Financial advising with a

S3 EP08 Powering a Vision for an Ideal Advisory Practice with Jim Palumbo

04.20.20 | 0 Scale Transform

My guest today is Jim Palumbo.

Jim is a veteran of the financial services industry, with more than 25 years of experience in creating and managing organizations that grow and preserve wealth. Jim is a Principal and Chief Development Officer of Dynamic Advisor Solutions, an advisory and practice development firm for growth-oriented independent advisors. Prior to joining Dynamic Advisor Solutions, Jim served as Chief Executive Officer of Oxford Asset Management, where he grew the business from zero to more than $100M in AUM. 

In this conversation, Jim explores different options that are available to today’s advisors who are looking for a path to independence, and why it’s important for an advisor to begin with what his or her vision and purpose of independence is. 

Jim also talks about the potential pitfalls of advisor technology, and why FinTech alone is rarely the complete answer for advisors who want to create scale and capacity. We discuss how advisors can avoid creating a “tech graveyard”, why the only way to create more capacity is through intelligent delegation and collaboration systems, and what that looks like inside some successful RIAs. 

Finally, we talk about how advisors can differentiate themselves through true expertise and a creative, fun approach to client service and business development. At the end of the day, nobody enjoys boring and awkward “networking events” — so why not do something that would be unique and memorable instead?

Don’t miss one of our favorite moments, when Jim shares his experience of creating what he calls a “Living Library” at Dynamic Advisor Solutions. It may be helpful to read an article to solve a problem, but it’s measurably better to get access to a community of professionals who have already solved that problem and looked at it from a dozen different angles.

As you think about this conversation, how are you inspired to differentiate your firm? Will you discover new partnerships, practice management systems, business development ideas, or creative and unique client experiences? Whichever area you begin with, take Jim’s advice and connect with a peer group to strengthen your practice and build the life you’ve dreamed about. 

Looking for more ideas about growing your practice? Join the Model FA Facebook Community, where you will find expert advice on how to launch, grow, scale, and transform your firm with an incredible client experience. Or, check out our Model FA Accelerator, a premier coaching and practice management program for entrepreneurial financial advisors.

Resource Links
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FULL TRANSCRIPT

Patrick Brewer:

What direction do you think financial advice is going to go? I mean, do you think that I'm wrong in virtual financial advice from acquisition all the way through to trusted relationship is possible and sustainable long term for small to midsize firms? Do you think that firms are going to have to be more local, and work the local market, niche markets? What are your thoughts on that from a marketing perspective?

Patrick Brewer:

Welcome to the Model FA podcast. I am your host Patrick Brewer. Today's guest is Jim Palumbo. He's the principal and chief development officer of dynamic Advisor Solutions, it's a professional services provider for successful wealth advisors looking to elevate their practice to the next level. Prior to joining Dynamic, Jim served as the chief executive officer of Oxford Asset Management, where he grew the business from zero to more than 100 million in assets.

Patrick Brewer:

He's a veteran of the financial services industry. He's 25 years of experience of creating and managing organizations that create growth, wealth, and preserve wealth. Jim, welcome to the show.

Jim Palumbo:

Great to be here, Patrick.

Patrick Brewer:

Awesome. Well, I'm excited for our conversation. I feel like this is top of mind for a lot of advisors. Just the idea of what should they be doing with their career? Should they be hanging their own shingle and going at it independently? Should they be teaming up with other advisors or joining in with a larger organization that has more infrastructure?

Patrick Brewer:

So, I feel like bringing you on the show today will give our listeners a lot of perspective about what their options are. And hopefully, help them narrow them down if they're considering a career move in the short term or maybe in the intermediate future. So again, super excited to have you on the show.

Jim Palumbo:

Looking forward to the discussion.

Patrick Brewer:

Awesome. Well, let's get started. So, M&A, let's jump into what are the advisor's options. What I've noticed is there seems to be a trend, and that trend is leave where you're currently at potentially, and start your own business, start your own RIA, build your own tech stack, build your own workflows, start to eventually hire contractors and hire staff.

Patrick Brewer:

And I've seen a lot of advisors start to buy into this model. What is your thought on independence? Should firms really go at it on their own? Should they be thinking about teaming up with another advisor, a partner with a different skillset? Or should they be building under a larger brand with more infrastructure? What are your thoughts on that, Jim?

Jim Palumbo:

So, the answer is really yes to all of those. And it really depends what it looks like. And by that, I mean independence. So, do I think advisers should be independent? Yes. I think that the majority of advisors that are having any success, they want to build their own dream. They want to build their own future. They want to build equity in their business.

Jim Palumbo:

So, the answer to that is yes. The real question is what does that look like? Do you partner with somebody? Do you tuck in under another firm? Do you go it alone 100%? File your own ATV, start a corporation, do the whole thing. And there are really several different ways to find independence. The answer to the question of how you do it I think is simple.

Jim Palumbo:

That the advisor who starting out doesn't have the scale, doesn't have the financial capability to really build a world class firm. So, you're going to have to partner with somebody. What that looks like It can be different, right? Can tuck in under another firm, or you can outsource a lot of those services. You can find what's commonly called now is a platform that that might be a tech stack that's already made, and lives in the cloud.

