Many young professionals will one day be offered a succession plan as part of their career path as more established planners plan for their own futures and put a succession plan in place. Only some of these succession plans are successful and many aren’t. Connor Koppa, CFP®, was incredibly fortunate that the financial planner who he worked with at Focus Financial, Kyle Watkins, CFP®, wanted to encourage his dream of owning a financial planning practice.
Together, Kyle and Connor worked through a unique ownership agreement that worked for them. Right now, Kyle is still the Executive Officer and a financial advisor at Focus Financial. Connor now owns 15% of the practice, and takes the lead on client relationships, business structure, and building a practice culture.
Not everyone is fortunate enough to have an open, honest line of communication with with the lead advisor and owner of the financial planning practice where they work. In this episode, Connor walks #YAFPNW listeners through what it’s like to be part of a succession plan, what his ownership arrangement looks like at Focus Financial, and more. We hear about succession plans often in this profession, but we so rarely get to peek behind the curtain to see how an individual plan pans out – and this episode gives you that opportunity!
[tweet_box design=”box_10″ url=”https://buff.ly/2MqvFru” float=”none” excerpt=”If another talented individual can come in and improve my weaknesses, and provide something different, I think we’ll all be better off. We’ll have a better chance of growing this into something bigger. -Connor Koppa, CFP® on #YAFPNW”]If another talented individual can come in and improve my weaknesses, and provide something different, I think we’ll all be better off. We’ll have a better chance of growing this into something bigger. -Connor Koppa, CFP® on #YAFPNW[/tweet_box]
Hannah: Well, thanks for joining us today, Connor.
Connor: Yeah. Thanks, Hannah. I appreciate you having me on.
Hannah: Your story is fascinating, because you are 28 right now and you’ve already bought into a practice. Did you ever imagine, when you started your financial planning career, that you would already be owner of a practice by the age of 28?
Connor: No. Not at all. It’s been kind of a fun, but wild journey. Truthfully, when I started with the firm that I’m currently with, I just wanted to be a good financial planner. I was fine just kind of being a part of the team and really didn’t have a concept of what elevating to financial advisor, having my CFP, being a part owner, what all that looked like.
But truthfully, I stumbled into a great opportunity and was provided just fantastic chances to kind of elevate in my own specific career path, and here I am now in my sixth year with this team. As of January 1st of this year, I’m now part owner. So yeah, to flashback half decade or so, no, I never thought I’d be in this situation.
Hannah: Time goes fast in this profession.
Connor: It does. Very much so, yeah. It doesn’t slow down, that’s for sure.
Hannah: When you were first hired, was anything ever positioned about ownership, or was it just, “Hey, I got a good job.”
Connor: It really was just the, “Hey, I got a good job.” Now, to be fair, my partner, whose name is Kyle, Kyle was really good from the outsets of kind of not just saying, “Look, here’s what’s expected of you in your initial role, but here’s effectively the future path that I see in front of you.”
He communicated that there was opportunity here, but it really wasn’t until I reached about the end of 2013, so I would have been on the job I think close to nine months at that point, where he kind of outlined his idea for the future. At the time, I think he was either maybe 52 or 51 and that was the first time that the idea of ownership became a little bit more of a concrete idea versus just something that he was thinking about how to communicate it.
Then shortly around that time, he had actually given me an article I think by Angie Herbers called How to Think Like An Owner. Stupidly, admittedly, I sat on it for a bit. It was just one of those things I was like, “Okay, great. Thanks, and I’ll get around to reading it.”
A couple of months passed and I was kind of stalling out a little bit and I decided to pick that up and that was really what changed kind of my focus. I think in the mid 2014, early 2015, we started having more serious talks about what does that path towards ownership look like?
Hannah: Okay, so I have so many questions for you.
Hannah: Give me a landscape of like what does this firm look like? How big is it? How many clients, how many other advisors? Do you have other staff?
Connor: Right, yeah. Our practice is a team of five right now. We do close to about 120, 130 assets under our management, just depending on how any one advisor will quantify a client or a household. We’ve got anywhere from 150 to 175. How we were structured previously was Kyle owned 100% of this practice as an independent financial advisor, as a registered representative with Royal Alliance who’s our broker-dealer, but then also Focus Financial, which is the firm.
He is one of many different advisors inside the firm. I think there’s about 110 or so advisory practices inside this firm, and Focus as a whole I think manages north of five billion in assets under management. I don’t have the exact figures right in front of me, but we’re probably I would say easily in the top five to 10 as far as total practice size by assets under management.
