Kurt Dupuis:
Welcome to The Whole Truth, where two wholesalers help financial professionals build great practices and thrive in a rapidly changing industry. We'll bring you the stories and voices from those on the front lines of this change. And we'll have some fun along the way.
Steve Seid:
We're building a community of financial professionals who are growing forward-thinking and want to get better. Thanks for listening and contributing to the discussion.
Disclosure:
The views expressed herein are those of the participants and not those of Touchstone Investments.
Steve Seid:
Welcome everybody to The Whole Truth. From the Bay Area, California, I am Steve Seid.
Kurt Dupuis:
From Atlanta, Georgia, I am Kurt Dupuis. I forgot to tell you, I just had lunch with a guy here in Atlanta who just found the podcast through recommendations, I guess the Apple “algo”, the AI working in our favor. He is like, "Yeah, I love podcasts. I came across yours and ended up meeting a new guy." Very like-minded. Loves practice management was like, "Ah, well we going to be people then."
Steve Seid:
So someone somewhere recommended us. Is that what you're saying? This is happening? It's all coming together?
Kurt Dupuis:
We are appeasing the AI robot Gods. Well, so we had one of our favorite people. We caught up with Penny Phillips who owns Thrivos Consulting, so it's a consulting company for practice management for financial professionals, but she's also started as a co-founder of an RIA1 that's been really successful fulfilling a niche for them that obviously it's working because they're recruiting like crazy and growing and building. So we sort of intertwined the business happenings of the RIA, but also what she's talking about in practice management related things since she's so close to it. Great conversation with her.
Steve Seid:
She won Episode of the Year, that first year that Kurt and I were doing this.
Kurt Dupuis:
That's right.
Steve Seid:
So go back and listen to that other episode after this if you haven't already. But we just love her. She's fantastic. And I kind of wrote down a couple of notes. The first one is it's been kind of interesting, and I don't know Kurt that we set out to actually do this, but we've had a bunch of what you would call quote/unquote “aggregators" on the show so far, which is that if you're not in the... I guess it's good to call in the independent world but I don't even want to say that because they're happening everywhere. But let's just say in the independent world, you can go fully independent and run everything for yourself and have the full payout, et cetera, but a lot of people don't want to do that. It's to run all the compliance and the operations and the rent and the whatever. So that these organizations pop up to be able to help with that.
Another good example was Daxs was on our show, Daxs Stadjuhar…
Kurt Dupuis:
Right.
Steve Seid:
…from The Network, Mariner Wealth Advisers who does it in the LPL system. We had the Golden State folks. And Penny has done it in the RIA space. I thought it was interesting what their group focuses on, which is essentially get financial professionals to the point where they're really spending the bulk of their time on growth. I mean, the numbers she threw out there was 80% of their time on business development and growth, she used the term “relentless prospecting”. And so you get 50% payout, but they handle everything else; the practice management, the operations, the compliance. I mean, I hadn't heard really anybody talk about fully owning the processes, the practice management, all of that, which I think was kind of interesting.
Kurt Dupuis:
She was one of the first people that talked about this idea, because I think part of our practice management efforts were pushing financial professionals to think more like CEOs, to be more business minded. And she was the first to be like, "Have you actually talked to these people? A lot of them do not want to be CEO. They want to be financial professionals and not do all this other stuff." And so, I mean, doubling down on that idea, there is a market for outsourcing a lot of the other stuff and people just want to spend time with their clients and prospects and outsource as much of everything else as they can.
Steve Seid:
Yeah, it's a good point. Some people are predisposed or could handle the things like CEOs pretty well and some can't. And it's kind of interesting to know where you are and how you approach the business and what you're capable of and where you want to spend your time. And then you've got all these different options to kind of figure out what's the right structure for you, which is why all these structures exist. That's a really, really great point.
She also got into, "Okay, if we're going to spend all this time on seeing clients in business development..." She talked about growth and she talked about the paralysis that people often get in marketing. "Okay, I've carved this time, I know what I want to do and then I end up answering a bunch of emails all day and feel like I'm busy." No, it's like how do you get beyond that paralysis. And she has some very specifics around that, which I thought was interesting. And one other thing, and there'll be more than these takeaways but I just kind of wrote the top three for me, was her comments about sales assistants and their career track.
Kurt Dupuis:
Human capital. She's also like the human capital practice management person.
Steve Seid:
You figure, "Okay, I got a sales assistant. They may do it for this long. Where do they go from here? Whatever you think, that would be logical." But I haven't really seen as much of that in the marketplace. What I've seen is kind of a sales assistants all get put in one bucket from the people that don't want to get registered at all to people that are full-fledged CFP in front of clients, even business development, and they're kind of all in that same bucket. And it frustrates me. There should be different roles and tracks, et cetera. So I thought all of that was really, really interesting. And as with the first time, loved having her on.
