#FASuccess Ep 226: Building CPA Alliances To Reach A More Affluent Clientele To Serve, With Paul Saganey

Author: Michael Kitces

Team Kitces

Michael Kitces is Head of Planning Strategy at Buckingham Wealth Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors.

In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

What You’ll Learn In This Podcast Episode

Resources Featured In This Episode:

Full Transcript:

Michael: Welcome, Paul Saganey, to the Financial Advisor Success Podcast.

Paul: Michael, thank you. I appreciate this. I’m a big fan of yours and a big fan of your podcast. So, I was thrilled when you invited me to join you today. So, thank you for that.

Michael: Oh, my pleasure. I really appreciate you joining us and being willing to share a little about the advisory business that you have built. You have a very large firm of many, many billions of dollars under management and hundreds, I guess more than a hundred advisors now. And I think it’s a unique, yet not unique, yet very unique way of doing a lot of work with alliances with CPAs, which I feel like is a realm a lot of us tend to talk about. I’ve been doing this for more than 20 years. And even I heard from the very start, “Build relationships with attorneys and accountants. They are centers of influence. They’re COIs, for sure. And they can refer you client opportunities.” And many of us have done that in various ways. But you seem to have scaled that to a whole other level beyond what a lot of advisors typically do in the depth of CPA alliances and the kinds of business owner clients that you go after and work with through that. And so, I’m excited to talk about what it looks like when you try to take that level of CPA relations and CPA partnerships of COI referrals, to a whole other level beyond just, “Yeah, I met two CPAs in my area. And then, I built a good relationship with them. And we sent some clients back and forth.”

Paul’s Vision Of Collaborating With Other Professionals To Access Wealthier Clients [04:23]

Paul: It was certainly, Michael, having the vision too, back in the day myself, so when I put the firm together back in 1996, I have always been a financial advisor and continue to be an advisor today to clients. And so, I remember back in the day, who I guess would be my sales manager saying, “The best way to grow your business, if you want to double your revenue, would be to double the number of clients you work with, if you work with clients with the same net worth, or,” he said, “You could grow by working with wealthier clients and work with fewer people.” And so, just going back to the mid-’80s, early ’90s, that’s the path I took, Michael, was really trying to work with other centers of influence and collaborate with other professionals to get in front of wealthier and wealthier clients. And so, that really was the vision we had back in 1996 and all the way through to today. That’s what we think about every single day.

Michael: Interesting. That’s interesting to me how you frame that. So, it wasn’t just a…right, what you said, “If I want to double my business, double my clients. And twice as many clients, twice as much business. And hey, I could go do that by getting referrals from accounts or CPAs or from my clients or all the other ways that we market and get business.” But that you had a vision more in the direction of, “I don’t want to just grow by doubling my client base. l want to grow by getting more affluent clients, more dollars per client.” You can also double your business by just doubling the revenue that you’ve already gotten from your clients and continue to serve those same clients. And that for you, it wasn’t just working with CPAs as a pathway for generating leads and generating client opportunities and get more clients in order to grow the business. But that for you, it was very specifically an upmarket, a more affluent client path to say, “That’s where I want to go because I think I can get more affluent clients there than what I’m getting directly on my own.”

Paul: Yeah. There were two pivotal points in my career. So, going back to 1990, Michael, prior to that point, I was doing what I thought was high-end financial planning work. Prior to 1990, also, I was with a company where we would offer disability insurance to attorneys here in the Boston area. So, I had the chance to meet a lot of attorneys. And this was at the beginning stages of second-to-die life insurance and even the infant stages, if you will, of offering fee-based financial plans. And so, 1990 was a big year because my best friend and mentor, business mentor, for me, Peter Gaines, he and I, he invited me over to become his partner. And he was running a firm called Cigna Financial Advisors. And so, from the early 90s, Michael, until 1996, we had the chance at Cigna, Cigna really was a company that was really focused on doing high-end estate planning work for business owners and ultra-high-net-worth individuals.

But what was important about that model, Michael, and what I learned from those days was that the bulk of our business was by working inside of wirehouse firms like Morgan Stanley, Smith Barney, Dean Witter. And so, for five or six years, the business model was an FA from Morgan Stanley would say, “Hey, I’ve got this large client opportunity. Would you come in and do their estate plan?” So, we’d come in, Michael, do the estate plan, charge a large fee and then, would give the assets back to the Morgan Stanley FA. And so, that’s when I learned the power of another professional bringing you in the door to a high-net-worth client. And so, that was, let’s say early ’90s to mid-1995, 1996. And the reason why ’96, Michael, was a pivotal point because that’s when accounting firms in the state of Massachusetts could get licensed as financial advisors. And so, we just saw the opportunity to take what worked so well, say working in the wirehouse community, take that exact same model and lay it on top of large accounting firms here in New England. And boom, the thing just took off for us.

Michael: I love that framework that you’re building this back in the ’80s and early ’90s, dare I say it, when insurance agents were insurance agents and stockbrokers were stockbrokers. We hadn’t quite gotten to the point where everybody did everything and was maximally multi-channel and had every possible license and blending it all together the way that we do today, that you outright had a business of writing the insurance as a part of the estate plan with a warehouse advisor who would bring you in because you did the insurance business and they did the investment business. And what that actually meant, as financial advisors, you could work together on joint clients. You weren’t head-to-head competition in a way that I think about that environment today. That would never happen today, for better or worse.

We all try to be so holistic for all of our clients that we might share with “outside professionals,” but we very rarely share with other people who are registered in the industry that we usually view as competition. But that was, in many ways, I guess, a more cooperative era and environment in some ways because not everybody was as blended. So, you really could have joint clients, joint casework with other advisors who had a specialization in a different part of the advisor world, because you were deep in insurance with Cigna. And they were deep in investments at Dean Witter or Merrill or wherever it was they were.

Paul: I think, Michael, and it’s even true today, it’s the recognition that each party brings a different capability to the table. And so, where the FA at Morgan may be a great wealth manager, we were trained to come in, charge a fee. And so, once again, I learned that by charging a fee, I could change the dynamic of the relationship. In other words, I was now there being paid to serve the client and to take care of their needs. And there was no doubt about the fact that they were paying me a fee to do that. So, it was a very different relationship. But I think even today, Michael, and as it is back then, it’s two professionals recognizing that we bring different capabilities to the table. And so, boy, if we collaborate and work together, we can do what’s best for the client. And doing what’s best for the client, certainly, it’s good for our business model as well It’s that collaboration, Michael. It’s working today with that CPA, bringing our capabilities to the table, in that classic one plus one equals three. That’s what we’re really driving to do every single day.

Michael: And so, the other thing that strikes me about this, just in looking at how it was playing out, one of the benefits, one of the virtues, one of the opportunities of working jointly with wirehouse advisors, in particular, was that was, and frankly still is, where a lot of the biggest high-net-worth opportunities are. It’s literally where the dollars are. And so, I’m struck as well as you’re talking about this that you were already living in a pathway of one of the best ways to find a path to more affluent clients is through other professionals that may have more affluent clients with whom you can work jointly. That was already occurring, even in that estate planning environment with wirehouse advisors.

Paul: Even to take it a step further, not only was the recognition of working through the wirehouse community to get access to wealthier clients, because you’re right, Michael, they certainly did control the hearts and minds of the wealthiest clients out there, but I think it was also the recognition that, and what the FAs and wirehouse would learn is that it was hard to call a client of wealth and try to battle tooth and nail against another advisor who’s also managing their money. In other words, even today, it’s really hard to differentiate your story just by the way you manage money compared to say, how I manage money. And that’s where I learned the power of estate planning. And that’s what I am teaching all the time and talking to our advisors about. There is no such thing, Michael, as the perfect estate plan. And so, therefore, I think if you talk to any estate planning practitioner, they would tell you there’s never been a situation where they sit in front of a client of wealth where they can’t bring some level of planning improvement or make a significant impact in their overall estate plan.

Michael: When there’s a lot of dollars at stake just mathematically. There’s a lot of financial impact for a good plan and even just one good nugget, one good thing that makes them look at or plan their situation differently. That much money at stake, lots of difference in the financial outcome for one good strategy.

Paul: It’s huge. And I think that people of wealth, their minds are wide open to new and interesting ways to put their estates together or control the way their wealth will go to their children. So, even today, this market’s been climbing so aggressively that it’s, once again, hard to come at and try to win people over by managing money differently. But if you approach it from the estate planning standpoint, and that’s why, Michael, what’s about to happen with some of these estate tax changes, we’re pinching ourselves because it’s going to give us all these opportunities to get back out there and be seen as leaders in that space of estate and income tax planning.

Michael: Yeah. And I know for advisors that haven’t been doing this for a couple of decades, they may not realize just how much lower estate tax exemptions were back in the 1990s. The estate tax exemption at the time was $600,000.