Jim Palumbo:

So, you can access all of the tools that you need and resources that you need to be successful. Do that in a virtual world, and do it for half the price of what you could do it on your own. So, there's a couple of ways to skin that cat, but the answer, yes, always independence. How you get there, different story.

Patrick Brewer:

How does the advisor differentiate? I feel like there's more and more folks that are offering support for advisors, whether that's platform, tech, marketing, practice management, or that everything bundled under one roof. where does an advisor start? How do they differentiate? What are your thoughts?

Jim Palumbo:

Well, you touched on one thing, practice management. So, from our side on the supporting and advisor in their success, we're finding that the technology become a little bit ubiquitous, right? There're so many choices out there for technology, and a lot of promises that go with that technology. What we've discovered is that the tech alone is not the solution for the advisor.

Jim Palumbo:

So, whether it's the starting adviser, or let's say the advisor that's reached that inflection point, and I think that's really important, 20, 30, 50, 80, $100 million, they're unable to grow because they don't have the scale. And it's difficult to build that infrastructure internally. The promise that you see in the advertisements, the emails that come into your inbox, the magazines, the trades, is that the technology is going to solve your problems.

Jim Palumbo:

And in reality, we think that's a false promise. The more technology you buy, the more you have to learn how to use it. The more that you're entering data, the more time you spend in front of the keyboard putting things in. It really isn't the solution. When I was running a regular investment advisory firm with a few advisors, I found the more technology I bought, the more work I had. It didn't save me time.

Jim Palumbo:

It ended up costing one more time, and I had to hire people to do data entry, or understand software, reconcile a performance reporting software, all of that. It actually became a burden rather than a solution. So, I think its partnerships with people and with the skillsets. Our solution has been to outsource the personnel. We have a great tech stack at Dynamic, but it's not just about the technology. Even though it's highly integrated, really efficient, all the workflows and systems are there, so the advisor doesn't have to build it.

Jim Palumbo:

But in the end, it's the people. At some point, you just want somebody else to do that. What is the advisor's best and highest use of their time? It's building and strengthening relationships. Sitting in front of a computer, tinkering with the latest and greatest technology, or your basic components in the chassis, the CRM, the performance reporting and billing software. The advisor's time is not best spent there.

Patrick Brewer:

Agreed.

Jim Palumbo:

Any good at all being an advisor. Every minute, they're in front of a person, whether it's a prospective client or real client, learning more about what their needs are and listening to them. That's where the real value is.

Patrick Brewer:

It's funny, I just put a post out on Twitter earlier this morning that more technology doesn't equal more capacity. It just means that you get more technology. And I think that I would agree 100% with your assertion there. A lot of firms, I think when they first start out, they get enamored with technology.

Patrick Brewer:

They start hooking it up, they get the API integrations, and they just want more, and more, and they feel like that's going to increase the level of capacity as they grow their business. And I think there're really only two levers you can pull in the business. You've got a capacity lever, which isn't... you can't create capacity through technology. It helps in certain circumstances.

Patrick Brewer:

But I feel like the only way to create capacity is through delegation. And then also, intelligent collaboration system. So, we've actually built something in our firm, SurePath, our wealth management firm. Sounds like probably something similar that you guys have as well, but we call it advisor provisions. And it's a collaborative process that we use to project manage all aspects of the client experience.

Patrick Brewer:

Because I'm a firm believer that wealth management, if you think about your responsibility to the client, really all it is an exercise in project managing someone's finances for their entire life. I mean, what you're committing to every time you say yes to a client is here's a service that I need to deliver until you eventually leave this planet, and wake up on a cloud one day.

Patrick Brewer:

And I need to effectively project manage that process all the way through as your needs change. So, I think that the CRM and all the tech that we have today, it's just too static, and it doesn't allow for the right accountability systems, or collaboration between the staff. And I think most advisors, and I think you'd agree with this, they're not great project managers in most cases, and they're not great technologists either.

Patrick Brewer:

They tend to be better at communicating and connecting with individuals, at least the successful ones that I've seen. So, it's good to see that you're thinking along similar lines. If technology isn't the answer, or maybe let's say its only part of the answer, what in your mind do advisors really need to accelerate, and grow, and scale their business?

Jim Palumbo:

Well, it's an interesting question and really leaping off of everything that you just said, which I think is correct, if the shift in the delivery of wealth advisory is focused on, you're calling project management, but I think again, you're right, taking all those elements of a person's financial life, and helping them through that as does that change? That means that what we're really talking about is advice.

Jim Palumbo:

So, do advisors really need advice and intellectual partnership as much or more than they need a cloud-based program or a tech stack? And more and more, that's what we're seeing is that the collaboration we've been encouraging advisors to have with clients is the same thing that advisors are looking for. They're looking for partnerships that they can take their business to the next level. But a lot of times, it's one offs. Like you say, it's not just static technology.

Jim Palumbo:

It's okay, I'm going to grow my business this way. Should I merge? Should I acquire another practice? Should I hire advisors? Should we just look at organic growth and be adding clients? What segment of clients should we be adding? Where's our strength? Where's our weakness? What should we not be doing? And we're finding more and more of our time spent in the professional services part of the business, not on the technology, not on simply executing certain plays.

