EP 4 – Transcript
Matt Sonnen: [00:00:24] Welcome back everyone! As our announcer Luke Sonnen so proudly declared: this is The COO Roundtable Episode 4. I cheated with the first three episodes I simply interviewed those professionals that we had highlighted in our COO a White Paper that we published last year. It was actually during those interviews that I completely geeked out and I said to my co-workers these interviews are so cool we need to do more of these, and they immediately said to me well let’s do a podcast. So, here we are episode four we’re still finding our way a bit here in podcast land. So, thank you all for being patient with us. We’ve had some incredible guests covering some, in my mind, some extremely important topics for the RIA Industry and we’ve received really great feedback so far. So, thank you all of our listeners for bearing with us. I’m always open for feedback and suggestions on topics that you’d like to hear on future episodes or guests that you’d like us to have on so feel free to contact me anytime. My email is available on our website but it’s email@example.com. Our guests today are Stacey McKinnon of Morton Capital here in Southern California and Tom Harms of Summit Trail Advisors. Tom physically sits in their headquarters in New York City, but they have offices in Chicago and San Francisco as well. So, thank you both for being here and welcome.
Stacey McKinnon: [00:01:47] Thanks Matt.
Tom Harms: [00:01:49] Thanks Matt. Good to be here.
Matt Sonnen: [00:01:50] Perfect. So, Stacey and I were introduced last year shortly after our white paper came out. One of her partners at her firm who I’d been talking to for several years, he reached out to me after reading the white paper and said hey if you want to meet a top-notch COO you need to meet Stacey. And we had a phone conversation in December, I believe, it was right before the holidays and I was blown away by her knowledge of the industry and some of the strategies that she has implemented at Morton Capital. And I really just I just like the approach that she takes to her role as COO. So, I immediately thought as soon as we’re done with these intro episodes, I wanted to have Stacey on. So, I’m very excited to have her here to share her knowledge today. And with Tom, ironically enough, we had our very first conversation just a few weeks ago when we were prepping for this podcast. But I’ve known of Tom for many many years, dating back to his time at Fidelity. And PFI Advisors, we’ve known Summit Trail for quite a while. I’ve known Jack Petersen and his founding partners since before they launched the firm. And in fact we highlighted Summit Trail in our first of two and M&A White Papers declaring Summit Trail a successful buyer in the RIA space. And I know Tom’s going to touch on their approach to M&A in our conversation today. So, let me zip it now. I’m stealing your thunder a bit so I will step aside. Stacey, why don’t you go first. Could you just give us a little backstory of Morton Capital?
Stacey McKinnon: [00:03:22] Sure and thank you for that intro as well. So, Morton Capital was founded in 1983. We have about 36 team members and manage $1.8 billion in assets. People come to us all the time and they say what makes Morton Capital different? We’ve decided that there’s really three factors in our industry. One, we do a lot in the private investment space. So, we have a broad approach to how we think about our portfolios and portfolio construction. That means that we look beyond just the traditional markets for things like real estate equity or private lending and that would add value to our client portfolios. We also do pretty broad-based financial planning. So, as opposed to just the investment planning and cashflow planning, because we do a lot in the private investment space which means the liquidity, we also do pretty deep dive estate, tax, and insurance planning. And the last one which I think is really the most relevant to my role as COO, is the way that our team is designed and orchestrated. So, we’ve made the decision that we really want the team to be built in a way where we have groups of specialists best serving our clients. So, we have advisors that help work with clients – usually one client gets 3 to 4 advisors. And then we have teams that support the advisors, so that we have an investment portfolio management teams, financial planning team, and then an operations team. And my role really focuses on working within those teams to best support and train them. And I think about my job, my role as COO, and I really feel like it’s to support the people, to support the team, to empower them to lift them up, and so we actually have a saying that we have here it’s our purpose statement which is to empower families to enjoy their lives and our advisors work with our clients doing that every day. But I think about my role as COO and the families in that statement being our team families. So, my role is to empower our team families to enjoy their lives and their careers.
Matt Sonnen: [00:05:19] That’s fantastic. I mean there’s been so much talked about in terms of fee compression and how are RIAs/wealth managers going to keep their fees where they are and I think that has been the answer is – you need to be offering a lot of services beyond just investment management. So, I think that’s fantastic and we’ll dig deeper into those three components as we continue our conversation today. So, Tom I’ve stolen a bit of your story, but could you give us the overview of Summit Trail?
