Alexandra Miele: 'Sphere of Influence' Is the New Referral Marketing

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Everybody wants more referrals. Today's guest has developed a systematic referral process that generates 90% of her firm's new business. Hi everyone, I'm business coach Steve Sandusky for Barron's Advisor, The Way Forward Podcast. My guest today is Alexandra Mealy. Alex is a managing director and partner with The Andreal Group and serves as the Chief Business Development Officer for the team. Within the practice, Alex specializes in working with high net worth individuals and multi-generational families. In today's conversation, we explore how her firm has developed what they call a Sphere of Influence program. Now, that's a little different than a traditional referral program. So rather than spending time on traditional marketing programs like webinars, seminars, advertising, and digital marketing, they focus their efforts on the people who can refer ideal clients to them and vice versa in a mutually beneficial relationship. We wrap up the conversation with some thoughts on training and developing career paths for next-generation advisors. I know you are really going to enjoy my conversation with Alex Mealy.

I didn't come from a finance family. I didn't really understand all the different roles that you could have in this industry. So I took my resume in hand and knocked on the door of every financial firm I had ever heard of, which of course in small town Connecticut are wealth management shops. Happened to knock on the door of my current partners today who had a gentleman in their office whose intern had just announced that he was not going to be coming for the summer. I said, well, if you need help, I can work for free. I can work in exchange for college credit and happy to kind of have a waitressing job at night and would just love to learn. Through working with that gentleman, I met my current partners and started in 2008, July 1st, which was a very fun time to start.

I was going to say 2008, in some ways it's probably a really good time to start in the industry.

It absolutely was. I did not think so at the time because it certainly was not easy and it was an environment where not only did the public not have trust in major banking institutions, most financial advisors were not quite trustworthy either, right? Especially after the Madoff scandal. I mean, I vividly remember my first couple months at Merrill and pulling out an old statement because that was one of the ways that they let you prospect was in the program before graduating the practice management program, you were allowed to sort of look through old files, reach out to, you know, quote unquote dead clients. So I pulled a file and and found a Madoff statement from an old client. I was like, oh my gosh, can I like frame this? They're like, no, we have to shred that. Just a wild learning experience. And I got to see how the advisors in the office I was working with, which to clarify was not my current team, this was part of the training program, but just the advisors in the larger office, how the best teams really didn't have panicked client calls coming in. It was more proactive outreach, and the advisors that were sort of smaller, less high performers just were panicked, running around sort of trying to figure out what to do. And it was that sort of focus of the advisors that are proactively taking care of their clients and communicating and focusing on the long-term planning aspect, which even in 2008 was not yet that prevalent, sort of set me on the track to get my CFP, and I had a bit of an identity crisis at the beginning. I said, what is this industry really about? I was getting, you know, the folks that were, you know, very transactional, the folks that were very sort of money-focused. And I called my now senior partner in 2011. I said, you know, what is— what am I not getting here? Because this environment just doesn't seem to be taking care of people that really need guidance and help. And he said, well, now you're ready to come join us. Come tomorrow, right? So that was, that was sort of the evolution. And with my current practice where we're so focused on not only custom investments, but the planning process and proactive communication and education with our clients and empowering them to understand where and why we are taking certain risks in the portfolio, that sort of was a really great cultural fit. And I can't do anything unless my values are aligned with it. So when I move to look at the quote unquote, you know, sales process or growth process, to me it's, It's not about that. It's, I know people need help and I know that I can bridge that gap for them.

So tell me about the current firm and however you measure the size of it and tell me about your role at the firm today.

