EP 13 – Transcript

Matt Sonnen [00:00:00] Thanks for the introduction, Luke! Happy New Year to everyone. Welcome to Episode 13 of The COO Roundtable. I’m still riding high after interviewing Mark Tibergien and Karen Novak on our last episode. That interview took place, it was the week of the big Schwab-T.D. announcement; it was a couple of days before, so obviously we didn’t know that was coming and didn’t have a chance to talk about that. But as I said on the podcast, I view Mark as The Godfather of the professional management concept in the RIA industry. And we were able to go deep into topics near and dear to all COOs’ hearts. So, I really suggest people take a listen to that episode if you haven’t already. Also, I gave Mark an Eddie Van Halen-Eric Clapton history lesson. So that alone is worth a listen. With this episode, we are back to our standard format of interviewing two COOs running extremely successful RIAs. We had The Godfather in the last episode. And with this episode, we have a graduate from the London School of Economics. And our other guest has a physics and a mechanical engineering degree from Yale. And there’s a saying, something like “If I wasn’t the one throwing the party, I wouldn’t even get into the party”. So, for the second interview in a row, I’m way out of my league here. I’m going to do my best to keep up with both of you. But you may have to talk slow. We have with us today Kristi de Grys of Merriman in Seattle, Washington. I know Merriman from my days at Focus Financial, Merriman is part of the Focus network of RIAs. My time at Focus didn’t overlap with Kristi’s at Merriman, so we’ll talk in a minute about her background and when she joined the firm. Kristi is the Chief Operating Officer and the Chief Investment Officer, which is interesting in-and-of-itself. We’ll talk about that a little bit as well. Merriman is about $2.5 billion of AUM, and I believe they have three office locations. So welcome, Kristi.

 

Kristi de Grys [00:01:55] Thank you. Hi Matt.

 

Matt Sonnen [00:01:56] And joining Kristi is Larry Miles of AdvicePeriod. AdvicePeriod is headquartered just up the road from our offices. AdvicePeriod is in Century City, California, and they’re in that $2.5-$3 billion mark as well. According to the website, the firm has 13 offices in eight states. But you guys are growing so fast. I don’t know if you’re updating your website fast enough, so we’ll talk a little bit about that. But welcome, Larry. Thanks for joining us on the COO Roundtable.

 

Larry Miles [00:02:24] Thanks for that Matt, I really appreciate it.

 

Matt Sonnen [00:02:26] Perfect. So, Larry, I’ll go to you first. Why don’t you give us a quick overview of the firm?

 

Larry Miles [00:02:31] Sure, AdvicePeriod is rapidly approaching its sixth anniversary. Although my two business partners and I have worked together for most of the past 20 years, with starting AdvicePeriod the idea was we wanted to start from scratch, focusing on the question of, “What would the wealth management firm of the future look like? What services would it provide because of what matters most to clients? How would we charge? How would we use technology?” And so, from the beginning, we’ve been a very planning-oriented, technology-enabled company. Like you said, we’ve grown to a few billion dollars in AUM. We think AUM is a fairly useless statistic as it relates to gauging the success advisors have working with their clients. We keep track of it for regulatory purposes, of course, but it’s not really something we pay much attention to. Our ideal client is one who values planning, who is looking for their lives to be made simpler by the digital integration of their financial lives, which we try to help them in terms of growth.  You mentioned throwing a party that you weren’t sure you were going to get invited to, well when we started from scratch with no clients, we had no legacy systems, no legacy process. I think that was a positive for us because we could build what we wanted to, but we also had no revenue. For those first couple years, we were hoping that clients would hire us, and we were lucky enough that enough did that. Two or three years into the business, we started attracting other financial advisors who believed in the same future in client experience that we do. That’s what’s really propelled our growth. I think we’ve attracted about 30 different financial advisors across those half-a-dozen or so offices that you mentioned, and that’s very much what we’re hoping to do going forward.

 

Matt Sonnen [00:04:28] That’s interesting because PFI, we work with a lot of breakaways. And I always tell them this is the best way to do the entrepreneurial journey. Yes, the business is launching, but you pretty much know most of your clients are coming with you out of Morgan Stanley or Merrill Lynch, or wherever. But you guys really hung your shingle and you were open for business, though there wasn’t that flow of clients coming to you, right on day one?

