How Scott Hanson Grew Allworth Financial From $10M Into a $15B RIA

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In the previous episode in my CEO series, I talked to Mary Beth Storjohann. Now, Mary Beth was just promoted into the CEO role after having been the chief marketing officer at Abacus Wealth Partners. So there's some specific learnings to that particular early stage of being a CEO. Today, I'm having a conversation at the complete opposite end of that spectrum. My guest is Scott Hanson, the co-founder and co-CEO of Allworth Financial. Scott and his partner Pat McClain founded the company back in 1993 when they moved from an insurance company to the independent broker-dealer Securities America, and they brought with them about $10 million in assets. Today, Scott and Pat's firm have $15 billion in assets under management, and they serve about 15,000 families. Scott has been the co-CEO for that entire ride from $10 million to $15 billion. So we're going to get a different perspective here on what it takes to evolve as a CEO, to raise your vision of what's possible, and how to deal with outside investors who own a controlling stake in their firm. I'm your host, business coach Steve Sandusky, and let's get started with Scott Hanson of Allworth Financial. Well, you and I go way back. We met in 1993 when we both joined Securities America that year. I was working at the home office helping them launch their corporate RIA. And you and your partner Pat McClain had just joined the firm as independent advisors.

So— Yeah, we just left Lincoln National Life Insurance Company where we started out our careers and then formed our own RIA in 1993. And then partnered with Securities America for our broker-dealer business.

Do you remember how much assets you brought over back then?

Pat, it's funny, Pat McClain and I were speaking about this yesterday. I don't know if it was $3 million or $10 million. We were arguing. I think it was $10 million. He thinks it was $3 million, somewhere between $3 and $10 million?

I think it was $10 because I remember we were at a conference, one of the Securities America conferences, and you and Pat were speaking and I was standing in the back of the room with one of the vendors and he and I were just looking at each other. We're like, these guys are so good. I mean, you and Pat were just on a roll. You had the crowd in stitches, yet you were delivering great value. And you were talking about how in the middle of the night you left the firm with $10 million and joined Securities America.

Okay, so it was $10 million then. That was the story back then anyway.

Okay, that's right. And I'm sticking to it. Okay. Well, here you are today. From 1993 to today, you've gone from $10 million to $15 billion, which is just an incredible story. And so I'm going to dig into that. And you and Pat have been the leaders of the company that whole time. And I'm doing a series here on the role of the CEO. And I wanted to have you on the show, particularly because you've been there from the very beginning. And you're one of the few folks who can actually be an entrepreneur, found the company, yet still turn into an executive, a leader, a CEO, and run a very substantial 9-figure revenue business. So I think we're going to get some really good insights from you. So let's start with maybe going back to the first half of your career, the first 15 years as the business was really starting to take off. What were maybe some of the challenges that you were facing back then, you and Pat, as the leaders of the organization?

I think it's a— what many people feel as they're running smaller businesses, as you start to grow and start becoming more profitable, and then if you want to keep growing, you've got to decide, do we throttle back on some of that profitability and reinvest for future? Do we hire more people? So those were always the challenges, and we kind of reshuffled the organization. We were tiny before. I mean, I think I remember there was myself, Pat McClain, and I think maybe we had 2 or 3 employees. We had this consultant come out and we put together an org chart with, I think, 16 different job titles. There was like 5 of us total. It was my name or Pat McClain's name in most of the boxes. As we grew, it's like, how are we going to— the next hire, where should this be? We look at that org chart. As time went on, you hit certain levels and it's time to relook at, do we have the right people? Do we have the right structure? And so, it's these kind of inflection points that are sometimes difficult to get past. And I think a lot of businesses stall at one of these points just because it's a little more challenging. But I think the key— one of the things for me, about 20 years ago, I went through a Dan Sullivan Strategic Coach program in the year 2000. So, I was 10 years into business, essentially. I was working like a dog, doing lots of different things. And I got really clear on what I'm good at and what I'm not good at. And the importance of delegating, of true delegation, giving someone both the responsibility and the authority to do a task and the resources. I think from that point on, it was quite freeing for me. I don't have to do everything here and I'm not capable of doing everything and I need to surround myself with really good people. I think one of the things that I feel has been kind of my secret over the years is just having really good people around me. I don't think I'm all that talented. I tend to lack most of the skills required of a CEO. So I don't know if I'd even get a job at my own company if I were to apply. But for whatever reason, I can get quality people to come around me and help me and help us execute the plans that we put in place.