Paul: That’s right.

Michael: And I guess adjust for inflation, it’s probably close to a million dollars today. But a million dollars, as I’m sure a lot of people see routinely in their practices, if your estate tax exemption was a million dollars, any middle-aged couple who just has term insurance for their kids in case someone dies before the kids go to college has an estate planning problem.

Estate planning issues were everywhere because even just standard levels of insurance for protecting against normal risks would create estate planning problems, never mind having the really, really sizeable dollars where the situation amplifies further. And that was an environment within the estate tax rate that topped out at 55%. So, there was a lot of estate planning relative to what there is today where our exemptions now are 10X bigger, and we have portability. We didn’t have that back then. And so, I can certainly see your frame of mind and that mindset. If any of the tax law changes that are starting to get discussed now around higher estate tax rate, lower estate tax rate, exemptions occur, it really rapidly widens the scope of who’s got an estate tax problem to talk about and to plan for.

Paul: When you mentioned it, your comment earlier about how many times do we walk into a situation where the life insurance is actually owned in the name of the husband or the wife and they’ve got that big house. And so, I think that a lot of times people, especially if they do change the exemptions here, but people do step into that world of having to pay an estate tax just because of the way that sometimes the way they own their insurance or the way they maybe own some of their properties and things like that. But I think, Michael, regardless of what happens with the final rules and the final tax changes, I think that as we’re telling our advisors in our CPA firms to our CPA partners is that let’s take advantage of the fact that there’s a lot of confusion out there today. And the lack of step up in bases and lowering exemptions and people being taxed over $400,000, these are things that are in the press every single day. So, we’re not waiting for the final tax laws to happen say a year or so from now. We’re getting out there today. And we’re talking to people doing a lot of what-if analysis and really trying to be seen as the leader, if you will, when it comes to these tax law changes. And so, we’re really working hard to position ourselves, once again, in that leadership position and getting communication out there and so that when change happens, we’ll be top-of-mind for all of our potential clients.

What Led Paul To Shift Away From Partnering With Wirehouse Advisors [16:42]

Michael: So now, help us move forward to the next stage of this story in your evolution. So you’re working at Cigna Financial Advisors. You’re partnering with wirehouse advisors in estate planning cases where you get to come in and write the second-to-die insurance for the estate tax planning wrapped up in an eyelet. They do the traditional investment portfolio management business. You’ve got a nice partnership. They’re an entree to higher-net-worth clients. But then, you made some shifts in 1996 you said. Some rules changed, that CPAs in Massachusetts could now get licensed as advisors. I’m assuming that also means something was going on that you decided that doing this as joint work with wirehouse advisors was not your long-term future. So, what was changing? What led you to make a shift? And just what actually changed? What happened at that point?

Paul: Yeah, a great question. So, I think for those of your listeners that are maybe old enough to remember these days, but when I came into the career, Michael, in 1986, I remember getting a 7% or 8% load on an American Funds A share. And so, the early ’90s is when the idea of charging 1% to manage money on an ongoing basis was…I don’t want to say it was in its infant stages. But certainly, there were more people paying attention or more advisors paying attention to that potential business opportunity. So, I think, Michael, it was two things. A very large case that I had worked on over a number of years. It was a very, very large case. And really having a relationship with the clients and them begging me to manage their money but me having to say, “Well, no, we’ve got to give it back to the wirehouse FA.” That was one thing that I realized that this wealth management and the idea of charging whatever, 1% or whatever it may have been back in the day, certainly had the opportunity to grow up bigger in a more efficient business model.

And so, isn’t that great that at the same time, for us anyway, that the idea of charging asset-based fees coincided with the fact that accounting firms could get licensed to be financial advisors? And back then, Michael, we realized that the average CPA that was getting licensed, he or she could open up a 401(k) plan or open up a 529. Anyone could make some revenue doing that. But the idea of that CPA, he or she doing complex planning on their wealthiest clients, that certainly was not going to be the case. And so, just like everything in life, having a couple of interesting connections to some local accounting firms, sitting down, and describing this vision of, “Why don’t we partner together and let us handle your top 20% and you can take care of the other ones?”, that’s how the whole thing began. And with the first handful of accounting firms, Michael, bringing in close to $100 million of assets in the first year and a half, that’s what got our attention. And then, we started growing just by word-of-mouth. We’d meet another accounting firm and then another financial advisor would come and join us. And so, we built it that way. We weren’t really looking to be the largest or certainly grow this thing on a national scale. We were just a local New England group of people that were trying to put these partnerships together.

Michael: So, help me understand more just what you were doing, what you were building, what you were creating. A hundred million dollars of new assets in 18 months is a large number, even by today’s standards, never mind 25 years ago. So, what did you do? What did you go out and do beyond saying, “Hey, there seem to be some opportunities with CPAs. Let’s see if we can get some referrals from them.” What did you do that suddenly made all of this money start moving?

Paul: I want to be clear, by the way. Not every CPA, Michael, as we learned later has the same level of results in such a short period of time. But I think back to those days. If it wasn’t for that first firm having such tremendous success, then we may have walked away from this program because, certainly, the third, fourth, and fifth firm were nowhere near as good, say, as the first couple of firms. But it was the success of the first handful of firms that really got our attention. And made us stay with it, Michael, even during those difficult times when we questioned ourselves and we weren’t sure if we were going to keep doing this, we kept saying, “Yeah but remember what we did with that firm over there.” And you know what it was, Michael? It was pretty simple. We went in the door and one of the first things we did was the financial and estate plan on the partners of the accounting firm.

And so, looking back now, that’s our routine now is we want to try to do the CPA’s financial plan as an estate plan pretty early in the relationship. But with this particular firm, Michael, they were a mess. They had a lot of moving parts. They didn’t even have a buy-sell agreement. So, we went in and did a lot of really complex work for them. And then, they just became tremendous fans of what we do. And they literally would grab every client and say, “Hey, go sit down with those guys.” And they’d be walking through the hallways. And the main owner of the CPA firm was this very outgoing and very charismatic individual. And if he would tell his client, “Go give those guys 20 minutes of your time,” then the people would do that. So, certainly, Michael, it was the power of a CPA firm who the partners experienced the planning process and became really disciples of it and starting to tell all their clients, “Get over and see those guys.” And that’s what really made it take off.

Michael: There’s nothing like having them go through the financial planning process to actually finally really understand the value of the financial planning process that we still often have trouble describing the value of.

Paul: It’s huge.

Michael: So, I’m just curious though. How does that work? Do you go to the partners and say, “Hey, we’d love to give you this service. We’d love to just put you through our financial planning process and show you what it’s all about. It’s complimentary to you because we want to get to know you better. We think you’re going to really benefit from the process,” or you going to them and saying like, “No, you need a financial plan and you don’t have one. We charge X dollars for it. But this is going to be really valuable for you,” and you pitch them more directly as, “Become a paying client. We’ve got great value and expertise for you.” And then you also know that once they go through and do that, they probably are going to end up talking to others about it and referring you as well.

Paul: Yeah, I think that’s it, Michael. And I think once they recognize the capabilities that we brought to the table and the fact that, look, I don’t want to say this the wrong way, but I think if you were to ask the average CPA, “Of all the financial advisors that you know in the world, how many would you trust with your highest revenue-generating clients,” they usually say a pretty small percentage of us, unfortunately. And so we were just able to bridge that gap. And we were able to give that CPA the confidence to put us in front of their wealthiest clients.

Michael: But how did you get in front of them to do in the first place? Are you cold-calling CPA partners and saying, “I want to do your financial planning? It’s $10,000, and you’re going to love it?”

Paul: No, not really. No. Now, it’s mostly word-of-mouth and CPAs talking amongst themselves. And I think, Michael, it’s really about the CPA realizing that they want their clients to be in the best possible situation. So, it’s that “who do you want to be a hero to?” I think that a lot of CPA firms realize right now that just simply doing taxes for their clients, especially their wealthier clients, is not enough. And so what we do is we just simply find who are those CPAs that want to bring us in to help them be more of a hero to their clients? So, it’s truly bringing together the professional services of the accounting community, financial advisory community, and the legal community and really help put together better plans for their clients. And that lets them grow their franchises and their business models. And it gets their clients talking to other clients. So, once, again, if done the right way, it can really grow exponentially. There’s huge potential out there.

Michael: And I’m presuming, as well, you said one of the catalysts for you in deciding to focus on CPAs in 1996 was the year that they could start getting licensed as financial advisors on top of being CPAs. So, I’m presuming that means that this wasn’t just a cross-referrals program. This was a getting them licensed under your firm, I guess either as brokers or insurance agents or IARs of a corporate RIA, and literally doing split cases with revenue with them.