 

Larry Miles [00:04:59] No. That’s correct. We had sold our last business back in 2007. By the time AdvicePeriod was started, we were legally allowed to take all those clients back and start all over, as some firms have done quite notoriously. But that’s always struck us as, while legally allowable, not very moral. That is, selling your business one day and taking it back a few years later. We didn’t want to do that. We wanted to start from scratch. There were about 10 clients that came with us and we paid the firm that we sold to the same multiple of revenue for those 10 clients that they had paid us several years prior.

We were starting from scratch. And that made us feel good. But it also was a true entrepreneurial experience.

 

Matt Sonnen [00:05:50] That’s great. So, Kristi tell us a little bit about Merriman.

 

Kristi de Grys [00:05:56] Sure, we’re probably on almost the opposite end of the spectrum. Merriman was started in 1983 by our founder, Paul Merriman. He had a vision at the time, which was to provide institutional class investment strategies and financial education to everyone. At the time, that was a pretty revolutionary concept. Through a series of workshops and radio shows, Paul really built a firm with a very broad national client base. A sort of a representative story that I like to tell is this summer I had the opportunity to go visit one of our clients and this client was in a little mid-sized town called Tyler, Texas, which is obviously a far cry from Seattle in many ways, which is where we’re based. He came on board in the early ‘90s, when he was stationed on a military base in Germany. He saw a newsletter with this piece from Paul and he liked it so much that he called up the firm, but he only had $5,000 at that point. Even in those days he wasn’t really eligible to become a client, but we were launching these mutual funds. So, he was one of the very first investors in our mutual funds with his $5,000– and he’s still a client today. He went on to become a very highly successful JAG lawyer who took cases to the Supreme Court, and we now manage several millions of dollars for him. We were there visiting with his advisor, we’re doing a bunch of estate planning for him, for he has a daughter with special needs who’s an only child. I like that story because it’s sort of like he started these very humble beginnings very early in the firm, with an investment management focus. And we as a firm have grown. We’re now, as you said earlier, at two and a half billion. We have three offices across the Pacific Northwest. Fifty-five employees. And we’ve really moved beyond investment management to trying to provide comprehensive wealth management services to just a really wide range of clients, from those with half a million to clients who have more than $150 million in assets with us. In doing so, we’ve really evolved from very much a founder-led firm to an ensemble practice, to I think what now is a true business. But in doing so, we really like to believe and feel, and I think our clients feel, that they’re still part of our Merriman family. So, our tagline has always been “Invest wisely. Live fully” and we’re really just constantly striving to better deliver on that promise of helping our clients live fully by providing better and better advice and helping them with all aspects of their lives to make good financial choices so that they might have peace of mind and to help them create time in their lives to be able to achieve their goals.

 

Matt Sonnen [00:09:10] That’s a great story. I love it. And as I mentioned earlier, you have a physics and a mechanical engineering degree. So tell us, how did you wind up at Merriman and then how did you wind up with the position of COO and CIO?

 

Kristi de Grys [00:09:24] So prior to coming to Merriman, which I will have been here four years at the end of this month, I worked for 18 years at an aerospace engineering firm, which makes a lot of sense with my educational background. I started there fresh out of college as an engineer working on product development and through the years I kind of rose through the ranks, ultimately, before I left, I was managing one of the product lines there. People always ask, how does that compare? I say, well, it’s revenue of about 30 million, so you can probably translate that about to the size of an advisory firm. I was recruited to come to Merriman. I’d been recruited over the years. I had both a friendship and then prior working relationship with the Merriman CIO at the time I made the move. He came calling me again. He called every five years and said “You want to come work for Merriman? It’s a great place to work.” And I was like “No, no, I’m really happy with what I do.”  But just for a number of personal and professional reasons, when he called in June of 2015, I was kind of like “Oh, you know, I’m kind of interested.” I at least think you should explore something like that. So, I came to visit and just loved what I saw. And he somehow convinced them that I could do investment research. And after some reflection, I decided that, yeah, it really wasn’t every day that you’re going to get an offer to make your career change that was super attractive and that if I didn’t take it, that it would be one of those choices that in life, you look back on and regret. So, I kind of made the leap and figured out if it doesn’t work out after a year I could always go back, right? So, I started in January of 2016. I was super excited to really try to understand, “What does an RIA do? What is an RIA?” And some things happened at the firm that kind of coincide, which kind of helped tell the story about how I got to be COO/CIO. So, at the same time as I started in January of ‘16, it was announced that our then-current COO was going to transition to the CEO role. And then in April of that year, we closed our first merger. And in June of that year our CIO at the time, who had recruited me, had a personal situation that he felt it necessary to take some significant time off. So, somebody above me decided that, because I’d been doing a good job and had past management experience, I was going to take over leading of the research being that my title was Director of Research, but I was also going to manage the investment team. And the biggest challenge was that merger that we had closed in April of that year–while it was an RIA, they had several portfolio managers who managed individual equity and individual bond strategies. That was a very different fit for us from an investment standpoint. And most of those portfolio managers knew at the time that they were going to either retire or move on to other roles, and that over the next one to two years we were going to move the vast majority of their clients out of those active individual strategies and into more asset allocated mutual fund ETF strategies that Merriman was bringing to the table. So it became my job and role to sort of lead that, along with the portfolio managers, and our advisors, and our soon-to-be CEO through this sort of both client transition and cultural transition, so that our advisors would be able to talk to these clients who’d been in active strategies about maybe a different approach to investing. That really got me engaged with all aspects of the firm and was also sort of an opportunity to leverage some of my operational skills to make that as successful as possible. Then at the beginning of 2017, when our COO at the time retired and our current COO became CEO, I joined our leadership team and then we closed another merger in June of 2017.  And at that point, since I’d done all this work. I really took over essentially running all aspects of that merger, including operational aspects, integration of systems and through all that, our CIO retired this March and so, I officially assumed the role of dual role of COO and CIO.

