Welcome back to the 100th episode of Financial Advisor Success Podcast. This week’s guest is Joe Duran. Joe is the founder and CEO of United Capital, a national independent RIA that oversees nearly $25 billion of assets under management. It’s one of the largest independent wealth management firms in the country.
What’s unique about Joe, though, is that he doesn’t view his own advisory firm as being in the wealth management business but instead in the financial life management or FinLife business instead, where, as Joe puts it, the primary focus is to help clients live richly, not die richly.
In this episode, we talk in depth about United Capital’s financial life management offering, why the firm starts by talking to clients not about their goals but about their values and their intentions instead. The unique tools that United Capital developed specifically to facilitate the values and priorities conversations with clients, and especially couples.
How United Capital standardized the value-add of their financial planning process even while allowing their advisors to choose from multiple financial planning software platforms. And why Joe believes it’s not wise to force every client to go through a comprehensive financial plan up front even for firms that are otherwise very financial-planning-centric.
We also talked about the evolution of United Capital itself, why the secret to scaling an advisory business is moving beyond what Joe calls a cult of personality business centered around the founder/owner to a cult of company business, where both clients and talented employees want to work for the company itself. How United Capital began to charge standalone financial planning fees to reflect their financial planning value, but ultimately shifted back to charging AUM fees instead.
And why asking two simple questions, “Will this help us serve more people?” and, “How would we beat United Capital if we were making a competitor to ourselves?” has guided United Capital’s evolution from being an RIA aggregator to a single advisory firm with a unified client experience to increasingly becoming an advisor technology platform company instead.
And be certain to listen to the end as Joe shares the advice he wishes he could go back and tell his younger self. That in the end, you have to keep focusing on the process of serving clients and not the results. Because you can’t control the results, only your inputs. Even a steady focus on the right inputs has allowed United Capital to grow an advisory firm with more than $200 million of revenue in under 15 years. And so with that introduction, I hope you enjoyed this episode of the “Financial Advisor Success” podcast with Joe Duran.
What You’ll Learn In This Podcast Episode
- Joe’s main goal when he started United Capital. [04:23]
- The real value advisors bring to clients. [17:14]
- Their three guiding principles. [21:18]
- How AI will transform the industry [22:58]
- An overview of the firm. [25:39]
- What their client process looks like. [30:27]
- How they apply behavioral economics to the client interaction process. [37:12]
- Why Joe doesn’t make every client go through a comprehensive financial plan upfront. [45:13]
- How United Capital justifies their premium pricing. [51:41]
- Their fee structure. [1:00:25]
- How to bond clients to the company, not the advisor. [1:06:16]
- What Joe says is the number one reason for his company’s success. [1:12:39]
- United Capital’s origin story [1:25:21]
- His biggest surprise in starting his company. [1:33:51]
- His lowest point. [1:36:43]
Resources Featured In This Episode:
- Joe Duran
- United Capital
- My Money Mind
- Honest Conversations
- Litmos LMS
- FinLife CX
- Red Phone Holographic Communication
- The Money Code by Joe Duran
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Michael: Welcome, Joe Duran, to the “Financial Advisor Success” podcast.
Joe: Thank You, Michael. It’s great to be here.
Michael: Really excited to have you on the podcast. We’re celebrating a milestone here of the 100th episode of the podcast having launched almost two years ago, and, well, running every week. So here we are, 100 episodes, 100 weeks in. And I’m really excited to have you on the podcast to kind of celebrate this milestone episode as you’re coming up on a rather significant milestone yourself at United Capital.
I know you guys are coming right up on $25 billion under management, which is, frankly, a difficult number for me to wrap my head around, and has been I think a really meteoric rise for unity capital over nearly 15 years now. And so just talking about what you’ve built and the path you’ve been down and, you know, what it’s like to build and lead a $25-billion firm.
And I know you have some really just interesting insights and perspective on financial planning and what we’re all doing here, and what value we’re really providing clients that we’re getting paid for. So I’m excited for the discussion. Thank you for joining us on the podcast.
Joe: Well, I’m thrilled to be here. And I will always be number 100, I guess, which is nice. It’s a nice, round number.
Joe’s Main Goal When He Started United Capital [04:23]
Joe: So it’s great. I’m super thrilled to be here. It’s obviously been an unimaginable path. So what I hope we’ll do is talk a little bit about some little business lessons, some of the things that we think are happening in the industry. And really my goal from day one of starting United Capital was really helping advisors to win by really helping their clients to win.
And, you know, interesting enough, $25 billion for an investment firm is not that much, but for wealth management, it’s really never existed before, you know. A $25-billion singular RIA wealth management company, that’s a new thing.
Michael: It’s an interesting phenomenon to me that…Just really the sizing of our industry that, on the one hand, it wasn’t that long ago that just a really big advisory, I mean, a really big advisory firm had $1 billion. That was the benchmark number of the 2000s.
And then $10 billion became the new $1 billion. And it’s this just unimaginably large number to me that most firms will never see, and only a couple of firms get close to. And then you guys have blown through that number. And I know there’s already some firms that are saying the target for the 2020s is going to be $50 billion and $100 billion firms.
But at the same time, Merrill Lynch is like $2 trillion. As big as our firms are getting, like, we’re still an order of magnitude off of how big completely national scale firms really are.
Joe: Yeah, I know. Even at our size, you know, we have 650 employees, we’re generating over $230 million in revenue. So, we have more in revenue than the vast majority of independent firms have in total assets. And we’ve doubled. At 2015, we were at $11 billion and around $100 million to $110 million in revenue.
So, in three years we’ve grown from $11 billion to now almost $25 billion. So it’s been really meteoric. And half of that has come from acquisitions, and a half has come from organic. So we’re already over $2 billion in organic assets and flows this year. But we’re still tiny.
So, when I look at it, what I think is we can be $100-billion institution in the next 3 to 5 years. And that there will be several three to five big national firms. And if you’re an independent advisor competing against the United Capital or an Edelman or even a Creative Planning, it’s a very different thing than competing against the guy at Merrill Lynch, who’s an independent guy doing basically what you do but with proprietary products. We’re a different creature, you know.
So it’s a very different competitive landscape than looking at Vanguard or looking at the big warehouses because we are all creating a singular client experience, you know. If you go to Creative, you got an Edelman, you go to United Capital, you’re going to have one client experience, which we invest millions of dollars into.
So that is how the world is really changing in a competitive sense for the independent firm. And you’ve written very well about this, Michael. Just the real pressure is on the firm’s that are beyond lifestyle size, you know, 250 at the low end up to, you know, $3 to $4 billion, where you haven’t cracked the code and don’t have the resources to really invest in your technology and your client experience. That zone is really an interesting and I think dangerous place to be.
Michael: Yeah, I call it dangerous middle. And it really is striking to me how that gap has emerged. On the one end, I think the industry and some commentators have been just egregiously overly bearish on solo independent practices unnecessarily so that there’s just, particularly as the technology gets better and better, you can be a ludicrously profitable solo advisor, work with your 50 great clients, make a fantastic income, and just have such a deep relationship with them.
No one realistically is peeling them away. And the more specialized you are and whatever you do for them, the stickier that relationship gets. But as soon as you try to grow beyond yourself and you’re not huge, however you want to find huge, that gap between solo and huge is a really tough middle point. You’ve got a higher staff. You’ve got to grow the business beyond yourself. You’ve got to start systematizing and building.
But you’re now competing against firms, as you said, like United Capital and Edelman and Creative Planning, which I think are all great examples. Because those are all firms that don’t just aggregate a bunch of advisors under one umbrella the way maybe some firms like HighTower have done or more classic roll-up models like…
United Capital, Edelman, Creative Planning are all firms that have created a singular standardized client experience that everybody in the firm is intended to deliver and that all the clients in the firm experience. And so it really is to me at least the start of this is what it looks like when you take small boutique and you start to systematize and scale it.
And it’s just a different kind of competitive environment. Even looking in terms of our own firm, like, 10 years ago, our typical approach talk was like us, a local rep from Lincoln Financial, because there’s a whole bunch of them in the Baltimore area, big presence, and, like, their brother-in-law who started working for Northwestern recently.
And as long as they weren’t worried that, like, Thanksgiving would be awkward with their brother-in-law, we would tend to in the business. We won most of approaches with this, you know, holistic financial planning experience or model and all the rest. And now when we approach new clients, it’s us and two or three other sizable RIA wealth management firms in the area, all of whom I know. Sometimes it’s one of your United Capital firms, right, because you’ve got a presence here in the DC area.
And, you know, I can’t say anything bad about the firms that were competing against. Not just because I don’t like say anything bad about my competition. But just literally, like, okay, I know all the firms that we’re competing against in for this client. And these are all good firms and good people. We might do it a little differently because, you know, we do a little more tax, and they’re a little more passive, and we’re mobile more tactical, and they’re a little more DFA.
And, like, we can start articulating differences at the margin, but we’re competing at the margins now in a way that just wasn’t happening not that long ago.
Joe: Well, look, this is the way most advisors need to think about. You can be really successful if you have a cult of personality business. And that’s my different way of putting what our lifestyle business is. It’s typically one or two people dependent, and the success and failure of the business completely dependent on the advisor who started it and their relationships.
And as you’ve seen in our industry, after 20 years, most advisory firms falter, the vast majority. Because an advisor starts, they get a group of new friends over the first 10 years. So they do seminars or workshops and get their set of clients. Then they spent the next 10 years getting the friends of the friends by referrals.
And typically, I call it…it’s two degrees of separation between their newest client and themselves. It’s usually the friend of a friend is the newest client. And that’s it. So you typically have, to typical advisors, 200 to 300 clients in their firm that they’ve accumulated over 20 years. And if they have wealthy friends, that might be $300 million. And if they have poor friends, that might be $30 million. But they’re kind of flatlined.
And if you’re going to break beyond that, which most firms do not. Most firms that’s kind of where they stick. Maybe they partner with someone else who also has $200 million in friends, and they end up with $400 million. But you’ve left the cult of personality business when you are no longer tethered and don’t necessarily know all of your underlying clients.
And then what you’re trying to do is built a cult of company business, where it’s really about the company, the firm that you represent, the services you offer. That’s a completely different creature. It requires a different mindset. And many of the advisors that are really good at building a cult of personality business have no idea how to run an actual business.
And so that transition is difficult. It requires letting go a lot more. We’ll talk a lot more about that. And, you know, again, the advantage of having built two firms to multi-billions of dollars is that I know where the stages are where you have to let go and do new things differently, which I’m happy to talk about. But so the idea is very important for the advisor to say, “Maybe this is as big as I need to get. And I’m going to milk it, and live well, and my clients will stay with me forever.”
