We sit down with Ryan Shanks, CEO and Co-Founder of FAMatch, to talk about advisor trends, the importance of building a personal brand, and how the industry can adapt to better recruit young advisors
Transcript
Speaking Logicly as brought to you by ETFLogic, the leading provider of analytics and portfolio analysis tools for financial advisors. No information within this should be considered trading or investment advice.
Scott McKenna:
What’s up, guys, and welcome to Speaking Logicly. My name is Scott McKenna.
Emil Tarazi:
And I’m Emil Tarazi.
Scott McKenna:
And today we are joined by Ryan Shanks, CEO and co-founder of FA Match. Ryan, how are you doing today?
Ryan Shanks:
I’m well, how about you?
Scott McKenna:
Can’t really complain too much coming off of a long weekend. How was yours?
Ryan Shanks:
Good. It was good. As I like to say, there are five Mondays in the week typically, and we get four this week. So it’s a good week.
Scott McKenna:
Yeah, that’s a great point. It’s funny, I always see a debate on social media. Does it feel like a Monday, Sunday, or Tuesday? And I think it basically is saying, whatever is your least favorite day of the week, it feels like that on repeat like Groundhog day. Well, anyways, Ryan, let’s jump into it. For those who don’t know much about you or FA Match, why don’t you give us a little bit of a background?
Ryan Shanks:
Yeah, thank you for that, Scott. I’ve been in this business for 20 years, trying to help financial advisors make transitions from one firm to another. And through the years, a lot of that’s become launching their own independent firm. And when you get knee deep in that work, and I love that work, it’s not scalable. And so that’s really why we created FA Match. There’s a multitude of reasons, but the big drivers are, we wanted there to be a standardized process that would allow for advisors to evaluate their options discreetly. And we wanted there to be the ability for that to scale so that it could apply a benefit to tens of thousands of advisors over an annual basis. You’re not capable of doing that when you’re doing it on a one-to-one and it’s really no different than an advisor working with their clients. You get to a certain capacity point and you can’t scale without hiring and bringing other folks into service.
Emil Tarazi:
Can you give us a little background on how big is the market? How many advisors are out there at any given time? How many people are coming to you for, ballpark numbers let’s say, coming to you for advice or looking to make a move?
Ryan Shanks:
Yeah, the annualized number changes, but it’s typically anywhere between 25 and 35,000 advisors make a move every single year. Be anxious to see how it shakes out this year although I’ve seen some pretty decent movement trends. And so, again, the advisors that are coming to us, oftentimes they don’t know what they don’t know. They know that they’re not happy where they are. They don’t like the folks they’re working with. They don’t like that their compensation’s being cut. They want more control. They want to call the business what they want to call it. So it’s a multitude of reasons that drive the advisor to us. And what we’re saying is, is that there’s not a silver bullet. There’s not one firm that stands alone in the entire industry that is the right fit for all advisors.
Ryan Shanks:
And so what happens there is, you end up having this network of traditional third-party recruiting that is oftentimes doing self-dealing. If an advisor goes to one of them and says, “Hey, I need help,” what’s really going to happen is that recruiter’s going to put them in front of the firms they have contracts with. So it’s just like, if an advisor were to say, “Well, I can put you in this product that I’ve got the ability to do,” it doesn’t mean that it’s what’s best for you. But that’s the volume. And so you think about that. That’s, call it roughly 10% of the advisor population, makes a move on an annualized basis. That’s significant. And I think what underscores that is, it’s a problem. I think that if advisors move to the right firm, at some point that number starts to shrink if it’s being done right. But that just hasn’t been the case.
Scott McKenna:
Retention is so important, there’s no doubt. Do you have any strategies for advisor firms that they can implement to maybe better retain their advisors or for advisors who are looking to make a move?