Well, I think you're selling yourself short here. That's for sure. I know you reasonably well, and I know that you have done a heck of a job.

Most people that are successful, it's because there's this kind of gap between their expectations and their accomplishments, and they never feel quite good enough, so they keep pushing forward. So that might be some truth to that with me as well.

Well, a couple things I want to touch on from what you just said there. So one is you talked about, coaching. And of course, you know, I'm a huge fan of coaching. I know back in the early days, back in the '90s, someone that you and I both know really well, Ron Carson, had a coaching program. And I think you were part of his— not necessarily the coaching program back in the '90s, because that didn't—

that was Ron's first client.

That's right.

Yeah, like, I heard him speak at a conference, and I went up afterwards and said, hey, can I come out and visit with you? And he paused for a moment, and he said, actually, I'm having something— we're hosting something out in Omaha. And he told me after that In fact, he called the secretary and said, hey, put together some flyers. And they picked a date. And so it was a weekend. It was myself, Pat McClain, and some guy from Reno. It was 3 of us at Ron's place. And that was the start of his coaching program. And it was very, actually it was quite helpful for us at the time. We learned a lot from Ron.

Yeah, that was probably '93, '94, '95, somewhere right around there.

Yep.

And then he continued to do that once a year, his, I would call it more of a dog and pony show. And then he and I partnered in 2001 and really turned it into an ongoing coaching program, and then I ran that from 2001 to about 2012. So coaching is huge. So you learned some good things from Ron back in the day, Dan Sullivan's Strategic Coaching Program as well.

Michael Gerber, The E-Myth. We had hired Gerber for some things. I hired Bill Goode years back too for some consulting. And when you're small, you can hire these smaller firms. It doesn't cost you an arm and a leg. It's like the larger you get, I think companies just look at the size and that's how they determine their price. It's what it feels like, because it can be mind-boggling what some of these big consulting firms want to charge for projects.

Well, pulling some of those names out, you're clearly dating each of us. That's right. Yeah. So the other thing I wanted to mention here is you talked about some inflection points, and there's some numbers that are thrown out in the industry in terms of when a company reaches this size, that's an inflection point. When they reach this next size, it's another inflection point. And I don't know if it's necessarily that mechanical, but as you think back as your firm grew from $500,000 to $3 million to $8 million to $15 to $30 to $90 to whatever, were there any numbers that sort of stick out? Or maybe what were some of the drivers that might have caused those pivots?

I don't think it's the numbers just as much as a level of complexity. And I say leadership team, we've got a great leadership team today. I don't know if we had quite the same leaders, but the folks we had were the leadership team back when we were smaller too. We just hit these certain points where it just got very complex. And with the team in place, with the resources in place, just didn't see a path forward. It's those type of things like, how do we do more of what we did the last year? Every year, like, the reality is you need to change some things as time goes on, right? And adapt. And it wasn't any specific numbers. It was just, we'd hit these areas of kind of stalling a bit and then figure out we need to do something different.

Well, there's some suggestions out there, particularly out of Silicon Valley, that there's this idea of the rule of triples, in that every time your business triples, things break and you've got to redo things. Whether it's, oh, we've got a CRM system that worked fine at $1 million in revenue, but now that we're $3 million, maybe we need to get Salesforce. Or we're at $3 million now—

I think there's some truth in that for sure. And I mean, oftentimes when we look at whether it's a technology platform we're employing or deploying or some other structure. We're not designing it for 20 years from now. We're designing it for this kind of next chapter, the next 3 to 5 years. That's how we tend to look at things. What can get us from here to there over the next 3 to 5 years? And we'll reevaluate at that time.

Okay. So look at where you're at today, $15 billion or so in assets under management. What are the triggers for you right now as you think, what could break at this point at your current size that you're thinking about?

