[00:00:11] Luke Sonnen: Hi, I’m Luke Sonnen. Welcome to the COO Roundtable, powered by PFI Advisors. Here’s your host, Matt Sonnen.
[00:00:24] Matt Sonnen: Welcome everyone to Episode 49. We are recording this on January 26th. Listeners of the podcast know, that January 26th for me is always a big day in the Sonnen household because today is Eddie Van Halen’s birthday. He would have been 68 today. I wanted to start off by saying happy birthday to Eddie Van Halen. Very important to me. But I’m really excited about this episode. Both of our guests have challenged me to think about the COO role in different ways during our work together in preparing for today’s discussion.
I think all of you will enjoy hearing what they have to say. Our first guest is Alex Satterfield from Byron Financial located in Charlotte, North Carolina. PFI Advisors has worked with Byron on and off for a little over a year now. We’ve gotten to know Alex really well since he joined the firm late last year. Alex, welcome to the COO Roundtable.
[00:01:20] Alex Satterfield: Thanks so much, Matt. Good to be here.
[00:01:22] Matt Sonnen: Joining us today from Tobias Financial Advisors in Fort Lauderdale, Florida is Edgar Collado. I was introduced to Edgar by Sean Capazinsky. I know a lot of our listeners know Sean, and I’ve really enjoyed getting to know him. Edgar’s bio on the firm’s website states, “Edgar currently serves as Chief Operating Officer. He oversees the firm’s day-to-day operations and procedures, and leads compliance, marketing, finance, human resources, technology, and administration processes.”
Our listeners have heard me say many times that the COO’s job description is often to do everything around here that isn’t getting done. I think Edgar’s bio pretty much sums that up perfectly. Welcome, Edgar. I’m excited to have you here.
[00:02:07] Edgar Collado: Thank you, Matt. I appreciate the invitation. Glad to be here. We’ll definitely talk a little bit more about that.
[00:02:13] Matt Sonnen: Yes. All of those tasks are on your shoulders. Well, Alex, I’ll start with you. Why don’t you give us a little bit of background on Byron Financial?
[00:02:22] Alex Satterfield: Absolutely. Byron started in 1985. Our founder, Bill Byron, was really a dedicated insurance and life insurance salesman. As he got to know his clients, found a niche with clients that were first-generation wealth, a lot of business owners, entrepreneurs, and a lot of them needed help beyond the life insurance part of their planning. In 2005, Bill stood up investment RIA, and it was really a one-person shop alongside Bill’s life insurance business, all the way up to 2019.
In 2019, Bill took a step back and realized, “Hey, there’s a lot more we can do for our clients, this whole investment advisory component of our business is the bigger need for our client base, and the place to grow.” That became the sole focus in 2019. At that point, we had around 175 million assets under management. We sit today at nearly 700 million. Since 2019, that became the focus that has certainly shown in the growth, but we have also a team of soon-to-be eight, seven currently, we’re looking to hire now, and could be as many as 10 depending on the growth track and everything by the end of the year.
[00:03:47] Matt Sonnen: Yes, I mentioned we’ve worked with you guys for a little while now. Tremendous growth and that’s why you were brought on, and we’re going to talk a lot about that, the different things that you’re trying to institute to support all of that growth. I know that’s on the minds of a lot of our listeners. You’re the perfect guest to have here. Edgar, give us a rundown on Tobias Financial Advisors.
[00:04:07] Edgar Collado: Definitely, happy to. Tobias Financial Advisors, we’re based in Plantation, Florida. Been around as a firm since 1980. We actually celebrated our fortieth anniversary a couple of years back. We also had a different founding, we were founded as a CPA firm with tax and accounting, mainly for business owners. Our founder, at the time, realized that a lot of the advice that his tax and bookkeeping clients were getting from their “financial advisors” was pretty bad. He said, “You know what, if they’re giving this kind of advice, I know I can do a better job.” He started branching out into the financial planning space.
About nine years into it, he did a full conversion, completely got rid of the tax accounting business, and converted into more of a financial planning firm, which we are today. We are a fee-only firm, meaning that we really pride ourselves in getting compensated fully based on the advice that we’re giving to clients. We have had a tremendous amount of growth over the last five years. In fact that our founder decided just several years ago that it was time for him to let go of the reins, and sold the firm to our current owners.
We were in the 200 range AUM in 2016 and 2017 and are currently approaching 700 million. We got a significant amount of growth on the AUM side. We were about five employees or four or five employees, and we’re currently at 19. We have a strong foundation and tax planning. We’ve invested a lot in building out some of the tax work that we do for our clients. For us, we see it as a tremendous value add above and beyond what clients can get from our RIAs.
