recognize the responsibility that we have to serve others and to give them amazing advice as they're going through moments, amazing follow-through, want to work within a team environment, and ultimately, they want to reach their potential.

And so in our industry that is happening. What you have is not only succession plans. So, you've got advisors that are looking for succession plans. And to their credit, you have more and more advisors that are looking, what is the safest place to put... I know that I'm going to retire in the next 5 years, where can I have my clients transition to and I know that they're going to be cared for and taken care of?

And in our industry, in certain marketplaces, we're gaining a reputation where advisors know that we're serious about this, we take it responsible. Obviously, we want to have fun with our clients, but we're in deep relationships. And so we're attracting those advisors that are serious about their succession plan, but we're also...we just added an advisor from North Carolina a month or two ago, just an amazing advisor, up and coming, just a rock star of an advisor, late 30s.

Great organic growth, but he wants to do more on behalf of his clients, wants to expand his value proposition, knows that he can try to build it 1 employee at a time like so many of us have done or he can work with a firm like us and have it overnight. And that will actually accelerate his growth and be able to have bigger, deeper relationships with his existing clients. So, we're attracting advisors that are like-minded, and that's accelerating our growth, and then also those that are looking for succession plans, and then our existing clients' advocacy. So, it's a combination of things that are tying into our growth at this point.

Michael: So, I'm fascinated by some of the numbers you put there both on the growth from existing and the referral flows that I want to actually come back to a little bit further. So, you said this, essentially, contributions from existing clients could be, you said $500 million to $800 million next year relative to your asset base. That's 10% to 15% growth rate from $5 billion with $500 million to $800 million coming in.

That sounds like is mostly from corporate execs and entrepreneurs where at this point you already know they've got options or RSU's coming due, it's an entrepreneur that's already in the process of a sale where you know the liquidity event's going to happen next year. I'm presuming it's that kind of stuff that gives you a forecast projection of "We think there's more than half a billion dollars, more than 10% organically that's just coming from existing clients making contributions."?

Rob: Yeah. Think about like our people in athletes and professional sports and you know what their contracts are, you know what their saving rate is right now. The income is reliable. We can walk into next year and you know what they're going to likely net save when it's all said and done. They're directly depositing their paychecks with us. So, all of the money in and all the money out is going through the accounts that we're helping them to manage thoughtfully.

And so we know what those net flows are going to be and it's becoming much more predictable. Even we're starting to get better at knowing how many clients are going through big moments of buying the dream home or having major outflows for an expense standpoint. And we take that into account too, but it's slowly becoming more predictable as we continue to grow.

Michael: So, have you literally created systems for this to track it or to advisors log somewhere? Tell me about the ongoing savings of your athletes next year and any business owners that are having liquidity events that we can roll this up across the firm and try to do a business forecast of our growth?

Rob: Yeah, I think we're on step 4 of a 10-step program there. I've seen that some of our advisors are starting to build the systems and our CFO and our operations platform are starting to take that into account. So, I can see that we're going to get there, but we're just making the progress on them and being able to have the data analytics to support that type of work. But also, because so many of us have been doing this for a while, you can look at a client base.

I can look at the advisors that are supporting our professional hockey players and I can see the clients, I can see what they saved last year, I can see what the flows have been from their practice the last couple of years, I can see the number of new clients that they've added predictably, and you can get in a pretty good range. You can get in a pretty good range as you think about it. So, it's not perfect, but it's getting better.

Michael: Yeah. Well, yeah. You had like a mere $300 million swing on that estimate. So, I get there's some approximation to it, but just I'm still struck by both how dialed in you seem to be in the predictability at this stage and also just the sheer amount. Again, $500 million to $800 million is 10% to 15% and 16% organic from existing clients. It's a much bigger number than most firms have, but I think, as you said, that speaks to your clientele that are still mostly in the accumulation stage and are very high-income accumulators, right? Execs, athletes, entrepreneurs.

Rob: Yeah. The good news is I have a conservative CFO who rounds all of my numbers down…

Michael: As a good CFO should. Absolutely.

Rob: Yes.

Michael: And then talk to us on, as you framed it, the client advocacy side, I am presuming that essentially means referrals, clients that advocate out for you into their marketplace and their peers. So, you highlighted that as you're anticipating $400 million, $700 million in flows. So, is that a similar, we've got a sense of what percentage of our clients give us referrals and the typical size, we've got enough track record for it that this is what we project?