Well, it's funny because there's often little parts of the company that are broken now. And part of my job is to say which of those are not that important and which ones are highly important. In high school, I was a C student in part because I didn't see the benefit of getting anything more. All I cared about was passing the class and being done with high school. And not that I'm proud of that, but one of the lessons I learned is that there's certainly times in life when a C is just fine. And a C is going to help you get to where you need to go. And so in business, there are times you need to make sure you've got an A+ or a solid A, but there are other areas who are a C, a C- for a small division or whatever, that is perfectly acceptable. And it's not getting too freaked out about that. And it's really understanding what is the core business? Who are those core clients? Make sure you're delivering A+ for that group. But those things on the periphery, like maybe C is fine there. So That's been part of what helps us keep focused on what's important and pushing forward and not always worrying about the things that are currently broken in the organization, sometimes allowing those to be acceptable. But I mean, if I look today, the things that could break, cybersecurity is obviously one of our things we all worry about the most and spend a lot of time and resources on that area. And I think do the best job we can there. And from there, it's really, to me, I look at it, it's more about the people we've got more than anything. I think something that could really derail us would be maybe some sort of a personal crisis with someone on the leadership team. That would be more than anything. Not that it— I mean, we're all replaceable, but there's some people that are really important in the organization. If something happened where they were gone for— dropped out of a heart attack or something like that, I mean, it could have an impact on the business over the short run.

One of the keys to being a great CEO is the mindset that you bring to the job. Let's go back to when you were, say, $1 billion in assets under management, and today you're at $15. So 15x. Do you think you had a mindset of sky's the limit, we can be $50 billion, we can be $100 billion? Did you think in those terms, or was it more, I'm thinking just like the next 12 months?

How do you approach that? I think when I first started, I was young. I didn't set out to become an entrepreneur. I just didn't— I didn't like where I was working before and didn't see any better options. So I grabbed the guy in the cube next to me that we did some work together and said, "Hey, why don't we just go start our own firm? How difficult can it be?" And for many years, it was really just about lifestyle. It's about cash flow, getting enough clients, obviously serving the clients. That was our goal. But from a personal standpoint, it wasn't really about growing some massive company. It was more about getting to a point where I get enough financial resources coming in so I don't have any financial stress at home. That was a lot of it. And I think for years, We operated a bit with a poverty mindset. McClain and I started a separate company in the— right around 2004, something like that, with a very different mindset about selling it within 5 years. And we sold it 3.5 years later to a Fortune 500 company. But for whatever reason, that approach that we took with this kind of startup from scratch, we had a tough time putting with our own business with Allworth. We were called Hanson McClain back then, in part because we were always so focused on that cash flow. It's like, how many nickels can we wring out? We had never brought in any outside capital. I never had in my life, never borrowed any money. It was 4.5 years ago we decided to take in some outside capital. That's where we had a big mind shift because at that point it was, we weren't so concerned about cash flow. We were much more concerned about growing this thing. Now, a conversation I had this morning with our leadership team, we were talking about building a 100-year company. I was just sharing with the team, it was like, that language of 100-year company, we need to be repeating that often so it filters down through the organization and other people start hearing that because I think it gives a sense of security. I think sometimes when you're backed by a private equity firm, or sometimes people aren't quite sure what the future might be, people get concerned, like, what's going to happen when there's another change of control or that sort of thing. So being able to show to the organization that this is something we care deeply about, it's about helping our clients, about helping our associates, we're not just looking for a short-term win here, we're looking for long-term solutions for everybody. So by having some private equity, my risk tolerance certainly increased from where it was before, that's for sure.

Yeah, well, and I want to dig into this inflection point a little bit more because you said originally it's more about cash flow, lifestyle, making sure there's no financial stress. But then about 4.5 years ago, when you decided to take on some private equity, what was the shift then? What was the size of the business then? And what made you say to yourself, hey, I think we could really massively grow this?

Yeah, even though we were at about $2.5 billion, maybe 60 employees, something like that. But a few years before that, if I go back 7, 8 years, I think we were about $1 billion, just over, a little over $1 billion. We decided to grow the organization. Frankly, I wasn't working very much. And my CFO one day came and said, "Hey, I can arrange it so that you and Pat only have to be in the office every other Wednesday. And you don't even have to have email over that time. We'll make sure everything's taken care of." And I'm like, "Well, then what am I supposed to do?" Like I—

You worked yourself out of a job.