 

Matt Sonnen [00:14:22] Thrown right into the fire. That’s amazing. So, it was his initial persistence of calling you over and over again and then you being willing to take that risk. I think that’s great. So, Larry, your title is technically “Principal” and not “COO” but your bio on the website describes your primary focus as “providing strategic leadership for growth and profitability while driving and maintaining a culture of excellence.” I think that fits perfectly with the traditional responsibilities of a Chief Operating Officer. You may not have it by title, but I think you are a perfect guest to join us. Give us your background a little bit. How did you zig and zag your way to where you are today with AdvicePeriod?

 

Larry Miles [00:15:07] You know I’m still trying to figure that out myself. I’m not entirely sure. I think it’s just been one big accident after another, and it’s let me do some pretty cool things. I was always interested in investments growing up. My father was in the business and when I was in college, I was looking for internships in the investment world that would allow me to play on my summer baseball team. I found this small company that had just started a couple of years prior in my hometown in Maryland. And it just so happened, just dumb luck, that the founder of that company was Steve Lockshin, who today is my business partner. I couldn’t have fallen backwards into a better situation and a better person to learn from. And that’s really just something I’ve tried to do throughout my career, and it hasn’t been all that hard to find people that are a lot smarter than me that I can learn from. Now, the hard part is trying to combine that with conning them into giving me responsibilities that I’m wholly unqualified for so that I can learn. And that’s really what I’ve tried to do and that’s taken me from working with clients, which I did at first, to really learning that my true passion was helping my teammates be successful and trying to grow a business. That gets into the growth and the profitability and the culture. Over the years, I had a chance to be accountable and get my hands in a lot of different things. I’m still trying to figure out something I’m good at. But I’ve learned a lot along the way and I’ve really enjoyed it.

 

Matt Sonnen [00:16:39] Awesome. So, you both have had very different paths to your roles today. Kristi as an outsider to financial services coming from an 18-year career in aerospace engineering, you talked a little bit about the transition. But do you think your outsider’s perspective has helped you in your role today?

 

Kristi de Grys [00:16:59] Yeah. For me personally, I think when I was first introduced, I really had no idea what a financial advisor was, or what an RIA really did. I think through my time here, I’ve really become a raving fan of how valuable financial advisors can be and how much value they provide for their clients, both on the investing side and the planning side. I came in thinking since I had read a few investment books and I was pretty decent, and I think compared to your average person, I was. But also, I gained an understanding of how much better a professional can be than pretty much anyone, unless they are just super passionate about it as a hobby. And boy, I only kind of knew about investments. I certainly had no clue about all the value-added planning things that people could do. I think having not known that, and having it then be applied to my own life and see it coming from outside, it’s really helped me help us articulate our value proposition to people who maybe aren’t in some related field or didn’t go to business school. But like so many people out there come from, especially in Seattle, the tech world and they don’t have any idea what a financial advisor does, but they know they need more time in their lives. They know they don’t know what to do if there are issues. They know their problems, but they don’t even know that there’s someone out there who can help them solve them. To be a connector between those two sort of communities and needs, to match a problem and a need, and really be able to articulate that for people who are just so close to the problem that they don’t necessarily even appreciate how valuable the service they provide is. I think in terms of specifics to my COO role, I think the most valuable thing has been organizational leadership experience in a larger organization. When I started fresh out of college, we had about 300 people and then through a series of mergers, I ended up working for a 5,000+ person company. But having seen what works at a slightly larger organization, how they do things and then being able to bring those ideas and apply them has really been something that’s been helpful to our organization as we’ve kind of moved from maybe a little bit more of ensemble practice to really being a business. And certainly, as we’ve brought on and done mergers and have multiple offices and people coming from different perspectives, that has been very valuable to have someone with an outside perspective come in and help with those sorts of things.