Jim Palumbo:

I was thinking as you were talking, Patrick, that investment management and process management for customer service, let's say, has all become very synthesized, right? We already know what to do. Who's bringing anything new to the investment universe? We already know that asset allocation price results, the asset allocations are so similar across different companies, different providers, et cetera.

Jim Palumbo:

We already know what works. We already know what processes work for a customer service. Now, we're talking about really getting into the fun part of the business. How can we be creative? How can we deliver better experience to the client as you were describing it before? That's really, I think where the art in the future of our business is.

Patrick Brewer:

I agree. Yeah, 100%. I feel like there's two aspects of the client experience. Just to clarify because I focused on one specifically a second ago, and that's the actual service obligation that you need to fulfill on the financial side. So, first, documenting that on the front end. What have you committed to? What does the client need?

Patrick Brewer:

And then making sure that you're project managing every aspect of that service so that you can actually deliver, and turn them into a good working relationship where they trust you, and they like you, and they want to do more business with you, or at least refer more business to you. But I think the key, and what I'm hearing from you is moving past the actual things that clients are directly paying us for.

Patrick Brewer:

And then having the team behind you as an advisor that can think creatively, and maybe come up with interesting ways to have a live event, and invite your clients that are supporters of your business and build deeper, more intimate relationships with them so they introduce you to other folks in their network.

Patrick Brewer:

And coming up with creative marketing strategies to get the attention of folks in the community that may have influence, or that you may want to bring on to your firm as a client, and getting their attention so they sit down with you, and they're at least skeptically curious about what you offer.

Patrick Brewer:

So, being able to use the firm's collective resources to support the advisor as they deepen relationships, and they broaden the client experience. Is that what you're thinking as well over at Dynamic, or is it a little bit different? How would you phrase it?

Jim Palumbo:

Yeah. You hit the nail on the head. I like to call it a living library. The collective intellectual and experiential resources that an advisor can tap into when they're either part of a network, or part of a team, or part of affiliating with the service provider, similar to our firms. They're now having that collaboration that they didn't go to the next level because everything isn't, as you mentioned, static, the experience isn't the same for every advisor.

Jim Palumbo:

You mentioned a client event, and in my mind, I was just thinking, "Okay, the younger advisor, or the earlier stage advisor is really looking for clients." So, he wants to events that are attracting prospects, or potential new clients. The advisor that's reached an inflection point of 100, 200, 300, 400 million in assets under management, their challenges are completely different.

Jim Palumbo:

Their event or whatever they're doing is to build better relationships. They probably have more new clients than they can handle. So, for them, the challenge is scale, capacity, and deepening the quality relationships, and maybe even moving away from unprofitable, or current relationships that aren't fun.

Patrick Brewer:

Yeah, for sure.

Jim Palumbo:

So, their set of circumstances is very different. So, if we're a provider of services, advice, et cetera, advisors, those are completely different experiences and resources that we need to bring to those two advisors.

Patrick Brewer:

Yeah, I agree. Actually, in one of our systems with the Model FA, we call it the accelerator. We train advisors on this process of moving people through the different relationship stages. So, I think you're hitting it the nail right on the head. You've got advisors that are early stage, and they need to focus on marketing, and they need to pull that growth lever.

Patrick Brewer:

Then you've got advisors that have more developed business, and they're usually stuck in the business, and they need to create capacity for themselves. And I think the industry has done a good job of brainwashing a lot of these advisors that what you need to do is just get more technology, and get more staff, and throw bodies at the problem.

Patrick Brewer:

And I think having done consulting for a long time myself, that's usually what I've seen happen is once a firm gets to 60 to 100 to 200 to 300 million, they end up spending way too much money on enterprise tech, and then they spend way too much money on bodies that are either operating the enterprise tech, or designed to fill in the holes while the tech is integrated into the practice.

Patrick Brewer:

And then usually, what ends up happening is you've got this tech graveyard, and then you've got all the other employees that were, let's say managing the implementation of that, and then they end up getting either fired or reskilled. And before you know it, your profit margin is at 5% to 10%, and you're looking for a way out of that hole.

Patrick Brewer:

So, is that what you guys are seeing with folks that reach out to Dynamic, or are you catching them earlier on in the cycle? What has been your experience with that?

Jim Palumbo:

Yeah. I think you're pointing to the right thing. You mentioned accumulation of tech, accumulation of bodies, and that as they're building that, I was thinking of a firm, I talked to the folks there that got a few hundred million dollars. They have 20 bodies in an office, and a really long list of different technologies that don't talk to each other. They're not stitched together.

Jim Palumbo:

So, here, you have a successful practice, several hundred million dollars, and smart folks there, I've talked to them. But they're pouring the majority of the revenue into this incredibly inefficient pole of disconnected tech, but also people who are trying to figure it out basically, versus they don't realize that there are the types of things that we do, or other solutions that you can almost make that whole thing virtual.

Jim Palumbo:

And I think that disconnect for advisors, they're still thinking traditionally that the answer to the pressure, and that I'm feeling with all this workload, and not being caught up, their hair is on fire all the time. They're in a panic, they're working too many hours is I just need to hire another person to take care of that. And I throw that person in there, and they have to figure it out. It's incredibly inefficient.

