Ep10 - Rethink: Moving Firms – Captive vs IBD vs RIA – Featuring Ryan Shanks

Adam and Derek tackle one of the most-asked questions they get: which business model — captive, independent broker-dealer, or RIA — is actually best for an advisor. They bring in recruiter and FA Match founder Ryan Shanks to add real transition data, including LinkedIn poll results showing only 49% of respondents favored starting as a fully independent RIA. Shanks argues that culture and values fit matter more than compensation alone when advisors consider a move, and the hosts discuss the two most common advisor profiles who reach out about switching firms. The episode closes by teeing up Episode 11's conversation on entrepreneurship and business ownership.

• Captive vs. independent broker-dealer vs. RIA models compared
• LinkedIn poll data on how advisors prefer to start their careers
• Two common advisor profiles considering a firm transition
• Culture and values fit vs. compensation when choosing a firm
• Client portability challenges when switching firms
• Strategic planning vs. impulsive moves between firms

Full timestamped transcript.

[00:00:00] H. Adam Holt: Welcome to Rethink: The Financial Advisor Podcast. My name is Adam Holt.

[00:00:06] Derek Notman: And this is Derek Notman. We are your hosts, both veteran advisors and fintech CEOs who challenge the status quo, question everything, and have fun doing it. Hear honest commentary on the challenges facing advisors today. And be part of a community where we can all rethink the profession.

Now on to our episode.

Adam, what is the best type of firm for a financial professional? Is it captive? Is it pure RIA? Is it independent broker-dealer? Is it hybrid? Is it some combination? What is it, my man? And hey, like, nice to see you again.

[00:00:54] H. Adam Holt: Nice to hear you, too.

[00:00:58] Derek Notman: Thanks, I think.

[00:00:59] H. Adam Holt: Do you know how many times we get this question? I- as if we know the answer, right?

No. I mean, having been in the business for 20-some years each, it's, it's a sticky question, and we've been hesitant to talk about this one to some degree, although, as we mentioned before, we're gonna do it anyway.

[00:01:15] Derek Notman: Uh-huh.

[00:01:17] H. Adam Holt: This gets some attention, doesn't it? A lot of attention.

[00:01:18] Derek Notman: Why do you

[00:01:18] H. Adam Holt: ask me? Well ... Why do you ask?

[00:01:21] Derek Notman: Well, man, like I, oh, there's so much rhetoric around this, and, and I think that there are some stronger opinions out there, um, that like to say some things, but then, like, the data may not support that. But yeah, like, man, I get this either individually or we see posts about it. Man, it's everywhere. And so yeah, we're gonna unpack it a little today, and we've got a special way to do it.

[00:01:43] H. Adam Holt: It's true. And, you know, you know, both Asset-Map and Connectr have many clients in this space that are affiliated with all of these questions that you asked, right? Um, and but it's interesting how many kind of off, we'll call it behind the scenes questions we also get because people are curious about what's on the other side, right?

What are the- Mm ... what are other people doing that are using your products, and are they better? Is it better for me? Should I be there, and so forth, right? Do you... I feel like a refugee stuck in a camp, and I need to find a place to land, or am I living in a palace, and I'm happy, and I just wanna know what else the Jones are doing?

I mean, so it's, it's important. So let's kind of, let's address what kind of social surveying and research we did to try to answer this question for our listener group.

[00:02:30] Derek Notman: Yeah, so I, I'm a big fan of data, and I like, I like using the polls on LinkedIn specifically. You can get a lot of data pretty quickly.

Now, obviously there's always some margin of error here, but we asked a couple questions. Uh, one of them, which I think will resonate with a lot of us, is, like, what is the best way to start as a financial advisor? And the options available to pick from were, like, a wirehouse BD employee, uh, a non-captive wirehouse or broker-dealer, a fully independent RIA/IAR, or something else.

Now, from the rhetoric, you would s- you would think, "Well, everyone should just be an RIA and start that way." In fact, only 49% of the people that voted on this, uh, said that fully independent is the way to start. So I find that really interesting. I don't know, what do you think about that, Adam?

[00:03:17] H. Adam Holt: Well, I'm, you know, I'm actually surprised about that, um, because most of the time...