A lot of the advisors here are kind of just sole practitioners. Us having a team of five, we’re probably in the minority in the sense of team size. It’s the five of us here, and the way that we’re structured right now is we basically have Kyle as the controlling partner, me as the minority partner, and then we have three staff members. One investment specialist, one individual in kind of a paraplanner client service role, and then another individual who’s kind of the Jack of all trades, kind of business operations, first face the clients see when they walk in, that kind of thing.
Hannah: Was anybody else interested in ownership?
Connor: The way that our team is structured, it’s kind of a nice setup with diversity of age. We have me at 28, the individual that works in our paraplanner role, she’s 25, and then the other three team members are north of age 50. Prior to me joining the team, it was Kyle and the investment specialist and then another individual who no longer works with our practice, and they were all right around the same age range.
So, bringing me on infused a little bit of youth and then we did the same with another recent hire. The way that it’s effectively structured here is you have Kyle and I yes as the advisors, then there’s the admins, and then whether or not those individuals were interested in ownership, truthfully, admittedly, I don’t really know.
The conversations never, I believe, occurred with them. From two ways, I don’t know if interest was ever expressed, and then I don’t know if that way in which Kyle has his vision set up for the long-term, those were the right individuals for that. I think it’s really just simply a product of I can be a little tenacious sometimes and I’m sure that maybe gets on his nerves, but I pushed and pushed to have that conversation because I really bought into his vision and what he wanted to do long-term.
He selflessly really gave me the opportunity. Whether other people had that conversation or not, I’m not sure. Whether people want to have into the future, we’re always open to any ideas that increase our talent quotient here at the firm.
Hannah: You keep mentioning Kyle’s vision. What was Kyle’s vision for the firm, or what is Kyle’s vision for the firm?
Connor: Sure. The way that I understand it is we see a lot of the changes that are occurring in the industry when you look at the demographics of the average age of the advisors and what’s changing in regards to how they’re transitioning out of the industry, what amount of talents coming in. But then at the same time, a lot of the pressures with things like topnotch client service, utilizing technology, streamlining investment management and focusing more on comprehensive holistic financial planning.
There’s a lot of just these different headwinds and tailwinds in the industry that’s I think for the first time in a long time and needed, causing some change and some disruption. He saw that really early on and he knows his weaknesses and his limitations, and I think that by him adding me onto the team, we were able to kind of create a nice yin and yang of younger and older experience versus inexperience.
But someone that whereas he can be of the next decade or so phasing into the twilight of his career, he’s now got someone that’s kind of tied to him at the hip to be focused on how do we combat those changes and make ourselves relevant.
His vision really ultimately is to create the one stop shop for topnotch client service and convenience, and to make our value proposition truthfully building of the relationships, understanding what’s best for the clients, and trying to move further and further away from having kind of a singular value proposition just strictly around whether it be investment management or one factor or thought facet of financial planning.
We really want to provide our clients more sticking points to understand the value that we create. You can’t automate trust and I think that that’s where our focus lies is how can we make everything around us more efficient and streamlined in order to provide the best overall experience for our clients.
Hannah: What’s striking to me about what you’re saying is Kyle recognized that he needed to bring in people around him in order to provide that experience for his clients.
Hannah: That just seems very counter to what I hear a lot of people say like, “Well, I can build it.”
Connor: Right. I have to give him credit. He’s a fantastic leader and he’s also someone that has zero issue checking their ego at the door. That’s actually been a saying that we’ve kind of tossed around between the two of us for a long time. This isn’t hyperbole. I’ve never had a situation in the six years that I’ve been here where he’s had his door closed to an idea.
I mean, he’s got a very open door policy and he doesn’t want to surround himself around yes men and women. He wants to absolutely be challenged, be brought forth with new ideas. This took me a bit to learn, but he also wants those ideas to have some meat on the bone. If you’re going to present a challenge, present the solution.
Once I figured that out, I think that’s where we really started to gain a little bit of traction. I always joke with him, this whole structure that we’ve got set up, at some point it won’t be begging him to stick around. We’ll probably be forcing him out the door because he’s just looking for every way to make our clients feel more comfortable with us and ultimately have more peace of mind with their financials.
As a way of doing that, he really doesn’t know how to slow down or stop. He really always has kind of the pedal to the metal so to speak. With us, bringing me on and other individuals, he realizes that he needs that kind of counter balance so he doesn’t burn out, so he doesn’t have to feel like he does it all on his own, that he can maybe just be the guy where at the end of the day, he signs off on the idea but the people around him are the breeding ground of great ideas.