Tom Harms: [00:05:50] Sure absolutely. You just set the stage, Matt. Summit Trail Advisors was founded in late July of 2015. Unusual in that the three advisor teams all broke the same time. I think if it hadn’t been for Barclays Wealth Management exiting the business, never really had that catalysts. So, the three teams were quickly followed, I think within 60 days, with another two teams from Barclays. So, by the end of the year 2015, we found ourselves with five teams, I think as you mentioned, in New York, Chicago, and San Francisco. And in late 2015, we had roughly $2.2 billion in assets under management. We’ve now got 43 employees across those branches. We do have a satellite in Boston and in D.C. and historically over the past three years we’ve largely grown organically. We’re just pulling the ADV figures together now but we’re going to be north of $6 billion. Most of that has been organic. We did acquire one team in 2017 and that added I think roughly $500 million. But our growth vision for the future is clearly more acquisition. We’ve got a stated goal of actually establishing real estate footprints in any market where there is an advisor or an advisor team that makes sense and I think that’s first largely determined by the types of clients. And our ideal client is the individual with hopefully $25 million of liquid investments that we could then deploy across our models. And we are a manager of managers shop and I think much like Morton, a large component of private investment. So, without having, you know, $20-25 million of investable funds, it’s really hard to kind of fully deploy the asset allocation model. So, we’ve spent probably the past three years ensuring that all six teams are following kind of the same regimen in consistently adhering to our policies and procedures. So, I think as we continue to grow, we see that as probably being one of our top challenges.
Matt Sonnen: [00:08:39] You know, obviously PFI, we do a lot of work with breakaway teams and your guys’ story is so amazing because we always tell breakaways look – spend the first six months just focused on your existing clients, you just need to get them moved over. Get the billing set up, get some revenue for the firm, get your feet under you. Then, around that six months mark you can take one deep breath and now you should go after new clients and sort of feel what that’s like. You’re now presenting yourself as an RIA as opposed to a captive adviser at a larger firm. So, just sort of feel how that is and then I don’t know, somewhere in year two maybe look to make your first acquisition. You guys made two acquisitions in the first two months of being in RIA. It’s just incredible what you guys have been able to accomplish. So, in terms of your roles.
Tom Harms: [00:09:27] Indeed!
Matt Sonnen: [00:09:28] Yeah exactly, Tom. In terms of the two of you how you approached your role as COO you’ve taken different paths to get here today. So, I’ll start with Stacey. Could you give us a bit of your background story and how it shaped the way you approach your role as COO at Morton Capital?
Stacey McKinnon: [00:09:46] Sure, I’ll share a little bit of kind of Lon Morton’s story too and how he founded the company. So, before we were founded, he was an insurance salesman. He was going door to door selling insurance and he ran across a potential client who someone had just actually left his door who was trying to sell him a CD. This was in the late 70s when that was still attractive. And he basically gave Lon the prospectus and said which one should I do? The CD or the insurance that you’re selling. Lon looked at it and he said you know what you really should go with the CD, it’s a way better option for you. And that was the moment that he realized that really, he wanted to be compensated for his advice not for just selling a product. So, that was how our company was formed, it was formed by looking at the world a little differently, thinking about what you give to your clients, and how can it be done better and maybe an even more authentic way. So, fast forward, it ties into my story eventually, in 2006 he sold to Union Bank. He had cancer, recovered, and by 2013 he decided he no longer wanted to be with the bank and so he’d decided when he bought himself back, he wanted to have a succession plan of strong people who could continue living that legacy. Continuous really in how do we act in the client’s best interests and if I get cancer again, what is going to occur on how can I still have a successful company? At that time, we had I think over 800 clients. So, his next generation of leadership that he decided on, one of them are co-CEO Meghan Pinchuk, was actually a client of mine at a fitness studio nearby. And she had been a client for a year or so and she came up to me after class one day and said I love the way that the studio is run. I’m looking for good people. We just bought ourselves back from the bank. Will you join me? At first, I didn’t know if I wanted to trade fitness and flexible lifestyle for being behind the desk, but I think I didn’t know that much about the finance industry and since then I’ve obviously realized that there’s so much more to what we do besides data and numbers. So, I joined Morton Capital in 2014, prior to being in the fitness industry my background is actually in wedding and event planning. So, the way I approached my role at Morton Capital was almost through that lens. While I wasn’t necessarily coordinating photographers and caterers anymore, I was definitely coordinating how do all of our team worked together, how can they function in the best possible way, and how can we make this firm go from “mom and pop” – because at that time there were only 18 employees – to truly institutionalize which is where we are now. So, I’ve tried to incorporate as much as my planning and coordination skills as possible into the business and the industry. I think we’ve been really successful in creating those teams that I mentioned before and the second component of it is I didn’t realize actually early on and maybe mistakes that I had made was that if you coordinate and put everything in its place that doesn’t necessarily make the best possible teams. And so I’ve been doing a lot of research over the last few years on – ok, what makes really good teams? How do people feel fulfilled at work? How do they feel empowered? And I read this quote one time that said, “you don’t build a business you build people and people build the business.” And so that’s the approach that I’ve taken to my role as COO, is this mixture of the wedding coordinator in me and the one that really focuses on the people because if we prioritize our people our clients are going to be so well taken care of.