Rob: Yes. Advocacy is what got us here forever. From year 28 and beyond, just the phone has continued to ring, and so we've relied on that and expect it as we move forward. And actually, those years that our volume referrals decline, you immediately go to...you look at your value proposition, you look at your service experience. Have we changed something? Are our clients talking about us less?

Are we having less of an impact? You need to go to that and you try to hold up the mirror right away. And are we delivering everything that we should or where we can be? But four out of five years, we have reliable advocacy from our clients where you're, again, making a difference in their lives, they're talking about it with family and friends and the phone is ringing. And so we do count on it as we put together forward forecasts, and it has been a reliable source of our growth.

Michael: And is that what the pattern looks like in the growth over the past several years? Just, I'm struck by this hockey stick of growth. No pun intended. You have a lot of professional athletes. The other thing you said you went from a billion to $5 billion over just the past 6 years or so. Did you have acquisitions in there? Is that all client momentum?

Rob: It is. Actually, that number, my guess of that growth, it's probably a third is inorganic and two-thirds is organic, it's my guess is what's got us here. So, yes, we've had a couple of...my partner, Todd, who joined us, him and his team from Chicago, that was a large acquisition, a little over $1 billion for us in 2019. That's our largest to date at this point in time. We've had a couple of small ones. Beyond that, we're adding some teams along the way. So, we've had 4 or 5 acquisitions in our history, but our anticipation right now, as we move forward is to increase that significantly going into the new year. As I mentioned, we might have 2 to 4 of those in 2024.

Leveraging M&A Strategy To Increase Breadth In Advice Services [57:13]

Michael: So, help us understand how you think about acquisitions in a world where you already may do $1 billion to $1.5 billion in referrals and contributions from existing. Why mergers and acquisitions on top of that?

Rob: To get better, I think is my quick answer. But I look at just in my mind, I'm thinking about the acquisitions we've had. Every acquisition that we've had, we have gotten materially better as an organization. If you do it the right way, and I'll go back to our Chicago team joining us, what did I get from adding that group? There's a little over $1 billion in assets. I ended up with... I've got 4, soon to be 5 amazing advisors, just advisors that care. They're passionate about components of advice and the client experience.

And so I've got 4 to 5 great senior advisors. I have a client team, a team that's supporting clients that are also expanding what we do. But as I add that, to a little bit what we were talking about before, we were immediately able to add a couple of tax professionals. We were able to immediately add 2 investment professionals. I was able to add another attorney and was able to expand the depth of each of those advice teams.

And so we see the opportunity for us to get better as an organization in each one of these acquisitions and, of course, fill gaps. We have a group that's joining us that they have areas of competency that we're light in, as an example, they have an advisor that focuses on entrepreneurs. Excellent. We're having more business coming to us from entrepreneurs. I need to expand those teams. And so there's a combination of what that does and why we want to do it. But I also see it as being...

There's an opportunistic side too, is in our industry with so many advisors who are looking to expand their value proposition and us being, I think, a leading firm in depth of value, I see this as an opportunity for us to grow thoughtfully with the right people, with the right people that want to master the craft and do great work, and that provides an opportunity for all of us. But when Chicago joined us, we got better and bigger than any of us would have done individually on our own. And that's something I just want to continue to do more of.

Michael: So, as I hear that and process it, I think about it two dimensions. There's the outright talent that comes with an acquisition, right? I know in the tech world sometimes these are literally called "acquihires", like you acquire to hire because it's actually easier to acquire the firm than it is to try to hire and poach away the talent as it were, just acquire the whole thing and bring good people on board if the organizations are aligned in the first place.

So, I'm hearing a part of this is talent acquisition, like, you can get talent in acquiring businesses that you can't necessarily get by just hiring, posting a job ad. And that secondarily, as the organization just gets larger and bulks up on assets and revenue, it allows you to expand the advice teams more deeply because for every X dollars of revenue, you can add Y members to the advice team. So, as the organization is bigger, you just get deeper a tax team, deeper legal team, deeper insurance team, deeper bill pay team, and so forth. Am I thinking about those well?

Rob: You are. We're going through that big time. And I can point to 2 examples right now that are totally top of mind. We are very out-to-market right now, but we need to expand the advisors that can work with professional athletes. You have to have some experience in it. There's relevancy. There's all kinds of things that go into the ability to effectively work with a professional athlete, relatability, all kinds of things. And so for us, we're out in the marketplace that we're looking to hire and bring on advisors and acquire firms that have competency already in it because we have more work that's likely coming our way than we can handle, and I need to find the right advisors that can keep up with that.

