Welcome back to the 156th episode of Financial Advisor Success Podcast!
My guest on today’s podcast is DeLynn Zell. DeLynn is the Co-Founder and CEO of Bridgeworth Financial, a hybrid RIA based in Birmingham, Alabama that oversees nearly $1.6 billion of assets under management for almost 2,000 clients.
What’s unique about DeLynn and her firm, though, is the way they decided from the start to build an advisory firm that would be sustained past the founders, and have taken steps over the years to establish the necessary career tracks, and equity and compensation structures to attract and retain next-generation talent for the firm in order to be sustainable for the long run.
In this episode, we talk in-depth about the four-tier career track that Bridgeworth has created. From a planning coordinator who focuses on the technical work for a base salary, to associate advisors who are involved with client meetings but also have the responsibility to start networking to establish themselves in the community; lead advisors who have the primary responsibility of relationship management and some incentives for business development; and partners who have not only a heavier responsibility for business development but also a greater financial participation to incentivize their ongoing efforts to keep growing the firm and its equity value.
We also talk about how Bridgeworth structures its compensation for partners. The unique way the firm allocates partner salary based on credits for both their business development and revenue or other leadership responsibilities to compensate their ongoing work in the business as separate from their equity ownership of the profits, which in turn is based on what they originally brought to the business when it was formed, how and why Bridgeworth is reinvesting into the business development training for its next-generation advisors so they too can become eligible to become a partner in the future, and the way the firm is developing advisor teams that each have their own specializations to support their individual business development activities under one common firm-wide umbrella.
And be certain to listen to the end, where DeLynn talks about how, even with the long-term success in the business, it was still incredibly difficult in the early years. Why she thinks in the long run, the advisory business is an especially good fit for women; how the gender split of CFP professionals may shift in the future; and why the most important thing when selecting an advisory firm to build your career is not the firm’s compensation or particular role, but instead, its culture and whether it’s a place you want to be in the long run, and then to let the role and your opportunity evolve as it may over time in a firm and culture you trust.
What You’ll Learn In This Podcast Episode
- How DeLynn Cultivated A Mindset Around Succession Planning From The Start [05:11]
- How DeLynn’s Firm Deals With The Marketing Limitations Inherent In the Hybrid RIA Model [18:38]
- How Her Firm’s Niches Have Evolved Over The Years [23:55]
- How Her Firm’s Compensation And Equity Structure Is Determined [32:08]
- How DeLynn’s Firm Developed Career Tracks And Taught Business Development Skills [55:39]
- What The Partner Role Looks Like At Her Firm [1:13:36]
- How Bridgeworth University Is Teaching Business Development Skills [1:23:55]
- What Surprised Her The Most About Building An Advisory Business [1:27:35]
- How Her Role In The Firm Has Changed Over The Years [1:34:28]
- The Advice She’d Give To Young Women Coming Into The Industry And What Success Means To Her [1:44:33]
Resources Featured In This Episode:
- DeLynn Zell
- BridgeWorth Financial
- Echelon Partners
- Carolyn Armitage
- #FASuccess Ep 028: Scaling Up A $6B Independent RIA Using A Full-Time CEO As Chief Inspiration Officer with Michael Nathanson
- #FASuccess Ep 153: Generating More Productive Referrals By Closing The Gap Of Prospects Who Are Referred But Never Call, With Dan Allison
- Never Eat Alone, by Keith Ferrazzi
- Scout Branding
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Michael: Welcome, DeLynn Zell, to the “Financial Advisor Success” podcast.
DeLynn: Thank you, Michael.
Michael: I’m looking forward to the podcast today. And the firm that you are building has, I think some unique characteristics over others, as we’ll talk about more in the podcast today. I know this was something that you had launched with other partners a little more than 10 years ago. And it’s something that you had launched sort of from the start saying, “We want to start and build an advisory firm that is going to go beyond us and live past us.” And I find it’s an interesting juxtaposition because that doesn’t really happen a lot in our advisor world. I think there’s a lot of firms, particularly on the solo practice end that just they probably won’t outlive the founder. They almost certainly won’t outlive the founder. And it’s going to make great money for the founder, and they can retire and achieve their goals. So, more power to them. You don’t always have to make a thing that goes on. You can do the work and get paid well for the work and move on.
And certainly, there are a subset of advisors that I think get to that point where you’re within maybe 5 or 10 years of retiring yourself and look around and say like, “Oh, we built a thing here. I think this could probably last beyond me. I think I’m going to try to figure the succession planning thing out. I want to figure out how to do this. I’m proud of what I’ve created, and I would like to have it go on.” But you seem to have come at this from a little bit of a different perspective of already being experienced in the industry but saying, “Hey, we’re going to make this independent firm thing. And from day one, I’m assuming we’re going to try to build something that’s going to live past us.” And I’m fascinated by that mentality and just very interested to know sort of, in practice, how has that played out? What have you done or tried to do, and how do you start structuring and building a firm if you’re coming at it with the assumption, “This thing is going to be here long after we are?”
How DeLynn Cultivated A Mindset Around Succession Planning From The Start [05:11]
DeLynn: Well, when we started talking about that, we came up with that idea really about 12 years ago. We were with a prior firm. And maybe we’ll talk about that a little bit later. But as we were thinking about what we wanted to build and what we wanted our future to look like, we looked around, and we looked around our city, looked around our region, around the country, and like you said, a lot of people were solo practitioners or two or three partners, and they use their name. It was built on that advisor’s name.
And I had started my career at one of the big eight accounting firms. I guess that tells you my age a little bit. I think it’s what, the big four now, started there. And I thought a lot about their model. And my husband was with a very large law firm here in the city, and I thought about their model and thought, “Maybe we should structure something like that. That’s how firms kind of perpetuate themselves into the future is not resting on one person.” And so that really is what started it. Now, I will tell you, as we continue down that track and have gone through some reorganization and built career tracks, you realize, really, it’s in the best interest of our clients. It’s in the best interest of our employees. It’s in the best interest of the G2s and the G3s for a firm to sustain that and live past the founders.
Michael: It’s an interesting point that, as much as we sort of talk about this in our advisor world, in our, I guess “trying” to figure this out as an industry, that having service businesses that are built around people’s knowledge and intellectual capital, so that pure thing of what we do in advisor world, that challenge of how do you take businesses that are built around individual people’s intellectual capital and then turn it into actual lasting enterprises that outlive those people, we are not the first ones to come up with this challenge. Law and accounting have been doing this for a century or two. So, we don’t have to entirely reinvent the wheel. Starting point is just, as you said, just look around at what some other industries have done. There are other folks out there that have figured some of this stuff out, at least one way that seems to work pretty well for very long periods of time.
DeLynn: That’s right.
Michael: So, how did that…was there a model that was taking shape in your head as you were going down this road of what you would want it to look like? Were you trying to model pretty directly off of a big four/eight accounting firm or a big law firm? How were you visioning sort of V 1.0? Because I’m sure it’s changed a little. So going back to ’07, ’08 as you were thinking about this, what was version 1.0 in your head of how might you try to build an advisory firm that’s going to live beyond us?
DeLynn: Sure. I guess to really explain that, I need to share some context of where we were. We were with a firm at that time, and it was a planning firm. And I would tell you, 30 years ago, the leader of that firm I think was a visionary and got a lot of things right. A lot of things were not right, but with the idea of, look, one person can’t know everything. Right? I think if, as an advisor, you sit in front of a client and you say, “I’m the end-all-be-all and everything in financial advice,” I think that’s being a little disingenuous. And so, the firm was really built, the prior firm was built, we had a planning department. And again, this was 30 years ago. I think we paid for CPAs, attorneys. We hired a lot of that intellectual capital. At the time I was in my 20s, I didn’t have a lot of experience at this. Neither did many of us there.
And so, we had that planning department, which was fantastic. And some of the best things that happened career-wise as far as the growth happened during that period. But there were things that didn’t feel right. And what I mean by that, Michael, is that it was like many other firms, set up like a real estate operation. We marketed under one name. We shared some resources together. Outwardly, the clients really didn’t know we weren’t a real firm, but each of us was eat what you kill, hire your own staff. So yet here we were operating with this great planning department and doing what I thought was really extraordinary planning, yet the infrastructure was still very solid. And that’s where I had the biggest problem going, “This is not sustainable into the future. This isn’t what we want.” It didn’t feel real good to us. And honestly, at the time, we were kind of a square peg in a round hole. Here we were, we were all CFPs, we had this great planning department, and we were affiliated with an insurance broker-dealer. And you know the pressures they put on you from that standpoint. That didn’t feel right to us.
So I think it was, happened at a point in time in my life where I was able to step back a little bit and say, “Hey, what does the future look like?” I was taking a little…I never took time off, but I slowed down some, and I had a baby, and husband was working, and so, I had a little bit of, I guess time to think and think about the future and came back and said, “Folks, we need to do something different. This is not the right model for us.” And that was really the impetus 12 years ago when we started thinking about putting a group together. And it was a little interesting because not everybody in the firm, honestly, was those we felt we wanted to build the next firm with. So, that was a little awkward. Not everyone shared the same vision.
So we hired a consultant, did some strategic planning, did some visioning, came up with the name, and we launched Bridgeworth in October of 2008. And that’s another interesting story in itself. But here we were, we became Bridgeworth, and we were in the same building as our other group. It was like getting a divorce and living in the same house for a while. But that was really the impetus, Michael, for that vision of, “Hey, we want to build something that lives past us.”
Michael: So you were in, it sounds like a fairly traditional broker-dealer environment, insurance broker-dealer environment. They give you the platform, they give you certain centralized resources. So, they had a planning department to help you as a centralized resource across all the brokers, the broker-dealer. But at the end of the day, just that looming presence of, “You know at the end of the day, we all get paid when you sell the company’s products” was just kind of a looming problem for you? What did the business model look like for you? Were you still active in that world? Were you kind of already migrating into a more AUM and fee-for-service sort of world and then getting friction from the company because you were doing more fees and less products?
DeLynn: Yeah. At that point, the insurance broker-dealer, it was really open architecture. So they were not pressuring sales. And we weren’t doing many sales. We had already migrated to the fee side. We were doing planning. We had the credentials. We had the reputation in town of really being good planners, but at the end of the day, from a competitor standpoint, “They’re just with that insurance broker-dealer.” Client gets the ADV and it talks about you being an insurance agent. That just didn’t fit what we were really doing. And I would tell you, that was at the core of part of the change as well.
Michael: Was just the perception, and you had this joint, I guess ADV as a hybrid. And the joint ADV as a hybrid is disclosing this long list of things that you don’t actually do, but “the firm” does. So their disclosures are your disclosures and your disclosures and now you have conversations with your prospect that you didn’t necessarily want to have because those are things you do?
