Welcome back to the 105th episode of Financial Advisor Success Podcast!
My guest on today’s podcast is Chip Munn. Chip is the co-founder and managing partner of Signature Wealth, a hybrid wealth management firm on the Raymond James platform that has quickly grown from $300 million to over $1 billion of assets in just the past few years.
What’s unique about Chip, though, is the way that he’s grown the firm, with an acquisition strategy focused on buying books of business from advisors who are retiring and leaving the industry, and then handing them off to younger advisors who can service the clients, and using the credibility and experience of the firm and its team to help clients get comfortable with the transition to their new young advisor.
In this episode, we talk in depth about what it was like for Chip’s firm as they transitioned from a regional broker-dealer to the independent model under Raymond James, how trying to hire staff and gain economies of scale created challenges growing the advisory business, why Chip ultimately decided to create an option for other advisors to affiliate under Signature to solve those challenges for other solo advisors, and why there’s still such an opportunity to support advisory firms that have chosen the independent model, because being independent doesn’t necessarily mean that we want to be alone.
We also talk about Chip’s process for acquiring advisory firms. How they created a structured questionnaire for the advisor to dictate answers to in order to quickly build a historical record of all of a client’s relevant information, the way they focus on telling the story of Signature Wealth and its greater resources to persuade the clients to stay through the transition, how they position young lead advisors as part of a team to get transitioning clients comfortable, and how they do semi-annual events for clients in each branch office location to keep clients engaged with the firm.
And be certain to listen to the end, where Chip talks about his own evolving role in the advisory business as it grows. The way he’s reallocated a portion of his time from developing client relationships to developing team members, how he’s identified his own unique ability, and the way that he repositioned leadership duties with his business partner, in recognition that he’s a visionary and his partner is the business integrator.
What You’ll Learn In This Podcast Episode
- Chip’s advisory firm as it exists today [03:42]
- What it was like for them as they transitioned from a regional broker-dealer to the independent model under Raymond James [10:51]
- What the affiliate back office model looks like [19:09]
- Signature’s growth strategy from here [40:16]
- How he finds and reaches out to advisors who want to affiliate [44:35]
- Signature’s process for acquiring advisory firms [55:17]
- The biggest surprises for Chip going through the acquisition process [1:05:23]
- His process for quickly building a historical record of all of a client’s relevant information [1:08:23]
- How Chip’s role within his business has evolved [1:18:15]
- The two key roles in business [1:24:29]
- His vision for Signature moving forward [1:34:40]
Resources Featured In This Episode:
- Chip Munn
- Signature Wealth Strategies
- Clemson CFP Program
- Join Signature Wealth
- Strategic Coach
- Questionnaire For Transitioning Clients
- Advisor Success Scorecard
- Rocket Fuel by Gino Wickman
- XY Planning Network
Michael: Welcome, Chip Munn, to the “Financial Advisor Success” podcast.
Chip: Thank you. It’s great to be here.
Michael: I’m looking forward to today’s podcast because you’ve had a very interesting growth journey, as I’ve come to learn about your firm, in this breakaway transition from a regional broker-dealer to the independent BD side, and doing what I think is kind of a unique version of I guess an acquisition tuck-in kind of model for growing your book with retiring advisors, and have had a really fast growth cycle from a couple hundred million dollars to over $1 billion. And I’ve lived certainly through some fast-growing companies. I know that puts you in a lot of turmoil and change as just a leader and owner of the firm about all the things you guys start doing differently as the business grows rapidly and bulks up. And so looking forward to just talking about business growth, fast growth and advisory firm acquisitions, and, you know, what that does to us as advisors as our role starts changing in the business.
Chip’s Advisory Firm As It Exists Today [03:42]
Michael: So maybe to get started, why don’t you just tell us a little bit about your advisory firm as it exists today? Like, paint for us a little bit of a picture of the firm and what it is you do.
Chip: Sure. Well, we’re an independent firm affiliated with Raymond James Financial Services. And we were originally, for the last probably 15 years or so, 14, 15 years, we were with a regional broker-dealer. Back in February of 2016, we had gone through, you know, various struggles with trying to be able to do more and do different. And that kind of structure, we found it difficult. I have a partner in my kind of original practice, if you will, who lived in Myrtle Beach, South Carolina, so he was about an hour out of…you know, from our home office, and we felt like…
Michael: And where are you guys in South Carolina then?
Chip: We’re in Florence, South Carolina, so it’s about, you know, 60 miles or so from Myrtle Beach. So we had some experience working with a different…having some remote work. And we felt like there was a lot of opportunity in the marketplace for being able to… Our average age of a partner at the time was roughly 45. And kind of looking at what we felt like the landscape was, we felt like there were a lot of advisors who were in their 60s who at some point would want to transition out of the business. And there were a lot of young folks in their early 20s, maybe, who wanted to get into the business.
But, yeah, our kind of hypothesis was a 65-year-old isn’t necessarily looking to transition directly to a 25-year-old, and so we felt like we could provide an opportunity to bridge in between those two folks, provide, you know, some training and some gray hair even, if you will, so that the legacy advisor and his clients could feel comfortable that, you know, there was somebody with some experience involved but also could transition that fairly quickly to a younger advisor to handle some of the, you know, relationship management and service of duties.
Michael: So where were you previously before you went to Raymond James?
Chip: We were with Hilliard Lyons, a regional BD, you know, and then came here.
Michael: They were recently in the news because they got acquired by Baird, I think.
Chip: Yeah, I think I saw that. Good for them. Great company, great culture. We enjoyed that part, but, you know, again, for somebody like me who considers himself to be unemployable at this point in my career, it’s one of those things where you just wanted more freedom. And we didn’t feel like we had enough of that to suit us.
Michael: So was that the driver? Like you said, you sort of had struggles wanting to do…like, wanting to do more and different things than what you could there. Like, was it around, like, what you were implementing with clients or what you’re charging and business model or more directly around this like, “Hey, we want to acquire advisors and tuck them in because there’s people retiring and young advisors who want in, and we think we can, you know, be a matchmaker in the middle,” but you just couldn’t do that on the Hilliard platform?
Chip: Probably a combination of the two. You know, when you have a branch office network at any firm, I’m sure there are constraints around that. And so that wasn’t something we felt like we had a lot of opportunity on. But also, one of the things that for me I find the…all of the areas of our business to be very fascinating. So things that you all have done, the XYPN and the RIA model, and, you know, the ability really just to run your own business and to make your own decisions, whether that’s an acquisition or whether that is delving into new technology or marketing, or, you know, even as an independent, you know, you have a lot more freedom and flexibility on things like even just having a Facebook page, and being able to do some of that.
You know, we just had some limitations that for me in looking at where…I just don’t think that a financial advisory business should have to be that much different than any other small to mid-size business. And so, you know, wanted to be able to have more flexibility in how we ran our practice. And so, you know, we had to…we just had to do something different.
Michael: I find that striking, though, because I feel like a lot of the movement amongst broker-dealers these days is driven a lot by the financials. You know recruiting bonuses, payout rates, you know, just differences in grids. Like, was that a factor for you as well or was this, “No, it’s not really about the numbers. Like, we just have a vision of growing in a certain way that we don’t think we can do where we are?” Like, you know, just more style and culture?
Chip: I mean, to suggest that the numbers don’t matter probably would be, you know, disingenuous. I mean, I think that every financial advisor, we deal in numbers for our clients every day. And, you know, one of the kind of eight things…you know, when we’re talking to other advisors, one of the eight things that we focus on is finances. I mean, that’s an important…you have to know your numbers. But for us, it definitely was not about… You know, going independent, you’re not doing it for, you know, a transition check. It really has to be more about building the kind of business that you want, but also, you know, for us, the concept of being able to build enterprise value, being able to work with the people that you want to work with in building kind of your own vision was much more the kind of driving force for us than the financials.
And so it is…one of the things that I’ve found in talking with advisors kind of from all of the different areas is the financial part can be really confusing because it depends on who it is that you’re talking to. Everybody kind of has their…you know, I hate to equate it to buying a car, but if you look at…if you go and look at three different kinds of cars, whoever it is that’s presenting or selling it to you is going to highlight the importance of their features. You know, the features and benefits of their particular model. And I think that, you know, as advisors, we have to really have a clear vision for what it is that we’re trying to accomplish to determine whether or not, you know, one particular model works best.
What It Was Like As They Transitioned To The Independent Model Under Raymond James [10:51]
What we have tried to do, you know, in becoming independent and now in growing kind of our business is…you know, a lot of the stuff in going independent is hard. It was more than we, if I’m being honest, more than we expected. And, you know, we had more decisions on the front end than… You know, you read a lot and you listen to the podcast like yours, and you try to, you know, expect the unexpected and pay attention to that stuff. But it ended up being way more in terms of the running a business side of things than we originally expected. And so after kind of getting over the wall of doing that, what I found was, in talking to some former colleagues of mine and folks that I know around the industry, that’s what keeps a lot of people, you know, in the wirehouse-type space or the regional space is the notion of, “I really don’t want to deal with that part.”