When we, when we started in the business, there were no RIAs, independents, right? You know, you, you actually were either forced to go to a wirehouse, uh, an established, uh, organization, uh, an insurance carrier that was moving towards wealth management, and those were the two that hired, especially people which, that had no book of business and no assets to bring.

So- Right ... to learn the business and cut your teeth, and also maybe even get some small stipend or salary to be able to pay the bills in those early years, you tended to have to go with a, to a company and learn the ropes. Um, it's interesting to see how many people... I'm surprised actually that 49% said that you could actually start at a fully independent RIA.

I'm wondering what, what business do you bring to the table?

[00:04:01] Derek Notman: That's a tough one, right? 'Cause you're, you're, other than maybe coming with, like, a, a strong natural market, you're, you're not coming with much. And let's face it, the majority of RIAs are small shops.

[00:04:12] H. Adam Holt: Mm-hmm.

[00:04:13] Derek Notman: And even if you look at some of the dialogue in that, in that post in the comments, like, the idea in a silo makes sense.

I get it. But who's gonna pay that person to come on board to build up, you know, assets over three years or five years? That's a really expensive run for a, a shop that's got one advisor or maybe three, right?

[00:04:31] H. Adam Holt: Right.

[00:04:31] Derek Notman: Um, we

[00:04:32] H. Adam Holt: don't- Begs the question, though, whether they bring them in as employees first, and then make them paraplanners, and then you learn the business for the next three, four years, and then maybe you earn the right to, to, to start working with clients.

So it beg- it does beg the c- the case that an established firm is gonna have to have revenue and invest in their infrastructure, so that needs to be the right fit. What, what else did you see? What other surveys did you run?

[00:04:54] Derek Notman: Well, w- we found also interesting, so FINRA released this in 2019. We don't have the numbers for 2020 yet, I don't believe, uh, which is kind of funny given that we're almost done with 2021 here.

But, um- ... they, they looked at the decade from, was it 2010 to 2019, through that whole period there, um, at, like, the, the type of advisors and, and the traject- traject- I can't speak today

[00:05:19] H. Adam Holt: Yeah, that

[00:05:19] Derek Notman: thing ... trajectory, that thing, um, about the different types. And what basically is, they, uh, say, the, the data supported was, "Hey, the broker-dealer type of advisor has actually decreased by about 20% over the last decade, where the RIA side has increased by about 20%."

Now, in total numbers, the BD types of advisors far outweigh the, the, uh, the, um, RIA space, but the numbers are clear. And so what I asked is like, "All right. Well, what type of advisor's gonna lead the next decade?"

[00:05:50] Ryan Shanks: Hmm.

[00:05:50] Derek Notman: And only 4% said broker-dealer reps. Um, but what's interesting is, like, we've got 55% that said investment advisor only, so pure RIA, but 41% that said dual, dually registered.

Uh-

[00:06:05] H. Adam Holt: Why do you think that is?

[00:06:08] Derek Notman: The BDs still have a really big hold, and I, you know, w- we're, we have a special guest where that's actually probably gonna t- touch on this a little bit today. But the pain of leaving a broker-dealer environment where most advisors are can be quite high. Mm-hmm. Mm-hmm. So if I don't have to leave, but I can bring on some, some RIA-type stuff to my current broker-dealer situation, that feels pretty good, and it's, it's a lot, not as hard to do.

[00:06:33] H. Adam Holt: Yeah. So, yeah. It's true. I, we're, we're gonna t- yeah, I'm, I'm looking forward to talking about that one, especially with Ryan. And what was... You know, we, we've been, we led this with what's the best place to land as an advisor. You'd recently done some surveying on this. What did you find?

[00:06:47] Derek Notman: Yeah, so this, this survey's still running.

We just, it's not even 24 hours old, so the data's a little premature. But right now, like, I asked, like, what's the best type of advisor? And I, I misspelled it, so instead of wirehouse, it's wine house. So if you wanna go drink wine as an advisor, we do have that position apparently.

[00:07:02] H. Adam Holt: Oh, I thought it was complaining wine.

Like Winehouse. That too. I mean,

[00:07:05] Derek Notman: I guess one of the two. Or

[00:07:07] H. Adam Holt: Amy Winehouse could be that.

[00:07:08] Derek Notman: Amy

[00:07:10] H. Adam Holt: Winehouse. Right.