He’s leveraging us up to be able to do that and empowering us to do it. I’ve definitely bought into his methodology and he’s very much someone who doesn’t think he knows it all. Now, he also thinks his ideas are the best, but he’ll let himself be challenged on it, right?
Hannah: We all think our ideas are the best.
Connor: Right. I’m the same way. I can’t even fault him for it.
Hannah: That’s great. The advisors or the planners that I just admire the most are the ones who make decisions with the client at the center of that decision, whether that be in how they interact with their clients or how they run their business. That’s a lot of what I’m hearing you say is I want to serve my clients better, so therefore, I have to give up ownership.
Connor: Absolutely, absolutely. That was I think kind of what he maybe realized was he had this unstoppable force, so to speak, kind of brimming and bubbling underneath him saying, let me do more, let me do more, let me do more. But it was never selfishly designed. It was all things that I wanted to do as a way to improve our experience, not only for our clients, but also for our culture.
I’m really big on creating a great environment for a team, and that’s because I luckily was able to learn on somebody the same way. Yeah, you’re totally right. I mean, it’s definitely the client’s experience at the forefront of all of our thought.
Hannah: One of the things that you brought up earlier was this article, How to Think Like An Owner. When you read that article and kind of as you transitioned from just, “Hey, I have a great job,” to now a business owner, what have you learned about what it means to think like an owner?
Connor: Sure. The biggest lesson for me was, because when you’re not an owner, now that I am, it’s a totally different way of thinking. That way of thinking, that door being opened for me wouldn’t have happened had I done the process of trying to think like an owner even prior to having kind of my neck on the line or more for me on the table as far as ownership and control or whatever.
From 2015 on, it was having to kind of through deep practice train myself to literally view almost every decision that I was making, whether it be direct client facing decision in the meeting with the client or it was kind of back office related or tech related or whatever it might be. Every time that I was going through one of those decisions, I had to stop and say like how would Kyle handle this? How would an owner handle it?
Is this a decision that’s worth pursuing further, or is it one that we should stop? Is it costing me time? Is it costing me money? Is it impacting our clients? To do that is a really hard leap to make when you really can’t quantify or understand exactly what it’s like to be an owner. But now with all the operation stuff and understanding more of how to actually run a business, I’ve already got out of the way that methodology of just trying to feel like you actually have skin in the game.
If there was anybody else that would be going through this situation or looking to do so, the best thing you can do is just slowly train yourself to think like an owner, and even if you don’t get that opportunity in the specific job you’re at. I mean, I always reserved myself to saying nothing was guaranteed. What if this never matriculated and Kyle didn’t give me the opportunity or was open to the opportunity of having a partner?
For me, I said to myself, even if it doesn’t work here, all the stuff I’m doing right now is building a skillset for the future. So, that’s probably the biggest thing I learned is just to try to train yourself to literally save for being cheesy here, to follow Angie’s words and think like an owner.
Hannah: Was there any particular decision or aha moment that you had especially at the beginning of that process?
Connor: With like reading the article?
Hannah: Yeah, or thinking like an owner, what in your daily life were you like, “Oh my gosh, I need to think about what I’m doing right now differently.”
Connor: I found that emulation was a big part of success. Whenever I would struggle with something, or I was learning something new, a client calls in and they’re upset about something, or they call in and they’re not upset about anything. It’s even something as simple as wanting to thank us for something, instead of trying to forge my own path, and of course it’s key to be genuine and be your own individual, but I would oftentimes emulate the same things Kyle was saying.
Then before you know it, those were things that I started to believe in more or understand better. It became more of a habit, so to speak. That was probably the aha was when on individual things, where in that moment you felt it go from being something that had historically been a difficult challenge to feeling yourself having mastered that concept.
Emulation was a huge key to that. At 24, 25, 26, you just don’t … No matter how smart you are with this profession, there’s just whole things when it comes to beyond the personalities and personal management and then people management. It’s hard to know exactly the right way to handle stuff. So following someone who had done it and that I respected, I think really paved the path for me to kind of be able to create my own environment where I was able to do the same things but with my own spin, my own flair.
Hannah: One of the things I’ve been thinking about a lot lately is, is the goal to be right or is the goal to make progress? We can be right all day long, but that doesn’t mean that we’re actually helping our firm or our clients move forward.