Our ideal client, generally, the clients that we really enjoy working with, and we would say are our ideal clients are Gen X business owners, and entrepreneurs, average AUM of three to five million, but besides that, from a qualitative perspective, we enjoy working with people who, they’re really smart, they’re really strong, and leaders in their industries, and just don’t have the time to take care of the personal side of the thing. Most of our clients have been tremendously successful in their business but consequently have neglected their financial house.
Then we come in and really help them with estate planning, tax planning, obviously, financial planning, and investment management to set them up so that they can be as successful personally as they have been professionally.
[00:06:45] Matt Sonnen: Great, both of your firm’s tremendous growth in the last five years or so. Almost identical growth, roughly 200 million to 700. That’s great. Edgar, you joined Tobias about five and a half years ago from outside the industry, why don’t you walk us through your career progression to where you are today?
[00:07:06] Edgar Collado: Definitely. I have a bit of an interesting career path in this space. It’s funny because I actually started my career in investments. I used to work for Dreyfus Mutual Fund and Mellon Bank really early in my career, but then after college, said, “Hey, I want to leave the investment space and focus more on corporate finance and strategy.” Worked at AT&T for five years as part of their financial leadership program there.
I then left AT&T and worked in real estate for a couple of years, where I was doing sales and management, very different from the finance work I was doing at AT&T. Then, went to Ingersoll Rand and trained at the air conditioning company, I was part of their finance organization starting as a senior analyst, and leaving the company as the VP of Finance, or the CFO, for their Latin America air conditioning business. Was a million-dollar business with about 1,500 employees. It was very interesting to me, in 2017, I was thinking, what’s the next step? What do I want to do next?
I had moved to South Florida a couple of years before that. I was looking to jump into something smaller, I wanted to do something different, and I wanted to leave the big corporate environment. Around the same time, the current CEO and other co-owner of the firm were in the process of buying the firm from the founder, they quickly realized that they really enjoyed the work that they did with the clients, but didn’t enjoy as much, nor had the time to do everything else that needed to be done at the firm. I got a call one day, and said, “Hey, would you consider coming and working for us?” I said, “Well, I hadn’t thought about it. You’re a little smaller than I had been looking, but let’s talk.” That’s all she wrote.
Five years later, I’ve been in the role. I love it for many reasons, mainly because I do wear a lot of hats, but also because I get to make an impact every day in the firm, the growth in the firm, and in the professional development of all the people that surround me. It’s been a tremendous experience. I definitely have a different background, in finance and corporate strategy, but I’ve been able to bring a lot of that experience and implement it here, which I think has helped a lot of our growth.
If you ask our CEO, one of the things that have contributed to our growth over the last five years has been the ability for her and the other owner to step away from the day-to-day management of the firm and focus on service. That’s been really, dramatically impactful.
[00:09:45] Matt Sonnen: Thank you for going through that story, and for that last comment. That’s the whole point of this podcast. A lot of you know this, but I get so frustrated with the mentality in our industry. All those ops, pat us on the head. Those Ops folks, they’re an expense, but they’re not driving the growth of the organization. It’s all about the sales team, the sales team, and then the advisers that are bringing in the business. What you said is so important, you freed everyone up to go focus on business development. Your firm couldn’t have grown the way it has in these last several years without you in that role. Super important. Thank you. Alex, I mentioned you joined Byron last year. You were supporting RIAs, but you haven’t worked at an RIA yet. Why don’t you walk us through your career path?
[00:10:37] Alex Satterfield: Yes, I actually started my career with Vanguard, part of an accelerated development program right in the middle of 2008, which was a perfect time to join the financial industry. I loved Vanguard. The mission, the way that they do business, and the way that you see an organization come together when under fire when the whole industry is under fire. It taught me a whole lot. Over a 12-plus year career at Vanguard, I got a lot of experience under one roof. I had the opportunity coming out of the development program to lead support service centers.
I learned a lot about financial planning. I actually wanted to become a CFP, so I started and finished that journey very quickly, and then, moved into relationship management for high net worth. Worked my way into having a $26 billion book of business, a team of 12, and very talented, very good relationship managers and planners that helped to really get to know their clients over a million, and take care of that whole house, and that whole broader book, and drive some really meaningful sales goals and planning efforts just to do the right thing for the clients.
I also had a chance to work in our strategy, IT, project, and program management. Vanguard also supported me to do my MBA outside, early mornings, and late nights at Wake Forest University. I had a phenomenal career at Vanguard. I learned a ton. Through ultimately my MBA, I realized this is an opportunity to look in the mirror and see, who I am, what is the impact and legacy, and what I enjoy the most. I think that ultimately, I’ve got an entrepreneurial background. My dad owned his own business, as an optometrist.