Ryan Shanks:
I mean, I think for retention, and I always say to folks, that’s what’s most important. I don’t care about your recruiting numbers, I care about your retention. Because if you can’t keep the good folks you’ve brought in the door, why are you trying to bring additional ones in? It becomes a one-to-one, we’re going to replace everyone that’s leaving. So for the firms, it’s being really vulnerable and honest with themselves. Do they actually have something that’s of value for another advisor to consume, as it relates to technology, compliance, oversight, et cetera, marketing programs. Do you have ways that can help me grow? You have ways to help me deepen the relationship with my clients. So as far as being really honest there, and it’s also looking at the comp structure, is how you’re paying the advisor competitive and what does that return going to feel like for that advisor? Do I feel like that I’m getting a fair payout for the services and solutions I’m receiving from you or not? That can drive a lot of that.
Ryan Shanks:
On the advisor side of the ledger, it’s doing the same exercise. Looking yourself in the mirror, analyzing the business that you have today. Will those clients follow you if you make a move, because that really seeds your business in that transition. If you move over and none of the clients come with you, most firms in the industry are going to terminate that relationship. It’s all based off of goodwill that we’re going to put this in place with the assumption that your clients at this level are going to come over to our firm, which drives their profitability metrics. That advisor needs to be truthful about that. And they need to think about, not only the needs that they have today, but they need to try to envision two, three, five years out, the advisor they think they may become. They may need to ask some of those questions and that can solve for them not making another move in five years, if they can… As I tell folks, it’s not checkers, it’s chess that you need to apply when you’re evaluating this landscape.
Emil Tarazi:
So on the advisory side, what are some of the skills that, especially when you see people moving from one place to another, what’s on their resume that really resonates with adviser firms?
Ryan Shanks:
So, it’s different than your traditional recruiting. They clearly have a skill. The skill is working with clients and helping them with their investments. Some firms, it’s a function of, you’ll need to bring a certain amount of those clients over. That’s the number we’re looking for. The more sort of well thought out firms, we see most of these in the RIA sector where they’re independently owned and they’re at a certain size, where they’re saying we don’t need someone to come with a book of clients. So at that point, they’re really looking for designations, are they a planner, a CFP? And so they’re saying, “We’d like to bring you inside of our organization. We have current clients of the firm and we would like for you to apply your expertise to and planning.” And oftentimes that’s to support maybe a senior advisor, which is interesting.
Ryan Shanks:
So, again for the advisor, that’s like, I have been really over here working my tail off, helping to support this business, but the clients that I’m interfacing with, they’re not my clients. I’m not happy, I want to leave, but I have no clients that will come with me. So that’s an opportunity that presents itself for them. So for advisors who are listening to the podcast and you’re thinking about wanting to be independent, maybe you don’t have clients. Your best route is going to be to find an established RIA and communicate with them about coming in and being a part of that team.
Scott McKenna:
Diving a little bit deeper into that trend you mentioned before, about 10% of the advisor workforce making a move every year. I’m curious what the general trend is. Is it generally that advisors are looking to make a move to becoming more independent or does it not really matter what type of firm they move to, so long as it has the right fit?
Ryan Shanks:
Yeah. Those numbers have continued to climb. It’s interesting, when I got into the business 20 years ago, an independent broker dealer just wasn’t commonplace. An advisor knew about other wirehouses, banks, regional brokerage, et cetera, but not so much about the independent side. And that was why, you’re going to go over there, that’s so risky. The pendulum has swung where now there is so much awareness about it. There are resources out there that work with a lot of these companies that are trying to engage with those advisors to entice them, to move their business there. So I think it’s not all tracked as cleanly as I’d like for it to be, and what I mean by that is, there are advisors that aren’t necessarily leaving a wirehouse and going and starting their own, and they’re plugging into one.
Ryan Shanks:
And I think what we’ve seen with the exodus to independence over the last, call it the last seven years, have been what I would think are kind of the earlier adopters. Folks that were captive that said, “No, you know what, I’m going to jump. I’m going to go do this, I’m going to build it.” Now, we’re dealing with advisors on the captive side of the industry that are, they’ve been more reluctant for a longer period of time. You could also articulate it this way. They have a higher pain tolerance, and they’re just getting to the point to where enough pushing has gone on that they’re like, “I’m done and I want to go and I want to explore.” And the independent landscape has caught up to the wires and these captive firms that have historically had really solid infrastructure technology. The independent technology today, I would stack up against any captive wirehouse type firm in the industry, all day long. And when you see the output of that and that client experience, it’s second to none. It comes down to the risk that advisors are comfortable taking.