Matt Sonnen: [00:13:19] That’s incredible. I obviously I think most people would say wow I never would have thought those two go hand in hand but that really is a lot of the COO role is you just need to be the glue that’s listening to all these independent, what feels like very independent decisions being made and you need to be the one saying wait if you’re gonna make that decision over here it’s going to affect three things over here. It actually makes perfect sense. I never would have thought of it but that – the coordinate that really is the role of the COO. So that’s fantastic. I love it. So, Tom how do you leverage your background to tackle the day to day responsibilities that you have a COO?
Tom Harms: [00:13:57] You know, I had one answer, but Stacey’s was so impressive. I mean it just really reminds me of kind of the way I’ve always thought about it. It’s a live television show and, you know, what the client sees is the end product. You know, what comes out on the screen or on the stage if you will. And I think a COO’s role is to ensure that it’s all, you know, that picture is the best it can be. And that the actors and the technicians are all doing exactly what they need to be doing and feeling fulfilled etc. So, I don’t think Stacey’s much difference between that and a wedding planner in terms of making sure that the event, which is live, once it kicks off and all that planning, and preparation has to pay off because it’s the experience at the end of the day. But Matt I think what became very apparent after Summit Trail was launched and after Jack Petersen, the managing partner, had six months of playing not only CEO but COO. I think it became very apparent that Summit Trail Advisors, which had really been built with dedicated professionals. Jack had run private wealth for both Lehman and Barclays. David Romhilt, our Chief Investment Officer, had done manager research at Barclays. Our Head of Operations, Okey Onyebuchi, had run operations or alternative operations at Barclays. So, we had all these individuals who had years of experience in dedicated roles. Well what we didn’t have was a COO/CCO who had day to day experience with branch management and branch risk. And so I, as you pointed out, had been after 25 years at Morgan Stanley in branch risk joined Fidelity where I’ve been consulting with very large advisors on risk management and compliance. And I think as you and I discussed I was really anxious to get back on the other side of the table and actually be responsible for running a business and not just consulting which just is not as fulfilling. So, I brought to the table here at Summit Trail my experience in running wealth management branches from the operations, administration, and risk standpoint around the world. I helped setup Morgan Stanley’s Asia wealth management businesses and built our UK businesses and so ultimately ended up as head of branch risk across Morgan Stanley, Dean Witter, Smith Barney, a thousand branches 17,000 advisors and I learned a lot in terms of what those top risks are, and it really actually started to morph even more. So, I spent a lot of time -really our top risk is cyber security and data security. So, we’ve invested an awful lot in that, but I really come in every day and feel not much different than I would if I was in one of the wealth management branches of Morgan Stanley working with large advisors. So, it’s great to kind of get back to that sense of being right there in the midst of the business and I think Stacey and I were talking about that. It’s just never a dull moment it’s always exciting the days go very quickly.
Matt Sonnen: [00:17:51] Yes. Yes. Just the sheer number of things you need to keep an eye on at any given time. So, let’s go a little deeper into the core responsibilities of a COO. So, in our white paper, our COO a White Paper that we put out last year we had we narrowed it down to three main roles. One is just the administration of the firm. So, you’re executing the company’s business plan and you’re upholding the firm’s culture. Two is the one component that everybody thinks of when they think of a RIA COO, you’re driving the workflow improvements, you’re managing the vendor relationships, and overseeing the technology stack. And then three is the piece that I always talk about, is the human resources component. You’re really in charge of recruiting, developing, and retaining the employees as your firm is growing and trying to continue to provide high touch service for an ever-increasing client base. So, Stacey tell us how you leverage your people to push the organization forward.
