EP 7 – Transcript

Matt Sonnen [00:00:24] Hello everyone! Welcome to Episode 7 of The COO Roundtable. I believe this episode will go live right around, if not exactly on our announcer’s 6th birthday. So, let me just say happy birthday to Luke Sonnen. He is on a field trip to the park today as part of his summer camp, so I just want to say happy birthday Luke. He likes to remind us often that he is the true boss of PFI Advisors so we wouldn’t be here without Mr. Luke. But we have a very exciting episode today. As I’ve said many times the goal of this podcast is to elevate the general perception of the COO role within the RIA community. We’re trying to shed light on the fact that this role serves much more than simply a technology function within your organization, but the COO is a true business consultant within your firm that not only drives profitability but also opens the door for both organic and inorganic growth. And both of our guests today are a perfect example of that so I’m very excited to speak with them. We have Heather Goodman, who not only serves as the COO of True Capital Management in San Francisco, but she is also a founder of the firm. Heather and I met several years ago. We were on a COO panel together at a Pershing Conference and we’ve spoken several times over the years. I’ve always been very impressed with her entrepreneurial spirit and her approach to wealth management in general, and how she positions her firm in the competitive landscape of our industry. As she will discuss today being a true entrepreneur and being a true COO, she has held just about just about every position at the firm since its inception in 2006. So, I’m very excited for her to share her thoughts today with everybody. Welcome, Heather.

Heather Goodman [00:02:11]Thank you. Matt it’s great to be here and I’m excited to chat with you guys today.

Matt Sonnen [00:02:15] Awesome. And joining Heather is Mark DeLotto of Massey Quick Simon. The firm is headquartered in New Jersey. They also have offices in Los Angeles Chattanooga, Tennessee and Denver, Colorado and I believe all of those locations were added over time due to acquisitions and we’re definitely going to speak to Mark about the firm’s or inorganic growth as well as organic growth plans. Mark and I initially met a few years ago at an Echelon conference here in Southern California and we’ve had some great conversations ever since around a lot of the topics that we’ll be discussing today; products and services to offer clients; the scalability of the broader organization; HR policies and procedures among many others. I’ve really enjoyed getting to know Mark. He is a very thoughtful leader. So, welcome Mark and thank you for being here.

Mark DeLotto [00:03:09] Matt, thank you very much. Glad to be a part of the discussion. And nice to meet you, Heather.

Matt Sonnen [00:03:17] Awesome. So, Heather I’m going to go to you first. Can you just give us a high-level overview of True Capital Management and the history of the firm?

Heather Goodman [00:03:27]Sure. So, we technically did start in 06 but I always joke because it was around December 28. So, I think we officially really launched in 07. So 2007, we actually, Doug Raetz and I are the two Co-Founders. We were at Smith Barney and I’ll talk a little bit more about that probably in another question. But we left Smith Barney realizing that there was a new need for a platform that was much more independent, and much more service focused. And so, we left with about $40 million in assets and about 30 clients and now we’re about $1.1 billion with about 220 households and about 36 employees. Our focus is on a full-service family office for professional athletes and sudden wealth individuals. And we really offer that full-service component everything from bill paying and investments, all the way to insurance and alternative investments and buying homes and buying houses and family estate planning and the full gamut. So, it’s a true full-service family office for a niche market that definitely needed an independent platform like an RIA versus the wirehouse infrastructure. And we have offices in both LA and San Francisco.

Matt Sonnen [00:04:50] Oh okay, I missed that. How big is the LA office?

Heather Goodman [00:04:53]We have about nine people down in LA. Down in Century City.

Matt Sonnen [00:04:59] And Mark, I believe Massey Quick Simon was founded about the same time – early 2000s. Can you give us an overview and a background of the firm?