My wife is a state planning attorney, hung her own shingle, and does her own thing. I think that the RIA space is filled with entrepreneurs that are just bright go-getters. At the end of the day, an entrepreneur and an RIA have the highest accountability. I mean, their name is on the wall. It’s their clients they went out and got in their business. I really valued the independence. We’re not trying to pitch our own product or do our own thing, and very organically grow through our own complements and offer, but their sole focus is the client in front of them across the desk, or on a Zoom call or wherever, but their clients are their sole focus, and it’s unbiased.
I just love that about this space and this industry. Yes, I had an opportunity to cross paths with the leadership at Adhesion. They outsource all the investing and empower RIAs, and Create, and they have the second-largest model marketplace of UMAS and SMA investments that allow advisers to be advisors. It’s just a fantastic mission. It’s helping the good guys, is what it felt like every single day. I love the people. I miss the people, and I miss the client. Anyone that’s listening and that was a client, you are missed.
Certainly, I led the service initially, and onboarding, and then ultimately also assumed all the relationship management. As I moved into the relationship management side, working with Adhesion for a couple of years, passion is contagious. These entrepreneurs and advisors were so passionate about their clients, and the way that they’re making an impact in their clients’ lives that I realized how much I missed it going back to when I led a book of business and wasn’t looking, but ultimately had an opportunity to come and build that here at Byron.
[00:15:23] Matt Sonnen: Well, in addition to freeing up the folks so that they can go do business development, we just published an article the other day that talked about the COO as the main strategic thinker at an RIA. Most RIA owners are financial advisors at heart, and they’re always going to self-identify as a financial advisor first and a business owner fourth or fifth down the line. When you ask them, “Hey, what are your strategic goals for next year?” A lot of the time you get the answer, “Well, we want more, we want more AUM, we want more clients, we want more advisors,” et cetera.
But it takes the COO to take a step back and say, “Well, wait a minute, what type of clients do we want more of this year? What service offering is going to best attract that ideal client that we’ve identified? What type of business are we really trying to build here?” These are all incredibly important questions, but in my experience, without a competent COO in place, these questions are often missed. Edgar, I’ll go to you first on this one. How are you involved in the strategic thinking and planning at Tobias?
[00:16:28] Edgar Collado: I think you hit the nail on the head with most of the owners or founders of RIAs are advisors, and they really enjoy that aspect of the business. Like I said before, not so much the aspect of running a company. In our experience, when I came here, I started asking some of those questions that you mentioned, also around, what’s our kind of winning aspiration, what are our long-term goals, and where we see ourselves in five years. We were good at annual budgeting because you kind of always have to do a budget, but we weren’t very good on the long term, and who we wanted to be as a firm, and thinking about all the aspects that go into that.
I actually run our strategic planning process, and we do it every year. We don’t go as deep every year as I would like to do under those time constraints, but when we do, we look at a set of broad categories that we ask questions on. What’s happening in our industry? What are some of the trends and implications that are important that we should be worried about, or aware of? What actions do we need to take? What’s happening across the different customer segments, and the way investors are hiring advisors, is there a change in that? What are some of the capabilities that we need?
One of the things that we ran into early on after I started was, we were getting approached by a lot of high-earning professionals, very successful in their careers. They hadn’t really accumulated a lot of investment assets, and most advisors were turning them away. These are a great opportunity for us that’s going to guarantee at least some of our growth into the future, so we developed an offering to fit those types of clients, and they weren’t, “the ideal client at the time” but they will grow into that. Then, what are some of the systems that we need in place, that’s HR systems or operational systems?
I think we’ll talk about it in a little while, what’s the right organizational structure? These are all the types of questions that when you’re busy working with clients, and then the “operating role as a CEO or an owner of an RIA” is done in the evening after dinner, and your kids are in bed, you may not have the time to think this way.
[00:18:55] Matt Sonnen: Alex, talk to us about how you’ve brought this type of thinking to the organization.
[00:19:00] Alex Satterfield: Yes, absolutely. I’ll be the first to say there’s no shortage of ideas, an even better problem to have, no shortage of good ideas here at our firm. I have found that what we have to do is take a step back and Edgar alluded to this. You got to ask, what’s our North Star? What is it that we do really, really well? How do we get clients? How does this work? How does our RIA work? What do people say about us? What do we want them to say about us?
Sometimes even before you start asking those questions, you got to ask, “Why are we in business? What are we doing, and what do we want to do when we grow up?” For us, our firm, we’ve taken that step back, and we’ve said, we are about a premier client experience. I love that, everyone will say that. But what does that mean? It means we haven’t lost a client in the last three years. Now, I am knocking on wood because that’s something that you can always say but never take for granted, all that goes with that, but we just pour into our clients to make sure that they have a total white glove from your experience.