Because the minute you go to a cult of company from a cult of personality, your relationship with the clients now become a lot less tight. And then you’ve got to rely on everyone delivering something that’s so unique and so special that those clients will stay loyal to you. And what you’re doing as a company, even if a person leaves or if an advisor leaves, and a lot of advice just haven’t made the investments and their systems or in their story or in their technology to really keep the clients loyal to the firm rather than to any one person.
And the best example is like Starbucks, right? Like, when you go to the Starbucks, maybe you like one barista. But if there’s a different barista, you’re going to keep going to that same Starbucks. Versus if you have a coffee shop where it’s all about you, you know everybody, and everybody goes and say, you know, here’s an example of a bar. Cheers, you know, where you go up, and want to see…Yeah. That’s not true at Starbucks, but you’re going to keep on going.
Michael: I think the mentality in the advisory industry for so long is literally that clients are loyal to the advisor, not the company, right? I mean, we kind of joke about it sometimes that there are a couple of very large firms with some pretty bad reputations right now and still have astronomically high retention rates. Because, as you know, we see every time, the survey, researchers go in there and do their thing. You know, they basically say, you know, so-and-so, a last-tier Wall Street firm, you know, has a terrible polling for brand trust and reputation. But the clients trust their advisor even if they don’t like the firm so they stay.
Joe: It’s the same thing as government, right? We all hate Congress but we like our congressman.
Joe: That’s exactly the same. Like, again, the one thing that Merrill and all the big warehouses have not done is create a unique client experience. That is changing. They’re investing a lot of money now. So it will be interesting to see how that evolves as they continue to invest in creating a much more institutionalized approach to the client experience.
And that’s the area that I think is really interesting. Because, you know, Wachovia was one of the…Well, now Wells Fargo, one of the very early adopters of finance where they called it Envision. And they’ve really had a lot less advisor departures because the underlying clients are very accustomed to getting what was then a revised version of finance. And it was a really smart way to get the advisors into planning, lock the clients in, which are now all the warehouses are starting to emulate, of course.
Michael: Except the trend, even from a lot of the large firms, over the past 10 years, is moving away from their own proprietary software and, you know, licensing or maybe light customizing some of the third-party solutions out there because it’s really hard to build software from scratch.
Joe: And maintain it is really expensive.
Michael: Especially when you’re a large firm.
Joe: Yeah, yeah.
Michael: Are they going down the wrong road? I mean, is your take sort of they actually had it right 10 plus years ago when they were building their own proprietary software, they just have to figure how to do it better?
Joe: Here’s what I can tell you. All of the larger firms realize clients are very sticky once they get a habitual about looking and seeing something. What they’re all betting on is that their digital interaction with the clients, the amount that they’re investing in their portals. I think the Merrill Lynch’s is called One, or something like that.
It’s not the underlying…And we learned this very early on, that the underlying planning software is a commodity. And the clients don’t care whether they’re using MoneyGuide or Financeware or eMoney. They don’t understand any of it. They just want to know that you are doing something that they can participate in and be in the process of it.
The Real Value Advisors Bring To Clients [17:14]
The truth is every single plan that’s ever written is wrong. That’s the truth. Advisors don’t like to acknowledge it, but there’s never been a plan that is right, because it assumes that the clients will lead an average life. And what we know for a fact is that every single human has a once-in-a-lifetime experience. And no plan includes the things that will actually happen in a person’s life.
They’re not going to put in there they’re getting divorced. They’re not going to put in there that they can’t go in a car accident. They’re not going to put in there that spouse got cancer. And then they’re going to put in all the good things that will happen that they sold their company for twice more than they expected or that the stock market did a lot better. So nobody ever has a once-in-a-lifetime experience.
And therefore, you can’t anticipate how their goals will change or how their expectations will change, but there’s still a lot of value in having a plan. And the challenges that advisors sell the plan as a product rather than the process of amending the plan.
And that’s a battle that I have all the time, as, you know, I speak as you do all over the country. And I try to tell people, look, your value is not providing certainty where none exists. You can’t pretend you know what the market is going to do. You can’t pretend that the plan is right because it isn’t.
What you are doing is helping people make intentional decisions. What you’re trying to do is help them to avoid the blind spot they’re naturally going to go down and the alleyways that they’re naturally going to drift toward because of your experience and knowledge to help optimize every decision with everything we know at that time, knowing full well that we will know a different set of things than six months, and that the decision-making, the process will stay the same but the output will be different because your life will be different.
That idea petrifies advisors. It petrifies them, that they can go to their clients and say, “I have no idea what the market is going to do. And I know that this plan is wrong. You’re not paying me to build the plan. You’re paying me to change the plan.” But that’s why you can charge an ongoing fee. And when we tell this to clients, which we’ve been doing now. It’s been 12 years, 13 years. I can’t tell you the reaction.
Because the clients know that it’s true. And the advisors who’ve joined us, who’ve been working for 20 years with these clients, will go bright red, but they’ll see the clients say, “No, I know that. No, I just want to be understood, and I want to make sure I make the best and most careful decision I can at any given time.” And they are more than happy to pay for that advice as a separate office, as a separate service.
So again, clients and advisors…advisors are the ones holding themselves back, because they think they can only charge investment fees, and they give away the planning. And that diminishes the value of the actual planning and guidance, which is the real value you bring to the table. It’s not putting together DFA portfolio, a BlackRock portfolio. That’s worth 20 to 30 basis points. It’s not worth 1%.
So we really think it matters that the advisors in the future charge for what the clients value, which is the guidance and advice about their entire financial life, not just their money. So, you know, that’s Anchor 1. We have three guiding principles. That’s the first or most important one that our whole firm has been built on, which is that people want to live rich, they don’t want to die rich.
And our whole industry treats people like walking wallets, treats them like the only thing that matters is that they have as much money as humanly possible even if they’re making absurd daily sacrifices that are not at all in their life interest. They’re just in their financial interests. And that your job is an advisor is to actually marry the two. It’s really managing lives. It’s not managing money.
And that’s an area that, again, for me it’s blue water. There is so little discussion and so little innovation in that side of the house that it just shocks me. Because, again, I’m out there, very vocal about it. And yes, a lot of big firms are copying our messaging and making ads. But if you go in, you’re still going to get the same thing they’ve always delivered. They have no way of delivering on the promise of how do I make sure you live richly.
United Capital’s Three Guiding Principles [21:18]
Michael: So out of curiosity, you mentioned three guiding principles there. One is people want to live rich, not die rich. What are the other two?
Joe: So the first is life beyond money, you know. We manage lives not money. The second one is that the world is bionic. That if you’re going to win, it is not a digital versus human world. It is a human-powered by digital world.
And iron man is a great analogy for this, that the reality is, as technology takes over, all of the quantitative aspects in a much more efficient way than any human can, heart and empathy and judgment, are going to become exponentially more important. That the aspects of how we interact with people, how well we understand them, how important they feel because of their connection with us, those are going to drive your success.
And you’re going to have to have incredibly deep technological involvement in every aspect that the way we interact with clients will change. Geography will become a lot less relevant. You’re going to have to use a lot more video. That the world is just becoming a lot more digital. And you’re going to have to play the human role a lot stronger but then embed technology in every aspect of what you do.
And advisors are woefully behind on this, you know. They typically will make one major technological shift every three to four years. So maybe they move to the new version of MoneyGuide. And then three or four years later, they’ll move a CRM. The pace of technological evolution is so much quicker than the average advisor adapts. And that puts them in a quite a big disadvantage to a firm that moves a lot quicker.
How AI Will Transform The Industry [22:58]
And the third one is that data and information are the oil or gold of our industry. And what I mean by that, explicitly, we think AI and machine learning is going to be quite important in how we service clients. And I’ll give you a concrete example, Michael, because people ask, you know, what are you doing in this area.
In order to be able to use machine learning or any form of AI, you need to have really really good data. And unfortunately, while we have great data about planning and investing, with very little data around the client choices that they make as advisors typically. Because we’re using a yellow pad and pen. We take notes in a long-form. We then put it in Salesforce, and we say we’ve digitized it. But it’s not digitized, because it’s not searchable. It’s just an essay with lots of words, right?
Michael: It’s not in a standardized structured data format.
Joe: Exactly. So I can tell you, this year, we’re spending millions of dollars taking every client interaction we’ve had, the long-form notes, and digitizing it so that they can be stratosphered, like, put into categories. And then, in future meetings, creating pulldown menus.
So when you’re doing a check-in meeting, you can say what are the major topics that you covered and be able to curate them. So that then when we do machine learning, here’s what we could do. A client comes in. They’re 48 years old. Their first kid is off to college. And she sits down with us. And we can say, “Across the universe of clients we’ve got, when the first kid goes to college, here are the four most frequent things that people ask about or need help with.”
For example, you know, somebody comes in, they’re 65. And we can say, “At 65, you typically are now going to have these four things that are going to be really important to you.” Maybe it’s elder care. Maybe it’s making sure that you’re thinking about your legacy, whatever it is. So we’ll be able to actually use our insights from our actual experiences with our actual clients to project out what is likely on this person’s mind before they’ve even comment.
And that kind of information, it can just make advisors so indispensable to the clients. Because, again, they might not have even thought about the kinds of things that they should be thinking about. And so, again, it’s useless if you don’t have data. And so, for us, great data means great client interactions, better insights, better decisions.
And so we think that that’s going to be the gold rush of the new millennium, will be this, will be this idea about data and how do you manage it and store it and collect it. And, I mean, again, as you know, most firms are woefully incapable of doing that kind of work.
An Overview Of The Firm [25:39]
Michael: So let me take a step back for a moment and just ask you to describe United Capital itself. Like, how would you describe the advisory firm, the business you’re in, what you do. I mean, you talked a little bit earlier about just the kind of headline stats, almost $25 billion in assets under management, $230 million of revenue, and 650 employees. But, you know, if you’re describing United Capital to a prospective client, like, how do you describe the firm and what you do?
Joe: Well, we’re a financial life management company. And what that means is that we help…we basically live where life meets money. And our advisors have the most sophisticated tools to understand how you want your life to unfold and to make sure you get as close as possible to it.
So what I tell people, when we find them in an elevator is, financial life management company helps you live richly. And what that means is that our primary job is to help you live the life you want. That is the only thing you should want from great wealth advisor. They help you live the life you want. The only question that they are obsessed with is how do we ensure that every day you make intentional decisions that help you live the life you want.
And a lot of that’s going to have nothing to do with money. Our number one reason that people work across our company, our 20-some-thousand clients, the number one is to spend time with people I care about.
And as, you know, we’ve got this whole digitized, gamified way of prioritizing people’s intentions. And we spend a lot of time on intentions, because goals change, but values and intentions don’t. And so articulating why people work and what the intention behind their work is and what the money is actually intended to do, you will get to things like spend time with people I care about.