 

Matt Sonnen [00:20:01] Perfect. And Larry, I ask you this question because I get the same one posed to me a lot. AdvicePeriod has an aura about it of “we do things differently here.” And you’d mentioned you’re leading with “what advice firms would look like in the future.” Yet, like me, you’ve been a lifer in the wealth management space. And when I’m at a party or I meet parents at school or whatever it may be, and I run them through my bio of Merrill Lynch, Luminous Capital, Focus Financial, PFI Advisors, their eyes roll back in their head and they say “So you’ve basically had one job your entire life?”. And I try to say “Oh, no, no, a wirehouse is completely different from an RIA. And then after working in an RIA, I worked for a firm that owned RIAs–” and then I sort of stop myself like, “well, yeah, I guess I’ve had basically one job my whole life.” It feels like it’s so important at AdvicePeriod to have this outside perspective “we’re doing things differently”, do you ever worry that you kind of have blinders on and you have a hard time achieving that outsider’s perspective?

 

Larry Miles [00:21:08] Yeah, that’s a good question. Personally, I know enough about being a financial advisor to be dangerous. I’m certainly not an expert. And likewise, with each of the functions of our business, I think I’ve either done them or been responsible for them enough over the years that I’m able to help at a strategic level. Those different teams accomplish what they’re looking to accomplish. But I think for me, I’m still a recovering History and English major from college. And despite studying economics in grad school about a million years ago (I don’t think I remember any of that) I love building the business and I love bringing people together and getting the communication right and helping to build the culture that’s going to allow us to accomplish what we want to do. I never thought that I had followed a traditional path of business or financial advice. So, when we’re hiring teammates and looking for financial advisors who are the right fit for us, I think we’re looking for something different than I think that traditional wealth manager is looking for in so much as traditional wealth managers are very investment focused. They might have an MBA or CFA–they’re investment first and we’re planning first and investment–I’m not even sure it comes second. It’s probably in the top 10. And so, when we’re looking to hire advisors at all levels, we’re looking for a different pedigree. We’re looking for different interests than I think the traditional wealth managers of the past, even those that we’ve hired in the past. Not only does that help us better deliver what we think really matters to clients, which isn’t investments first, but it’s significantly more cost-effective. If you want to find a group of people who overvalue themselves and their knowledge, it’s so-called investment experts with their strategic asset allocation and tactical overlay. They think a lot of themselves and they’re awfully expensive. We think we’re able to get a win-win for our clients by hiring folks that have expertise that they benefit from at a lower cost, by hiring attorneys and accountants and things like that. And for us, it’s all part of our culture. So, yeah there are some of us that have been in this industry for a long time, I guess, and others that are newer to it. But for us, our culture keeps it new and fresh. And we’re curious to try new pieces of technology and learn new strategies and having that common denominator of culture, I think keeps everything fresh and new for us.

 

Matt Sonnen [00:23:41] Yeah, on the topic of culture, one of the things I try to drive home on this podcast, is that so many people think that the COO role is just a technology position. I feel that a lot of people just think, well, I just need someone to manage my tech stack. And that’s pretty much it for the role. I keep trying to drive home that the COO must get people. It’s people that are going to interact with the technology and it’s people that have to use the technology to offer a high touch service to clients, and that involves workflows and process and everything else. So, Larry let’s talk about your views on culture. We’re going to talk about your book here in a minute, but you wrote an incredible book that I recommend for all COOs that are listening today. You dedicated an entire chapter in your book about culture. Walk us through your thoughts around culture and how your role impacts the culture at AdvicePeriod.