The same thing with complex families. We have what I would consider family offices or complex families that are coming our way, and we're looking for advisors that can keep up with a $50 million or a $100 million, or a $200 million family. And those are hard to find. So, as we think about acquisitions, it's definitely going to the marketplace to try to find the advisors that are going to fill in and help us to bring in some gaps as we think to grow the firm effectively.

Michael: Well, I'm struck by this as well because I feel like for a number of advisors, when the whole discussion comes up of, should you specialize, some advisors are concerned of, "Well, if I focus on one area, then there's other people I can't serve. Am I going to pick something too narrow?". But one of the concerns I've heard crop up from advisors as well is, "Well, if I specialize into a particular area, it may be harder to sell my firm someday because it's gotta be someone who wants this particular specialization since I don't have a broad-based clientele". But I'm struck as you're framing it here that you basically only want to acquire firms that have specializations that complement the things you already specialize in. That's what makes them better acquisition opportunities for you, not worse.

Rob: Yeah. I think there's a combination of both because where we're looking to go to the marketplace that we want to expand, that we also want to deepen our capabilities beyond what we already have is private markets. You make sure you hear the pain points all the time within the advisor force of just having competency of those that can handle private market assets. And so I can hire those people one at a time or I can look for the right acquisition targets to expand that and have that be a deeper part of our value proposition, our examples where we're... I gave you the example as an entrepreneur, so I'm trying to do a combination, but, yeah, on our existing things that we're already great at, and then trying to grab onto areas that were a little light.

Michael: So, as you explore these kinds of acquisitions, I guess, just someone from your perspective, how do you look at and think about all the private equity M&A that's happening in our industry right now? Because they have a different story and reasoning than what you're describing, but I'm sure you bump into them in some firms that you're trying to acquire. I would imagine a few of them have called you as well because ADVs are public, so they know where the large firms are. So, when you're in this kind of growth mode and doing this acquisition activity, how do you think about and look at the private equity acquisitions in our space?

Rob: Yeah. Talk about a transformational time in our industry related to that. You're definitely running into private equity-related competitive situations, but you have advisors that are now recognizing what's involved in the check. And so we're in a really great conversation with an advisor that before they met us, they had talked to 3 different private equity firms and they're thinking about succession and they're thinking about what's next.

But as we were having the conversation, and we're not going to be at the top of the price range on the economics here and we're completely in play for this be a firm that we acquire because they're thinking about quality of advice, they're thinking about wanting to have a longer timeframe, they're thinking about the community and culture, they're thinking about depth of services because 2 of the 3 private equity firms that they're talking to, they just want to keep the same model that the advisor already has.

The advisor is just doing investments and then they're outsourcing everything and they can tell that the quality of their advice is suffering related to it. And so as these advisors are making decisions about their clients and the future of their practice, I'm finding more and more advisors that it's not about just...the number one thing isn't about price... it's definitely a factor, of course, but it's a combination of what they're trying to accomplish. And with us having so many strengths, as well as being able to step in and be competitive on price, I think we're in a good spot.

Michael: And how do you think about it in terms of doing a deal with PE yourself? The acquisitions you're doing, I'm sure, are capital intensive unless you do all of this stock for stock transition. So, do you think about taking private equity dollars to accelerate the growth path you're on?

Rob: Well, your timing is interesting just because I'm actually just completing a transaction this week on that. But we did this a little bit different. For us, as we were thinking about our future, since 2017, we've had 30% growth. And we have had a capital partner over the last 4 or 5 years, but our growth rate is just above average, and trying to find the right firm that can keep up with that has been a challenge. And I think one of those, we started to think about who's the right partner for our future, preparing for growth and, of course, expansion of services.

One of the challenges that we had in the private equity companies that we were coming across was the short timeframe. Well, in my mind is the short timeframe, 4 years, 5 years, 6 years, 7 years. And you bring in a private equity partner that has a 5-year timeframe, you're 2 years into a transaction, and all of a sudden, they're getting prepared for them exiting and it's like, I'm thinking 20-year timeframes. I'm planning to do this into my 70s and we're thinking about setting up the organization as a legacy firm.

And so about a year ago, we started a conversation with a really great organization, the company's called Sammons, a very large private company, most people aren't aware of them, located in Des Moines, a big business and the 44th largest private company in the United States with a big business and financial services, insurance, a huge stake in Guggenheim as an example and other investments, but not in the advice business.

