Scaling Your Advisory Practice: Insights from the CFO’s Perspective

Lee (00:20)
Mm -hmm, mm -hmm.

Conor Delaney (00:28)
over the years. But Lee, walk me through a little bit just quickly about where your background, where you’re from, and some of that kind of early on stuff. And then I got some questions around where you were iterating in your past career and how that kind of ties into what you’re doing today.

Lee (00:44)
Yeah, so I’m from Blacksburg, Virginia, home of Virginia Tech Hokies. Grew up there, went to school there, and after graduating, decided to leave. Spent most of my career in corporate accounting and finance roles, first with Marriott in Washington, DC, before moving out to San Diego and joining LPL Financial, where I spent roughly 13 years in the corporate accounting and finance world, ending my tenure at LPL with developing the CFO Solutions Offering, which is a fractional CFO.

offering for independent advisors to utilize to help understand their data and how their strategy plays into their financial situation. One of the big things throughout my career that I’ve always really enjoyed and one of the big reasons that I came to GoodLife was being able to have tangible impact at a company and being a finance guy, finance nerd, tangible impact on the financial statements.

understanding the work of what you’re doing and how that generates more revenue, more profitability, how spending more money makes you more money. Like really having your fingerprints all over the design of something that makes its way into a financial statement is kind of where I really like to be. Good Life has definitely provided that opportunity for me over the past couple of years.

Conor Delaney (01:59)
So I think a lot of that DNA though comes from this isn’t your first rodeo in terms of working with small business owners, right? I mean, this has been a part of your DNA growing up with your family and everything else,

Lee (02:09)
Yeah, no, my parents and grandparents are serial entrepreneurs themselves in Southwest Virginia, owning commercial real estate, dry cleaning businesses, car washes, you name it. They probably owned it at one point in time, but it was really my two grandfathers, my mom’s dad, my dad’s dad, that have such a keen entrepreneurial spirit that my parents were able to take advantage of, that I took advantage of for…

for my first day at work. I worked for them for my first job, you know? And as lucrative as it would have been to stay in the family business, I set my sights elsewhere as I wanted to kind of get out of the Blacksburg bubble, if you will.

Conor Delaney (02:48)
That’s awesome. That’s awesome. So this is making a lot of sense. So you start with small business, then you move into hospitality, then you move into financial services. And I really think, mean, if anybody ever said, why do you call him the best hire ever besides the great hair and the good looks, think we would, mean, that formula makes so much sense, right? I mean, if you think about the majority of the advisors that we serve and or the majority of the advisors that we’re looking to serve.

have a lot of that same DNA, right? You’re building a business, whether for somebody else at another firm that’s not independent, or you’re building it for yourself or shepherding it on ongoing basis for yourself and for your family. That’s one element. The successful advisors get hospitality because that’s so much of it, right? Next to the doctor, the advisor is probably the most important person in terms of just being able to go in there.

and meet the clients at their table and meet them where they’re at and pick up on their energy and their stresses and their anxieties and somehow suppress that, right? And then the third element is just understanding the whole financial picture. And so that makes a lot of sense how those three things kind of get strung along. So when you’re at Marriott, I’m sure a big part of what you’re learning about, even if you’re the guy in the back, it’s the culture, right? It’s what permeates through the whole organization.

What’s some of the stuff that you did at Marriott that was that white collar or white glove type of stuff that is transferable mostly to the stuff that you’re doing today?

Lee (04:17)
Yeah, and I mean, I think, you know, hospitality is all relationship building, you know, and whether you’re checking a guest in at the front desk or or helping them during their stay, you know, you’re developing a relationship with that with that traveler or with that with that person staying at your property and just understanding that, you know, you you understand how your attitude impacts everything, you know, and so having a positive attitude and a positive out like and and and really fostering on that.

Developing of a relationship whether it is a quick interaction or a more long -term interaction where you’re at is what is what is transferable? To to the financial services industry, know, I mean I think almost every advisor when they when they meet a prospective client You know the first conversations much much quicker than the second conversation than the third conversation same thing with a repeat traveler at any property so so just having those relational abilities the the emotional intelligence and the EQ

to empathize along the way, whether the person is traveling or whether the person may be in a difficult financial situation. The idea of having an emotional talent students and meeting that client or that traveler wherever they’re at still remain the same.