Jim Palumbo:

So, linking the type of efficiencies we're talking about to really the new digital age too, Patrick, that all of this stuff can be done so much more efficiently in the cloud, in a virtual environment, in a really a resource-sharing world that just having another desk, and cubicle, and another person trying to tackle the set of problems is not the most efficient way for those advisers.

Jim Palumbo:

Maybe yes, once they're at multiple billions of dollars of assets under management, they have the capacity to build some of those systems. But if they're available, why try to reinvent the wheel, and why do it in a 1994 way, right? With a cubicle and another person, that's not the way. The digital age, this is where the technology meets the people. And it really does create a real solution.

Jim Palumbo:

And that is not just tech, it's outsourced personnel plus tech. That I think is the missing ingredient in the dialogue today. If I look at the most popular tech, and I want to say every article, most popular tech of 2019, or most popular tech 2018 is that it doesn't solve anybody's problem. It just gives the advisor another task to learn that software, start typing all the client data into it, and it's going to produce some report.

Patrick Brewer:

Well, it generates a nice 90% gross margin for the technology companies selling the solution. So, I mean, it's open to somebody, right? And then advisors are on the other side of the coin and they're like, "We need to cut our fees, our fees need to be zero." The Fintech vendors are laughing. They've got two jets they're flying around on. So yeah, I'm very familiar with the issues we have with tech IN our industry.

Patrick Brewer:

I think the other thing with just to go back to that idea of hiring employees and putting people in the office. Part of the challenge that a lot of advisors have, which I always encourage every advisor, just start with the end in mind. What are you trying to build? What's your vision for your life? What's your vision for your practice? How much money do you feel you need to make?

Patrick Brewer:

How many people do you feel you want to work with? Are you building a really large castle with huge walls, you got archers on the tower, you got people farming the lands, you're building a small reasonably sized kingdom where you've got a lot of free time to go out, and do whatever you want? I think starting with the end in mind really helps them make those decisions better with a framework.

Patrick Brewer:

And if the answer is I'm looking to build for lifestyle, I want to have a couple of hundred relationships, I want to make really good net personal income, but I have hobbies, and interests, and I want to spend time with family when I'm not working, then the answer is rarely start to bring on a bunch of employees. And part of the reason for that is not that you can't be a good leader, a good manager, you can't create the right incentive systems.

Patrick Brewer:

You can, but if your vision is such that you're only building to, let's call it two to three million in gross revenue, then the people that you're bringing on, they can't see themselves moving up with your vision. There's no opportunity for them to advance in their own life, in their own career. So, I feel like the challenge that a lot of advisors have is they don't realize that other people that they're bringing in wants some level of advancement.

Patrick Brewer:

And what ends up happening is these people that are talented start to work for the advisor, and they get put into a director of operations position, or maybe they're in a junior advisor role. And after a few years, they start to wonder what's next. And the advisor sits down with them and says, "Well, you actually just worked for me for 35 years. I'm pretty comfortable." And they're like, "Well, that sucks. I don't want to do that. I want to grow in my career."

Patrick Brewer:

So, what's the next step? Well, it's either the employee leaves, and they take clients with them because they wanted to grow. And there wasn't a path for that with giving the advisor's vision. Not to say that the vision is wrong, it just is what it is, or you have an employee who you're overpaying, or you're giving equity just to retain them because you don't want to get back in the business, and have to do the things that they're doing right now.

Patrick Brewer:

So, I think part of the challenge for a lot of advisors is they have to walk through that themselves, and burn their hand on the stove to realize that teaming up with someone that has infrastructure, that has an executive team, that has these people in place, it's not only to have the people and to do the things. It's to keep the people and better move them throughout the organization, and get better people because you have that career ladder, and that advancement structure so that the advisor is actually able to have more talented, more let's say engaged support staff because it's not about the advisor anymore.

Patrick Brewer:

It's about the people that are part of the organization, and what they're building collectively as part of a bigger vision. And the adviser benefits from that in a number of different ways. So, that's how I've been thinking about the human capital side of the equation. Because I feel like it's always, "Well, I can hire my own people." It's like, "Yeah, you can, but here are the issues associated with that."

Jim Palumbo:

Well, it's a topic that I feel strongly about, and it's a little nuance, but let me try to continue from what you're saying. If you think about the human capital, some people are team builders and some are not. So, let's say an advisor is a team builder, he likes that. But what you're talking about is this career path for people. Very difficult if it's all secretaries, admins, and ops people in an advisory practice, you need incredible scale to be able to provide advancement and all of that.

Jim Palumbo:

But what if this, and I just wrote an article about it, what if the model were that you didn't have to hire any admin people. And rather than hiring admin people, the adviser who likes being a team builder was bringing in professionals and paraprofessionals. What fun? And then you talk about the advancement opportunities are truly there for those people.

Jim Palumbo:

So, let's say you outsource the ops, and the admin, and now you want to bring people in. You can bring in another advisor, another three, another five advisors. What about a paraplanner? What about a CFP? What about adding CPA? In the article I wrote, I just started looking up average salaries. So, an advisor assistant, national average, I think is around $42,000, $43,000 per year for an advisor's assistant.