Yeah. And most of my, all my experience has been I'm in this industry and I'm being honest with myself, I don't think, I don't know if I was successful, I'd be in some other industries and got a lot of relationships in this industry and whatnot. So we decided that didn't sound like a very, very interesting path. So we said, let's see how fast we can grow this thing. And so we launched into a couple of, we were based in Sacramento for years. And so we said, let's launch into some other markets. So we launched into the Bay Area and to Denver with some de novo offices and a lot of marketing. We were having some success there, but when you started looking at how much capital it takes to grow, it's either going to take us the rest of our lives to get to $10 billion or we're going to have to bring in some outside capital because I was at a point personally where more money was not going to change my life, but less money certainly could. I wasn't going to reach into the piggy bank to start funding this business anymore. Actually, I hadn't in 20-some years anyway. When we brought in some private equity, Basically took some chips off the table for ourselves personally, kind of secured the family finances. And from that point, it's having that additional capital alongside some really brilliant people who help us think through some of our decisions. It really got us to the point where we're thinking, "How big can we get here?" Because we were $2.5 billion just over 4 years ago, we're at $15 billion today. I mean, our plans are to get to $50 billion in another 4 years and the sky's kind of the limit. I don't know how to get from from $15 to $500 billion, but I know how to get from $15 to $50. And so that's what we're worried about right now. Okay.

Now, you almost brushed over something here just a moment ago that would be like a dream, I think, for a lot of people listening to this, which is you'd only have to come into the office every other Wednesday and you don't even have to check email in between. So I think a lot of people want to get to the point where I don't want to say they're irrelevant, but you know that you've built a business, you know that you put the team in place, the processes in place, and things are running smoothly when it doesn't rely on you anymore. So take me back to what did you guys put in place so that you could get to the point where you and Pat didn't have to be there every day?

I mean, I think a lot of this comes back from my time I spent as the Strategic Coach 20, 22 years ago, uh, and I only did one year of the 3-year program. I was a dropout like Like a C-suite would be. I got most of it. I actually went back, I went back about 5 years ago for a couple more years, but I got really good about delegating, really good about having free days. And free days were essentially no work at all, no email, no voicemail. You were just unplugged from the office. And I got really good at those. And to the point my wife's like, what the heck are you doing? I'm seeing you too much, right?

Yeah. Started another business.

But I remember one day I'm riding my bike. I was doing a lot of triathlons. Athlons and stuff back then. This was maybe a decade ago. And one day I just had this epiphany. I think God created me for more than just riding my bike. I love to play. I really do love playing. And I have many kind of hobbies like that. But I find myself personally, I have more satisfaction when I'm helping others do something, accomplish other things. So the whole idea of like working 2 days a month just doesn't sound very appealing to me at all. And when I say work, it's really getting around other people, people that I enjoy being around. Trying to figure out solutions to interesting challenges and watching other people grow in their career and having successes and wins. And I feel quite fortunate in the fact that my career today is much different than it was when I started 30 years ago. I started as a financial planner. I don't really do that anymore. And, but I have a new role and I feel like I'm learning. I'm surrounded by all these great people. It's, I kind of pinch myself some days. I feel very fortunate.

Yeah. And I remember I had a conversation with Peter Malouk a couple of 3 years or so ago when they were at $50 billion in assets. $1 trillion in assets under management. He's the CEO. And he said, "I'm having more fun today than I've ever had." And it seems like you get to a point where the business is of a certain size where if you are the CEO and you've surrounded yourself with the right people, you've got the systems in place and the trains are running on time, then you're doing well and you know you've done it right. And it looks like you got to that position, a few billion into it, you got there, which is great.

Yeah, and I must say we've had a strong Chief Operating Officer. He's been with Allworth, I think, 9 years now, Pete Inglekin. And to be totally transparent, he does some of the CEO roles that a traditional CEO would do. I'm terrible when it comes to Excel or PowerPoint, any of those things, and I haven't bothered to learn how to do those very well, and nor do I care to, frankly. But so I just make sure I've got people that can help me carry the water, so to speak, when it's necessary.

All right, so we've talked about this guy named Pat McClain, this mysterious guy who is not in our conversation today. So you and Pat have been been partners, I think, since day one. Tell me about the nature of a partnership, 'cause so many partnerships blow up. You and Pat have made this work. So tell me, how have you two made it work? And then also, how do you two think about maybe the division of labor between you?