Kurt Dupuis:
Absolutely. So without further ado, here's our conversation with Penny Phillips. But before we get to that, make sure you smash that subscribe button, tell a friend and leave us a five star review on Apple. It helps other people find the show. Any questions or comments or criticism, email them directly to Steve at thewholetruth@touchstonefunds.com. And here's our conversation with Penny Phillips.
Steve Seid:
Welcome back to the show, one of our favorite guests. And I say that not just to butter you up. You know that you won Episode of the Year our first year. We told you that, right? Did you know that?
Penny Phillips:
I don't think I knew that. That's amazing.
Kurt Dupuis:
You didn't get the six-foot trophy?
Penny Phillips:
I didn't get a gift.
Steve Seid:
You didn't-
Penny Phillips:
I didn't get anything. No. Maybe I didn't. You know what it is guys? I feel like I just spoke to you, but it's been a minute. It's been like a year and a half, right?
Kurt Dupuis:
Yeah, almost two.
Penny Phillips:
Almost two years.
Steve Seid:
Yeah, it's been couple years since that episode. So I should say her name since we're already into the conversation. Welcome back, Penny Phillips. We are delighted to have you back.
Penny Phillips:
Thank you so much. Glad to be here.
Steve Seid:
There's a whole lot going on in your world. When we first connected with you, you had the consulting business, which is Thrivos Consulting, which you still do. But you had just at that point started with Journey, which was an RIA that you started up with a couple of partners. So maybe as a kickoff to this conversation, remind us who Journey is and how things have been going since you launched.
Penny Phillips:
Absolutely. It's wild that I spoke to you folks right at the beginning of that. So I was doing the consulting thing, still own that business, consulting advisers on how to build and monetize businesses. What I noticed about the consulting, and this will lead into the Journey story by the way, is that the advisers started to think differently about what they were building. They were building within a broker dealer or a captive system. And at some point, they started to realize that the businesses they were building had real value, significant value. More than they could ever get if they stayed internally and sold back to the home office.
The pandemic hits and the whole world sort of changes. And so not only do advisers realize, "Gosh, I can leave the institution where I'm at and recognize what I've built in a real way, but I'm sort of rethinking my whole career and life and I'm not even sure what I want to build." And so I noticed that advisers were hitting this, I don't want to say a wall, but this fork in the road. And so I decided to leave the consulting thing and launch an RIA for advisers and fill a very specific gap in the marketplace. That gap was advisers were leaving broker dealers, institutions, wirehouses going RIA and one of two things were happening. Either the adviser was going out to launch their own RIA because the industry's telling them they need to do that. And they would do that and then recognize it's not that fun to build and run your own RIA. It takes a tremendous amount of work, more so than it does to build in a broker dealer where you already have baked in resources.
So advisers are building RIAs and then hitting the capacity wall and recognizing like, "Eh, I don't really love this. The valuations on these businesses aren't as great as the bigger ones." The whole story. It was either that or they'd join an RIA platform, they'd give up basis points or a percentage of their P&L to access resources. We can think of any number of RIA platforms out there right now offering this. And adviser would say, "Great, I can access resources and then run my own business only to realize, well, so many of the real challenges I'm having actually have nothing to do with technology and resources and everything to do with actually running the business."
Steve Seid:
Right.
Penny Phillips:
So what I was finding was advisers in that scenario were coming back to the same challenge they were having at the broker dealer or wirehouse. "I'm giving up money for an expected value and I can't explain what that value is I'm getting in return. Oh, and by the way, I still have to run my business."
So what we wanted to build was an offering that sat really in the middle of those things, allowed advisers to own their entity and their equity, own their clients unless of course they want to sell, allow advisers to have access to all of the resources necessary to build a business, actually help them operate and run the business, but allow them to spend the majority of their time doing what they actually want to do, which is rainmaking and working with clients. So that's the offering. And so it's been incredible to have this idea come to life. We're 24 people now, nine advisers, just under 3 billion in assets, three offices. So it's been a wild two years.
Steve Seid:
Yeah, that's great. Kurt and I have had the opportunity to talk to a few different, I would say not exactly the same as what you guys are doing, but something a little bit like that, which is just to say, "I want to go independent, but if I don't have anybody that helps me to any degree, it's like what do I even do?" And so you see the LPLs, you have these super OSJs2 that people are rolling under. And even in the wires now you're seeing the ones that are creating semi-independent channels, you're seeing some of those sub-organizations pop up. So what do you guys, if you had to succinctly say what you guys do that's maybe different?
Penny Phillips:
I'll take this super OSJ model where you're in a broker dealer, big broker dealer and then you're in an OSJ, and then you have your own DBA or firm name within that OSJ. And from the OSJ, you are getting access to the investment management piece and you're getting access to, maybe it's a financial planner in-house who can help you with complex planning scenarios. You get the compliance oversight, et cetera.
By the way, that model is great for some advisers. That works really well. But oftentimes what happens is the adviser will still hit the capacity wall at a certain point because they are responsible for hiring, managing, and retaining team members. So yes, they have access to all these resources. They're on a 70 something percent payout or an 80 something percent payout. The firm is telling the adviser, "We're going to give you access to all this stuff and we're going to proactively help you." When in reality, and this is the differentiator, the proactive help means if you're an adviser and you pick up and you call your manager at the OSJ or you're a regional leader, they're going to pick up the phone. That's not proactive support.