DeLynn: Yeah. It didn’t feel right, and it wasn’t the right place for us. And so, we became a true…we were playing our own hybrid in 2012. Made a change. Brokerage side of the business really was not selling products, it was more of legacy holdings. We had been in business many of us for 20 years at that point, you have all that legacy business. And if it had been my decision alone, I would have just walked away from that and said, “Hey, we’ll be fee-only.” However, at the end of the day, it’s people, it’s not just an account. There are people who we made promises to years ago. And maybe older clients at a brokerage account may have been the right thing for them. Morally, we didn’t feel like we could walk away from those people. We wanted to deliver and be there as long as we promised them.
Michael: So, the transition for you in 2008 was that, what, you launched an external RIA but you kept the broker-dealer relationship for the legacy brokerage business and became a hybrid with an external RIA. You could drive yourself instead of being dual-registered under the corporate RIA? Was that the actual shift in ’08?
DeLynn: The shift in ’08, Michael, was we stayed with the same insurance broker-dealer. We reorganized under the name Bridgeworth. It was really a baby step to leaving. And then in 2012, we actually left that broker-dealer, walked away, formed the hybrid. We put our brokerage business and we custodied with LPL, and we now custody with Schwab also.
Michael: Okay. And is that still the structure today that you operate as a hybrid? The brokerage business is under LPL, and then the RIA business is under Schwab.
DeLynn: Right. Our brokerage business is just very, very, very small, 4% of our revenue. But we shut down brokerage. We don’t open any brokerage account. We’re not taking any commissions again. We just have that as legacy. Maybe a client has a managed account and they may still have a small brokerage account. And we’ve looked at selling that piece off. We’ve looked at doing something different, but at the end of the day, I think we’re just going to let it slowly continue to die on the vine and just not continue feeding it.
Michael: So I’m curious on that end because there are so many firms that are in that same position, that the business has largely gone RIA but they do have some level of, call it legacy brokerage business. It’s got old trail, so there’s compensation attached to it. And just it’s business you can’t always move. At least often old managed accounts and mutual funds, I can do a share class conversion to an institutional share and move it into an advisory account. There’s at least often a migration path. But when you get legacy and annuities, legacy 529s, some of the others, there just isn’t a thing. There just isn’t a way to work with it on an advisory basis. And so you get to this crossroads of, we can walk away from it and just sort of let it become a house account where it is. We can sell off that book of business if we can find a friendly buyer that isn’t going to try to poach the…
DeLynn: Take your client. Yeah.
Michael: Poach the clients that you’re now sort of working with jointly, or you can just keep it and try to find a broker-dealer that’s willing to let you hang your hat there and keep the client business there, recognizing that you’re not exactly a growth story for them because you’re not adding new clients and new brokerage business. But presumably from their end, like, you’re stable and you don’t have a lot of service demands, so it shouldn’t be hard business for them to support. And it just kind of runs off over 3 or 5 or 10 or 20 years or however long it takes for all of those things to wind down.
DeLynn: That’s right. People joining us do not get their securities license. Most in the firm have dropped their securities license. We don’t pay out brokerage revenue, it comes to the firm.
Michael: Oh, interesting. So any legacy business is just like, this is just part of the kitty? I guess in practice because most of the people who did it are partners who merge in their practices anyways, as a partner, you kind of get a piece of it. Maybe not exactly your pro-rata share, depending you contributed what. But it is profits to the business, and the partners participate in profits. So if you brought some of the revenue in, you at least kind of sort of participate in some of it.
DeLynn: Sure. And there again, it’s so small. And to try to sell it just didn’t seem practical. It just seemed like a lot of hassle to us. And I couldn’t figure out how people sell it and you have a client you share jointly, that just didn’t make a lot of sense to me. So at the end of the day, and LPL was very understanding about it, we went to them and said, “Look, this is the business model we want to operate on.” And I will say that they were very receptive to that and understood what we were doing.
How DeLynn’s Firm Deals With The Marketing Limitations Inherent In the Hybrid RIA Model [18:38]
Michael: So I do have to ask, though, from just the…as you said earlier, the marketing and perceptions end. You have a hybrid relationship. So LPL shows up on the ADV as a disclosure, you’ve got a bunch of different things that now have to get communicated. You’ve got a second regulator in FINRA that at least has like one claw, one tentacle into the firm now. You get limited in that you can’t market as fee-only, which important for some, not for others. So, how do you look at or think about those issues? Because I know for some firms, that’s actually what causes them to pull the trigger, is like, “I’d just be able to want to market in a simpler way.”
DeLynn: Sure. Well, we do our marketing. I will tell you, there was a lot of thought and effort and consultants and attorneys involved in this, and taking a look at, “We will market under the RIA.” And so we’re very careful with that, but we do market under the RIA. And yes, you’re right, the ADV certainly has to have those disclosures. But the fact that we have a brokerage affiliation seem to be…that doesn’t bother me or our clients as much as having that insurance relationship, so to speak, with the insurance broker-dealer.
Michael: Oh, interesting. So in practice, the hybrid to LPL has been less of a concern for you than hybrid to a legacy insurance company in particular?
DeLynn: It did. It really did. And I can’t explain this. It may have just been where we were in the lifecycle of our firm, but when we became that true hybrid, our average size client went up tremendously. Our firm’s makeup on client size and revenue looks completely different today than it did 10 years ago.
Michael: So to what do you attribute the change? Is that just, this is the value of having your own independent brand? That you’ve been able to build a brand in your town, so you attract a different kind of clientele than “just” being another registered representative of ABC insurance broker-dealer?
DeLynn: Sure. I think it was several things kind of all coming together at the same time. One, we had 20 years in the community. Personal reputations, networking, building our own personal reputation. And then to be able to go out and really… In our prior firm, there were no marketing dollars spent. It was really us individually doing it. And then when we came together as Bridgeworth, that was part of the whole impetus for starting Bridgeworth., other than reasons I’ve already stated, but to be able to go out there and brand under a name that wasn’t just us individually. And I think just that branding out in the community, the 20 years. When you’re out marketing, you’re building your own thing. As you well know, Michael, it doesn’t happen overnight. It takes a long time. And then after a while, you start planting those seeds. And many times those seeds start developing and maturing. So I think it happened all at once, if that makes sense, the branding, and then our tenure just in the lifecycle of our careers.
Michael: Well, and it’s worth recognizing as well, your firm is based in Alabama. I think your headquarters is in Birmingham, and then you’ve got a second location in Huntsville. So you’re in a, I guess a mid-sized market. Birmingham is not a small city, but you’re not in a New York City, Chicago, Minneapolis, like, ultra-dense metropolitan area, you’re in a city that has some size and substance but is still small enough, you can actually stand out and differentiate and truly become regionally known in your city.
DeLynn: That’s exactly right. Exactly. So, we feel very fortunate with that. I would say our competitors, for the most part, as we were getting started were really the smaller fee-only firms. There really hasn’t… well, there’s one affiliated with an accounting firm that’s done a great job but outside…and started from their own standalone RIA. We are really the largest. It’s the makeup in size that we are.
And I think size is important. My practice was built in one niche area, with South Central Bell employees and one of my partners, did the same thing with Alabama Power, Southern Company. And we were able to utilize the specialties in that niche marketing to really grow the practice. But as we continued to grow, and again, back to the law firm, accounting firm analogy, I felt the size, well, we didn’t have to choose one specialty. We didn’t have to say, “Hey, we’re just going to work with retirees.” All of a sudden we kind of developed a niche in the legal community. I have a lot of lawyer clients and niche really in the medical community. We see a lot of physicians, of course, the retirees. And then obviously, with the number of women we have in our firm, we certainly couldn’t overlook that. And so, we do see a lot of women, especially women executives here in Birmingham.
How Her Firm’s Niches Have Evolved Over The Years [23:55]
Michael: So I have so many questions around this, of… Niche is, as many folks who know who listen to the podcast, we kind of talk about niches with some frequency of power of niches. But so often, niche conversations are like, what is your thing going to be? What is your focus going to be? And it’s kind of a, pick your one. So, I’m fascinated that you have kind of ended out with multiple different niches. So I guess just talk to me a little bit more about how that works. Does the firm market in all these different niche areas? Is it like individual partners end out with their niches? So like, you are known for your specialty with employees from South Central Bell and your partner is known for employees in Alabama Power and all of you sit under this umbrella regional brand known as Bridgeworth?
DeLynn: That’s right.
Michael: Is that how it works?
DeLynn: So, again, for a little context, so back in 1988 when I started, and two of the remaining founders of Bridgeworth started with me at that time, we were building our own little brand, our own little silos, if you will. And I’ve always said successful people always have a little luck along the way. It takes a lot of hard work. And I think my lucky break was being in a situation when South Central Bell made their first early-out offer in 1990 and ’91, I was working with a lot of those women and other people at the company. We had their pension calculations. We were on their list of approved planners for their executives, and lo and behold, they made this offer. And we’re the ones in Birmingham who were able to do the projections for them. The company was not giving the projections. That’s when the lump sum was based on the PBGC rate, and that rate was moving quite a bit at that time. That was our lucky break. And the same thing was happening with the Power company. And so I would tell you, the retiree market has really always been the bread and butter of our firm.
After we launched Bridgeworth, a lot of that slowed down, and I personally am looking on the landscape going, “Okay, I don’t want to practice just built around…then it became AT&T, clients that you want to branch out. And I was fortunate and started getting a lot of referrals in the community in different areas. Maybe it’s because I was married to a lawyer. But all of a sudden, I found myself with quite a few attorneys. And my partners are really doing the same thing. And then a few years ago, as we were bringing in younger advisors and newer advisors… And I will tell you, through a lot of your podcasts and listening to all of the people around the country, I do believe specialization is the key to driving those referrals. That’s a lot easier when somebody says, “Hey, go see DeLynn, she knows everything there is to know about AT&T.” And then the client just picks up the phone, “Hey, I’m told I need to come see you.” That’s pretty powerful, Michael. So I am a firm believer in specialties.
So to fast forward a little bit where we are today, as we were looking at our marketing efforts and where we were spending our dollars, we really divided up our client base and said, “Hey, because we have 18 advisors here, we have enough people here to specialize in a lot of different areas.” And I wanted to build it out that if somebody came in and was an executive and had a lot of complications with stock options, that we have a team that specializes in that. If somebody, if it’s a female executive, today is a little bit different than it was when I started. A lot of times they’re wanting to work with another female. So we have that option here for them. If it’s a doctor at UAB, we have one of our partners who does a tremendous amount of work with physicians at UAB. We’re going to bring them in and utilize their expertise with the clients. We also have a planning department, Michael. So we have three people full-time who are not seeing clients but who are our technical resources as well. And they have a deep strength of knowledge in all these different areas, too.