Sure. So at the Angiol Group, we are a partner team at Hightower. We've been with Hightower, it'll be 10 years in November, which is very exciting for us. And we are a team of 12. So, in 2018, we were a team of 8. So, to be able to have grown to that point, we manage about $1.2 billion in assets. We have 4 partners: myself, our founding partner Charlie Andriol, who founded the practice back in 1989, Rob DeLuca, who's our current CEO, and Matt Montana, who's our Chief Operating Officer. And it's been a really exciting transition from advisory firm to advisory practice. And what I mean by that is with this growth that we've experienced in the last 4 or 5 years, where we went from, you know, $3.5 million in revenue in 2018 to $7 million in revenue just about this last year, we've really had to sort of evolve to all of us really working together and embracing that executive capacity within our practice. So I think some advisory firms run into the trap that we were sort of running into where we were all running around doing the same thing and not really working efficiently together. And we sort of, as partners, realized, wow, we've made it to this point where we need to have executive roles and responsibilities. All these case studies we've looked at, all these, these leadership seminars we've taken, We're here, and not only do we need to invest in building out our infrastructure and building out our, our staff, we need to focus on what we each do best and really specialize so that each of our days are spent as productively as possible. So it tends to be an evolving process, right? If you're not evolving, you're not growing, you're not being the best that you can be. But we've just, just really embarked on this journey of segmenting. So, so as it stands today, my role as Chief Growth Officer is still focusing primarily on what I do best and bring to the team, which is develop relationships with our key referral sources and bringing in assets and cultivating new relationships, working on servicing our more complex, more multifamily office style clients, and then also coaching and bringing everybody together so that we're all communicating the same message. Our marketing is communicating the message that we want, more proactive outbound communication, and also communication within the practice as to what's a healthy client, what should be our service model for each of these different types of client relationships, how should we price, and are we thinking about pricing the same way, do we need to evolve that. And it's funny, my role is also sort of scheduler of executive meetings, so it's, it's making sure that we all dedicate that time as we're making this really exciting transition to to really be focusing as one executive unit and, you know, sort of mapping out our executive priorities.

So, and so your team of 12, how many of those are client-facing advisors?

7 client-facing advisors.

So with 7 client-facing advisors and you're the chief growth officer, how do you think about bringing in new clients in terms of, is it at the firm level? So you're now the chief growth officer, so you're responsible for bringing the people in and then they sort of get fanned out to the 7. And/or do each of the 7 also have responsibility for bringing in their own people? Is it a combination of the 2, or how do you think about the role of bringing the people into the company?

I love that question because that's actually what we're working on figuring out. Because prior to this change, we all do and continue to have new business priorities and responsibilities. But we've never been a culture of, Okay, partner X, you have to bring in X million of revenue by this date. We find it doesn't work, and we find that the clientele that we prefer to work with, which tend to be in the sort of liquid net worth space of between $3 to $15 million, is really sort of our sweet spot. What we find is that those clients tend to take time, right? You can't rush that process. I don't think you can rush any sales process, honestly, when you're dealing with a business built on trust. But when we do what's in the best interest of our clients, their success and ours will come. That's our banner, that's our motto, that's what we all discuss. So as we've sort of grown in our roles and as the practice has, has grown, we've sort of naturally shifted towards, you know, Matt taking on more operational, Rob taking on more leadership, Charlie, you know, focusing more on direction of the firm and culture and portfolio management and My talent is bringing in business and cultivating those relationships. So, this is sort of more formalizing it and also helping the team formalize some of those goals and directions as well. So that, you know, for example, we've got an advisor on our team who really excels at, you know, 401(k), right? So, that's assisting how he can build that piece out. We just brought on an advisor in 2020 who joined us during COVID Actually joined with more of an operational background, now focusing on the growth piece, who works closely with me servicing some of those, you know, more complex trust and estate family relationships. So it's sort of giving more definition and target and coaching to how we're each best spending our time, and then also allowing our other partner capacities to free up to focus more on what they should be doing day to day. So that's another piece of the evolution that we're still figuring out. And I think that's something that advisory practices are sometimes afraid to say that we're, you know, we're not experts and we're rolling up our sleeves. But that's the best part about being independent and being able to, you know, know that your values are aligned and that you're going to continue working out those kinks and continue to get there.

Well, every company and every person is always in a state of becoming. So, there's always something new to learn. There's always some new twist that the business is throwing at you that you're going to have to figure out. So, no shame in admitting we're still figuring it out.

Yeah.

So, you've basically doubled the business here in the past few years, and everyone's going to want to know, well, how did you do that? Do you have like a specific market niche that you go after, or what is the secret sauce here, so to speak, in terms of how you're actually bringing in new clients to the firm? What would be the, quote, the marketing strategy here?

So, we have in our market a very quiet culture. Charlie likes to describe it as sort of the Yankee culture, right, where the families with the most money are, you know, driving around in beat-up shirts and 25-year-old cars and just really quiet.