Because we do that, we are able to do the follow-up question, “Well, who else do you know that’s not having a good experience?” We build out our referrals, which then leads to ultimately new business, and with that new business is an opportunity to create yet another premier client experience. It’s a simple cycle, but it’s worked. It’s accelerated our growth and grassroots marketing, but we have to first ask, what is our Northstar, and how are we going to assess the health of the client experience, the health of our referral network, and the health of the new business that we’re bringing in in terms of quality and quantity of prospects?
How do we measure our success at these things? How do we know where we are at any given point in time? That’s our core business. We’ve taken steps back to then say, “How do we define success qualitatively and quantitatively, and continue to sharpen each of those three elements?” At the same time, what’s happening in our broader industry? What’s happening in our community? What are local trends happening in the North Carolina Regional Charlotte market for us? How do we really identify the driving forces and the why’s behind each of those events and each of those trends?
Then our business comes to an intersection of, do we want to lead? Do we want to follow fast? Is that out of our scope? Is that not something that we do well, and we just want to watch it monitor these trends? Ultimately, strategy is about being true to who you are and what you’re trying to accomplish.
[00:21:55] Matt Sonnen: Yes, while strategic thinking is so vital and important to the firm, as we just discussed, we don’t always want it coming from the top down. Some of the greatest innovations to the business can come from the employees that are in the trenches every day, working directly with the clients, seeing and hearing what roadblocks are coming up on a regular basis, or just knowing what repeated requests are coming from the clients. Alex, how do you get the entire team involved in this strategic planning process?
[00:22:23] Alex Satterfield: Yes, I love that question. I think this is really a leadership question at the end of the day. I think it starts with making sure the entire team knows why they’re here, and why we’re here as a firm. Everyone is committed and bought into that mission, and whatever you’re going to do to assess the quality, either numerically, or quantitatively, everyone’s bought into the system, it’s so much easier. But then as the COO or any leader, as a manager, as a team leader, as a director, or work at any point in my career, it’s my responsibility as a people leader to know how, and know their what, and know what their struggles and challenges are, and know their day-to-day. That doesn’t come by closing the door in my office, that comes from regular touch points, one-on-ones.
In those one-on-ones, I probably listen more than I talk. It’s probably 70/30. I don’t think I was hired at any point in my career, or any point that I’m going to have all the answers, I think it’s to maximize the answers from within, and from within the team. It starts with that listening, but then it comes with creating places that are safe for those ideas to come together, then be prioritized, and then be acted upon with a clear assignment of who owns what, by when, and how are we going to be better from it. When that transparency, that line of sight, and that empowerment is in, and those boundaries are set with priorities and resources that just allow people to be successful, passion is contagious, but success is too. If people are loving what they’re doing, they’re seeing the results, you can really get at humming the whole machine. I think that’s much more about leadership than it is any other skill.
[00:24:31] Matt Sonnen: Edgar, I know that this has been a priority for you. Talk to us about how you approach this.
[00:24:37] Edgar Collado: Sure. When we looked at the capabilities like I mentioned before, that was important, one of the ones that kept coming up was the team’s ability to really think and act strategically, and what that means. Yes, when you’re a smaller firm, and you have five employees, generally a lot of that direction is coming from the top. I’d frankly be lying to you if I told you that we’re perfect here, this is an area that we’ve struggled with, and we’re currently in the process of thinking through what is the best way to really put this into practice.
When we think about thinking and acting strategically, that encompasses so many things. What we’ve done is we’ve looked at some of the capabilities and the competencies that we think our teams need to have in order to think and act strategically [inaudible 00:25:23] happen anywhere in the organization, from the receptionist to the adviser to the client, to the marketing person, anyone can really think and act strategically, and how do we really give them, A, the tools and resources that they need to do so, but B, give them a lot of the coaching and guidance so they can think through how to do that best.
I’ll give you an example, the use of data. If you’re coming with a decision and saying, “Hey, I think we should do this, I think we should enter this market, or this or that, back it up with some data, present and share data that are intellectually honest, and it’s not necessarily like an opinion. The other aspect of this is communication. Again, we don’t do a great job of this, but we make an effort to communicate to the team, what our strategic goals are. At times a lot of these conversations happen in a closed room with two or three people. If that’s happening in your firms, then there’s no way the rest of the team can truly be aligned with your strategic goals, they don’t even know what they are.
One of the things that are also equally important is the ability to have open and honest communication in the company, and at the firm, and realizing that some of the capabilities and some of the ideas that are going to come from in regards to new strategies, and in regards to the execution of priorities and initiatives that you have, and even how to prioritize, and what you should focus on is going to come from a lot of places in the organization. Providing the tools and the resources, and really giving the team the ability to speak up when they think something is not right, I think are truly some of the things that are going to help an organization set itself apart, and realizing that all the ideas don’t have to come from the top.