Jim Palumbo:

A CPA, a new or young CPA is only in the 50s. That's 14%, 18% more that you have to spend. You could bring a CPA in your office, you could bring a CFP, a paraplanner. Start bringing, and surrounding, and building a team with those types of folks. They all have advancement opportunity, but look at the deliverables that you have for clients. You're now bringing an incredible client experience that becomes available from that firm versus having a bullpen full of secretaries and admins.

Patrick Brewer:

Agreed. Hey, Model FAs, I know you're enjoying this conversation, but I wanted to take a quick break to talk to you about the Model FA Accelerator. This is a unique collaboration between us, and you where we help you build a financial advising practice that you can be proud of. We focus on the foundational concepts around how to pick a niche, or a specialization, how to price your services, how to construct an offer that people are going to buy, and then how to market it, and sell it in a way that will get people to sign on the dotted line, and become clients of your firm.

Patrick Brewer:

All while giving you the information to scale, and set up workflows, and operational processes that will allow you to reclaim your time, and build a practice that doesn't run you. So, if you like to hear more about that, go to www.modelfa.com/accelerator or www.modelfa.com, hover over, work with us, and click on Accelerator. Hope to see you in the program.

Patrick Brewer:

We're doing the same thing in our wealth management firm. I mean, it's good to hear you're thinking along similar lines, but the key is just building that expert team model, right? Whether you're going to outsource it or insource it, it needs to be built because the advisory firm of the future, you need to be the trusted advisor. A lot of CPAs are getting into our business, and they want to be viewed as the trusted advisor, and they have a leg up because for whatever reason, clients really care about getting their taxes done well, and saving money on taxes.

Patrick Brewer:

So, there's a threat to advisors that just want to focus on the investments or even just want to focus on the ones and twos with financial planning. You need to be able to offer a more comprehensive set of services even if you're going after the mass affluent, I think within the next few years because we're seeing a lot of these larger players. Even with Goldman Sachs, his acquisition of United Capital that are getting into the mass affluent space, and they're going to be able to spend a lot of money on business development and marketing getting in front of that audience.

Patrick Brewer:

So, I think you're absolutely right. Having the ability to create an insourced expert team and provide a revenue sharing opportunity for CPAs, even attorneys. Our office has two of our wealth advisors in there. We've got a CPA, and we've got a business tax attorney, and we're probably going to be adding a mortgage lender soon. So, the more people that you can add, and create the right incentive structures between the parties, whether they're employees or just at an arm's length running their own company, the more success I think advisors are going to have in the future.

Jim Palumbo:

Yeah, really good point. And I'm visualizing the type of model firm that you're talking about, and think about how much fun, and how interesting that is as a career path for an advisor versus this thought of building a team of admins, and techie people, and data entry people. It's just so much more exciting, and really so much more appealing to clients because that's what they really, really want.

Patrick Brewer:

That's what they're buying. Yeah.

Jim Palumbo:

The clients want that experience. Can you just take care of it for me? I was doing some research on robocars. Everyone told us we're going to get put out of business by the robos. And what I found is that, at least when I looked it up, Betterment's average account size was $15,000. And that the thing that their clients wanted the most was advice.

Jim Palumbo:

So, even though they built this fantastic model with great automation, a great cloud experience, in the end, what did people really, really want? They still want someone to just say, to talk to and say, "Here's how you should do things. Here're some options." That they're looking for the input for the advice, for the guidance, for their expertise. So, what a great time for us to be in this industry. We have what people want.

Patrick Brewer:

Yeah, yeah. Actually, I'd be curious to get your opinion on this. I put out an article recently on virtual financial advice. Initially, I was a bullish on it, and I was like open to the idea that people would want to work virtually, at least have that initial interaction with an advisor, virtually build a relationship from there, 100% virtual. And I've shifted my perspective over the past year.

Patrick Brewer:

I feel like the model is you can work virtually with a client after you've already acquired them in person, and built the trusted client-advisor relationship. But going out and starting a business and saying, "I'm going to work with folks in San Francisco, California from Philadelphia, Pennsylvania," is a very difficult, if not impossible, endeavor long-term given how competitive, and expensive client acquisition costs are going to be with these larger firms, and all the consolidation in the industry.

Patrick Brewer:

So, I'd be curious to get your feedback on what direction do you think financial advice is going to go? Do you think that I'm wrong, and virtual financial advice from acquisition all the way through to trusted relationship is possible and sustainable long-term for small to midsize firms? Do you think that firms are going to have to be more local, and work the local market, and niche markets? What are your thoughts on that from a marketing perspective?

Jim Palumbo:

You're hitting on a really important point. I believe that, and just by way of observation, we haven't spent a lot of time studying, but we encourage advisors to make the acquisition process as grassroots as possible. I'll make a couple of comments on that, and then exactly what you're saying, that the ongoing experience and relationship can be managed very virtually for the majority of people.

Jim Palumbo:

Just because circumstances, life has changed, people are busier, and they're now comfortable with a phone conference, or a shared screen experience, et cetera. And so, what does that mean? It means that the advisor's footprint is smaller, the size of the office, the type of the office is it's a shared suite. What does that look like today versus 1999? Very different from just the actual physical footprint.

Jim Palumbo:

Circling back to the acquisition part, I try to coach and teach advisors that the quickest path to success, especially early stage, is you being an important part of your community. So, therefore, it's always grassroots, right? If you live in a small town in Iowa, or if you live in New York City, it's still the same, right? If I go to Queens every neighborhood is different and you say, "Oh, I'm in New York. It doesn't matter."