That leads you to a completely different discussion about life. And so we can talk about things like, hey, if you’re working to spend time with people you care about, take vacations now with your kids while they actually want to be with you. Don’t defer it until you’re 65. Do it now.
It is remarkable how few people have their advisor say to them, “Max out your vacation. Have a dinner date once a week with your wife or your husband. Make sure that you’re with your friends,” which is, again something a lot of people don’t think about. So what we do now is when you pick that card, we then have a list of things for you to consider.
And then the one thing we do that’s very very cool is we ask you to scale on a score of 1 to 10 how you’re doing on that priority. So if that priority, if that intention is spend time people I care about, and they score a three, we’ll actually say, “What needs to happen the next six months for you to improve this to an eight or a nine?”
And we digitize the whole interaction, store it. And the clients on their mobile portal with us, we call the Guide Center, can score dynamically and send notes to their spouse when they’re not living up to the commitments they made.
Just like we have a dashboard for all the planning things we need to do, long-term care or making sure your balance sheet is updated etc., there’s a checklist for the clients every six months of the things that they’re committing to. I commit to going on a date once a week. We’re taking a three-week vacation on that one card. Maybe a card is, another big priority for people, to be healthy. And maybe I commit to going to the gym and eating less carbs.
And then when they come in every six months, we’re actually helping them to see how they’re doing. And this is all in the quest of helping you live the life you want. That’s our goal. And we have 650 people, who everyday obsess about how do we do that better than ever before. And so we invest in behavioral economics, and we invest $10 million to $15 million a year in technology to just constantly say, “How do we help people make better more intentional decisions every day?”
The whole company is just built around that idea that our job is to help people live richly, and we do that by making sure they live the life they want. And you can’t do that if you don’t know what that life is. You can’t do that if you don’t tell people when they don’t have enough and need to make compromises. And you can’t do it if they’re not prepared for life’s big surprises.
So we have a fairly simple mandate. It takes a huge amount of new ideas to deliver on it, because no one else is doing this, at least on the scope and scale that we are. And so there are a lot of people who talk about it, but there’s no one who’s actually putting their money where their mouth is and saying, “Let’s talk about how you apply behavioral economics to the client interaction process.”
What United Capital’s Client Process Looks Like [30:27]
Michael: So can you maybe walk us through, like, what does this client process look like as you’re trying to go through all this? I think a lot of us like to say, “We’re trying to have good conversations with our clients around their goals and their values.” We do that in varying degrees. I know your process is much more structured.
But can you just walk us through what that looks like? Like if I’m coming on board, you know, you gave me that pitch. I said, “Joe, that sounds totally awesome. I want me some of this. So, like, sign me up as a client.” What happens now over the next couple of months or year that I’m a meet new client with UC over the process?
Joe: So, Michael, we would get your name and your email and your spouse’s name. You’d get a call from a United Capital ambassador. And that ambassador would call you and say, “Hi, Michael. How are you? I am one of United Capital’s ambassadors, and my job is to make sure your first meeting is the greatest meeting you’ve ever had with an advisor. What we want to do is create an agenda. We’re just going to take 10 minutes to create an agenda for you so that we answer and address the major questions you’ve got when you come in.”
So the first thing we’re doing is your first touch point is nothing like any interaction you’ve had with another advisor. And we have a team that that’s what their job is, is to welcome a prospective new client.
Michael: So this is entirely separate from the advisor themselves? Like, this is…
Michael: …this is a centralized team whose job is just, here’s the contact info for a new person who just said yes. We’re going to reach out to them and say welcome. Do you have any questions? And what do we need to make sure we cover on an agenda of the first meeting with you and your soon-to-be advisor, who you may not have even met yet?
Joe: Yeah. Let’s say I’m the advisor. I would call our team at Dallas. I’d say, “I just met Michael Kitces. He’s a potential client.” They’re going to call you. They’re going to call your spouse. They’re going to say, “Hey, I want to welcome you. I’m the Ambassador. We’re going to make you feel good. We’re going to put an agenda in place.”
Then you’re going to receive an email. And she’ll tell you this, “We’re going to send you an email with your agenda attached. Please confirm that it is what you’d like to cover. And secondly, you’re going to have a very simple game that we’re going to send you to go through. And it matters, because when you come in, we’re going to use this to help us understand how you think and feel about money.”
And it’s designed by behavioral economist. You’ll enjoy it too. It will give you great insights, but it’ll help us to help you when you come in. You will get this welcome email that has your advisor with a scheduled time for the appointment. Let’s say it’s me, with Joe Duran, your advisor, the location, the time.
And there are, I don’t know if you fly Delta ever, but if you do, you get these this welcome page that says, “Here’s the entertainment. Here’s the food.” All the rest. There’ll be a welcome video that talks about United Capital. And there will be a link to the Money Mind exercise, which we will talk about in a second.
And then there will be an agenda attached. And we will already have started the process of, in that first call, collecting how much you’ve got in assets and how much you’ve got in income. So we’ve already done an initial set of data collection that we asked you to confirm just to confirm this is what you told us that we have so far.
And if we need them to bring something in, we ask them to bring it in. Typically, in that welcome meeting, we get all the information we need so the advisors meeting has no time spent on show me your balance sheet, show me your income saving, show me how much you make. It’s none of that, which is, like, a really painful administrative function.
And we copied that from the medical profession, you know. The doctor doesn’t come and take your pulse and do all the basics. So the ambassador does that for you from a central support in Dallas.
You then take the Money Mind exercise, as does your spouse. Because you each get your own email. And the Money Mind exercise is basically a really fun…You can see this on our website because it’s open-source. You go on, and you go through this exercise, and it tells you where to use money to protect yourself, to enjoy life, or to take care of others. And to what degree you favor using money in each of these contexts.
The questions are simple questions like, you drive your new car off the parking lot of the lot, what’s the first thing you think about? I can’t wait to take my family in it. Did I get the best possible deal? Or I love the new car smell. So you answer these questions that appear to have nothing to do with money but tell us exactly how you think about the spending of money.
And then we will give you a result that compares to your peer universe, other men in their 40s who are married with children, because all the questions are curated to the demographics of the person and shows you how you compare to other people, but more importantly, how you compare to your spouse.
So when you come in for that first meeting, I already know, Michael, that you are driven by a need to protect, and also, you use money to take care of the people that you care about. I also know that your spouse really enjoys money to be a part of it just enjoying her life.
And so when you fight about money, it’s because you really care about being frugal and protective and protecting yourself from bad outcomes, but your wife wants to use money to enjoy life and make the most out of it. And she wants a big vacation, and you want the more frugal one.
We know the kinds of arguments we’re having. We know the issues we’re going to have to overcome. We know that if you’re protection or fear Money Mind, you’re going to care about costs and performance. If you’re a happiness Money Mind, you just want to get the heck out of the meeting. So we know exactly what you’re going to think. But your first interaction with us is so fun and so different. And it’s like getting your own personalized horoscope, right, but it’s really true. And we’ve done this…over 100,000 participants have been through this.
Michael: For anybody who’s, like, curious and wants to put themselves through it to see how they score or how they stack up on these three dimensions, we’ll have a link to this in the show note’s resources area as well. So this is episode 100. So if you go to kitces.com/100, we’ll have a link out to the Money Mind and you can see how you stack up on the dimensions of…I guess they’re basically fear and protective, happiness and enjoyment, and the third one is kind of a…
Joe: Commitment to giving.
Joe: Commitment and giving.
Joe: Yeah. And so you do that. First meeting you have already is very different than most advisors. So you will want every touchpoint to be truly unique. So you’ve had the ambassador. You’ve now done the Money Mind. Now you come in, and we’re going to say, “We live to help people live richly, and our purpose, the way we do that, is to make sure you make really smart choices throughout your life. Our view of what it takes to live richly is to not just have money but to make sure you live the life you want.”
How United Capital Applies Behavioral Economics To The Client Interaction Process [37:12]
So we start by understanding what do you want your life to be like, and what do you work for? Your goals over life will change. So we don’t spend a lot of time right now talking about goals, because we will, of course, get to goals and build a financial plan. We start more in the very beginning with understanding your intentions. The purpose of your working, the purpose of your life. And we have a great exercise that we’ve built with behavioral economists to do that.
So we then hand they’re husband wife, if they’re a husband wife, each a deck of cards. This happens, by the way, virtually 30% of the time. So we have a virtual version of this, where you can go online while we’re video conferencing. And you will see a deck of card. And we ask each of the spouses to prioritize their happiness cards, their protection cards, and their giving cards. There are five in each.
They prioritize them, and then they choose across categories. And they each, individually, basically describe for us what their most important purpose for money is, what the biggest intentions are. As I mentioned, the number one that we get across the country, spend time with people I care about.
Then the other spouse does the same thing. While they do that, they give us a score on a scale of 1 to 10, how do you feel you’re doing in this? They tell us explicitly what it means and what they need to do.
And then the two spouses agree which are our joint priorities. And this is really important. Because typically, what we do that’s very very different than most firms is we’re really speaking to the non-financial spouse and bringing them into the discussion. And so once they’ve done that, once they’ve both agreed on why they work and how they’re doing in that, we know we’re going to get that client.
I mean, I can tell you, in the referral programs, the Schwabs and the Fidelity is where we have national relationships, we close about 80% of the meetings we have with that combination of things with the ambassador calling, with the welcome kit that we send, with the follow-up, with the very unique Money Mind, and then the honest conversations. Because the non-financial spouse, if you get that person, you get the relationship. Because they’ve been ignored by our entire industry.
And what we’ll do is we’ll just talk about what you want the money to do for you. We then go through a really great gamification exercise where we’ll API to Morningstar to make sure their investments are in the right place. And then the advisor can choose MoneyGuide or Financeware, you might need to do the plan, because we’re indifferent to it.
And the clients are indifferent to it. They just want the output. They don’t care what system you use. The same is true about the investing too. They don’t really care what you use as long as it’s in line with what they want. And our whole process is really to build everything around the life that you want.
And so after that first meeting, they’ve typically signed an agreement with us. And then the next meeting is the implementation meeting. So there’s two meetings. We do very little data collection our first meeting, because the ambassador has done that already. We’re simply getting to truly understand the client. And the job of any first meeting is to really take a stranger and make them a friend. And the process we built makes that happen very very quickly.
And then the second meeting is really the implementation meeting. Our great advisors, what they have done, is that they will sit in on the first meeting with a wealth advisor, who’s a junior advisor in that meeting. And then the junior advisor takes over Meeting 2. And that lead advisor never visits with that client again.
That model allows for the advisor to really do what they’re great at, which is meeting clients, having that first meeting, and then do the servicing, they have somebody else do the servicing and the ongoing management.