It's a multimillionaire next door.

Yes, exactly. It's funny because where a lot of advisory businesses focus on client referrals and really struggle with what I've come to find out, struggle with spheres of influence, which is our term as we believe it's not just the center, it's a 3-dimensional space because you're not only working with that one person, you're working with everyone at that their firm, if it's a CPA or an estate planning attorney, and then everyone in their respective networks as well. So that's, that's where that term comes from. But Charlie had sort of always focused his efforts and his networking efforts on, on not driving the client referral, because that's usually very binary, and it's usually— it's not always a qualified referral, right? That might be someone's best friend, but no one really talks about in our communities what, you know, what's your net worth? Like, you'd be a perfect fit fit for my advice. Like, that doesn't really happen. So what he found was not only do these spheres of influence really sort of exponentially refer once they have confidence, he sort of also saw that there was the need for a next-generation person to come in and not just work with the initial sphere of influence, but work with the rest of their team, right? So when I first joined the practice, Charlie actually and this is, I think, so important when you're mentoring new talent coming into the practice, really introduced me to folks that he either knew or were working with some clients but hadn't really formed great referral relationships yet, or just thought, you know, I think you'd be a better personality fit for XYZ CPA. And then he kind of let me run and really kind of take my time to figure out, you know, which professionals do we really want to trust? What I focused on was how do I make myself, one, indispensable to that person? How can I be viewed as a part of their team? And two, how can I remove this referral barrier that so many advisors talk about? And I remember reading a paper that came out in 2008 about how naturally by academic training, CPAs and estate planning attorneys are naturally hesitant to refer to advisors. And the piece was written by a trust and estate planning attorney at Alliance Bernstein, and his theory was, look guys, you're asking someone who is trained to be risk-averse, right? A CPA doesn't want to have an audit, they don't want to perform any tricks with the IRS, an attorney doesn't want a lawsuit, doesn't want a client to sue or lose or be in a risky position. So if you're asking that, that advisor to refer to you and you don't have a track record with them yet, and, and the markets are so volatile that they could refer you one of their largest clients and then see their portfolio drop by 50%, that's a very difficult concept to wrap one's head around if your whole training is to be risk averse and to not take that chance. So how can we evolve our structure to not only help these advisors tell our story, not only develop a service model where we're front and center, but providing real value, but also remove that fear of how do I really engage with this team that I don't know without this fear that this is going to come back and bite me and ruin my own reputation. So what we did was sort of a three-pronged approach. We rolled out our fee-for-service model As we found, we said, you know, these service providers all communicate and charge in hourly fees or flat fees. If I want someone to tell my story for me, why am I asking them to speak in a language that they don't use? Why am I asking them to say, oh, Alex is going to manage your assets for 85 basis points if she custodies the—

What's a basis point?

What's a basis point? What is— why do I have to move all my money to her? I just want to make sure that I'm on track with my plan. And what we found was not only by offering that, but also by offering a menu of services to CPAs, estate planning attorneys, to be able to contract directly with them. For example, family law attorneys sometimes need an expert witness to come in and say, oh yes, this annuity is, this is how this works, or this complex private equity investment is liquidated in this way. Or an estate planning attorney might have a wacky asset that needs to be retitled that the paralegal can't quite get a good contact for.

For.

We said, look, if you, if you want to try us out, you can contract with us with your company. And that was something we were never able to do in the old wirehouse model. So working with Hightower to really build that out and to get, you know, everything compliance-approved and just in a way that we could scale it with confidence, all of a sudden the conversation became, wait, we don't have to tell our clients that you're just going to pitch them on moving the money? They can just work with you And if it doesn't work, they could just walk away with a really great plan. Yeah. And what we saw was that not only did the referrals start coming in exponentially, clients were feeding back to their CPAs. One of my favorite CPAs, who, who is just— she's just fabulous to work with, Alex, she said, I've never in my career worked with an advisor where no matter what the market is doing, just constantly hear good feedback. She's like, What are you guys doing? And it was in reality the relationship that we had set up with her. It was proactive contact quarterly about, hey, here's what we're doing for all of our client relationships and here's where they stand tax-wise. Or so-and-so and I just had this conversation, might be an opportunity for you to look at a Roth conversion in December. Do you want me to block some time? It was how can we help each other generate revenue mutually and how can I be an arm of celebrating and enhancing your firm and your capabilities while you're doing the same. So these relationships moved from a tit-for-tat, who's referring what, to getting phone calls from, you know, one of our largest referral sources on a Friday saying, hey, do you mind if I pull over 30 seconds on the phone? Okay, we're opening up a new, you know, $4 million account for this person. Send out the documents in 2 hours, we'll get it done. I mean, it's now, it's like You're an extension of their practice, and how can you make their lives easier? How can you enable them to tell your story without so many barriers?