Mark DeLotto [00:05:09] You bet Matt. So, the Co-Founders of the firm were Les Quick, Stuart Massey, and Stewart’s father Dwight Massey and they founded the firm in 2004 and really was born out of frustration. Les and Stewart had both recently retired and they found that they were being constantly pitched by the same brand names, pushing the same product, pushing the same agenda. And so, they got together over breakfast – as Les would say “Because that’s what retired people do. They go to breakfast.” And so over breakfast they shook hands to start Massey Quick Simon and each one putting up their own personal capital to start the firm and fast forward 15 years now later, we’ve got about a little over $4 billion of assets, 350 households, and 55 employees. And really the services kind of run the gamut as we’ve evolved over time. We were a very investment focused firm, I would say, when we started out in 2004. Focused on a lot of institutional and not for profit business. And over time we added more and more financial planners, a Head of Financial Planning, and that led toward more planning opportunities and a more holistic relationship when you’re looking at more than just the investment piece. And then we merged with a family office in 2017 that brought with it a whole host of services that we had never even dreamed, of actually ones that I said that we would never do because I didn’t know anything about them. And things like tax and bill pay and accounting, bookkeeping in house. And that offering was something that we found very complimentary towards where we were headed in terms of the future and where we saw client relationships. So, fast forward 15 years, firm has changed a lot. But the people, the culture, still very much the same. Stuart retired last year but Les is still very active and Dwight Massey, I’m proud to say that my partner Chris Moore and I purchased his equity in 2013. So, the firm is going strong 15 years later.

Matt Sonnen [00:07:52] It’s great. We’re going to do our best to not turn this into a wirehouse bashing session. I want to get to all those family office services. I definitely have that on the list of questions. But first, let’s go through, personally, both of your backgrounds. We’ve talked about the firm. Heather before launching True Capital what were you doing? What was your background? And the skills you picked up along the way, how are you using those in your role today?

Heather Goodman [00:08:31]Yeah. So, I grew up in a very entrepreneurial family and knew that I always felt comfortable running a business and I always kind of envisioned that. I didn’t know what type of business or what form it would ever take but I was comfortable around that kind of risk minded environment. I started my career at Deloitte I was a CPA in public accounting and then moved to business development in a for a search engine during the Internet 1.0. Living in the Bay Area in the mid 90s you couldn’t not work for a startup if you felt like you had some entrepreneurial spirit in you. So, I was lucky enough to do that and after watching the highs and lows of the dot com boom and bust, it really gave me a greater perspective of what running a business or what it took to actually start a business. And so, after that I looked around and decided I knew I wanted to be on the business development/sales side of life, but I always valued my foundation of accounting and operational side. And I kind of stumbled across financial advising and I interviewed with Morgan and Merrill and Smith Barney and what drew me to Smith Barney at that time was very much the entrepreneurial spirit. You could really build your own book of business and really however you wanted. And so, I started my career thinking that I was going to be servicing dual income families where women were either the breadwinners and or the decision makers on family finances. And I started out by building some seminars and doing symposiums and pretty quickly in my process through Smith Barney, one of the things that I did learn from growing up in an entrepreneurial household is that I wanted a business partner. I wanted somebody to go through a business with somebody to bounce ideas off of. Realized that two brains are better than one. And so, within my first year I really interviewed and kind of got to know every adviser in my 100 person office in San Francisco and pretty quickly met my now partner Doug. And we just realized that our skill sets were very complementary. And so, I was building my holistic planning approach on financial advising and Doug was building a business on corporate executives. And we kind of came together and realized that this could actually work. And within that first year we had an opportunity to enter the sports world. And this was really kind of the early years of sports where family office or business management services were really not offered to athletes it had been around for entertainment forever. But it really was important for the athletes face because Michael Jordan was really the first athlete to make real money. And so we had an entree into the sports world, realized that it was pretty under serviced and decided to really learn the business as much as we can and seize the opportunity. So, for the next four years or so we learned everything we could about the business. And Doug spent four years pretty much on the road following agents and business managers and accountants and learning about what it takes to actually acquire clients. And I spent four years building the back office and the infrastructure and investing money. And so I taking my accounting and finance background and saying ok, let me think about this from a business perspective but also then learning how to invest the money and really create the plans that were needed for these type of clients was really fascinating and that’s where we realized we needed to do the holistic side of it. We needed to do the banking, we needed to do the investments, we needed to offer alternative investments, we needed to review deals that our clients were seeing and all those kind of things that we needed to be on a more independent basis. And so, we spent a couple of years trying to figure out what that vision looked like and we’re fortunate enough to be able to build it and had a seed investor in our early days which has been one of our lifelines and still great advisors for us throughout the entire process – who is Ronnie Lott. And so that’s a wonderful relationship that we’ve had from day one. And just really grew that business mentality of educating athletes, providing full service, and differentiating ourselves in the marketplace from not just a business management perspective or not just from an investment perspective but doing a holistic offering for them. And so, over the last twelve years, kind of what Mark said, the business kind of morphs so because you have these different things. We just kept having to add services along the way and realize that all of the skill sets that we learned from our previous years whether it’s from my accounting and tax years, which I firmly said I never wanted to own an accounting business, I somehow ended up owning an accounting business. I didn’t realize that it’s a compliment to the investments side tremendously and especially for our client base. It’s been an interesting ride. It’s been a wonderful evolution to watch the services grow and the athletes learn and really change that mindset of what is important for them.