And that allows for massive skills. So we have one team that joined us. So they’re doing $5.7 million in 2012. They’re doing $20 million in revenue now. They’ve grown from $600 million to over $20 billion, over $2 billion in assets in six years.
Michael: So, all right. So I’ve got two questions about this then, and kind of that handoff that you just mentioned. So number one, I guess, just the handoff itself. Like, I feel like, I don’t know, the traditional advisor view would be something to the effect of, so we’ve welcomed this client in. Like, the lead advisor has just had the most powerful transformative meeting ever with the client around this discovery process and my Money Mind, and honest conversations, and these rankings of intentions and priorities and values. And clients are all wound up.
It’s like, oh, by the way, you’re never going to see me again. But have you met Jimmy? He’s really awesome. That feels like a really, I don’t know, disruptive handoff. That might just, like…
Joe: No, let me tell you what actually happens. Let me be exact how it happens. The advisor comes in. He has or she has their Wealth Advisor Number 2 sitting right there in the meeting. It’s very clear. We work as a team. My job is to make sure that we understand you really well as a firm. And then you’re going to be working with Kathleen, Steve, Bob, whatever his name is, on a daily basis. I will be reviewing your account. And if anything major needs to be done, we’re going to meet. But your day-to-day will be Steve, Bob, Jane, whoever it is.
So in that first meeting, I am helping to guide the process. But that other advisor is taking all the notes, asking questions, asking for the scores. And then on that second meeting, they’re taking the lead in implementation.
Michael: So a lot of it, like, you’re set…I mean, and this is part of the nature of literally managing client relationships. The lead advisor is setting the expectation from the start.
Joe: Yes. Yeah, you come in Michael, and I’d say, “Look, I run a whole office. We have hundreds of clients. And my job is to make sure every client has an unbelievably great experience. That’s why I like to be in the very first meeting, to make sure we’re all on the same page and I understand what we’re trying to accomplish for you as a team. Betsy here is really great a day-to-day, much better than I am, at following details, making sure you get what you need. And she is a great CFP. And she’s going to make sure that we don’t forget anything. Because I’m pretty scatter-brained.”
And then Betsy is going to run most of the meeting. She’s going to be talking about, here are the cards. Put them in order. Do all that. I’m just sitting here part of the process to make sure that, again, as a team, we’re doing what needs to be done. And of course, if the client is $15 million, maybe I take them on myself.
Michael: Right. Okay. And then second question, you mentioned, like, advisors may use any number of planning tools, Financeware, MGP, or eMoney. When does the planning software show up and get used? So, like, my ambassador has gathered data before the first meeting. So am I going to show some of this in the first meeting after we do honest conversations and the rest, or do I take all the values and intentions discussions we had in the first meeting and I start showing some kind of plan output in the second meeting? Like, where does that hum?
Joe: Yeah, so it very much depends on what the agenda said. So if they said, “I really need a financial plan,” I will bring up the client portal, Guide Center. And I’ll show them. Here all the areas we have to fill out. I’ve already populated your balance sheet here. So you can see it’s there. And as you can see, your plan doesn’t have any goals linked to it yet. So at our next meeting, we’re going to get explicit about goals.
But I show them exactly what we’re going to do. And from Guide Center, I’ll click, and it will take me straight through to money guide or Financeware or eMoney, whichever one I use, and bring it up, and say, “You can see all of your data is already here. At our next meeting, we’re going to start populating these goals based on what you told me the purpose of money is.” If they wanted to cover that, then I might have blocked already an hour and a half out, and we’ll start doing the work right away.
Why Joe Doesn’t Make Every Client Go Through A Comprehensive Financial Plan Up Front [45:13]
So it really depends on what the agenda looked like. Some people say, “I really got to straighten up my IRA.” Some people will say, “I want a financial plan.” We want to make sure we address the primary concern that the client wanted to deal with in that first meeting, so that we can then get to the second thing.
So for example, they might come in and just say, “Hey, look, I’ve got a big rollover from…I’ve got a new company. And I got a big rollover opportunity. I need to know whether to take a lump sum distribution.” So we’ll do honest conversations. And then address that question. And then say, “The next meeting, we’ve got to build a plan, because everything you do has to be part of a process.”
So we still want to address their primary question at that first meeting, and then still go do the planning and everything else. So we’ll show them our first meeting, this is how we’re going to do it, but not necessarily have time to actually do it. So that’ll be the second meeting.
Michael: Well, I think there’s something very striking there that’s sort of obvious, yet most of us don’t do it, which is not just starting off that first new client meeting with, you know. Here’s the process we’re going to go through, you know. We do data gathering, and Meeting 1, and then Presentation Meeting 2, and Implementation Meeting 3, or whatever that flow is, that your first meeting is always starting with a question of the client before the meeting of what’s the primary issue on your mind that’s making you come to us and hire us as an advisor, and let’s put that at the top of the agenda of the first meeting and we will hit that in the first meeting.
Joe: Well, we know, if they coming to us, they’ve got an itch to scratch, right?
Joe: So we better address that itch. And, you know, it is remarkable by the way how few advisors actually take the client’s lens and say, “What is this client coming here for?” They just have their standard. This is how we do it. This is how I’m going to do it. It’s remarkable.
So, you know, we’ll sometimes not even do honest conversations in the first meeting if we really have…an investment question needs to be dealt with. We’ll take them. They’ll have done the Money Mind already. But then we’ll say, “Let’s do the Investment Viewfinder first,” which is a way where we link all their accounts. We can run analytics, straight API through Morningstar, and say, “Well, this is why your current portfolio looks like.” And address that. And then say, “At the next meeting, we’re going to talk about the purpose of this money. But first, let’s straighten this out.”
Most advisors, they just have a canned, this is what we do. And then the client come in and says, “Okay, thank you very much.” Leaves. And then they come to us, they go, “Man, these people actually listen.”
Michael: So playing devil’s advocate slightly, though, like, I feel like the…and maybe we overstate this, but the response is always one way. We can’t make any recommendations because we have to do it as part of their whole integrated plan. It’s like I can’t do the other stuff first. We have to put them through the plan. And then we’ll give them all the recommendations about stuff they’re worried about, but we have to do it as part of the plan. So you have to go through my planning process first.
Joe: I think that is an incredibly, absolutely not the way the world works now. Look, clients today in every interaction they have start and end and go as deep as they want to. So it’s not up to us. It’s up to the client. If the client doesn’t want to deal with a financial plan, they just need to know what the hell do I do with my IRA right now. And you stubbornly say, “Well, I can’t do that until I built your whole plan.”
The thing you can start with is saying, “Look, let’s just do a simple risk question right now. Please know we’re probably going to change it. But since it’s an IRA, we don’t need to worry about it. Let’s just find a way to scratch this itch right now.” And then, at the next meeting, they’re more than happy to go to the next thing. They’ve got an immediate problem that’s going to be dealt with.
So, look, that is true when you’re on Uber or when you’re on Facebook or when you’re…You’re going as deep as you want to and dealing with what you want to deal with when you want to deal with it. And the dogmatic approach of this is how we do it, and this is how everyone has to do it, you know, again, I just don’t think that’s the way the world is today. Clients want to be part of designing their own experience.
Michael: And you don’t worry about the risk that you give a client some answer. And then in the second or third meeting, they bring up a whole bunch of other stuff as part of the holistic planning picture. And you’re going, “Oh, crap, I wish we hadn’t done that thing we’ve done. Last time, I didn’t have all the formation. I do now.”
Joe: Well, you’re not going to obviously build a trust or anything like that without the information you need. But certainly, the one thing we see all the time when we win these competitive situations is that natural planning firms will not address the investment concern a person has immediately, like they just stubbornly say, “No, we’re going to go through four meetings before we can get to that place.” And these people are like, “I don’t want to go through four meetings. Can I just please…can you just invest this money for me?” And, again, it’s just stupefying to me honestly.
So, again, we have a relatively, I think, a relatively arrogant profession, you know, we pretend we know where the markets are going. We pretend we build plans that are right. We pretend to know what’s better for clients than they know for themselves. And I just think a little bit of humility and more understanding about the fact that our job is not to tell clients what they need to do, it’s to let them know what’s possible and let them know the consequences of their actions.
And the more we bring them up to the front of the cockpit, the more we incorporate them in the decision-making process, the more they feel understood, the more empowered they are, the more likely they are to be really happy with the services you provide.
But again, I still see most the industry doesn’t work that way. They’re like, “We can’t show them what we do. It’ll look too easy or, you know, they won’t appreciate what we get paid for it.”
Michael: Well, I do feel like there’s a challenge, you know, in this world where we’re all saying the investments are getting commoditized. You have to focus more on planning. So we said, “Fine, then, we’ll do a financial planning process with every client before we invest their money.” And now you’re saying, “No, no, no. Don’t do your planning process before you invest their money.” So, like…
Joe: No, of course, that’s…
How United Capital Justifies Their Premium Pricing [51:41]
Joe: Everyone gets the same end spot but they don’t get there the same way. That’s what makes people feel like you’re valuable. You know, the question I’m often asked is, how do we justify pricing? Every single premium product in the world justifies their pricing in one way, only one way.
And this is a great irony, whether you go to Tiffany or you got a Nordstrom or you go to any of Four Seasons Hotels, all of it is linked in one way. It’s by making the consumer feel important. And if the consumer walks into a Four Seasons, and we tell them, “Sorry, we don’t do it that way here. You have to first order your appetizer, then you can have your main meal, then you can have your dessert,” we’re going to not feel like that’s very important. Now you would not be surprised if that’s how McDonald’s treats you, because you’re not important. And what, they don’t charge premium pricing.
When you go to a Four Seasons, everything is built around me and my desires. So you’ve got to do all your work. Ultimately, the Four Seasons has to still put you in a room and put you where you want to be. But if you want to go have lunch first, no problem. You want to your room first, no problem. You want to have breakfast for dinner, no problem. Ultimately, you’re going to have the entire Four Seasons experience, but you’re going to get there in the way you want to get there. That’s the idea behind it.
And if you’re going to have a premium priced financial advisory firm, you have to understand if you’re going to deliver the entire awesome experience but in the way the client wants to receive it. And the only thing we’re not very flexible about is we want both spouses in the room for that first meeting. So that’s the one sticking point.
If it’s just going to be the one person, and they’re married, and they love each other, and plan to stay married, we’ll just say, “It’s not going to be very productive unless your spouse comes, because we really need them to understand what we’re doing. It really matters to us. So we won’t do honest conversations with just one of the two spouses. It’s totally counterproductive.”
Michael: There’s a powerful framing there to me just when you make the point that, look, we’re still going to get them through everything. The end point holistic experience is the same. Their money is going to get invested, they’re going to get the insurances they need, they’re going to get their comprehensive financial planning. We’re going to do all these stuff. Just let the process flow to where the client wants to be and the priorities the client wants to set as opposed to forcing the client through your one and only standard sequential process.