Conor Delaney (05:29)
Right, right. actually, so there’s there’s two elements. There’s one being personal enough with them that you can meet that that client or that traveler wherever they’re at. But two is also, I mean, if you think about it, if you’re at a Marriott in Kansas City or Marriott in Florida or a Marriott in Pittsburgh, those experience, there’s a lot of that experience that should actually be similar. And so, you know, I think about that as an advisor. You know, how do you create

those repeatable processes, both for you as well as for your staff that you’re supporting to say that whatever the client looks like when they’re walking in the door, there’s certain key functions that we have to be able to do for them regardless of whether they’re their investment life cycle or what. I think one of those cool things about being in hospitality is that you kind of get both of those. You have to dive deep with the client or the traveler on one hand, but at the same time, you got to be able to do that stuff in a repeatable way.

or Marriott never becomes Marriott, right? They just become that one boutique sort of Airbnb.

Lee (06:31)
Yeah, and that’s I mean, that’s you know, this is the finance person to me, but that’s learning how to operate at scale, you know, developing a service model, tools, procedures, you know, having having your culture, like you said earlier at the at the forefront, so you know who you are, what you’re doing, and then the processes to kind of back that up, that allows you to do it at scale. And that is what what really helps independent business owners through.

Conor Delaney (06:53)
So talking about culture for a second, then so you go from Marriott and now you moved over to the independent broker dealer sort of arena. And I think one of the things is you and I have talked over the years that that’s so cool about where you were, which created the opportunity for where you are today is that you were inside of a business that works with independent entrepreneurs. And so the culture, I think, at least in my experience, that has kind of reverse permeated that we’ve learned so much from them. And then they in turn have

created this thing amongst the 15 ,000 or so employees that they have now is this idea that if Lee has a good idea, that doesn’t just sit on the shelf because he’s somebody else’s employee, right? You were able to take a lot of the stuff that you learned from Marriott, learned from being a small business owner, and actually pulled that through into something that you led up around the sort of virtual CFO solutions. What are your thoughts around how not only virtual CFO, but in general,

that advisor that has gone independent, that now is seeking the resources to put around them, what were some of those sort of ideations that you had that eventually led into what became a viable option for advisors to get that kind of outside financial counsel that they needed?

Lee (08:10)
Yeah, and I think that it’s great to be able to provide a type of service like that to advisors. As I was exploring different roles and opportunities throughout my tenure at LPL, working with the financial advisors, you really learned that they’re kind of starved for data or the data that they have access to, they don’t understand how to interpret. And even then they don’t understand how that flows into their certain financial condition of them overall.

really was born out of providing advisors data, helping them interpret that data and helping them understand how that data flows into really their financial statements at the end of the day. And so then you have this kind of cool suite of information where you understand the underlying business metrics, you understand how they impact the financial condition of your firm, and then you can start thinking about, okay, well, what is my strategy?

And if I do this, what does that mean to my short term cash flow, to my overall profitability, to the ultimate valuation of my business at the end of the day so that you can make those decisions and understand at key points along the way what the impact will be. Are you making the decision today that will maybe lessen or decrease your short term cash flow, but really bolster your valuation when you go to monetize? Is that something that you can take on? Is that a risk that you’re willing to take at the end of the day?

Being able to look at through those lens and pair all of that data together and interpret that data into a forward looking strategy and how that impacts the overall financial condition was something that advisors found extremely helpful and extremely valuable. And even had advisors say like, hey, it’s like your CFOs are financial advisors for my business, you know, because one of the big things about going independent that you manage is cashflow, you know, you have.

more cashflow going independent than you did when you worked at a wirehouse previously. how do you invest that? How do you know what to invest that in? so having a trusted third party, just as advisors or trusted third parties with their clients was really, important and a huge part of that value prop that carried through.

Conor Delaney (10:12)
That’s a big lift though. mean, all the stuff that you’re talking about are things that we were never really taught when we were in how to become a financial advisor school. But I think at least from my experience, working with hundreds of advisors over the years, the cool thing is that the advisors that have decided to take that leap over to the independent side understand that they don’t need to just sort of sharpen their…

their skills around the financial planning process to make sure they’re always at the top of their game, make sure they have the right tools and technology. But they’re realizing at least, you know, maybe not on day one, but on month four or five, that they’re not just an advisor anymore. They’re an entrepreneur. And I think that’s one of the cool things about our position is that we’re helping advisors go from being financial advisors creating wealth for somebody else to financial advisors that are creating wealth for their clients, same as they were before.

Lee (10:55)
Mm

Conor Delaney (11:09)
But the wealth, the wealth path through that is happening for them and their family is significant. And the advisors need to be willing to dive deep into some of those KPIs, those different things that you’re referencing. And the cool thing is if you’ve made that jump over to being an independent financial advisor, we already know that it’s becoming a part of your DNA to get better as an entrepreneur every day as well, you know?