Connor: Absolutely. Somebody once told me, and I hope I don’t butcher this, but that life was three parts, knowing where you came from, knowing where you are, and knowing where you have the potential to go. The reason why you say potential to go and knowing where you have the potential to go versus saying you know where you’re going is that if you already know where you’re going, you’re only going to stay where you are.
I remember that being a huge eye-opener for me at a young age that it doesn’t matter how much experience you have, how old you are, how young you are. None of that matters. It’s truthfully, every day is a learning process. I think that if you focus your direction every day to trying to accomplish something new or be better than the day before, it really humbles you as well because you figure out real quickly that you truthfully don’t know what being right is. I completely agree with you. I think the progress is exactly key.
Hannah: When you go in to buy a firm, can you talk a little bit about the logistics of that? Kyle started the conversation, did you guys use outside consultants to help with this?
Connor: We did. Here’s kind of looking back full circle here. I thought kind of stupidly that I could figure it all out on my own and present him the perfect win-win formula and all the research. You know what? I pursued that and what was actually great about that was I think it softened the beachhead, so to speak, where I presented all this data. I showed him the industry changes. I showed him what a win-win looked like for me.
I was reading every book that I could find on succession planning and listening to every podcast that I could find. I was doing everything. I finally just hit a wall and I told him I said, “I don’t think I can do this, and I don’t think we can do it on our own.” We actually reached out to a third party consulting firm heavily focused on succession planning for financial advisory industry.
We started with them in June of last year. They provided a valuation for Kyle’s business by the end of June I believe it was. Then we spent the remaining part of the year just kind of focused on all the logistics of what does the structure look like for full buyouts by the end of the plan? What are the financials of that? How are we going about obtaining financing?
Everything from writing down a memorandum of understanding, so we have kind of a soft contract between Kyle and I of what’s expected at different times throughout our relationship. Then doing all the legality behind it, setting up the different business entity.
So, all of that took a long time and then admittedly, our busy season because we do a lot of the year end tax planning for our clients, got super, super busy earlier than normal and we kind of stalled out a bit and then wrapped up everything early into 2018. I think it was by the end of March everything was signed and official. We had kind of already been acting in the capacity as partners, but the signatures were on the pages and we moved forward.
Hannah: So, you get the valuation of this firm. Was there a negotiation on the valuation, or did you just kind of take whatever number was handed to you?
Connor: That would maybe be a better question for Kyle, but from my memory, I don’t think there was much in a way of negotiation. I think we felt very comfortable with the valuation that was provided to us. If anything, the negotiation component, which was very minimal in our process, more or less resided in once that we had the valuation was when we had a suggestion from the succession consulting firm as far as what the initial buy-in looked like.
Because you’ve got to look at things like well, I have a lack of controlling interest and lack of marketability, so am I buying 100% of the value? Am I getting a discount? All those different things we wanted to take a look at. That was really where we negotiated, but it really wasn’t much in the way of negotiation. It was him expressing his thoughts and feelings, me doing the same, us using an expert to kind of guide us and meet in the middle.
Hannah: Did you have to put money upfront for the succession plan?
Connor: Yes. The way that we structured it was effectively, I’m utilizing instead of going through bank financing, we decided to do seller financing. Effectively the way that we structured it was there was an upfront down payment and then the remainder being financed over a 10 year period. Then for future business tranches, it just depends on do we utilize an outside form of financing or do we do seller financing again?
In the truest sense, the way that we had it structured was a win-win for both of us. Where it wasn’t all of a sudden overnight, I needed to come up with hundreds of thousands of dollars and then all of a sudden be over leveraged and really risking my own personal finances. It was structured in a way where there was minimal impact unnecessary to Kyle from the perspective of taxes, same for me. Then at the same time, just making sure that he gets full value and that it’s not him stringing me from a daily cash flow perspective.
The structure of all that was the end game. It was kind of us both having to be a little bit more honest and open and kind of vulnerable to say, what are we capable of handling individually, and how do we do this that it not only a win-win for us, but a win-win for the important people in our life, our spouses, our family, et cetera?
Hannah: You guys are at a broker-dealer, right?
Hannah: Are you guys doing reps on the accounts, or kind of how have you structured that from a logistic point on the ownership of the clients, if that makes sense?
Connor: Absolutely. That’s a great question. This is where for anyone that’s listening in a similar situation or for anyone interested in this, you know it’s a bit of a leap of faith on my end. What we strongly believe here in our team is kind of the lean methodology process of just more or less trying not to get too caught up in step 10 or 12 steps or whatever it might be, and really just focusing on what’s in front of us and seeing if we can master that.