Joe: And I’ll tell you, that’s how we…I know from experience because that’s how we used to do it. We used to say, “This is a three-meeting process: Meeting 1, Meeting 2, Meeting 3.” And guess what we found, we lost half, 50%, between Meeting 2 and Meeting 3. They just felt like this is too many steps. And we would have a great Meeting 1, and they wouldn’t come to Number 2. So we would start, they would say they were interested. And between 2 and 3, we would lose, after Meeting 1, 50% of the pull through.
Now we have complete pull through. Because we just said, “Look, what we’re doing is so valuable. We have a Net Promoter Score of 80 across our company. What are we doing wrong?” And I realized this is my fault. I was being too dogmatic. We were all as a team too dogmatic about this is how we do it, these are the steps they must follow, and it was a mistake. So we learned from it.
Michael: I’m struck, though, that just the mere fact that you track and aggregate the data on meetings being had to know that, of your three meeting process, half the clients weren’t sticking for the third meeting, I’m struck that I don’t think most advisory firms, if we wanted to sit down and figure out, like, what percentage of our clients go through our entire three-meeting process within the first two months, it would be hard for most of us to even pull the data to answer that question.
Joe: Well, as I said, what’s Number 3 of our guiding principles is data. So we know. We know pull through. We know client satisfaction. We know how many interactions they’re having with us every day. We know how often they look at their client portal. We know how often they’re interacting with us in every aspect.
So data matters, you know. It makes you better. You just have to be willing to have a lot of your assumptions that you viewed to be facts just to be wrong. So when the clients tell you, and by their actions, what they’re doing, what they appreciate, you’ll have to just be very surprised because it’s so different than what you think is valuable.
Michael: So how do you train advisors to do this? Because I know, like, you have lots of advisors that join you from lots of different paths and backgrounds. Some are newer/ some are less new. We don’t like changing our process what more comfortable with it.
You know, it’s one thing to say, like, “We want to deliver a consistent experience as a firm,” which I think a lot of us would say we want to do at a high level. Like, I want to deliver a consistent experience in my firm, but I don’t want to piss off all my advisors and have them leave because I want to do my process. So, like, how do I balance this as an advisory firm business owner?
Joe: Well, the first thing that we’re doing is we’re not replacing anything they’re currently doing. Like, when keeping them with the same planning software, we’re keeping them with the existing investment solutions. So if they like the DFA, no problem. They like BlackRock, no problem. They like Vanguard, no problem. We’re totally agnostic as to which software they use for planning and which investments they use.
So the first and most important secret is don’t change something that they’ve spent a lot of time learning. Because it’s like learning a new language. Nobody wants to do it. However, what we’re replacing is something that they know is not very good, the yellow pad and pen. We’re replacing the intangible conversation that frankly is different with every client depending on what day it is and what they mood is like that day but the advisor and the client.
So we’re not replacing anything that currently exists. What we’re doing is saying, “Look, let’s systematize that the way you systematized your CRM, the way you systematized your planning, the way you systematize your investments, your build models,” right? Yup. Why? So you can have scale, right? Yes. So you can have repeatability, right? Yes. So you can have consistency, right? Yes. And that everything would be predictable for the client, right? Yes. Well, let’s do the same thing with a yellow pad on the planning, the upfront guidance aspect of it. Let’s systematize that too.
And there are very few advisors, most especially the kind of advisors we work with who are in their late-30s mid-40s, they know that they need to do this. So our advisors tend to be younger. They see what we’ve built. And there’s not an advisor who doesn’t see what we built and said, “This is exactly what I would build, exactly what I would build.” It’s just that they didn’t have the millions of dollars we’ve got to build it.
So it’s not like we have to convince them. They see it. Now our training is all on-demand, micro-learning. So we just got a big medal for best training in multi-industries. And we use Litmos, which is an online LMS, learning management system, all digitally-based, dynamic client meetings. So it’s about a four-week program that they go through to learn all the sub components and how to present them, puts them in live situations where they have a dynamic client meeting and answer questions, tells them when the answers are wrong.
So it’s super dynamic. Two to three-minute video learnings as well. And by the time they finish, they’ll come to a boot camp in Dallas, and they’ll have live client meetings in front of each other to…so when they go back to the offices, they know exactly we’re doing. So they’ll come to Dallas for three days. We’ll recap everything they’ve learned. They’re already educated by the time they come. We have data managed to make sure they’ve completed all the courses and passed them.
And then they’ll spend, typically a group of 20 to 35 people, three days in a live boot camps where they’re doing real client meetings for each of the steps of the process. And we’ll change it up. One person will say, they only want to talk about investments. Another one doesn’t want to bring their spouse. Then they’ll go through every step of the sequencing.
And so by the time they go back, they’ve not just read it and studied it. They’ve actually done it and practiced it. So by the time they go back, they’re know how to do it. And then they have a live coach, who will watch their first few meetings, and give them feedback, here’s how you can do it differently.
So we mass train hundreds of advisors. Now with FinLife, where you can white label this whole platform, we’re obviously doing a boot camp now. It used to be for a year. We’re now doing once every three weeks. We would bring in advisors and train them. Now those are United Capital and FinLife firms.
United Capital’s Fee Structure [1:00:25]
Michael: So talk to me about how you guys set your fees and structure all of this? You know, you said earlier there’s kind of this industry rotation of let’s make sure that we’re getting paid for the value that we’re actually providing. So, like, are you still running an AUM model at the end of the day? Are you a blended model with planning fees? Like, what does that look like?
Joe: The clients can choose. So we do have a you can pay an annual fee. It works out to run 25 basis points. We started that way. So it was an annual fee upfront. And then when we gave the clients a choice of boiling it into their management fee, 90% of them said, “Please, shift me to a basis point agreement.” So some of our clients still do annual planning, but the vast, vast majority choose to go to a fee-based model.
And the way it works is quite simple. Let’s say they’re paying 1% today. We will show them the guidance process alone is it’s up to 50 basis points. Their investment fees, investment management alone, will be up to 1%. So the combination can be up to 1.5% or 1.6%.
If you do both together, they’re 1%. Half is for planning and half is for investment management, or 1/3 is for planning and 2/3 us for invest management. The advisors and FinLife choose how they want to mix it. What you’ve done in essence is kept the fees relatively the same for the clients but you’ve recategorize what you’re getting paid for.
Which means, when they say, “Well, I can get investments for 40 basis points with so-and-so.” You can say “Well, you’re paying an extra 10 basis points for me. You’re really getting all this other guidance and planning and advice for 50 or 60, which they can’t do.”
So you’re basically helping the clients to reframe their pricing model and what they’re paying you for. And then what changes, and this is really important, the expectations for that semi-annual meeting will be different. Because they know what they’re paying for.
Which means you’re not going to spend 90% your time on investments. You’re going to spend most of your time on their life, are they doing what they said they wanted, and you have to obviously go beyond simply looking at their financial plan, which hasn’t changed enough in six months to be worth a lot. And that’s why we do all of this intentions, and did you do the things you said you wanted, did you go on a date, how you doing with your time off, all of the things that they really care about, frankly.
Michael: So I’m struck that in this environment today where there’s so much discussion about business models, fee models, retainer fees, flat fees, well, the AUM model even, hold, like, you tested the non-AUM model and went back to the AUM model.
Joe: And the clients took us there. It wasn’t like I decided it. We asked the clients, “Which do you prefer?” And can I tell you what they said universally? “I pay $7,500 in January, and I can’t go buy myself a new fridge. I hate it.”
The financial spouse liked it. He knew what he was paying, or she knew what she was paying. The non-financial spouse despised it, despised it. They would much rather pay a quarterly fee that works out to this…it’s economically the same number. But honestly, percentages are the casino chips of our industry. There’s a reason it’s easier to talk about 25 basis points than to say it’s going to be $8,000 a year.
Michael: Like, the percentages are the casino chips.
Joe: They are.
Michael: With all the good and bad that comes from that analogy.
Joe: That’s true. That’s exactly right.
Michael: Interesting. So does that mean you still end out with minimum asset sizes, minimum account sizes, and things like that just to ensure you can deliver this guidance process to whatever clients come in that want to work with you?
Joe: Yeah, yes. The assumption is that we have, in order for that model I just described, we have to have at least half of your assets. If we have less than half, then we’ll charge your separate guidance fee as well as the investment fee on the money that we manage.
Michael: You require at least half of their assets, of whatever their assets are?
Joe: Their liquid assets. Yeah, and again, part of our planning process, we’re going to know about 100% of the money. And again, if they want to give us none of them money, that’s okay too. We’ll just charge them a basis, you know, 25 to 50 basis points for guidance over money that we don’t manage. And we have lots of relationships where that’s the case.
Michael: And is there a minimum, just asset amount, like, we just can’t start a relationship with you for less than $300,000?
Joe: Yeah. Look, a minimum is $500,000. That’s what is stated. But really it’s $250,000. Below $250,000, again, what you can do is you just have a lower-level advisor servicing the client. You’re not going to get, like, a managing director working with you.
Joe: And we have, for our offices, you know, we have a central group in Dallas that can serve clients down to 50,000 bucks. They just offloaded to that office, that group. And that group, it’s a whole team of CFPs. You just handhold the clients virtually.
Michael: So in essence, like, a $500,000 minimum, you know, parentheses, which better be at least half of your liquid assets, gets you a full relationship with the United Capital advisor. If you want to go further down that scale, you can go a little bit further down that scale, you just make it a new or less experienced advisor who’s not quite a senior. If you go a lot further down that scale, you may still have a CFP relationship, and you’re going to be working purely virtual to someone who’s centralized in Dallas.
How To Bond Clients To The Company, Not The Advisor [1:06:16]
Michael: And so I want to come back to this discussion and comment that you made earlier about the transition for advisory firm owners is going from, you know, clients that are loyal to the person, to the advisor, up to clients that are loyal to the company. Which I think is…I mean, it’s a challenge for probably most of us as advisors if only because when you start from scratch, like, there is no company. The business is you.
So we basically all start out with bonding clients to us because it’s all we have when there’s…it’s hard to say we’re bonding with the business when the business is only us anyways. So what does that transition look like? Or, like, I guess at the most basic level, like, how do you bond clients to the company so that they don’t just get bonded to the advisor?
Joe: Well, the first most important thing is the advisor has to be willing to cede some control. Now here’s that dilemma for most advisors. Most of us, especially the ones who are good salesmen, are driven by raging insecurities. They won’t admit it. But I promise you, every great salesman has raging insecurities and a need to be loved.