With that fee-for-service model, how did you structure that in terms of your fees, and how did you look at that model compared to an AUM model, which might be much more profitable for you?

What we found, which was a bit of a surprise, was that like all ideas, we had to flesh it out. We started and we said, wow, we're really underpricing here. This is We're spending way too many hours on this and we've got to sort of adjust, but what we ended up finding that really sort of worked was that we did market research, right? We had to make sure that we understood what other fee-for-service planners were charging in our market, and we arrived at an hourly fee rate, and based on the scope of the project, then drafted an engagement letter based on the approximate amount of hours that we were finding that, you know, running a complex financial plan or life insurance analysis or all these various projects could take. The client would sign off on that agreement. And then what we would do is we'd say, look, if you decide at the end of this engagement that you'd like us to work in an assets under management capacity for that full service experience, what we'll do is if it happens in the next 6 months, we'll credit the fee towards your first year of advisory fees. But there's no pressure. It doesn't have to happen that way. And what we found was that by the end of going through all of the fee-for-service work, most of those clients were either engaging us on assets under management or were engaging us for recurring consulting services. So, we have some clients that are paying, you know, anywhere from $10,000 to $15,000 a quarter to looking at their aggregate portfolio, which we're able to do through our performance software. We can set up hard data feeds with outside custodians, the clients might not be able to move that money due to loan pledges for their business, or they may have an extensive real estate portfolio that they don't need to sell. And then what we also found was that, guess what, their professional advisors sometimes needed that same visibility. So a trustee that has clients with private equity assets that they're not getting real information on, or real estate assets within trust, that trustee needs to pull up that view and see to see what's the allocation to physical real estate, what's the allocation to private equity, hedge funds, where do we stand in terms of the investment policy statement. So what tools can we roll out that help them fulfill their fiduciary duty? So that has continued to evolve and been just a really compelling option for a lot of these high net worth families that have these complex assets that don't have a good way to wrap their hands around their true exposure. Beyond an Excel spreadsheet. And I think we're a little beyond Excel spreadsheets. So, it's been very exciting. And that was actually our— one of our most recent hires was someone to really help us build out that reporting capability. And it is a lot of man-hours. So, you have to be really cognizant if you're going to take that on to communicate that pricing and make sure that you've invested in the infrastructure, both technologically and manpower to keep that working.

And in your area, roughly what is the hourly rate that you can charge for as a fee-for-service provider?

In our area, it's roughly $300 to $450 an hour. We sort of landed at $350 is sort of about right for us based on what we're seeing and, and really the, the detail of projects that we're taking on. That's where we've landed, but we're continuing to keep an eye out on that.

All right. And I would imagine you're not paying referral fees Absolutely not. Okay.

Nope.

And just tell me the thinking behind that.

So what we've seen is that there are a few complications with that. One, it's sort of a core value of ours that there should never be any perceived or actual conflict of interest when working with a referral source. And to us, it just sort of feels wrong to be referred business because the attorney knows they're getting paid for it versus being referred business because you know that it's what's best for the client. We've heard the same thing from actually from our referral sources. It just sort of doesn't feel right. But then there's also the very difficult aspect of making sure that your referral source is properly registered, properly compliant with their licenses, properly disclosing the referral fees to your clients. And the risk in managing that. There have been epic advisory practices that have run into these issues that have lost their practices because they were not on top of these things. It just seems like, you know, again, fundamentally our core values don't align with that. And then also the risk inherent in adopting that sort of model from a lot of reasons just doesn't quite fit.

And of your 7 advisors, are all 7 of them cultivating relationships with the spheres of influence, or is it mainly you and maybe the other partners doing it?

In it?

How does that work?