Allowing the organization to share those ideas, and providing some feedback loop is going to have a big impact. The other thing that we’ve done too is, we’ve invested in our team so that they can develop these skills. We took some of our advisors last year, and we sent them to leadership training, and management training. One of my advisors is currently getting their MBA. We’re being very proactive about trying to develop these capabilities in the organization. As we grow, and as we start delegating things to other people, it’s going to become more and more important.
[00:27:48] Matt Sonnen: I think that’s exactly right.
[00:27:50] Alex Satterfield: Edgar, I think that’s awesome. I think you bring up a really good point. One thing I would add to that is, as we go through managing, and actually setting the expectation that you can contribute from any chair, it’s also important to reward that, like when you see it, and to do that publicly. One thing that I’ve seen done very, very well at Vanguard in particular, is if a new idea comes up, they would reward that on the spot, and celebrate it.
It would be a new story that goes around the before, the after, and the impact that this person had. It frequently didn’t come from the top down. When you do that time and time again, it not only makes it safe, but it becomes ingrained in your culture. It’s a big part of who you are as an organization, what you believe, and then you’re now living it. I think that that’s just a key important part that is, yes, a motivator for the employees and for the staff, but certainly, a big part of your identity as a firm.
[00:28:57] Matt Sonnen: Great. Well, Alex, as you did your assessment of the firm, when you first joined, I know you came up with a long list of things that you wanted to improve, tweak, or implement, how did you set out to make a priority list? You can’t tackle everything at once, so how did you determine what to work on now versus what items would be a next quarter initiative, versus what tasks were going to be next year’s initiative?
[00:29:22] Alex Satterfield: [laughs] I’m laughing because this is the hardest part. This is what I think because, I see the potential, and I see the really good ideas. I think that I’m a firm believer, that there are multiple ways to get to one destination. I want it all yesterday at the same time, and I don’t think that any of the ideas, concepts, or priorities are unreasonable, but you’re right, if you focus on 12 things, you’re not really focused on anything. I think that historically, this is a point of pain that I’ve seen a number of organizations and even us fall into as a firm, into that trap, what you have to do is take a few steps back and ask, why do we need to focus on this? And why is this a priority?
And first, you vet it and make sure that it lines up with your north star that I talked about earlier and the core of your business. Assuming that it does, then you got to find out why it’s not working as well as it could, or what’s really behind the problem, and a lot of times you’ll come back to a common answer of, “Well, it’s time,” or, “We don’t have the right talent,” or something there, but go deeper than that. Is that because you don’t have enough people, you’re not developing your people the right way, training them the right way, or even having a defined role that your people know is a priority that they need to contribute to?
Are you assessing their performance? And does it align with a system of metrics and checks and balances that go all the way up to those KPIs or key goals that you have? And if not, then talent’s not just the answer. There’s something behind it. Or time isn’t just the answer, or wherever you come to the conclusion, there’s a root cause behind it. Keep peeling that onion, and as you peel the onion, it makes you cry sometimes, but it’s important, and from there you design a plan that tackles that root cause. Now, six whole months in the COO role, and it is drinking from a fire hose at times, and I tend to prioritize, Matt, to answer your question just more succinctly, what are we best equipped to do? How much time is it going to take to get this going, or to get this in a better space?
Let’s make sure that we’re not just saying the answer is to hire someone, but let’s build out what that role is going to be, how they’re going to do it, what changes that’s going to have to the people working alongside this person, and their roles and responsibilities, how we’re going to train them. You can’t just stop at the first step. You’ve got to plan it all the way through to do it right, and that’s why all of this takes time, it takes discipline, and it takes saying no to some things that could be distractions to keep you from realizing the potential of whatever it is that you’re currently working on.
It’s a balancing act at the end of the day. If you find out what’s really behind it, and the root cause, you’re always going to be in a better position to tackle it, and then if you align what’s going on with your organization, with your key priorities, then you’re going to give it the time it deserves to see it all the way through the finish.
[00:32:56] Matt Sonnen: I love that answer, and Edgar, at the top of the interview, I rattled off all the areas of the firm that you have your hands in. How do you prioritize your never-ending to-do list?
[00:33:07] Edgar Collado: I joke about my title COO, which means a chief of other, so it’s a constant juggling act, and it becomes ever more challenging as you start ironing people to take over some of their responsibilities. Because no longer is it just making time to do the work, but it’s also making the time to help someone else, and guide and coach them to be successful.
Backing up to answer your question, when I first started a little more time than Alex has been in the role, and Alex, I wish I could say it gets better or easier, in some aspects might, but it becomes even more and more challenging over time, but one of the first things I did was I’ve met with everyone in the organization, and from function to function outlined, what are some of the pain points, what are some of the things that people wish were done differently?