Michael: Interesting. So the firm effectively may have multiple niches but sounds like individual advisors, individual partners still tend to be at least mostly in one particular area.
DeLynn: Yeah. And some will be generalist, but I will say you could almost…I could go look down the hall and put people in one of those niches.
Michael: So from the firm perspective, I guess that’s one of the nice things of being an ensemble practice of multiple advisors and multiple partners under one shared firm and one shared umbrella, if I can bring the doctor in, it doesn’t matter whether I take the client or it goes to the other partner who happens to specialize in doctors from that medical facility because the firm participates and the firm serves the clients, and that makes the firm profitable, and you have a lot of partners who participate in that.
DeLynn: That’s right. And again, back to that law firm example, I always use the example with my partners here, my husband is a litigator. He gets friends and people call him all the time, “Hey, I need my will done.” And he laughs, he said, “You don’t want me to do your will.” And he walks them down the hall or refers them to their estate planning area. Of course, he’s still getting credit for landing and bringing that client in, but he is handing them off to somebody else who specializes in that. And in a firm of our size, that is what I wanted to build, to make sure we had specialties and that built a compensation and equity structure that was looking at the firm as a whole. And quite frankly, that’s…and we’ll probably get into this a little bit later, I think that’s how we’re going to be able to bring in and sustain that firm with the G2s and the G3s going forward.
Michael: So I am curious just in the context of this conversation around bringing clients in that may go to someone else at the firm because they have that specialization. How does compensation and equity structure work at Bridgeworth? It strikes me, there’s an equity bucket here. There’s sort of a compensation for the work you do bucket. There’s usually like a business development bucket that may be separate. So, how do you handle that in a firm where you’re really trying to make this more a team-based environment, more collective environment? You want cross-referrals to happen across the firm specializations, but obviously, you want people to be excited they brought in a client, not grumpy that they brought in a client but “they” don’t get to work with that client. So, how does that work?
DeLynn: We use the phrase a lot around here, if we were building this from scratch, we probably wouldn’t…it wouldn’t look like it does today. But when you brought 11 people together with different sized practices, we had people at the time when we came together who were generating $1.5 million of revenue themselves, and we had others a good bit lower in different stages of their career. So to build out that equity piece, that was a puzzle that I don’t care how many podcasts I listened to, I could not figure out. We were fortunate that we had been introduced to a woman named Carolyn Armitage. At one point, she was with LPL, and they had offered us her services to come in and really do a strategic plan. And I said, “Sure, come do it.” And through that process, we started looking at how we needed to change our infrastructure. During that time, she became a partner with ECHELON Partners out of California, and…
Michael: Who I know does a lot of consulting around practice management, partnership structures, equity transactions. They do a lot of mergers and acquisitions business as well.
How Her Firm’s Compensation And Equity Structure Is Determined [32:08]
DeLynn: That’s right. And because we had a relationship with Carolyn, she knew us. I talked to some other consultants, and we just had a long history with Carolyn. So when she got to ECHELON, they walked us through this process. And I would tell you that they did a fantastic job doing it. It’s a little complicated, Michael, but as far as referral process, we came up with something called referral calculator. So a client, somebody sees me and says, “DeLynn, I need some help.” And I say, “You know what? Why don’t you go down the…I’m going to introduce you to one of my colleagues who specializes in that area.” Or, “I’m going to…he or she will call you.” I’m going to keep in my bucket, we call it my revenue bucket, and this is important for equity, I’m going to keep 15% of that.
If I’m involved, and oftentimes we all are, we land the client, we help get them here. We may be involved in the initial round of plan presentation, at least securing that client, involved on the front end and then we back out, that’s another percentage totaling 40%, and then whoever is servicing that business will be credited with 60%. And everybody here is on salary, but we still keep up with things in our bucket to base those salaries off of. Does that make sense?
Michael: I think so. So let me just make sure I’m processing. So first, just at the client level, kind of like, a new client comes in, you’re figuring out how to split this up. It’s like 15% for the introduction, 25% more if you help facilitate the close, if you help seal the deal, and then 60% for just the keeping and the servicing the client on an ongoing basis. So that’s how you figure out sort of who’s got credit for what. Now, help me understand how this translates to sort of salary/partner income, partner distribution, etc. Because obviously, you can’t literally pay out 100% of the revenue because you have staff overhead and other expenses here. Otherwise, we would run out of money very quickly. So I get sort of the allocations of this like bookkeeping entry, but how does this actually translate to who gets paid what?
DeLynn: Yeah. So, this is where it gets a little complicated. And I can tell you that I see us maybe evolving this in the future, but this, what we came up with, what ECHELON came up with worked for us. And that is, we set partners on a guaranteed payment. Obviously, in our legal structure, it’s not a salary, it’s a guaranteed payment.
DeLynn: Yeah. And so, we have a grid. And so, the top-level salary, the highest level of production, the guaranteed payment is on a grid. So if somebody is producing $2 million of revenue, they’re going to cap out on the top level of guaranteed payment. Obviously, it scales down. So somebody who’s doing $400,000 of revenue is going to be obviously on a much lower guarantee.
We then, we hold back 15% of all the revenue to cover, as you said, all the expenses of the firm quarterly. And this is where this gets a little crazy, quarterly, we do a profit distribution, and that profit distribution quarterly is looking at each partner’s bucket. And then at the end of the year, our profit is paid out based on ownership in equity. When the partners contributed their equity to the firm, they got shares. And those that contributed the largest amount of equity obviously got more shares than the ones who had the smaller practices. And then the founders and those who were really giving up their practice to run the firm also have an equity, additional equity piece as well. Now, that was to get us started because, to take somebody that was generating close to $2 million of revenue as a partner and somebody at $400,000 or $500,000 as a partner, you can’t equally share profits.
Michael: Right. So that’s interesting that you kind of split these apart. So I’m going to have these like…so I’m going to have this kind of referral calculator bucket calculation. Maybe like, I service $1 million worth of client revenue, so that’s 60%. So $600,000 is in that bucket for me. Then there’s another $500,000 that I helped bring in and close. So I get 40% of that. So that’s another $200,000. Then maybe there’s a little bit more that I did in referrals, and that’s another $50,000. And so I might touch $1 million or $1.5 million of revenue in various ways. By the time you apply percentages, my revenue in my bucket might be $800,000. And then somewhere there’s a grid that says like, “Okay, if your revenue bucket is $800,000, your salary is $200,000” or $300,000 or X or whatever it is. And you decide as a firm what the salaries are going to be relative to your revenue buckets. But you can agree on that as a firm. Everyone is playing the same game under the same rules. So hopefully, we’re all comfortable with this.
DeLynn: Right. Because it still…it gave us a component of sharing profits at the firm level, and to make sure that we’re thinking from a firm perspective, not as an individual partner perspective. Now, I will tell you those at the higher level, we don’t think twice about getting a new client, landing it, maybe helping close it and then handing it to a G2 advisor, and who is a lead advisor but not a partner, to manage. And that’s easy. I would tell you those at the lower end of the scale are having a little bit of trouble with that. And I think that will come over time.
Michael: Just because their total numbers may not be adding up to where they want. Because I’m just sort of thinking of this out loud, as a partner who manages revenue, this is really sort of true in any advisory firm, there’s a portion of the revenue that I will get paid for, call it my work in the business. It’s my direct salary or revenue-based compensation or whatever it is. And then there’s a portion I’m going to get off the bottom line as my profit distribution.
And so, what strikes me and part of the distinction that you’ve made here is, there’s essentially a salary component, guaranteed payment, like functionally, there’s a salary component that ties to sort of the revenue you have some kind of stewardship over, you brought in, you closed, you serviced, but presumably, that’s not all the revenue in that pot because some of it is supposed to drop to the bottom line as the profits of the firm. And I might participate in those differently because the above-the-line portion is carved up based on our revenue buckets off of the referral calculator. The below-the-line portion is based on a relative equity interest, which is much more driven by whatever I came to the table with as a founder that I put into the pot to get my relative equity share, or I guess if I’ve bought in or earned in equity, subsequently, I may move that number a little bit. But I could have very different percentages. If I was a newer, up-and-coming partner, I might not own a lot of equity because I didn’t bring a lot at the beginning, and now it’s a large firm and more expensive, but I can still get paid pretty well for my revenue bucket because I’m getting business done.
DeLynn: That’s right. And then, Michael, the dream is, you have to look at it not just today, but when we, with the help of ECHELON, are looking at that, at this over the next 5, 10, 15 years, the things we’re doing as a firm, those are really going to flow to the bottom line. And what I mean by that is we’re acquiring practices, we’re buying out partners, and so we’re creating more and more, and we’re creating more leverage with our other G2 and G3 advisors. So that profit going to the bottom line is going to do nothing but to continue to increase, and the partners are going to share more and more from those bottom-line profits, not just on their own bucket.
Michael: Right. Because that’s part of the distinction, right? In sort of the classic broker world, well, the platform takes something off the top, but whatever you get off of your grid, all that’s yours. We don’t really make a distinction of like, “What was your servicing revenue, your referral credits, your biz dev credits, and your profits?” Just like, “Gross revenue minus broker-dealer cut equals mine.” And we don’t make these distinctions. Once you get into a firm environment, in a multi-firm environment, in a multi-firm, multi-owner environment, these distinctions suddenly start to matter of how much do you get above the line? How much do you get off of the bottom line? And recognizing just sort of the fundamental nature of ownership of a business, from an owner’s perspective, you kind of want to drive it to the bottom line.
DeLynn: Exactly. That’s exactly right, and what we’re trying to do. And to be an owner is not just producing revenue. An owner has responsibility for the welfare and the health, financial health of the firm. And if we want to build a firm that sustains us, we have to start pushing things down the line, so to speak. We can’t just look at it as each partner looking at it for themselves. And I think that’s just a requirement of being an owner. One of your previous podcasts and I think it was, I don’t recall his name, from the Colony Group, I believe, it was that he talked…
Michael: Michael Nathanson.
DeLynn: Yeah. I think it was he who talked about if you bring in a client under a certain amount, the partner is required to push that to another advisor. And we have not implemented that, but that is on the table for discussion in our January meeting. We have a responsibility to bring on this next generation. Listen, if I were starting this from scratch, it would be great if everybody was about the same level of revenue and everybody had the same equity and we paid the expenses and we paid ourselves a salary and we split the profits. But coming together as we did, we had to find some way to reward those who had done a great job and had built a really big business, who were not willing to take… If you’re doing $1,700,000 of revenue, you’re not going to be happy on a $200,000, $300,000 salary and hope their profits at the end of the year.