Really, all 7 have focused on working with key spheres of influence that we really resonate with. So we do have spheres of influence that we work on together. Some of our larger referral sources will, for example, they know our whole team, so they'll say, oh, Alex, can you take the lead on this one? Or Charlie, can you take the lead on this one? Or Scott, can you take the lead on this one? So it's definitely a team approach. To make sure that we're working with each appropriate person. However, my job has sort of also become to make sure that we're reaching out and servicing those spheres of influence the way that we should be communicating, listening to them, asking, hey, what can we do better? What would you like less of? What would you like more of? And making sure that they are being treated and feeling like they are our best clients because they are.

So during tax season, it's popular for financial advisors to do nice things for CPAs. So Does your firm do anything special for your CPA referral sources?

What we try to do is we have actually just rolled out a new portal where we are proactively making sure that all of our client tax summaries are sort of done in advance. I mean, as quickly as they possibly can be, but sort of that proactive communication, being on for all of the time that our CPAs are on, which can be nights, weekends, that immediate response time. And luckily that tends to be a little bit less stressful for the CPAs we're working with because we're communicating throughout the year exactly what our clients are running into. So there's never, I shouldn't say there's never, but it's very unusual that there's a big surprise for any client because we've been so proactive throughout the year with our communication. Some of the things that we've also tried to do, you know, we'd like to send out care packages to our CPAs, you know, with coffees and brain-healthy snacks to help energize them, send flowers if we know it's a particularly difficult season or if it's, you know, oh, I miss this or I'm feeling buried, just to, you know, brighten someone's day. I tend to, you know, not to be too stereotypical, but I have a wonderful group of female CPAs that I like to network with and female planners that I like to work with. And, you know, I try to take them out for cocktails afterwards, you know, make sure we plan a date to celebrate something together, either with our mutual clients or just as business partners and saying, what, how'd this year go? So that's some of the stuff that we do. Just, I think a lot of those, those spheres of influence have become true friends. So it's, it's not hard to do, right? When you work so closely together on these complex issues where you're in the thick of it together.

Roughly how much of your new business would you say is coming from these spheres of influence in terms of the referrals?

I would say over 90%.

Okay. So you're not doing any traditional marketing outside of that SEO marketing or digital marketing or seminars or webinars or any of that good stuff?

Correct. Throughout my career, I have certainly done those, but we have found that our efforts are best spent at being the most efficient, most communicative. And also there's sort of a— again, it's you have to know your market, But for us, there's a benefit to an air of exclusivity. You know, it's the American Express model, right? It's you want the black card, you want the Andrea Group at Hightower.

You want them to feel lucky that they get to work with you.

Exactly. And you also, you know, everybody is so busy. It's our sort of philosophy that when you hit people over and over again with stuff, they see your name come through and they just hit the delete button. Right. We want our communications to be as such where when they see an email, it's actionable, it's important, it's efficient, and it's something that brings value. That takes a lot of time, but it's something that we see results on. So that's where we try to focus.

I want to go back to something you said here a minute ago. You said you have a tax summary letter that you send out. What is in the tax summary letter?

So for clients that we've been working throughout the year, it's going back and saying, okay, you know, at this time we've paid these, when we do, as a backstory as well, we end up working with quite a few trusts and estate clients who again have more complex tax reporting than just a simple, you know, 1040. So it's which estimates were paid when, where are the income, and you know, going through working with our admin staff of expenses paid out of each trust entity, for example, expenses, income, classifying, everything in an easy spreadsheet so the CPA can just look and say, okay, here's everything that I need to file this tax return. Obviously, the regular 1099 interest and dividends, projected income, projected events for the year, just reminding them of, you know, this fund is unwinding, we're expecting a tax event here, reminder this K-1 is going to be late, so that the CPA can look and say, okay, everything that I've been working on throughout the year is in one easy place for me in one email. And I can go to my one portal and click on each client file that I'm working with, and I know that everything's going to be there. And if I have a question, it's also organized for me that I know that if there's something missing, to ask for it. I just got an email from one of our CPAs this morning saying, you know, I think we're missing the XYZ K-1 for this one client. And the client's, oh, you know, they changed reporting custodians. Let me grab it. Right? That's a tax document that we didn't have access to. To, but it was just so easy for her to pull that up and say, yep, here's the schedule we agreed to in December, here's the tax letter. You know, she found it in 4 minutes, so.