Paul: That’s right. And it was like pulling teeth to try to get them in the middle of being a full-time accountant to get that Series 7 license, but we did it. And we persevered. And so yes, Michael, certainly, the offshoot of this whole story is the fact that we’re helping accounting firms build and establish what I would call a financial services division of their accounting practice. And so, we’re just the ones that are coming in to run it, to oversee it, and bring the capabilities to the table. But yes, on behalf of our CPA firms, we’re helping them literally put together a financial services division, which is there to help the overall coordination of their client’s financial affairs.

Michael: And it becomes a revenue opportunity for them because they get to charge for this work or at least revenue share on this work with your firm that may be doing a big chunk of the behind-the-scenes and planning work. But they’re part of the relationship. They’re part of the advisory delivery. And so, they get a piece of this, as well.

Paul: They do. And it’s substantial. There are a large percent of our accounting firm partners, what we have helped them build is actually worth more than their accounting practice. So, you’ve got accounting firms now that are selling for right around 1x recurring revenue where the wealth advisory firms are selling for north of 2, 3, 4, sometimes 5x. And so, yeah, I don’t want to say we’re fortunate, but we’ve worked hard to make sure that in being a good partner and in being a trusted partner, we’re respecting the fact that we’re a guest in that CPA’s house. And so, we act accordingly. But we, as a firm, are out there trying to help to bring more value to the accounting firm as well as our financial advisor. And so, the beautiful part of that is it’s just growing I think faster than what other advisors can do inside of accounting firms. We really do respect the fact that it’s the accounting firm’s client, Michael. We’re there to bring a service to the table. We will share revenue with them. But we’re helping that accountant build something that he or she could not have done on their own. That’s the key part of the story.

Michael: And I think it’s striking that you do frame it this way, that you’re not trying to take them as “your” client. The CPA referred it to you, per se. You really are framing this as it’s about keeping it the accountant’s client and now making the accountant look like the hero in this story to their clients. And it continues to be their client. But you’re supporting. You’re doing a lot of the work. You are helping to get it done. And you are financially renumerated for that. That’s part of the transaction and how it’s structured.

Paul: That’s right. That’s exactly how it works. And I think if you also were to look at the demographics of a typical accounting firm, they’ve got an aging client base of small business owners. And the average CPA is not too far off from the average age of a financial advisor, approaching age 60. And so, yeah, when you put that all together, Michael, and especially bringing the quality planning services to their clientele, it’s a fantastic model for us.

What Paul’s Business Model Looked Like When He Started Partnering With CPA Firms [28:07]

Michael: So, when you started down this road 25 years ago, what did the business model look like? Because I’m presuming you’re still in Cigna. This is still a world where there’s a lot of insurance. Second-to-die is on the rise. Variable universal life is on the rise. Mutual funds are still mostly A shares and B shares, not much C shares. Not a lot of advisory fee-based accounts out there yet. What did the business model look like then? You mentioned they were getting Series 7 licensed. So, I’m presuming they’re coming in to do brokerage, not necessarily advisory because that wasn’t a thing yet. What was the actual joint business that you were doing with them?

Paul: Yeah. So, in 1996, I made the jump from Cigna, by the way, Michael. So at that point, Cigna was not prepared for nor were they really a “wealth management company.” So, I made the jump to a company called All America Financial. And they were a wonderful organization, fantastic people. But they had this mentality that, “Hey, Paul, if you’ve got a vision and a dream, we’re not going to get in your way.” So, my days there at All America, they did have a very good wealth management platform, Michael. So, we already brought the expertise to the table for insurance and estate planning. They had a very good wealth management platform because their executives who were in that company actually came out of Fidelity. And so, they really knew how to put these wealth management platforms together. So, no, I need to give a lot of credit to All America Financial back in the day because they also shared that same passion for getting involved with the CPAs. And so, it was, once again, us finding a firm that shared our vision that helped bring capabilities to the table. But they left us alone, Michael.

So, back in those days, there was only a handful of us. There were five or six, maybe seven advisors. And we used to have our meetings in a small little office all the time. But it was just a handful of us. And it truly grew by word-of-mouth. Another accountant would reach out. And we would start working with them. And then, we would bring another advisor in the door. And so, I would say, Michael, from 1996 all the way until 2003, which is when, and we can talk about this, we made the jump to Lincoln Financial, we were just all word-of-mouth. We had no recruiter. We were just a bunch of advisors who were working, once again, through introductions and really growing it that way. But All America ceased to exist around 2003. And so, at that point, Michael, Cigna was bought by Lincoln, which is now called Sagemark. So, for us, we made the jump from All America in ’96 over to Lincoln in 2003. And, once again, it’s because Lincoln back in the day and even today continues to share our passion for estate planning and working with wealthier clients. So I don’t want to confuse the years here, but 2003 is when we made that jump to Lincoln.

Michael: So you came out of Cigna in the 1990s and went to All America. Cigna ended up getting sold to Lincoln. That division got rebranded Sagemark. And then, seven, eight years later, you end up going back to Lincoln Sagemark to get back to those people and back to the roots there.

Paul: Exactly right. Exactly right.

Michael: And so, when you were doing this joint CPA work back in the late ’90s and early 2000s, I’m just trying to understand and visualize what the business, what this relationship looks like. What do you actually do at that point? Are you making comprehensive financial plans? Are you doing investment business? Are you doing insurance business? Are you doing estate planning cases? What did it actually look like at the time?

Paul: Yes to all three. Certainly, it was leading with a planning mentality. So, we weren’t walking in the door with any preconceived notion of managing your money or doing your life insurance. It was just simply walking in the door, offering to do a fee-based financial plan, and then where that financial plan would lead us, Michael, that would be the implementation. But we spent a lot of time really working to clear our brains, if you will, and truly walk into a new client opportunity without any preconceived notion of where I want to take this. And even to this day, we talk about that a lot in our training classes. It’s about just flushing your brain, get to know the person you’re sitting across from, and, once again, let that plan dictate where you’re going to go. And so I think there’s a famous line there, Michael, which I learned a million years ago by a gentleman named, John Bergstrom, who was one of my mentors and general agents a million years ago but he said, “The easiest way to sell life insurance is just meet with people that need to buy life insurance.” And so, isn’t that a wonderfully simple way of increasing insurance sales?

And so we knew if we got in front of business owners, if we got in front of people that had high net-worths that the result of a good financial plan 80% of the time would probably need some liquidity. And that liquidity had to enter at the right time. And so, therefore, life insurance didn’t really need to be sold, Michael. It needed to be presented as a solution to a problem. And even today, that’s how we work with our life insurance opportunities. It’s not selling life insurance. It’s looking at the plan and trying to introduce the client to the fact that there are different times where liquidity will be needed. And wouldn’t you know it? Here’s a product that actually does it for you at the right time. And so, that’s how we do our life insurance sales but leading with planning, Michael. That was the key from day one. And that was a differentiator for us is that through those ’90s and what I had learned in the early ’90s was just get in there, charge the client the fee, and then you had their attention. So, once they paid you, you had their attention. And they were going to listen and pay attention to what you were doing with them. And so, planning is the key phrase here to make it work with the CPA firm.

How Paul Navigates And Manages The Client-Advisor/Client-CPA Relationship [33:57]

Michael: And so, how did this work in how it gets delivered to the client? Just in this world where this is still the CPA’s client and the CPA’s at the center of this, were you doing all the behind-the-scenes work for the insurance analysis and investment analysis and then handing it all to the CPA and they would present it to the client because it was their client? Do you do this as joint work where you go in and the CPA goes in and you meet with the client jointly at the CPA’s office so it’s still on their turf? Mechanically, how did this work? Who does what in a world where you’re trying to grow your business but you’re trying to keep the CPA at the center and keep it as the CPA’s client because that’s what they want for their business?

Paul: Yeah, a great question. I think early on, Michael, the way our model worked is we would go into an accounting firm and the accountant, he or she, would handle, say, the smaller cases. Once again, as I mentioned earlier, those 529 plans or put together a 401(k) plan. And we were really trying to confine ourselves to that top 20 percentile of the CPA’s client opportunities. But very quickly, we realized that the CPA was not a good financial advisor. And it would only cause them more frustrations. And so, I would say, Mike, very shortly after starting the program, we just stopped all of our accountants from ever acting as a financial advisor. So, from early on, 1997, ’98 onward, even through today, our CPAs are not allowed to sell anything, make any recommendations. They are simply there to introduce our financial advisors and our capabilities.