 

Larry Miles [00:24:34] Happy to. Quite simply for us, we believe that if the culture isn’t right, nothing else matters. That’s true of an individual teammate that we’re considering, it’s true of the teams that we work with, and it’s true of the overall business. Now, if you really believe that culture eats strategy for breakfast, that culture is what happens when the boss isn’t around–there are so many great definitions of what culture is–if it’s that important, I’ve always been struck by why don’t more companies spend more time on it? Why don’t they make it a priority? Why don’t they talk about it? We’ve tried to learn from those mistakes that we’ve made in the past and we make culture a priority. There’s no such thing in our world, in our opinion, as a great teammate who is just kind of a jerk. Life’s too short. We want subject matter experts who are awesome to work with because, if we like working with them, our clients are going to like working with them and the whole experience is so much more fun and enjoyable for everybody. So, we very purposely work to build our culture. Now we’re fond of saying that “Every company has a culture. Period. It’s just a question of whether or not you’ve purposely built the one you want, or do you just accept the one that you get.” And we’d rather purposely build the one that we think is going to do the best job for our clients and our teammates. And we’ve worked hard at it.

 

Matt Sonnen [00:25:56] I love it. Kristi, what strategies do you have at Merriman to ensure that all the employees are moving in the right direction or that they’re reading from the same playbook, so to speak.

 

Kristi de Grys [00:26:06] Sure–and I just want to say I’m fully on board with what Larry had to say about the importance of culture–it’s something we talk a lot about here both with our employees and at the leadership team level. And we’ve done a lot of reflecting on “how to”. We think we’ve built a great culture. There are always things we’re evolving, but also how to retain that family feel, that client-centric mentality that we just all value so deeply, the firm has grown and continues to grow both organically and I think even more importantly, inorganically. We’ve thought a lot about how we communicate our strategic direction, our values, and our expectations to our team. And we kind of break it down to, in my mind, two to three levels of communication. One obviously starts at the top and that’s communication from our CEO that goes to all our employees. For us, that’s twice a year. We get together and he does a town hall meeting and we talk about the goals. We talk about our progress. We talk about our culture. We’ve had employees participate by standing up and saying how they view our culture or what’s most important to them about our culture. We have one client service person who’s been here now 30 years and she’ll give a little reflection and involve everybody. But also, clearly, it’s the message from the top we want to always be consistent. We also do a monthly communication piece that gets sent to all our employees. So that’s kind of like the top level. And then this year, we’ve really been focusing on connecting with and guiding our department leads, kind of like what you call the middle management level–they’re the people who manage most of our employees and we feel like are such an important part of the culture of the firm as well. So, we’ve been doing quarterly offsites with that group on a combination of relevant topics, like “How to you give good feedback?” and “How do you develop your employees?” and involving them in more detailed discussions on our vision and our business strategy and really to engage them in creating the future of the firm and also helping them communicate our message of the culture and the strategic direction down to our employees. And then really for me, the third level is something that I sum up with a quote, which is “Culture happens one conversation at a time”. And that means being present and engaged with our employees one-on-one every day. Helping them understand what they’re doing and how it ties into our mission. For my direct reports that means meeting with them one on one every week or two. Other times it means walking around and talking to employees. When I became COO in March, I spent the first two months trying to take all of our non-advisor employees out for coffee one-on-one, really to answer questions and to help them understand my vision and what I thought the role would be, and make sure they knew that my door is always open. I love suggestions coming from the bottom up. We all make them understand that culture is part of something we all build together.

 

Matt Sonnen [00:29:31] That’s great. Thank you both for diving into the details there, because again, it’s a big driver that I’m trying to promote with this podcast–just how involved the COO is in that day-to-day discussion around cultures–so thank you. Larry, I mentioned your book– I want to talk about that a little bit. It’s called It’s That Simple: How to Build A Professional Service Firm of The Future. I think it came out a year ago. As I said earlier, I think it should be on every COO’s reading list. We’ll put a link to it in the podcast notes for this episode. Full disclosure, I am not affiliated with the book in any way. I just think it’s good and it’s very relevant to the topics that we discuss on this podcast. In the book you cover client experience, team building, the value of professional management in any organization– I think you even talked about your dentist’s office in the beginning of the book– how to best leverage technology, and how to build enterprise value. Again, it’s all things that every COO, all things every business owner, frankly, should be focused on. So, take a minute to just tell us a little bit about the book. How did that opportunity even come about? How long did it take you to write it, etc.?