Emil Tarazi:
So, on that point, that’s one of the key trends is where people are going and which firms they’re going to. Curious about some of the other trends that you’re seeing because obviously you’re in a prime spot to see where people are moving. I guess, one of the things that’s often mentioned is that generally advisors skew older, and that there are more and more sort of younger advisors coming online. Curious about that. And then on the investor side, as millennials gather more wealth, there’s a broader base of millennial investors that need to be catered to. I view that sort of as a complimentary trend there, so I don’t know. What are your thoughts on those trends and other trends in general?
Ryan Shanks:
Yeah. I mean, I think, for the millennials, sort of the younger perspective client if you will, I think one element, and it’s funny, I just got to wrap it up on Zoom with an advisor talking about this, when you’re trying to kind of define what’s the client segment that you’re trying to go after. The younger generation, so much of their DNA is do it yourself. I know my three kids, I’m certainly raising them to be able to be competent, that they don’t need someone else. They can go and they can do it themselves. So you’ve got that element where it’s do it yourself and where it hits a tipping point is whenever they’ve accumulated enough money in savings or in investments or their income level gets above a certain threshold where they start to really look in the mirror and go, “You know what, I could do it myself up to a certain point. Now, it really hurts if I screw up. I want to go on, I want to kind of find someone, to target someone.”
Ryan Shanks:
I’d like to think that there’s going to be an interest in aligning with a peer. So a millennial working with a millennial adviser. You are able to look at one another to see that, hey, we’ve got some of the same philosophies around life. We’ve kind of grown up with some of the same circumstances, sort of all digital versus very little for the older consumer or the client. And they’re able to look at one another and see, hey, we’ve got a long runway together versus going and working with an advisor that’s in their sixties. And so I think that’s an element that’s going on there.
Ryan Shanks:
When you go upstream, the older advisors if you will, the irony is the rule of thumb that typically plays out is, the average age of the advisor, call it above 55, equates to a very similar average age of their client. So you’re able to really look at that advisor and you can actually glean quite a bit of insight into their client customer base, unless they’re doing something unique and different and they’re working with a next gen, which folks are still struggling to try to overcome. That business, it gets to a certain point of distribution to where the overall value of it, it depreciates. So I think you’ve got kind of both ends of it. We’ve got the average advisor getting close to 60, of which most of them don’t have an executable succession plan in place. So in the event something happens, there’s not anything that can be monetized from a transaction to a next generation.
Ryan Shanks:
So they’re really not putting their clients in a position to say, “Hey, I’ve thought about you and if I get hit by a bus, here’s exactly what plan I have in place. Here’s, what’s going to happen. Here’s who’s going to step in and continue to take care of you.” They’ve not done that. And frankly, between you and I, I think that is one of the most significant voids we still have in this industry.
Scott McKenna:
Like you said, the average advisor is over 50 now. The baby boomers in their seventies, they really have to start thinking about who’s going to take over their business next. And in my mind, I think that is a huge issue in the community and from my own experiences, I wanted to get into the industry right out of school. But the places that I had interviewed at, it was eat what you kill model, where you come in, you’re going to call your friends, your families, we’re going to give you this cold call list. And if you generate enough revenue for us, maybe you can stick around. And that’s just a model that I was not comfortable with at all. And had I been given a different model, I think would have become a financial advisor in another life. So I’m curious to your thoughts. Is there a big issue when it comes to getting new people involved and interested in becoming a financial advisor, or is that something that’s really being worked on and will be solved by the time all of these baby boomers are ready to retire?
Ryan Shanks:
Yeah. No, that’s a really great point. The days of the really robust training programs, which are really brokerage and insurance, where a lot of folks came into the business, they learned the business, they cut their teeth, the business spit them out frankly, because they didn’t cut it. Maybe they had enough friends, but the friends weren’t willing to come and give them an investment, because think about that. If you and I were the same age and we just came out of college and you became an advisor and came to me, I’m going to say, “Scott, look, man, love you. We’re good friends, but I’m not giving you a dime because you don’t know what the hell you’re doing. You’re still figuring that out.” So I think that’s tougher today for folks trying to get into this profession because there’s still some of those training programs, but a lot of it is very much structured the same way.