Stacey McKinnon: [00:19:02] Sure, I was just thinking about those three points and how they all have to be working and working well to be successful. You really can’t let one fall through the cracks. Like I was mentioning before, the coordinator in me just wanted to kind of come in and do the workflow piece and then really recognizing that the human resources or the culture piece was just actually probably more important than the workflow piece. So, in 2017, Lon actually did end up passing away and shortly thereafter is when I took over as COO. Myself and our other leadership, Meghan Pinchuk and Jeff Sarti, kind of got together and we said – ok, this firm’s been around for a long time, we’re in transition our founder isn’t here anymore, how do we continue his legacy but then kind of define the team in the culture and who we want to be in the future? Maybe in a little bit different way, in a new way, in a way that might help people be refreshed and excited. So, did a lot of work on career pathing. I think I’ve read every benchmarking study that’s ever existed. Interviewed about 25 different firms and came up with. Well actually the result of that was that no one does anything the same and it’s all up to who you are as a team, a firm, and a culture. Unfortunately, I wish that there was a golden ticket on that one but it’s not quite there. So, we did a lot of work around career pathing every single position in our firm has a career path, including our operations team, our advisory team, everyone even the people doing HR and finance. There are different levels at every position. Each component of the career path defines what the responsibility of the position is but then it also defines how that position can be reflected through our core values. So, that’s a really key component to how we’ve been able to run the firm and create a really positive culture that we have here. At first when I thought about core values I kind of thought that sounds a little bit corny or cheesy. I wasn’t quite sure how that would integrate into our firm and our people. But I read a book called Traction, which I know a lot of people know about, and it talks about the core values being a reflection of your best team members, people in your life that you really aspire to be like, and then you take those core values and you basically tell your team this is what you need to accomplish every day. But this is how I want you to accomplish it. This is how I want you to treat our clients, how I want you to treat our people, and what I want to be embedded in our culture. Implementing core values in our firm has been absolutely transformative. There are five E’s, we have excellence, empowerment, empathy, ethical, and enjoyment and the way that we basically express this to our team is that equal to the results of your performance is how you went about doing it. I’ve hired to the core values. I’ve fired to the core values so far over the last year and a half. I’ve helped people to understand how serious I take them. And I think that just really made the culture that much stronger because our team actually cares about being empathetic to one another when somebody has too much of a workload and they have to jump in. They know that that’s important to us and that they’ll be rewarded from treating each other well. They know that, and one of the things I talk about with excellence, is that excellence is not my expectation of you but your expectation of yourself. What does excellence mean to you and how can you become better in this firm and add value and what would make you proud when you went home every day that this is what you got to do. So, I would say that while driving workflow improvements is where I started, I swapped back to – ok, what are our core values? How do we create an awesome culture here? And then now I’m actually back in workflow and saying we’ve created the culture, everyone is accountable to each other excited to work with one another, let’s launch these workflows and I’m actually getting such better adoption. From just having everyone be on the same page, same culture, like excited they all trust each other, and they trust me. It’s making the whole entire process of integrating technology so much easier when you have that type of positivity around you.
Matt Sonnen: [00:23:22] So, say them one more time because you rattled through him quick. The five E’s, excellence was the first one…what’re the 5?
Stacey McKinnon: [00:23:27] Sure. Excellence, empowerment, empathy, ethical, and enjoyment. And there’s actually a long story that goes along with those as to how we came about choosing them and how meaningful they are to me, but you can save that story for another day or someone could call to tell you about it.
Matt Sonnen: [00:23:48] No that’s fantastic. And I think I’ve always said it kind of as I was going through the three core responsibilities, I think everybody thinks it’s just about the workflow improvements, the COO role. And I think a lot of people probably that sit in that seat come to the same conclusion you do. Oh wait a minute, I’ve got to get the HR component right first and then we can work on the technology and the workflows etc. I think that’s fantastic. I love those five E’s. That’s great.
Stacey McKinnon: [00:24:18] And your team has to trust you.
Matt Sonnen: [00:24:21] Yep absolutely. And at your recommendation I’ve started Traction.
Stacey McKinnon: [00:24:28] Adoption only comes with trust and so your team has to trust that the leadership of the firm is acting in their best interest, has the best of intentions, and that whatever new technology or new workflow, new process that you’re implementing is going to be to everyone’s best interest. And I think that’s really where the core values play the keyest is component I guess you would say…is just really – ok, you have to trust that we’re not just throwing new things at you for the sake of it. But it’s really in your best interest to. So that’s the one thing I’d say about that.
Matt Sonnen: [00:25:03] That’s fantastic. At your suggestion I have started the book Traction, I’m only a few pages in so far but it is fantastic. So, yes thank you for that one that is. That is a great one. So, Tom tell us tell us about the structure that you’ve brought to Summit Trail in the context of these three core responsibilities we’ve highlighted.