Initially, admittedly, when there was the idea of okay, now I’m going to be partner, what does that look like for me? Like you said, kind of how the registration of the reps are with both the broker-dealer, accounts on statements, all that fun stuff. It was a bit of myself having to check the ego at the door, and what Kyle and I agreed on was for simplicity and then as I mentioned earlier, kind of keeping the clients in the forethought.
It was a big deal to just bring up the whole concept of a long-term business continuity plan and the succession plans for our clients, to all of a sudden shift them to where my name is showing up on everything and that I own them in the eyes of the broker-dealer just felt like an unnecessary burden potentially for the client. Right now, everything runs up through Kyle. Everything is in his rep code and my name is not tied to any one specific singular client.
From a registration perspective, when we reach, we all have a controlling interest of the firm. That will predictably change, but up until that point, I don’t need my name on anything or sole ownership or anything running up through me to justify what we’ve got going on here. In fact, I would argue that to do so would just be an unnecessary waste of time at this point, because I own the value in the business. Having my name tied to a client specifically wouldn’t …
Yes, you could make the argument that I’m taking a risk there in case anything ever went sour between Kyle and I, but I believe in what we’ve got going on here so much that that was an easy decision for me to make. Not everybody’s situation would be that way.
Hannah: How much of this has been communicated with clients and how did those conversations go?
Connor: Yeah. Another great question. We were really nervous. We thought like this was going to be something that clients, what was their response going to be? They’ve been used to Kyle for years. Older clients that we’ve had in terms of how long the relationship has been with our team, we thought would be a bigger push to kind of get them to understand what we’ve got going on, versus newer clients.
In fact, what we actually found out was a little bit of the opposite. Some of the clients that had been around for 30 years felt that they appreciated that Kyle was doing planning not just for himself, but also putting continuity in place for their relationship. How that started was in 2015, we started communicating with clients, not necessarily that Kyle and I were going through the process of these discussions, but that I would just be getting involved on a more one-on-one basis with them.
Maybe I was doing their client meeting upcoming or if they had a question on a specific topic, I was the leveraged expert on the team for that. Then through that time, I started beginning my own relationship with these individuals. By the time that it rolled around where we were able to communicate it in depth what we’ve got going on and what does that look like for their relationship, we’ve had minimal, if any, pushback from clients.
The only ones that have really had have actually been newer relationships that are still learning our process, so I think it’s less of a pushback of having a succession plan in place, but just more still getting comfortable with everything, that it all of a sudden as it would for anyone, hey I’ve joined on and I’ve got referred to meet with Kyle and he’s great. I’m working with him. Then oh by the way, here’s this communication about changes that could be occurring into the future.
We’ve limited that conversation a little bit, so some of these newer clients that have been referred directly to Kyle, I haven’t been as involved with. But we’ll get them on that same process of communication down the road. But clients that whether they’re our largest, smallest, newest clients, oldest, I mean it really runs the gamut of who they are, that we’ve explained everything to and most people I’d say 99% really have been extremely happy with what we’ve got planned.
Hannah: A lot of newer planners come in and there’s this expectation that they’re supposed to become the rainmaker if they want to buy into a firm, or have a career path within a firm that at some point they have to start bringing in assets.
Hannah: Bringing in client relationships. Is that an expectation for you?
Connor: Yes, and no. We don’t want traditional fracture lines in our business, where there’s this expectation of okay, I bring in X, Y, and Z, which again reinforces why everything runs up through Kyle’s rep code or whatever with our broker-dealer is because we didn’t want to have any sort of internal competition.
Now, that’s a great marketing strategy, Kyle, but that’s not for my clients. We didn’t want that. We wanted one team, one vision. Multiple layers of input, sure, but if we’re going to buy into something as a group, we all need to be on board.
So, while there’s an expectation absolutely to grow the business, that was more of a layered expectation I think the last two or so years where I wasn’t an owner and maybe those were different opportunities that were laid in front of me to maybe prove that worth, so to speak, of the ability to go out and gain more clients and build up our business.
But now, and this was I’d maybe referenced earlier, the idea of how to think like an owner changes when you’re an owner. That’s the big change, is that all of a sudden you realize that everything you’re doing, that you had been thinking about potentially impacting you, now is. So, every day you spend making sure that your client acquisition and client retention are at their highest.