What we have done is said, "We're not going to put you on a 70% payout. We're going to give you 50% of your revenue. We are going to do everything for you, including telling you when you need to hire the next team member. Helping you craft compensation strategies for your associate adviser, help you develop a associate, a client service associate into a financial adviser. That's the most critical evolution of a role, by the way, on a team. We are actually going to help you strategically run the business while giving you access to all of the resources."
For me, you're either giving advisers lowest cost or highest value. We are highest value. If you go to a firm that's telling you, "We're going to do everything for you," usually you're either giving up 100% of your equity and you become an employee of the firm, or you have a forgivable note of some kind, you have a contract that has clawback provisions and all the like. We don't have any of that. All of the risk of retaining advisers is on us. And so what I love about the wirehouses is they really create this network and community around advisers to help them be advisers. The problem is the way they think about the business is so outdated. I saw one of the big wires just had some social media thing about how they're letting advisers record videos. I'm like, "You got to be kidding me. Who, what’s that out there?"
Kurt Dupuis:
The year 2000 called.
Penny Phillips:
Yeah, I mean it's ridiculous. So we've looked at both of those models and said like, "What do we like and not from each of those and how can we bake that into the contracts?"
Kurt Dupuis:
What are those pain points that you're talking about from a practice management perspective today?
Penny Phillips:
How to optimize their business and get the most out of the people who are working for them. Number one thing we work on, I would say... Well, there's a couple things. The first is team development. And it's not just, "How do I hire somebody?" It is, "How do I develop somebody into a role that is going to be either revenue generating or what I call revenue protecting?" When I think about the optimal advisory business structure in today's marketplace, obviously it's the Journey structure, it has to be, but it's an adviser is spending the majority of their time rainmaking and business developing, and they have people on their team responsible for delivering advice and service to clients.
So at some point, if we want advisers to continue to rainmake and generate new business, we need other people on the team not just to take away the administrative and operational stuff. We also need people who can deliver advice to clients. Every adviser and every consultant and coach out there talks about how you need to add rainmakers to your team. My perspective has always been, "No, if you are the rainmaker, you need to add advisers who want to be in-house advisers and can deliver advice."
And so a lot of the work we do is around how do we shift people into roles or how do we hire people for roles where we're constantly scaling and optimizing. We talk a lot about growth, obviously organic growth, inorganic growth. We help advisers understand like, "Do you even want to buy a book of business?" Every adviser says, "I want to buy a book of business." Why do you want to buy a book of business? Do you know what that entails? So a lot about just growth in today's marketplace.
And then I'd say the third thing, succession planning. So many advisers have G2 on their teams and they always assume G2 would take over. A lot of the G2 advisers do not want to buy out G1 and they don't want to be rainmakers. So what do you do in that scenario? That's a lot of the stuff that we work on.
Steve Seid:
So the first around getting to a point where the financial professional is spending 80% of their time on business development, a big problem in the industry right now is, one, finding talent, hiring talent. I guess, one, what do you do about that problem? And the other part of my question is, are people rethinking roles? So you alluded to something there that was like an in-house adviser being different than a rainmaker. Are people thinking about different roles for sales assistants? So I think I just threw 15 questions on you.
Penny Phillips:
The one thing that does not keep me up at night about this business is finding talent. It is the opposite of what everybody says. I believe the firms that cannot find talent are the firms that have no differentiator, value proposition, vision and mission that especially the younger talent wants to coalesce around. And listen. Maybe that's harsh and maybe people will disagree, but when you have an industry where the leaders of these organizations, all literally physically look the same by the way, except for me, but physically look the same, they have the same background and pedigree. I think when you have a different perspective on the marketplace, when you're trying to do something different, one of the things we talked about very early on was this idea of allowing people to define success for themselves. This idea that every adviser or every person who enters our business needs to become the billion dollar adviser who's a CEO of the business. To me that is us dictating success for everybody else.
What if somebody wants to come in and be an adviser and have work-life balance and pick up their kids from school at three o'clock but work with the type of people they want to work with? That's an adviser that... It's our responsibility to build a model around that adviser. Not get them to change what they want. And so the way we were talking about what we were trying to build, I think, just attracted a lot of talent. We're 50% women. 50% female adviser, which is very rare in our business. I think it's because we've just taken a different perspective.
The other thing is this, I am a relentless prospector. That's a concept I talk a lot about. I have been keeping a list of people I've wanted to hire in a fictitious business venture that I didn't even know about seven years ago. I've had a list of people for probably a decade, people that I've met through coaching, through consulting. Everybody at Journey is somebody that I knew from a past life. So when you're running a business, and I tell this to advisers all the time, you have to be that obsessed with the future of what you're building so much so that you meet somebody, you have a conversation with them, guess what? They're going in an Excel spreadsheet. You're calling that person four times a year because when the role opens up and you want that person, it's guaranteed they're joining you because they're so excited about what you're building.