Tom Harms: [00:25:26] And I will be going to Amazon and getting my copy of Traction as well. Again, I agree with Stacey. It’s all about your people and Stacey, you put it the other way but first you get the right people on the bus and then those people decide where the bus goes and how it goes. So, I couldn’t agree more. So, a little different, Matt. I spend a large, I think as I mentioned kind of at the preamble, a large amount of time and energy on working on consistency. You know, rules of nature and physics being what they are. I mean six different teams all started out doing things a little bit differently and as you know from a regulatory standpoint, with a multi branch business you’ve got to demonstrate control and knowledge of how you’re doing things. And so we could call that kind of driving the workflow improvements. And specifically, we’re looking to Salesforce as a means of standardizing workflows and processes and being able to kind of feel comfortable that as we grow and grow from 6 teams to 8 teams to 10 teams, that there’s consistency in those processes and reporting from those processes. So, that’s takes probably 60 plus percent of my time. We do have a position for head of technology. It was open for a couple months but I’m happy to say we will have an individual joining next month. So, that will be an immense help and then I think I can probably revert to not so much the day to day administration. I think we’ve got to configure it where it is running itself – these are the six teams. I would say from a human resource standpoint, again with the multi branch paradigm, you know, Stacey we go about a little bit differently. I build trust or attempt to build trust by involving the employees in the actual development of the technology. So, we have, you know, call them champions. We have Salesforce champions and we have Addepar, our performance reporting, power users. So, we’ve got kind of these two core technology teams and each branch has got multiple members who have an affinity towards one or the other and they actually help define our processes and give us the feedback as we roll out new technology. So, the hope is in keeping our employees involved from day one with all the requirements that they feel a sense of ownership. In terms of the career path I think we’ve struggled a little bit more, I mean we don’t have the five E’s yet defined. But we do focus on our culture. And again Matt, just the difference with people like Jack Petersen as as our managing partner, he’s playing a big kind of culture carrier. He’s got a once a month Brown Bag Lunch. He’ll do one on ones with all the employees. And so, he feels it’s important to kind of build this rapport in the sense that we’re all one big team. So, I think managed a little bit differently I think just given our size and geographic footprint. But most importantly for me is to ensure that Summit Trails’ plant runs efficiently and effectively and allows the advisors to do what they do best which is work with clients and help them fulfill their financial ambitions. And so you know the less they have to worry about the technology, the more the technology kind of fulfills their mission, and makes things easier for them, the better. So, we try and ensure that compliance and technology are not business impediments but through the development of process and technology things that they’re able to kind of deal with efficiently and effectively.
Matt Sonnen: [00:30:15] I should know this, and I don’t. Does Jack have client relationships or is he just sort of, you talked about how he focused on culture and he’s really working just internally, does he have client relationships?
Tom Harms: [00:30:27] Yeah. Yeah, he has a small book. He has two partners who essentially run that book and I’d say practically speaking I think Jack gets involved with those clients, which date back to his days of Barclays and probably Lehman, very much the same way he’d get involved with any of our other clients and the other five adviser teams and meeting with them. So, you got Jack’s partners are Danie McCugh and Duff Saxe and so they’re doing that day to day management of Jack’s small book. But you know 80% of his time, if not more, is either recruiting for new M&A opportunities or for networking or spending time with the rest of our employees.
Matt Sonnen: [00:31:23] Got it. Perfect. Okay. So, you’re talking about consistency Stacey. I know you’ve got a story of one of your first tasks was working through, I think it was the custodial onboarding, and then as you were working through that you found some consistency issues within the organization.
Stacey McKinnon: [00:31:42] Yeah. Well I’m just one comment on what Tom had just mentioned. One of the things I think that’s important for COOs to recognize too is that people rally around CEOs. CEOs inspire a team, they lead people, they’re generally those that you want to become one day. And I think that it’s so important and like you mentioned that you said Jack and his main role is being out there and being with the team, being with the people, being the community, and then our role I think is to keep it alive while we are behind the scenes. So, I love how you said that highlight is just kind of even the difference between the CEO and COO role. As far as in terms of structure and processes, I think I think I might have been wearing my wedding coordinator hat when this one happened. But when I first started, I looked at what the firm was, it was 18 people and one of the glaring things that happened was that everyone was using different fonts. I know a kind of a silly way to start. Interesting to see the development from “mom and pop” to institutionalized firm. And I would encourage even anyone who wants to get into leadership roles one day just sit back and look around your firm and even if you don’t have all the knowledge or the experience just say what little ways can I add value? Where are we inconsistent? How are we treating our clients differently? I mean our meeting structure was different advisor to advisor. What reports people wanted were different advisor to advisor and the only way to scale is to streamline some of those tasks and items. And this was before I was the COO. This was basically saying – ok, let’s all be on the same team together. As we move forward. So, worked really hard on streamlining the onboarding process but then also just the little ways that we work with each other in providing I guess one brand our that faces outwardly as well.