Jim Palumbo:

That neighborhood of people in Queens, it might be ethnic, it might be a particular demographic. It doesn't matter. That's a community. And there are organizations, and churches, and civic groups, and chamber of commerce, all unique to that community. The advisor has to be a respected, trusted, appreciated member of that community in order to gather assets, to win the people's trust, and for them to look to him for advice.

Jim Palumbo:

You can't, like you said, be in Philadelphia and say, "I'm going to virtually cultivate San Francisco clients." That connection of trust is not there. And even our competitors that have billions of dollars on the big online teens, they still have difficulty making that model work, and they have millions of dollars to throw with the marketing and development of the tools. So, I think for the advisor, that's our constituent, Patrick, from emerging to a couple billion dollars of assets under management.

Jim Palumbo:

Virtual client acquisitions are nearly impossible hurdle to get over. When you can do it at grass roots, and make that work with almost for free, just by being a great person in your community. In our marketing, we begin with this idea that the brand is you. It's you as a human being in your community with the people that get to know you, and trust you, and at some point, they're willing to hand you a check for $1 million.

Patrick Brewer:

Yeah, I agree. I think there're some things, so on the marketing side locally that advisors can do in addition to, I 100% agree with everything you just said there as far as being present, building trust, building likeability, and eventually the money just takes care of itself and shows up. But I think there are some things that they can do to accelerate trust.

Patrick Brewer:

One of the things that we're doing, and part of the reason that we got an office in Downtown Austin was the ability to invite business owners into our office to do a podcast. So, I'm a big believer that marketing in our industry is just creative ways to get people's attention, give them something they want, and then strategically advance that relationship during the business development process.

Patrick Brewer:

So, if you think about an entrepreneur, right? Most advisors are like, "I want to work with business owners." It's like, "Okay, great." And they're like, "Okay, well, I'm going to reach out, and I'm going to ask them if they have any challenges." It's like, "That's not going to work." Because they're too busy. You don't know well enough, and they're just going to look at you like a salesperson, and they're not going to give you anything to do.

Patrick Brewer:

And if you think about what is in a way, what does a business owner want? Well, a business owner wants to make more money. They want to have more profit, they want to have better profitability, they want more influence, they want to increase the reach, and grow their audience. They want to grow. They're generally significance driven.

Patrick Brewer:

They're not super concerned about risk, which is the reason why they're an entrepreneur in the first place. So, what can you give an entrepreneur or a business owner that will allow you to advance that relationship towards a potential sale or new client for your firm?

Patrick Brewer:

Well, if you invite them into your office, and you interview them on a podcast, and you deliver a really solid piece of collateral to that business owner that they can then share with their network, they can share with vendors, they can share with employees and staff, they can share with potential sales prospects that increases their credibility and authority. That's going to make them more money.

Patrick Brewer:

It's going to make them increase their influence. It's going to build that their audience for them. And you are just facilitating that process. So, I think it's flipping marketing on its head and saying, "We don't need to buy advertising on LinkedIn, and tell people that they need to work with us." We just need to think about creative ways to get in front of people that give them what they want, and position us as a credible source for that information.

Patrick Brewer:

And also, mediate the attention that's associated and created from it. So, I want to make sure that advisors understand that there are a lot of opportunities available to them in the marketing front, but it's just different than most industries since it's highly relational. I think you can probably agree with that, Jim.

Jim Palumbo:

Yeah, absolutely. And I love that idea. That's so creative inviting them in to be on the podcast. And that's, I think what's exciting about what you're saying is how it's different and very relational business. Yeah, this terrific creative opportunity is like that, having business owner on a podcast available to you, and to make those connections, to cultivate those relationships because ultimately, that's what it's all about. And I've mentioned a couple of times, it really should be fun. So, that type of thing, isn't that so much more fun?

Patrick Brewer:

Oh yeah. It's great.

Jim Palumbo:

Creating a podcast. Having a business owner and learning, I love to hear people's stories so they get to learn more about them, their business, and their story versus tapping away on a keyboard, doing that at your keyboard.

Patrick Brewer:

Yeah. And of course, they're going to end up doing-

Jim Palumbo:

[crosstalk 00:35:09] before and make that technology solve your problems. I'd much rather spend my time-

Patrick Brewer:

And advisors are so afraid of business development because they think about it the wrong way. They think of business development as I need to go to a BNI, I need to shake my cup around and be like, "Give me assets." And of course, everyone, you're going to feel awkward if you do that. It still works, but it just requires you to really put your emotions over here in a corner and say, "All right, I'm going to feel a little bit emotionally discontent, and I'm going to do business development today."

Patrick Brewer:

But like you said, what if business development could be fun? And instead of going to a BNI, and sitting around the table, and asking the realtor if they know anyone, you could have somebody into your office spending an hour and a half with them. Even drink a beer, hang out. If you've got an office, whatever, just build a relationship with someone, be a normal human being, and then deliver a really valuable piece of content.