And so from the beginning, when we looked at leaving and coming and starting Signature Wealth, we decided that we would document everything that we did along the way as if someone was going to come behind us. And so, you know, our transition, you know, how we set up everything, we made a point of kind of documenting all that stuff so that that way, with the model that we anticipated, we wanted to be able to share that with other people. And it has been…yeah, it’s proven to be helpful here over the first three years or so.
Michael: So help us understand what Signature Wealth looks like today. Like, how big is the firm? I don’t know if you measure by clients or revenue or assets or staff. Like, what does the firm overall look like today?
Chip: Sure. Well, we measure all those things, but, you know, ultimately, just to give you some…when we originally moved over and started Signature Wealth from our previous life, we were, in terms of AUM, about $300 million, and our office here in Florence today, almost 3 years later, we are about $1.1 billion, 8 offices, and 15 advisors, up from, there were 4 of us originally. And so, you know, our structure allows…it’s designed for flexibility. So we have three, well, two, a third one coming next month, three offices that are acquisitions, and then four others that are kind of affiliates, satellites, if you will, but who are making use of our shared services, kind of back-office structure but that we don’t own the practice. So we partner with the advisor to…they run their own practice but have use of all of our back office, you know, kind of any of the systems that we’ve developed, transition for those who came from outside the firm, and then, you know… So they take advantage of those things, but we are not equity owners in their practice.
Michael: And I’m presuming, and everyone is on the Ray Jay platform because you kind of have to be the…have them as your broker-dealer.
Chip: That’s right. That’s right. Absolutely.
Michael: And what does this look like from a business model perspective? Like, are these all advisory accounts? Are you still doing some brokerage? Do you do, like, insurance business, annuity business? Like, what’s the business model and revenue mix for the practice?
Chip: Yeah, our practice has been around since 1970. So for a lot of practices, you know, and if at some point you want to get into kind of how that originally…you know, going back years how that got started, but like a lot of practices that have been around for that long, we still have, you know, some commission-based business. Whether that’s, you know, trails from either mutual funds or annuities. But like most people, I think we’ve definitely drifted from a new business standpoint towards the advisory model. It’s preferable for me and for us, but we definitely still have, you know, a substantial amount of the, you know, again, kind of traditional commission-based business.
And so it is one of the things, I think, that for us does allow us, in talking to advisors, it allows us the opportunity to be able to have conversations with people who, you know, again, maybe have been in a wirehouse or a regional for 20 years and have a business mix that doesn’t suit kind of to go purely RIA. And so it opens up a lot of doors for us. But we definitely are, you know, probably 65% advisory and trending in that direction.
Michael: And was that part of the driving decision to go to a firm like Ray Jay as opposed to going out to the RIA channel? Like, you had either some combination of enough commission trails that you wanted to hold on to them so you needed to find a hybrid platform, or you specifically wanted to acquire hybrid advisors who you wanted to be on a hybrid platform to acquire them?
Chip: Well, one of the things, you know, I want to have flexibility. And I think that the platform on the independent side at Raymond James offers us and, you know, anybody that works with us in whatever capacity an awful lot of flexibility to do business. You know, our name, Signature, came from the concept of…really, my wife is a creative and a marketing person, and she asked me one time when we were trying to figure out what we would name it, you know, if I could boil it down to one word, what would it be? And the word for me was “unique,” in that our businesses, our advisors are unique, our clients are unique. But unique wealth management didn’t exactly…you know, I think the domain was probably taken already. It was just not something that…you know, but we couldn’t think of anything that was more unique than our Signature.
And so the idea for us of being able to have flexibility, for our clients to be able to do the kind of business…you know, to be able to do business their way, where… You know, I have a client coming in tomorrow who is a flat fee, so we have the ability to do X number of dollars a year or AUM or, you know, again, in a very limited capacity, you know, we can do insurance business and have commissions for that. Not necessarily a big focus, but, you know, it offers an awful lot of room for people to be able to do the kind of business that, again, as long as is legal, moral, and ethical, they can do the kind of business that works best for them.
Michael: So with some offices that are acquisitions under your firm, you know, part of your equity, and then the subset of firms where you’re essentially a back office servicing firm for the downstream advisor, I’m assuming that just the economics and the structure of those look differently. So, like, how do you split…? I guess I’ve got a few questions. One is just, how do you split between the two? Like, of the $1.1 billion, like, what’s your internal AUM and what’s your, you know, downstream advisors who’re servicing AUM? Like, do you separate them that way?
What The Affiliate Back Office Model Looks Like [19:09]
Michael: And how do you structure arrangements like that? I mean, I think we…well, we all kind of get, you know, the equity end like just, the clients of the firm pay a fee, advisors get compensated. Hopefully, a profit margin left for the firm. But, like, what does an affiliate back office model look like in your context? Because I think there are a lot of advisors out there on BD platforms, on hybrid BD platforms that are interested in this model of, “What would it look like if I took some other advisors in?” But, like, nobody seems to be clear about just how you structure that. Like, how do you charge for that? Do you get overrides? Does Ray Jay pay you? Do they pay you? Like just, how do those deals work?
Chip: Yeah, our deal at this point essentially is an override. So it’s essentially that we work with our branch offices, and they receive a flat payout. And so, you know, it is a…generally speaking, there is a difference between what we are paid and what they’re paid. And we keep the spread or the override in between the two. And, you know, we disclose all of that, you know, to the office owner. And, you know, what we have done thus far is right now we have what I would call kind of a core group of services that include things like, you know, at this moment, very basic marketing, HR, finance, operations-type stuff. We handle all the payroll, benefits, you know, those kinds of things, compliance. So that would be what I would call kind of core services.
Over time, we are, you know, continuing to work with the folks who have come on board as to what their needs are. You know, I’ve found that, you know, at one point, we considered centralizing…we have centralized investment management for our owned offices, but for folks who come on board, some folks, a lot of the advisors that we have had, they kind of have their own preferred way of handling asset management. And so, you know, that’s something that at some point we could offer as a service. But thus far, the folks we’ve worked with haven’t…that’s just not a real hot-button thing for them. I think that we’ll end up… Pardon?
Michael: I was going to say you’re kind of covering just the core overhead like back office things that just every advisor needs and it’s a pain in the butt to hire one at the time…
Chip: That nobody wants to do.
Michael: …when you’re a solo advisor.
Chip: All those things that when we came over, that were just a pain in the neck to have to deal with. You know, one of the biggest fears… We had an advisor group, another independent advisor affiliate with us earlier this year, and just having group benefits, a larger group benefits, saved them $500 or $600 per person per month. So just little thing…
Michael: Oh, just on, like, group health insurance bargaining as part of the firm.
Chip: Yeah. It’s just things that you don’t… Again, I mean, when we came over, we did COBRA insurance for the first year to try to figure out… You know, you’re just kind of putting it together. And so, for the folks that have joined us here in the last, you know, 18 months, just the ability to feel like they could be independent but not alone, and to have some sort of structure. And a big thing for us is finding like-minded people. You know, when we left the regional kind of firm culture, one of the things that I missed was the interaction with my colleagues and having other folks to bounce ideas off of, and that feeling that, as attractive as being able to forge your own path is, it can also be one that’s kind of lonely. So, you know, your old friends can’t do the same things or don’t have access to the same kind of potential platforms and technologies and those kinds of things. And so it can…you can feel a little bit isolated.
And so for us, being able to… You know, we were fortunate kind of, the way that we originally expanded was, I had a friend who was one of our former wholesalers. So he was a wholesaler that covered us for probably 10 years. And I found out about nine months after we joined Raymond James that he had bought a practice in Charlotte, North Carolina and was considering Raymond James. And so, you know, I reached out to him and said, “Don’t know what your plans are, but if you’re going to…you know, if you’re considering Raymond James, I think that we offer a lot of structure that would be helpful for you.” You know, I may have told you at one point, we then later added a former regional director from Raymond James. Came and is one of our partners. And that was, again, kind of part of what has evolved is really just…yeah, it’s a lot about relationships and keeping aware of people that you know and not feeling like you want to be by yourself. And that’s been a big thing for us.
Michael: We found a similar phenomenon frankly for XY Planning Network, and I think is just true with overall the rise of, you know, super OSJs and the broker-dealer community as well and various platforms and rollups that are starting to emerge in the RIA space, like, there’s a whole lot of advisors, I think, that are in that mentality you put it so well, that like, “I want to be independent, but I don’t necessarily want to be alone,” and trying to find the midpoint between those. Like, “I want to keep my independence and my control, but I don’t want to feel alone. I would like to have a platform that gives me some stuff and support?”