[Speaker] Yeah, and it's, they usually don't work, right? And I wouldn't recommend it starting out, but what's worked with us, we were both at Lincoln National Life Insurance Company right outta college trying to survive. It's funny, I didn't even know they were a life insurance company until like my second day, right? Like, they want me to sell life insurance? I thought this was a financial planning firm. But we started doing some work with retirees from AT&T, the spinoffs back in the day, PacBell. So Pat and I started working together, not as partners, but just doing some joint work together. Hey, let's figure this thing out together. We had unique skills and we complemented each other well, and we had some good success. And so when we started what was then Hanson McClain in 1993, I think the first few months we were kind of keeping our own books or whatever of business. And after a while we said, well, this is ridiculous. Let's just throw everything in the pot together. Let's don't worry about who does what. Let's focus on what each one of us are good at and not worry about the rest. It's worked so well for us over the years that in the back of my mind, and I'm sure in the back of his mind, there's always that question like, "Would I be more successful or less successful if we didn't have this long-term partnership?" But it's worked so well, I think neither one of us are at a point where we say we want to part ways with that and do something independently just because it's worked so well in both growing the businesses and also having good work-life balance, which has always been important to us. We've been working together for 30+ years.

And I think I heard you say something to the effect of you had like complementary skills. So what were those? How did you two complement each other?

Pat actually likes cold calling. So he's not afraid of anything. He loves the sale, loves the hunt, really loves the hunt. Gets bored with any sort of process, gets bored quickly actually.

He's got—

I tend to maybe be more of the glue of the organization at times, have a little more patience with people. I think I connect really well with people. And I think maybe some of the softer side of things I'm a little better at than he is and have a little more patience. And I think sometimes maybe I can see a little further out than what's right in front of us.

Okay. So if I asked Pat, hey Pat, describe Scott for me, what do you think Pat would say?

I've been carrying that guy for 30 years. I don't know. I think probably the things I just said. I don't really spend that much time thinking about how we're supposed to complement each other. Like, we just both focus on things that we enjoy doing and the things that we're not proficient at or enjoy doing, we have other great people in the organization that do those things.

So you're the Lennon-McCartney of the financial industry.

Okay.

And I say that because I'm going to see Paul McCartney in concert in May.

Oh, there we go.

All right. So I want to talk about a few of the areas that a CEO gets involved in, and I want to get your thoughts on that. So one, of course, is setting direction for the firm, vision, strategy, resource allocation. So are you the lead on that? Do you and Pat share those duties? How do you think about setting the direction for the firm?

Well, the board's the ultimate decision maker, but I'm the one who kind of drives that and pushes that. I obviously have people on the team that help figure out the budgets and what's realistic and capital flows and all those sort of things. But I think at the end of the day, I'm the one setting those goals. But obviously Pat McClain, we have discussions about those, but No, it's really about strategy and culture, right? That's what's going to make us a winning, winning organization, and getting people to see beyond their current mess and to see what could be in the future and why the future's a better place than the present and why it's important to change and why we need to do things a little different. And that's a lot of my role.

Okay, now you mentioned here a moment ago this idea of a 100-year company. How did that come about?

Well, I stole the term from our previous private equity partners.

There you go.

In all seriousness, I remember one day I was having a conversation with them and I was thinking about how do we build the business for the next sale, which was kind of surprising the answer from a private equity guy. He says, I wouldn't think about it that way.

Did the PE guy ask you that or did you ask him that?

I asked him, hey, should we be thinking about like Having a list of who's our potential buyers in the future. And he said, "I wouldn't think about it that way at all." He says, "Why don't you just focus on building a company that's going to last generations, a 100-year company? So you build the right company, you're not going to have any problem finding capital in the future." And that resonated with me.

And so since then, I say, "We're building a 100-year company." [Speaker:TREY_LOCKERBIE] Well, I'm happy to hear that because typically you think of these PE firms as 5 to 7 year hold, they flip it, they make their millions of dollars, and they're on to the next kill. But I love what he said there, because if you do that, if you build it to be a 100-year company, you're gonna maximize the value of it by thinking long term like that. So happy to hear that. Do you have a formal meeting rhythm process? For example, an annual planning meeting, quarterly review meetings, monthly, so on and so forth? Tell me how that Yeah, it's the least favorite part of my job.

By my nature, I don't like any, I like every day a little different.

You don't like to be in meetings, I'm gathering.