 

Larry Miles [00:30:35] Yeah, I think for about a year prior since sitting down to write the book, maybe a little bit more than that, I’d been writing blogs and just posting them on LinkedIn–nothing fancy–because we came to believe that a great way for us to attract teammates, clients, and advisors to us was putting out into the world what we believe in. Tell the world what you believe and be very clear on your beliefs and your values. And we thought that would be a good way of attracting people to us. And so, we were experimenting with blogs and emails. And again, as a former English major amongst lots of business folks, I got tasked with writing a lot of it and I enjoyed it. After doing that for a year or so I thought, “There’s enough material here where I could probably just wrap all these blogs together, call it a book, and it’ll just be another way of telling the AdvicePeriod story to prospective advisors who might want to join us and our teammates.” Of course, I was dead wrong about that. Writing a book took a significant amount of time and a lot more than I thought. It was probably 14, 15 months from the first chapter to the last. And then there was getting it published and all the back and forth. It was a fun process, but not one that I think I’m going to repeat anytime soon. It was, I learned a lot and I thought that I would just be telling the AdvicePeriod story, which is something that I love to do and it’s pretty easy, but the research that went into it, all the conversations that I got to have with really, really smart folks that gave me great ideas that I then stole and called my own, was a lot of fun. I got a lot out of that. And we very much looked at it as a bit of a companion to Steve Lockshin’s book, Get Wise to Your Advisor, which was meant to help clients find the right advisor for them and things to look out for. And this book being for the advisor and the professional organization that surrounds advisors, we thought would be a good companion and a good thing to talk about what we’re doing for clients and advisors alike.

 

Matt Sonnen [00:32:54] I’ve heard that from several first-time authors, “I don’t think I’m going to write another book.” It is great. I can’t tout it enough. All that hard work paid off.

 

Larry Miles [00:33:05] I appreciate that.

 

Matt Sonnen [00:33:06] Yeah.

 

Larry Miles [00:33:06] It was a lot of fun putting it together. And I enjoyed the challenge. I would tell folks that as much time or work as it may take, it’s the first blog that’s the hardest. The first page is the hardest. I think there’s so much that we have going on right now in our industry. I think this is the best time ever to be a financial advisor, and the more content we can put out there to help clients and help each other, the better off I think we’ll all be. So, I would love for more folks to contribute more.

 

Matt Sonnen [00:33:37] Absolutely. Kristi, what I find fascinating about you is the fact that in addition to the COO role you have that CIO hat. We’ve had many COOs/CCOs on the podcast. And I actually was a former COO/CCO as well. We’ve talked about how those two roles overlap quite a bit. We also just put out a White Paper detailing the CCO role and how it often overlaps with the COO’s responsibilities. [But] I don’t think we’ve ever on the podcast had a COO/CIO. Talk to us a little bit about how you manage both of those roles. Do you find any overlap in responsibilities between the two?

 

Kristi de Grys [00:34:25] In terms of managing both roles first, I think investments are just such a huge part of the client experience from their actual returns. There’s such an interwoven dependency between their goals, and how they should invest, and how we communicate to them, and how we retain them as clients, because performance is such a big thing. I think just being able to see how the investments fit into the overall picture of the firm. It has been really helpful in terms of, I feel, like helping us think about how to deliver an even better client experience and tie investments and goals together for a client. I think the other area of overlap that I found is— I guess I would call it operational efficiency– when it comes to implementing portfolios. There’s a great portfolio on paper and then there’s how do you trade it? How do you manage cash? How do you manage taxes? How do you do that? How do you do that in an operationally efficient manner? We know we have over 2,000 households that we serve and a lot of them tend to be mass affluent. We’re trying to deliver a great experience, but also do that profitably for the business. And leveraging that technology and combining it with the portfolios has been a huge area of focus for us. We’ve essentially centralized all the trading. So, for all of our accounts over the past two years, including automating things like tax loss harvesting, RMD distributions, rebalancing, it’s really been an effort between research, and portfolio trading, and ops– all of which are under me now.

 

Matt Sonnen [00:36:19] That’s great. And I think that’s a very good point. CIO title or not, I think many COOs are deeply involved in the implementation of the portfolios and how to do that in a scalable fashion. So that’s a very good point. Another thing that I always try to drive home with this podcast, we here at PFI Advisors truly believe that no RIA can meet their organic or inorganic growth goals without a competent COO in place or at least “professional management” and both of your firms are very active in the acquisition or advisor recruiting game. Kristi, can you talk a little bit about how Merriman uses you and your role as COO in the recruitment of advisors?