Certainly, Michael, if it’s a CPA’s larger clients and the clients that they want to, once again, be the hero to that client, that CPA will sit in the meetings. They won’t make presentations. Certainly, at different times, the client will ask their opinion on something and they can give their thoughts and all that. But it’s truly a program, Michael, where the CPA understands that they’re there to introduce us. And then, we take it from there. We do everything from running the meetings, the client’s service work that takes place after the fact. The CPAs are just simply just making the introductions. And that’s an important thing to realize is that you don’t want the CPA getting in the middle of the relationship as it pertains to the financial planning part of the engagement because they just get in the way. And you don’t want them bringing their personal biases to the table. So, we want to get them to the side, get them to bless what we’re doing. But we handle pretty much everything from that point forward.

Michael: And so, then do you get CPAs that start getting uncomfortable like, “Geez, Paul, it seems like you’re taking over this client relationship. I thought this was supposed to be my client.”

Paul: No, because it’s what I refer to as just really spending the time to be hyper-transparent, Michael, from the very first meeting and explaining what everybody’s role is. And so no, we’re certainly… We recognize the fact that we’re a guest in that CPA’s house and that we’re not there to wrestle control away from the CPA. And contractually, Michael, everyone has a contract in this program we put together where the CPA always owns the client. But our advisor will own the revenue that generates from the client. And so, we’ve got this wonderful check and balance where everybody understands what each other’s role is. And then we put a well-laid-out contract, which was put together over many years, with advice and counsel from our CPA partners and from our CPAs. But everybody’s interests are protected, Michael. And that’s important. As I knock on wood here, over all this time, we’ve never really lost a CPA firm. And we really haven’t lost any advisors that are part of our CPA program. But we wanted to make sure if, unfortunately, something did happen that everybody’s interest was protected, the CPA’s, our financial advisor, our organization, as well as the client’s interest. And so, we’ve done a really good job at being very, very transparent as to how we put this together.

How Paul’s Practice Evolved In 2016 And Why He Realized He Could Grow To A National Scale [27:55]

Michael: So, talk to us now about how this has grown and evolved. So, you had a vision for this in 1996. Hey, we’re doing well getting referrals from higher net-worth clients. But I don’t want to only do the insurance business. I want to be broader, which means I probably can’t keep doing this with wirehouse advisors because they’re doing the same thing. So, I’m going to work with CPAs because they’re doing none of this. So, it’s all additive to them. And they’ve got relationships with more affluent clients to create business opportunities. So, you start down this road. And you’ve got a big win with one early CPA firm that sends a lot of business your way. You start putting more into it. You go back to Lincoln Sagemark to build it further. So, what happens next? How does this build and grow?

Paul: So, 2016 was an important year for us. So, we were still at Lincoln. And that was around the time there, Michael, where the Obama administration was trying to redefine the fiduciary rule and what was a fiduciary. And there were certainly the thoughts that things would really change in our space.

Michael: This is the Department of Labor’s fiduciary rules and scope that it may apply.

Paul: Yeah, exactly right. And that caused us to look closely at our business model and were we going to be in a position to be successful going forward? And that’s when we made the decision, Michael, that we were going to form our own RIA. And so in 2016, we had about three and a half, maybe $3.7 billion of assets. Once again, a small boutique firm here in the New England states. We did grow down into Virginia with some really talented advisors down there. But that was really our footprint. But I need to give credit to Dan Sullivan, the strategic coach program. And it was really being part of that program for so long, Michael, that Dan was able to change my vision and get me to look at what we were doing and look at it in such a way that we recognized that we could take our success here on the East Coast and we could grow this thing nationally. And so, at the end of 2016, we put our own RIA together, roughly, once again, about $3.5 billion to just under $4 billion of total assets at that point.

2018, Michael, after we got all of our advisors into the new RIA and got everybody settled, 2018 was a pivotal year because that’s when we truly decided to take our story national and expanding into CPAs around the country and bringing in advisors from different states. And so, sitting here today from 2018 to now, 2021, our headquarters now, Michael, are here just outside of Boston, as well as our West Coast headquarters are in San Diego. And we have grown this thing from just under $4 billion to now over $10 billion in just a handful of years here. And the exciting part is we don’t see the end. We’re out there talking to a lot of accounting firms, a lot of wonderfully talented advisors. And so, we have really set our vision sights very, very high right now. We’re catching the accounting community and the advisor community at the right time for our story. And we’re certainly very excited about that.

Michael: So, when you made the transition in 2016 to form your own RIA, so, I guess I’ve got a couple of questions about that transition. But the first is what were you seeing in the DOL fiduciary rule that made you want to make a shift and make a change?

Paul: Well, I think it was certainly the whole idea of fiduciary, which is acting in the client’s best interest. And so, we just felt, Michael, that we had double the responsibility because not only are we responsible for our clients, but we’re also responsible for the clients of our accounting firm partners. And so, we just felt, Michael, that we had to have more control over the cost, let’s say, of using certain investment platforms or our ability to really take our financial planning to the next level. And so, we just felt, once again, the idea of having our own RIA just put us in control of our own destiny. And this is not to knock our prior company. They’re a wonderful company. But we just felt for what we were doing, Michael, and for us to really follow the tenants of that fiduciary rule that if we, once again, could control our destiny, that would be a much better spot for us to be.

Michael: So, just a concern at the end of the day. And it’s the nature and the reality of being on a broker-dealer platform under the BD environment, at the end of the day, they decide what’s on the shelf that you get to use, what investment platforms, what offerings, what funds, what managers. And so, it sounds like at the end of the day, you wanted your control and ability to make those decisions, to negotiate those arrangements, to set whatever that pricing is and not necessarily have the broker-dealer either dictate what it’s going to be that you get to use or not use or alternatively impact the pricing of what you get to use or not use. If they’re involved and they’re overseeing and they’re choosing, there is another hand in the cookie jar, as it were, that can impact the cost of things.

Paul: And I think too, Michael, back in those days, if you think back, I think large companies and large broker-dealers, they weren’t sure quite what to do. And this is no knock against what Lincoln was doing. They were certainly doing the best they could possibly do. But for them to make a change, Michael, to adapt to the change in the fiduciary rule, they’re moving a giant ship around the ocean where, with our own RIA, we could pivot in a matter of 24 hours. And so, no one knew what was going to happen back then. And in retrospect, it was probably a lot of what they were talking about never came to be. But certainly, we just felt that our CPA program was growing rapidly. We saw the opportunity to go national at some point with our story and our model. And so, we just felt that just having that control and being able to pivot based on what was going on around us would be much more effective. And certainly, that’s proved to be true.

Michael: And were you already in an RIA structure with advisory accounts at the time and just under a corporate RIA there, or was this all brokerage business that you actually had to convert and move to advisory in the process of going out and hanging your hat as an independent RIA?

Paul: Yeah. No, it was a hybrid structure. So, it was a corporate RIA with the corporate broker-dealer. And I would say back then, Michael, our assets were probably 50/50, maybe 60/40, 60% on the corporate RIA, and say 40% inside the broker-dealer. But once again, looking forward, we could see that certainly growing our wealth management on the RIA was going to be the way to go. But at that point, if it was 60/40, my goodness, I would say today, Michael, it’s 96% to 4% going in the broker-dealer. So, we are truly bringing in our new assets, and our advisors are certainly investing their client’s assets, on the RIA platform versus the broker-dealer platform.

Michael: And so, I’m presuming then if BD business is still a slice of your business that you didn’t go stand-alone RIA. Only when you made the transition, you went to another environment where you could be a hybrid.

Paul: We did. So we knew we had a lot of legacy assets on the broker-dealer channel. And so we looked around up there, Michael. And we wanted to find what we thought was the broker-dealer that was best prepared for this potential fiduciary rule change. And that’s how we came across LPL. Certainly, they’re the largest out there. And so they’re easy to find. But I had known a number of people inside of LPL for many years. And some good friends were a part of the LPL story. And so, as I did my research and as different team members looked around at other broker-dealers, we just felt that LPL had spent a lot of money and they were prepared for potential changes coming ahead. And so, honestly, that was the number one reason why we chose them over others.

Michael: Was that you felt like they were best positioned to handle whatever disruption came from the DOL fiduciary role?

Paul: Boy, they invested a lot of money, Michael, to make sure that on the broker-dealer channel in their corporate RIA that advisors could certainly check that box of being a fiduciary. And so, yeah, we were very impressed with not only what they had built but their commitment to even spend more money to abide by the rules. And so, once again, having our own RIA that was less of a concern with what, say, LPL was doing but certainly, we were thoroughly impressed with their broker-dealer operations and just the people. They’ve got some wonderful people in there that were easy to deal with, easy to talk with. And so, yeah, that decision was one that served us well now looking back on it.

Michael: And so what’s your structure under the LPL umbrella then? Are you using your corporate RIA now, or is your own independent RIA in their…they’re only on the brokerage side?