Like, that’s now a space to me that seems to be blossoming across every different version of an independent channel at once. With firms rising up and saying like, “We’ll do some of that stuff. We’ll create that environment for you, where you’re independent but not alone and you’ve got some structure, and you’ve got some support, and you’ve got some peers, but you’re independent and it’s still your firm and it’s still your equity. So if that’s what’s important to you, like, you can hold on to that.”
Chip: For sure. And if you focus on culture and bringing in the kind of folks that fit in with the other, again, regardless of the ownership structure matters less than the…I think the psychological makeup of the people who are involved, it is… I mean, one of the advisors that is now with us in Lexington, Kentucky, we were at the same broker-dealer years ago on an advisory board together trying to move them forward, you know, and coming up with new ideas. And we worked together in trying to help the firm overall progress. And eventually when, you know, she reached out to me to see, you know, what we were doing, it became a situation where it’s kind of like, you know, “We really wanted to do this as part of a bigger organization, but I know you and what your vision is and you know me, why don’t we do it together?”
And, you know, I’ve joked with her, it’s a little bit like the Peyton Manning and Brad Paisley commercial, you know, where he said, “We’re going to put the band back together.” I think that, you know, for the two of us, it was a lot like that. To say, “We have a shared vision. Each of us wants to be able to implement bits and pieces of it in our own way.” She has an all-female advisory team that’s phenomenal with, you know, women executives. You know, so she wants to be able to do some of that her own way. But the bigger picture vision, you know, of both of ours is very much the same, real similar.
Michael: So for advisors that affiliate, like, I realize you may have slightly different structures with each as these evolve over time, but can you just give us some, like, context of how this works as a firm if you’re trying to, you know, serve them and generate revenue and make it work from your end? Like, are you participating in 5% or 10% of their grid? Are you participating in, like, 20% or 30% because that’s what it takes to provide all the staff infrastructure support that you’re providing? Is it more than that? Like, what does this look like? Or at least, what neighborhood is this?
Chip: Generally speaking, it’s between the 5% and 10%. You know, I think that as our business evolves, I think that, you know, we can cover kind of the core services between 5% and 10%. Again, because if as a partner you’re taking too much, you don’t allow enough…I mean, there’s not enough money in it, you know, for your partner to be able to do the things that they want to do if they’re paying too much. You know, there are some models where essentially, you know, you’re on an independent platform but you’re paid more like a wirehouse advisor. And that’s not, you know, our model.
We, again, kind of stay in that range, and then what I can anticipate we will do over time is, as we develop other services, and we’ve done this kind of in beta, is, you know, whether it’s marketing campaigns that folks can roll out in their local market or…you know, those kinds of things would be a la carte. Most of it thus far, anything beyond core services, we kind of have a preferred vendors list and folks that we’ve kind of negotiated with to be able to provide that, but we don’t…at this point, it would be something that we have a list of resources that we don’t provide in-house yet. But if it became such, you just want to…there’s no sense in… One of the biggest frustrations for me in my previous life was paying for things that I didn’t use. And so, you know, when you are in a situation for a long enough time that you realize that somebody like you doesn’t like that, then when you get an opportunity to build your own organization, you want to do it in a way that somebody like you would appreciate being able to do business like that. And we try to remember that kind of as we grow.
Michael: So I’m just imagining this from the advisor’s end. So if someone comes in and they’re doing $300,000 of GDC, you know, you’re having this conversation with them and saying like, “Look, you know, we’ll draw 10% of your grid or about $30,000, but, you know, we’ll be doing your compliance support and your HR and your employee benefits and your finance and supporting on marketing and all these other items.” And just as an advisor, like, I’m going to sit down and say, “Well, either I think that’s worth the 10% or $30 grand or not, but for most independent advisors, like, those would be either a whole bunch of different hires or a whole bunch of different part-timers I have to manage, which is a pain, so, you know, one consolidated check to you to provide all this stuff sounds pretty handy.” Like, that would be the sale? That would be the…?
Chip: And convenient. I mean, when you’re in the independence space, you make business decisions every day. And I think that’s a big part of, again, why we are an option is, you know, when we originally made the transition with the original group, we had kind of a…internally, we were a big enough team to have somebody who pretty much only did compliance and who…you know, so he focused on that, and somebody else who focused on operations. And I did the planning. My partner, for 20 years, I’ve done planning, he’s done investments. I don’t manage my own money. I don’t have quotes on my computer. So it is…you know, we had the basics of that.
And then for us, everything going forward becomes a business decision. And so for our partners, I think it’s the same way. You decide whether or not you want to do the compliance or pay somebody to do it, you know. And that’s true of all the different things. What we found is it is cheaper for…and again, looking at this for myself as a business owner, it was cheaper for me in a lot of ways to expand and share resources with somebody else. And we even have offices who partner individually on certain things, you know, marketing-wise, let’s say. Whether it’s a content writer or, you know, somebody to run their Facebook. Where it’s cheaper to have two of you splitting one expert in something than it is…that’s the concept even on a macro scale.
Michael: I mean, it’s the essence of, growing businesses get economies of scale. And, I mean, I feel like the advisor world, and particularly the independent advisor world, has had, I don’t know, like, 30-plus years, as long as the IBD movement has been around, 30-plus years of advisors coming together in loose “partnerships,” where I kind of put partnerships in air quotes because it’s really like, “Look, I run my business and you run your business, but we’re going to share the office rent and, you know, the salary for a front office admin person to handle the clients and maybe an ops person.” And, like, we’re basically in a resource-sharing, cost-splitting partnership. Like, those have been out there for a long time.
The phenomenon to me that’s interesting is firms like yours that are not just saying like, you know, “Hey, Jim, let’s come together and split salaries so that we can have a full-timer between the two of us,” you’re at a whole other level with it already when you’ve got 8 office locations and a billion-plus aggregate dollars, a big chunk of which is rolling up under this. And now you can hire a bunch of staff that are each, you know, fractionally available to the various advisors on the platform. And just, you can do more and you start benefiting from all the economies of scale that can exist in larger advisory firms, but you’re not requiring them necessarily to roll up and be your advisory firm. You’re kind of an immediate platform for them on the Ray Jay platform and Ray Jay does its share.
Chip: Sure. Well, and for us, a lot of it is about leverage, right? I mean, as financial advisors, because again, you know, with the exception actually now, we are all financial advisors. So, you know, we were kind of for advisors, by advisors. And for us, it’s all about leverage. You know, from the time my partner and I originally got together 20 years ago, you know, the concept at the time, because our branch manager at the time thought it was crazy, this teams thing was just ridiculous. Nobody did it, you know. But the concept then was, you know, I had an interest in planning due to some old family circumstances. My partner and his dad had been in investments. I was 22 years old when I got into the business. So, you know, most of the folks with $1 million rollover weren’t looking at a 22-year-old saying, “You know what? I really would like to entrust my life savings to this child.” And so being able to say, “You know what? I could leverage your investment experience.” At the time they didn’t do…really planning wasn’t something that they offered. And that was really the early beginnings of it. And it really just has expanded from there.
What I found is when you get to a certain size, and we’re getting there, I mean, again, there are plenty of firms that are bigger than ours, is that you can continually upgrade the level of talent by doing it together. So, you know, if you’re…most folks don’t need…if you have $100 million practice, you know, again, one of the practices that we acquired was $100 million, you know, 150 clients, and it was an advisor and an assistant. And he didn’t need, he wouldn’t have needed a full-time planner because he did a fair amount of that, or he didn’t need, you know, a full-time anything. And so being able to collaborate and kind of co-op, I think that businesses outside the industry have done it for a long time.
And so being able to have an exceptional person in a particular area, kind of their unique ability is X, being able to have access to that person is important. But feeling like you have to… A lot of times as we were growing in my practice, you had somebody that you hired to be a particular position, but they only had 50% of their time allocated to that, and you had to find something different for them to do that was a value for the rest of it. And this way, what we found is we don’t have as much of that.
Michael: Yeah. Well, the…I always joke, I mean, the hardest staff member to hire as an advisor is your first one because it’s really expensive when you double your headcount.
Chip: For sure.
Michael: Because that’s what happens when you go from one to two. Like, you know, for a business, like, when you’ve got 20 employees and hire your 21st, like, it’s a business decision. You know, it takes a small slice of your margins. You make a decision to reinvest. Like, it’s not that lumpy of a cost because of the size of the organization at that point. But when you hire your first and you double your headcounts, like, doubling your headcounts is very expensive and challenging in any business. And you can’t get there fractionally. Or it’s hard to get there fractionally. I think you can do more of that than you used to with the rise of virtual assistant, virtual paraplanner services. And there’s certainly a lot more that you can outsource than you could before, but it’s still a challenge. You still have to find and manage those people. And so a firm that comes and just says, “Look, we give all this to you and it’s centralized and we train them and manage them and oversee them, here you go, you want to sign up?” like, well, as you’re finding, there are definitely advisors who sign up for that.