 

Kristi de Grys [00:37:02] Yeah. One of my beliefs is something I talk to my team constantly about is our job is to enable our advisors to spend as much face time with clients as possible. We all know that time and intimacy build trust, and ultimately the advice business is about trust and about the client relationship. I firmly believe that having a well-designed and well-run back office with this mentality really enables advisors to serve more clients and deliver a higher level of service. And I think when you start talking to advisors and small groups of advisors, ultimately the studies say and reality sets in that you can’t grow unless you ultimately have a back office team that you can delegate all of that day-to-day repetitive work to, so that you can serve more clients. And so when we’re talking to, whether it be one advisor or, a sort of ensemble practice or even a larger firm, we’re talking about how we have a back office that can do a lot of things for them so that they can elevate their service game, elevate their experience and offer time with clients and serve more clients. And I think for most advisors, the time spent with clients is really what they find meaningful in their role and in their job. And that’s something that we bring to the table and it seems to be quite attractive to advisors out there.

 

Matt Sonnen [00:38:37] I think that’s exactly right. Larry, how are you involved in showcasing AdvicePeriod as a proper landing spot for advisors?

 

Larry Miles [00:38:45] Let me just start, Matt, by saying that so many financial advisors are terrible businesspeople. That’s why they undervalue and under invest in the infrastructure and technology, and the operations. Some of the best advisors that I would be more than happy to have be my advisor or my parent’s advisor, just aren’t good businesspeople. And that’s why I think what you’re doing at PFI and with the podcast is so important because it hopefully sheds a light on that need. And the best of the worst are the advisors who recognize that’s not their strength and their genius and they hire the folks and build out a true business, so it’s not just a practice. At the same time, I think anyone who is in an executive leadership role, C-suite, whatever you want to call it, everyone sells. You have to sell if you’re an executive, is my opinion. And to me, it’s just impetus over exclusion. I’m sure most Chief Operating Officers, their first goal is not hitting their sales numbers. But I look at it as we’re all ambassadors of our companies. Again, most of the best advisors and people in the advisory community get into it because they want to help people. Well, I’m going to be able to help more people and impact more lives if people know how I can help them. And if I truly believe in what I’m doing, then my network, my friends, my family, folks I went to college with and those I’ve just met– they know what I can do and I seek them out because I want to help them. I want to make sure they don’t make mistakes by hiring the wrong firm or getting bad advice. So, for me, even though it’s nowhere near the top of my priority list every year, I want to help bring in revenue to the firm. And that makes me really proud to able to do that, even though it’s not my primary focus. So, I help in that way, I help our 30 advisors with sales coaching and building their personal brand and help them figure out how they want to grow their businesses. And then by telling the world what we believe in through podcasts and books and blogs, that helps attract financial advisors to us. And then I’m part of the process of helping to decide if this advisor is going to be a good fit for us and vice versa if we’re going to be a good fit for them.

 

Matt Sonnen [00:41:01] Awesome. Yeah, that’s a very good point too. It’s not just about a sales pitch on your part of getting them to want AdvicePeriod, but you also have to do some due diligence on behalf of the firm and make sure there’s going to be a mutual fit there. That’s a very good point.

 

Larry Miles [00:41:15] For us that’s key because it goes back to culture. We need to make sure that you’re going to be a fit because we’re planning first and because we believe in low-cost passive investing. I’m not saying we’re right, but that’s what’s right for us.

 

Matt Sonnen [00:41:27] Right.

 

Larry Miles [00:41:27] And so when we need teammates, whether they’re an advisor or an analyst, we want folks that want to work with us. We want the missionaries that believe in our vision and our values. We don’t want hired guns that are going to jump ship as soon as somebody else offers them a couple more dollars or a fancier title.

 

Matt Sonnen [00:41:45] That’s great. One last question for both of you. I’ve spoken to both of you about this one-on-one. The COO position can sometimes feel very lonely. There aren’t a lot of resources out there for COOs to learn some of these strategies that we’ve been talking about today. Larry’s book, obviously, we mentioned is a great resource, and we’re hoping that this podcast fills a void to some extent as well. Kristi, let me start with you. Where else can you turn? Where do you turn to get peer support and kind of some best practices or continuing education that is relevant to your role as a COO?