[00:07:10] Derek Notman: Um-

[00:07:10] H. Adam Holt: They're very dark scenarios. But that's interesting they got the least votes.

[00:07:14] Derek Notman: Oh. Uh, but what's happening here, it, again, it's tilted towards RIA space, and I get why. But only 57% so far are saying that that, the best type of advisor is an RIA.

There's 29% that are saying hybrid, and then there's some margin for error that are just saying other things. So a- again, it's still early on in this, this poll. We don't have a ton of data yet, but I find it pretty interesting where it's trending.

[00:07:37] H. Adam Holt: That's great. So th- that's interesting. So RIA tends to dominate the kind of the commentary of what's going on, at least on the social side, but there's still a holdout, um, for broker-dealers and roles and, and of course, a lot of us that sold BD products.

It's not just typical mutual funds and TAMPS and so forth. It's also the variable life and the variable annuity, and these things are very sticky and hard to unwind, nor would you probably want to after they've been so seasoned. Um, and so there's, there's gonna be a need to continue to service this line of business as well as, I think, write more and more longevity ti- style products in the future given the demographics.

So I think that, that the BD will still have a very prominent role, but there's no question that the pressure for advisory or advisory mostly instead of advisory only is a, is a big theme, and we have to be really, uh, attentive to this. Uh, as was we recently talked about with, uh, with Michael Kitces on episode nine.

Um, and so that's, uh, that's something. O- one of the things that we figured out, Derek, is that we wanted to go searching for an expert who's actually dealing with these transition questions because instead of us trying to answer what we think our friends are doing and who's better off, we decided to reach out to someone who we know who's, who's been in the business for 20 years, Ryan Shanks, who's the CEO and founder of FA Match.

Um, we, we kind of think of it as he's built as a, as a recruiter of financial professionals along all of these firms. He's also worked on and built something that's like the match.com of financial advisor fit, so the technology platform helps people figure out where they are today. And so we, well, the first question we asked him is a three-part.

We actually asked him three questions. Who's looking to move, and what is the typical profile of a financial professional considering a move today? So let's listen to what Ryan had to say. I-

[00:09:19] Ryan Shanks: it's, it's there's very specific needs or wants that they have, I guess, and then we start to try to unpack it. So, you know, a next gen advisor, a lot of those conversations are around, you know, look, I'm, I'm plugged in, and Derek, you can appreciate this.

I'm plugged in with an insurance platform, and I wanna do financial planning, and I'd like to do more fee-based business, and frankly, they're restricting my ability to do so, right? So that's one particular use case. Another use case is, uh, you know, I'm at a wirehouse. I've got 250 million in assets. I've got one more move left in me.

Do I go to a lateral firm that's gonna give me some really big check in the same comp level and that's it, or do I look to roll that into independence, and what does that risk look like for me? And then on the opposite spectrum, it's, it's that older advisor that's like, "Look, man, I love this business. I'd like to keep doing it for another five to 10 years if my health holds up," um, but there's a lot of sort of administrative items and things that I'm running up against every single day that I would like to see if I can't sort of outsource that to someone else in the interim and then also have that be someone who can be my succession when I decide to hit the button

[00:10:24] H. Adam Holt: So I heard three things in there, right?

We were trying to quantify who's actually talking about moving these days, and then reaching out to a recruiter and actually making a move. And, and I heard three there, so I'm gonna try to do these personas. One is a person who's been in the business for 10 years and has kind of gotten past needing, uh, you know, we'll call it the paternalistic help.

They wanna create identity brand, they want control. Uh, they want maybe tech. Maybe they wanna sell crypto. They wanna do more planning. They wanna change their fee base. They figured out what worked and what didn't work, and now they're looking for their next landing spot. The second was they're looking for money.

They're a wire house jumper, and they're gonna basically get paid to bring their book of business. We see this happen a lot. Um, and then lastly is that veteran who's kind of in that later stage thinking, "I wanna make my life simplify- simplified. I need a succession plan. Maybe a, an e- an exit plan, and so I'm looking for the place I'm gonna have, finish out the last bunch of years."

Is that what you heard?

[00:11:18] Derek Notman: I did, yeah. It's, it's interesting. I like it. It's actually quite diverse. Um, but it totally fits, and it's nice to have someone like Ryan on the front lines validate that 'cause he's having some, I'm s- I'm sure some really interesting and very private conversations with people looking to make these changes.