Chip: No doubt. And I think you mentioned an interesting point. You know, one of the areas where we’ve had success is in, you know, not feeling like, and this is another kind of the independent…the flexible nature of being independent has allowed us the ability to do things like remote and fractional work. At one point we had…actually, I think we still use them. Our graphics design and marketing team that put together a lot of things was in Romania. And you had the ability to… You know, we have team members in…I think we have eight offices in three states, but we have team members in six. And so six different states because they do things from wherever they are. And having that virtual capability is a big deal. But when you’re running your practice every day and it’s the only thing, you know, you have to focus on that, the notion of going out and sourcing folks who can do some of these things is…I mean, it just doesn’t even hit the radar.
Michael: So how many staff members are under Signature that are kind of doing all this support stuff? Like, what does the headcount look like for the organization?
Chip: So, you know, if you look at kind of across the organization, we have 31 team members. That’s including in the branches: advisors, team members. At this point, from a kind of, we’ll call it a home office staff, for lack of a better word, there are about six. There are six. Some of us, myself, for example, also work…you know, I still have clients and work in my practice as well. And then we have committed to hiring two…we have two new folks who are starting in January. So first of the year.
Signature’s Growth Strategy From Here [40:16]
Michael: So talk to us about the growth strategy for you from here. Like, I’m particularly struck since you’ve got this sort of two-edged piece. Like, you have advisors where you’re acquiring them, and then you have advisors where they’re affiliating into you. So what’s the growth strategy and vision from here? Like, are you still trying to do both? Are you expecting that over time you’re going to do more of one than the other? Like, how do you view the path?
Chip: Well that’s a good question. You know, a big part of that, at least in the… So, if you had asked me three years ago how we would have grown to this point, I don’t know that it followed the script that I would have had. So I think that, you know, the market will dictate that to some point, but I think that… You know, when you look at our business as a whole, one of the…you know, acquiring a practice is a lot of work. It’s one of those things that we know will be a part of our business going forward, particularly… You know, one of the things…one of the benefits of being part of a group like ours is, if you decided that you were ready to, you know, transition in some way, you know, sell your practice, we will be ready to acquire it.
So if any of our folks…you know, and that’s one of the terms that one of our advisors who joined us this year said, you know, “You guys have kind of institutionalized the succession process.” Because they joined us as an affiliate, but they know that in the next five or six years, they’re going to want to sell their practice. So we’re working with them on building out kind of the team structure to be able to acquire that. So we will always…acquisitions will definitely always be a part of what we do because we believe in bringing… Again, I started in financial services when I was 22 years old. I taught school for a year, and, you know, was able to talk my way into this business. And so, I’m a big believer in bringing along young people and giving them opportunities, you know, to get into the business, even from varying backgrounds. You know, a lot of our younger advisors don’t necessarily have…you know, they aren’t…though we are recruiting more in this direction, they’re not coming from a CFP program.
I have a good friend, Josh Harris, who runs the CFP program at Clemson, who has helped us a lot with internships and things like that. And so bringing along young folks, it’s a passion of mine because I had an opportunity when I was really young to get into the business. And I don’t know that as much…it doesn’t seem to some extent that as much of that opportunity exists today. Just a lot of the training and things like that seems to have…you know, there’s just not as much of it.
So we know that we’ll always be developing talent and doing some acquisitions. I would expect for, you know, probably at least 2019 to 2020 for the affiliation model to be an area where we expect to grow an awful lot more because I think there are a lot of folks…between mergers and acquisitions in the regional and wirehouse space, there are a lot of folks who want to be independent but don’t want to deal with some of the things that are required in setting up a business and figuring out some of the legal things. And there are a lot of people who don’t want to have to deal with those things. And we feel like we’ve kind of got a solution for that that still allows them to get into and run an independent business but not have to deal with the things that for a lot of advisors, they just want to meet with clients. So we think that with what’s going on kind of in the space, that that presents the biggest opportunity for the next couple of years is folks who want to come out of the regional space or the wirehouse space and build something of their own but build it with some other people to kind of put their shoulder to the stone and help them.
How He Finds And Reaches Out To Advisors Who Want To Affiliate [44:35]
Michael: So how do you find advisors that want to affiliate or tuck in or do this in the first place? I feel like that’s actually one of the biggest challenges for a lot of advisors that want to grow their business by having more advisors affiliate to them is it’s just hard to find those advisors. And it kind of seems like everybody is recruiting them right now because, you know, there’s a lot of reasons to pursue money in motion. So, like, how are you finding advisors that would even be interested in this? How do you find them? How do you reach out to them? How do you communicate to them?
Chip: Sure. A lot of them are…you know, it begins with relationships. And so much like… You know, I’ve been impressed with what you guys have been able to do with XYPN over a relatively short period of time. Where, you know, it starts in some cases, in our case at least, you know, it’s folks that you know, who, you know, having been a part of a regional firm, even though not all of the folks that I know have an interest in going independent, we certainly have, over the last three years, had a lot of folks call and ask what the process was like. How is it? One of them has joined us. A couple of them have gone RIA. So being a resource to folks who are interested in what kind of independence has to offer and what the difference is between the two spaces. Again, I think you can kind of get caught in that space and not know what else is out there. So a lot of it has to do with relationships is a big first part.
Michael: And how do you explain the nature of independence to them?
Chip: Well, I think the first thing I do is ask them to explain to me kind of what their pain points are. I think that every advisor has a different experience with whoever their, you know, BD, service provider is. And then what I try to do is compare and contrast to the extent that, you know, again, if they were calling from somewhere that I’ve worked, I have more insight. But I think that the biggest thing with being on the independent side is the flexibility to have access to, if not everything that you might want, most things that you might want. And the ability to… You know, most advisors that I talk to have…particularly those, again, in a more captive-type space have…the growth-minded ones, the ones who would even consider independence have either a different financial planning software that they’d like to be able to use, some form of marketing that they’d like to be able to do that they just aren’t able to do.
And so having a conversation about what’s possible in kind of our world compared to the more captive space, and really just understanding what it is that they aren’t happy about. Everybody who calls is unhappy about something. For some folks, it’s marketing and the ability to…
Michael: That’s why they call.
Chip: Right. And for other people, it’s the technology. You know, for us, when we were kind of exploring our options, technology was a big component, you know, of that. And, you know, wanting to feel like we were going to partner with a firm that had the kind of technology that made doing business simple. And so when we chose Raymond James, that was a big part of that, because for us and for the kind of business that we do, and we’re a planning first investments second firm, you know, the investment is kind of milled into or the implementation of the planning, Raymond James had a really solid planning solution and reporting and a lot of those things that really were streamlined and made…for us, it made doing business and building systems around doing the business, made it easy. And so talking through some of those things a lot of times for advisors who were in a different situation can be pretty eye opening.
Michael: It strikes me that, you know, when you’re talking about kind of the appeals of independence and flexibility, like, I feel like there was a point years ago where advisors that were in wirehouses, BDs, like, captive firms, the appeal of flexibility was just, “I want a wider product shelf. Like, I don’t want to have to only do my company’s products, I want a more open access platform around insurance or investment solutions or whatever we’re using.” And that, you know, while there’s still a few firms like that, increasingly, more and more have some reasonably open structures and architecture, at least around product selection. And that, you know, as you’re saying, like, when we talk about, “What does it mean to have more flexibility on the independent side now,” like, it’s not flexibility of product choice necessarily, it’s flexibility around things like marketing and technology. That’s just a striking contrast in how much the world has changed. That that’s the…those are the kinds of things that drive a decision-making switch now, not just the products on the shelf and the availability of them.
Chip: Yeah. I think if you think about it, for most people, I mean, we all believe, or, you know, advisors believe that people do business with people. And different firms have different ways of saying it. But ultimately, our clients do business with us, and it’s important to be able to put that out there. I mean, for people to understand who you are, why you’re different is a big thing these days. If you look at them, and you with your Nerd’s Eye View blog and a lot of the things that you guys do to generate inbound interest in some of the various things that you do, to be captive in a way that doesn’t allow you to do that, it’s a hindrance. And so it can really be a hurdle for some people to being able to do more.
And for us, looking at what other businesses can do relative to what we can do as advisors, you know, it’s important to me to be able to get closer and closer to being able to do the same kinds of things that…to implement technology solutions that other people can. To have access to virtual workers and to be able to expand in ways that any other kind of business that we would see, that’s the big frustration I think sometimes is the notion that other businesses, again, small to mid-sized businesses can do certain things, but because the industry we’re in or because of the captive nature of some, you know, firms or cultures, we’re not able to do that. And I think there’s…I think that comparison, for a lot of advisors, can be frustrating. And marketing and technology are two areas where that is…where the difference is the starkest.