So the other piece I'd say is, in terms of advisers finding talent, look at what's happening in our industry with firms like Fidelity that have these in-house advisers, right? I'm not saying Fidelity's laying people off. I'm saying, you want to hire an adviser on your team to deliver advice? Look at the insurance broker dealers. They bring on so many advisers that fail out within the first three years because they can't rainmake or aka sell whole life insurance to anyone but are great advisers. You find people at Fidelity or any of the custodians who are in-house advisers and get sick of working in a corporate structure, that's where you need to be looking for talent. And so that piece is never one I'm worried about.
The piece about evolving roles, I have a different perspective on this idea that advisers are aging out of the industry. We keep saying advisers are retiring-
Kurt Dupuis:
It's not happening.
Penny Phillips:
Not only is it not happening, the industry has consolidated. So this idea that advisers going to retire and their book of business is going to be left in limbo, it's not true. Theoretically, what's happening is advisers are merging, firms are buying other firms. And eventually what'll happen is books of business will go to salaried advisers at these mega ensemble RIAs. That's the truth. So I don't think we have the problem that we've been telling advisers. I think we need to be more open to the idea that not every adviser wants to be and eat what you kill production oriented adviser. And we need to be more open to this sort of salary plus bonus structure and get our service advisers, our relationship managers, our client associates into those roles.
You mentioned the CEO and I want to just say one more thing on that.
Steve Seid:
Yeah.
Penny Phillips:
What I think is really important for... And even before they think about how do I want to grow, how fast do I want, any of that, advisers need to pick a lane in terms of, "Do I want to build a lifestyle practice or do I want to build an enterprise?" And the truth is that many advisers say they want enterprise, they really want lifestyle practice because they don't want to leave the role of business developing. They enjoy... I mean, most of these folks that we grew up in the business with, I mean they started as salespeople, right? I mean their dopamine levels are so tied to getting more people to want to join their firm. And so they don't want to leave that.
So my point in saying that is making that decision fundamentally about like, "Am I going to stay in the business development role? Do I want to still advise?" is absolutely critical. I don't believe that the adviser of the future is an adviser that is a technician in investment management. That's just my opinion. I think it's an adviser who is planning oriented, perhaps grew up as an investment only professional at in the past, but has the ability to deliver the wealth management and planning capabilities to a client. So that's tax planning and cashflow planning and retirement planning and all the things which means that they got to outsource the investment management piece to some extent. And that's also the investment operations piece. So trading, reporting, billing. I don't necessarily believe an adviser should be doing that. Somebody on their team or their firm should be doing that for them.
So now they've got all this time and capacity. And one of the things I learned right away with this business is you can give people all the time and capacity, but they will default to filling that time with sometimes busy work or things that make them feel like they're busy because they avoid the tough stuff sometimes, which is the prospecting and getting out there. And so a lot of what we help advisers do is, number one, focus and simplify. You don't have to have a 50-page marketing plan on a fillable PDF template in order to have a marketing plan for the year. You need to be focused on a couple things. What are the objectives you want to achieve? You want to deepen brand awareness. You want to develop and be recognized as a thought leader in your community. You want to bring on profitable new business, meaning you're queuing yourself to say like, "I'm not bringing on the smaller client. I'm bringing on the client that generates 10,000 or more in revenue to my firm a year." So getting clear on that.
And then on a monthly basis, meeting with your team or yourself to say, "What are the activities that are going to drive towards achieving those objectives? Am I speaking about what we're building or the value we are delivering in to every single person I talk to in a day?" Just think about that for a second. I have Journey. Every single person I talk to, whether it's you guys I'm talking to today, I've had five other calls, some with prospects, some with just random people that I know and love in the industry, at some point during the conversation I'm talking about Journey. You shouldn't be embarrassed about it.
If you have complete conviction in what you're doing for people, if you believe so deeply in the mission of what you're doing, it's your obligation to talk to people. It's your obligation to talk to people and say, "So much is going on right now in the markets. I know you work with an adviser. What are they doing to manage risk for you right now?" You are not trying to sell them. You are genuinely and curiously being a steward of your profession and asking somebody what their adviser is doing to help them manage risk.
So helping advisers understand that every conversation and interaction is an opportunity to promote the business, that's number one. The other thing is creating authentic content. Most advisers think that they need to become TikTok and YouTube stars, and they're like, "I can never do that. I hate talking on video." First of all, I totally agree. Some advisers who are doing the video thing, it's like, "Please, don't do it.
Kurt Dupuis:
It's cringe worthy, yeah.