What are some of the things that people want to stop doing? And I put together like literally a big huge laundry list of things that I think as a firm we want to get done, and then came the exercise of really honing in on some of the key priorities at the time. One of the things I learned many, many years ago was in this two-by-two prioritization matrix where you look at things that are high value, but low effort, and you do those now, and then you look at things that are low value, but high effort and those are the things that you maybe decide not to do, and even though I don’t necessarily have and look at something like this every single day, it’s the mentality that we go into whenever we’re trying to make decisions around prioritization, is what of those things are going to have the most value and take less effort, and let’s just get those done like as soon as possible.
Low-hanging fruit, so to speak, and some of the things that are maybe high value, but are going to take more effort are those things that you’re going to start planning for, or maybe delegating to someone else on your team. That’s really helped us work through that. On an annual basis, we start the year off with a list of goals and things that we want to accomplish, and we think realistically, how much can we actually get done? I read a book a couple of years ago called Essentialism: The Disciplined Pursuit of Less, he jokes and talks about how the word priority and prioritization by definition means one thing.
As humans, you can really only do one thing really well at a time, and over time, priorities became like a list of priorities, so we always focus is, what is that one thing that needs to get done now, whether that’s day-to-day things like, “Okay, we have to update our ADB, so for these couple of weeks, that’s what I’m working on. That’s my number one priority,” and thinking with that mindset, like, what’s that one thing that I need to do next that’s going to incrementally get me closer to hitting my goal? At the same time, it’s important to be flexible. Realistically, business change, people change, people leave, and people come. In our industry, markets are very volatile, right? So you have to be willing and able to be flexible.
A very simple example, and maybe one that a lot of your listeners may be going through, is we’ve historically been a custody with TD Ameritrade, so Schwab bought TD Ameritrade, and this year they’re going to be transitioning all the TDA clients to Schwab. Well, that was never in my long-term strategic plan. There are things that I had to push off my to-do list, and now my team and I need to focus on making sure that that happens seamlessly and doesn’t impact our clients negatively, so being flexible is equally as important. Nothing that we write from a strategic planning perspective is set in stone. You have to be willing to flex as the business needs it. Then lastly, I think really important to learn from your mistakes.
You’re going to make wrong decisions or bad decisions. You’re going to ultimately do something that you wish you hadn’t done or maybe done something not as good as you wish you had, but what’s important is, are you learning from that? So maybe it’s higher, maybe it’s a workflow that you put into place or a process that you re-engineered, but it doesn’t stop once that “project” is done, let’s see if there’s a better way to do this, and having that mentality of continuously improving, continuously learning also helps a lot when you think about working through your priorities and what you want to get done.
[00:37:39] Matt Sonnen: Fantastic. With so many tasks and initiatives on everyone’s plate, it’s always tempting for RIAs to say, “Well, let’s not do these tasks ourselves. We’re going to outsource them,” but outsourcing can be a tricky concept. Many tasks can’t or shouldn’t be outsourced, and really need to be handled in-house. Then other tasks, even when you do outsource them, there’s still a lot of work and responsibility left in the hands of the RIAs employees, so many firms find themselves frustrated because they thought they were completely ridding themselves of certain responsibilities, but then they find out that their employees were still handling certain aspects of those outsourced tasks. So, Edgar, talk to us about how you determine what can be outsourced, and to what extent certain tasks can be outsourced.
[00:38:26] Edgar Collado: Sure, Matt, the first thing I’ll say is that it’s never an easy decision. It’s always difficult when you’re thinking about outsourcing, and I always come back to, what capabilities I either need or want to have at the firm. And am I willing to invest in that internally, or am I okay handing that off to someone else? I know a lot of firms, for example, work with PEOs, and they outsource a lot of the HR-related stuff, and we’ve talked about it, and it comes up every couple of years, but for me, like that’s a capability that I think it’s so important in our industry that I don’t want to outsource this. I’d rather do it in-house, even if it takes us a little bit more time.
I want to be and have the flexibility to do HR the way we want to do it, because it is such an important aspect of our business, and even something like payroll where you think, “Hey, I’m going to outsource my payroll, and I can just go to sleep and not worry about it.” It’s just not the way it works. Ultimately, the buck is going to stop with us, and if someone has an issue with their paycheck, or if there’s a bonus that needs to be paid out or a raise that needs to be reflected, these are all things that need to come from us. So, I didn’t find that I would get the value out of outsourcing that, for example. We look at the idea of outsourcing compliance, and that’s another thing, right?