Paul: Yeah. No, we don’t use their corporate RIA at all, Michael. So, we’re a true hybrid. A hundred percent of our RIA assets are sitting in either LPL, Fidelity, Pershing. We are a multi-custodial RIA story. But, once again, to accommodate advisors who join us that have some legacy broker-dealer business, there certainly are some products that our advisors use on Lincoln’s platform. So, we still have a number of our advisors that are what are called hybrids. But the trend is, Michael, certainly were helping our advisors as they move from that hybrid model and get to where they want to be 100% RIA-based. And so, we’re helping to facilitate that conversion internally.

Michael: And if you’re already on the LPL platform for the brokerage end, what leads you to be multi-custodial on the RIA end?

Paul: You know something? We’re also finding advisory practices to purchase on behalf of our advisors. And so, by being multi-custodial if we find another small RIA or another mid-sized RIA that we want to purchase, Michael, we can do it with the least amount of disruption. And so, originally, we wanted to have a multi-custodial platform so that we could pivot if, in fact, we did acquire or one of our advisors were to acquire a practice. But now, I think it just gives our advisors more choice, Michael. And I think when you’re working with wealthier clients, those clients will bring a different bias to the table. Maybe there is one name they don’t particularly like so much or a name they do like. And so, we just wanted to make sure that, once again, we could pivot based on the needs of our financial advisors.

How Integrated Partners Grew So Rapidly [48:21]

Michael: So, you said in the four or five years since you made the transition from Lincoln Sagemark to LPL and out into your own independent RIA you had very rapid growth from $4 billion to $10 billion. So, help me understand just where that growth is coming from. Is that advisory firms you’re acquiring? Is that just referrals from existing clients? Is this specifically scaling up the CPA partnership offering, getting more CPAs that are doing joint work with you? Where is the growth actually coming from at this point?

Paul: Great question. And I want to give kudos here to Rob Sandrew. He’s our chief growth officer. And Rob’s just a very talented individual. And his reach, if you will, expands across the entire industry. And so, we just give Rob and his team the story to tell. And so, you’ve heard our story. It’s “Helping advisors grow their practices by working with wealthier clients.” And you find those clients via the CPA firms. But I would say, Michael, right now, our recruiting story has changed even over the last say 24 months where now, we’re attracting small advisory groups, say between $100 million to say $1.5 billion. We’re attracting these groups that would like to “tuck under”, it’s called, into our story, access our capabilities, access the CPA program. So, I would say now, Michael, the work that Rob is doing, it’s certainly small RIAs. It’s small advisory groups, wirehouse advisors looking to jump off to the world of independence. And it continues to be that hybrid advisor, that advisor that has maybe that legacy book on the broker-dealer side that they decide to do more on the RIA channels. So as we get our story out there… We call it our reach, by the way. But as our reach is expanding and more and more people care about what we’re doing, it’s been tremendous for Rob.

And so, I don’t want to put words in his mouth. But he just did an interview a few months ago where our pipeline, Michael, right now is tremendous. And we’re finding wonderful opportunities with these small advisory groups and RIAs. And our CPA program right now, Michael, is about a 130-ish accounting firm partnerships where now, we’ve got a plan to expand that to 250. So, we call it our CPA 250 Plan. And so, we’re now partnering with state societies where we’re also running the PEP, the PEP pension plans, on behalf of some state CPA societies. And so, once again, we’re just doing what did so well for us in New England. We’re expanding that to a bunch of states around the country. And so, it allows us to tell not only our story, Michael, but we can also make the promise that if advisors join us, we can really do our best to get them working with that CPA partnership. And then, that’s going to help them accelerate their growth. And so, the stories really tied together really nicely for us.

Michael: And so, it sounds like a big piece of the growth driver in terms of why advisors come to Integrated and why they work with you is tying together this, “We’ve got a growth machine in the form of CPA relationships that we’ve established that we’re growing, that we’re scaling up, which brings a flow of higher-net-worth clients in who need planning work, who need to be serviced. So, if you’re an advisor who’s great at service and wants to grow but isn’t quite certain maybe how to make that rain come, how to make those new clients come on board, we’ve got a system and a structure around that. And you have an opportunity to plug in and be part of that growth.”

Paul: And I think two other things that are important, Michael. And John Pastore and Andre Peterson who run our CPA program nationally they’ve got a line where, “What’s the dog going to do when it catches the car?” And so, we also recognize that regardless of how big the advisor is, we’re placing them into an environment, which is that CPA firm, where they’re going to work with clients that are 5, 10, 15, 20 times larger than the type of clients they work with today. So, we’ve also, Michael, invested a ton of dollars into our financial planning departments where, on behalf of an advisor, we can sit second chair with them. So, if they get way over their head, we can sit right next to them.

And collectively, together, we can make sure we bring the right plan to the table at the right time, or we can support the advisor behind the scenes and get him or her ready to go to get back into that meeting on their own. But we recognized early on, Michael, that the typical advisor who’s joining us, they’ve got these wonderful, great business models with a lot of assets. But their model maybe isn’t appropriate or isn’t quite the story that needs to be told when you get in front of those high-net-worth or ultra-high-net-worth or even business owner clients. So, we do a lot of training, a lot of study groups. And, once again, we’re there to support the advisors and make sure that when they catch that car, they’re going to be okay.

And the second part of the story, Michael, which is as exciting, and this is what’s really driving our vision in the next five years here, is if you think about the 130 accounting firms, what’s actually more impressive than that number is that the average accountant has roughly a thousand clients. And so, think about that, Michael. Think about that. We have access to the tax return information of over 100,000 potential clients around the country. And so, we have a marketing company, which is called InTouch Innovations. It’s a company we started about 12 years ago. And so, Michael, on behalf of our CPAs and on behalf of our financial advisors, we upload all of that client information to our marketing databases.

And then on behalf of the CPA and the financial advisor, we’re just trying to deliver that message of financial planning to the right clients at the right time. And so, that’s going to be our magic story going forward, Michael, as we get this up to 250 accounting firms, 250,000 potential clients. Let your mind wander as far as that goes. But we know we’re spending all of our time now on just getting our vision straight regarding how we want to market to those clients, making sure that our capabilities are there to support the advisor when he and she gets in front of these wealthier clients. And so, if we just keep turning that over and over again, boy, the future’s very bright for us.

Michael: Interesting. So, you have a whole marketing team, a whole marketing division whose focus is when a CPA comes on-board and says they’re going to partner with Integrated and work with you, they give you a client list of contact information, which I guess they can do because they’re now jointly registered with you. So these are functionally shared clients. And then, you start running the marketing messaging and essentially the engagement campaigns of Bob, this CPA is your accountant. But did you know there’s all this other client opportunities and issues? And here’s some things that you might want to learn about, know about. And if you want to help with this, we’d be happy to meet with you and Bob together to talk about this. I’m sure your person’s more eloquent. But that kind of story and positioning?

Paul: Yeah. It’s that classic. Dan Sullivan has taught us over and over again. And he wrote a wonderful book, by the way, which I would strongly recommend. And the book is called “Who Not How.” And so every single time, Michael, that we’re faced with an opportunity or maybe even a roadblock to our success, the first thing we ask ourselves is, “Who can solve this problem?” Not how do we solve it, but who can solve the problem? And so the reason for the marketing company is we recognized early on, Michael, that it was hard for a financial advisor. They’re running their own practice. And they’re doing the best they can to be the best wealth manager that they can. And so, they really didn’t have the time to also then handle the marketing expertise. And so, we just invested a ton of money. We actually built and even today we have our own proprietary databases, which allow us to do things that can’t be done on, say, databases that are offered to the general public.

And so, to your point, Michael, under that who not how, we become that who on behalf of the CPA and the financial advisor where we will, under their brand, under their look and feel, we’ll get that educational information in front of their clients. It’s always about the problems we solve, Michael. It’s never, “We can do this for you.” It’s always, “Hey, do you have this particular problem that we can help you solve?” And so, by staying focused on the problems, that does open a lot of opportunities for us. But once again, with 100,000 potential prospects out there in our CPA firms, we needed to have a story. And we needed to have a way that we could get the message out on behalf of our financial advisors and our CPAs. And so, we certainly take that upon ourselves, Michael, to be the ones to drive that for them.

Michael: And out of curiosity, just why a separate thing? Because it sounds like this is a separate business, a separate offering that you got. And why not just outright under the umbrella of the advisory firm as part of what you’re doing? How did it come out to be a separate thing?

Paul: Yeah. And this is the advantage under that “who, not how”, is we had a bit of a challenge. How do you handle an accounting firm’s information, which obviously, is highly private? How do you handle it the right way? And so, we’re also blessed, Michael, to have our own attorney here at Integrated Partners. His name is John Cataldo. And he was a former SEC attorney. And so, John was able to help us navigate the waters and find a way that we could, without getting anybody in trouble, market efficiently to these CPAs’ clients. And so, one of the most important things, Michael, was never to bring that information into Integrated Partners. In other words…

Michael: So, you do keep it separate.