No, but sometimes they're kind of important and necessary. And I realize like I'm not gonna continue to grow and learn without making some sacrifices. Everything great in life takes work and sacrifice. And although I might not enjoy being in meetings and having scheduled meetings, They are clearly an important piece of the organization. I don't always participate in all the meetings that are happening, obviously, but we have a formal process, weekly standing senior leadership team meeting that we do for 90 minutes or whatnot. And then we've got monthly meetings for our kind of growth strategy, like how are we doing as far as growth? It's a smaller team. It's funny that there's some people in the organization that when you say, hey, Why don't we go tackle this hill? They get all excited. That'd be great. And others look at it and they're like, oh my gosh, that's a lot of work. So when we're talking about growth stuff, I don't like the people who say, oh gosh, that's a lot of work. I don't like them involved in the room and in the discussion. So it's really to surround ourselves with people that are growth-focused. And then we've got quarterly board meetings and we'll do every fall our kind of— one of the things that I don't enjoy as much today, it's that you put together your plan for the year, Obviously, things change and you make adjustments, but when we were small, I could have some idea and like, "Hey, let's go try this thing." And next week we're working at it. Now, because it impacts so many other people and could impact the plan that we put forth, things just tend to move a little slower. And I got to sometimes sell my idea on many more people instead of just myself. But I appreciate the discipline because I am one who will get excited and charge down a path without thinking much about it. It's interesting, our SVP of marketing, Brad Bookstein, he's one of these guys that, first of all, everything is driven by data with him and he never makes the decision quickly. He needs to think about it and do some research and get the data behind it. I'm the opposite of that. I get excited like, "Oh, here's what we're doing." So he's been a perfect balance for me and he's involved in a lot of our growth discussions as well because He's the one who'll kind of maybe have a little reality check on things and then validate when something does make sense.

And I think that's such a great point because if your team was just filled with growth, growth, growth folks, then there's no one to make sure that the trains are running on time, that you're checking to make sure that you've got the capital to make all that happen. So you really need that complementary balance. You can't go too far in one direction though, 'cause otherwise that's gonna be a problem. But I think you need the—

I can't have everyone who thinks exactly the way I think. Essentially, one of the people on our leadership team is a bit of a contrarian. I think whatever we're talking about, he likes to take the opposite perspective, which could be annoying at times and I can get mad at him, but I also appreciate it. I appreciate it because we can all get excited about something and he's the one saying, "Hey, here's the reality here." Then conversely, sometimes we're not excited about something and he'll take the opposite approach. That's been helpful to have on the team.

Yeah, and it's the search for the truth, really. It's— you want someone to poke holes into it because you don't want to have a blind spot here that you're going along your merrily way here thinking, oh, this is great, when someone else could have pointed out a blind spot that you didn't see that really was obvious to someone else, but you just missed it. So having someone that can play the devil's advocate, so to speak, is definitely a good strategy.

And we had an all-day— it was a day and a half of— we did this on a quarterly basis with our leadership team. We'll spend a day and a half together. And this last time we went through the book, The Five Dysfunctions of a Team, Pat Lencioni. I'd read it a few times before. It's a very quick read.

I was just listening to a podcast with him this morning on my hike.

I mean, I think he— I like his stuff a lot, but for us it was just good because we had just some open, honest conversations. And what that led to is two weeks ago, one of our leaders sat me down and called me out on a couple things, which I was so appreciative because one of the things I share with the team, I don't get enough feedback from you guys on— I don't know what, how to improve. I don't, no one gives me a performance report and that sort of thing. So I fired the guy. No, I appreciate him calling me out on those things. And I think of our organization as a team. We like to talk about a team a lot. In order to have a winning team, not only you need to have a good strategy and whatnot, but you need winning players.. And if you think about it, I don't care what sport it is, if you've got someone who can't do their role, you're going to lose. The team is going to suffer if somebody can't catch or throw or whatever, the team's going to suffer. And so there are times in the organization, it's just, I'm sorry, I like this person a lot. They've been here a long time, but we need someone much stronger and with more skillset than that individual has. And so it's either hiring above somebody or sometimes just letting somebody go, which is never easy to do, but that is highly important. As I think back over the last few years, and I just had this conversation last week with our team because we replaced somebody, somebody had chosen to leave. And like every time we replace somebody with a stronger player, we have better results. And just because somebody wants to do the job and they're, you know, got a great attitude, they may not have the skillset. I'm 5'6". I don't think I could be playing NBA. Right. As much as I might have a great attitude about it.