Ryan Shanks:
I think that as the independent firms gain traction and create more robustness, and what I mean by that is a stability, they’re actually operating like a company, it’s no longer a practice, that creates a destination for some of the next gen folks to come into. And I think the people that are running those companies that are smart, see where the puck is going, are able to understand that if we can bring in some of the younger advisors, they can communicate with our current clients’ kids and allow for that continuation, that transfer of wealth. We want to be in a position to continue to advise on it. And I think that gives an opportunity there. We don’t have enough folks coming into this business. You alluded to that, that is true. I think about that a lot. What can we be doing as an industry to try to attract advisors?
Ryan Shanks:
I think that one huge benefit we have is the younger generation that’s coming out of college now, they’re not so concerned about the income as they are of the impact. And I think that if we can somehow articulate that, that we can draw them to this profession. But I think the industry as a whole needs to elevate itself to create a welcoming environment for those folks to come in and find a spot to work. I think colleges around the country, they’re starting to… I mean, the financial planning, the finance departments, they got plenty of folks that are coming into it, but they may be popping out to some other… investment banking, some other role in the industry that’s not specific to what we’re doing around planning and financial advice to an end client.
Ryan Shanks:
And then I think, on the tail end, I mean, if you think about it, the average advisor being where they are, the irony that you’ve got there is, is that the most valuable businesses are tied to the older advisors. And so think about that, think about that sort of weakness, if you will, or that handicap. For those who don’t have a continuity plan in place to ensure that that book of 200 million or 300 million of client’s assets have some other advisor to step into to service. It’s a shame, frankly. And what it really says is, you’re able to give advice to clients, but not able to consume it yourself. And I think that as a profession, I’d love to see frankly, it get to a point to where it’s mandated that when you get above a certain threshold in age, you should be required to put a documented continuity plan in place to show that… You talk about fiduciary, in my view that is the greatest Testament to being a fiduciary for your clients, is thinking about how you take care of them when you’re no longer in the equation.
Emil Tarazi:
Ryan, I wanted to touch back on the technology trends and specifically what technology platforms or skills you see advisors having that really helps propel them through the industry. The technology is central to everything we do at ETFLogic. And going through your site as well, I can tell that technology drives a lot of the matching process. So obviously, technology is quite important, but I’m sure you can pick up on some sort of general skill sets in the technology or platform specific area.
Ryan Shanks:
Well, again, if you think about technology, what is its overall purpose? It’s its overall purpose I think is to scale, it’s to empower people to be able to scale. And I think as it relates to this business, there’s somewhat of an overwhelm that’s going on right now, especially with sort of this COVID. I don’t even want to call it the new norm. It’s the norm, this COVID environment that we’re all functioning and working in. I mean, my goodness, I had spent so much time on Zoom, I’ve spent more time on Zoom since this took shape than I have in the last 10 years combined. And I think everyone is doing that. And so, I think more than ever technology is more important because you realize we all miss sort of the in-person component, but we’re realizing that we are fast forward on a virtual environment and a virtual world for everything.
Ryan Shanks:
I’ve had experiences with music and bands and cocktail parties and it’s all virtual. You’re not with your friends hanging around in a room somewhere, it’s your home. So I think that that is one of the elements though by the way, with the younger demographic coming in, because they’ve sort of just grown up, consumed wholly by technology, that it’s second nature. I mean, I look at my kids and it’s getting to a point, I feel like I’m pretty savvy, but it’s getting to a point to where I’ll sort of just bring something up occasionally around some of my kids and they’ll pop off and I’m like, “Wait a minute,” and we’ll go a little deeper and they totally understand what my question is and they have the answer, and they’re 14, 11 and nine.