Lee (11:33)
Absolutely. Absolutely. think it’s such a cool thing to be able to move from a really a practitioner to that full service entrepreneurial CEO. Because then a lot of those things that we’re talking about when it comes to infrastructure, when it comes to how you spend the money, when it comes to how you develop your service model, being a practitioner really helps inform that. But then putting your CEO hat on and thinking about it more holistically allows you to do that again at scale.

and find the best people, tools, and resources to help you do that.

Conor Delaney (12:00)
Mm

So you know why I think that this is a couple of reasons why I think this is a winning industry to be in right now. Number one, because we’re in it. So we’re a little bit biased. But number two is because it’s realization I had a couple of months ago. We are in the first really full cycle of clients and frankly just

millions and millions and of Americans that are leaving the defined benefit world, meaning we’re going to stay at a company for 30 years and we’re going to get a pension, which doesn’t necessarily give advisors a big opportunity to serve those people if the majority of their income for retirement is coming out of a pension, to now really being the first full generation we’re defined benefit, unless you’re working in some sort of government or state job, doesn’t exist the way that it used to.

And so that creates longevity for advisors because there’s going to be a lot more money to manage while at the same time advisors, the next generation of advisors yet to be raised or defined. So that’s cool. But the third reason why I think this is, and this is probably the most important one, I think that I know it’s a good indicator that we’re in the right space. It’s because private equity wants to be in it. And those guys seem to know where to go all the time. So want to get your thoughts on private equity.

Lee (12:59)
yeah.

Hehehehehe

Conor Delaney (13:23)
coming into the space, how has that sort of changed the game? And just your opinion, whether that’s a good thing or a bad thing.

Lee (13:32)
Yeah, I mean, I think you’re right. mean, private equity knows how to evaluate a landscape, get into that landscape and learn and know how to make money out of that landscape. And really the financial services, RIA space has been a magnet for them in recent years because of the ability to make the anticipated return. It’s great also in certain aspects for those independent advisors or business owners to

to get that capital injection and be able to have that money. understanding that each private equity firm is different and terms and conditions of each deal are very different, you’re typically are working now with not just you as the entrepreneur, but with a business partner. And so that means that there are certain control aspects that may change, there are certain decision -making aspects that may change, investment decisions that may change. so…

making sure that you’re comfortable with that and that you can, you know, go from this kind of individual founder led think to, kind of group thinking group consensus to get things done. or even at times, depending on, on how it checks out being told what to do, even if it’s, it’s against you. So, so it’s, it’s making sure that you’re, you’re getting in with the right person and the right company that, that aligns with who your business is, who you are and what your values are, I think is, is, is, is really, really key. You also want to make sure that you’re not just

hopping in with someone that’s trying to make a quick buck, which you can kind of see across the landscape. know, bonuses and pros of getting kind of a capital injection, but those obviously come along with strings, you know. Not many people are out there giving out a lot of money without anything that they anticipate.

Conor Delaney (15:13)
Yeah, yeah, I think so. So there’s there’s pros and there’s cons, right? I think the the pro is it brought liquidity to the space and it helped advisors get some of their chips off the table. The cons are that, you know, it almost becomes circuitous. So you went from working for somebody else to working for yourself to then whether you like it or not and whether you know it or not, working for somebody else again, you know, and I think some of the some of the folks that are have a tremendous amount of conviction.

in the independent space, in the independent business model, some of them I know very well, one in particular, that I think is going to really push back hard against that. so the challenge becomes, you’re not going to kind of welcome private equity into the space, how does the advisor get the liquidity that they need? And I think that that challenge is sort of yet to be fully defined, but…

It’s an exciting place to be, think, in this time, both in terms of being somebody that’s in it as well as somebody that’s considering it. And frankly, I think there’s there’s hope for those advisors that are looking to get out that maybe wanted to get out, but for years had this liquidity jam up, you know.

Lee (16:20)
Yeah, I mean, I think, you know, all challenges lead to opportunities, you know, and who are the people that can get in there and help solve these challenges, you know. It’s not just private equity, I think, at the end of the day. I think that there are other tools and resources and abilities, especially in this industry, that will allow that challenge to be solved, which is exciting.

Conor Delaney (16:42)
330 ,000 financial advisors in the industry, at least that’s the data point that I could find today. Only 24 % of them have made that move over to independent financial advisor landscape, meaning that there’s a big grab in the market left. And of that, 71 % of advisors that are considering making a move are considering making that move to independent space. so…

very there to me there’s there’s just a lot of excitement and there’s a lot of cool things happening and I think some of those early on folks are seeing that in the beginning it was a challenge to go independent and figure that out right it’s like the first first couple of boats that came to America you know hundreds and hundreds of years ago you’re looking around you’re like wow I got a lot of work to do but now those that have are benefiting from that that that tailwind behind them of those that have walked before them I think it’s so cool and so what will be needed is to see

how those advisors that sort of were the pioneers that are now looking to exit, how they’re able to exit. And then second is how those advisors that are looking to be that next generation, one, do well with it, but two, honor those that walked before them. Because frankly, if it wasn’t for some of those folks early on, I’m not sure that there would be as much of a ripe opportunity as there is right now, you know?