Yeah. Owner is an ESOP. Owner is an employee stock ownership plan. And we started having a conversation about, they wanted to get into the advice side of the business. We're looking to grow. When we talked about what it could look like, they'd already done their homework about who would be the right partners. And the firms that they've acquired in the 1940s, '50s, and '60s are still the companies that they've brought in and that they have equity in today. And so I have a long-term approach.

In addition to that, we've been thinking about employee ownership and expanding our employee ownership base. And so they literally this week just ended up signing an agreement where they are going to be our long-term partner for the rest of our careers as we move forward to not only expand and meet all of the needs that we have to continue to grow, but do it in the right way. We spent so much time about the future of our industry and what it means for quality of advice and maintaining relationships.

And the good news is they're not an operating company. They're leaving it to those of us that are living and breathing this every day and where it's incredibly personal, but they want to invest in there, they want to get into the business for the right reasons. And so, for us, we think we found a very unique type of capital partner type of approach that's sustainable, scalable, and will help us to get to the next level.

Michael: And so, is this ultimately a "traditional style" arrangement, like Sammons will put dollars into the organization in exchange for equity, like you're selling a minority stake to raise cash capital to invest for opportunities, or is it a different kind of deal structure?

Rob: Yeah. For us, it ended up being a different deal structure because the ESOP approach, they came to us initially, which was an interest in having 50.1% ownership of the company, which in conversation number 1, conversation number 2, conversation number 3, I was telling them I don't think I'm ready for that. That doesn't represent our future.

But the more we talked about what control means and what a day in the life looks like for us, not 5 years from now, but what a day in life looks like for us 10 and 15 and 20 years from now, and what a path to excellence could look like, it was clear that we were going to be able to carve a path where in the next 3 years, I could end up where I thought I could be 7 to 10 years from now.

And so we kind of, in a sense, gave them their ownership stake that they desired in the firm, getting them over the 50%, but at the same time, allowing us to have control of our destiny and the operational control and a day in the life of all of the...what you would think in the top 10 big decisions that you're going to make in the setting the destiny to control the brand, the technology platforms, the operational excellence, components of advice, who you hire and who you're don't hire, and so on, as we make decisions for the firm. And we got to a really good spot where both of us, both parties felt comfortable with what we can live with down a collective path, again, for excellence.

Michael: So, they get a financial stake that they want, but you've got a management control component or a management company structure to be able to drive the business decisions that you want?

Rob: Correct. And probably one of the best things that came out of it is that there's a possibility that if we do this right, that NorthRock Partners can be around 100 years from now. I can build an organization...so many of us want to do that and then private equity comes in or a succession happens, and then that changes everything. But as I saw their path and plan to ownership, for us, I mentioned this at the beginning, is we have so many clients that are our clients' kids, and parents in the next generation that we're helping these clients build legacy plans and building them there. They're building just amazing legacies.

And it's aspirational for us. I want us to be an organization that's executing those legacies 30 years from now, 50 years from now, 60 years from now in a consistent path and plan that we designed today, and it was very unique for us to find a partner that was willing to have that kind of timeframe and actually had demonstrated that kind of timeframe in the past with other organizations. And that was really what the draw in here was when we thought about doing this and why we would do this, but, ultimately, yeah, that's what brought us to this point.

Michael: Interesting. So, the appeal for you on Sammons is that they don't have the PE-style timeframe. They stay invested for very, very long periods of time because they've literally bought things that they've held for decades, so do you. That's the demonstrated track record that these guys are really serious about running with a long-term time window and letting you grow the business with a long-term time window.

Rob: Yeah. And right now, we're still working on it, but it's likely that every one of my employees will be an owner in the firm next year.

Michael: Because that's part of their ESOP style, is...

Rob: That's right.

Michael: ...to make sure that everyone has ownership.

Rob: Yeah.

What Surprised Rob The Most About Building His Own Advisory [1:13:18]

Michael: Very cool. So, as you reflect on this journey, what's surprised you the most about building your own advisory business?

Rob: As I think about what has continued to surprise me along the way is this feeling of never getting there. Your first couple of years in the business, you know that you have a long way to go, and there's so much to learn and you imagine and dream about when you get there, what it's going to look like and feel like. But I'm surprised that you're 15 years into the business, 20 years in the business, and I'm 20...now I'm 30 years in the business, but when I was 20 years in the business, I was dreaming and thinking about what it's going to look like when I get there. Knowing that I'm incredibly grateful for this journey.