That's right. A couple things there. So one is you talked about no one gives you a performance review, and that's one of the unique things about the role that you're in, the CEO role, in that everyone in the company reports up to you, and then you have this board of directors, part-time people that you meet with once a month, once a quarter, whatever it is. You report to them, yes, but they're not necessarily going to give you deep performance reviews. And so it's a bit of a loan, and I've asked Yeah.

And I haven't gotten much.

There you go.

Yeah.

So that's why it's important to have like—

I mean, it's not, they don't work closely enough probably with me. They see the results and luckily we've had, we continue to hit our numbers all the time. And so when you exceed your plan, the board tends to be pleased about that. So. Right. They're not ragging on you too much.

The other thing I want to mention here is you talk about the team. So absolutely we want to get the best people possible that we can on the team. But we could have a team of superstars that don't work well together. That's right. They're more— okay, tell me about that. How do you think about creating a team of top performers, but also a team that is looking out for the team and not for their own individual?

Well, one thing before we hire someone on the leadership team, the other members of the leadership team interviews that individual and sees, is it going to be a good cultural fit? I mean, right now we just Actually, I think I just got a verbal. This person I've been chasing for over 2 years. I finally got a yes yesterday from this individual. The person, we had them speak to people on our leadership team. And like, I wanted to know from these, like, do you want this person on the team? Will you feel comfortable with this person? Can you work well with this person? And so at times we get a thumbs down or I just have a sense somebody's not going to fit in well with the leadership team and it's a non-starter for us. I mean, this is our team, right? They got to play well together. And they gotta be team players. It can't be superstars that want all the glory for themselves. Right.

And how do you think about promoting from within versus hiring externally? So this person, it sounds like they're outside of the organization. You're bringing 'em in at a high level. How do you think about that?

Yeah, we've had success in both areas. But if I think about the, our leadership team, a couple people have come through us through acquisitions, strong people through acquisitions, and that are on the leadership team. Actually, 3 of those people. And the rest we hired outside. We've had some really strong people as we were smaller organizations, but it just, as we grew, sometimes people just didn't want to run that hard or the complexity of it just wasn't exciting for them or they just weren't able to make it happen. One of the things I learned really early on is that you can't just expect people to grow with the organization. Not everybody does, which is fine because organization, you need lots of different people at different levels. But not everyone's just going to grow just because the organization's growing. And just because somebody wants more responsibility doesn't mean they're capable of it. And those are some of the more challenging decisions. They reverberate. But my experience has been, and we haven't fired a lot of people over the years, but there are times when it's just not the right fit, right? It's not working out for anybody. And my experience has been, let those people go. There's typically a sense of relief from the other members on the team. It might be a first shock, I fired 2 good friends over the years, my 30 years. So one in a different company, but it's never easy.

Remind me never to be your friend.

And I'm still good friends with those individuals. But, and I just remember we had a person, maybe this was 5 years ago on the senior leadership team that just, it just wasn't working out. And I remember telling our HR director, hey, I'm gonna have to let this person go. And just that look on her face, like, oh my God, not him. Everyone loves him. And so when I let him go, I got one of our really strong people came to me with a resignation letter. Like she was quitting over this. And I'd like begging her, please just stick with me a few weeks. Like, don't quit today. If you want to leave, just give me a few weeks on this. And I think as time went on, they realized that as much as they loved this individual, this individual just didn't quite have the skillset needed to run that department well. And the department was suffering as a result. And so as time went on, I think they realized it was the right decision, as painful as it was for everybody. Yeah.

And what I found is that if it's not working for you, It's not working for them.

No, it wasn't working for him.

Yeah. And, and, you know, we're all stuck in inertia, and sometimes you just have to give the person that push to find something new, something that's better for them. And while it might be painful initially for them, like you say, it's a relief. The shock, yes, initially, but usually, in my experience, when I've had to let people go, usually they end up in a better position.

Yeah.

Because they find a better fit for them.

So I also have to look at what's fair to the team. I don't care how nice somebody is. We're all here to do a job, but we, like, we need to serve our clients. We have 15,000 clients. We need to make sure they're served well. We need strong players on the team to make sure that, that we deliver on our promises. And if we've got someone who can't deliver, that's not fair to our team. It's not fair to our clients. A lot of us lose as a result.