Michael: So you’ve got this base of advisors that you’ve got relationships that you’ve known over the years and have…you’ve been having the conversations with them, and some of them find their way to you because you went independent and they want to know what it’s like. Are you looking at other, like, marketing strategies or approaches, like, as Signature to say, “How else are we going to find firms that want to affiliate with us?” And are you looking more external to Raymond James or are you also looking at this, like, internal Raymond James, just saying like, “Hey, let’s find the other Ray Jay advisors in the area and have them affiliate in as well?”
Chip: Sure. Well, I mean, we definitely are…you know, we’ve had our own website kind of for Signature, an advisor-facing website, joinsignaturewealth.com. But just advisor-facing content that talks about some of the things that we do in terms of building a practice and how we structure things. You know, so we do some content marketing. And that way, personally for younger advisors, this year kind of put together a book from me personally that is more about getting into, breaking into, and building a scalable business for younger people. So we really are focused on doing more proactive, you know, marketing.
We spent the first two or three years really building out the capabilities. And so for the last six months or so, we’ve been focused on beginning to enhance kind of the level of content that we’re putting out there, either via our website, at some point…you know, doing interviews like this and having an opportunity to tell a story is really good for us. I think that ultimately, it’s about building relationships and just having conversations with people, whether you’re talking about advisor-to-advisor or when we as advisors are out, you know, trying to attract clients. That’s really what it’s all about, having an opportunity to tell a story. So, you know, we’ve been much more active on the content front here in the last six months or so, and we’ll focus a lot on that.
We have had a lot of folks inbound because, again, two of my partners are former wholesalers, so we have some contacts in that way. But we are definitely… You know, you only know so many people, which I think is what you were kind of alluding to. Now I would also point out that, to build a really big firm, you don’t have to know a lot of people. And for us, you know, we definitely are mindful of, you know, the kinds of folks that we want to build a business with. But it is, you know, marketing to other advisors and having those conversations is something that’s, you know, a key component of our growth strategy going forward.
Signature’s Process For Acquiring Advisory Firms [55:17]
Michael: So you talked about that you’ve got these two pieces of the business. Like, there’s the affiliate side we’ve been talking about where you’re taking advisors in and providing the support structure for them, and then you said you’ve also acquired three offices and made the note that I’ve heard from a few advisors that have acquired firms, that are acquiring a practice is a lot of work. So can you tell us about what the acquisition process looks like for you? Like, what kinds of firms do you buy? What do you do? How do you actually transition them? What does that process look like for you?
Chip: Well, you know, the actual acquisition is…ultimately, kind of the implementation of that is about as unique as the advisor, you know, who is going to be retiring. And so we’ve had a couple of different experiences. I’ll share those with you. So the first was an advisor who wanted to retire, and relatively quickly. He had been looking for a succession kind of plan or partner for a number of years and, you know, was just at a point where he was ready to be finished. And so with that one, we ended up having a younger advisor who had been with us for a couple years. And he moved to…that was in Greenville, South Carolina, so it was about three hours away from Florence. And we had a young advisor who was in his mid-20s who moved up there to function kind of as a relationship manager and went through a process where he met with most of the clients with the senior advisor. We came in as…you know, my partners and I, and met with them as well to demonstrate that it was a team effort.
And within about I’d say six months or so, the legacy advisor was to the point where over the first six months, we did the introductions and meetings with all of us and the legacy advisor. And then he began to…over the second six months after…you know, from say months seven, eight, and nine, he came into the office less and less frequently. And then the last three months, he was kind of on call. So he would answer questions if we had any in particular.
But, you know, one of the things that we did that was particularly effective there was we made use of dictation. And so Copytalk-type subscription, and had a list of questions for the senior advisor. And he would answer those so that we would have some background on the clients. Went through and met each one of them individually, and then kind of applied our standard service schedule to those clients with a rollout of… You know, this is why we actually did a video with, you know, us and the advisor who was going to retire talking about…he and my partner who used to be a regional director had a long-standing relationship. So we kind of…each one of these…if you look at our experience so far, each one of these mergers or acquisitions has a story. And so we try to tell the story to the client, and then explain, from the client’s point of view, what the benefit of the partnership is for them. And really, we have a fairly standardized kind of service process then that we roll out to the clients to let them know what their expectations should be, introduce them to the team.
You know, so for him, it was a…he had about a one-year kind of ramp. We’d love to have more time than that, but, you know, it is…sometimes, you know, we aren’t operating necessarily on our schedule. I’ve found that a lot of advisors who are getting closer to retirement, what they say to me is, “I wish I had started building a team five years ago. But by the time, you know, I have gotten ready to retire, I just don’t have it.” And so, what we’ve been able to offer, you know, to somebody like him is an instant team. You’ve got an investment person who can come in and help with the portfolios. You’ve got a relationship manager. You’ve got a planner.
Michael: I was going to ask, and so part of the way that you position this to the client as well is, you know, “Your advisor is leaving, but we’re bringing in this whole team to support you and replace you.” And that both I guess becomes part of the transition communication to the client and is also how you support the young advisor that’s going in because the client doesn’t just see young advisor coming in, they see young advisor and more senior partner, who may or may not be there in all the meetings and all the team resources. And, like, I guess that’s how you build client trust in an otherwise younger advisor who may struggle with client trust?
Chip: Absolutely. And then we also…we do two events per year in each practice location. So where, you know, our investment manager and I or one of the senior partners, whoever is, you know, geographically appropriate, I guess in a way, will go in and really do a client workshop twice a year, kind of what we call it a kickoff in January and a halftime in… I’m a big football fan, so I try to keep things simple for myself. And go in and talk about the planning process. What’s going on, where things are in the market, new things that they need to talk about. And we do that in conjunction with the younger advisor to cement the notion that this person… And we don’t make any illusions on the local level that this person is alone. Because we present it as…you know, from the beginning, you know, we tell the story of why the advisor chose us, why it is…you know, what the benefits are of them working with us, and how things are going to go from the beginning.
And what we have found is, having a process for how you do things, in a lot of cases, you know, some advisors haven’t had an organized proactive contact structure and some of those kinds of things. Being able to communicate that to the client and the retiring or legacy advisor being able to tell their story as to why they chose us is…and we’ve had phenomenal retention as a result of just…positioning is a big deal, I think, in those situations.
Michael: Okay. So how did some of the other acquisitions then differ from that scenario?
Chip: So another good example would be the…we had one who joined us just a couple months ago who was a younger advisor who had been operating in a practice with his father. So his father had one business and he had a different practice in a separate location. And unfortunately, his dad passed away, and for a couple of years, he had been juggling both. So he had been splitting his time between two locations. And, you know, that wasn’t what originally he intended. He wanted to live in Wilmington or Leland, which is right beside Wilmington, North Carolina, and now had taken responsibility for another practice that was an hour away.
And that really just long-term wasn’t something that he was really excited about. And so it became a situation where for him, he affiliated with us and still runs his individual practice that he originally started. But we acquired the legacy practice and have placed another young advisor down in that practice to be able to run it. They’ll utilize our systems. But it was just a situation where this advisor didn’t want to be, you know, a business owner in that capacity. It wasn’t what he had built out and planned for himself. And so having access to a bigger structure was of benefit to him.
So in one case, you know, the first one, the advisor wanted to retire, in another case, you know, the younger guy, who’s more mage, wanted to be an advisor, but for the most part, other than running his practice, he didn’t want to be a business owner having multiple office locations and things like that. So we gave him a good kind of out for being able to continue to do what he liked to do but be able to sell us the legacy business that really wasn’t part of his focus running both operations. So those are two good examples of how an acquisition can kind of come to pass.
Michael: Interesting. So in essence, like, the son sold his dad’s practice that he inherited but didn’t actually want to be working and servicing so he could go back to his practice that he had all along.
Chip: That’s right. And it just goes to the nature of sometimes, you know, particularly on the independent side, we can end up in situations that were unexpected. And whether that’s waiting, you know, closer to retirement, you know, or just ending up with a practice that was bigger or more cumbersome than you wanted, I think that having a backstop, an additional or a larger structure, if you will, to be able to support that in one way or another, you know, is just an additional unique opportunity that we’ve been able to provide for a couple of different types of advisors.
The Biggest Surprises For Chip Going Through The Acquisition Process [1:05:23]
Michael: So you’d commented that, you know, again, like, acquiring a practice is a lot of work. So what’s been the biggest surprises to you between, you know, like, how you thought it was going to go when you started acquiring firms and then how it actually turns out when you go through the process of acquiring firms?