Our expectation isn’t necessarily any sort of quota that you need to go out and meet. We don’t want to grow too fast at the expense of our current relationships, but at the same time, we recognize the need to grow and remain consistent in existence in this industry.
If anything, moving forward now as an owner, I think our focus is more or less going to be making ourselves as an attractive team for maybe potential other practice acquisition in the independent financial advisory space, versus going out and trying to develop any sort of method or marketing strategy to try to gain clients on a one-on-one basis, if that makes sense.
Hannah: Yeah, so there’s like no bonus or anything for any clients you bring on or any oddball structure like that?
Connor: No. There was a little bit in the past when I was acting just in an employee role. There was incentives there, but in a strange way, and again, I get not everybody would be wired the exact same way, but for me, I guess I never really looked at it like that. I just looked at it as are these good clients? Are they kind of people that we want on board? Are they going to be fitting our niche? Let’s move forward.
To me, whether the bonus was met or not, it was all kind of that process of am I doing the right stuff for the day to put ourselves in the position to gain good clients? As a result, those bonus incentives luckily for me were met, which was always nice.
But now that I’m an owner, Kyle and I have not sat down and outlined some sort of incentive program or anything that I need to reach. It’s just basically every day coming in here and, as you had astutely pointed out earlier on, focusing on the process and progress more so than any sort of one specific measurement that we are attaining in kind of a tunneled vision.
Hannah: As you progress, is it six years that you’ll be the controlling interest?
Connor: I believe so, yes. It’s the start of 2024 will be when. That’s just the blueprint of the plan. Life may change, but that’s the plan is ultimately for me to switch over to a controlling interest ownership in the year 2024.
Hannah: Then is that every year you gain more shares?
Connor: Right now, I’m currently 15% owner. I stay at that for through 2021 and then in 2021 the plan is for me to acquire another 15% and then between 2021 and 2024 prepare myself to acquire in 2024 21%. It’s actually three tranche purchases versus any one kind of gradual uptake year over year. I’ll stay at 15% from now until 2021, and then switch up to 30% at that time, but it matches …
The reason why we structured it that way is it matches at that time my hours and time in the business will increase as Kyle’s decrease relatively. The idea was by that time, we’ll have been five years into the plan. I’ll now own 30%, but theoretically, he’ll be able to be in the office and involved a little bit less than he is right now.
Hannah: Then for the payment for those future tranches, is it still going to be owner financed or I mean will you do something with your salary?
Connor: That’s yet to be determined. Again, with that lean method where we’re kind of figuring out a lot of stuff that works right now. The processes in place here has worked great so far where it was important for Kyle and I both to not really take a huge reduction in overall gross pay from 2017 to 2018. The way that we structured our first tranche here worked out nicely for that.
When 2021 hits and there’s a reduction in his hours and an increase in mine, we’ll probably change the base compensation for both of us as well there. But then as far as the structure of will we choose to do seller financing or will we choose to use bank financing, I think it will just depend on where we’re at at that time. What we’ve found is a lot of institutions, they wanted us to have a higher amount of ownership for me on the upfront because they didn’t like the idea of underwriting an initial loan lower than $500,000.
When we got that pushback, we just figured yes, it’s different than Kyle getting a duffle bag of cash and instead he’s getting payments per month. But it just was more comfortable for the both of us, versus all set in me getting saddled with unnecessarily high closing costs and interest rates just to make me advantageous or attractive to a third party financier. For future acquisitions, will be a higher theoretical purchase price. I would imagine using some sort of outside financing.
Hannah: Has there been any talk of potential future owners as well?
Connor: Yeah, there has. I’ll be completely transparent here. Like I said, tenacious, but a bit of a control freak sometimes too. When we first set out with this, I was like, “No, I’m going to own the whole thing outright. It’s going to go one to one transition from Kyle to me long-term.”
As I’ve gotten more involved both at the process leading up to the succession and then actually being a partner, there’s a lack of I think really good talents in the industry that also is interested in being an owner. There’s a lot of people I think that are just very good financial advisors and financial planners that they’re in their lane and they’re good with that.
We haven’t really run into a whole lot of people, at least maybe in our sphere that are also interested in hiring and training and managing and focusing on our business bottom line and operations and being up to date on tech and all that other stuff.
If the right person comes along, I think I’d be a fool to not give them the chance to buy into what we’ve got going on here. Because ultimately, if another talented individual can come in and kind of improve on where my blinders are or improve on my weaknesses or provide something different, I think we’re all made better off and we’ll get an even better chance to have this grow into something bigger than if I try to do it all on my own.