The SEC is not going to take, “Oh, I outsourced it, so that’s why that’s not working the way it’s supposed to be,” as an excuse. Ultimately, I need to be able to stand behind what we’re doing as a firm. There are some things that we’ve outsourced, but I’ll tell you, marketing, for example, we outsourced a lot of the marketing initially, but at some point, we came to the conclusion that while we enjoy and we do work with an outside firm, we were missing something. That’s something was the ability to have someone in-house that can, go advisor by advisor, interview them, get ideas, help, go to events, speak to prospects, and work with our COI. We hired a marketing person last year, and it’s been a tremendous value add.
We still outsource some of the marketing work, but again, it came back to, what capabilities I want to have in-house, do I think I can develop in-house versus those that I know that I can outsource? It’s tough. I mean, yes, there are some things I can do and maybe save money on if I outsource. As a firm, I also, and especially in our industry, because it’s so heavily regulated, I appreciate having the ability to control some of those things more than if I outsourced it. Now, things like, at some point, we did a lot of our rebalancing using spreadsheets, right? This is some time ago. We used TRX for a while, and now we use Orion’s Eclipse. That was smart, right? To leverage technology, to outsource some of that in a way, but to still retain some of the control.
It’s a balancing act, Matt, to be honest with you. Something that, every year comes up, what are some things that we can do or outsource more of? It’s not always about saving money. Sometimes it’s also, do I have someone who has a high level of skill in my organization that’s spending a lot of time on something that’s not necessarily equally value-adding? Then maybe that’s something that we can outsource. Me, I have a finance and accounting background, so for me, it’s very easy to work in QuickBooks, bounce accounts, and do all that, because I’m very comfortable with it, but it’s not necessarily where I add the most value to the organization. That’s something that I’ve outsourced almost from day one.
Actually, I’m in the process of interviewing to do a higher level of outsourcing there, because, it’s still taking up more of my time than I would like so that I can focus on things that are more important. It’s a continuous evaluation. It’s looking back and saying, “Hey, what do I want to have in-house? What capabilities do I want to develop in-house that I think are going to be important, that is going to get me closer to that north star that Alex mentioned? What are some of those things that I’m okay if I’m not doing them at my level, but that I’m able to outsource and get it at a level enough that I’m satisfied with without it negatively impacting our business?
[00:42:55] Matt Sonnen: Alex, coming from Adhesion, I know the story there is very much, “hey, RIAs, outsource your investment management to us.” I know you’re very familiar with the concept of outsourcing. Now that you’re working in an RIA, what has been your experience with outsourcing other functions beyond just investment management?
[00:43:12] Alex Satterfield: No, I think it’s a great question, and I would actually go back. I think Edgar’s and I’s backgrounds are very similar because we came from large organizations where we were managing leaders of leaders, teams of teams. Like we had dozens of people. Going from that to an RIA that is seven now, soon to be eight, is a shock, and it’s different. But one thing that I noticed when I was considering coming to Byron was, we’re seven people. I’ll be number seven, but we do have a PEO. We do have outsourced partners with trading our bonds, fixed income, and different specialties and different things that we do, marketing, we have a lot of partners that get us through.
You almost have to think of each of those partners as your own employees. What do you do with your employees? I like to have a quarterly review. Two of them are informal, and two of them are relatively formal, like check-ins. What are you supposed to be doing? What are the goals? What are the objectives? Here’s your performance. You have to manage your vendor and your relationships in that same way. While we’re short in terms of headcount, the way you manage, set expectations and really know what you’re getting into, you should have vendor quarterly reviews.
Honestly, I learned that from Adhesion, because I was on the other side of that table having presidents and COOs interview me about why they should stay with Adhesion. Sometimes it would be an annual, sometimes it would be every six months, but that’s where I really got to build that relationship and strengthen it, and showcase the value that by outsourcing this, here’s what you’re getting.
So much of it I think gets back to, what are the elements of your core business for us as experience referrals and getting new business, right? There are different components of that. You would never outsource anything that lines up directly with those things, but for everything else, it’s worth that consideration. I think Edgar brought it up perfectly what are the capabilities that you need and have to have, but then it’s, what’s the best path to get it? You’re going to interview any person that you want to bring in and hire full-time. Edgar says he interviews his vendor relationships and prospects, and that’s exactly how you have to think of it. You have to interview them too, but you also have to check in and make sure that they’re going in the right direction.
You have to recognize, look, whoever you’re interviewing as a vendor, that’s their sales team. It’s their professional interviewer, right? They are the pro at interviewing. You’ve got to go a step past that with your due diligence to make sure you’re on the same page with a reasonable set of expectations. That’s how you have a truly long-lasting, durable partnership with those terms. That’s what you want. You want a partner, you don’t want a vendor. This space is largely open architecture and has a lot of choices out there. Sometimes a paralyzing amount of choices, but it’s not so much about, “Sid I choose the right one?” It’s also, “Am I managing them the same way I would manage this in-house?” Right? With the same expectations, the same checkpoints, and to make sure that I’m getting what I need? You have to assess that periodically.