Penny Phillips:
But teaching advisers that anything you could possibly need to know about how to market to people is provided to you by your clients. So at the end of every week, make a list of all of the questions or problems somebody came to you with that week that is a post or a couple sentence blog of for every day of the next week. I tell advisers to think really simple. If you don't have a social media following... By the way, it's taken me literally five years to build any sort of social media following. You have a natural audience, your clients. Start writing a Wednesday Wisdom, I used to do this, a Wednesday Wisdom blog to your clients where you say, "We're getting so many amazing questions. We're helping so many people solve problems. I want to share a highlight of the week with you, a strategy that we've helped somebody implement." It could be made up, it doesn't matter, and encourage people to share that. That's how you build a content following. It could be an email. And so teaching advisers how to do that and step into what I call the relentless prospector mindset-
Steve Seid:
I've heard you talk on other shows or maybe it was Wealth... Where do you write? You write for wealthmanagement.com, is that what you write for?
Penny Phillips:
Yeah, I do. Yes. Yes, I do a monthly blog and vlog for them.
Steve Seid:
Yeah, you're all over the place. I forget. It was absolutely great to go into the Penny Phillips world before this.
Penny Phillips:
Oh God.
Steve Seid:
I was all over the place. I don't know where I was, but I was-
Penny Phillips:
I'm sick of my face. I'm sick of my face and my voice and everything.
Steve Seid:
I was bouncing all over this industry. But you talked a little bit about paralysis in marketing. "I want to have time, but then I find myself doing busy work." What causes that paralysis? And is it simply by going through the things that you just mentioned that get you over that? Talk about that a little bit.
Penny Phillips:
It's such a great question. It's a couple things. So first of all, we are so over stimulated in general especially in our industry. Every day it's someone, a vendor or a third party promoting a new way to do things, like, "You need to be on Twitter. You need to be on YouTube. You need to hold a virtual webinar." At some point, it becomes really difficult. I mean, it's really hard to sift through all of that, not get FOMO, and figure out what's authentic. So that in and of itself is really difficult.
By the way, the bigger institutions now, because the industry's consolidating, they are dominating our industry media, right? So they're saying, "Most advisers are growing because of SEO on search engines" or whatever they're saying. Yeah, if you have millions of dollars of budget to put around SEO and ads, of course you're going to grow that way. The reality is if you talk to individual advisers and you ask them, "How did you grow last year? How was last year for you? How are they going to answer that?" They're going to say-
Steve Seid:
Referrals.
Penny Phillips:
Amazing. People keep introducing people to us. Actually, we don't even ask her referrals. They're just giving us referrals. Imagine if we ask, that's what advisers always tell 99% of the time. So my point in that is doubling down on creating experiences, tangible value in the individual meetings with clients, using things like Holistiplan, I'm speaking on a Holistiplan webinar next week, introducing tax planning software where you're scanning their tax returns and providing insights. No one's doing that right now. So thinking of ways in which you can elevate experiences in and of itself as a marketing strategy.
The other piece of this though is really important. We will naturally default to the things that make us feel like we've had... It's the dopamine sort of regulation or oxytocin or whatever it is that makes us feel good. We feel good when a client says to us like, "I love working with you," or a prospect wants to work with us. But realistically, we can have a week where we don't get any of that feedback, right? And so what starts to happen is we don't want to put ourselves out there as much because we're not getting that positive feedback, we're not getting the dopamine. So the idea of getting the rejection or going on posting something on social media and not getting any likes, it starts to... psychologically and subconsciously, we're not getting the feedback, we don't want to do the activity anymore. And so what do we default to? We default to doing things that are making us feel like we've completed something. So we're doing BS work. We're answering an email or we're stepping into something we shouldn't be stepping into because there is some finality to it. We have control over it.
And so what I tell advisers is when you start to feel that, call your best clients. If you have a week where you're not getting that dopamine that's going to keep you excited about prospecting, create it for yourself. Call your best friend, call your best client, call a center of influence, ask people what they love about working with you. Do something that's going to create that to get you motivated. So a lot of that paralysis actually has to do with literally what's going on in our brains.
The last thing I'll say is I hear from advisers a lot, I have an associate adviser, a junior adviser on my team, they don't want to rainmake and I want them to rainmake, or I want them to be looking for opportunities. If it is not your natural inclination to be the influencer or the connector, it doesn't matter how much capacity you create for these people, they're never going to default to that activity. So change your expectations.
Kurt Dupuis:
Staying with technology, so you mentioned Holistiplan. I've had several folks talk about FP Alpha as also kind of a next gen technology suite…
Penny Phillips:
Yes.
Kurt Dupuis:
I know you have a whole presentation on technology. So what are some of the trends?
Penny Phillips:
First of all, I think the advancements in the FinTech space, I mean it's been great from the standpoint of what we can deliver to clients and the value we can add as advisory professionals, but it's been absolutely paralyzing in terms of what's happened the last 10 years is the industry's consolidated so much and a lot of these firms are... Our model aggregated and the tech breaks down. It doesn't integrate with other tech as well as it should. We've got a lot of consolidation. So we've seen a lot of big FinTech players buy other FinTech players, which makes it difficult for advisers who are maybe working with one planning software, but then their CRM is now owned by another planning firm. And so there's so many challenges in the FinTech space that we don't emphasize enough because we like talking about how exciting everything is and there's this new thing and that new thing.