Chip: I think that, you know, anytime you sort into any new business endeavor, it begins kind of with a hypothesis. And ours was that, you know, you could bring in a younger advisor to a legacy advisor’s practice and that it could be well-received and you could bridge the two. That was kind of the hypothesis when we started. And, you know, one of the things, I hate to say it, one of the surprising things for me was that it worked. It was just it worked about…you know, you kind of ended up like the dog that caught the car. You know, what are you going to do with it now?
And it’s been a very pleasant surprise for us the ability to retain…the client relationships and how receptive they have been has been, you know, a very pleasant surprise. I think that from an amount of work standpoint, I think that, and you may know it academically, but it’s a little bit different in practices how much client and institutional knowledge that advisors keep in their head. And so having to develop not just the processes but about the people and the little things, the nuances of relationship, figuring out the ways to get those out of, you know, a senior advisor’s head and the kinds of things that you’ll need to know to transition a client relationship. I think, you know, figuring that out was something that was somewhat unexpected for us, trying to figure exactly how all of that needed to go and what information you needed to know.
And I think that as we evolve, you know, in all of our processes, it’s about, you know, every time we do something, we do kind of an after-action review, I think the term comes from the military, to, you know, say, “What worked and what didn’t?” And to try to make the next, in this case, acquisition, better than the last one by, you know, smoothing out any rough spots that we had.
Michael: And I guess that’s where that process evolved, where you’re using tools like Copytalk and I guess essentially having the advisor do a brain dump of just, “Here’s everything I know and can think of about this client. Let’s dump it into a recording.”
Chip: Absolutely. And there’s a big difference between saying, “How about turn on the recorder and tell us everything you know about the client?” There’s a big difference between that and giving them a list of questions and prompts to be able to answer. I think that’s part of that evolution is over time, you don’t know what you don’t know, but once you find out, it’s a good idea to write it down so that you memorialize it.
Chip’s Process For Quickly Building A Historical Record Of All Of A Client’s Relevant Information [1:08:23]
Michael: Yeah. So now you actually have, like, a questionnaire thing? Like, “Here’s the,” whatever it is, “The 3 questions, the 5 questions, the 10 questions that you’ve got to talk through with every client in the Copytalk as we’re coming up on the next meeting so that we know what’s going on and we can transition them successfully?”
Chip: Right. Well, it’s almost a questionnaire for the advisor. And this works…I actually am about to go through it with one of our associate advisors here in our practice with my clients so that…it works just as well inside of a team to…you know, essentially, the client’s name goes at the top, and there are, you know, 10 or 15 things about that relationship that it would be helpful for anybody who talks to them to know. You know, married.
And some of these things are evident on the new…you know, some of your internal paperwork, but others aren’t. You know, where they went to college. Do they have a favorite hobby? Just things that, again, they may not…an advisor may not know the answer, and that’s okay, but it’s important to have asked the question because it’s the kind of thing that…you know, some of those smaller things that allow us to…because originally, when you’re first coming into a new relationship, whether you’re taking over for…whether you’re beginning to manage a relationship from inside an internal team or whether you’re doing an acquisition, some of those kinds of things, even the small things that you may not typically think of, give a new advisor an opportunity to build a relationship and build rapport by having access to…
You know, you’re not going to spout off, you know, that you know the client went to Clemson because the advisor told you so, but you may weave it into a conversation that allows you to build some rapport and relationship with that person. And if you don’t ask the senior advisor the question, chances are a lot of that stuff is never going to be something that would come up. If you just said, “Tell us everything you know,” it’s usually going to be occupation. You know, things that you could read off of a new account form. We want to be able to get a little deeper than that.
Michael: And out of curiosity, is this a formal questionnaire thing you’d be willing to share out for other advisors? Just, I don’t know, the questionnaire, like, things you need to know if you’re taking over a client.
Chip: Sure. Yeah, I’d be happy to pass that along.
Michael: Okay. We’ll include it in the show notes then. So for folks who are listening, this is episode 105. And so if you go to kitces.com/105, we’ll have a copy of Chip’s questionnaire of all the stuff you want to make sure you ask about when you’re taking over a client relationship from the existing advisor.
So Chip, I’m curious about, like, the evolution for you. So when you transitioned out a couple of years ago to the more independent side, I mean, you had said like you wanted more flexibility to do some more stuff, but, like, was it your vision, “I want to build this platform where we’re acquiring and affiliating advisors and try to be at $1 billion in a couple of years?” Like, was that what you were shooting for or that’s just kind of what happened and now, you know, business is business and it’s grown?
Chip: It has definitely grown faster than I originally anticipated. You know, as I may have mentioned, you know, we had a partner who worked remotely from Myrtle Beach, which is about 60 miles from Florence. So what we knew was… You know, our town is a great place to live, but it’s only so big. It’s not a big metropolitan area. And so, you know, no matter how much you increase your market share, when you’re in a small to mid-sized market, it’s only so big. And so to grow, you know, a good bit bigger, we were going to need to expand geographically. We already had a partner who lived in another town. And my original expectation was that we would open an office there, and that would…you know, that we would build a team around that advisor, and then we would eventually find other advisors for whom kind of the process worked.
So the concept of what we ended up building was definitely part of the vision. It really caught fire when we had an opportunity to have my former wholesaler and his group, you know, when they were considering Raymond James, that opened up… You know, what I have found is, anytime you begin a new relationship with…you know, like with our partners in Charlotte, there are typically two or three advisors that they know who may be interested in doing something similar. And so that’s kind of…you know, when we talked to them and they decided that they would want to be part of us, they had talked to, you know, somebody else who was trying to do something similar, and it became, you know, a situation where a little bit like a Venn diagram, where the two circles meet in the middle and you have that overlap. And it’s kind of…
You know, I’ve been an advisor for 20 years. My partner who ended up joining us has been in regional management for about that same period of time, and so…who had some different skill sets than ours, and it became a situation where you begin to get introduced to other people. And that really has kind of had a ripple effect in, you know, folks that the different partners know has really accelerated the process faster than I would have originally anticipated. So that’s been…again, the vision was very similar, but it has definitely grown bigger, faster than I expected.
Michael: And I guess that’s part of the dynamic of just being in a smaller town environment. That, you know, I guess the bad news is there’s only so many advisors to network your way to, but the good news is there may actually not be a lot of other people calling on them in the first place. Like, I’m imagining some of this in our D.C. metropolitan area here and, like, the advisor world is so dense. I feel like anybody who’s thinking about retiring and selling their practice probably has a dozen firms calling them before they’re even ready. Just saying like, “Hey, I noticed you’re an advisor in D.C. area and you’re kind of old. So if you ever want to sell, just give me a call.” It seems like there’s more opportunity for you in a smaller market because there isn’t that much dense outbound activity happening?
Chip: I think too that the other thing is, you know, again, for us, none of the advisors that we’ve recruited have been in Florence. So we haven’t added anybody in our local market. Everybody has been from outside of the market. Because, you know, and again, in a smaller town, most of the offices here are of the, you know, regional or wirehouse, bank wirehouse nature, and in a lot of cases, they aren’t bringing on younger folks, but they’ve been together for a long time. And so the notion of one of them breaking away from kind of their, I’ll call it clique of advisors, a group of guys who’s been together, even though they have separate practices, they’ve been in the same office for a long time, there’s not a lot of movement. And so, you know, our experience has been that by going to bigger markets, again, a Charlotte, for example, there is an awful lot of opportunity for people.
Or, you know, again, bigger for me is Greenville, South Carolina, is, you know, going to places where there are folks who are, you know, one or two-person shops who just really haven’t looked into other alternatives or who haven’t found kind of the right fit for them. It’s a little bit like… You know, we’re big enough to be able to get some of the economies of scale but small enough that I can rattle off all of our team members’ names off the top of my head. So it’s a little bit like “Cheers.” Kind of, you want to go where everybody knows your name. And being able to do that I think has been helpful. But it’s not easy, at least in our location, having small town because you’ve got four or five advisors who’ve been together for years and years. They haven’t developed any team members, but, you know, at this point, they aren’t old enough, at least the ones locally, for the most part, aren’t quite ready to retire. So hopefully, they’ll look us up, you know, when we get to that point.
But it is…I just think for us, it’s been a, you know, right place, right time from a standpoint of all the mergers going on in the regional space. I went through a period where I switched business…I stayed at the same desk but switched business cards, like, three times really early in my career. And, you know, people get tired of that. And I think that, you know, it’s just been an interesting time in the business that, you know, I think that we’re in a good place at the right time where people are more receptive to the notion of independence than they ever have been. But, you know, having the capabilities of a little bit bigger group to be able to help with that, to make it easier is… You know, again, I hate to say, it’s not like we didn’t mean to go in this direction, but I certainly think that it’s been accelerated by just kind of where the market in the advisory space is right now.