I had to have my own process of getting to check my ego at the door, but we have talked about it because we realize there’s good individuals out there that want to do what I’m doing with Kyle and we’d be stupid to not have an open door policy to at least entertain the idea to have them potentially come in and get involved. What that looks like, how that would occur, I mean there’s just so many unknowns there at the time but I think we’re open to the idea if it’s the right fit.
Hannah: How has your day to day changed since being an owner or as you’ve transitioned into that ownership role?
Connor: Yeah. That’s a great question. A lot hasn’t changed, just because the last few years leveraging up to being more involved with clients one-on-one. From a client perspective, really nothing has truly changed from a day to day workflow. Where the change has occurred is I’m more heavily involved in our initiatives for marketing or our initiatives for a better streamline use of our systems internally.
More involved in making sure we’re up to date and always constantly evolving and refining our investment management philosophy. I’m more heavily involved in that stuff. Additionally, by adding more team members. We’ve brought on two new people that are here currently since November of 2016, which for our sized team was pretty rapid growth.
There’s a lot more delegation and delineation of tasks. What I’ve found has had to be the biggest change for me is a better focus on time management. I spend way more time now time blocking, specific time for emails, specific time for phone calls. I now use a planner to outline my day, which is something I’ve never done.
At the same time, I spend an active amount of time reading and educating myself not just in all the things that we need to know to be successful in this industry, but also to create a fantastic workplace environment and a great culture. Because this all is going to come crumbling down if I don’t have the team around me that’s buying into what we’ve got going on or wants to be here every day.
I spend more time now focused on big picture things, but if I had to be completely honest with you, it does not feel like it’s that much more time because I actually kind of from a nerdy perspective, I love that stuff. So, to take extra time to read it and be better and learn, it’s really not that much of a change. It’s just more of a time commitment.
Hannah: You’ve talked about the consultant that you worked with. You talked about how to think like an owner. For the planners who are listening to this who are really interested in the idea of becoming an owner, what are other resources or places that they can go to help get them up to speed?
Connor: Oh gosh, that’s a really, really good question. Yeah. Wow. One of the best resources I read, and it’s just a bit out of date now, but that’s less because of the information and just more of how the industry has changed over the last four to five years.
But there was a book by David Grau who works with a company called FP Transitions. We actually didn’t use them, but I really liked their stuff, the stuff that they were putting out. Not just currently through the form of blogs or whitepaper, their own form of media to kind of put the information out there about the industry changes and how advisors can take advantage of them.
David Grau actually wrote a book called Succession Planning for Financial Advisors, I think was the exact title. I read that front to back. It’s chockfull of a ton of information. It kind of reads like a textbook, but for this subject, you kind of have to treat it that way because it’s getting caught up to speed not just on the industry changes, but for someone that would be in a very similar role as I was in and a very similar career path that I was in.
It doesn’t really matter about age. But for me that was a big deal because I wanted to kind of approach this with the idea of it’s great to know every statistic about this. It’s great to know every potential avenue or opportunity, but what’s the psychology that I’m dealing with?
You have someone like Kyle who joined in the industry during the computerization. The overall change in the industry in the 1980s of your broker, your financial advisor, your trader being more readily available to the every man, and he was very successful at that. Then transitions out of more of a product pushing commissions, high sales role into really being kind of on the forefront of the idea of fee-based asset management in the early ’90s.
Like many people like him, there’s this career that has been extremely successful and it’s provided a tremendous amount of opportunities for him as an individual that maybe when he set out didn’t know where even he would be in 30 years. Those that have lasted for that time period, they really had to cut.
They ran a heavy sales culture and that’s just not what most individuals that are coming in the industry now have to deal with. Having not had dealt with that on my own where I came in and just learned that I need someone and kind of leveraged up over time into a different role.
What I wanted to do was provide myself more understanding of what was the individual I was trying to convince that a succession plan made sense for? Not the statistics that I was trying to use or anything else. What could I do to help convince them more? For me, it was understanding that psychology.
That book actually helped for that, because I think the first two chapters are explaining like how we got to now, which is great. I would recommend that. Then Michael Kitces did a podcast with a gentleman by the name of Eric Hehman out of Austin with a firm called Austin Assets. He was much younger when he bought in. I think he was like 22, 24, somewhere in there.
In his podcast with Michael, I’ve listened to multiple times because it helped me understand that psychology even better. Then he and two other authors actually co-authored a book that was also very helpful. Those are really outside of just kind of random things that are here, read here and there with different blogs or resources. Those were the three that I relied on the most.