Matt Sonnen [00:13:39] That’s great. I’m going to make a random aside here for a second. Being fairly new to the entrepreneurial world, everything I’ve learned about entrepreneurship, I learned from the movie Jerry Maguire. I watch that anytime that comes on TV and so you’re talking about athletes not making a ton of money. So, when did that movie come out the mid 90s? I think…maybe it was early 2000s. As I was watching it just the other night and the whole point that movie Cuba Gooding Jr is trying to get the big contract – “I need the big contract.” And so, at the end of the movie he gets “the big” contract and I just watched this other night and I was blown away. It was an $11 million contract over four years and that was like the biggest thing. “We finally made it!” And I thought wow, the bench warmers now make $11 million a year it feels like across all the different… I was just shocked that was the contract.

Mark DeLotto [00:14:34] The economics have certainly changed.

 

Matt Sonnen [00:14:34] Yep. So, I can definitely…

Heather Goodman [00:14:40]It’s changed a lot over the last 12-15 years.

Matt Sonnen [00:14:43] Yes. Ever since Jerry Maguire came along.

Heather Goodman [00:14:48]Yeah. Jerry Maguire and Cuba Gooding Jr. saying show me the money really changed people and the environment.

Matt Sonnen [00:14:54] Exactly. It’s been an interesting transition to that. So, that was my random aside. Back on track. Mark…

Heather Goodman [00:15:03]No I love it!

Matt Sonnen [00:15:07]So, you’ve been at Massey Quick for a long time. What’s your backgroung? What were you doing before joining the firm?

Mark DeLotto [00:15:14] Yes. So, I actually grew up in Morristown which is where the headquarters are now. I really haven’t strayed too far from the nest, but I grew up in a household. My father was a physician. And so, it’s interesting the dynamic of running a business and being business minded was something that I was always interested in much more and my grades really showed it when it came to any kind of science classes. And so for me, I never wanted to be a physician. I always want to be involved in some way shape or form in markets. And did the stock clubs in high school and went to Villanova, graduated with a business degree. And came out and at the time, the dot com bust already taken hold. Enron had gone and the accounting scandals, mutual fund market timing, I mean that the business world and the industry, financial services were changing pretty rapidly at the time. And I was able to find that opportunity, ironically, with a training program with Quicken Riley, which was Les’ family’s firm that he and his father started back in the mid 70s. I didn’t know Les, personally was just a pure coincidence. So, I got my licenses and I did a corporate rotation and I partnered with was a successful team in New Jersey and I was covering bank branches and pitching annuities and mutual funds and that’s kind of what the business model was. And I quickly learned that it wasn’t what I wanted to do for the rest of my life. My talents didn’t really lie in those areas and I had a great market manager that brought me up to a managerial job to help me supervise the market with them. And it was a role that was rooted in a lot of the things that I’ve taken on over the years, compliance operations, training and development, people. I mean I was able to use my knowledge of being an advisor and my rapport with other advisors and make a name for myself. And so, in 2007 one of my best friends from high school told me that the COO here was leaving and that I should come in and meet with Les and Stuart. And so, I came in and I met with them and three weeks later I was here. It was a pretty easy decision for me. I was young, I didn’t have any kids, and have a whole lot of responsibilities, so making big changes was not a big deal for me. Fast forward, my best friend from high school and I are still here, we’re now partners of a firm. He’s our CIO. But looking back, it was the whole fiduciary model really resonated with me. The fee for advice and not products, it just made so much sense to me. And I really just loved the altruistic nature of the RIA world. So, of course the opportunity to get in on the ground floor too was exciting and rewarding. Culture was very merit based. And the more that I put in, I got out. So, as you said I’ve been here for 15 years and the roles clearly changed over time. We were like six people – I think there were six people when I started here. And over time I’ve been able to take on a lot of things and learn a lot of things in my role as COO/CCO.