Paul: We totally do.

Michael: InTouch is there, in part, because now you can say, “The RIA never sees the CPA private client information.”

Paul: Nothing. It’s totally a separate company run by her name is Becka Zophin who, interestingly enough, was the daughter of our very first accounting firm when she came out of college. And she’s just amazing and her team is amazing. And so, once again, she becomes that who for our financial advisors. And it’s a separate company. And that’s how we make sure we’re obeying both the privacy laws that the accountants have to hold themselves accountable to, Michael, but also what we do as financial advisors. So, making sure we’re doing the right thing with this information, it’s super important to do that.

Michael: Interesting. So, when a CPA firm comes on board and says they’ll be part of this alliance program, they agree they’ll use InTouch for marketing the service to their clients. And the CPA firm ends up retaining InTouch directly to do that so that the client information only goes between them and their marketing firm, not between them and your advisory firm. But then, to the extent that there are client planning opportunities, your advisory firm ends up being brought in and actually does the business. And then, I’m presuming revenue shares go back to the CPA firm.

Paul: Exactly right. Exactly right. And it’s the classic, Michael, we could be the best financial advisors in the world. But if nobody hears about us, then it’s not going to work. And so, that’s the job of InTouch Innovations is to get that story out there and keep us top-of-mind. As you know, Michael, money comes into motion or something happens in a client’s life that makes them say, “Hey, I need to talk to a financial advisor.” And so, the whole goal is to be professional, not be intrusive, but let people know we exist. And so, when those events happen in their lives they say, “Oh, let me reach out to the work that my CPA and Integrated partner is doing.” And so yeah, InTouch has been a huge part of our success story in making this work for our financial advisors.

How Integrated’s Business Relationships With Their CPA Partners And Financial Advisors Are Structured [1:00:01]

Michael: And so, then, the CPAs just literally end up under solicitor agreements. Is that just the actual structure to it?

Paul: That’s the reason we can hold our goal of CPA 250, Michael, because to your point, we now do not have to get these CPAs a Series 7 license anymore. Certainly, this is state-dependent. But yes, getting a solicitor’s agreement, sharing that agreement with the client at the very first meeting, once again, under that hyper-transparency model, explaining what everybody’s role is to the client, that’s how we’re now doing it under the solicitor’s agreements.

Michael: Okay. Okay. And I guess the good news in that context is that, at worst, maybe the CPA has to get a Series 65. I think if they’re a CFP or a PFS, they don’t even have to take the exam. They waive into it. Not all states require a series exam for being a solicitor. So it’s state specific, but this gets much less burdensome than, “Let me introduce you to the study materials for a Series 7.”

Paul: Back in the day, we had a full-time person who would just gently call the CPA every other week and say, “Get your work done.”

Michael: Get them to crack that book open?

Paul: Yeah, it would take six months to sometimes a year to get a CPA from start to finish. But we did it. But you know something, Michael? Looking back at those days, that’s why we just persevered. And we knew we had the time to make this work. And so, as we saw our competition get frustrated or if they weren’t getting the result that they wanted, they would back away. So, think about over the last 25 years. I’ve not only seen local financial advisory firms but even the largest companies out there try to structure and build a CPA partnership program. And by and large, they lost interest or they got somehow frustrated with us. But we just stayed with it. And I always go back to that very first CPA firm. And we knew the potential was there. And we just had to really work on our capabilities and make sure that we were going to do this the right way. And while others backed away, we stayed with it. That was the key to our success.

Michael: And so, for advisors who are part of the firm, are they independents? Are they employees, advisors of the firm? What’s the actual structure of advisors for the firm now?

Paul: Yeah. No, just the opposite. So, a big part of our firm, Michael, is really celebrating that advisor’s entrepreneurial spirit. And so, these advisors own their own practices. We don’t have any employees that are financial advisors internally. And so, they can even keep their own brand and their own look and their own feel. So, no, we’re about celebrating that entrepreneurial spirit of the advisor but using our size and our scope and our vision and our capabilities to just bring more to the table. And that’s really been the key to our story is that we can attract these larger groups and these RIAs and these wirehouse advisors because we’re going to help them be better entrepreneurs, maybe help them tie into our vision for the future and where they can go with their practice and then give them the people to make it happen. And that’s really been the key to our story.

Michael: And so, I’ve got to ask. So, what, at the end of the day, makes Integrated different to be competitive in this space? As I’m sure you know and experience in trying to reach out to advisors to affiliate with the platform, “everybody” says, “We have resources and capabilities. We’ll help you be a more successful advisor. Look at all these centralized tools and things that we’ve got.” What actually gets you guys to win the advisor’s business on that compared to all the other people out there telling similar-ish stories?

Paul: A great question. So, whenever, Michael, I give let’s say a talk in front of potential clients or maybe an industry event or something like that, I always say that, “Look. It would take you a long time to get to know what Integrated Partners is all about and what our story is.” But then I pivot and I say, “Look. We have got 130 accounting firms. And these are 130 accountants who could work with any financial advisor from the world. And yet, they chose our story and our model.” And so that’s the big part there, Michael, is that we’ve worked so hard in our story to make sure that we are very attractive for that CPA to want to be part of our model. And then, once we have the CPA and we have access to that CPA’s clients, it’s not that difficult then to introduce that CPA to say one of our potential recruits like an RIA or a small advisory group and say, “Let’s get you all together here.” But the story for the advisor, I think if you look forward here, Michael, I think certainly there’s fee compression. And there’s the desire of a client of the advisory role, I’m sorry, to work with wealthier and wealthier clients because I call it the complexity curve.

Once the advisor starts to work with clients that have more complex financial lives, Michael, their fees go up. And those are the kind of clients that aren’t going to be under that rule of fee compression because they truly value the advice and counsel of a competent advisor in their life. And so I think when we help the advisor, Michael, look at their vision for their practice over the next 5, 10, 15, or 20 years, I’m trying to get them to look ahead and realize who are the clients you serve now that will be somewhat vulnerable in the future to different pricing structures. And then, who are the clients that will never be vulnerable to a different pricing structure? And, once again, those are those wealthier people with complex financial lives. And so, we’re always just telling our story, Michael, and looking at the advisor’s practice, the way it’s structured today. Certainly, Michael, the advisors who look and join us want to grow. They’re probably not at the latter stage of their career. They’re at that stage they want to keep growing their practice. And they want to protect the fact that they own it.

And although they see their friends out there selling their practices for amazing multiples, they know if they can keep growing this practice. And so, imagine, Michael, 5 or 10 years from now if your practice consisted of wealthier clients that are tied to your practice model, plus a CPA firm or two that gives you access to more clients, when that advisor goes to sell that business model, my goodness, that multiple is certainly much larger than a practice that maybe is more exposed to fee compression and clients that may look at different types of ways to get their financial advice.

Michael: So, it’s really that combination of, “We’ll help you move upmarket to more complex and sophisticated clients where you can generate more revenue per client and that these are less prone to compression because they have complexity in their lives. They’re not getting less complex any time soon. And we’ll give you a pathway to actually get those more affluent clients because we have all these CPA relationships where we can connect you with CPAs who are going to be referring business and giving you the opportunities to get in front of those clients. And so if you want to move upmarket and know how to better serve upmarket and have a lead generation channel to get the clients that are upmarket, that’s what we bring to you together at Integrated.”

Paul: Bingo. That’s it.

How Integrated Partners Helps Advisors Who Join Their Group Get Up To Speed Working With Higher Net Worth Clients [1:06:58]

Michael: Now, you had said earlier that a part of this shift for advisors to move upmarket is I guess learning how to better connect with higher-net-worth clients, learning how to tell their advisor story better to high-net-worth clients because it may be different than the story in the way that they positioned themselves in the past. So, I’m wondering if you can talk a little bit further about what is that? What is that that you teach or train? What is it that they have to learn to do and tell that’s different than what they do today and want to serve these clients?

Paul: Yeah. So, the key line there is we don’t really make them do anything, Michael. So, an advisor, he or she, can join us. And if they like the way we’re doing things, we’ll certainly support them. But we do want to make available to the advisor study groups with their peers. And I run a lot of the educational events and our Wednesday brunches and our Friday study group meetings. And so, we’re always getting together and talking amongst ourselves. I want to say this carefully, Michael. But when I meet with a new advisor or a current advisor, I always use the formula I call it “6 times 10 plus 1”. And what that simply means, Michael, is that to go into a typical accounting firm, the goal for an advisor, especially an advisor with a successful practice, is try to use that CPA to find 6 more clients that have 10 times the investable assets of the average client you work with today. So, simply put, Michael, if I look at an advisory practice and let’s say that they average about a million dollars per client of investable assets, well, the CPA program’s about getting in front of clients that have 10 times that or $10 million of investable assets.