Hannah: Can we have you talk just a little bit more about that psychology. How did that change your approach or what … How did that tangibly change the course of kind of what your succession plan and your track was?
Connor: No, that is a really good question. When I first started with that process, I’d mentioned thinking I could kind of tackle everything on my own. I was very data driven. If I just tell Kyle the best statistic or show him the best win-win formula, it’s a no-brainer. In a lot of ways, to give him credit, it wasn’t a hard sell.
I mean, he saw it. He got everything. I then realized with him that once I could get past that hurdle that it was going to be a challenge once we started really getting into the nitty-gritty of everything. You could talk about a succession plan, you can look at statistics, you can view all the pros and cons in a vacuum.
But it’s not until you really start to get into the process when the solo practitioner realizes they’re going to have to give up some value to grow, that we’re taking on a risk, especially during an upmarket, in a market that’s been nice for a considerable amount of time. For me, it was really important to kind of go with the art of war here, so to speak, is another literary reference and try to understand the individual that I was trying to, to use kind of the art of war terms, “conquer”, versus trying to just figure out my own methodology or my own path.
It was better to understand what were their blinders? What were their weaknesses? What were their issues, and how could I make them feel more at peace with it? That was really important to me because I never wanted a partnership with Kyle that he was ever 50/50 on or sitting on the fence with. I wanted him to be fully on board.
To kind of lay down my armor, so to speak, and kind of go into this with my ego checked at the door, it was best to understand what is it that he’s struggling with? There was a lot of times where we would have conversations that would be him and I just kind of opening up to each other and me asking him tough questions that had less to do with the numbers of everything and more to do with just how he felt about everything.
There really was no magic formula. It was literally just sitting him down and saying, “What’s on your mind? What’s your struggles with this? What’s the real challenge? How can I help? What can I do?” Then slowly over time, when things started to get very real for me, little did I know he was doing that right back and kind of offering me those same questions from him to me.
That made the whole process really smooth. The brain is a powerful thing. If you can tap into utilizing that to your advantage, not just your own, but understanding someone else’s, it makes everything way easier because then you truly do get to empathize with them and understand their challenges. It makes it more real to you as well.
Hannah: The irony of everything that you’re saying is that’s what makes great financial planners great financial planners.
Connor: Right. Yeah. That’s exactly it. It’s that obvious. It’s the best planners in the world are ones that really truly try to understand what is best for their clients. Even the idea of trying to “put yourself in their shoes”, that’s still a method that’s centered on you.
Connor: It’s really putting yourself in a position to be open to understanding what’s making them tick. It’s easy to sit back in hindsight and make it sound like I’ve cracked the code on something, but honestly, throughout the entire time, I can quantify it to you now. But at the time, I really just wanted to check in with Kyle and make sure he was good with everything.
If I did that, then whether it went the route that I wanted to or whether it was as optimal as I wanted it to be, none of it mattered to me if he was going to be regretting his decision. That doesn’t make for any good outcome for either of us, which is also I guess like a financial planner, right?
Hannah: Right. This is just so great, Connor, and hearing your story. Are there any other pieces of advice or thoughts that you wish you would have known when you started out?
Connor: Yeah. It’s an industry that really I think the self-starters are the ones that cut it and make it. While it’s great to be where I’m at at 28, just something as simple as Kyle provided kind of the key to the kingdom by handing me an article by Angie Herbers that said How to Think Like An Owner and I sat on that for three months.
I can’t tell you why or if I was just busy or whatever it was, but my number one advice would be this industry is absolutely changing and we’re here to really take advantage of a huge transfer of wealth that’s going to occur. Then also just a transfer of opportunity between advisors that have been in for 30 years and those that are just now starting out, to prepare yourself to be able to handle that.
It’s not waiting, procrastinating saying that you’ll wait till tomorrow or the opportunity will present itself. You almost have to, without ruffling any feathers or stepping on any toes kind of have a move or get out of my way mentality. That didn’t really click for me right away, but once it did, it was that definite approach where I view it every moment as how am I not wasting my time? What is worth my time right now?
My number one advice for people would be figure out what works best for you. But just kind of I guess the overarching theme of our conversation here has been kind of trusting that process and the results will come and that just working towards progress every day is worth it. Don’t sit on anything, especially if someone that’s come before you nudges you in the right direction, don’t wait three months to tackle what they’ve given you.