That creates a real problem because they project their value by the love that the clients have for them. I’m playing a little bit of a therapist here. But I’ve worked with advisors all over the world. And the biggest most successful ones care the most about being most adored and admired by their clients.
So there is a direct inverse relationship between what they feel and what they want and what’s good for the business. And it’s no coincidence that there’s also a direct inverse relationship between their importance to the business and the value of the business. So it really starts with the advisor first being willing to accept that these clients will be just as faithful and loyal to someone else as they will be to them. That bridge alone for most advisors is impossible to cross.
Michael: Because we’ve spent the better part of 20 years self-selecting and hiring into the industry sales people who like to retain control.
Joe: Exactly. And it’s very hard to let go. And I’m not sure that you should, you know. If you’re a junior advisor and you don’t develop a personal relationship, you have no asset. You’re basically an employee. But if you’re the founding advisor, that it’s your business, it is completely counterproductive to the economic value of the business to have the clients completely loyal to you.
So if you want to increase the value of the business, you must increase the loyalty that the clients have to the business beyond you. If you do that, you’ll have a very good outcome. If you don’t, then you’re going to have a company that attracts people that are there to serve you and not serve the clients. If your goal is to really serve the clients, then you need to have a mindset of servitude. And that means our job here is to serve clients.
Like, no one at United Capitals heard me say, “Your job is to serve me.” Nobody who works a United Capital says, “My job is to make Joe happy.” And that’s how we are able to bring in such amazingly big advisors, because they all know. The only thing United Capital cares about is doing the right thing for the client. That is a non-disputable goal. And we do it as a company.
And we tell them when they join, “This is the Navy. You get the heft of might of the Navy. You’re the captain of your own ship. But you wear the uniform and you salute the flag.” So that’s the analogy. And if you want to be a pirate, do not come to United Capital. This is not your home.
That mindset really works, because it’s all about our mission, and our mission as to how people live richly. The challenges that most advisors haven’t said clearly, we are here to serve our clients. And so what many of the employees are doing is they think we’re here to serve you, master. That’s what, as you know, you go around to RIA to RIA and ask the junior staff or their support staff, “Who do you serve?” They’ll go, “Well, we serve the founder.” And yes, we care about clients. Yes, we want them to be happy. But if we want to get paid while, we’re going to make the lead advisors are happy.”
And that makes it very hard to recruit talent. It makes it very hard to keep really smart talent. So if you are a serve-the-mission company, you’re going to be able to attract anybody in the world if you have a noble mission. If you are a serve-the-person company, like serve me, you’re going to be very limited in the people you attract.
And that’s why when advisor says, “I can’t bring any good people.” And I’m like, “Well, you must not be a very good place to work.” That’s all there could be. Like, you want to get people interested? Be interesting. You know, you want attract vibrant, compelling people? Have a vibrant a compelling workplace. You want to attract mission-driven people? Have a really big mission.
So, you know, the hard thing is, of course, you always have to ask, what am I doing wrong? What am I doing that is limiting our success? And what I found very often is we get successful, we stop asking ourselves what can I do differently. And that’s when you stop growing. All growth requires change. All growth requires discomfort. All growth requires risk. There’s no way around it. There comes a point where we just don’t want to go through the aggravation. And that’s when we’ll stop growing.
Michael: Wow. I’m, like, processing a whole lot of different stuff there. Even from that starting foundation, you know, if you want to increase the value of your business, you have to increase the loyalty of the clients to the business that goes beyond you. Which is really powerful just to literally say, like, making your business more valuable is not about making clients more loyal to you. It’s about making your clients more loyal to the business.
Which is a mindset shift, then, about, well, how are you making the business more awesome, the clients will be loyal to it. I’m kind of fascinated by that mindset shift of how you make that transition.
What Joe Says Is The Number One Reason For His Company’s Success [1:12:39]
Joe: Well, you know, the interesting thing is, for anyone who asks me how have I done it twice, I always tell people, I have a massive mission, and I just want to try to attract people to it. It is not the Jascha. If it was the Jascha, we would be one small fraction of the size we are. We would never attract any really great people.
It starts by understanding that the mission and the purpose is bigger and more important than you. And if you can’t get past that, you’ll never get across the bridge. So if what you’re here to do is not bigger than you, you’re doomed.
You know, I caused a bit of a ruckus around referrals because of this idea that I said. I think it’s disgusting. I think it’s demeaning and cheap to turn to a client and say, “Who do you know that I can serve?” Like, you know, the whole referral thing I find so demeaning and awful…
Michael: I got trained in the business. “You know, we get paid two ways when we work with clients, though. The first is the compensation from the company for lending our products, and the second is the referrals that you provide to me…”
Joe: You’re right. You’re right.
Michael: “…like your friends and family that I can also work with and help.”
Joe: Ah, so awful. So awful. And, you know what, I always have gotten so many referrals. And, you know why? Because I honestly believe it is a privilege for me to work with you, and for you to work with me, that my time is genuinely valuable. So when I ask for a referral, it’s a completely different approach. I’m not asking for referral. I’m asking because my mission is to help as many people as possible. If I can help somebody that you care about.
And it changes the entire…it changes my whole feeling. Because I’m not here to get more business. I want to, but my job is to, first and foremost, improve as many lives as I can for us as a company. It removes my own self-interest from all of it. It’s how United Capital has grown so much and so quickly. Because I’m constantly saying, “Will this help us serve more people? Will it help us serve more people, and ultimately, will make the money and we’ll grow and all the rest?”
But it takes us to places we never imagined it. Like white labeling our platform. Which a lot of my internal team, including our own advisor said, “Why would we give our tools to our competitors?” Then I say, “Because this company was built on helping as many people as humanly possible. And there is a limit to how many people we can serve if we have to know every client ourselves. So we’re going to put the tools in the hands of great advisors.”
Because the mission is what drives the outcome. It’s not, oh, Joe wants to be the CEO of the biggest company in the world. No. What has to drive the purpose is, can we impact more lives?
So when you ask for referrals, going back to that, if I say to a client, “Look, you are really really important client for me, and I care deeply that we do great work for you. And if you have any of your friends or family that need my help, I’m happy to do a phone call for them, because I care that you’re happy, and the people you care about need to be happy too. So if you ever need me, you just let them know. I’ll give them an hour, a 30-minute, or a 40-minute, or whatever-phone call, free of charge, just to see if I can help solve any big concern that they got because they happen all the time.”
When I say those words, there’s not a person who doesn’t say, “Thank you, that’s really really nice of you.” And they’re not going to take advantage of it. And guess what I’ve done, I’ve got the client’s loyalty. And then when they do send me a niece or a nephew who is a lost, you know, lost soul, and I take that phone call for 30 minutes and serve them, I bought that client for the next 10 years because they’ll never forget it.
And by the way, very shortly thereafter, they’re going to send me their buddy from the golf course who’s got 10 million bucks, just because I’ll say, “You know what, I can’t believe my advisor sat down and spent 30 minutes with my useless son-in-law or brother-in-law, whatever he is, and he’s just the greatest. He really really took me out of a jam.
So again, it’s the mindset. It’s the intentions which drive not just our clients but you as an advisor. You want to stop being dependent in having the old business revolve on you. You’ve got to start by not being revolved around yourself. You need to step back and say, “We are a company that has a mission. And that mission is bigger than me or than anyone here.”
But that’s, you know, again, I am convinced that that is the…it’s certainly been the number one reason for our success in this. And I’m sure and the company before this.
Michael: So then, I’m going to ask just where does $2 billion of organic growth for United Capital come from if you’re not true driving a proactive let’s-ask-our-clients-for-more-referrals campaign?
Joe: Well, we have referral partnerships with all the major custodians. That’s probably, I think so far this year, around $700 million, $600 million.
Michael: So the Schwab Advisor Network, Fidelity…
Joe: Yeah, Fidelity, TDF.
Joe: The second is, our biggest by far, is our existing clients bringing their friends and family. What we do is so shareable. So, you know, it’s going to happen automatically with what we do. Because the first meeting that a husband and wife have or a husband and husband, whatever the unique combination is in this day and age, come into a meeting, they’re going to go back to their friends, and they’re going to bring up a client problem. They’re going to say, “You will not believe the conversation I just had with my husband about taking more vacation time.”
And the friend will say, “What are you talking about?” I mean, let me show you. We have to score on a scale of 1 to 10 how are we doing on this. That person, again, the ability to show and interact and share the experience, it’s nothing like anyone has ever heard of.
So it leads to automatic referrals from existing clients, most especially the newer ones, because they’re going to go back to their friends, families and say, “You will not believe their meaning I just had.” So, again, if you want to get referrals, be referable. Like, have really great stuff that is exciting to people.
Michael: If you want to get more referrals, just try being more referable.
Michael: So I also want to understand. You mentioned this kind of shift of the company from what you were doing internally to white labeling your tools. I guess is that effectively the offering of FinLife partners that you guys have as separate from United Capital?
Joe: The FinLife CX, yeah. We call it CX, FinLife client experience. And we started originally with FinLife OS, which was the entire CRM and everything else. But we’ve now untethered it so we can overlay it on any CRM system in the country. And you basically keep doing your planning, keep doing your investing, but you are able to deliver this entire client experience in your own brand and color set.
Michael: Okay. And so what if…I’m just trying to get a handle of, like, what does that mean? Like, what literally am I buying from you? Do I, like, I get to do your Money Mind and conversations pieces?
Joe: The honest conversation, the client portal, we have what we call FinLife 360 relations with accountants and lawyers across the country, so you can do tax prep and estate planning. We have collateralized loans with Goldman Sachs. You basically have an entire support team that allow you to implement almost any imaginable thing for your end clients.
What we’ve built for our advisors with $25 billion in assets, you basically have access for us. Imagine if you went to Northern Trust and they gave you everything they got through your own brand, that’s exactly what we’re doing.
So you have a whole team of investment people that will do calls with your clients. You have all of the APIs we built, most importantly, like video messaging to your client. When we do a market update, our chief investment officer Kara sends an investment update. You can actually forward that video to your client or many of your clients.
Our technology actually has…so when your client changes their plan, you’re notified on your mobile phone. You can then rerun the plan on your mobile phone and attach a video from yourself on your mobile phone to your client. And they will dynamically get a notification on their app. A new note from your advisor talking about your plan or your investments or anything else. And you can do that one-to-one or one-to-many. So it’s basically the entire way of interacting with your end consumer in ways that no independent firm could ever get there, you know, not without spending a fortune.
Michael: And how do advisors engage with that, like, am I paying you a software fee like other software companies?
Joe: Yeah, yeah. So you pay a $600 per client.
Michael: Okay, $600 per client. So you’re not pricing, like, per advisor or…
Michael: …instead the clients that are loaded into the system. Or, I mean, do I effectively have to pay for all of my clients if I’m doing this because I’m kind of all in on your tech or not?