I think the reality of where we're going is we're going to see a lot more consolidation, which means tech is going to move from being specialized. So specialist tech to, I'll call it general tech, where it's the Envestnets of the world or the AssetMarks or the Orions who are trying to deliver across the entire value chain, right? CRM, planning, investment management, marketing. I think it's inevitable that that's where the industry's going to go.
What I say to advisers is this, start auditing your technology two or three times a year. Most advisers use... I think the stat, it's like a crazy stat, less than 50% of the tool that they're actually signed on with. We at a Journey are Orion eMoney, Wealthbox, Holistiplan, RiskAlliance. I mean, we use them all, we love them, but you got to go really deep with these firms. Some of these firms, what they can do and offer, it's just unbelievable. So first of all, understand what you're paying for and use the hell out of it. If you are paying and have access to all of these different things within a software, use as much as you can before jumping to sign up with somebody else that you heard of at a conference.
The other thing is set your foundation first before you add the add-ons, right? You need a solid CRM, you need a planning software, and you need a portfolio management tool. That's your three core things. Before you look at anything else, make sure that you fully understand the integrations. If they don't integrate well, look at firms like PreciseFP that works behind the scenes to fill in the gaps when data breaks down. Make sure that you understand how your custodian feeds data to the systems. That is the tablestakes stuff that you should do. So, "How does the custodian feed data? What are my three core planning tools and how do they work with each other?" And by the way, if you don't like or love any one of them, then go to a solution that has all three. If you don't have a preference, go to a solution that has all three.
And then don't add on things that aren't relevant to your clients. If your clients are young, millennial entrepreneurs, you may not need to look at an FP Alpha. I think FP Alpha is great by the way. But be very cognizant of adding things because it's the right time for you as a firm to add it versus you want to do what everybody else is doing.
Steve Seid:
I love something you said there, and I think it's worth repeating, going deep with the technology that you actually have and that alone kind of being a differentiator because most people actually aren't doing that. And Kurt, how often do we see that? I mean, the big one out there is Salesforce that everybody has. How superficial are people in their use of Salesforce? I don't really know all the bells and whistles with Salesforce, but I can tell you that most people are not really maximizing that thing.
We heard that this week from a wire that has this great tech suite that they're trying to roll out, they're trying to show everybody all the bells and whistles when they're realizing they're scaring people away because they don't have the nuts and bolts and the foundational stuff figured out.
Penny Phillips:
They're such a beast too. They're such a big firm. What I found is that simple is so much better especially for advisers and especially on the CRM topic. Have realistic expectations about what a CRM is supposed to do for you. A CRM is not supposed to literally be a robot that runs your business for you. The CRM is supposed to make sure it houses all of the information you need on a client, demographic, psychographic. It's supposed to serve as a place of record. You can go back and look at notes from any conversation. And it's supposed to be a place that allows you to disseminate tasks and workflows to people on your team.
A lot of advisers right now want this CRM and any of their tools to do everything for them, like, "I wish I could go into my CRM and see all of the accounts that a client has." What I always share with advisers is, it doesn't matter what firm you're at, what channel you're at, it doesn't matter. Nobody has found the perfect tech solution. It's almost freeing to recognize that you're always going to have issues with your CRM. You're always going to have issues with your custodial feed, whatever it is. I don't think advisers should go down a rabbit hole of spending hundreds of thousands of dollars trying to figure out how to build a dashboard when in reality the tech, in most cases, works for what we need it to work for.
Steve Seid:
Right. So keep it simple, but still go deep and understand the full capabilities. There's some kind of nice medium or in intersection of those things. Is that fair?
Penny Phillips:
Exactly, yes.
Steve Seid:
Okay. Can we debate niches a little bit? Which I know you pushed back on. Can we have this debate?
Penny Phillips:
Yeah, absolutely.
Steve Seid:
It surprises me to hear you push back on that when one of the things that you said before had to do with, "Let's create experiences." And to me, the thing that I like about niches is, one, once you have it, you can sort of do that relentless prospecting. You can get that target list, you kind of know who your audience is. But also, isn't it the whole point to be able to create a better experience because you're in that world and you're focused on that world? Or how am I thinking about that wrong?
Penny Phillips:
You're not. I remember exactly when I said that and in what context, Steve, and-
Steve Seid:
Am I misstating the context? It could be.
Penny Phillips:
I've been in the practice management game right, the webinars and the coaching cohorts and whatever. We make all these declarative statements about what advisers should do, like, "You cannot be successful unless you are a-"
Steve Seid:
"You must do..." Yeah, I know.
Penny Phillips:
You have to be an in a niche. Listen, is there data around the fastest growing firms or the biggest firms and do they specialize or not? Sure. I mean, there is data that points to that. And I would agree, by the way, anecdotally. You talk to most of the really successful firms or advisers in the business. Number one, they're all relentless prospectors, right? They're obsessed with their business. They also tend to focus in a specific area.