Ryan Shanks:
So, you think about where we are today and think about how technology is continuing to propel us. I think that we’ll see some of these younger advisors coming in, I think that is an element and that’s how I coach some of them that if they want to get into this business, it’s a way for them to bring immediate impact to a firm, is that knowledge, that ability to be so dialed in with social media and technology and the value of integration.
Emil Tarazi:
Yeah. So on that last point on social media, we think a lot about how we market ourselves, obviously as a technology platform, but how important is social media and that aspect of marketing yourself, or is it still sort of in the early stages?
Ryan Shanks:
Without a doubt, it’s in the early stages. You can just see when you’re out and about on social, you can see the folks that are pretty engaged and active and the folks that are every once in a while. I’m not on it sort of all day. I know I’ve got friends that are on it all day, every day. I think it depends on you. I think it’s a preference. I do think that because of COVID, I think that if you were getting into this business as an advisor, you are going to suffer, not being able to grow the way that other generations prior to you have, because you could go and meet at a coffee shop with a prospect. You could have them come and meet you at your office when the convenient time worked out. Those things have been eliminated and so I think now more than… I think social media, we’re going to continue to see that become even more involved.
Ryan Shanks:
Where you struggle with it in our industry, is on the captive side of the fence. It’s restricted very heavily. There’s certain technologies that financial advisors are not allowed to use because big brother’s saying, “Hey, you can’t use that. We’re going to monitor this one and you can use it, but only in this way.” And then when you sort of see the opposite extreme, you see folks that are running independent wealth management firms and independent advisors having carte blanche. They’re on there and they’re active and they’re engaging and they’re having fun. So I think it gives the captive side something to look forward to. And I know some of the advisors I’m talking to, that’s one of their elements.
Ryan Shanks:
They’re like, “Look, I want to be able to use social media the way I want to use it, to engage with my current clients and prospects.” So they see that as a means for them to be able to scale and grow their business. But I think the personal preference is going to come down to, frankly, it’s just like what we’ve always seen. What would be an interesting study and this is something kind of fun is, could we identify, are more folks engaging with social media, introverts or extroverts? I’d be really curious about that stat, to see what that level of engagement would be. Because if it were the case that it were introverts, then you could see that maybe they have a more profound impact in engaging with prospective clients that they otherwise couldn’t in a normal world. So that could be an advantage for them.
Scott McKenna:
Yeah. I’m a big believer in developing a personal brand and more and more, I think, having that personal brand and allowing your personality to shine through is going to be really important to developing the overall company brand. And I can see how advisors would want to be able to do that and be on social media to give their own voice. Because as we’re talking about the value of an advisor changing over the next generations, it’s really more going to be about the behavioral finance stuff that they can offer, the relationship building, the financial planning. And it’s so important to have that personal brand as part of that.
Scott McKenna:
And Ryan, I can tell you the first thing that I would do after having an initial phone call with you, if you called me, would be to Google you and for an advisor who’s restricted like you said before, they can’t even have a Google review. So if I’m not able to find anything about you or even understand who you are a little bit more, the likelihood of me as a millennial working with you, is very slim.
Ryan Shanks:
Well, when you think about that, you talk about Googling and pulling somebody up, typically what you’re shooting for is, target number one is a website and that website is meant to drive intel, information flow back to me, I’m going there. But it’s also meant to validate, is it validating this person’s, their competency, their ability to provide what I need for them to provide. And I got to tell you, that’s step number one. And there’s a lot of folks that aren’t even getting that right. It’s having a proper website that articulates who you are, but you nailed it. If I’m captive as an advisor, I’m really not meeting you and saying, “Hey, I’m Ryan Shanks.” I’m really meeting you and saying, “Hey, I’m the brand and I just happen to be somebody that’s going to sort of champion the process on behalf of the brand. So it’s not important that you know a whole lot about me. I’m just here to kind of exercise off of this.” And then when you get onto the other side…
Ryan Shanks:
I love watching that. I love watching advisers that have gone from being captive and restricted to being independent and just feeling like they’re jumping off of the roof into a swimming pool. They’re just celebrating, they’re excited. And they can go about articulating in a way that they always wanted to. And I think it resonates with their current clients, but I think it also gives them the ability to win new business because they’re able to be more authentic. And I think that’s really the key. Are you able to be authentically yourself in a captive environment?