Matt Sonnen [00:19:10] And we’ve talked about that a lot on this podcast. We’ve written about it on our blog. A lot of times the job description of a COO is just “do everything around here that needs to get done.” It can oftentimes be very daunting. But in addition to that overwhelming role of COO, like you mentioned, you also have the see CCO job title. So, how do you juggle between those two? And do you find a lot of overlap between COO and CCO functions?

Mark DeLotto [00:19:45] Yes, very much so. It’s a challenge to juggle both roles. And I’ve been doing both since 2013 when I became a partner. I think that was like my barrier to entry was, we’ll give you a partnership but you’re going to take on a liability of the CCO role, which I did which I was happy to do. I had been assisting Les who is the CCO since 2007. And so, a lot of the things I was doing and taking responsibility for anyway. But on the compliance front, after Madoff and Dodd-Frank, things change, and they changed rapidly with regard to custody and privacy and cyber security. They were all important initiatives that I had to come off the curve on pretty quickly and own responsibility for and they were all rooted in what we’re doing on an operational basis. In terms of account openings and how we provide information to clients. And so, they’re very much intertwined. I’m blessed to have a great staff that it builds over time. It’s taking on more and more of the day to day responsibilities with regards to things like performance reporting, technology systems, infrastructure systems, and even the compliance piece too. I mean, it just keeps evolving and new regulations come out, almost every other year that are pretty big projects that require us to have access and reassess and reassess again. How we’re doing things from both the regulatory, compliance, and operational basis.

Matt Sonnen [00:21:46] Yeah. My former life I was a COO/CEO as well and I do think there’s a ton of overlap. Many times, I didn’t know when I was, you mentioned cybersecurity is the easiest example. When I’m doing something cybersecurity related, was I wearing my compliance hat or my operations hat? It’s really both. So, it definitely can be done you just have to be willing to work a lot of hours to do both. But I do think there is a lot of overlap.

Mark DeLotto [00:22:16] That is for sure.

Matt Sonnen [00:22:17] Yeah. And then Heather talk about time management skills, in addition to COO, you’re a founder and president of the organization. So, what are your, from a day to day perspective, what are your day to day responsibilities and how do you find time for all of them besides working 20 hour days?

Heather Goodman [00:22:39]Yeah. As we all hope and wish that there are more hours in the day but I don’t think any of us have figured out that sauce yet. We just burn the midnight hour probably more than we should. I am fortunate now to not have to where the CCO hat anymore as of recently which is wonderful but CFO, CTO, COO, President, CHRO, any other role that you can ever imagine within the firm has really been, even client relations and advisor and all of those aspects. So, I think the biggest thing for me is realizing that, and this took me a while I would say definitely in my first five – eight years of the firm, I felt like I had to still be involved in every decision that was made and I think the firm felt that I needed to be in every decision that was made just because there were so few of us. We were small and relatively growing at a nice pace but didn’t really hit mass until probably 2013, 2014 when we started doing more acquisitions and lift outs. And I think upon that time I realized that you really have to build an incredible team and really empower and trust those around you so that you aren’t holding up or being kind of a bottleneck to the success or to the evolution of the firm. And that was definitely a learning experience. I think it’s hard as a founder to shed some of those responsibilities. And so now I think I really focus my energy on the core things that matter to the firm every day but yet empower and hope that the people that we brought in, which I know we have, can really rise to the occasion and we’ve been very lucky. So, from a technology standpoint, we spend a lot of time building the platforms from Salesforce and Addepar and Data Faction. All the different things that you need but getting them to talk together and then empowering a team to kind of run that and be a part of that. From the compliance side, I had to really lean on my Chief Investment Officer and use a lot of outside counsel and thanks to that. And then we really outsourced probably a lot more than we did in house because in order to find the time, you needed help. And so, I would say now that I’ve been able, we reached a certain critical mass, we’ve been able to hire certain positions that are really helped out in those areas. I’ve been able to spread my time a little bit more towards the growth opportunities and the true efficiencies of the operation but it was a definite challenge especially in the first probably eight years or so and I’d say the last three – four we’ve been really fortunate to build that infrastructure, to invest in the technology, to invest in the people, and be able to allocate my time to that. But I will say the hardest thing was realizing that there were going to be decisions made that I’m not going to be the final say on and be excited about that. And that was hard but it’s the right thing to do and you have to do that.