But my point to, especially newer advisers, I've seen a lot of advisers say like, "I need to focus on a niche." And all of a sudden they're like, "I want to focus on dentists who own their practices or female entrepreneurs." And it's like, "Okay, first of all, do you have access to that network of people? Do you have a passion and enthusiasm for doing work with those type of people?" It's perfectly okay to have a specialty with three or four or five different types of communities or target groups. If you started out in any one of the captive channels, you brought on anyone with a pulse. And then over time you started to find that you had your sweet spot with certain types of clients. I always tell advisers, allow that to evolve organically versus all of a sudden you're posting ghost-written content about female entrepreneurs. And it's totally... First of all, if you are-
Kurt Dupuis:
From left field, yeah.
Penny Phillips:
Not only is it from left field, there is nothing about the actual experience that it's reflecting that you serve female entrepreneurs other than the fact that you have it on your website. So that's a critical piece of this. If you are going to be going to market and saying, "We serve," and I'll use this example because it's easy for me, like, "the female, millennial entrepreneur," very specific niche. If that's what's on your website and that's what you're telling people and you want to go to market as that, I better feel like what you're delivering was built specifically for me.
So here are a couple of examples. First of all, your content needs to be focused on things that I'm concerned about right now. Concerns for me are things like work-life balance. I have 25 different side hustles in addition to my main business. How do I balance all of that? How do I maximize cash flow for myself? Things that I'm thinking about as an entrepreneur. Oh, and by the way, I don't have time to be physically meeting an adviser at noon in their office. So giving me options for how to engage, how to onboard, how to meet with them, sending me videos like, "Hey, we just sent you a link to the portal. Here's a quick video on how to get yourself in versus scheduling a meeting to..." These are the little things that you need to think about.
Sending me an article about breathing exercises that I can do while I'm on a plane flying to my next appoint, sending me a book, 10% Happier, a great book about meditation, that entire experience is for the Me-s of the world, right? If you are saying you serve me but you're treating me like you would your retiree client that lives in your community, there's the breakdown. And so I want advisers to be very careful with that. If you're not willing to go to that level to serve somebody, then forget the niches and just serve whoever you want.
Steve Seid:
It makes total sense. Don't force it and make sure you're able to deliver that experience at value. Okay. Now it makes sense. So it wasn't much of a debate at all. I actually agree with you completely.
Penny Phillips:
I wish it was. What can we debate? I would love to argue with you guys on something.
Kurt Dupuis:
She referenced the data. So the data is pretty clear. People that niche down tend to drive more business. But it's not the fact that they have a niche. It's how they service that niche, which makes the difference.
Penny Phillips:
So that's exactly right. There are a couple of firms, a couple of big RIAs right now that serve let's say athletes or celebrities or whatever. Well, the services that they offer, what they're talking about, there's one firm in particular I'm thinking about, it is only around that. I know I was just on another firm's website, they serve tech entrepreneurs. They do financial planning for tech professionals. On their site, they literally have, "If you work at Apple, if you work at Google, if you work at Meta, click here for a free guide on benefits at your firm." That's niching.
Kurt Dupuis:
Right.
Penny Phillips:
Saying that you serve tech entrepreneurs and then the website looks the same…
Steve Seid:
Right.
Penny Phillips:
…and the onboarding process is the same, forget it. Just don't even say that.
Steve Seid:
I do want to talk to you about sales assistants. We talked about roles before. I find people struggling there more than anything else, in a couple ways, the recruiting, but I think you kind of touched that. That's more like specifically make sure that you're building a bench of when you got to bring some on. So I like that concept. But what about the difference of, one, some sales assistants that are unregistered that really don't have the desire to do much more versus people that are full on getting a CFP3 and what you do with them?
Penny Phillips:
Yeah, and this is such a big discussion and maybe another episode, the role evolution on a team. The first is advisers need to be really clear with the team member they're hiring about, first of all, expectations and the objectives that their role needs to achieve. Meaning you can have a service associate or a sales assistant or whatever. The way that you get the most out of that person in their current role is not to give them a list of tasks to complete or a job ad with like, "Here are your responsibilities." So a lot of times the criticism or feedback I'll hear about that type of a team player is, "God, they do what I ask them, but they don't think two steps ahead. Or they're not proactive, they're not strategic. They're not really evolving." And I always say to advisers, "We'll, have you helped them think about what it is that they should be aiming to achieve in their role that leads to business results?"
So for example, an admin, their objective in any given week should be to serve as air traffic controller of the organization. And how do they know they were successful at being an air traffic controller? Simple. Everybody got a response within 24 hours. All communication that needed to be, or all questions or challenges that clients had that needed to be addressed got addressed. The adviser was prepared for every phone call and meeting 36 hours in advance. I'm making it up. But those are the key results, right? So now all of a sudden what you're doing is you're giving the person, and you're co-creating this with them, but you're giving them everything they need to self-assess, to hold themselves accountable, and to figure out whether they're achieving results or not achieving results. And so on and so forth.