Does your firm have account minimums? And when you do get referrals from your spheres of influence, are you letting them know what an ideal client looks like for you? What happens if they refer someone that perhaps isn't ideal, or does that just not happen?

So one of the other reasons why we love working with spheres of influence for new business and for growth is that you can have those honest conversations with them. And I remember it was a few years ago, it was a CPA we'd been working with for a long time, sat down together and I said, you know, what is the ideal client for you? Because we've been sending, you know, this type of client, but is that really who you wanna work with? And the answer was no. It was, I really wanna work with this size business or this, and I'm, She's like, "How about you?" I'm like, "Well, this is who we wanna work with." And as professionals, I think that it's the easiest conversation to have, but most people don't have it. Most people aren't sitting and saying, "What type of revenue do you need? Is this client a fit for you? Does this make sense?" And having that active conversation before a client is brought on so that we know what we're getting ourselves into and they know that it's gonna be a good relationship for them because even though it seems counterintuitive to decline business, which we don't do all the time, but sometimes we absolutely have to say, you know, this is not a great fit for us. Like we want the client's experience to be fantastic and that's not our core competency. So they're best off going here, here, or, you know, to one of your other partners. If anything, that strengthens the referral relationship because they know that you care as much about their end client as they do. And that they can have the confidence that you're going to give them the right answer, not just yes them to death and then end up with a bad client experience.

When you think about these spheres of influence, roughly how many do you think that you are actively in relationship with? And it could be either like, oh, there's 6 firms that we have active relationships with, but there's like 30 people in total within those firms. Or would you look at it individual spheres of influence, like there might be 5 within a firm, how, how many roughly would you say that you're actively working with?

So, in terms of firms, and again, this really runs the gamut between your traditional referral sources. So, we do a lot of work with divorce attorneys. We do a lot of work with, of course, CPAs, trust and estate attorneys, but also we do a lot of work with, for example, psychologists and folks who are in the athletic industry, folks who are in the insurance world. So, it's sort of a little bit different than your normal— I mean, we have a fabulous referral source who's a florist who refers us business all the time. So, we've got sort of our non-traditional referral sources as well. But I would say we have about 30 firms that we actively refer to, again, across the board. So, it's third-party administrators, CPAs, estate planners, etc. But what we find is that you you can't have a gazillion of them, right? Because one, there's no way for you to monitor that quality, and two, in order for the relationship to really be productive, you really need to know who you're working with. And I personally have made that mistake of, you know, putting faith in someone that I thought I had done the due diligence on who then needed to close their practice down. And, you know, that's never a good client experience, right? So you sort of get burned early on of trusting someone too early and not not really taking the time to develop that relationship. And I think that's also a big mistake that advisors make as well, is immediately expecting that they're going to get business after they have lunch with someone.

You mean that doesn't happen?

No. If it did, it's not a good thing. It's not going to end well. And that's also a tricky part with bringing in new talent too, because in order for the firm to be, and the practice and the team, You know, that should be our primary focus is for the good of the team, for the good of all of us. And when you have new talent coming in, you need to know that if that's your business model, there has to be some time for that to really nurture and grow into a new relationship, whether or not it's a new sphere of influence or a new advisor or what have you. It just takes that time to season and really result in a fruitful referral relationship. So, so myself, for example, my Path up was a little different because of where we started in wirehouse, you know, training and all that stuff. But it really took me a good, a good 5 or 6 years to really start to have the compelling growth that I needed to be in the business development space.

So you mentioned a psychologist and a florist. So are you referring business to them?

Oh yeah.

Okay. And they're referring business back to you?

Yep.

Okay. So how does a florist enter into a conversation about, oh, you should go talk to my financial advisor? How does that happen? And a psychologist.