 

Kristi de Grys [00:42:19] I find peer support to be such an important thing for me to feel less lonely and also just to get great ideas because all the COOs, those I’ve interacted with, just are such amazing, wonderful people who are passionate, as Larry said, just passionate about helping clients and growing their firm. In terms of my peer group, I’m part of a study group. My study group is sponsored by Dimensional [Fund Advisors] because we’re one of their firms, but I know there are a number of other organizations that sponsor them as well. We have about 15 COOs who work for firms that are of a similar size and kind of $1 to 5 billion in that group. I think that finding a network of COOs whose firms are going through similar things, who are facing similar challenges, and are at the same kind of stage in their growth from, you know, founder-led to maybe enterprise at that top level is, I think Michael Nathanson kind of talks about, sometimes is really important. And for me, this group provides that. So, we meet in person twice a year and then regularly reach out to each other on email when we have a topic that we want to get advice from the group. We’re also part of the Focus Financial family and so similar to Dimensional, they provide opportunities for their firms to connect and build a network with other people in the same role at their firm. And then I guess I’d also like to say, sort of last but not least, it’s a little bit different than the day-to-day COO. I’m doing the G2 leadership program sponsored by Fidelity but put on by Philip Palaveev and the Ensemble Practice. They’re based here in Seattle and the really neat thing about that program, for me, in addition to lots of great training and perspective on firm leadership it’s a unique forum to discuss topics of partnership, and succession, equity, ownership with a group of people who weren’t granted equity when the firm was founded and are sort of buying in and entering the partnership and talking about things like valuation and how do you do that and equity transitions. And that’s a topic that I found from that group isn’t really covered in a lot of the other networking opportunities I’ve had. So that’s been a great way to connect with people who are at the same sort of stage in their growth within the firm as I am.

 

Matt Sonnen [00:44:53] We’ve had several COOs on the podcast, they’ve mentioned all of those. The DFA COO networking groups are fantastic, I’ve been told by many, many people. The G2 program comes up several times. The Ensemble Practice, they do a fantastic job. And shameless plug– Anna Garcia here at PFI and myself, early on helped get that COO group within the Focus network off the ground. So, I’m glad to hear that is still going and you’re getting value out of others. That’s great. Larry I’ll throw it to you. We’ve talked about COOs. You really have to work hard to go get some continuing education in this in this role. Where do you turn for best practices?

 

Larry Miles [00:45:33] Yeah. Two things jump out to me. One, I read a decent amount. And as I’ve talked with more advisors and more teammates, I’ve come to realize that while I didn’t think I read a lot, I’m surprised by how little people read actual books, not like a blog or Instagram, but like an actual book. I am making my way through listening to all the Berkshire Hathaway Annual Meetings on YouTube and I’m condensing, each one is about four or five hours, and Buffett spends 80 percent of his time reading. And while I’m nowhere near that amount, it just strikes me that you can learn so much from so many different fields, walks of life. And it gets back to Kristi’s experience and what you talked about earlier, that the benefits of diverse experience and to me books are a great way of getting that diverse experience. So, I love that, and I get great ideas. And I get the great ideas for the company from all these books and then for me, the peer groups I’ve been in this stage and YPO, which are kind of executive peer to peer groups where you get together with president and CEOs and COOs of lots of different businesses from lots different fields. You talk about the things or issues, opportunities and challenges in your businesses and I find that massively valuable, not just because I get such great ideas from the members, but it’s also a lot of fun to be contributing as I’m working on an issue that one of my forum mates has and I’m thinking critically, I’m working some new skill sets. Both of those have been immensely valuable.

 

Matt Sonnen [00:47:13] Fantastic. Well, this has been great. Kristi and Larry both thank you so much. You’ve shared some great insights, some actionable, tactical insights here. This has been great. Thank you both.

 

Larry Miles [00:47:26] Thank you, Matt.

 

Kristi de Grys [00:47:27] Thank you Matt. And thank you, Larry, for sharing.

 

Larry Miles [00:47:29] Likewise.

 

Matt Sonnen [00:47:29] We at PFI had declared 2019 to be the, “Year of the COO.” That was the year we launched this podcast. We’ve been putting out a ton of content around the need and the benefits of professional management. We are going to continue with that theme and that mission in 2020. I can’t say too much yet, but we have what we believe is to be a few big announcements coming in the next few months as we continue to push the RIA industry forward and continue to promote the evolution of practices to businesses and how the COO role can spearhead that movement. So, thank you everyone for listening to another episode. And we will talk to you soon.