Matt Sonnen: [00:33:36] Yeah, I’ve seen it a million times. One specific team within the firm, they’re prepping for a meeting with a really big prospect and they decide they want to customize one little piece of the presentation and then when the adviser comes back from the meeting he tells his team “Hey, that really worked well let’s just keep that in our standard deck for any other prospects.” And so they start using that but then they don’t tell anyone else. They don’t tell anyone else at the firm that they’ve made that one will change. Over time, it just becomes exponential. Each team is doing this, longer and longer time keeps passing by and you wake up one day and four teams, five teams, whatever you have at your firm, they’re selling completely different firms. If you didn’t see the common logo you would think…. they have different value props that they’re highlighting, and it can be a big problem. So, it often takes the COO or sometimes it’s the CCO that catches it from a reviewing of advertising, but it takes someone with that professional management hat to rein everyone back in and make sure that they’re all selling one common brand. So, yeah, the fonts we laugh about it but it really it just leads to bigger and bigger problems so that’s fantastic.
Stacey McKinnon: [00:34:52] Yeah for sure it leads to big training problems too, right. You have different teams within your firm learning a different story. Then they’re out there in the community and they’re telling a different story and then you’re bringing up new associate advisors and the associate advisor is wondering which story do they listen to and abide by and then all of a sudden it gets back to you at the COO desk basically saying well I do this for this person and not for that person. And that’s when I think that really gets stuck. So, I totally agree with you. Perfectly said.
Matt Sonnen: [00:35:22] And this leads perfectly into our next topic. I mean we have to talk M&A, it’s such a big part of our industry. So, PFI we’re an operations and tech firms so we’re slightly biased but we’ve made the argument that in order to brand yourself a successful buyer, it really is an infrastructure story that you’re selling. You need to convince a seller that your firm has the people and the processes and the technology that will alleviate him or her from the day to day burdens of running a firm. They can just go back to focusing on clients and prospects. And that the firm will allow them to offer different products, different services that they didn’t have available to them at their previous firm. They’re plugging into a scalable organization. And we’ve argued that the best person to make this presentation about the infrastructure story of the firm would be the COO. Yes, the Jack Petersen’s the world, the rainmaker at the organization, it’s their name, it’s their story that’s attracting sellers to begin with. But I really do think the COO kind of walks in at the end of the meeting and really closes the sale. So Tom, what is your role within Summit Trails’ M&A strategy?
Tom Harms: [00:36:38] You just summed it up.
Matt Sonnen: [00:36:41] Once again I stole your thunder! Sorry!
Tom Harms: [00:36:45] Yeah well as you know it just means great minds think alike! And actually, I started even while I was at Fidelity obviously with my green business card. We would impress upon would be advisors how great life would be in Fidelity’s environment. And actually, there’s even very similar what I’ve done at Morgan Stanley as we were talking to recruits for the wirehouse. And it’s really to impress upon the would be recruits of the quality of life that they’ll be enjoying. And I think just as you pointed out, how efficient and effective and well-staffed the organization is so that their break will go well. And from an operations standpoint thing will be easy and understandable and they’ll be people there to help them. So, yeah, I’d normally come in near the end and spend 30 minutes. One, covering a little bit of my background and the fact that I’ve worked with wealth advisors for 30 years. But also, just cover what we’ve done here at Summit Trail in terms of our systems, technology, our partners and the resources that we’ll bring to bear to ensure that one, the transition goes successfully but two, they’ll be able to grow and prosper through the years as they conduct their business.
Matt Sonnen: [00:38:38] We’ve talked a lot about advisor pitch versus client pitch and advisors think “Well, I’ve spent 20 years, I’ve been really good at bringing clients to the organization and I can build trust and I can sell the investment philosophy of the firm.” And then they grab that same exact presentation deck that they’ve been using with clients or prospects for 20 years and they try to go show that presentation to advisors and it’s a completely different story. It really is that infrastructure story. And I think one of the things that you guys can really point to is the fact that you’ve done so many deals already and that there is a documented plan, onboarding plan for both the employees and the clients and that you have capacity to do more. A lot of advisors or a lot of firms will say to a selling adviser how does 2022 to look for closing this deal? Because we have a few other transactions ahead of you and we just don’t have the capacity. So, one thing that you guys definitely can show is that you’ve done it before and that you have the capacity to swallow their advisors. So, I think it’s fantastic. Stacey, what about Morton Capital’s M&A plans and how are you involved in that process?