Joe: Again, what we found, we typically find…because it is more time-consuming. Like, again, you’re not going to do this for clients. Many advisors have suboptimal clients or just too small. So what we find, it’s like a Salesforce contract where you basically up front. Our average contract is probably 150 to 200 seats. Because you’re not going to do it for clients who are 85 probably. You’re probably not doing for your clients who are 23. It’s really ideal for clients with 35 to 75, and, you know, you have a certain amount of assets.
So typically, what we’ll fine is it’s 200 seats, 600 bucks per seat, and then there’s an installation fee to get all the technology connected depending on what you’re using. And then they will use our investment platform as an augmentor if they want to. So, you know, we’ve got a, for example, an index fully-implemented, managed, rebalanced, fees-debited, performance reporting, everything else for 10 basis points. So what you’d pay Betterment 25 for, we can do it for you for 10. So that’s down to $10,000 accounts.
So that’s a really good solution for a lot of your suboptimal accounts to say, “Jeez, I can’t do this for 10 basis points.” And it’s, you know, we do all the rebalancing and everything for you. It’s fully custodied, everything done for 10 basis points at any custodian.
So the advisors then can choose, you know, here’s what I need from you. An average advisor firm is about $500 million. So they’re quite big. And that’s a surprise to me, honestly. I thought that we’d be, you know, $100 million to $200-million firms.
But what we’re finding is the firms you’ve identified as the ones in the middle, they’re the ones who see most immediately the benefits of doing this. Because they’ve already decided I’m going beyond the cult of person. They just don’t have a way of doing it. So we are a soup to nuts way of doing it. And we’ve got several firms, a couple billion dollars, who say, “I’m building a mini United Capital. Do you care?” And I’m like, “No, we’ll even give you the capital to do acquisitions.” So we want there to be several institutions that are of size.
And so, again, what we’re trying to do is build the systems and tools to allow for advisors to be hyper-competitive. And we priced it that way. So, you know, we have many billion and $2 billion and $3-billion firms and lots of $500 million, $600-million firms that are saying, “This is what I’ve been looking for. A scalable client experience.”
Michael: You could do it as a smaller firm as well. I guess just sweet spot is…
Joe: Oh, sure. Yeah, yeah.
Michael: You know, when you’ve grown to that size of a half billion up, you were squarely in that middle zone. You can feel the pressure of I need to do better tech stuff and I don’t have the resources to do better tech stuff, and I’m too big to be small, and I’m too small to be big.
Michael: And using something like FinLife CX seems appealing by comparison.
Joe: Exactly. So it’s an easy discussion. And, you know, the guys with the $100 million, they’re like, “Yeah, you know, I’m pretty good. Do I want to spend the money? Do I want to bother learning something new?” They will when they realize I got to get beyond myself. I want to grow.
So the firms that want to grow, so the $100 and $200-million firms that are part of this, they want to double and triple in size the next few years. They need something like this to do that. So this is a way to grow. We’ve proven it works. Nothing we do is just an idea. It’s proven. It’s done. It’s been delivered by many multi-million dollar advisors. So, you know, again, it’s not like you’re taking a risk. You know that it’s going to work.
United Capital’s Origin Story [1:25:21]
Michael: So how does this compare to the vision when you started? Like, can you take us back? What’s the founding story of why you…like, what you had in mind when you were going out and creating United Capital in the first place? Like, what was going on? What was the vision you had or the problem or gap you’re trying to solve?
Joe: Yeah. So I’d sold the first company. I was 34 years old, sold it to GE, had over $100 million. No, I didn’t. We sold it for more than that. So it was a really amazing outcome. And I’d come here with 200 bucks, but I had a non-compete. And I’d realized really quite early on that I was not made to be president of GE for very long. Most especially when I came home to my wife and said, “I don’t know if I can do this.” And she said, “I think that’s a great idea. You’ve been an ass since the day you sold the company.”
So I said, “All right. What should I do?” She said, “Well, you’re not going to be sitting there at 40. You better need to just go build another one.” I then interviewed 100 entrepreneurs about how they built and sold their companies. And that was my second book. But I also started every interview with the same question, which was start at the end. Tell me how it felt. And all of them then would say, “It was amazing. It was the American dream. Blah blah blah.” All races, all ages, they all share the same feeling.
And I said, “I don’t feel that way at all.” And then, they’d say, “Me either.” And I’d say, “Really?” And they’d say, “Yeah, it’s like a death in the family,” or “I sacrificed so much and I don’t know what my big rush was,” or “I lost my marriage because of it,” or “I have no relation with my kids.” All these regrets about this massive race.
And I thought the irony that I was a wealth manager and I’d never asked, anyone what’s the money for, never asked myself the question what’s the money for. What’s the purpose? That was the very beginning of United Capital. There is a need to help people identify what the money is for so that their decisions are made intentionally and consciously. Because what we do as an industry is talk to people like walking while it’s where it’s all about the money. And I thought I can change that.
And I wonder. I know how to acquire firms. I know how to integrate them. So I thought I wonder if I can build a firm that serves that purpose. And then we brought in technologists and behavioral economist, and then proved that clients would pay for this service, which is really really important to make the economics work. I am a commercial creature.
And then what we found at the end of it was that the advisors attracted to with the younger, more ambitious, more growth-oriented advisors. We grew. And then we do one exercise that’s really been helpful. Every couple years, we’ll sit down and say, “How do we beat United Capital?”
And three years ago, the answer to that question was you’d offer all these systems and tools without forcing an acquisition. And we all went, “That would beat United Capital.” So then we said, “Why wouldn’t we beat ourselves?” And that’s why we came up with this idea for white labeling.
So all of our best ideas come from us trying to beat ourselves. And that’s everything from the investment platforms, to even when we have first launched FinLife, it was built on our CRM. And then we said, “How would we beat in the capital now?” Well, we wouldn’t force the CRM conversion. So then we did CX instead of OS. So it’s just the client experience.
Too many people concentrate on what they’ve done to be so successful rather than what they’re doing that is stopping them from being more successful. I call that the success paradox. So for us, it’s always, why aren’t we twice as big. Why aren’t we $100 billion? What’s holding us back?
And sometimes you don’t want to hear the answers, you know. That’s the truth. That often, it’s, “Well, it’s you Joe. You’ve got to make every decision, and that’s holding us back.” And I don’t want to hear it, but you’ve got to have a culture and environment that says, “Look, we serve our mission. And our mission is not Joe. It is the company.”
Michael: So you started out with this vision about giving wealth management advice, asking these questions around what’s the money for. I feel like, at least from the outside, sort of observing the company over the years, that the model has kind of evolved, you know.
Early on, United Capital did a lot of acquisitions. You kind of got the label of being a rollup and an aggregator. You know, clearly you’ve spent a lot of years now trying to focus this into a more singular advisory firm experience, which is not really the aggregator role anymore. Classically, aggregators just sort of band them together. They don’t try to put anybody into a common experience.
Now you’re sort of white labeling a technology platform. Like, I feel like you’ve had this evolution from aggregator role up to advisory firm to tech company. Like, is that a fair characterization? Is that how you would think about it?
Joe: Yes, yeah. But again, I would say, yes, absolutely, but it’s always been under the same principle. We are here to help people live richly. That’s what we had to do. How we get there, how do we do it faster, how do we do it with more people, how do we do it so that it’s even better, everything is viewed from that lens, from that first guiding principle that we’re here to help people with their financial lives.
And initially, to get credibility, we did acquisitions. Because if I did it onesies, twosies with me doing the way we did originally of doing seminars and everything else just take forever. And I just am not a very patient person. And if we did it by doing only acquisitions, it would take forever. And I’m not a very patient person.
So we just have to constantly challenge ourselves to say, “If our goal is to improve as many lives as humanly possible by helping them make conscious choices, what else should we be doing differently?” And we challenge every sacred cow we’ve got, always. And that, yes, the company is evolved, and it will continue to evolve. And by the way, I think you would say that of any great company.
Think about firms like Apple and what they’ve become over time and how incredibly different they are today than they were five years ago. Their core and their soul is the same, but the way they do things is completely different. I just think you’ll see that with every great firm. They will evolve and evolve. And what will you see when they don’t? You see General Electric, you see JCPenney, you see Sears.
I mean, the great irony of a brand like Sears, this is…I love sharing the story because I think it’s just really fascinating. They were the original direct-to-consumer Amazon. They had catalogs and every person’s hands around the country. They were the very first one.
Then they became one of the first national geographically diverse footprints for consumers to buy. Then they became so obsessed about that’s what they were that they didn’t think about we have been successful by going wherever the clients are, wherever the consumers are. And at first, they were at their homes, and they weren’t. Then we put it in their malls. Now we need to go digital. Because they couldn’t get out of their own way, they didn’t question what is our core central mission. And they did not evolve. They’re stuck.
Walmart, on the other hand, very quickly said, “Our job is to give low prices to as many people as possible where they live.” And when they saw that Amazon was eating them alive, they realized, our footprint is a disadvantage unless we evolve and become digital and use our footprint as a place to pick things up.
Now all of a sudden I can do things with Walmart I can’t do with Amazon. I can order online. I can purchase online. I can get great pricing, frankly often cheaper than Amazon. And I can go pick it up at the local warehouse if I don’t want to wait, which most people don’t. But the functionality and the ability to do it makes them a compelling alternative.
So Walmart, unlike JCPenney, unlike Sears, realized we’re going to use our geography as an advantage, but we’re going to change our interaction with consumers. Still staying loyal to who they were as a mission and as a company.
So you have to be questioning how you do things. And most independent advisors just do not do enough thinking. They don’t have the time. They’re so busy serving clients. And that’s the advantage of having a bigger firm. I can spend more time thinking about how should we be evolving. And is this sacred cow holding us back?
Joe’s Biggest Surprise In Starting His Company [1:33:51]
Michael: So in that vein then, what was the biggest surprise for you in growing and building the business between what you thought you were going to build and have it be versus what it’s turning out to be?
Joe: It’s much more technology. I thought it would be heavy in technology, but this has become a technology company. I mean, the speed at which all of our major initiatives now, they’re all built around technology. This new one on AI, machine learning. I just never realized that I would actually end up being a tech entrepreneur. I always thought I was a wealth management entrepreneur, but that’s not true. I mean, everything is becoming a technology company. Everything is becoming based on technology. Everything. And I never anticipated that at all.
So, you know, a few years ago, I started making a ritual of going up to see firms like Facebook and Google and all of that really just out of interest. Had I known then how important it would be to the future of the firm what I was doing, I would have taken a lot more seriously. But at the time, it was just out of curiosity, how are these firms doing it. It is now, I just realized, everything, everywhere is becoming consumed by technology. And I would never have guessed that coming in.