[00:46:44] Matt Sonnen: Well, one last question I’ll throw out to both of you. Our listeners hear me say all the time that I believe 75% of a COO’s job is HR. It’s determining which employees are filling which seats when to hire new employees, how to fit those new employees into the existing team, and making sure everyone understands their specific roles and responsibilities, et cetera. Edgar, how do you get the right people in the right seats?
[00:47:09] Edgar Collado: Yes, that’s a good question. Going back to what we just talked about, outsourcing and all that. Another aspect of what we looked at, and actually, we looked at this when I first joined when we did our strategic plan, is what is the right organization structure. Even about, forget about the right people in the right seats, how do you determine what are those seats, right? That’s the first question. What’s that structure that makes sense for you? We looked at and evaluated all the different possible reporting structures in our industry, right? From traditional vertical organizations to more horizontal ones, to strategic ones. Then there’s Angie Herbert’s diamond structure, which a lot of your listeners are probably familiar with.
We settled on something similar to the diamond structure. For us what was most important, there were two things. One is having some clarity on when I needed to hire someone, right? When do I need another advisor? Or another client service person, or whatever role it is that I’m trying to fill. Also, am I providing the environment and structure that’s going to help everyone in the organization learn and grow? In your traditional vertical structure where you have the firm principle with maybe an associate advisor, and then a client service person, there’s not a lot of flexibility for growth and ability for growth.
For us, it was about first defining the right structure, and then it’s defining those roles or those seats as well as you can, right? What are some of the capabilities that you need? What are some of the background and experience, credentials, et cetera, that are required for someone to be successful in their job? I’ll tell you for us on the advisory side, we have a pretty well-defined career path that says, “Here’s where you’re starting in the organization, either as a paraplanner or as a client service associate. Here are the things that you need to get to the next step, the following step,” et cetera, et cetera, along with a list of capabilities that you have to develop or be working on in order for you to hit that, go into that next level. We use that not only internally, but we use it externally when we recruit as well.
If this is the role that I’m trying to fill, if it’s a diamond that I’m trying to build, or if I’m missing, first base, or a home plate on a diamond, it clearly defines who and what experience and background I need to fill that seat. That’s, for us, has been really I would say life-changing in many ways. It’s, A, given us the ability to help people grow and develop, and give them more autonomy and responsibility. B, it’s freed up some time for our more senior advisors to do other things that are going to contribute to the firm’s goals and growth.
[00:49:58] Matt Sonnen: Alex, talk to us about the HR component of your job.
[00:50:02] Alex Satterfield: Absolutely. I think Edgar’s spot on that you first have to define the seats, and then you have to define how the whole organization and collection of seats are going to work together. Edgar, you got a lot of really good points in that and a lot of wisdom. I think that you also have to make sure in addition, that everyone is bought into the why, but that there’s transparency as to why I’m here, and what I’m doing, and how I’m doing, and how what I do every day contributes to our broader mission. I think you do that by a series of goals, objectives, and milestones, and then check-ins along the way to make sure everything’s moving accordingly. You might have a goal of, for example, we want to have just a pure hypothetical 500,000 of new revenue coming in for this year.
If that’s the goal, then to get there, how many leads do you need, and to get there, how many new appointments do you need, first new scene pitches, how many clients do we need to close, and within our ideal client market? If you have accountability, and everyone’s able to see, “Hey, I helped hit this revenue target,” and make it fun, and reward along the way, but also, “I helped hit it because I was responsible for the leads, and I got us 200 leads that got us the 15 new clients,” or whatever the numbers are. It’s going to be different for each firm, but everyone is able to see not just the right seats, and how they work together, but also their contribution to the big picture. I think that’s what continues to just motivate and keep people there.
It’s the COO’s responsibility to make sure everything stays on track, and that you have vetted out what needs to be successful at every angle, who’s going to be responsible for that component of success, and how do we make sure that they’re trained up and ready to perform in that role so that ultimately we’re able to meet that objective? I think that that is really critical. It’s not just the right people, the right seats. It’s making sure that it’s managed along the way.
[00:52:27] Matt Sonnen: This has been a fantastic conversation, Alex and Edgar. Thank you both for spending some time with us today, and sharing your knowledge with our listeners. Thank you.
[00:52:35] Edgar Collado: My pleasure.
[00:52:36] Alex Satterfield: Thank you. Thanks for having us.
[00:52:39] Matt Sonnen: Great. That is a wrap on Episode 49. We will talk to everyone soon.