Scott McKenna:
So Ryan, you use the analogy of jumping into a pool, but I’m sure for an advisor who’s moving from a big network to becoming independent, it more feels like jumping into an ocean in that, used to have all these resources and now, you’re kind of on it alone. And my question for you, Ryan, is, if I’m thinking about leaving a network and becoming independent, what are some of the questions that you’d ask me to help gauge how independent I really want to become?
Ryan Shanks:
Essentially it’s what do you want. Do you want control? Do you want brand? Do you want the financials, compliance? You have this vision that you think you could build the wealth management firm of the future and you want to be the architect of that? All those different elements come out. You could say, “Well, I do want to have the brand and I want to have my own website, but I don’t want to be responsible for the compliance and all the…” So it’s up to you and so, what I challenge every advisor is, go look in the mirror and tell yourself what it is that you want. If it’s you just want to be away from where you are now and the environment that you’re in, okay, that’s fine. You’ve outgrown where you are. You don’t like the people you work with, the clients aren’t what’s being put first. It’s something as simple as you can’t charge for a planning fee and you want to. You want to justify your value and you think that that fee articulates that, and you want to be able to put that in place.
Ryan Shanks:
So it comes through all of those elements and some of what I challenge them with is, okay, well, so let’s run through here. You got young kids, it’s a Friday and we’re in a normal world, we’re in a post COVID world and you want to be able to go coach your kid’s game. Do you want the ability to be able to bounce out early to go do that or are you comfortable knowing they did swell? You got to make sure that you’re doing your reporting and your billing to the clients and it’s payroll for the employees. What do you want to be doing in this business? And I think that’s really important. I want to take care of my clients and I’d like to go out and see if I can’t harvest more of the same and take care of them, but I don’t want to be in all these other areas. Okay, that’s great. There’s a solution for you. I want to go and build it on my own. Okay, there’s a solution for you.
Ryan Shanks:
So it varies and again, the issue that you’ve got is if you go out there, depending upon who you go to, to get the advice, oftentimes that advice is self-serving. They’re going to guide you to a destination that might profit themselves in doing so. And it may end up being that it’s not the right fit for you. Those are some of the elements that you can get into. Do you want guarantee and compensation? All right. That’s going to be more of a W2 structure. Are you comfortable with a little bit of that risk and you’d like to get a little bit more of every dollar? That’s a 1099 independent structure. Sometimes I’m like, do you have expenses that could be allocated to the business for you to operate it? All right. Well, that’s going to be 1099 because you can not do that as a W2. So again, it just depends upon their current circumstance, what they’re looking to go and do. Here, we just try to guide them down the right path to ensure that they’re no longer in the moving business, they do at one time and they do it right.
Scott McKenna:
Awesome, Ryan. Well, we’re coming up on our time. I hate to cut it short, but is there anything else you wanted to say before we close it out?
Ryan Shanks:
No, again, we hit on a lot of the things that are really important to me, so you nailed that. It’s the younger generation coming in. What is the path into this industry? For the older folks, what is the path out of the business, handing off the business to a younger generation. It’s the nuances around sort of qualifying opportunities for an advisor. For a firm, it’s sort of taking ownership and taking stake in what you really are putting on the table for advisors and is there of any value there. This has been a great discussion.
Scott McKenna:
Yeah, I totally agree. Thanks for coming on again, Ryan. And for those who are interested, if you’re thinking about making a move, you could reach out to Ryan Shanks at ryan@famatch.com. And if you are interested in streamlining your investment research and portfolio construction workflows, you can reach out to me at scott@etflogic.io, or you can go to logicly, spelled a little funny. It’s spelled L-O-G-I-C-L-Y.finance and you can go ahead and request two week free trial access to our logicly platform. Thanks again and we’re looking forward to offering a whole bunch more of these Speaking Logicly episodes to close out season one. We’re running all the way up until December. Thanks again for listening, guys.
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