Michael: Well, and I think you make a good point overall, kind of twofold here. One, just recognizing this split of what you do in the business versus the profits of the business and that you don’t have to participate…you don’t necessarily have to participate in those pots evenly, right? If you impact revenue more directly, you can be paid more directly for your revenue. That’s different than your ownership of the profits, which is what you get after all the people who are responsible for revenue get paid their fair compensation for servicing the revenue.
DeLynn: Right. And we had this conversation with a partner just this week and said, “Look, you sourced the client, you help land them, you turn them over to a G2, G3 advisor over time, you’re still getting 40% of that revenue and you really aren’t doing anything. And you still are going to get some from the profits at the end of the year. And so hey, that’s not a bad deal. Bring them in, land them and turn them over.
Michael: And I guess functionally, it comes out to sort of be a version of revenue-based compensation. Because my referral buckets are going to add up to something. When I put those buckets through the tiers of the salary, X dollars in my revenue bucket equals Y dollars of salary. So if I divide Y and X, I’m going to essentially get to a version of revenue-based compensation, and then you can decide as a firm like, of this revenue bucket, how much are we paying out to the advisors who sourced it, closed it, and service it, versus how much are we dropping to the bottom line? And that’s just a, decide how much you want to pay your people to attract and retain your people.
DeLynn: Sure. That’s exactly right. Exactly. And as I said at the outset of this conversation, that is the model that worked as we came together. There’s some who might say, “Let’s look at who…maybe there should be some credit of who’s more profitable.” Who has the fewer clients and the largest revenue stream, as opposed to some others who have a lot of clients and a lower average revenue per client. So we are looking. Each advisor gets a sheet at the end of the year now. And we are taking a look at what their average revenue is for a household, and making sure that there’s enough revenue coming in on each household to cover our overhead and our direct expenses.
Michael: So, I understand the need to arrive at the structure and kind of just the finessing that has to go on in practice to get to a structure that works for everyone. Because as you said, we weren’t starting with clean, where just everyone was from zero and everything was starting from zero and we could just say, “Hey, let’s all build this thing together.” People come to the table with existing stakes. And just simply put, you ain’t going to get their buy-in by chopping them off at the knees. Maybe they’ve got to give a little to build a greater thing, hopefully, but you can’t completely chop them off. You have to find a way where everybody feels like this is equitable.
So I guess I’m wondering both…so there’s both an upfront like wrangling that happens to try to get everybody on the same page, and then I’m presuming there’s some kind of ongoing wrangling that has to happen as you have these conversations about how to adjust and change the structure. So talk to us a little bit about that end. I’m going to just start from the early end. As you’re trying to put this together in 2012 and you have all these different people, I think you said 11 different practices of varying revenue and size and personalities and all the rest, like, just how do you get everyone on the same page to come to an agreement on a thing? How did that come about?
DeLynn: I have to tell you that today I sit back and look and think, “I can’t believe we did that.” It was pretty remarkable. When we came together in 2012…let me just kind of make sure we’re on the same page here. When we came together in 2012, we were still our own revenue. You kind of eat what you kill. It was really in 2018 that we spent the entire year of 2018 working with ECHELON to reorganize all of this and come up with a new equity structure that we’ve just been talking about here in the firm. But as I think back on it, a couple of things had to…the stars had to line up. First of all, you have to have the right people. And we always say you’ve got to have the right people in the right seat on the bus. And our other favorite phrase here is you have to be able to play well in the sandbox. So of the partners that came together, the 11, I don’t think it would have happened just 11 people coming in off the street to say, “Hey, I’m going to do this.” Keep in mind, the original founders had been together since 1988. We’re on 31 years together. If you don’t trust somebody for 31 years, you shouldn’t be here, okay?
Michael: Yeah. It’s kind of amazing you didn’t grow apart already if you were together after 31 years, you didn’t trust each other.
DeLynn: Right. So, there was a huge, a very high threshold of trust. These people are like family. I know what they’re…we know what each other is thinking, going to say before they ever say it. But we’ve been through a lot together, and we’ve built something together. So, there is so much trust. I can’t tell you that this could have been pulled off at every point in time along our path and our history, but I would tell you that the people…it’s like Carolyn said, “DeLynn, you’ve got the right people at the right time to do this.” Even though we may not have worked with them for 30 years, they’d been here long enough that we had such a level of trust with each other, that these are the people that we wanted to build something with, and these are the people who I trust to take care of my retirement one day.
Michael: So out of curiosity, were there originally 12 or 13 or 14 and you came down to 11 that got along the best in the sandbox or was this really everybody and everybody came along?
DeLynn: First of all, not everybody became a partner because they didn’t meet the criteria we set out. We had a threshold for revenue, but at the same time, we had some other thresholds too. We believe strongly in commitment to the firm and volunteerism and leadership and what they’re doing at the community. And we had to set one-pager that I had written, just our personal thoughts and listening to other firms of what it really meant to be a partner of Bridgeworth. So you had to have qualitative and quantitative measures to become a partner. When we did this structure, we did have one fallout from one person. It was unfortunate, but they were not going to be a partner and probably never would be because they just managed family money. And it really just, it was a very nice parting of the ways. We were just not the right place for that person, but still, have a great relationship. But everybody else was in.
And I think it was exciting because you’ve got to get out of looking at it today. You can’t just sit there and think, “Okay, what’s this revenue percentage today?” But when you look at it and say, “Hey, as a firm, as a large firm who owns all the clients, we become extremely valuable, a lot more valuable than we were the year before. We have the revenue, we have the credit. We can make investments together as a team.” Because before, we had people say, “Hey, I want to go buy a practice,” or, “I’m going to go out and buy a practice.” Today, we’re doing that as a group. We’ve bought out this year one of our founding partners. And it was pretty nice for him to be able to say, “I can walk away. I don’t have to go out and look for my successor. It’s here within the firm, and a firm of that size and revenue stream, and who is going to be sustainable, is going to be here to pay me out over the next few years.”
So I think you’ve got…the people here have…and I think they’ve done a good job of not just looking in their siloed situations, but say, “Hey, what is the potential? What can we do out there?” Because Michael, we’ve had people calling us who were interested in retiring. There’s a lot of one, two-men, two-women shops out there. And as I’ve talked to one recently, they said, “DeLynn, I’ve got a partner here who’s going to buy me out. But what if the partner has problems and doesn’t make it? I’m putting a lot of risk into one person’s ability.” And I think that’s a huge advantage of what we have right now is somebody can come here with their practice.
And sometimes when you have one successor, they don’t jibe with every client, right? So somebody can bring their practice here. We can buy them out. They have an incredible… We have just incredible, talented planners. They can look around and say, “Hey…” We’ve got a deep bench, if you draw on the basketball analogy, a deep bench strength here. And we can divide those clients out, and we can fund that person’s retirement, and it’s a win-win for everybody. And then the partners here, obviously, when that’s paid for one day, that free cash flow goes to the bottom line. It does nothing but increase profits. So that’s really our vision, Michael, is to do that.
Now, I’ll tell you, we’ve talked a lot in this conversation about profits and that, but that’s not what we sit around talking about every day. It’s really more of how we’re going to build out the firm with our career tracks and bring along the G2s and the G3s. And we’ve built out a Bridgeworth University and a training program for those folks. Because when we talk about a firm being sustainable, it’s only sustainable if that next generation is successful. And I feel that is our obligation, to make sure that happens.
Michael: It’s a powerful point, I think, just to kind of say it out loud like, “The firm is only sustainable if the next generation is successful.” Because I find for a non-trivial number of firms out there, I think there’s often a frustration of next-generation advisors that just they’re not necessarily up to speed where founders and partners are. And to be fair, some of that is just, well, yeah, you had like a 20 or 30-year head start on them, so it takes a while to get back to that same level of experience and capabilities.
But that for a lot of firms, there’s sort of this…I don’t know, sometimes I feel like there’s this lamentation of our next-generation advisors are not where we’d like them to be. And to me, there’s just a fundamental kind of mentality mindset shift when you come in and saying, “The firm is only sustainable if the next generation is successful.” Because that’s, frankly, to me at least, that communicates it’s less about, we’re trying to find the few magical next-generation advisors that can perfectly hit the ground running and do all the stuff that we are hoping they can do. There’s this, if the next generation is successful, and how are you responding to it? Career tracks at Bridgeworth University. Sounds like you’re approaching it from the, “The question of whether they’re going to be successful or not is on us to develop them. So let’s get at it.”
DeLynn: That’s exactly right. The industry has gone through a tremendous transformation. And 30 years ago, Michael, there were a handful of fee-only planners. As you know, the industry was born on the commission side, right? I hated that. I came out of an accounting background. I hated that tremendously. I hated hearing about sales contest and paper in the kitchen of who had the most production for the month or something.
Michael: Oh, yours was in the kitchen? Ours was just in the main hallway but like around the backside of the office, because like, you can’t have it on the client’s side of the office because that would be really awkward. So it was on the back-end of the main hallway, not where the clients walked, but where everybody else walked getting to their offices, just so it was right there and everybody knew who was at the top of the board.
How DeLynn’s Firm Developed Career Tracks And Taught Business Development Skills [55:39]
DeLynn: That was the culture, and that’s why I wanted to build a firm with my partners that was a true professionally run firm and got away from that. But we fast forward, we are really fortunate. We are located in a place where University of Alabama, that’s 45 miles down the road, has a great financial planning program. University of Georgia has a great financial planning program. And we have hired quite a bit out of those programs. And they make great planners. I am so jealous of…I had to study accounting to get into this, they were actually able to study financial planning and do this. But the one thing that we’ve realized is we’ve created and hired a lot of great planners, and we’ve set this up, so this may be our fault a little bit, but we’ve set them up and they have a career track and they come in and they have a salary. You and I started without a salary. It was just a phonebook and phone and, “Go get it.”
Michael: “Start dialing.”
DeLynn: Go for it. Wish you well.
Michael: “Start dialing. You better smile while you dial.”
DeLynn: So I sit here and look at these folks, it’s like, “God, they don’t realize, they’ve got it made.” Right? However, there is something to be said for those people who had to get out and hustle and build it, because they gained a lot of business development skills. And so the one thing that I’m, I won’t say struggling with, but looking at now is going, you know what? People come in with great technical skills, and they’re learning great technical skills with people here in our firm, but we’ve got to teach those business development skills, because not everybody has those. And so that is something we’ve put a lot of emphasis on this year. We’re moving our offices in two months to a much more centrally located area to get our advisors closer to downtown, in downtown where everything is taking place and get more visible and teach them how to get out and develop business, because I worry about that too with the next generation. The great news is we have brought in a lot of clients. We have a lot of clients. We get great referrals. But when I leave one day and when my partners and I leave, those of us who came up the old-school way, if you will, I just want to make sure they still have those skills.