So he's got some insight that we just can't have on the outside looking in.

[00:11:39] H. Adam Holt: Well, the thing that I, we needed to figure out from Ryan, which was, you know, who is actually winning the favor of advisors, and why are they winning? And this is what he had to share with us. This was really insightful.

[00:11:50] Ryan Shanks: It, it, it comes back to, um, sort of that persona of that advisor, right?

So if they're money motivated, it's a captive or a lateral move, or it might be inside of a firm that's got some capital backing it, right? Um, but I, what I, what we tell folks is, you know, if an advisor cares a lot about culture and about the people fit in the equation, the RIA side of this industry is the absolute best at upholding that culture.

Um, you know, the independent broker dealers are winning at a really fast pace, but if you look at it, a lot of the IBD success in recruiting for the most part is recruiting from a comparable independent broker dealer, right? They may just have a little less that they can offer. Maybe they're not helping that advisor recruit or acquire, and that's sort of the next stage in their career.

Um, the OSJs of the independent broker dealers are, are very aggressive and competitive. Um, their, their culture is still not as in sync as an RIA though. So, you know, everyone's winning, frankly. I mean, you're seeing, you know, wire houses winning big teams, right? Now, we all know that the reality there is they're paying a lot of money to win.

So, um, it, it's, it's, it's across the board. I, you know, I say everyone's winning. We're having a lot of fun talking to the small and mid-tier firms, sort of the RIAs that are kind of up and coming, but they're under the radar. No one knows about them, and they're really trying to get it right. Right? They've integrated technology.

Um, I was talking to a group this week, and they're like, "Look, we're kind of old school. We actually really care about the advisor. None of us work with clients. We get up every day, and that's our purpose." And I'm like, "As ironic as it is, the industry has moved away from something like that." Right? It's gotten almost to the margin, and it's, you know, listen, you're ahead.

We wanna bring you in. As long as you don't have compliance risk for us, we're gonna take a scrape off the top line of the revenue, and we're gonna have some built-in expenses so the profitability's nice for us

[00:13:41] H. Adam Holt: And we tend to talk so much about investment advisors, and I know that's a big part of the business.

But certainly there are, there are whole teams that are doing different lines of business, whether it's business succession, estate, insurance, annuity.

[00:13:51] Ryan Shanks: Mm-hmm.

[00:13:51] H. Adam Holt: Are you starting to see these groups, uh, getting attracted by the financial outlets that are hiring you?

[00:13:58] Ryan Shanks: We are. And, and we love it because it... You know, we always say, "What's your niche?"

Right? "What's so special about you?" Any firm that I get on a Zoom with, I'm like, "Give me your pitch." Right? "Why am I gonna move across town to come to your firm versus the 25 other firms in a, in a five-mile radius?" And, and there's some of them that are really starting to get smart about that, right? Are we, can we help you bring on new clients?

Can you help, can we help you inorganically if you have that desire? Or can we help you with some of these higher market, up- upper market items such as estate planning? Um, you know, some of those types of strategies.

[00:14:33] H. Adam Holt: What do you think the advisors that are considering or contemplating moving, what is, what is the question they're not asking?

I mean, obviously they can tend to talk about compensation, uh, upfront equity, maybe technology. What, what do you think is the missing question that they're not asking themselves?

[00:14:50] Ryan Shanks: I think one of the singular questions that most advisors we interface with, that's all I can really speak to, that are not asking is, "How can you help me evolve in this business beyond my scope?"

Right? We tend to sort of get up every day and we sort of see kind of right outside in front of us, and that's sort of our vision. We don't have a vision for 24 months, and certainly not 60 months down the road. So I think that if they could start to engage in that type of strategic discussion, that this is what I'm doing today because it's kind of what I've known forever.

But are there things I'm missing? Are there blind spots? Are there things that I could lean into that could help increase, you know, the business that I'm running?

[00:15:29] Derek Notman: It almost sounds like, you know, the, the transition to move or go independent's been somewhat commoditized, so how are you gonna add value to that, right?

I've got options, so what are you gonna do from a strategic value perspective that's really gonna say, "Okay, this is where I gotta go. This is what I gotta think about."

[00:15:45] Ryan Shanks: You know what? That is 100% accurate if the advisor is thoughtful enough to evaluate the real marketplace.