Matt Sonnen [00:25:42] Yeah, if you’re going to have that growth you have to find that point. At some point you have to get there. Yeah. So, let’s go one step deeper. So, you hit that point, you realize okay, we’re going to need to hire, we’re going to delegate, etc. We’ve talked about it a lot. One of the core functions of a COO, usually at RIAs it is the COO who’s in charge of posting the job descriptions and getting the candidates in and kind of managing the interview process. So, kind of in the weeds here. How how did you go about…what was your kind of your hiring strategy and how have you gone about it?

Heather Goodman [00:26:24]Yeah. So, we took a very deliberate process to going through how we were going to fill these roles and I think the first role that I sought after, that I thought was going to be the most valuable, was the CFO. I need somebody who is looking at the business from KPIs and profit margins and looking at the cost structure just as much as the revenue structure. And so, the first position that we went after was a true true CFO. And that took us a lot longer than we expected. But the fortunate thing was during that process I found a woman who I immediately saw the skill sets. She came from a family office, she had an incredible accounting finance background, but had a strong operational side and so I brought in a Director of Finance/Operations. And so, she was kind of the first piece of the puzzle. As I found her, we then said okay, I literally hired her and said that I’m not 100% sure what position you’re going to be, but I think you’ll be great. I like your skill set. I think we can figure this out. And we will find a role for you. And she’s been amazing, and her role has morphed. But in that time, she was able to take on a lot of the operational side of things more so than the CFO side of things which actually freed up my time a little bit more to start and focus on what we really needed from that CFO side. So, at the same time we went out and said okay, we’re looking for a CFO as well as a General Counsel/ CCO. And I said between the CIO and myself we spend so much time on the chief compliance side of it. We spend a lot of time on the legal side of aspects of things because we have a lot of alternative investment products that we’ve created. So, I said we really need an in-house general counsel that can draft these document, oversee our investments, oversee the compliance of them. And so, we were very very fortunate at the same time, and we used placement firms, and identified exactly what we were looking for. And we were fortunate in both scenarios that the General Counsel/CCO and the CFO come from a very very strong alternative investment as well as investment, finance background not just an accounting background on the CFO side and not just a legal transaction background from the General Counsel side. They both have this extremely robust offering of finance and accounting and investment in fund accounting and fund knowledge which has been tremendous. By bringing on, we literally just brought those two individuals on in April and I can already..we’re 90 days and we were joking on Monday we said “Wow, alright, we all made 90 days! Good job we’re excited!” And I looked back and I said I can feel the difference tremendously and it’s just been a breath of fresh air to have somebody, to have a group or a team and now really an executive team that we built out who can take on and think about these topics more than just myself and Doug. And have a resource and a group of people who have level of experience that can really apply their skills to it. So, I think we’re just scratching the surface on it but we see the next position potentially as the Chief Revenue Officer. That’s something we think could be a really interesting position and we’re thinking about how to grow and really focus on the business development side. But big big believers in bringing in professional management to help run the business so that it can free up my time to not only focus on the overarching direction of the firm whether it’s from technology and operations but also from a growth and M&A standpoint as well.

Matt Sonnen [00:30:07] Yeah, I think that’s exactly right. And wealth management, RIA world, or not, I think just any business those are usually the first couple of hires. “Okay, we need accounting/ finance covered and legal.” So, that makes perfect sense. Those are your first ones to tackle so that’s great. So, Mark you and I have talked offline, you have a very unique hiring process with the goal of finding that right cultural fit as you add more and more employees. You’ve gone from 6 to 55 and going from six to seven that that seventh hire is going to make a big impact on culture and then the eighth. And so, it is a big deal when you’re going from smaller numbers to larger numbers so talk to us about that strategy of yours on hiring and keeping the culture the way it is.