So, what this means, Michael, is that lot of times when we look at the advisors who are joining us. And I want to say this carefully because I don’t want to be unkind. But maybe the way they’re currently doing their financial planning or wealth management, it may not be attractive for a client with say $10 million or $20 million or $30 million of liquid net worth. And so, sometimes that’s hard for the advisor to hear this. But it’s really my job to sit down and look at what they’re doing and say, “Look. What works well to manage a million dollars may not quite be the story at $10 million.” And so, it’s really looking at their practice, Michael. And I think also the reason why I think a lot of advisors stumble and fall when it comes to charging large fees is that many times, they don’t feel that what they actually offer for financial planning advice is worth a $10,000 or $20,000 or $30,000 fee. And so, it really becomes our job, Mike, to break that mold and break their confidence and say, “Look. We’ve got you. We’ve got the capabilities. We’ve got the training. We have in-house attorneys and in-house tax specialists. And so, we’re going to help if not get you better or help you get better yourself, we’ll sit second chair with you.”

But over time as advisors see how we do things, Michael, the beautiful part of working with wealthier clients is that their needs become much more similar than dissimilar. And so, you work with one business owner. The next one will have similar needs and desires. And the same is true for someone with $10 million or $20 million. And so, the more we can get them comfortable and confident and get them to maybe make some minor changes to the way they operate, we can get them to the point where a $10 million client will want to work with them. So, that’s why that “6 times 10 plus 1” model is what I’m really what I’m out there preaching over and over again. And it’s really just getting that advisor to realize, “You can go after that potential client.” And, Michael, the last thing I’ll share with you, it’s amazing that when a new advisor joins us, it always amazes us as to how many… They’ve got, say, a $100 million to $200 million advisory practice.

But they know a lot of business owners in their personal life or they’ve got access to people that have $20 million, $30 million. But they just didn’t know how to go after them. You know what I mean? And so, when they join us, it’s not only about the CPA connections we can make but that these advisors have introductions or entrees to wealthier people in their communities. And they maybe just didn’t have that capability to pull it off. And so, that’s the other thing that we’re doing is just, once, again, it’s about that confidence word, Michael. It’s just giving them that confidence to go after the kind of clients that they just felt maybe they couldn’t get on their own. And then by doing that and helping them get better, it makes them that much more effective inside their CPA firms.

How Integrated Compensates Its CPA Partners [1:11:15]

Michael: So, then, help me understand just the math of this and how the dollars split out. CPAs get a piece of this for being the solicitor. The advisors, obviously, get paid on their business. Integrated has to make money for what Integrated does as a part of the process. I’m assuming this is going to be a lot of just percentage of revenue splits to various parties. But how does this actually work for splitting out the dollars? Who gets what to make it all add up?

Paul: Yeah. So, I guess in rough numbers, obviously, it depends on how many advisors say are working on the case or if our team is needed or not. But the CPA is going to get somewhere around say 30% of any revenue generated. And then, the other 70% is split between Integrated Partners and our financial advisors. And, once again, it just depends on how much of our services that advisor needs. And so, that’s who it works in its simplest form is we’re, once again, respecting and acknowledging the fact that the CPA is helping us get in the door. And so, for that, roughly around 30% goes to them. And the rest is shared between Integrated and our financial advisors. And that’s why, too, Michael, it’s important when you look at this model, it doesn’t work in our world if an advisor uses the CPA program to get in front of the kind of clients that they already have.

In other words, if you’re getting in front of $1 million net-worth clients inside of a CPA firm and you can get them on your own and keep 100% of the revenue, then you’ve got to make that volume game work.

Michael: And just mathematically, if that program gets you to clients that are 50% to 100% larger in revenue per client or even further up than that, then yeah, you can revenue-share 30% of that to the CPA that provided the introduction. And you’re stoking to generate more revenue from that client.

Paul: Michael, I’m going to come over with the haymaker off the top here in that keep in mind what that advisor is helping the CPA firm build, okay, and the success of the program. And so, if you also factor in the case that a lot of our CPAs are in or around that age 60, our advisors will be the ones who will be buying that book of revenue away from the CPA over the next 5 and 10 years. So, the advisor’s actually building something, Michael, that at some point in time contractually, they’ll be buying that back from their CPA partner. And so, once again, that ties into respecting the CPA’s role, respecting our financial advisor’s role. But actually, our advisors are building something that at some point, they’ll have 100% corporate control of.

Michael: And in terms of how this breaks out between advisors at Integrated, you’ve said this depends on the amount of services the advisor needs. Is that an overall structure for the advisor, that just some are more independent and don’t use many of your services and you’ve got higher-revenue payouts, and others use more of your back office or centralized services and get less or is this down to a case-by-case level? You’ll get a 90% payout on this client. But if you have to bring our centralized planning team in, then it’s only 80% because that’s how our centralized planning team gets paid and you decide case-by-case what you’re going to do?

Paul: I think to keep it brief, Michael, it’s a combination of the two. Certainly, an advisory group who joins us is giving up a percent of their revenues to be part of our story. And I know we’ve focused a lot of our time on the CPA program and our financial planning expertise. But also, internally we can help the advisors run their practice more efficiently helping them with their tech stack and, once again, helping them be a better entrepreneur. That’s my responsibility is to teach them how to be a better business owner of their business. So, there’s a lot of other services above and beyond just the CPA program and the financial planning team. Even, Michael, some of our advisors come in the door and say, “Hey, will you just help me get space and you take care of it?” And so, although we respect the entrepreneurial nature of the advisor, what I’ve learned from my Dan Sullivan days, Michael, is that each of these advisory practices are different. And some would love us to offshoot or take over some of the things they do every day that are big time wasters for them.

And so, using that Dan Sullivan methodology of who not how, as we get to know the advisor’s practice and understand where they’re just not driving forward or what do they have I call them time sucks, what’s causing them to spend too much time on nonrevenue-producing activities, we’ve also built an entire internal structure to offload those onto our organization. So, once again, Michael, it’s understanding your practice, what you’re looking to do, what part of our services would be best to help you get to where you want to go. And, once again, as I always say, that’s respecting their entrepreneurial vision. And so, each advisor who joins us has their own dreams, their own ambitions. And so, it’s our job to understand those and then help them get to where they want to go.

Dan Sullivan has a great line. He always says that the biggest fear of an entrepreneur is they’re going to go to their grave not realizing the potential of something they had in the back of their brain. And so, I love that because it’s my job to get into your brain and tell me what your visions are and where you want to go. And then, we’ll just put the pieces together under that who not how methodology. And that’s how we can really help drive the success of the advisor practices is just understanding what their goals and visions are all about and helping them understand that we have got talent and people that can help them get there.

What Surprised Paul The Most About Growing His Advisory Firm And The Low Point On His Journey [1:16:38]

Michael: So, what surprised you the most about trying to build your own advisory business over the past 25, 30-odd years doing this?

Paul: That’s a great question. What surprised me? The one thing that maybe is not a surprise, Michael, but the one thing I have realized is that with my practice if I always lead first as an estate planner, so, I always call it net rate of returns. So, I’ll look at their investment portfolio and I’ll say, “Michael, you’re getting 15% on your money. Congratulations but if half of it’s going to go in income tax and the other half’s going to go on estate tax, what’s the true net?” And so for me anyways personally, I really want to dig into the estate plan. And I talk about net dollars. Do you have enough? We call it are you okay? Are you going to be okay financially for the rest of your life? And if you’re okay, how about your family, your kids and grandkids? And so, really digging in deep on the estate planning part, getting clients to realize it’s about net rate of returns.

And I think with this new tax law potential changes coming down the pike here with lots of setup in basis potentially and higher tax on capital gains, it’s just feeding into my story, which is, “Let’s talk about your net rate of return.” And so, that’s what’s I don’t want to say surprised me, Michael, but certainly, maybe the surprise for me is I’m always amazed at how few people of wealth have taken the time and attention to build the right estate plan. So, they’ve got wonderful wealth managers and wonderful advisors in their life. But no one’s really organized the entire scope of activities. And no one’s really taken a look at the overall financial and estate plan. And so, for me, I don’t know if that would be a surprise, Michael. But certainly, it’s an opportunity that I always look to take advantage of with the clients that I meet with.

Michael: And so, between all the clients of the firm, all of the advisors of the firm, all the team of the firm, $10 billion-plus under advisement, what does a typical week look like for you at this point?