Patrick Brewer:

So, I think it's just reframing. It's a reframing. What is marketing? What is business development for today's modern advisor? And yeah, I mean one of my platforms is just, I really dislike the idea that advisors are thinking they need to only focus on virtual acquisition, just building these sales funnels, and all this stuff.

Patrick Brewer:

It's great as a component of a well dialed in marketing strategy and marketing plan, but you need to make sure that it's relationships first, and you need to be meeting people in-person. If you're not meeting people in-person, you're not building the intimacy required to build trust. I think that's the biggest mistake a lot of advisors are making right now is they're not building intimacy.

Patrick Brewer:

They might be building credibility. They might be being reliable, and showing up with their content, with other things, but they're not doing a great job of building intimacy, I think in their current.

Jim Palumbo:

You made me think of two of the other what I would call the most fun experiences that I heard of recently, an advisor that we support our team of advisors out West takes their prospective clients and clients on a fly-fishing trip.

Patrick Brewer:

I love it.

Jim Palumbo:

They do that two or three times a year. And I thought, "Man, that is the most fun that..." If we're going to do marketing and business development. I want to be on your team when you go fly fishing in about a year. But you think about what you described earlier as also called reluctance, cold calling. Nobody wants to do these awkward and uncomfortable activities, whether they're digital or in-person. But go and fly fishing is great. What a great opportunity.

Jim Palumbo:

The second one I heard of, it was an advisor in Houston who does couples retreats, and just a little time for them to unwind, have some good food, and sometimes surrounding a common experience, wine tasting or whatever. And extremely successful with that, and it's totally fun all the time, just getting together with people and having a nice relaxing time. So, I think the creativity definitely trumps the awkward, I mean out of the cards at the mixer.

Patrick Brewer:

Yeah. You don't want to be the used car salesman. But you got to start with a level of creativity, and you've be intentional. That's the biggest issue I find with most advisors is they're unintentional with their marketing and their business development. They want to know what's the ROI, how quickly do I get my money back?

Patrick Brewer:

And I don't want to really do any strategic thinking to figure out who exactly am I focusing on, and what platforms do they consume information, what things do they actually want? I think that's biggest thing. It's a lot of information, a lot of consultants in our industry talk about niche marketing. Niche marketing is giving people what they want. It's find a market that wants something, and give them what they want.

Patrick Brewer:

And at the end of the day, if you can't do that, then you're always going to struggle to build a community of people that really trust you, that have similar needs that give you energy when you're actually interacting with them when you're building your practice. So, I think most advisors need to start there, figure out what the end in mind, and back into the equation. Okay. Awesome.

Patrick Brewer:

So, I wanted to ask you a few questions. One is specific to an app that you guys are creating, and I believe launching towards the end of the year. Talk to me a little bit more about that. It sounds like it's a community, a peer-to-peer app. What is that and how are you thinking about it?

Jim Palumbo:

We touched on a little bit earlier that people tend to connect around particular topics and more and more, they're joining virtually. So, right now, within the constituents of affiliate advisors that we have right now, you have a bunch of CFAs. You have a group of CFPs, and different people focused in sometimes different areas of either interest, or the style in which they deliver services to clients.

Jim Palumbo:

Lots of questions come up. So, for example, we talked about succession, and acquisitions, which I think overlap the same topic. All of those areas tend to have like-minded people who want to talk about things. They want to collaborate. They want the ability to connect to resources. So, what we're building is a virtual community, and really expanding on one that we already have that has... it's a less robust version of groups, where the advisors can connect audibly with chat.

Jim Palumbo:

The topics and resource materials are there. And we host round tables around those topics. And it allows the advisor who's independent, and out there, they're building their dream, they're building their vision, but they don't want to feel like they're alone. They know that other people are having similar experiences, are focusing on similar things, are trying to solve similar problems.

Jim Palumbo:

And if we can help those folks connect, and then we try to bring resources to it as well around those topics for communities, then the advisor is able to tap, what we talked about that living library. It's one thing to read an article about a topic or solving a problem, it's another to have your peer group with a couple of folks that have already been through it, and figured out, and just be able to talk about it.

Jim Palumbo:

And just be able to ask questions and sort it out. So, we're finding that those connections are incredibly important. And so, this community's application, virtual community's application online is going to strengthen and make that more accessible to all of the advisors and easy to use.

Patrick Brewer:

Nice. I like it. I like the sound of that. Another thing that I noticed when I was checking out your website in the value proposition for Dynamic, you mentioned that you have 100% payouts for the advisors that are affiliated with the firm. Would you mind just explaining the operating structure, and how you're able to offer that, and just how you guys are thinking about scaling infrastructure with that type of a model?

Jim Palumbo:

So, the majority of the advisors have worked at some point for a firm, whether it's a great big firm, wirehouse, a regional firm where they were basically splitting revenue with the house, so to speak. And those splits go... those numbers are all over the map, 30% and 40% payouts. So, and big firms to 80%, but you're always on a revenue split.

Jim Palumbo:

So, let's say I want to support an advisor's business, we're going to get together, and say, "Yes, we're going to support your business, we're going to provide these tools, technology, resources, advice, guidance, registration, compliance. I'm going to provide all these things because I want you to succeed." And the more that you succeed, the more I take, right?