Michael: Well, it is an interesting juxtaposition to me that the prior generation of advisors, it was still a commission-based eat-what-you-kill world, so you…I mean, for a lot of firms, literally, you started out selling, you started out trying to get clients, and if you were good enough at that and you hit certain levels of production and qualification in your contract, you were then allowed to go enroll in CFP certification, learn to do planning, and you might even be at a firm that would then allow you to charge a fee for that planning and get paid for a plan. And that was what you became allowed to do after five to seven years of sales success.
And so, there is this interesting aspect to me that we’ve kind of turned the career track around basically 180 degrees. That the prior generation, you did the sales and business development first, and if survived long enough at that, you got to learn the technical skills and do full-fledged planning. Now we just live in a world where you start out by learning the full-fledged planning, and then stage two, you have to go learn the business development. I’ve got to imagine there’s…for all of us that started on the biz dev side that look at people coming in today and saying, “Where are their business development skills,” I have to imagine a few of them coming out of great CFP programs would probably look at our technical skills when we were advising clients the first five years and were like, “I can’t believe you were allowed in front of another being because you didn’t know anything.” Right? So it always feels weird to look at the other side of that divide, whichever side you’re on. The CFP college students today probably knows more than what the average advisor did after seven years…
DeLynn: It is amazing what they know.
Michael: …in the past, but they come at it from the other end. So in the past, we got good at business development and the firms decided to teach us financial planning, now they come in good at financial planning, or at least the technical side, and we have to teach the communication skills and the business development skills.
DeLynn: Well, that’s right. So when we were reorganizing and coming up with these career tracks, Michael, that was the one thing that was first and foremost on my mind going, “Okay let’s build a career track, but they’ve got to accomplish certain things before they progress.” And when do they need to be thinking about business development? It’s not 10 years, 15 years down the road or if they make partner, they’ve got to be thinking about that. And we’ve got to start teaching some of that.
And so, year-one folks that come in, we call them a planning coordinator. Other firms may call them paraplanner. We just like that term a little bit better than paraplanner. We’re telling them, “Here’s your focus, here’s your responsibilities. Here’s what it’s going to take to advance. You’re going to get paid a salary, maybe a bonus, but we expect you to join the FPA. We expect you to be doing these certain things.” When they progress to the next level of associate advisor, they’re going to be paid a salary and a bonus, and their bonus, Michael, is based on some KPIs. And part of those KPIs are starting to build that network. We want you to go out and have some lunches or coffees. And we’re going to give you a business development allowance to do this. We want you to start building your professional network. Yeah, you may only be four or five years in the business, whatever, but you need to start building that relationship with the accountant, the lawyer, your friends.
Michael: So the pressure by stage two is not necessarily like, did you bring in X dollars of new revenue yet? Although obviously, that’s nice and you’ll probably get compensated for it, but at least like, how many attorneys did you have a networking lunch with? And that number better be bigger than zero at the end of the year. You’ve got to start doing that stuff because we know it takes a while to build those relationships, but you will never get to a point where you built those relationships if you haven’t started building those relationships.
DeLynn: That’s right. That’s right. We’re going to pay for their CFP dues. We’re going to pay for the FPA membership. We’re going to give them an allowance. We’re going to pay for them to go to a conference. We’re going to mentor them. It may not be formal, but people gravitate to different people in the firm and partners, and we feel responsibility to mentor. They’re going to sit with us in meetings. They’re going to learn how to ask for referrals if the advisor, the senior advisor remembers to ask for referrals. We’re going to take them on some lunches.
And then we’ve created the Bridgeworth University, where we take a day each quarter and devoting to training in a lot of different areas, but development skills are certainly one of them. Because if you don’t do that… And I will say the first year of an associate advisor and their KPIs, I call them layups, we’re not making them do anything hard. If you can’t go out and have several lunches a month, it’s going to be a long road.
Michael: Yeah. If we can’t even get that far, like, you’re not even being judged for results yet. We’ll get there someday. But like, if you’re not comfortable doing the layup activity, this may be problematic in the long run. But let’s just get comfortable with the layups that should be comfortable first.
DeLynn: That’s right. That’s exactly right. And we will be taking a look actually later today, okay, how much did each person spend of their business development allowance bonus? If they come in and I don’t see they’ve spent much of their business development allowance bonus, that tells me something right there. Go have coffee, go have lunch, and we’ll pay for it. I’m looking forward, frankly, to see how this continues to play out. But so far, I’m pleased with what I see.
Michael: So, what comes next? If kind of stage one is a planning coordinator, stage two is associate advisor, what comes next on this career track?
DeLynn: Yeah. So, the next part of that would really be a lead advisor. So lead advisor, best example would be… With a firm our size, frankly, I’ve had to back out a lot of my client responsibilities. There’s too much to do. So I have turned over my prior practice clients to two others. And we call them lead advisors. They’re lead advisors. They do not need a partner, a senior person in there to help manage that relationship. Other people may call them relationship managers, but they are completely responsible for managing that client. Now, their compensation structure looks different than that planning coordinator and that associate advisor.
Michael: Because just basically when they start, they start calculating off their revenue grid based on what they service and what they close and what they brought in and that calculation starts?
DeLynn: To some extent. So I was able to transition X amount of revenue to someone, and we built a salary. The financial advisors have a base salary. We do spend a lot of time looking at “InvestmentNews,” I’ve looked at your study, looked at Schwab studies. And so we have salary ranges for that. And it’s also based off their experience as a CFP as well as what they’re servicing. I almost hesitate a little bit to get into too much of this compensation model because I think we’re going to tweak it.
When we rolled this out last year, I said, “Here’s what we’re thinking. Let’s get into it this year and see how it works.” But it was a base salary and then incentive comp. If people develop new business on their own, they get a bonus upfront, one-time bonus on the front end, which some people have raised an eyebrow when I said that to other advisors outside our firm. But what we’ve learned from another firm that went away, a fee-only firm that was actually here in town that’s no longer in existence, what we learned from other employees was that if you have to wait a whole year to get a bonus, it’s not really motivating. It’s a lot more motivating to bring in a client and get a bonus for it immediately. So once I bring in the client, the account is funded or whatever is done, we will go pay a one-time bonus on that.
Michael: Okay. As opposed to like, you brought in a client in January and another one in April and you’re having a great year, we’ll true that up for you in December at end-of-your bonuses. And you’re like, “Wait, why again did I get this check?” I appreciate the check but like, I have to think sometimes to remember what I did last Tuesday, never mind last January, when apparently, I earned this bonus.
DeLynn: That’s right. That’s exactly right. And so, let me just kind of be clear on this. Our non-partners don’t participate in revenue. They’re paid a salary and incentive comp. And that was one of the things that ECHELON really… The same thing. I’m a big fan of Philip Palaveev. And I’ve read all his books and Mark Tibergien’s. And all the books that you read will say being paid on revenue should be reserved for the owners of the firm. And so our non-owners are paid salary and then incentive compensation plans. And I will tell you in all fairness, this is one of those things I feel like we’re building in the air, trying to find the perfect incentive comp plan. We met with a firm last week who said, “Hey, let’s sit down together and pick each other’s brain.” And I’ve yet to find the perfect one. So if you hear it, let me know.
Michael: So, the structure for you at this point is primarily, at least at this tier is, it’s a one-time bonus. It’s paid when the account is funded. It’s what, some percentage of the projected revenue in the first year?
DeLynn: Right. And then that’s one time. So that’s one bonus. The other bonus we’ve done this year, and we’re going to be really…this is the week for us to sit and do a lot of accounting. But did they grow? Did that bucket of assets that we gave them to manage, did it go backwards or did it go up? And we’re looking at paying a percentage of their salary based on some type of growth factor. But our idea of that, Michael, was just to kind of give them a taste of what that’s like when you become a partner.
Michael: Right. So I can influence growth by growing my client base by just getting clients to add dollars, right? Expanding relationships with existing clients, as well as just growing the amount of revenue that’s ultimately under my stewardship by whatever means I got it.
DeLynn: Right. And one thing we have to look at is you just making sure we’re just not paying on market growth. But at the same time, one thing we are implementing this coming year at the suggestion, again, of ECHELON, who’s just been a great resource for me, was that, “DeLynn, you want to make sure those advisors are doing the right thing. You could have an advisor, lead advisor, and we pan this revenue stream too to manage, this group of clients to manage, and it grows just because the market grows. Do you really want to be paying on that and they’re not doing the right thing.” So we are…we’ll be implementing some KPIs for our lead advisors as well. We have a lot of workflows here, Michael. We want to make sure they’re doing business in what we call the Bridgeworth way, okay? I want everything that goes out of this office consistent. And I want their practice and their best practices to be consistent with the high standards that we’ve set here.
Michael: So I am wondering on the biz dev end just this phenomenon that you want to pay them upfront because you just kind of…you’re trying to teach good habits around business development. So it helps to give a quick reward to reinforce the good behavior and success, but you literally don’t have the revenue yet. And presumably, at least, some risk that maybe it doesn’t work out and the client ends out going away. So I was just wondering like…
DeLynn: What is my thought?
Michael: Yeah. How much do you pay on this? Because you’re essentially fronting the money as a firm to earn it back later. So how much are you comfortable paying on this bonus, sort of recognizing that risk? Do you claw it back if it doesn’t work out? And how do you think through this?
DeLynn: Yeah, so the first thought process was really influenced by these folks who came to us from the fee-only firm that I mentioned. And the more I thought about it, I thought, “That makes sense.” And I will tell you, as I look back on my own practice and I looked at the numbers here in the firm, really, if a client leaves, they’re probably not leaving in the first year. How often does a client leave within 12 months?
Michael: You’ve got to really, really screw something up out of the gate to have them leave that fast. Otherwise, if they were willing to take the leap to join you in the first place, if you overcame that barrier and they signed some forms and transferred something, usually you’ve got at least a 12-month running start before you just screw something up enough they fire you.