Paul: Oh, boy. It’s certainly changed. But I’ve got amazing people around me, Michael. Years ago, to jump to when I was 26 or 27 years old the way I met Dan Sullivan, was I was working seven days a week, in at 6:00 in the morning, going home around 7:00 or 8:00 at night. And that’s what I was taught to do. And so, I didn’t know any different. And then, I heard this guy Dan Sullivan. He spoke at a Boston meeting. He used the example of Elton John, Michael. And I think what he said was, “Think of Elton John. He doesn’t park the cars. He doesn’t sell the popcorn. He doesn’t walk you to your seat, then sing and perform, and then clean the floors after, and then do all the work. He comes in, he performs, and he leaves. And other people around him are doing all the other ancillary work.” And so, for me, Michael, that hit me like a ton of bricks. It totally changed my life. And it’s why I’m so dedicated to his program because I learned that it’s all about me focusing on what’s most important.

And so, right now, Michael, for our organization, for me it’s about helping our advisors get better. It’s helping to coach them to be better entrepreneurs. So, it’s taking all of my training for 30 years in being an entrepreneur and sharing that back with them and helping them be better entrepreneurs, helping them be better financial advisors for wealthier clients, getting out there talking to our CPA partners, and letting them know what are the opportunities out there. So, I’m just blessed with people, Michael, who can run the day-to-day operations, the compliance, make sure the lights are turned on, and things are operating as they should. And that allows me to focus on where I can be most impactful. And so, like you, Michael, my first love is being a financial advisor, this whole business model built around the fact that I love being an advisor. I love being around advisors and coaching and training and working with them. And so, for me, even today, Michael, I can stay focused on those activities. And we can go to some amazing places. And I’ve got other wonderful people around me that are doing all the other work that needs to be done.

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

Paul: The low point on the journey? I would say, certainly, when we decided to leave Lincoln and do our own RIA, there were some stressful days there. And there were some days was I doing the right thing? And so, there were a lot of advisors and CPAs that were counting on me not to make a mistake, Michael, and make the right decision. And as you can probably imagine, it’s never easy leaving a large firm like that. But 99% of our people and our assets came with us. And to this day, I am always so grateful for that. But that was a difficult time, deciding what was the right thing to do. There were, once again, so many people counting on me not to make a mistake here. But at the end of the day, virtually 100% of our people and assets came with us on this journey. And every day I keep that in mind. And I make sure that we’re meeting their expectations. That’s one of my most important goals.

But that was a difficult time, Michael. But going back to my other comments, but I had people in my life that I could talk to and people that would help to guide me and give me the confidence to make that very important decision. And so, I think when I look at your iceberg diagram and I look at all the things that reside below the water there, Michael, for me, it’s always my “whos”. It’s who do I go to talk to? Who gives me the confidence? I’ve got the vision, and I’ve got a very strong hold on my vision. But there are times where I need people to just get into my head and help me realize what’s going on. And so, I think that’s why having the right people surrounding you is so, so important as you reach those difficult times, those times that you have below the water there.

Michael: And so, I guess I’m just curious. Who were those people, or who were those roles for you? Is that confidants, a particular kind of mentor, or is that coaching? Is that study groups? Is that something else? Just what do you find actually works for you in finding that network of people that, as you put it, helped get in your head and realize what’s going on?

Paul: There’s a couple of key people. And thanks for asking that. But I think back when I was in my 20s, there was a gentleman who you may know, Doug Lennick, who was then one of the senior guys at American Express. And back in those days, I wasn’t part of American Express. But I was teaching classes there. And Doug Lennick taught me something, Michael, which I’ve taught my son and he’s now teaching his kids. And that is the world’s about things that you can control, things you can influence, and then things you can’t control or influence. And so, I think early on, Michael, what I learned from Doug was that just stay in my lane where I can control or influence the result and stop worrying about things that I can’t control. And fortunately, I get the chance to speak to college kids as they’re graduating from some of the local schools. And it’s always the old guy giving the young people some advice. But that’s my number one advice-giver, Michael, is just don’t let the noise get you depressed, or don’t let the noise, the things you can’t control, dictate how you think. So, so much credit to Doug Lennick and teaching me to just stay in that lane of control or influence and let everything else just go away. That was so important.

And I’ve mentioned Dan Sullivan so many times. But I’m part of what’s called his Free-Zone Frontier. And that’s a blue ocean strategy, Michael. It’s how do we collaborate and not look at each other as competition? So, that changed my mind entirely where I don’t see everyone out there as competition. My mind first says, “How can I work together with that person to get the result that we’re both looking for?” And I give Dan a lot of credit for that. And people like Peter Gaines who is my mentor and just a wonderful human being in terms of how he works with people. There’s an organization called The One Thing. Gary Keller, the realtor, has something called The One Thing. And a guy named Jeff Woods who maybe your listeners know, he’s always trying to keep people focused. Once again, just what’s that one thing? And so, we as an organization are always trying to take large and multi-faceted problems and break it down into that One Thing at all times.

And so, knowing Jeff and the work that he’s helped me with has really been invaluable as well. So, just a lot of great people. Do you know Wickman who has that EOS system is part of my study group? And Lee Benson, Michael Rayball have a company called Execute to Win. Michael, it just goes back to that who not how. It’s recognizing where, once again, we have an opportunity or a roadblock. And so, we just find that right person to help us solve the problem. And so, these are all names I’m throwing out there that have been wonderful people in my life that have given me direction and leadership at the right time. And I think that’s what’s key is just have those right people around you.

The Advice Paul Would Give To Younger Advisors Entering The Professions And What Success Means To Him [1:25:51]

Paul: So, what advice would you give younger, newer advisors coming in today who are trying to get started in today’s environment and build their path to success?

Paul: Three things. This comes from Dean Jackson, who’s a wonderful marketing person. It’s all about your vision, your capabilities, and your reach. And so, just recently, we took the time to study Kylie Jenner and how she became a billionaire. And so, if you think about it, Michael, her reach was 100 million people on social media. Her vision was to start a makeup company that she could offer to her 100 million viewers. And so, she just found the right capabilities to make that happen. She partnered with a makeup firm that could get the product out within five days. So, I think for young advisors as I’m out there talking and teaching, it’s just make sure you know what your vision’s going to be. That’s the first thing.

So, listen to really smart people out there. You did a great podcast recently, Michael, with Tyler Schulte I think his name was. And he talked about retirees. And if you listen to his podcast, he knows what his vision is. There’s no question to that. So, I think that young advisors, you’ve got to get that vision and know exactly what it’s going to be. And then, stay on that track. In other words, you’ve heard me say a couple of times in the face of maybe looking to make a change away from the CPA program, we stuck with it because that was our vision. And so, first and foremost, have a strong vision and help others help you build that vision.

Then, get the capabilities around you, okay? Make sure you’ve got the right talent around you so you can deliver on the promises you offer to people. And then, what’s your reach? As you’re hearing from me, Mike, our reach is those 100,000 people that are clients of our CPA firms. So, that’s our Kylie Jenner 100 million people. It’s just ours are 100,000. So, is your reach going to be social media? Is it going to be referrals from other centers of influence? But I think if you’re newer advisors or people looking to go in practice keep those three words on their desk, it’s on a yellow 3×5 card so every day I read the same thing, my vision, having the capabilities, which is all about who and not how, and then, how do we expand our reach. And so, I think if you stay focused on those three words, you’ll be hugely successful, Michael, because there’s nothing but opportunities out there for the financial advisor world.

Michael: So, as we wrap up, this is a podcast about success. And one of the things that always comes up is just the word success means very different things to different people. And so, you’re on this incredible track for building a $10-plus billion advisory firm. And I think it sounds like looking to double it from here as you go to 250-plus CPAs and the advisors to add. So, the business is certainly on an incredible success track. But I’m wondering how do you define success for yourself at this point?

Paul: I think, certainly, Michael, it’s the combination of family with the business world. And a few years ago, I actually built out my 25-year plan. And so, imagine that. In the face of a lot of other RIAs and firms of various sizes building to sell themselves, we’re putting something together with a 25-year vision. And so, I think for me, Michael, success is getting enjoyment out of putting a vision down on paper and then seeing everybody around us get some level of success from that vision. That gives me personal joy and satisfaction. And it’s the kind of joy and satisfaction, Michael, that lets me see out 25 years versus the next couple of years here. But it’s several things. It’s family. I’ve got a couple grandkids, three grandkids now that are just the love of our lives.

And so, tying in family with business, having that vision, watching others succeed around you. I think, Michael, all too often this world is about seeing others fail so I can be successful. And that’s just terrible. So, I think that if we collectively try to help everybody get better and everybody get the same level of success, whatever that may be on an individual basis, then the future certainly looks very bright because you do hear much more talk about collaborations and people working together and not so much fighting each other. But how can we, once again, as I said earlier, work together to reach some of these dreams that we all have?

Michael: Well, I love it. I love it. Thank you so much, Paul, for joining us on the Financial Advisor Success Podcast.

Paul: Michael, thank you. Once again, I’m a huge fan of yours, a huge fan of your podcast. And so I just appreciate the opportunity.

Michael: Absolutely. Thank you.