Michael: And is that just because at the end of the day, like, that’s what really clients really want, is this blended tech experience? Like, is that what’s taking you there?
Joe: I think that what you’re seeing is what’s happening everywhere. The consumers are leading companies in the adoption of technology and how they interact with the world. It used to be, if you remember the old days. I don’t know. You might be too young. I remember when I started that all the modern and cool technology was in my office.
That’s been turned on its ear in the last 15 or 20 years so that all the cool technology is happening on your home and you’re not dragging your company along with what you’re doing. Everything from video cameras to how you do emails to everything. I mean, we used to be Blackberry and Microsoft Office everything else. Everything, you know, the cloud revolution, digital cameras, all of it happens at the home.
And that’s true I think because the technology now allows the consumer to be a programmer of their own experience. That’s totally new. You know, in the old days, programming was really difficult. In the new days, you go to Uber, and you’re basically programming your experience in a totally personalized way. You just don’t feel like you’re programming, but that’s in fact what you’re doing.
So the power shift to the consumer, and how technology is driving that is way beyond what I ever imagined and way beyond what most advisor…They experienced it every day. They just don’t apply to their own office.
Joe’s Lowest Point [1:36:43]
Michael: So what was the low point for you in this process of building?
Joe: I’d say the single biggest one was right after 2008, 2009. When the marker was in its tailspin, we had finally crossed the profitability, and then we ended up going down and losing our profitability. And we took our stock price for these advisors who had sold to us. And we’re very transparent.
So unlike what most advisors do where they just keep giving an artificial fake price, we buy back our stock at the price that we value it at. And we took the price down maybe 25% to 30%, 28% I think it was, in 2008. The advisors had sold to us. We’re obviously incredibly unhappy.
And I said, “Why are you marking the price?” And I’m like, “Well, everything has been valued down. And that’s true for us too.” And a few of them said, “Well, isn’t a privately-held? Why do you have to mark it down?” I’m like, “Look, no one is selling. I just want you to have an accurate portrayal of what the stock is worth today.” It was one of the lowlights. I didn’t have a choice. Because again, it’s so beyond me to not be completely honest about the world that we’re in.
And the interesting thing is we then did a bunch of acquisitions, we grew very quickly, and the value started to go up again. And today, we’re, you know, closer to 11 bucks or something like that. From $280, we went from $340 down to $280 or something, or $380 down to $280, whatever was. So we’ve grown a ton since then.
But at the time, the advisors thought it was really crazy for me to do that. And yet, two years later, they look back and they’re like, “You know, that’s what makes you not a couple what it is. We’re not afraid of pointing out when things aren’t working well.” But one of those moments honestly where you can sit there and say, “Well, nobody knows. We can price it wherever we want.” It just wasn’t in me to do that.
And you realize these, at the time, arcane, tough situations that there’s an easy way out, that not taking the easy way out can really define a company. And I know that that was one of those moments where it completely redefined the company.
The second thing that I feel good about, wasn’t a low point, but it’s something that I caution every advisor and every entrepreneur to think about, is this subtle and easy atrophying of integrity. And I’ll give you an example of that, because we see it quite a lot.
It’s easy to imagine that whenever we brought in an outside investor, that I, every instance, had the opportunity to take a bunch of extra equity. And yet, I’ve been deluded alongside all of our advisors. And most of the private equity investors, when they’ve come in, have said, “Well, how much do you want to get in incremental equity?” They’ll even put it in their proposal sheets. And I said, “No, I just want the highest possible price. Don’t give me that equity.”
Those are the subtle and nuanced ways in which you can very easily start going down a slippery slope where your integrity starts to get a little bit diluted. The same thing as the example I gave where we had to mark the stock price tag. It would have been really easy to just not confront it, keep the stock the same. But the hard decisions, the right decisions are the ones that really build a great company I think. They set an example for everybody too.
Michael: So having watched the evolution of the industry, the evolution of United Capital, this is kind of shift. You thought you were going to be in a wealth management business. It turned out you’re kind of a tech business but still doing human wealth management. When you look 10 years out from here, where do you see the industry going from here, and what would you be advising a new advisor coming in today about how they should think about the future of his business?
Joe: Ten years from now?
Joe: I can tell you where we’ll be. You’re going to have…maybe your first meeting will be your early meeting in person. Every other meeting will be virtual. I don’t know if you’ve seen the new red phone.
Michael: I have. The red phone.
Joe: Yeah. It’s the most amazing technology. But it actually creates a hologram right on a mobile phone. It’s breathtaking. The future is going to be an enhanced reality world. And I think it’s well before 10 years from now when you’re going to be contacting your clients on your phone.
And you will be having a face-to-face meeting that feels like you’re sitting in front of each other but you’ll be translucent and you will be having conversations about their life and their planning and many aspects of their life in ways that we can’t currently imagine but it’s already possible. That’s where I think we’ll be, in a really virtual, digital world.
I think enhanced reality is far more interesting than virtual reality, far more interesting. And what you’ll see is you’ll put this phone down, and you’ll be sitting in a conference room or in their living room and you will be able to see what they’re seeing. And they’re going to be able to see you. And you won’t be quite impersonal, but it’ll feel like you are.
Michael: The thing that’s fascinating to me about the evolution of the technology around communication, and particularly as video chat started coming up, and now kind of this future of holograms, is there’s always been this, I think, dynamic of well we have to keep the face-to-face meetings because, you know, humans just interact that way. That’s why we won’t go all technology.
And the shift now that’s happening already from video chat, and particularly when we get to Holograms enhance reality, is the face-to-face is coming back into the meeting even though it’s virtual with technology.
Joe: Yeah. And the truth is that a consumer, if they’ve seen a personal video from you where you’re addressing them by name, two weeks later, doesn’t recall if they met you in person or saw a video of you. They feel like they interacted with you in person. If that’s true, imagine when it’s like a hologram. Like, the truth is we know video changes everything.
So even without the enhanced reality, the reality is that I have not had a face-to-face meeting…Jen and I have not had a face-to-face meeting with Kathleen in seven years. Every meeting we do, she’s in her office. I’m in my office. And Kathleen is in San Francisco, the opposite side of the state. And we don’t skip a beat.
Now the tools that we use have to be built so that you can do it dynamically without being in person. But we don’t need to be in person. Like, our whole process, all of our meetings are interacted in a way that don’t require a face-to-face meeting. They are face-to-face. They’re just not in-person meetings.
Michael: So as we wrap up, this is a podcast about success. And one of the things that we always talk about in every episode is just that the very word success means different things to different people. So you, you know, you’ve built one successful company, sold it, building another successful company even larger than the first. So, you know, I think most people would say you’re checking a box on the business success end.
But I’m curious, just especially since I know you spent a lot of time thinking about this as you built this framework around values and intentions, how do you define success for yourself?
Joe: Well, that’s an interesting question. Because of my very screwed-up childhood, I have never felt any sense of accomplishment in anything that I’ve ever done. It’s quite a peculiar malfunction I have as a human that drives my wife crazy. But it’s a uniquely weird thing when, even though people think I have huge confidence, which I do, they also think I have a huge ego, which I don’t. Because I get no personal satisfaction from accomplishment.
So success for me is not an end state. My success is really, have I given everything I got to this day today? Like, I meditate every morning. I work out seven days a week. But I start every day and end every day with the same ritual, which is I start every day going over my intentions for the day. And I end every day I’ll see myself what could I have done better.
And if I have mostly succeeded in giving every day every ounce that I got, then I will have viewed myself to be reasonably successful regardless of what the outcome is. So my whole life is driven by one simple quote from Albert Einstein, which is, “The most important decision any man can make is whether he lives in a kind or hostile universe.”
I chose very early on when the world was apparently incredibly hostile that I’m going to choose to view that I live in a kind world. And if I live in a kind world, I will get what I deserve. So if I do great work, if I make a positive impact, if I give everything I got, I will be fine, no matter what happens.
And that’s been a really good way to view the world. If I can go to sleep every night saying, “I feel better about what I’ve done. And I’ve got some things I need to fix. But I feel completely engaged every minute of every day, giving everything I got.” That’s a lot. That’s a lot, lot.
And honestly, the accomplishments are awesome, and living nice are nice, and being able to live by the beach is awesome. But it feels much more awesome to say, “I’ve given everything I got.” And if all failed and I feel like I’ve acted in a way that I’m proud of, then I would still say, “I did what I could. And I got what I deserved, whatever that happens to be.”
So as I get older, I realize that the intention really really matters. And the only advice I give to my younger self, which is a question I’m often asked, is to just keep focusing on the process. Don’t worry about the result. Because the result is something you have no say over.
We tend to spend so much time obsessed about the outcome, and yet we don’t really determine the outcome. All we can control are the inputs. And the way you get the inputs, and the intention behind them really is all that matters. It’s the only thing you have control over. So that’s, you know, for me, success is if I generally do a good job managing the inputs.
Michael: Well, I think the success and trajectory of the company and United Capital and what you guys have built certainly is a nice testament to, yeah, you know, if you keep focusing on the process and giving everything you’ve got, sometimes there’s some good stuff that does result even if you don’t fully control it.
Joe: You’re right. Yeah. Again, it just depends on humility. Like, I spent a day a few years ago with a Dalai Lama, three different times in one day. And the underlying message he delivered to a small group at breakfast, slightly bigger group at lunch, and a convention center dinner was that humility is the root of all good human action, that every major innovation and change that happens in the world is rooted in humility and wanting to serve.
I think it’s a really interesting idea for me to just say how much of this is for the greater good versus for my own ego. And as I’ve gotten older, I just find that it’s more important than ever to just keep asking myself, am I doing this for the right reasons? Am I giving or am I taking?
And whether it’s as a dad with my three daughters or as a husband or as a CEO, being kind and being considerate and giving more than you take leads to these really interesting outcomes, you know. It leads you to attracting really brilliant people who do brilliant work that lead to great outcomes.
And again, it’s contrary to how I started the company, both of them, you know. They started off as a reflection of me, and they’ve evolved to way beyond anything I could ever imagine in both cases. So letting go really matters.
Michael: Well, it’s a powerful story. And I appreciate your willingness to join us, share the conversation. Hopefully, it’s a little bit more giving you’ve given that will eventually come back to you as well.
Joe: Well, I appreciate it Michael: And as you know, I have nothing but respect for the great work you’re doing to help advisors to win. I think that one thing we share in common is a genuine desire for the independent advisor to win. So I really appreciate everything you do to help them stay ahead.
Michael: Well, my pleasure. Thank you for joining us, Joe, on the “Financial Advisor Success” podcast.
Joe: You bet. Have a great day.
Michael: Thank you.
Joe: Happy 100th.
Michael: Happy 100th. Thank you.