DeLynn: Right. And that’s what I said, if they left in the first 12 months, I’ve got a bigger problem than whatever bonus I paid to that person. There’s something else going on. So the bonus, what we’ve paid this year, and it’s certainly on the table to be discussed, because I think it probably should be higher than what we paid, we started out with 15%, and that’s something we’re re-evaluating. When we rolled out this plan last year, Michael, the first thing I said was, I don’t want to be the type of leader who comes to the group every year and changing compensation plans, because that’s just wrong. People don’t like that. They want to say, “Tell me what I need to do to earn X.” And I want them to be comfortable and do that. However, when we were going through this complete reorganization, I did say day one, “This is our plan, and we may tweak it.” Because we’re going to learn things. We initially paid it just on new business. Finally, one of the other folks looked at us one day and said, “Well, DeLynn, shouldn’t we get a bonus if we get new business from the same client? It’s a lot cheaper to get more business from the existing client than go get a new one.” And I looked at him, I thought, “He’s absolutely right.”
Michael: That seems reasonable. Yeah.
DeLynn: That’s reasonable. I missed that. So, we’re re-evaluating that for next year also. And it’s just logical to me. So it’s worth the risks, Michael, to pay that on the upfront. And we certainly haven’t seen any problems with that.
Michael: And so, tier one is the planning coordinator, tier two is the associate advisor, tier three is the lead advisor. And by now you’re sort of full-on responsible for client relationships. So then what’s tier four?
DeLynn: Well, in my book that I wrote, I do have a tier four, senior advisor. And I’m not sure I remember why we did that, because that may be somebody who is very close to being a partner. There’s a difference between year-one lead advisor and maybe somebody who’s been a lead advisor for five or six years and might not be a partner. But the compensation models are really the same, and then partner. So it’s pretty straightforward.
What The Partner Role Looks Like At Her Firm [1:13:36]
Michael: And so, talk to us more about partner. So I guess partner is where the economics really start changing, because you now move away from just base salary plus incentives, where you get this one-time on your business development, now your biz dev incentives are ongoing credits that you get that go into your bucket in calculating the kind of salary grid piece that you get, not to mention that you participate in the profits. So, what does it take to become partner? If I’m a next-generation advisor, a G2 or G3, as you put it, like, I understand how I move up from planning coordinator to associate advisor, because I learned my technical stuff. I understand how I move up from associate advisor, lead advisor because I got really good at handling client relationships and being able to manage them. So, how do I move up to partner? How do I make partner at Bridgeworth?
DeLynn: Right. Well, so, in complete transparency, we haven’t had anybody to do that yet. Okay?
Michael: Okay. So we’re early enough in the process, someone’s going to be the first to cross the line. Okay.
DeLynn: That’s right. Somebody will be. I will tell you that that is something we’re still working through. I can tell you my vision for that is number one, they’re going to have to buy in to that. They probably, for the most part…in my career track, they’ve been given a revenue stream to manage. So they’re not just going to turn that revenue stream in again and get equity for that. They will have to buy into the firm with some credit for business that they developed. I think it’s going to be a mindset shift, Michael, because you read these things or you hear a podcast, it’s like, “Yeah, I need to think about that.”
And somebody in one of your podcasts, I believe it was, talked about, you can’t just look at what they’re developing, you’ve got to look…if you’ve given them a revenue stream to manage and they’ve grown it substantially, that’s worth something. You’ve got to give good credit for that. But at the same time, we are going to make sure that that person has those business development skills. And this goes back to what we talked about a few minutes ago. For this fund to be sustainable, they can’t just babysit clients, right? They’ve got to continue adding to it to be able to feed the generation behind them. So a partner is going to have to have those business development skills. I will tell you, the level for that is probably going to be higher in the future than it was in the past.
Michael: And I would imagine there’s sort of a double-edged sword here. That if I’m trying to make partner at the end of the day, I get better compensation as a partner, then as a lead advisor, because I get my ongoing credits instead of my one-time payment, on the one hand, I’ve got a little bit of an incentive to hold off on some of my biz dev until I cross the line to partner, but I guess on the flip side, A, you’re at least thinking about like, “Can I give them some credit for the business they developed?” And B, if you really want to play that game, you’re never going to have any business development under your name, and you’re never going to cross that line.
DeLynn: That’s exactly right.
Michael: So you’ve got to make your business development investment if you want to ever make the business development…if you ever want to make the partner line.
DeLynn: Absolutely. Absolutely. Yeah. If they start trying to play that game, that’s a no-win situation. Look at accounting firms, look at law firms, you have income partners many times where it’s folks who make partner but they’re not sharing equity. But to make an equity partner and get that big bump up in compensation, they don’t make equities partners in any of those firms unless they do have strong business development skills.
Michael: That they’ve already demonstrated and brought to the table with an actual track record of success.
DeLynn: That’s right. And that’s why I think we’ve got to…as we develop this formula, have got to…credit will have to be given for that. And I think that’s only fair. But I wish I could sit here, maybe next year I can come back to you and tell you what we figured out. But I have the large framework, we just haven’t worked through the final details.
Michael: Because I guess you’re…well, you’re 10-plus years in the firm, but only 6 with the standalone RIA and served only about 2 full since you really restructured into this compensation equity arrangement. So we’ve got to…takes a little bit of time for someone to hit the new lines.
DeLynn: It’s like, “Hey, I can only figure out so much at once.” But it is real important because we have some outstanding G2 advisors who are managing substantial revenue streams and who are absolute superstars. I can’t even imagine where some of us would be if we’d been like these guys that are so young now but they’re wanting to know. And it’s why we’re giving them the framework. But I guess fortunately or unfortunately, nobody is knocking on that door right this moment. I’ve got a few more months to figure that out.
Michael: Months. That’s not like, “Well, we’re going to figure this out over the next three to five years as the people move up.” We’re like, “We’re still talking the next three to five months.”
DeLynn: Right. Because they want to know. And I would want to know, too. If I’m sitting here managing this and I’m playing an integral role in the growth of this firm and developing as a leader, and that’s something else we’re trying to do with these G2s, I want to make sure I know what the end game is, right? I don’t want to be surprised. So, we owe it to these folks, and then we will have something shortly.
Michael: Well, and I think that’s an important distinction as well that I feel like I see routinely as a problem in the industry. That for a lot of firms out there, particularly if they haven’t introduced sort of new next-generation partners yet, there’s kind of this like, “Well, show me what you can do and I’ll decide if it’s partner-worthy.” And we decide on partners based on the facts and circumstances at the time. And I get that, I have sympathy for that, right, from the partner end. It’s like, I don’t want to introduce…I don’t want to promise or guarantee equity in partnership to people who are like, “Oh, my God, I can’t believe I gave that person equity. This is not good. This is not working well. I’m not happy with this.”
But from the flip side, it’s one thing, I think, to say to a next-generation advisor, “Look, if you want to make partner, you’ve got to make the pie bigger. And that means growing the firm, and that means doing some business development and demonstrating that you can do it successfully. Otherwise, you’ll have a great job and we’ll pay you as a lead advisor, but if you want to cross the line of partner and participate in the pie, you have to help make the pie bigger. But here are the rules of the game. If you can do these things and hit these numbers and contribute in these other non-biz dev ways as well.” I think you’d mentioned leadership, volunteerism to the profession with FPA, activity in the community. Like, “If you can check these boxes, you will have the opportunity.” So, we’ve defined the rules of engagement, now it’s just on them to decide if they want to step up and do the work and make the sacrifices necessary to get there. But it’s on them, as opposed to, “Well, I told them if they impressed me, I’ll give them a shot, and they’re not trying to impress me.” Like, well, yeah, because they have no idea if you’re going to give them a shot.
DeLynn: That’s right, it’s a double-edged sword.
Michael: You need to tell them what “impressed me” means. In your mind, that might mean bringing in half a million dollars in new revenue, in their mind, it’s like, “Get two clients.”
DeLynn: Right. And I can tell you, that’s not it.
Michael: If you’ve never gotten a client, you’re like, “I got two. I’m rocking it. Why haven’t I made partner yet?” Because that’s what happens if you don’t define the rules of engagement, everybody makes up in their own heads what is “meaningful.” And what’s meaningful to them may not be the same as what’s meaningful to you. So if you want a thing that’s meaningful to you, tell them what’s meaningful.
DeLynn: Well, and the other piece of that…that’s exactly right. The other piece of that that I think about and I remind my current partners off is we, again, have the financial responsibility for the well-being of this firm. And things can happen. I remember what kind of revenue hit we took in ’08 and ’09. Now, we came through that with flying colors, but when you’re an owner, profits may go down. We’ve got salaries to take care of. We have people to take care of. And so what I encourage and I’ve been talking to some of our G2 advisors is, “One other thing to do is you need to get financially prepared to be an owner.” Right? Because I can’t imagine what could happen today, but things could happen. And so, owners do need to be prepared to shoulder that risk. And that’s something I think some people, they think about, “Oh, I want to be a partner and the glory, etc. that goes with that,” but they don’t think about the risk and the downside that comes with it.
Michael: Yeah. It’s truly a special moment as a business owner the first time you’re looking at a business situation where it’s not even just, “Oh, we’re having a bad year, we may not get any profits,” but you actually have to figure out how to make the payroll.
DeLynn: That’s exactly right. Yeah. Fortunately, we haven’t had to do that, but I do envision… We’re making some investments this coming year and infrastructure and space, and that decision, of course, I’m leading a lot of that, but at the same time, some of these decisions are partner-level decisions. It’s like, “Are we ready to make the step up and make certain investments, which may and will affect the bottom line?”
Michael: So I do want to ask, though, because so much of this conversation has kind of revolved around like the business development piece and the fact that so many people coming in have to learn that. Because you don’t hone that skill out of the gate the way they used to. You hone the technical skills first, and then the biz dev skills come later. But you do have to get there. So you mentioned this, like business development is even a topic that you’re tying into your Bridgeworth University program. So I’m just wondering like, what are you guys trying to do to teach business development and nurture these skills?
How Bridgeworth University Is Teaching Business Development Skills [1:23:55]
DeLynn: Well, I think the first is awareness, right? Again, we have some of these great G2s who’ve come out of these fantastic programs and they’re so focused on the technical side. It’s like, “Wait a minute, let’s make sure we’re also hitting this other.” So, one is awareness. And again, we’re addressing that a little bit in their compensation, right, with the KPIs. But with the Bridgeworth University, and I will tell you, this is another program that we’re still building while it’s in the air. First of all, the person leading that program is one of the most experienced advisors. She came out of a highly regarded fee-only firm here in town when they closed or merged due to their founder retiring, and she just has incredible skills in teaching. So what she’s done is organize programs. And part of these things are reading books. We just finished reading “Never Eat Alone” is the name of the book. I cannot think of the guy’s last name. Fantastic book.