Mark DeLotto [00:31:07] You bet. For us the hiring piece has always been a big important part for us in our growth over time. The first thing I would just mention is that internships, it was a big thing for us very early on. And since even before me, we’ve had people constantly rotating through the organization which has provided a very natural stream of candidates. You get a look at them; they get a look at. You can see how they operate in the work environment and that’s been a tremendous feeder for us. I mean we’ve got five current employees that have come out of our internship program. And they go all year long. So, I think that’s one of the first ways to see if somebody is a cultural fit, is to just get them in the door. Get qualified candidates in the door and see how they do. From a from a big picture perspective, getting everybody in the organization somehow involved in the hiring process has always been a key distinguishing characteristic from my perspective. And obviously you can’t get everybody involved but you start with departments and you start with line leaders and/or people that line leaders identify as being candidates to join a group. So, we’ve got a hiring team. It’s a nine person committee. I’ve got two co heads, one of them being a client adviser, one of them being our office manager and head of infrastructure. And I try to take a hands off approach and really delicate a lot of the decision making and opinion forming to that group amongst themselves. So, as I’ve mentioned all areas of the firm represented. You’ve got family office, you’ve got operations, client advisory, research, etc. And from there you want to diversify experiences. I’ve got somebody that’s been with the family office for 26 years. I’ve got an entry level analyst that’s been here for less than a year and literally has gone through the process themselves. So, they know what it’s like being on the other side of the table. And again, it’s from Managing Partner, myself, level all the way down to entry level analysts getting in front of these candidates. And I think it’s important to have diverse opinions and perspectives. But with the strong sense and commitment at the end of the day to the cultural piece and I think you have to evaluate candidates based on what your core values are. And so when we ask everybody on the committee to fill out an assessment, we’re asking them if you think that the candidate fit within the core values or not and each one of the questions is tailored around the core values of the firm. So, it’s a pretty rigorous process that starts with a phone screen and then multiple interviews, online assessments. We have a tracking system. We’ve systematized it and we’ve got a process from resume intakes to their first day here as a full time employee but we’re constantly evolving, constantly looking at new systems, constantly looking at new ways to think about hiring. And again, it’s led by the group. I very much try to empower them to own the process and make it better as they see fit. And I think given where we are right now in terms of the economy and it’s tough to find quality candidates. It’s a tight labor market. And I love to have a diversified group of people and their opinions to find candidates because it’s very challenging.

Heather Goodman [00:35:37]To echo Mark’s point about the internship. That’s been huge driver for us. We’ve believed in the internship program from day one. Actually, one of our interns from Smith Barney is one of our largest advisors today. We’ve really believed in that process and we have 9 to 10 interns every six months and probably over the years have hired for 8 to 10 of them. And so, I truly believe that the internship program…we have a strong relation with Northeastern, we have a strong relationship with USF. We have a lot of different schools that we’re building out. You really get a feel of that culture and the breadth of their services and their skill set and how they work with you incredibly well. So, Mark I couldn’t agree with you more on the internship program being a huge feeder problem.

Matt Sonnen [00:36:32] That’s great. Okay, so now let’s tackle family office. I distracted myself. I wanted to tackle these other questions, but I’ve talked to you both personally. I think the term family office is being watered down drastically in our industry right now. It feels like everyone is touting themselves as a multi-family office. And when you ask firms to define what you mean exactly by that they’ll backpedal a little bit and they say, “Well what we mean, is we’re high touch. We care deeply about our clients.” And I go, right, that’s not exactly family office and they say, “Well we call ourselves a family office because we give out our cell phones to our clients.” And it’s like right, so that’s great client service but what exactly are you offering from a service. And they usually just go back to the same asset allocation financial planning tools. And I say, “Okay great, I love the client service, but this doesn’t feel very differentiating to me.” So, you both have talked about it. So, Mark I’m going to go to you first. Because I know both of you offer true family office services. So, Mark walk me through some of the service’s you guys are offering at Massey Quick.

Mark DeLotto [00:37:57] You bet. So, as I mentioned earlier, we had a family office merge into our firm in 2017 and that was a big event for us. It’s the services that they have been providing to their family was something that I never could even conceptualize trying to build out myself, right. So, things like tax and bookkeeping and payroll, foundation, and philanthropic giving, generational education. Even trying to think about building out an offering like that, I could never get my head wrapped around. And that’s why the merger made so much sense for us because it was something that we wanted to offer for clients and our clients were asking for and, in some cases, going other places for. So, for us family office services, it’s something that we’ve been doing technically speaking for 30 years as the legacy family office started in 1988. And it encompasses a lot of the things that I’ve just mentioned but it really is a very bespoke, tailored offering to each person within the family and so some people utilize bill pay and some don’t. Some people will utilize property management, and some won’t. Some people will ask for you know help with real estate transactions, buying and selling of homes, mortgages. Family issues and I won’t get into the details of them but that’s one of the distinguishing characteristics of really offering a true family office services being able to pull in the right resources to solve any kind of problem. And everything from, my partner Peter Simon said, “I’ve pretty much bought and sold every asset you could think of. From a boat to an antique gun. I’ve negotiated five divorces for my sisters.” That’s the type of experiences that I view as like true family office type offerings and you can’t just make that up. And the family office or family office services moniker does get thrown around a lot these days. If you’re offering a basic accounting type service along with the investment piece and some financial planning, it’s called family office and I think the three of us know it’s a lot more than that.