When you have let's say client service associate or associate adviser on the team, they are going to, again, adviser forwards them an email, "Take care of this or put together an agenda," they're going to do it. The way we get them to think bigger is one of their objectives is consistently creating capacity for the senior adviser.
Steve Seid:
Oh, good one.
Penny Phillips:
At the end of every week, that service associate should be asking him or herself and at the end of the quarter going into the professional development review meeting with their own assessment. But they need to be asking themselves, "Did I create capacity for the adviser this week? Were there other opportunities I could have created more capacity?" And then over time, what you will get is a sense of whether somebody has a knack for being more strategic, whether they are super efficient at operations, whether they're relationship management oriented. And then you build out the pathways from there. Somebody who starts out as, let's just say an admin/service associate has two pathways, really three. They're either going down the path of ultimately COO, right? Their admin, ops, service ultimately going to run operations for the organization, or not, but that's one.
The second is admin service, client service, junior adviser, in-house adviser, right? CFP delivering advice. Or in rare cases, service adviser, junior adviser, business development officer oriented adviser. That's it. It's usually going to be the first or second one.
Kurt Dupuis:
What I love about your story and the journey of what... Like literally building the journey of the RIA, but also you put such an emphasis on human capital which I hear so infrequently in our business. I know it's kind of like a dollars and cents. It's driven by numbers…
Penny Phillips:
Yep. Yep.
Kurt Dupuis:
…and big personalities. But valuing who's in the seat and how that person is developed over time, I just don't hear a ton of content around that. So I'm so happy that you found that niche. You're feeling that niche…
Penny Phillips:
Yeah.
Kurt Dupuis:
…I just think it's a story that needs to be told. So always great chatting with you, and thank you so much for your time today.
Penny Phillips:
Anytime guys. Appreciate it.
Steve Seid:
You're fantastic. We needed probably another hour, honestly, is what we needed just to even get going by.
Penny Phillips:
Totally. We should just do a series together or something, yeah.
Steve Seid:
You heard it, Kurt, so that's happening now.
Kurt Dupuis:
Netflix will pick it up too.
Steve Seid:
Well, thank you to our guest, Penny Phillips, who was fantastic. As always, we will be right back with our Costanza Corner. This is The Whole Truth. Stick with us.
And welcome back to our Costanza Corner where we like to leave on a high note. And Kurt is going to help us do that today.
Kurt Dupuis:
We got an email from a colleague this week that talked about work-life balance. And he was asking us as dealing with financial professionals like, how a lot of financial professionals are high achievers, probably difficult to turn it off, a lot of wholesalers are the same way. So how do we think about work-life balance? I'm so glad that you responded to that because I would've struggled to be as articulate. But that conversation sort of happening at the same time that this article came out. So there's this new I'd call it a meta-analysis of people dealing with depression. And obviously not a mental health professional at all, but I enjoy exercising. What this study came out to show is that there's significant improvements to mental health for people that exercise.
So this is out of the University of Potsdam in Germany. It's a meta-analysis. It's a 41 different studies, almost 2,300 people. Not super prescriptive, but how much exercise do you need to meet maximum mental health? There's no prescription in there. It's just some is good, more is better is kind of the diagnosis. And so I just think for any of us that get in our own head space about work-life balance, because particularly post COVID is not work-life balance. It's like work-life chaos. Just remember the role that physical activity can play in your mental health being. And you might shed a couple of pounds in the process that never hurts. But take the time. Do it for yourself. It has significant cognitive benefits.
Steve Seid:
I mean, the best ideas that I've ever come up with in my life or at least what I think other people might think they're awful. Who knows? But the best one was definitely when I'm on a mountain somewhere, climbing a hill, running around. There's something about doing that that really allows you to focus and think and what's crazy is the excuses. You know what happens when we open up our calendars. They're totally blocked across. “Where am I going to find time to exercise?" But what you don't realize is if you don't, all those activities that you have in there will be less optimal than if you actually fit it in.
Kurt Dupuis:
That's right.
Steve Seid:
I'm just yelling at myself right now is what I'm doing because I need to do it more. I need to do it more. I'm at like-
Kurt Dupuis:
That's what I thought. This is a good reminder for people.
Steve Seid:
Yeah. I'm probably twice, two to three times a week. And I want to be three to four to five times a week where I'm kind of on a hill or doing something like that. So thank you, Kurt. This was a high note. I'm going to go, right after we're done, right up a hill.
Kurt Dupuis:
I got you, dude. All right, well, that was our show. Thanks for listening and we'll see you next time.
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1RIA is an acronym for Registered Investment Advisor – a firm that advises clients on securities investments and may manage their investment portfolios.
2OSJ is an acronym for Office of Supervisory Jurisdiction – an office identified by a broker-dealer as having supervisory responsibilities for agents and branch offices within its region.
3CFP is an acronym for Certified Financial Planner – a formally recognized expert in the areas of financial planning, taxes, insurance, estate planning and retirement saving.
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