[00:15:52] H. Adam Holt: Ah.

[00:15:53] Ryan Shanks: Keep in mind, a lot of times what happens is someone is calling into that advisor and they've got their head down and they're not overly happy where they are, but they got a high pain tolerance, so they're just gonna stick it out.

Mm-hmm. Right? Because moving is the absolute worst scenario for them to consider. And that individual that called them got them to lift their head up and they baited with them with something shiny and they decided to go and jump. And they went and jumped, and they didn't really do any sort of comparative research.

Right? You guys sound great. You seem like good people. Let's go. I'm, I'm all, I'm all in with this. Right. And they move and then six months later they're going, "Wait a minute. You told me you could do A, B, and C, and I haven't seen A or B since I've been here, and C is a bunch of BS." Right? And you know in this business- Yeah, in my view.

Yeah ... Eric, you know in this business, if you move your clients, I tell folks moving your business in this industry is more difficult than any other industry.

[00:16:43] Derek Notman: Oh my gosh. Yep.

[00:16:44] Ryan Shanks: Right? It- I mean, it's, you gotta get clients. First of all, you have to ask yourself, do the clients love you, trust you, and wanna stay with you?

And we have seen scenarios where they have thought that's the case, and they've made the move, and, and that's not how the clients felt about them

[00:17:01] H. Adam Holt: So there you have it. So that was pretty interesting, Derek, right? Everyone's winning according to Ryan. Why do you think everybody's winning?

[00:17:09] Derek Notman: You know, I apologize, Ryan, I don't know if I can go with that.

This is, this is part of the rethink tank. Sorry, Ryan, we're supposed to try to, you know, uh, pick apart what you had to say. I think that a lot are winning, but, well, how do you define winning? It's one thing to recruit somebody over, but how long are they staying and how successful are they afterwards?

[00:17:31] H. Adam Holt: Hmm.

[00:17:31] Derek Notman: We don't know. We don't... I don't know that data, right? And so I, I, I don't know. Um, I think there's a lot of really interesting nuggets there. I like how he has... He, he's basically calling it out, like, "Hey," like, "the industry's somewhat of a commodity. There are plenty of firms to pick from, you know, so like why should I go to you versus the other 25?"

as he said. And what's neat is that the industry is starting to recognize on some levels that, like, all right, I got this whole, like, basic stuff down. Like, what's the experience and value add you're gonna give to me? And, like, the world in general has really kind of gone to this more experience, like, value system philosophy.

Like, why would I go to your firm versus another one? You both sell the same products, so why is yours better than the other one? And I find that ver- I find that very interesting, but it's also encouraging that, that that is, you know, something that's being asked now. Uh, but the advisor does have to get their head out of the, you know, out of, out of the, you know, just, you know, in the zone mode to be able to look at this stuff.

[00:18:32] H. Adam Holt: You know, I... It's funny, I, I was thinking about that too, and I think everybody's winning because marketing is really excellent, right? Yeah. People, people all move for reasons that don't always make intellectual sense. And what I loved what he said is that, that the scope, right, of understanding that this is not a 24-month decision, right?

The 24 months of transitioning, of bringing over a book from one BD to another AKA firm, whatever it is. But actually thinking 60 months out, 180 months out and thinking, "How does this really affect my ability to deliver so that I'm not doing this again in four years?" And I know plenty of advisors who have moved because they were aggravated or frustrated.

They weren't getting something, and they just, they were impetuous. Of course, it took time. They couldn't just make a decision like that. They moved, and then they moved three years later 'cause they were disappointed, right? And, and that's because we all know coming from the sales world, um, if you call somebody in their biggest moment of need or pain and you catch them with the right shiny object, sometimes they actually move, or they move their money, or they move their firm, or they marry you.

I don't know. Um- ... the point is, is ... The point is, is that we all make decisions, right? Um, that made sense in the moment. Now the question is, uh, I thought it was quite interesting that he talked about culture because there is, as you already said, this real big push to align the, uh, the culture and the positioning and how I wanna be represented and my reputation, um, with a, with a firm.

We are starting to see technology solutions that we know of effectively try to disintermediate this entire infrastructure because they realize it is getting commoditized and the, and the cost of delivering a larger firm is, is gonna get compressed just like everything else. What, what do I mean by that?