How Chip’s Role Within His Business Has Evolved [1:18:15]
Michael: So what does this look like for you personally as the business evolves? Like, I know you had said you were on the advisor side. You started out as an advisor. Like, are you still client-facing? Are you now mostly recruiting and just trying to deal with all the hiring and transitions and the rest that go with all this growth of acquisitions and affiliations? Like, what does the role look like for you and how is it evolving as you go through the growth?
Chip: Sure. Well, for me personally, it’s probably…I’m probably about 50/50 right now in terms of client-facing, and then working kind of on the business versus in the business. I actually, I think it was back in 2002, read “The E-Myth.” And I was on vacation, and, you know, one of the things that it kind of worked me through, at least, was the notion of building out your organizational chart. And, you know, if you’re the only one doing any of the work, you put your name in all the boxes and you slowly kind of recruit to fill that. And I still have…I actually wrote it out on the back of a paper plate because it was, like, midnight on vacation.
And so I just…for me personally, I slowly have worked at that. I had a partner at the time, I did planning, he did investments. And it’s been something that I’ve slowly worked at that over time, finding other people who were better than me at kind of the individual components. And so, I’ve tried to build our team in that way, to find folks whose… I’m a big believer in…you know, I’m part of the Strategic Coach program with Dan Sullivan. Big believer in the concept of Unique Ability and, you know, doing the things that you’re best at. And so we’ve tried to really use that as a means of continuing to grow out the rest of the structure of the company to free me up some.
Michael: So for those who aren’t familiar with it, can you just talk through a little bit of, like, what Strategic Coach Unique Ability framework is?
Chip: Sure. I mean, I’ve heard similar versions referred to, you know, in other terms “superpower,” you know, but essentially, it is really kind of drilling down and figuring out what, you know, you are good at that is fascinating and motivating for you, and then creating a team framework around you in such a way that you’re able to do that or spend the majority of your time doing that while other people inside your company are focused on other areas. And it really is, you know, very much the focusing on your strengths, and then finding other people who have capabilities to handle some of the other things so that you can focus on your one thing. You know, I’ve heard it explained a lot of different ways. You know, one of the ways that I’ve explained it to our team is, and I’d ask you, Michael, if you had a choice between if you needed help from a superhero, would you rather have help from the Hulk or the Flash?
Michael: Kind of depends on the situation.
Chip: Exactly. And I think that that is…you know, both of those characters, if you will, kind of have different strengths and weaknesses. If your kid was trapped under a car, you’d want the Hulk, but if you had to get something across town in a minute, you’d need access to the Flash. And I think that it’s a lot like…you know, for us, I kind of view it as, you know, ideally, you’d rather have access to the “Justice League” or one of those groups of superheroes where everybody is good at something, and, you know, you’re really using the collective to give access to that. And so for me, it has been… You know, one of my unique abilities is in building teams and recognizing strengths in other people and helping bring those together kind of in service of, whether it’s the client or the advisor-facing organization. And the more time I’m able to do that, the more successful we are.
Early on in my career, as compared to…particularly as compared to my partner, you know, my unique ability, relatively speaking, was in the area of planning. And so, you know, we decided that it was best for I only did planning. You know, again, now for 20 years, you know, I only did planning from very early on, and I focused on what I was good at. And he did the same. And we just did it for the same group of clients. And we’ve just expanded that over the years to include some of these other areas where…you know, insurance specialization for an advisor who is dealing with our clients, but then also somebody who specializes in some of the back office things like compliance and benefits. It’s been a constant addition of kind of the next new team member.
Michael: And so, you just kind of found these your unique abilities to just…you do them. It’s what you fell into. Like, you were the planning person early on, now you’re the teams person and talent development and recruiting I guess.
Chip: To some extent. I think that in a team, it’s a little bit like Jenga. If one of the pieces moves, they all move. And so you have to evaluate kind of where the strength is structurally and then, you know, adjust to that. I think that people… You know, one of the things about building an organization is, we’re dealing with people, and people are not static. I don’t know about you, I’ve changed a lot over the last 20 years. And so, you know, for us, it’s about continuing to evaluate if we have a team member who joins us, who has a unique set of skills.
The Two Key Roles In Business [1:24:29]
So for example, you know, one of the books that I read in the last year or so that’s been really impactful for me and for our business is one called “Rocket Fuel” by Gino Wickman and Mark Winters. And, you know, it essentially talks about the importance of the fact that there is a difference, you know, in what they call the visionary and the integrator. And, you know, both of them are incredibly important. The book refers to them as a two-piece puzzle. And, you know, it is important to understand that they are both leaders of an organization, but they have different kind of skills and capabilities. The visionary is more of the forward-looking, you know, next new idea, whereas the integrator is the, you know, get things done, keep things organized.
So after reading that book about a year ago, one of my partners who had 20 years of experience in management, you know, we were both…we were honestly dealing with a little bit of an internal struggle of leadership, of, you know, you can only have kind of so many leaders. And sometimes when you come together, it’s hard to figure out where everybody fits. And I read the book, “Rocket Fuel” and it really just…you know, it’s like somebody got me for the first time. And it was okay for me to… You know, when I read the description of the visionary in the book, you know, things like, you know, generates 20 new ideas a week, 1 of which is good and 3 of which could completely kill the company is it just resonated with me that, you know what? That’s…
And it talks about how that kind of person also needs an integrator to… I’ve often joked, you know, whether it’s in personal relationships, you know, with your spouse or partner or business relationships, every relationship has a gas and a break. And if you have two gases, you’re going to run in the ditch eventually. And if you have two breaks, you never go anywhere. And I think that the visionary-integrator relationship kind of as it was described in that book is the same as that kind of gas-brake analogy, where, you know, for me as a visionary, I’m always plowing forward, the next idea is always better than the last idea. And for me, I read it, I said, “This really seems like, you know, my partner and me.” I gave it to him, and he said, “Well, I guess I’m an integrator.”
But you could see that for us, it laid out a structure of how those two types of leaders could not only peacefully coexist, but the reason I guess that they named the book “Rocket Fuel” is it really…when those two kinds of folks get together, it can really propel an organization forward. And it’s been a big, you know, launch point for us to really be able to say, “You know what? I’m this way, you have these capabilities and skills, we should just follow the roadmap of how these two…if this one seems a lot like me and the integrator seems a lot like you, we should just follow the roadmap of how they suggest two people like us should get along.” And we’ve really worked really hard over the last year or so at doing that. And it’s been a huge, not just professional growth, but also, you know, I would say our relationship as partners has drastically improved because it gives us a different framework for understanding each other.
Michael: Yeah, I first read “Rocket Fuel,” well, I guess like a year, a year and a half ago as well, I think it probably came out in 2016 or early 2017, and found it just fascinating as well that, you know, as you said, it paints this picture of visionaries and integrators. And they kind of make the good point that, like, when you look at a lot of the famous businesses in history, including ones that have really well-known visionary founders, like, most of them actually succeeded in large part because they had key integrators that actually held the thing together as well. And you don’t always see them because they’re usually a little more internal and behind-the-scenes.
But, like, you know, Walt Disney was the great visionary, but Walt also I think nearly bankrupted Disney, like, three different times. It was his brother Roy who was the integrator, who actually kept the wheels on the bus and turned Walt’s great vision into something that also functioned as a great company. And, you know, Steve Jobs was the visionary but Wozniak was the one that helped keep it all together. And Bill Gates was the great visionary but Ballmer in the early years helped keep it all together. And that a lot of time visionaries are supported by these integrator roles.
And, I mean, I feel like that almost makes it sound like lesser for the integrator. Like, the key point of the book is these are really two essential roles that need each other. Like, great integrators often struggle if they don’t have someone painting a vision of where to go. And great visionaries that just paint directions of where to go will go 20 directions and divide themselves and kill the business if they don’t have an integrator that keeps it all together. And it’s all about the coexistence of the two, and then recognizing some of the tensions that come forward. I know one of the big things that they push hard in the book is like, and when the visionary disagrees with the integrator, the integrator always gets the final say because they’re the ones that can actually figure out what the business can execute or not because the visionary otherwise just can spin it up and kill it.
Chip: And that’s tough, right? It’s regardless of which role you fall into. And I would say this in case anybody goes out and reads the book. In either case, it’s humbling because, you know, as a visionary, first off, it is hard to go around and say, you know, “I’m the visionary.” It feels a little bit weird. But, you know, it is humbling to say, “You know what? I’m probably not the best person to deal with some of the day-to-day of…” As a visionary, I can say for myself, I’m not always the best communicator, because in my head, I understand how everything works. You know, I know exactly how I lay this out. But, you know, in our case, a lot of times, you know, I make it up, my partner makes it real. And there’s a big difference sometimes, I think, between the two is… And for the visionary, in the book, the way it lays out is, when you get into the day-to-day, you’re right, the integrator gets the final say. If we can’t agree in the day-to-day operations, the integrator gets the final say.