Stacey McKinnon: [00:39:56] So, I think that I would say that we are in the preparation phase, if you will. A lot of what Tom talked about was building the infrastructure and making sure that our firm and our team is prepared to grow in that kind of way because I think that M&A done wrong can be incredibly disruptive and can backfire on your business and your industry and your team. And we just want to make sure that we’re making the smartest possible decision for ourselves and our group of people. And I guess where we have explored M&A so far, where my role is a little bit on the, I think, the touchy-feely side. So, if you’re bringing on a brand-new firm and you’re bringing on X number of clients, how is that going to feel to the clients? What’s the story that they’re going to be told? When that advisor comes in or team of advisors come in, what team members do I have on staff that are going to be solely dedicated to the onboarding process? The last advisor we brought in in 2015, I had a co-advisor and associate advisor that I dedicated fully for six months just to onboarding that new advisor. And gave their responsibilities, spread them throughout the rest of the team. We want to make sure that anyone new that comes on board that they have the tools and resources they need to be successful and that transition doesn’t feel as much like a burden as an exciting opportunity for our firm to grow. I tend to play more of the role of – how is this going to feel? How is this going to look after the deal is done? What is this actually going to mean to not only the new people coming in and the clients but also our own team internally?
Matt Sonnen: [00:41:37] Perfect. Yeah, it’s so important to explain to the advisor what their role within the culture and within the new organization. One plus one you’re creating a third firm now and where they going to fit in? So, I think that’s fantastic. Switching gears, a little bit. So, we’ve talked on previous podcasts that the COO role can be a bit lonely and I’m always curious to learn where COOs are turning to get peer support and to just learn the best practices that others are using. So, Tom where do you turn with your business pain points or recommendations on best practices that you’re looking for?
Tom Harms: [00:42:23] Yeah, it’s a community. And I think that was one of the first realizations. Summit Trail has grown quickly. Our ability to take on head count has been measured. So, we’re very careful. And you call it step variable. So, our resources are largely through consultants. So, I’m either bringing in consultants to help with the documenting all of our policies and procedures or helping run our IT governance program. Obviously as you know, we’re a member of the Dynasty Network. So, we take advantage of their fantastic social media team over there we don’t have anyone really here dedicated to social media. A number of willing volunteers but that’s all enabled by the team over there at Dynasty. The custodians, obviously my old colleagues at Fidelity but Pershing remains are probably larger custodian. A lot of resources at the custodians. We’ve had Fidelity do a number of tech consulting engagements with us. And I think it’s really just knowing kind of who to bring in. And it’s interesting the dynamic, even though they’re consultants, they join calls and they really start to kind of feel and operate like de facto members of the team. So, I found that bringing in one consultant to work with my team is really kind of one plus one equals three in what we’re able to get done. So, I think it’s lonely in as much as the buck stops here and I’m not only the COO but I’m the CCO. Which is an even lonelier job. But there is, as you know, there is an ample amount of highly skilled professional individuals out there that you can hire on an hourly basis to really help accelerate your program.
Matt Sonnen: [00:44:47] Perfect. And Stacey, I know you have a few peer groups that you’re a member of. And then you mentioned Traction, but I know you’ve looked at some other sources for inspiration and strategies that you’ve incorporated. So, tell us a little bit about that.
Stacey McKinnon: [00:45:01] Yeah so, I would say that one of the number one ways that I am not lonely as a COO is really leaning on other COOs. So, I probably have a call once a month with firms from across the US and we share ideas and – what are you doing here? How are you leveraging technology here? How do you think about your team and growth? And when’s the right time to hire in the executive suite? We have these types of conversations and we basically leverage each other’s strength and experience and I think that one of my favorite pieces of being in this industry is actually how open fellow COOs are to brainstorm. So, I would encourage anyone to join any study groups that you can find that happens to do with managing and running the firm. I read a lot of books. I think that there’s a lot out there that can be inspiring and even if you get a nugget or idea from a book and you can implement it, I think that makes a lot of sense. Traction with one. I also think the book Five Dysfunctions of a Team which just talks really about – Ok, how do you look out for red flags that could be happening within your culture? And then I just read last week another book called The Culture Code and it was fantastic. It was really talking about kind of what actually Tom mentioned about Jack having the lunch dates with his team. Just the value of leadership spending time with their people. That was really great as well. And then finally, really lean heavily on consultants. I think just as Tom said, our Schwab and Fidelity relationship managers are phenomenal. I’m so impressed by their knowledge and their ability to help and they just seem to be really an extension of our team. We’ve also worked with Angie Herbers and Jared Upton of Herbers & Co. We’ve worked with Kristen Schmidt at RIA Oasis. We’ve worked with a few other compliance consultants. I just feel like the few thousand dollars potentially a month or maybe a bigger ticket project, a year that we spend working with consultants, there’s just nothing that can be…I’m saving that much money in potential mistakes for sure. I just am a big believer in leaning on the professionals around us to help us better our companies better our firm.