Matt Sonnen [00:41:10] And Heather you and I have talked about it so what is your service offering and how are you using that to make the client relationships more sticky?

Heather Goodman [00:41:17]Yeah. I mean just listening to Mark, those are everyday occurrences.  It’s crazy.  Buying/selling homes, divorces, paternity suit, starting a business, negotiating what type of deals they should and shouldn’t be in. So yeah, all those different things. I’d say the biggest thing that people don’t realize when they are truly offering family office services, it isn’t just what’s related to that one client or the main client who has the point of contact for the family it’s every person in their family. So, it’s the mother, the father, the child, the grandmother, the cousins. We really look at a household and say it is a full-service family office for the entire family. And for one of our sudden wealth families, we had a situation where the individual who came into the sudden wealth wanted to really help out his family, the parents, his siblings, and his original, initial thought was hey I’ll give them each $X million and that’ll put them away and we won’t have to deal with it. And we said,”Ooo hold back! That’s not going to work.” Let’s structure this and we really set up a real estate company for the family, invested the dollars, and made some of the individuals as members of the new company that now they draw income from and rather than getting a lump sum which cause tax issues and gifting and all these other issues that come into it. We created a structure where a family can actually participate and solve issues and live off of the money that is meant for them or intended for them in a way that is much more beneficial and much more tax efficient than just saying hey let me give you a certain amount of money and then when that runs out come back for some more. And so I think when you really are dealing with a full service family office issues you are dealing with the legal, the tax, the structure, the negotiation, the boundary setting, all of those things that come greater than just the investment side or the bill pay side of the world. And I think what we’ve always kind of inserted our self into our clients is a saying hey look we can be the “no person”. You don’t have to be the person that has to say no. Use us as kind of that person who can negotiate and direct things for you and then you really build that trust and that relationship with your clients and in our case we really get 100% of the wallet share for our client for a very few households that we are not 100% on managing of their relationship and I think it is because you can’t have multiple people in your life directing and negotiating and doing all those things because they would be conflicting. And so you do really need to centralize your resources, centralize your decision making and centralize your knowledge base of all your financial and life decisions into a central family office so that they’re all aligned and the decisions are being made that impact every aspect of your life, not just one component of it. And I truly believe that when you are a full-service family office getting into the legal, the accounting, the tax, the business side of things you really do create an environment that’s very sticky. That centralizes you as the key relationship in these families and there isn’t a need for additional investment managers or other people in their lives because you’re so aligned on what’s happening in my life.

Matt Sonnen [00:44:56] Yeah, I think those services…it’s a stickier relationship, it’s a larger relationship, and obviously by offering those I do think that is truly differentiating compared to other wealth managers. So, that’s a client acquisition story as well. So, let’s switch. Let’s do the flip sides. We’ve got organic growth. Now let’s talk inorganic growth. PFI has talked a lot about, in order to be a successful buyer in this M&A environment. You need to be able to promote the infrastructure of your firm and show the selling advisor that they’re going to grow faster as part of your larger organization than they can grow on their own. And we’ve also made the argument that there’s no better person within the organization to make that pitch to the selling advisor than the COO. So, Heather I’ll go to you first. You have a lot of experience in attracting advisors to your firm. Can you speak to your role as COO in that process?