We have a local florist who is— part of what florists do is they come and they decorate people's homes, and they are with folks, especially in smaller communities, during some of the, the toughest times and some of the most joyous times. So if someone's lost a spouse— and again, it's— we have a very small town, very intimate vibe. So she— I mean, we've been working with her for over a decade, and when people come in, She'll call, say, "Oh, Alex, I have this person for you. She just lost her spouse. I gave her your card. She'll be calling you." We use her to send out for every arrangement. She just does a phenomenal job. She's fabulously talented, reasonable, kind, runs a beautiful business. It's turning folks into advocates and enabling them to tell your story. The psychologist angle is interesting when you think about about the relationships, the fear that most people have around money. There was a statistic, I think it was American Funds, that said, you know, they did a study and they said, well, most Americans are actually more afraid of running out of money than they are of dying, or speaking in public, or speaking in public, right? I think that was number 3. I might be doing a close second, right? So when you think about those conversations that come up in these intimate discussions, money is often a part of it. And usually it's the types of referrals that we're getting are, you know, sometimes second marriages where they're not on the same page in terms of how money should be spent, or even first marriages where they're not on the same page where money should be spent, or, or overcoming behavioral processes around money that may have been shaped from past experience and evolving that to actually be able to enjoy what you've built, for example. So one of our clients that was referred to us You know, she said she had more than enough. And she said, you know, she said, when I was sitting with my therapist and she said, you need to get over the fact that an extra topping on a pizza with your grandkids is going to be 30 extra cents, like you've got enough. You know, she said, my therapist said, yeah, you need a financial advisor to give you that confidence to breathe a little bit. So that's been an interesting referral dynamic for us too.

Alex, let's switch gears here a bit. That was a great conversation there about the spheres of influence. So I want to talk about the next-gen advisors. So you mentioned you've hired several advisors here over the past few years. How are you thinking about training them? How are you getting them up to speed? How are you holding them accountable? How do you think about setting goals for them? How does all that work?

So our practice has always had a culture of nurturing and encouraging and building things in the right way. I'll never forget sitting in my partner Rob's office back, gosh, probably 8 years ago now. And it was right after we had joined Hightower and I was tracking my goals quarterly as you do, you know, when you're in the wirehouse model and need to report for that. And I said, you know, I haven't closed an account in 3 months and I'm really freaking out and I'm not doing something right. And he said, Alex, he said, You're doing all of the right things day in and day out. Just take a breath. And the next day I got like a $3 million referral. So, so I remember just that moment of saying, you're driven by what you're doing every day, not by when things are hitting. And that's why when we're bringing on new talent and mentoring, we really want them to focus not on a number, which could be meaningful or not depending on that person, we want them to focus on driving what we call in our practice fixed daily activities that we know are going to lead to an outcome of success. So, for an advisor that's focusing on business development, we want to make sure that if they're new in the business, they've got the skills and the education to be able to get in front of the type of clients that we're in front of, speak with confidence, So as an example, with me and starting out and reflecting on, well, how are we going to bring on somebody else into the team? We've just sort of figured this out, right? We just sort of jumped in and said, well, we're just going to throw everything against the wall. But when we can be a little bit more intentional about this, how would we design this? And thinking about, you know, your progression as an advisor throughout your career, you say, all right, you start and you're working on, you know, a certain type of clientele and then you're immersed in training, you get your licenses, you know, what's the most key designation for success in the business development space? And for us, that was getting the certified financial planner designation and making sure that if that advisor is going to be client-facing, that they had those tools and skills of all areas. So then depending on where their skill set was, whether or not be retirement plans, trusts and estates, tax, what have you, they could sort of develop their own niche based around their passion. So, and then after that, it's, well, then how do you transition into making sure that the advisor has experience not only on smaller accounts, but also on the big stuff? Because that's where you really learn. And I think what I've seen is a reticence of other advisors to really devote the time needed to truly coach someone the way that my partners coached me and that we're trying to coach our current teammates into things to avoid, right? Like we all know like what we should be, what we should and shouldn't be doing. But if we're not communicating that proactively and not setting them up for success by making key client introductions to clients that we maybe, you know, haven't clicked with or we think that they'd be a better fit for and sort of removing that ego from the process and also recognizing that the time invested is a J-curve. At first, you're going to be less productive with that new advisor because you have to invest the time training. But if you do it the right way and you're very specific about setting goals and what's appropriate for your team and allowing them the connections and the opportunity to be able to fail and succeed— and I'm going to underline fail with a big red underline if I could— to be able to fail gracefully, because that builds grit and that builds hunger. And then developing a really clear compensation structure. So, one of the stories that I share whenever I'm speaking to somebody about next gen and how to develop things in our industry, there has been an eat what you kill mentality that drives the incorrect behavior to building out a really successful practice. If you're nervous about paying your bills because you didn't close enough business, you're naturally going to drive towards negative behavior. And sometimes you have people that you bring on that are morally— that will get over that. And sometimes you have people that need to feed their families, right? So you have this compensation quagmire in our industry that, that I think is really evolving nicely, where advisors are realizing there's really no reason for anyone to be trekking up the hills barefoot in the snow worried about, you know, whether or not they can make it in this industry because they didn't sell enough this month, to how do we develop a real career path for someone with the passion, the drive, the academic excellence, the, the smarts, and just the natural fit to be able to drive behavior towards what's best for our practice. So that model continues to evolve, but we as a team have been moving more towards a salary and incentive compensation structure where eventually if that person does want to become, you know, go on the partner track or move towards revenue, you know, sole revenue relationship, that that can be an option. But giving the flexibility to really flesh out what is this person's skill set, where should they be finding their time, is it operations, is it trading and investments, is it research, is it business development, that's such a key component to building true talent that's gonna last and stay and be committed to your firm for the long run.