And I know that it's about the journey and I'm just... I wouldn't trade it. It's been special along the way, but here I am right now, 30 years into this with an amazing organization, amazing people, and we have so much untapped potential that we have a long way to go to get there. And I still feel that way. And you just want to get really close to get 80% of the way there sometime where you feel like you got pretty close to reaching your potential, but it's this path to reaching potential is one of the biggest surprises. But also, the other thing that I think about too is just the surprise of how hard it is to build and find the right team. I made so many mistakes along the way and building the team and the right team and how you do it.

And I've listened to some of your podcasts before of the challenges that others have made, not being deliberate about how you hire, and so on. But I'm at a point in time where we have the dream team where we've got this amazing foundation of leaders and people. And that's actually one of the few areas that I kind of feel like I've arrived, I'm arriving where we've got to this point where we've got the right team in place, but it was so hard. It was so challenging to get here and so many mistakes were made along the way, but that was probably the other big surprise for me along the journey.

Michael: So, what's been the biggest change from the way you used to hire that didn't work from what you're doing now that you're feeling so good about the team that you've got?

Rob: I'm sure other firms, large organizations, this is kind of back to the basics for them, but it's being crystal clear about the job description of who you're hiring and what that looks like and what a day in the life would look like for them where you can be clear so they can be clear. So, just spending time about the role and the responsibility and dreaming about it and then putting it on paper is one, but things that are hard to hire for, but we're hiring for curiosity. That was probably one of the biggest mistakes I made. I didn't hire for curiosity, and so I don't know, and I still don't know if you can teach curiosity, but I just...

So, you have people that aren't curious and we're in an industry where you're kind of paid to be curious. You need to find a solution. You need to find an answer. And so now having those types of personalities along the way that are, of course, looking for community and engagement and looking to self-develop and, of course, are appreciating a challenging, fast-moving type of environment, there's things that we're looking for that any one of those guides or any one of those traits can be seen simple, but you put them all together in one person and it's a challenging hire.

But what I'm so surprised on is the number of times my people team will come and say, "Here's the role that we're thinking to hire, and here's the person that we're looking to hire". And I go through the job description, I'm like, "I don't think that person exists. This is way too big of a role. And you're looking for somebody that's game-changing, amazing". And then they go find the person. Like, "Wow. Okay. You can do that". So, that's the type of being deliberate about hiring. And we still have ways to go to improve, but we've made so many amazing step forward to be good at it.

The Low Point And Challenges On Rob's Journey [1:17:29]

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

Rob: The low point, I guess, I would keep coming back to and I always reflect on probably my biggest growth moment too is when I was 29, obviously, growing the business, my brother developed leukemia and went through a really tough battle with that for a year and lived with me in the city while he was going through treatment and ultimately passed away.

And so I'm 30 and he's 28 and my best friend, really close to me. And going through that personally, and then also the impact that it had on me professionally changed my life, obviously, you immediately kind of go to understanding what mortality is and that you're not going to be here someday. But also, you develop an empathy and an understanding of people that are going through that moment and we'll all go through it, but that I just didn't comprehend or understand.

And also, in a unique way, it's benefited me in my life of being able to... I had a really good friend and team member who's been with me forever and her father passed away last week. And just knowing that how to lean in and the role that you should and want to play when people are going through those moments in time, my friends, my clients, my coworkers, it's changed my life, but it was really a difficult, toughest moment that I've ever done with.

And the other one that I'd probably point to that I think about tough moments is when you go through that with clients where I had a really great friend and a client who was a professional hockey player and he passed away from a drug overdose. And I was a mentor to him and definitely a coach and I just...the guilt that I had of, "Could I do more? Or could I play a stronger role as an advisor? How could I have missed these things?". It took me a long... I'm still not over it. But those are moments that have been the low moments that will define you, redefine you as you think about who we are as humans. But those would be the quick examples that I would point to.

The Advice Rob Would Give To His Younger Self And Other Advisors [1:19:47]

Michael: So, what do you know now you wish you could go back and tell you 20, 30 years ago as you were starting down this career path?

Rob: What I know now, I wonder if I would go back and tell myself. And the reason I say that is it would be nice to know that by putting the work in, that I thought I would have known that I was going to make it, but I don't know if that would have benefited me because those first couple of years, when I started in this industry, I didn't know if I was going to make it. And that sense of urgency and fear that I wasn't going to make it was a driving force for me. And the mistakes. I wouldn't want to see the mistakes coming because the mistakes…so much they've benefited my growth and my development and your wisdom and all those first 10 years of the major mistakes that you make and just building a business.