What I mean is, is that we all, most of us who've been in financial advisory some time, typically brand ourselves, right? We're rebranding. We're doing business as. We're not usually using our larger organization unless we're getting something from that, some form of credibility or reach or, uh, connectivity, right?

If we're l- with a large, uh, bank, we might really enjoy the benefits of being with the bank 'cause the consumer really values it. Um, but many of the growing areas of financial advice, uh, an independent or single person advisory firm is their own firm. It's John Smith's Financial, Mary Egan's, uh, uh, Planning, right?

It's, it's we're really branding ourselves. It begs the question of whether I need a big brand behind me that's no- that's recognizable

[00:21:06] Derek Notman: That is a huge question. I, I think part of it's gonna be driven by the type of clients you're gonna work with. Some clients, and I, you know, I don't mean to generalize here, but I would r- say that older generations I think would probably be more comfortable with large established brands.

Where the younger generations are probably gonna shift more to like, "I don't care so much about the brand as I do about the person behind the brand or the person representing the brand."

[00:21:30] H. Adam Holt: Mm-hmm. "

[00:21:30] Derek Notman: I really like Joe. Joe happens to have this other, you know, company he's tapped into, but I just like Joe, so I'm gonna go work with Joe."

You know?

[00:21:38] H. Adam Holt: Yeah. Absolutely. Well, let's hear how Ryan finished it up as we asked him what was, what was he trying to build to try to solve a lot of these problems so that we had a, a help understand where it's going. What

[00:21:47] Ryan Shanks: we've done is... I mean, I've been doing this for 22 years, right? So keep in mind, I've done it very old school, one-to-one.

Love the business, but you know, it's, it's sort of a, it's a scalability option. But what we've decided was we wanted to go out and create a very unique set, we call them avatar types, for every advisor type and firm type in the industry. And then we built an algorithm that drives compatibility on your ability to do business together.

So the only thing that's really left from that point is do you like each other, right? Do I get on a call with you, Adam, or a Zoom with you and I like the response you have to my questions? I like, uh, sort of the forward-thinking that the firm has. I like the fact that you understand that the advisor is your client.

Um, you know, all of those different elements. So we're just, we're just automating that. And our belief is that there's a lot of conflict in this industry, especially with traditional recruiters, where they get in front of someone with a big book and all they think is, "Who's my buddy? My buddy Bob will pay me the most money, so I'm gonna give him this lead."

And the advisor doesn't know any bit different, right? And so our sole focus in terms of the compass that drives us in everything we do is the fit Right? That matters. And, and we're trying to reduce the cost so that those small tiered firms that I spoke about earlier, it's actually affordable, right?

They're, they're up and coming. They've got a phenomenal value stack. No one knows about them. But one of the worst things they can do is go out and start paying traditional recruiting fees because it doesn't, it doesn't model out financially.

[00:23:15] H. Adam Holt: So there you have it. So what, what FA Match is trying to do, they're actually trying to build the subscription service for recruiting between advisors and firms, right?

So that's- Pretty awesome ... that's interesting what, what you're starting to see even in that industry as well. So thanks so much, Ryan, for, for everything you're doing and to shape the industry and for, of course, contributing some of your time to the Rethink Tank. Derek, what is the, what the takeaways that you have of that for advisors?

It's time for us to tell our friends where some things they can actually do or think about.

[00:23:41] Derek Notman: Yeah. What type of advisor do you wanna be, right? You know, get, get comfortable with that and know that, like, there's not one right or wrong answer. It just really depends on what you wanna be, so define that. And then once you figure that out, can you be that type of advisor or as, as Kitces said, advisor, you know, depending what you are, right?

[00:24:00] Ryan Shanks: Mm-hmm.

[00:24:00] Derek Notman: Where you currently are, can you do that there and do it well and be comfortable and happy and be profitable and all those things, or do you need to make a move? And if you are gonna make a move, as Ryan suggests, like make sure that that culture fit is good, that it's not just like, "Hey, we're gonna pay you the same, but our brand is better," or whatever.

Like really dig in. If you're gonna move, like, why are you moving? Can you actually do what you want to do at this new place? Um, and does the culture fit and all those other things that come with it? Those would be the things I would say write down, think about, do if you're in, at this stage- Mm-hmm ... of your career.