Heather Goodman [00:45:59]Yeah, I think the reality is when you’re building the infrastructure and you know the technology and you know the different offerings you can explain them better. You have a better comfort level. And so one of the things that we’ve been fortunate to have a couple of successful lift outs and acquisitions of advisors and immediately the growth of their client base and revenues has almost doubled or tripled within the first two or three years because of the wonderful suite of services that we offer. And we typically say that you can double your ROA on our platform versus where they typically were. And that is because of the family office services, because of the alternative investments, because of insurance, because of all these different services that you do provide. So, that is something that is attracting other advisors, but I think as a COO you pretty much built those platforms, you’ve created that structure. So, convincing or explaining it to a new advisor comes very natural and very easy because I’m sure, Mark and Matt I’m you both feel this way, that if you’ve implemented a technology platform or if you’ve implemented that system you know it inside and out and are more passionate about the success of this than probably the person who is having to be trained to use it. Because you’ve negotiated that contract, you’ve negotiated the enhancements, the customization, and all of those things that when you were building it you were thinking about it for the enhancements and the ease ability of either generating reports or efficiencies or better investment opportunities or reporting. So, I think that it’s critical that the COO is involved in those discussions because they can explain and probably the most passionate about why the infrastructure of the platform is so valuable more so than somebody who has just learned of it and is implementing or executing on it versus having built it.

Matt Sonnen [00:48:03] That’s exactly right. And Mark how are you approaching? We talked about it in the intro comments, you’ve made a lot of acquisitions over time, added office locations, etc. How do you approach M&A as part of your role as COO?

Mark DeLotto [00:48:18] Yeah. That’s great question. I think since day one of our firm we’ve always invested heavily in infrastructure and we always, Les will tell you that we set out to be a billion dollar firm from day one. And I think that they put the systems and the resources in place to be that without having one dollar in the door. And so you’ve got to constantly be looking ahead in terms of building your infrastructure and building your scalability and building a real true kind of institution and not just practice. And that’s how I’ve always operated in that mindset has been with me since the day I started here. So, when I think about the majority of firms out there, the big piece of the puzzle is time and how to grow your business while also managing people, while managing expenses, while managing technology, while managing regulatory responsibility and risk. I mean it’s just simply impossible to do all those things and be able to grow your business. And so, when I look and have conversations with selling advisors, a lot of their desire, to be a part of a larger organization, is that they’re looking to leverage that infrastructure scale. And because they’re doing all of those things like technology, expenses, people, they just don’t have the time for it anymore. And so when you look at an organization like ours, you can see that we have the resources and the capabilities to do all those things and do them so very well that it doesn’t make sense for you to allocate your time towards those. You want to allocate your time towards the things that will ultimately enrich you in whatever way that may take form. But I think for a lot of advisors it’s just spending more time with clients. And spending more time with clients, generally speaking, will result in greater revenues, more share of wallet, referrals, new opportunities. So, to kind of wrap it all up, when I’m out talking with M&A candidates or either advisers at wirehouse that are looking to break free, ultimately it’s about providing a turnkey solution that has the capability to take all those responsibilities and let the adviser spend time on what they should be spending time on.

Matt Sonnen [00:51:27] Yeah, that’s exactly right. And we were talking about time management earlier, so obviously they can dedicate more time to what’s important but also I think, they’re going to just enjoy their day better. They show up to the office with a little more pep in their step so to speak. Because that’s why they got into the industry to begin with. So, get rid of the running of a business responsibilities and let them just go back to what they enjoy, and their energy level goes up as well. So, I think that that is exactly right. Well, I think we’re going to wrap up. Thank you so much both of you. This has been fun and super informative. I can’t thank you both enough for sharing your insights today. You’re both at two of the top RIAs in the industry so thank you Heather and Mark for being here.

Heather Goodman [00:52:18]Thank you. Thanks Mark. Thanks Matt. It was great – I enjoyed it!

Matt Sonnen [00:52:24] Awesome. And if I may, I want to end the episode with a quick self-promotional plug. In addition to this podcast I am very proud of the written content PFI advisors publishes to our blog on a regular basis. Every day on social media, we’re sharing practice management articles written from all across the industry but once a week we’re trying to publish articles of our own to our blog and in some of the industry press but the RIA press they’re very big on covering the breakaway or M&A activity. I don’t think they get the clicks on the practice management articles that help run your business, grow your business, etc. So, they’re reluctant to publish some deep in the weeds practice management articles. On our blog, we’ve got articles about data aggregation and client segmentation and technology integration, around this you’ll building an infrastructure etc. and I’m very proud of those articles. So, I’m guessing if you enjoy this podcast you would also love some of the articles that we are putting up on our blog. So, if you’d like please subscribe at pfiadvisors.com. You’ll get an email notification whenever we put up a new article. We’re trying to do it once a week. Thank you everyone for listening and we will speak to you soon.