Matt Sonnen: [00:47:14] Perfect. So, I’ve got one last question for you guys. One of the goals that we’ve talked about a lot on this podcast is to elevate the role of the COO in the collective mind of the RIA industry. To be seen much more than just the “tech guy” or the “tech girl”. But at the same time, I’ve talked to both of you individually about this, a key personality trait of a successful COO is you need to be humble enough to stay in the shadows of the advisors and the owners of the RIA. I’ve also compared the I’ve often compared the COO to an offensive lineman on a football team. The quarterback, the running back, the wide receivers, they’re going to grab the headlines but without a top-notch offensive line blocking for them it’s going to be hard pressed for them to be successful at their jobs. So, Tom how do you see your role as the COO and how you fit into the overall organization?
Tom Harms: [00:48:10] Well first of all Matt, as you and I discussed today I am 110% for ensuring that COOs get the recognition for keeping the lights on every day. And before we started the call Stacey and I were chatting. It’s just about the myriad of responsibilities and challenges and questions that the COO is posed within any one given a 12 hour stretch. So, but it is important, this in… Stacey’s focusing on the people in developing and realizing that it’s each and every one of those individuals getting the job done and getting a job right that really matters. And so for me, and my managing partners know this, that my number one mission here is to build and help ensure that Summit Trail Advisors is built on a sound foundation and has individuals in place to last you know the next 10-20 years. I’m not going to be here forever and so the moment I got here I’ve been thinking about building this out as a legacy. So, again it is important, and I think people like Jack Petersen, who had the COO role for six months, that kind of know and appreciate it. But I think many advisors who haven’t had to kind of step in and deal with the myriad of questions may still kind of underestimate just how important it is to have someone with all those vendor relationships, with the eye towards the efficiencies, and the staff development so that the others can continue to just do do what they do best and do what got them to where they are today which is advising clients.
Matt Sonnen: [00:50:10] Perfect. And Stacey, I’ve got the football analogy, but you have some great analogies here on the role of the COO and its place within the C-Suite. Can you share those with us?
Stacey McKinnon: [00:50:22] Oh yeah sure. Maybe just as a starting point, I think one of the things that’s really important about being a COO is really being able to implement, integrate your firm. So, one of the things when you read Traction, it’s going to talk about how you have the CEO as a visionary and you have the COO is the integrator. And allowing the CEO, in my case I have two amazing co-CEOs, that really can set the vision for the firm and help us move forward and grow and they’re very inspirational and everyone can look to them for where we’re going as a company. But then in so many ways my role is to integrate that vision into what actually happens in the day to day. So, I talk about an analogy of our firm, our advisory firm kind of being like a play on the stage. You have your advisors or the actors, they’re not really acting, but they’re out on the stage and they’re with the clients, they’re defining their values, their goals or setting the strategy. But then equally important, you have sound and lighting and staging, and makeup and all of these things have to work together and cohesively in the best interests of the clients. So, while as a COO I’m not necessarily the writer and the designer of the play, in so many ways I’m the director of the play. I’m saying how do all of these teams work together in the best interest of our clients and really can be successful not only in their own division with the individuals but then how they work together as a team. So, that’s where I spend, I would say, the majority of my day is really just making sure that we have that cohesion between all of the different teams.
Matt Sonnen: [00:51:58] Perfect. Well I can’t thank you both enough for sharing your insights with everybody today. You both are doing such amazing work at your respective firms. Both of your firms are growing aggressively, they’re multifaceted organizations. So, thank you both so much for sharing your stories today.
Tom Harms: [00:52:18] It’s a pleasure.
Stacey McKinnon: [00:52:19] Thank you.
Matt Sonnen: [00:52:20] Great. So, podcast listeners as I said at the beginning of the interview here, if you have ideas for topics and or guests feel free to reach out with those. We’re recording this episode in March. I’m excited to say that we have interviews mapped out for the remainder of 2019 already on the books. So, I’m very excited for what is to come. You can subscribe iTunes or Google Play. New episodes are also obviously available on our website. And just last week the publication IRIS has started publishing our podcast there as well so you can pick up new episodes there. Thank you for listening and we will speak to everybody soon!