Jim Palumbo:

It continues to grow. So, you're building your dream, but you're also, the more that you do, the more that you make, the more that you expand your margins, your top line revenue, the more the house takes. What we wanted to build at Dynamic, is a model that was different. The advisor can determine their own future, and they have a set of costs operating, and running the business that are fixed, and should decline with scale.

Jim Palumbo:

So, that you just have an overhead number, rather than a revenue share. And now, you get to control your margin because what your costs are, and it doesn't change the more that you do. It doesn't go up, the more successful you are.

Patrick Brewer:

Understood. And are you monetizing through the investment platform? Is that generally how it works? Because obviously, you need to generate revenue somewhere. So, I'm just trying to get a sense of where that's coming from, and how that allows you to build out all these things that are serving advisors.

Jim Palumbo:

And so, advisers that affiliate with Dynamic, whether they're a RIA firm, or an IAR, you have obvious a fixed platform cost of technology, et cetera. Try not to build that into a basis point arrangement because those are static, right? So, if you're at 20 million of assets under management, the cost for the tech is virtually the same as if you have 200 million.

Jim Palumbo:

And so, we don't think that those should scale up with the revenue. And then the sharing that we do for human resources is then based on basis points, and decline as the advisor grows their business.

Patrick Brewer:

Got it. Interesting. Okay. It's a unique model. I like it. Is the advisor required to take your brand, or can they... is it more of a supported independent platform where they can just file a DBA, and just run under their own brand?

Jim Palumbo:

Both.

Patrick Brewer:

Okay.

Jim Palumbo:

So, we support two different kinds of advisors. So, to answer your question, it's all a new app. So, advisors can tuck in, register with Dynamic, and then they have the choice. They could identify with Dynamic, and use that, or they can register their own tier question, they can register their own brand. And all of their client portals, their quarterly reports all branded to their DVA.

Jim Palumbo:

But more and more, we're supporting RIA firms. Of course, they are independent, they maintain their own brand, and when we're stable, able to provide exactly the same level of support obviously without a compliance responsibility, but provide all the resources and tools of the tucked in advisor to the RIA firm. And the majority of our recent affiliations have been RIA firms.

Jim Palumbo:

And they're coming from areas that you were describing really earlier about that human capital, and maybe the last several folks have had a key employee operations person, something like that, we've realized that they'd grown to the point they can't replace it with one person. And they're forced to look at outsourcing that, and then finding they can do it for half the price.

Patrick Brewer:

Yeah. We've been seeing the same trend. When I started SurePath Wealth, the intention was just to grow it on the consumer side. And then out of the consulting work and the coaching work that we've done, we had people raise their hand and say, "Hey, I see that you guys are doing, and I like it, but I just don't want to rebuild the mothership. I'd rather focus on my clients, and I want to focus on business development, and be supported in those efforts. Can I join you?"

Patrick Brewer:

So, it sounds like you guys are doing something very similar, as far as supporting an advisor in their path to independence, whether that's them building their own brand, growing their own firm, or affiliating with your firm directly, and having the opportunity to be an independent advisor. So, yeah, I cheer you on in those efforts. I think that the industry needs it. It's a service that is going to help a lot of consumers.

Patrick Brewer:

Because I think both you and I can agree, the idea of being an independent advisor just offers better outcomes pretty much for everybody. For those that support the independent advisor, for the advisor themselves, for the clients, for the industry, just provides more transparency. So, that's yeah, I think what you're doing is great, man.

Jim Palumbo:

I was thinking about our group of client advisors, and I would say less than 20% use the Dynamic brand for themselves.

Patrick Brewer:

Interesting.

Jim Palumbo:

If we go way back to the beginning of our conversation, you talked about people wanting to build their own trade. And I think that's what's great about this business. They can build something for them, for their family, their legacy, the way they want it, a pride of ownership, the sense of accomplishment and having built something.

Jim Palumbo:

And I think that's so much key is letting advisors know that there's people like you, like us, that are ready to come alongside them, and help them build their dream. They don't realize how beautiful life can be. That this business can be fun. It doesn't have to be stressful. It doesn't have to be 90-hour weeks. It really can be great and wonderful. We're helping people delivering what they really want, and building a great business, and wealth, and security for our families at the same time.

Patrick Brewer:

Yeah. It can be fly-fishing trips at the end of the day, a couple of those a year, a couple maybe educational workshops, a couple of podcast interviews, maybe a beer or two. You're good to go. Net personal income, $1 million. So, well, great. Jim, I really appreciate you coming on the show. Before we sign off, is there any parting pieces of advice, something that you would maybe have as words of wisdom for an advisor who's considering either a transition, or just questioning their career path? What advice would you have for that person?

Jim Palumbo:

This is a great business to be in. It's a great time to be. This is an extraordinary time in our economy, our country, our industry. What a great time to be doing this. Realize that the resources, and the tools, and the help that you need to grow that, to make it what you want is there. It's not a mystery. It's not an unknown. There are tangible solutions and best practices to those questions that you have. Just reach out, find, make those right connections, and the help, and assistance, support to help you achieve that dream are available to you.

Patrick Brewer:

Love it. Jim, thanks again for coming on the show. Look forward to hopefully having you on in the future, and we'll talk to you soon.

Jim Palumbo:

Thanks so much. It was great being with you, Patrick.

Patrick Brewer:

Absolutely.