[00:24:35] H. Adam Holt: That's good advice. That's good advice. At least we're, we're consistent in the identity side of it.

[00:24:40] Derek Notman: Yeah.

[00:24:40] H. Adam Holt: Um, my, you know, my, mine tend to be more, I don't wanna call it fear-based or, like, question or challenging. I, I tend to believe- Well,

[00:24:47] Derek Notman: it's almost Halloween, so I guess that's

[00:24:49] H. Adam Holt: okay-

[00:24:49] Derek Notman: That's true ... fear-based.

Fear-based.

[00:24:51] H. Adam Holt: That's true. I'm gonna dress up as a full body hotdog, just so you know, for the benefit- ... of my child. Oh my gosh. I'm gonna be like the biggest idiot, okay? It's

[00:24:58] Derek Notman: a kosher hotdog, right?

[00:25:00] H. Adam Holt: Absolutely. Nathan's kosher hotdog. Okay,

[00:25:02] Derek Notman: brilliant.

[00:25:02] H. Adam Holt: Um, you know, I look, I tend to think that we, when we're making big decisions like moving, the, the grass is always greener, right?

Um, and you tend to bring yourself with you and your issues with you when you move, right? So sometimes we have to- Yes ... look inward and say, "What is the real reason that I need to move or I'm thinking about making a move?" Um, and I very much think of it kind of like your home, right? You could, you could try to move, right?

Or you could try to renovate. Maybe there's an opportunity for you to renovate processes or influence your larger, uh, organization to make some changes because otherwise they risk losing you, and so therefore it's a, it's a meaningful investment. And maybe you build coalition. Talk to your other peers at your organization.

Find out if what you wanna change in that, that organization is really... Is it just process? Is it technology? Is it access? And then go and advocate for it because we all know if those clients don't move with you- It's gonna be a big change, and it could be incredibly disruptive unless you're intentionally leaving the clients you don't want.

Um, and that, that's a big one too, and I heard him say this. I would, I would be curious, if you're ever gonna consider this thing, are your firm, are your clients really going with you? I've had... I've heard scenarios where literally the clients didn't wanna go. Um, that the advisor just thought they had more preeminence with the client than they realized, and turns out that it was actually the, uh, administrative staff that the clients loved and they had a relationship with because the advisor never called them anyway.

And they're not going with you, right? They're staying with the admin. Or the, or the, their, the, they like their website. They like, "I think this is a pretty good app, so I'm not leaving. If you leave, 'cause I like the app, I know how to use it, so I'm not leaving with you." Like, really? Yes. You're staying for the app.

And then the last thing is, is this. If, if you are gonna move, and there are a lot of promises made to you, get it in writing. In other words- Ah, yes ... if it's, if it's support you're leaving for or access to certain tech or a commitment to transparency, an acquirer should be willing to sign on your expectations.

Otherwise, it's just a dream and/or a hope, right? Think about the, think about the expectations that, uh, clients have for us these days as advisors, right? We have to put it all on an ADV. Here's what you're gonna get. Here's what it's gonna cost. Here's the transparency. Why don't we hold our acquirers to that same, uh, expectation?

If they can't put it in writing, why, you know, what, what's the promise? And I, I think that's something to, to really consider.

[00:27:19] Derek Notman: That's a great last tip. Uh, write that one. If you're gonna take anything away from this podcast, write that one down. That's huge.

[00:27:25] H. Adam Holt: Put it in writing. Um, you know, this question came to us right after, uh, last week's podcast, uh, where many of you know that we had, uh, featured Michael Kitces in episode nine.

We s- received a lot of feedback from this, so thank you for those of you that participated. Um, but we got this, this comment back from Joe in Pennsylvania. Uh, and Joe shared, he said, uh, he wrote to us and he said, "On your podcast, you discussed lowering asset management fees and offsetting those fees with advisory fees.

Now, this sounds great, but unless you have clients that are willing and able to pay the equivalent of, let's say, $5,000 a year effectively to compensate the advisor, that's gonna leave a lot of people out of the marketplace that have, you know, average or lower incomes, but, uh, now a significant amount of assets that came from the savings and the mar- market performance and matching," okay?