And so part of Bridgeworth University is they will have certain books to read each month, and then have a book discussion about it. We will bring in outside speakers. We will have certain senior of the partners here in the firm sit down with them and do sessions. One we’re doing right now is how do you ask a client for a referral? Do you ask a client for a referral? And number two, how you go about doing that. You had a great podcast just this past week on how to take referrals when somebody says, “Hey, I’ve told my friend, Joe Smith, to call you,” how you take that and make something happen with that. So we’re bringing in podcasts, we’re bringing in books, we’re bringing in speakers, and we’re talking about it. And then sharing, a large part is sharing, okay, what did you do this month? Let’s talk about what worked well, what didn’t work well.
So, we have a lot that we can teach. And we just had to have somebody here to organize it, put it together, keep it going, help me keep organized, and back to our tagline, drawing on a wealth of knowledge. There is a tremendous wealth of knowledge here internally, and we’ve just got to make sure we pass that to the next generation.
Michael: But it’s an interesting distinction that you’ve made, that look, the key isn’t just figuring out how to teach business development. If you’ve got a bunch of successful partners in the firm who’ve done this, there are some skills that can be taught. There are some books out there. There are some podcasts out there. There’s stuff out there if you take any level of time to go look. The challenge for so many of us is, I don’t have the time to look because I’m running my firm and I’m running my clients and all the other things that I…all the other duties that I have. So I find it interesting from just the business end that to me, the real distinction here is, and you put resources towards it as a firm owner. You hired a person who will be responsible for it. And like, lo and behold, when there’s a person who’s responsible and accountable for the thing, it actually often turns out the thing gets done.
DeLynn: Exactly. And something else it creates, Michael, that I wanted to… I look at the advantage of those of us who’ve been together for 30 years, there’s a bond there. And where did the bond start? It started when we were all in the trenches together trying to make it, right? I wanted these classes to be done in a way, this is an opportunity for the next generation to bond, to spend time together, to learn, because I think that is so…that’s so important for the culture of our firm, and building and making sure the culture that we’ve created, again, goes to the next generation.
What Surprised Her The Most About Building An Advisory Business [1:27:35]
Michael: So what surprised you the most about trying to build your own advisory business?
DeLynn: You mean the firm itself.
DeLynn: Not just my practice. What surprised me the most? I think what surprised me the most initially was, and again, I’m going back 12 years, was some were doing a great job. They were in their lane, they kept their head down. They’re just working, okay? They’re working, they’re taking care of their families, they’re taking care of their clients but had not really raised their head up to say, “Hey, what’s going on out there in the larger world?” And maybe that’s what I like to do. Maybe that’s why I’m in this role. But I think surprisingly initially, that others were ready to do something. So, that was my initial surprise.
However, what really surprised me is when we all kind of looked up and came together, by and large, everybody was on the same page. It has been the honor and privilege of my life to be able to work with these people for that long and us to have a common vision and looking out to build something together. And that was surprising to me. And I think this most recent reorganization, again, looking back on it, that everyone bought in, and even though every little detail was not done, not every i was dotted, every t was crossed, but that there was enough trust and respect. That, “Hey, it may not be perfect, we’ve got to still make some adjustments, but we believe in each other, and we’re going to do this.” That’s been a surprise to me. Happy surprise.
Michael: It’s such a striking point to me because just in practice, there are a lot of advisory firm partnerships and mergers that fail, that don’t work out. And not even just the like, “Hey, over the long-term, we kind of grew in different directions, and I just think we should probably start ways,” but like, we get together to merge or join together to build a thing and just it crashes and burns in 3 months or 6 months or 12 months. The partnership just fundamentally doesn’t work. So what was it that made it work in yours that just like, “Holy cow, we all had common vision and off we went?”
DeLynn: I do think, and as I said, I may be trivializing this song, but I do think it’s that long-term trust, long-term relationships they’ve made it work. And we had the right people to do it. Because let me tell you something, I’ve worked with people in the past who no way would they have done something like this. They were more focused. And that’s why you have people who are solo practitioner lawyers and some who are part of big firms, because they just have a mindset, they want to do things their own way. And I think we just had the right group of people. And we’re very careful, Michael, of who we bring into the firm. Because you bring in one bad Apple and you know what happens from there. So, the people we have here are just outstanding people. I would trust any of them with my money, and they’re all the kind of people that I want to be in business with.
Michael: Well, and it strikes me just…that’s how you describe people that you just fundamentally want to be in a relationship with. A lot of what you’re saying just reminds me of the commitments of marriage as well. Like, not every i is dotted and t is crossed, but how your life’s going to work out together in this shared thing for the next 10, 20, 30, 40, 50, 60, 70 years, depending on how long you go at it, there comes a point where you’ve made a commitment to each other in this relationship and you trust each other in this relationship. And you say, “When we hit this stuff, we’re going to sit down together, we’re going to have hard conversations, and we’re going to work through it, and we’re going to figure out whatever compromise it takes because we’re committed to the relationship and maintaining the relationship.” And I think it really is very much the same thing in the partnership context, including that if you get married a little too quickly before getting to know the other person, you kind of take a risk about whether that’s going to work out.
And I think there’s a piece of that in the partnership end as well, that a lot of partnerships I feel kind of jump to the marriage stage without the dating, get-to-know-you process first. And I’m always fascinated by partnerships that come together and end up blowing up, that everyone I ever talk to always says there were warning signs, in retrospect, they just were too enamored with the person or the relationship or the opportunity or whatever it is and didn’t pay attention to warning signs. And I’m like, yeah, kind of sounds like the same reason why some of those overnight marriages in Vegas don’t always work out either. Hey, every now and then it does. And if that’s your story, more power to you that you found that synergy. But the track record is usually not good because if you’re that caught up in the moment, you tend to miss the warning signs or ignore the warning signs. And usually, there’s some there if you’ve taken any time to look and pay attention.
DeLynn: One of my partners, and we’ve been together, as I said, a long time, and one of the things he and I have always talked about, early on in our career, we were young, we were in our 20s, and we’d see these guys, by then, these guys, who were very successful. And they let how successful they were. And they had a certain ego. And they weren’t very helpful to the younger ones of us. They would make threat comments, “Oh, we’re carrying the firm,” this, that, and the other. Wayne and I always said we never wanted to be that type of person. Regardless of how successful we became, if we became successful one day, we never wanted to treat people like that, and we never wanted to be that type of person. So there’s a lot of humility here in our firm. We’ve got a lot of successful people, but we also recognize that we don’t achieve success in our own, is collective.
And we may, could have…almost said may, I know we’ve had several opportunities to add people to our organization that at the end of the day, they met every criteria, except one, they could not play…we knew that they could not play well in the sandbox. And I think we just kind of… I know my idol firm who I’ve gotten a lot of help from and inspiration from is SignatureFD in Atlanta. And I know Heather talks about using an industrial psychologist. We have not done that, but I would tell you, that’s on my list of things to investigate for 2020 if we bring people in too is worth the investment to go through that process.
How Her Role In The Firm Has Changed Over The Years [1:34:28]
Michael: So, how has your role at the firm changed over the years? Because it sounds like it’s moved quite a bit over this 10-year journey.
DeLynn: Yeah. Yes. Somebody asked me one time, how did I wind up being the CEO? And I kind of laughed. I said it wasn’t like it was all, we’re sitting around a boardroom and we had this vote and I won. I think I just assumed the role and started to make it.
Michael: I was going to say, because everybody else stepped backwards really quickly, so you were the only one who stepped forward.
DeLynn: Right. Right. I guess it was… This firm has not been built just by me, it’s been built by the entire firm. But early on, I was probably the one out front saying, “This is what we need to do,” organizing things, getting the ball rolling. And I would tell you, at the time, I still had a large practice, but I did two things. One, back in the day when we were hiring our own staff, I invested a lot in bringing people into my team that could step up and do a lot of things. I invested very heavily in staff. And so that allowed me the time to do some things. I was at a time personally in my career, I hate to say this, I was married and my husband had a paycheck, right? And so I could step back a little bit and not be quite as focused on me and spend more time focusing on the firm, as opposed to others who supporting a family and a wife at home and had more pressures, if that makes sense. So I assumed the role, I started leading, and so far nobody has come into my door yet and said they want the job.
Michael: And it sounds like, in practice, you’re not doing as much or any client-facing relationship management work now because there’s just a lot of people to handle?
DeLynn: There’s a lot to handle. Everything we’ve gone through in the past year. It’s amazing what my calendar looks like at 8:00 in the morning and what it winds up being by 5:00 in the afternoon. The larger we got, and I think I underestimated this, Michael, because I love the client aspect of it. I’ve had clients who are still here that I had when I was 25 years old. You can’t just walk away from those relationships. However, I think it’s been successful in the way we’ve transitioned, but I’d make it a point, when my schedule permits, I get in those meetings. I let them know I’m still here, I’m still involved, I still know what’s going on, but I am not in the weeds. What I am actively involved, and I think this is part of my role, is through the business development. I think you’ve been around for a long time, you start getting referrals. And again, just point in time and career and colleagues and friends who’ve reached a stage of their life who need this type of service, I am able to do business development and bring clients in. And to me, that’s very gratifying. I love doing that.
Michael: So, can you give us just some context, what is the actual size of the firm at this point, of AUM or clients or employees, however you measure that?
DeLynn: Sure. Today, we have 18 advisors, lead advisors, partners. We have total of 46 people that’s in both offices. So we have a fully built out leadership team. We have a chief compliance officer who is kind of interesting. She started with me as an intern, went back to law school, came back here for a while, then went to Atlanta, and then we brought her back as our chief compliance officer. So that has been a great…that has been a really cool story. We have a marketing director. We have a CFO. We have a director of planning who oversees all of our planning, and we have a chief investment strategist, which rounds out our leadership team. Of all of those people, 22 of them are CFPs. And that’s something, again, I’m proud of, and the fact that they don’t progress in our firm unless they do get their CFP. And I don’t care if they have a law degree or a CPA, they have to have that CFP.
Michael: And do you get any of them that gripe like, “You know what I went through to get a law degree.”
DeLynn: Right. No. We interviewed somebody recently who had a law degree and there was no questions. It’s like, “Yeah, you have to start at the beginning. You have to get your CFP.”
Michael: And why do you put it at that level?
DeLynn: Because I think it builds credibility, Michael. We’re the largest group of CFPs really in Birmingham, probably the state. I think it sets us apart. And I am a firm believer in our profession being a true profession. And I just think that’s one way we can do that. Asset-wise, if you’re looking at total assets, including the brokerage stuff, we’re $1.5 billion to $1.6 billion.
Michael: And how many client households is that?
DeLynn: Yeah, too many, actually. A little over 2000, which is something that is, as I mentioned earlier, we’re really focusing on right now. Again, some of the…when you’ve been around this long and when some of our partners have been around this long, as you know, you’ve got clients who are in their 80s and their 90s and they’re distributing out of their portfolios, and so their sizes are going down, or who may not have met…who don’t meet minimums, or some of our younger advisors who when they started, as many, everybody’s a client, right?