Those are unbelievable growth moments, but I think you don't recognize it when you're in the middle of it. And maybe that's what I would point to, is recognizing those times when they're the most difficult, that every major difficult moment I came up that I experienced, I got better. And again, you don't see it when you're in the middle of it, but to understand and recognize that that difficult year that you had when you were in your 4th year, that it's going to be okay and you're going to be better on the other side, that might be an example of what I'd point to.

Michael: So, what advice would you give to younger, newer advisors looking to become a financial planner and start a firm today?

Rob: The common advice that I give younger advisors, advisors that are less than 10 years in the business or just beginning, somebody gave me this 20, 30 years ago and it was "A plus E equals R", activity plus effectiveness equals results. And the reason I'm here is because I had more activity than anybody and everybody else that I started with. I just had such a focus on the number of prospective meetings and seeing clients and meeting centers of influence. I had the highest volume of anybody and everybody that was around me, and that activity, those reps, they lead to effectiveness, and that effectiveness builds competency, which builds confidence. And then the confidence leads to results. And then the results ends up driving more activity for you, and then it ends up being the snowball and this reoccurring cycle.

And so many advisors are trying to circumvent activity. 4 meetings a week isn't going to get it done. You're prolonging the experience to get there. And so trying to bring on 1 or 2 or 3 big clients that are going to solve all of your problems, it's not going to make you better. Sorry, I take that back. It'll make you a little bit better, but you gotta be in front of people. You have to have a plan for continuing education and development. You gotta get smarter.

Those are core responsibilities, but activity reps. Part of mastering your craft and building competency is sitting across some people and giving them advice. And maybe the other one that I'd point to is mentorship. Mentorship, finding the right mentors, not necessarily the mentors that are just about business results, the mentors of the people that are doing this the right way that you want to be like.

I am pleasantly surprised at the number of senior advisors that are great advisors that want to give back to the next generation. And so you can find those people in your life that are willing to give back…senior advisors, or it doesn't have to be advisors, people that you look up to, that you surround yourself, that when you're going through difficult moments are going to give you good advice and help guide you. I've had really great mentors around me at different times in my life that have helped me push through moments.

Even right now, I've got some really good mentors sitting around me that have helped me to get there. But those are the things that I would point to, the development piece. These podcasts, like what you're doing, Michael, these are gold. Being able for advisors to listen into these types of sessions, if this podcast would have been around 30 years, it would have changed my life. This is the kind of stuff that…you didn't have people or the opportunity to listen to these types of stories and so on. So, leading into all of those things that I just mentioned, those would be some of the components of advice I'd give the next generation.

Michael: Well, you got to listen to the books on tape.

Rob: Yes.

Michael: With all that time you had driving around your car for all those activity meetings.

Rob: I did a lot of that. That's a fact.

What Success Means To Rob [1:24:41]

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 different things to different people, sometimes different things to us as we go through stages of business, of career. So, you as someone who's built, what, anyone objectively called extremely successful business as you're crossing $5 billion and staring down even more growth from here. So, the business is in a wonderful place. How do you define success for yourself at this point?

Rob: Success for myself, I think I would define it as impact on others. Even back to when I was a teenager, I wanted to have an impact on my friends, I wanted to have an impact on my family. It was just a driving theme for me. And even as I became an adult and I came into this business, for my family, I wanted to be a reliable force. I wanted to be somebody that they could count on, somebody that they could trust, but somebody that through good times or bad times, that they know that they could lean on me. And that's kind of been instilled, I think, through our business, is the ability and the opportunity for us to have an impact on others.

About a month ago, we had a 30-year anniversary celebration and we brought some of our clients that had been with us for over 20 years. And these clients shared stories of how we had changed the trajectory of their lives and the impact that we had made on their lives and helping them to make good decisions and being there with them during very difficult times and playing a strong role. And that's fuel.

Our organization is very purpose-driven because our clients are leaning in and telling us that we're having an impact on their lives. And I guess as we move forward, I want us to continue to be able to play that role, not just our clients' lives, but our fellow employee lives and our partners and all of those around us. And so we kind of always take a step back and think about the impact that I'm having on the organization and those around me, and that's probably how I would continue to define success.

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

Rob: Yeah. It's been an honor, Michael.

Michael: Thank you.