So the point is, is that his concern is that, that people will have assets that could pay for the advice, right, through an AUM fee, but not necessarily the incomes to support paying directly, uh, a fee and may start balking on it. So what's your, what's your gut on this one, Derek?

[00:28:29] Derek Notman: Well, this is a bigger conversation, but I think that this just reiterates things that, like Kitces said both on his podcast, even in, when he was at Riskalyze recently, is that there is a shift happening amongst- Uh, the consumer, and that there's this shrinking population that wants even to have help with their AUM and have to pay for it, where they would rather pay subscription or per hour, you know, planning type fees.

So I think this goes to what type of an advisor am I? We've talked about that before. And am I thinking as a business owner or not? So, like I understand, like if you've got someone who has half a million, million bucks in their 401, but they're making 50 grand a year, maybe they can't afford that 5K a year in fees that you were charging them.

[00:29:09] H. Adam Holt: Mm-hmm.

[00:29:10] Derek Notman: But they don't want you to charge them an AUM fee. So how do you get that client? Well, maybe they're willing to pay that subscription cost, even if they have to- Mm ... take a distribution. I don't know. Yeah. I think the, the f- the point here is that there's a shift happening.

[00:29:22] H. Adam Holt: It is.

[00:29:22] Derek Notman: And if we're not, if we're not thinking about it and changing how we are getting compensated and providing our services- Mm-hmm

we're gonna get left out in the rain.

[00:29:30] H. Adam Holt: Yeah, and it's true. And you know, someone... Actually, I had a call this morning with Chris, uh, from New Jersey, a financial advisor of the past 20-some years, and, and he said it to me great. He said, he said, "We're the only industry that requires the level of transparency that you itemize basically what you're getting."

He says, "When you go buy a can of soup, you don't actually pay that $1.29 and say, 'Okay, this much is going to the bean farmer. This goes to the tin manufacturer. This guy goes to the chicken stock maker.'" Right? We don't break that apart, right? Um, and I think the question for all of us in this space is can we actually itemize what, what amount that they're paying in that AUM fee is really advice, and can they choose to pay it differently, or can they continue to pay it from their assets?

'Cause frankly, the assets probably should be paying the fee, not the income. Right?

[00:30:20] Derek Notman: Ah, yeah. Yeah.

[00:30:21] H. Adam Holt: And that's the distinction- Yeah ... I think Joe's making here, is that the client is gonna perceive it as being a, a budgetary cost in my annual budget. Ouch. Mm-hmm. That feels, I need to pay for Netflix and my cellphone.

[00:30:32] Derek Notman: That hurts.

[00:30:33] H. Adam Holt: Um. Right. But when the asset's paying for it, it's just, it's just a fee on the actual fee. It should pay its own way, in other words. And I don't know that that's necessarily gonna have to change. We just need to disclose that they're specifically getting advice for that money. So that's, uh, that's kind of what I think.

What it's gonna really lead us into is actually episode 11, uh, coming up, which we actually did another interview, and it's all about entrepreneurship and thinking like a business owner. And a lot of this does tie together, doesn't it, Derek? Is- It really does ... you think differently when you're a business owner versus an entrepreneur, sp- specifically, versus just an advisor and, and, and running a practice.

[00:31:10] Derek Notman: There is a huge mindset difference. And you, typically, you actually kind of have to wear both hats depending on what you're doing. But yeah, we're gonna have fun with this episode. I'm looking forward to it. I agree.

[00:31:19] H. Adam Holt: Well, that's all for today, everybody. Thank you so much for participating. Joe, we'll send you a T-shirt.

Hopefully you'll wear it with pride. Uh, and remember to please interact with us on LinkedIn. Send us your c- your questions, your challenges, your disbelief, and your debate. We wanna hear it. Um, and of course, hopefully we'll turn it into an episode. Uh, let us know the topics you wanna touch on, 'cause we've got a whole list, but we wanna, we wanna make some waves.

So thanks for being here and being part of it. Derek, a pleasure, my friend. Always spending time with you.

[00:31:44] Derek Notman: Likewise, brother. All the best. Thanks everybody for chiming in to another awesome episode of... What are we doing again? Oh, yeah. We're

[00:31:52] H. Adam Holt: rethinking.

[00:31:52] Derek Notman: We're rethinking it all. All right. Cheers, guys.

[00:31:54] H. Adam Holt: Bye, everyone

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