And one of the things for me as somebody who brought in a partner who is now the integrator to a practice that I was already kind of the CEO of, the manager of or whatever, and to say…
Michael: And to surrender your own power.
Chip: And to say to your folks, “From now on, if there’s a question, you need to talk to Whitley,” you know. And that’s all of it. And that’s true of everything I think in building a business like ours, yours or mine. It is a constant state of humbling and looking at the fact that, you know, the organization is bigger than you are, regardless of which of the roles that you’re falling into. And it was hard for me as the visionary, you know, to say, “All right, from now on in the day-to-day, you’re going to have to talk to this other person.” It was, I’m sure, difficult for him to say, “You know what? I’m an integrator. And while I may have, you know, some idea about the future, I recognize that this other person is really the visionary.” And I think that that is a…you know, it’s humbling either way. And I just think that that’s important for anybody to understand that it goes both ways for sure.
Michael: I love how you just frame it, though, “I make it up and my partner makes it real.” It’s a good way to explain the blend. But to me, like, it’s also very empowering because, you know, it says to integrators like, “You don’t have to come up with all this stuff. Like, find a visionary who comes up with this stuff and you can turn it real.” And I think for the visionaries to say like, “It’s actually okay if you’re not sure how to execute everything that’s bouncing around your head, it just means you need to find an integrator who can, who can help make it real.”
Chip: You’re just wired a certain way. And, you know, for me, I’m wired that, you know, coming up…new ideas come to me all the time, whether they’re good or bad. I never lack for some sort of, you know, squirrel, something shiny kind of…I always have something. And so, you know, for me, that’s natural for me. It’s going to happen. What’s not going to happen is remembering to schedule certain things. I’m a big believer in Kolbe. I’m a nine Quick Start and a two Follow Thru. And so, you know, that’s a dangerous mix if you’re going to stay by yourself. And I think that, you know, we’re big… You know, again, we kind of have eight things we tend to walk through. We kind of have a scorecard, if you will, that we walk through with our individual offices. And, you know, building the ideal team is one of those. And then doing that, it really is…throughout the organization is a set of puzzle pieces. That, you know, figuring out how to put together the right team in any level of an organization is just paramount.
His Vision For Signature Moving Forward [1:34:40]
Michael: So speaking of kind of the visionary role and saying the vision, what’s the vision for you from here? Like, where does Signature go from here?
Chip: Well, I think that it’s important…we’ve reached the stage where we feel like we have enough size to be able to continue to specialize. I think the two things, you know, for me to see from a vision standpoint is, we’d like to continue to expand and add new practices but to add it in a way where the entire organization gets better as a result of each new join. And so we’ve been developing kind of a structure of, as new teams we have…for example, I mentioned earlier, we have a team of ladies who joined, and they’re an all-women advisory practice who specializes in working with women executives. And so, you know, one of the things that I would, you know, envision us doing is finding ways for advisors inside of Signature to collaborate to be able to give our clients access to the best possible resource, regardless of geography or specialty. So I would love to be able to partner with or collaborate with that practice, for example. And to be able to build out a network that can collaborate with one another is an important part.
But it’s also for me, culture is a big deal. You know, next to the vision, developing the right culture is absolutely crucial. And so for us, I think that the idea of growth for growth’s sake is not something that we want to do. We want to find the right people. And also, part of that group of people, it seems easy to think that that would be, we want to find the next retiring advisor. I want to find the next person who was like me. You know, I taught school, I taught sixth grade for a year. I like to joke that I was teacher for a year, which sounds a lot like teacher of the year if you say it fast enough that you can feel, but to find… A lot of our younger folks didn’t come from wealthy families. They didn’t come from backgrounds that are, you know straight out of the finance kind of playbook. So being able to find young people who want to get into the business, who just need the right opportunity is a big deal to me. And to be able to see them be successful.
I take more personal pride in seeing, you know, our young guys get new clients and build new relationships than I do doing it for myself. A big part of, well, you know, Signature for me was seeing us expand. I know that there are plenty of folks out there who are interested in finding good quality young people. I want to be able to find them too so that,, you know, when somebody who’s interested in finding a succession plan but doesn’t want to do the work or doesn’t feel like they have the time or the inclination to do all of that, that we can have some young people and instant investment on our part to go ahead and bring them in. Because it takes a couple of years before a young advisor is ready to be able to be in that forward-facing, you know, position. But, you know, I think that that’s a big part of the vision for me is continuing to develop a group of young people who are ready to be that next generation.
Michael: So for as well as the path and journey is going, I’m just curious, like, what was the low point for you in this journey?
Chip: That’s a good question. You know, I think the…one of the more difficult situations that I’ve had recently is having a younger advisor leave. And so anytime that you build a team and you pour into people, it’s difficult when somebody chooses not to be a part of that. And fairly recently, we had a situation like that, where… Again, we really promote and believe in the concept of being a family first organization. And that is not only our nuclear families at home but also a work family. And so anytime somebody, regardless of the reason, decides that they don’t want to be a part of that, yeah, that was personally a lower point for me is having somebody that I had put a lot into and, you know, I loved the person, you know, choose not to be a part of the family anymore was really difficult.
But that’s just part of what we…you know, that’s part of what we sign up for when you’re trying to build something is that you’re going to invest in and care a lot about people, and sometimes… You know, one of the ways that I’ve described it with our team, because one of the things when…in a bigger organization for example, in a regional firm for example, when somebody leaves, nobody knows. It becomes a like, “Well, I’m going to call Michael. Where did Michael go?”
Michael: Don’t even realize they’re gone. Yep.
Chip: Well, and nobody wants to talk about it. You know, “Where did Michael go?” “Well, you know what? Michael just didn’t really fit the culture here anyway.” You know, one of the things that I was having a conversation with one of our partners about is… You know, one of the things that I ended up communicating to our team was that this person had left. And I believe that… Kind of the example that I found was, I don’t know if you’re familiar with kintsugi I think is how it’s pronounced. But it’s, in Japan, they take broken pottery, and they actually mend it with gold so that they put the pieces back together. But it is done in such a way that they’re mended and blended with gold inside the cracks. And the philosophy behind it is that our…you know, those rough parts, those low points, they aren’t things to be ashamed of, they’re part of what makes us…over time, makes the whole more valuable. And so I had heard that story, and I just thought it was really cool.
And so, you know, one of the things that I committed to is, when we do have a low point, if somebody ever doesn’t want to be in the family then we tell everybody. And we make that part of, you know, growing stronger together rather than minimizing the importance of the person while they were there, enhancing the fact that sometimes, yeah, fractures come in in businesses or relationships, and they’re part of what make us better and stronger, rather than something that, you know, you just don’t want to talk about, like a lot of places I feel like do. So I would say that’s one of the, you know, lower points. It really isn’t…our business is built on people, not on markets and those kinds of things. And I think that that’s been…you know, our highest points are because of people who decide to be a part of the organization.
You know, we’ve got two new folks coming in in January that we’re really excited about. We’ve had a lot of people, you know, want to be a part of it from an acquisition or an affiliation standpoint. And those are the high points. They’re about people. And the low points are, every now and then, you know, for one reason or another, things aren’t a good fit and people have to go different ways. And so for me at least, the low points are about people too.
Michael: So, as we wrap up, this is a podcast about success, and, you know, the funny caveat to that word is just success means different things to different people. So, you know, certainly, the business is on a very successful trajectory, but I’m just wondering, like, how do you define success for yourself at this point?
Chip: Well, originally, if you had asked me five years ago, you know, professionally and really kind of selfishly personally, I have three boys, you know, so ideally, you know, I’m from a small town, and I wanted them to be able to come back and work as a part of our organization without necessarily having to move home. So, you know, there was a time when growing to a point where we had more than one location so that they had options was a big deal. And in that way, you know, I’ve accomplished…mission accomplished as far as that’s concerned.
Really now for me, everything is more qualitative. And so, I would say that for me, success for me now is building a life where every day, whether it’s at home or at work, where I and anybody who’s a part of our team is able to focus on only doing three things: doing things that they enjoy, that they’re good at, and that benefits the team. And whether that team is their family at home or, you know, Signature Wealth, at work, you know, I really think ultimately for us to live, you know, what we call our Signature life, that’s what it’s all about is doing things that you enjoy, having the ability to focus on things that you’re good at, and recognizing that ideally, those things are in service of something bigger than yourself, and, you know, that makes the team around you better, whether it’s at home or at work.
Michael: I love it. I love that framing, doing what you enjoy, what you’re good at, and that benefits the team.
Chip: That’s right.
Michael: Well, thank you, Chip, for joining us and sharing the journey on “Financial Advisor Success” podcast.
Chip: Thank you, Michael. I appreciate you having me. I’ve enjoyed talking.
Michael: Absolutely. Likewise. Thank you.
Disclosure: Michael Kitces is a co-founder of XY Planning Network, which was mentioned in this podcast.