Lee (17:58)
Yeah, no, I agree. it’s, you know, it’s an industry that is, you know, impacted real time by a lot. And so it is good to see those, you know, like you said, initial pioneers and see how they work their way out and what we can glean from them.

Conor Delaney (18:16)
So three quick hits, three things that you would tell an advisor that was looking to get out of the business in the next five years and three things that you would be telling an advisor that would be trying to double the practice in the next five years because he’s in his 30s.

Lee (18:32)
Yeah. So for those that are exiting or on an exit trajectory, I think the more you can do to substantiate and have recurring revenue streams, fee -based revenue, really help prop up your valuation. Of course, this is when it’s in the best interest of the client. think looking at your average client age and seeing what you can do to source maybe clients that are younger, may not have as much wealth, but kind of decrease the portfolio or the age of your overall portfolio.

It really shows longevity in the practice for a buyer. Easier to understand like, if I have a client, I buy a book with a bunch of 40 and 50 year olds, I can develop relationships over decades. Whereas if you are buying a book of 70 and 80 year olds, it just may be different overall. And then last, making sure you have a succession plan in place, maybe a kind of emergency, know, if something were to happen drastically tomorrow, but also a more well thought out one and those resources to

So that your clients know that in the event or at the time that you leave, there is someone there to take care of them. That really helps mitigate any client attrition at the end of the day. For those younger advisors that are looking to double the size of their business and grow, I think the first thing is, know, hey, when you start out, you’re doing what you can. You have the work ethic to take on what you can take on. And that’s great. But there’s going to come a place where you need to define who you are and who you want to be and create scale in your operations kind of behind that.

Doing that through recurring revenue as a fee based business is a great way to set up a model kind of for scale, which I think is really, really important. I think it’s important to look at all opportunities because there’s going to be a time that cross your desk, but only spend times on the ones that kind of meet where you are and who you are overall. Don’t always just chase the shiny new thing because it sounds like it’s going to make you a lot of money. Make sure that you’re focused and defined on who you are and stick with those opportunities.

There may be fewer of them, but the ones that land and hit will yield just a ton of dividends really for you in the future. And then I think, you know, as a younger advisor, surrounding yourself with people who are known for being successful in any industry, you know, having a core group of folks, whether they’re older financial advisors, financial advisors your age, other successful entrepreneurs, et cetera, and learning from them. I can’t say enough about it, even though I’ve been in the corporate world enough, having a

a great group of mentors and people to kind of work through has really helped grow my career. And I’m sure that as the advisors I’ve worked with know that they have peer groups that have helped them grow their business and their careers.

Conor Delaney (21:08)
Yeah, I think I think you hit a lot of really, really good ideas and things to consider there. If I’m a new a new advisor, advisor, you know, really in the first 10, 15 years, I’m looking to grow and I don’t necessarily have that capital. think the one thing to also consider is that work ethic. When we talk to advisors that are in there, you know, at the last five or 10 years of their retirement, they’re saying when what they’re looking for to to transfer their business, the number one thing they’re looking for is somebody that’s going to bring that same work ethic, the same passion.

the same integrity to the job every day that they did. And believe it or not, it’s been something that’s been a challenge for them to find somebody that meets that high standard that they might set. And so if you are that person that can bring that energy and passion to the job every day, I think that you’ll actually see the opportunity to create it for more creativity in terms of deal structure and things like that. So a couple more questions. The Pittsburgh Steelers, I know you’re living in Pittsburgh right now. Over under eight wins.

Lee (22:02)
Let’s let’s hope fingers crossed. I’ll give me I’ll take the over. You know, I’m feeling good.

Conor Delaney (22:08)
Over or under? You got to give it to me. He’s taking me over. Nice. And so, what about Virginia Tech? Over, under, seven.

Lee (22:18)
let’s I’m going to just cross my fingers for the over here.

Conor Delaney (22:22)
I like it. I like the optimism, man. Well, hey, Lee, thanks for coming on. I appreciate that you got the memo too about the blue checkered shirt. this is another episode of Thinking Independently. Thank you so much for joining us. Have a great day.

Lee (22:28)
Of course.

Thank you.