So did I hear you say that you might have two compensation models depending on how the advisor wants to operate? Meaning if they wanna be more of a relationship advisor and servicing advisor, it might be more heavily salary and small bonus versus if they wanna be a rainmaking advisor and active in business development, it might be more heavily weighted to bonus or commission, is that?

Correct, that's how it stands today. And we are, you know, again, I think The key is the trajectory, right? You have somebody coming in saying, I want to be business development. But if you're new to the industry, how do you really know that? And I honestly would say most people who are coming into the industry are afraid of that because they think it's just sales all day long rather than relationship building and truly helping people. And I also, as a side note, think that that's a big reason why we struggle bringing women into the industry as advisors because We, in the industry, don't do a great job of communicating what we actually do to top talent, and that feeling of, "Ooh, I have to go out and sell." People don't realize that you sell in every profession. If you're a doctor, if you're a lawyer, if you're a CPA, if you're in business, if you're a real estate, you're selling yourself. You're saying, "This is who I am. This is my brand. These are my values. This is how we can work together." When you look at transitioning, it's also transitioning over an appropriate amount of time. So it's not saying we're going to start here on day one. We tend to start with higher salaries in the beginning and then evolving that based on the trajectory of that individual and what's best for the team.

Well, Alex, as we get ready to wrap up here, is there anything that you want to mention or any question that you wish I would have asked you that you want to share here?

I think that in this current economic climate, one of the things that we as advisors have to remember is sort of back in my first days in 2008, seeing advisors sort of be reticent of calling clients because the market's down or because the headlines are off. You know, you can all day long say, well, you know, we're not about performance and our clients are patient and they're not worried. But it's getting out in front of clients and saying, hey, I just want to make sure that like you're okay.

How you doing?

Do you have questions? You know, we're not concerned, but I want to make sure you're not concerned. And having that proactive approach of, you know, calling on a Saturday saying, hey, you know, Mr. and Mrs. Client, like, just, just wanted to catch up with you for a few minutes. Doesn't— we don't want to have a formal review, but what's on your mind? What are you thinking about? And it could be anything from, we're thinking about going on our cruise, we don't really want to talk right now, to, hey, you know what, Alex, I'm really glad that you called me, and I'm really glad that you took the time to ask what I had to say. It can turn a client from a really difficult meeting coming up, right? So if you might have a meeting scheduled, it's just that few minutes of that getting, making sure that we have the client's true, true feelings top of mind can just really make the biggest difference for our end clients.

Excellent. And if folks want to connect with you, is LinkedIn a good place or—

LinkedIn is great. And another culture of our group that we love is collaborating with other advisors. It's one of the reasons why we joined Hightower, one of the reasons we continue to participate in podcasts just like this one is to share what we're learning, share what we're struggling with, get other teams' feedback and ideas, and just as an industry sort of lift everybody up. All right.

Well, this has been great. So, thanks, Alex, and congratulations on all the great success you and the team have had.

Thank you very much. We're looking forward to getting to 10.

All right, that's all for today. Make sure you like and share this podcast through your favorite social platforms. And for more great podcasts, visit us at barons.com/podcast. Take care and be safe.

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