Michael: Yep, as long as they can fog a mirror.
DeLynn: Make them a client.
Michael: As long as they can fog a mirror. Yep.
DeLynn: If they can fog a mirror. But now we’ve stopped that. And so focus will be to those who transition.
Michael: Is there a minimum for the firm going forward of who you’ll accept?
DeLynn: Yeah. We are. And we’ve had a lot of conversation about this recently, and we have a committee put together to study it. And we will fully adopt this at the next partner meeting, but we’re looking now at it as total revenue, not just by client size. That total revenue may be a combination of a planning fee or assets under management. But our minimum is $5,000 of revenue.
Michael: But the nice thing, as you noted, as opposed to just doing AUM, like a half a million dollar minimum at a fee schedule is look, if they want to pay us a planning fee of $5,000 and they find value in what we do and they don’t have to have assets, like, if they’re paying the dollars for the services, we will service them. And it takes some of the pressure off of saying, “You must have this much money to work with us,” and simply, “Here’s what we do and what it costs. You must be willing to pay what we charge.”
DeLynn: That’s right. And what it takes to successfully run a business. It drives me crazy to look at something and it costs us X to run the business per client and the client is bringing in half of that. That’s not a real profitable way to run a business. But it is what it is. We have that. We can’t just snap our fingers and change it overnight. And again, some of these that don’t hit minimums, they’re people that were great clients to us 20 years ago, and we’ve helped them in retirement and they are winding down their life. We’re not going to abandon them because they don’t meet a minimum, right? And we do have a program that we’ve used some called Bridgeworth Access, and that is for our young professionals. Not everybody who comes to the firm or calls in who doesn’t have the minimums we would put in this program. This is for those, maybe the young lawyers, the young doctors, they don’t have a lot of assets today, but my goodness, they’re who we want to be our clients for the future, right? So we want to establish relationship today. And so we’ll do less of a fee and sometimes a monthly retainer. We’re revamping some of that as well.
Michael: So what was the low point for you on the career journey?
DeLynn: The low point. I would tell you the low point was probably my second year in the career, Michael. My father was a big believer in being business for yourself, don’t work for somebody else. He did make me get an accounting degree, which I’m so very thankful that he did. But I’ve started with this firm and, “Here’s a phone, go get them, DeLynn.” And I lived off savings for a while, and the low point was having to sit down with my family and say, “Hey, I think I’m building something good. I’m getting some traction here, but I’m not making enough money.” Because I refused to sell products just to create a commission. That was not in my DNA. I was not going to do that. That was probably my lowest point. And having to sit there with him and say, “Is this worth doing?” I was very much career-minded coming out of school, and to have to sit down and say, “Hey, I need some help paying rent.”
Michael: And did you actually have to come back to him for financial help in that second year?
DeLynn: My father said, “You create wealth by being in business for yourself. And if you think this is the right thing to do, we support you.” And I was very fortunate in that. And yes, they helped me. They helped me.
Michael: It’s a powerful thing to recognize for is, as good as the business gets after 10, 20-plus years and building revenue and building firms and the profits that come and the rest, like, it gets pretty ugly for almost everybody in the first few years.
DeLynn: Oh, it’s awful.
Michael: And if you don’t have a pretty healthy financial base, some combination of savings, other income potential, for many spouses, income potential or family that you can help rely on, the sheer financial pressure of it early on I think has probably knocked a lot of really good long-term advisors out of the business, because they didn’t survive past year two or year three to get to the really great place in years 10, 20, 30.
DeLynn: And how wonderful it is today that people don’t have to do that. That’s something a lot of people appreciate. But we are as a profession getting to where we need to be. And I would never want to put somebody through that again.
The Advice She’d Give To Young Women Coming Into The Industry And What Success Means To Her [1:44:33]
Michael: So speaking of that, so looking back now, having done this for nearly 30 years, what advice would you give today to a younger advisor coming in and getting started? Or I’m thinking even, in particular, a young woman coming into the business, because we still have a dismally low percentage of women. I know your firm already has a much higher percentage of women in leadership than a lot of other advisory firms, but it’s still a minority of the total. So, what do you know now that you would tell yourself then or tell a young woman coming in today who’s trying to get started and figuring out how to do this?
DeLynn: Well, first of all, if we’re just talking about the female standpoint, I can’t think of a better career for a young woman. It’s really a natural career for so many of those talented women, the skills women innately have. Most women are nurturers, they are empathetic. They can take a lot of skills and apply that. There’s usually a lot of flexibility in this career, especially as you get up in the higher levels. But I would tell somebody, whether it’s male or female, find that firm that she can look around and say, “This is where I want to be.” Don’t worry about the starting salary. Don’t worry about all of that. Is this the culture, the type of place you can see yourself one day, staying one day and being a partner one day? That’s the firm you should join.
I would also tell them today, and I’m doing this, we’ve just…we had an outstanding intern this summer, and we’ve already made her an offer, and she’ll be starting when she graduates next summer, because we saw things in her. And that is a recognition of not only the skills, but the things that we can’t teach, the people skills, and focus on those relationships. When we talk about business development, I hate that word sometimes, Michael, because at the end of the day, what it really is, is relationships, right? I would give the advice that people getting started, start building your network, start building those relationships day one. Because if you wait too long to sow those seeds, it’s going to be a lot longer for those seeds to flourish.
Michael: I like that. The sooner you start sowing those seeds, the sooner they flourish.
DeLynn: That’s right. And look at it as a relationship, not…what you can do to help other people. We tell our folks, “Don’t go meet someone as a center of influence to figure out what they can do for you, you try to figure out what you can do for them and start doing that day one.”
Michael: Well, and there is…I mean, it strikes me, that your comment around like, try to find a good firm that you want to be out in the long term that has the right culture rather than fretting about sort of the particular salary and role. There’s a famous saying out there in Silicon Valley world I believe came from Sheryl Sandberg when she was looking at changing firms and getting on board with a new one. The same as, if you’re offered a seat on a rocket ship, you don’t ask what seat, you just get on and you figure it out later.
DeLynn: You just get on. That’s right.
Michael: You don’t always get a lot of chances to get on a rocket ship.
DeLynn: That’s right.
Michael: So if you get a great opportunity, don’t quibble about the seat, get on, and you’ll have a whole career there to figure out how to get to the exact role that you want.
DeLynn: That’s exactly right. And you mentioned the comment about fewer women. I kind of laugh. I hear that, I see the statistics. It is amazing to me, at least in our city, there has just been this uprising of women in the financial services arena and a lot of focus on that over the past few years. And the financial planning program at the University of Alabama, the majority are women coming through that program right now in their master’s program. And so I found that very refreshing, and I’m hopeful that over the next 5 to 10 years, we see a huge shift. And I think we will. I think it’s just letting these young women know that this career is out there. I don’t know too many people in high school whose parents are…girls in high school or parents are saying, “Oh, I think you should become a financial planner.” That’s not traditional. They typically find out about it when they’re in college or getting internships or whatever. But I’m seeing more and more of that, and that’s very exciting to me. Very exciting.
Michael: So as we wrap up, this is a podcast around success, and one of the themes that always comes up is just even the word “success” means different things to different people. So you’ve built what certainly is objectively a very successful business. You are the CEO of this business and guiding forward for a sustaining, successful business into the future, but I’m wondering, how do you define success for yourself at this point?
DeLynn: Yeah. Success is not about me. When I look back and think what success is, success to me is going to be able to walk out of this firm one day, retire and look back and say, “Hey, I helped create something that is going to be sustainable.” That through our efforts, we have these career tracks and the compensation program is all figured out. And we figured out the silver bullet. And we have this great Bridgeworth University. And we have the internship programs. And it’s just feeding right in and people just going through the pipeline. And our organization looks and is a well-oiled machine. Very much like other financial services firms and other…we talked about the legal and the accounting. To me, I guess seeing that happen, and frankly, seeing the G2s and the G3s step into leadership roles is going to be success for me.
Michael: And I have to ask, where did the Bridgeworth name come from? You said like you sit down and spend a bunch of time looking at it when you were figuring out what the brand to make the shift.
DeLynn: Yeah. We hired a firm, Scout Branding here in Birmingham. Just a wonderful gentleman by the name of Paul Crawford, who had had a lot of success outside of Birmingham. Came here, started a firm, and that’s really what he did. He sat down with us and we spent a day, I’ll never forget, going through and talking about the firm and our vision and really doing a brain dump on him. And he came back to us with some ideas. And we settled on one. This was a big deal, Michael, because many people, they would just use everybody’s last names, right? Like in a law firm or…use their name. And we wanted something distinctive and different. And the first name he came back with, this is kind of funny, was the name Havenworth. And we thought, “Okay, we like that. It’s kind of peaceful.”
Michael: Yeah. Like, who doesn’t want to spend time in a haven? A haven feels like a wonderful place to be.
DeLynn: So there was something about that resonated with me. So anyway, I was on my way home that day and I called my mother and I said, “Well, here’s what we did today. What do you think about this name?” And the phone just went dead silent. And I thought, “Oh-oh, something.” She said, “DeLynn, The Haven is the drug rehab center in your hometown.” I walked in the next day, I thought, “Oh my gosh, I can’t do that” Of course, my hometown was 200 miles away, but still. I walked in the next day and one of my partners was sitting there at his desk and he looked at me and he just shook his head and I shook my head and I went there and called Paul and I said, “We need round two.” So, as we thought about bridging the gap, bridging one generation to the next in families, bridging the next generation of advisors, the bridge seemed to mean a lot. And, of course, worth, money. So we found one group in the country who had that name. It was a defunct hedge fund.
Michael: Well, they didn’t bridge very well.
DeLynn: They didn’t bridge very well. And we grabbed it, trademarked it. And it has worked well for us.
Michael: Well, very cool. I love it, and particularly just in the context of trying to build this lasting, sustaining firm. To me, there is something very powerful around Bridgeworth and the bridging metaphor, not only in bridging clients from work to retirement and bridging generational wealth across families, but bridging the firm to the next generation as well.
DeLynn: Right. That’s right.
Michael: Well, very cool. I’m excited to see how the bridge building continues to work out for the firm.
DeLynn: Well, thank you. Appreciate the opportunity to visit today, and certainly appreciate all you’re doing. Because I have to tell you, I think it’s very powerful to be able to talk to others. We all shouldn’t be out there trying to reinvent the same wheel.
Michael: Well, thank you so much for joining us, DeLynn, on the “Financial Advisor Success” podcast.
DeLynn: Thank you, Michael. Thank you.