Right. So we've been talking about the executive team here. Tell me how it's filled out right now in terms of what are the positions in the C-suite right now for a $15 billion RIA?

Obviously, we have a strong CFO, Chief Operating Officer, Director of Marketing. We're just bringing on a Director of Sales. I think we're calling it Revenue or something. Sounds a bit better. Director of our Financial Services, Chief Investment Officer, Chief Compliance Officer, General Counsel. Probably missing one or two, but—

Okay. So pretty full complement there.

Yeah. People with different skill sets.

All right. Let's talk for a minute about your interaction with the board. So you do have a private equity owner, you have, I think a pension fund you said is an owner as well. So tell me about how you interact with the board. What's the relationship? What kind of relationship do you try to cultivate with them? How do you use the board to help you be a more effective CEO?

We got, had a new private equity partner join us just over a year ago, Lightyear Capital. Our previous private equity partners were Parthenon Capital Partners. They were fantastic. A lot of respect for them. We had a great ride together. And so our current backers are Lightyear Capital and Ontario Teachers' Pension. Equal partners and own the majority stake of the organization. So they're the ones who really kind of comprise the board. Initially, they made up the board. They're kind of handpicked people, along with myself and Pat McClain. We chose to bring in 3 outside directors. So we looked at the organization and said, "Where could we have some additional help that we don't have right now?" And the board before was primarily private equity people. They have a kind of certain view of the world, but can we have some people that have some skills from their own careers that they can help us out with? So We narrowed it down to a few different functions and did a big search with a search firm and have 3 great outside directors. One served as the chief digital officer for JetBlue Airlines, and his whole focus was how do we engage our customers when they're not flying to feel that they're part of the JetBlue family, which in your financial services firm, it was like quite resonated with us. And one was a chief marketing officer for a Spanish bank based out of New York, ran the whole US division. So a lot of experience there. And then One is currently the chief operating officer of ancestry.com and had been the chief marketing officer of Best Buy and Farmers Insurance and really a brilliant marketer. So these 3 outside directors are very different than our private equity partners on the board. Yesterday I had a conversation with one for 45 minutes about some problem we're trying to solve and it's helpful. Like 5 or 6 weeks ago, I had an issue I was dealing with and reached out to different ones saying, "Hey, can I get 30 minutes of your time? Can you help me think through this?" That's where I lean up on the board. We still have these formal meetings every quarter that they are boring, frankly. It's a board meeting, but it's much more the formal time. I think a lot of the work goes on, not really in the board meeting, but in side conversations and in prepping for the meetings and some of those things. There's definitely a level of formality now that doesn't really sit with my personality that well, but but it's a sacrifice I'm willing to deal with.

So some people try and keep the board at arm's length. They're like, yeah, I'm just gonna give you enough. I'm gonna keep you satisfied, but just don't mess into my business too much. Whereas others say, no, no, I, like I think you did say, hey, I wanna get 3 people on here that can really help me. So are you really embracing having the board?

Yeah, here's the biggest, here's our challenge. So we have our plan for the year and for 3 years, like, and we know if we execute well on the plan, it's gonna drive enterprise value a great deal, right? There might be some pieces in the organization that are important but not urgent. We'd say, "Maybe that'll be best for Q4 of this year or Q2 of next year or whatever." But when you have an outside board member who, let's say, their passion and all their history is in that one particular area that maybe it's not a priority for us for another year, year and a half, it's keeping them engaged, keeping that level of excitement that they've got because they joined the board because they want to make an impact. Most of them It's not really about the finances at that point in their life, although it plays a little role, but it's really about they want to make a difference. I think that's been one of the interesting challenges. Then making sure that everyone's aware that while they can have interaction with other members on the team, ultimately those people don't report to the board. They report up through me. They don't work for the board. I let my team members know, "You do not work for the board. The board, they don't have the ability to come and put things on your calendar and on your priority list that, that we haven't agreed to as an organization.

Okay, so I want to switch gears here, and I happen to know that you are very serious about your health. You and I have been on a couple adventure trips, and I'm still on the mountain and you're back at the hotel. You're showered and shaved and ready for the celebration dinner, and I'm still trying to finish the climb. So tell me— yeah, so tell me how you think about—

Dad, are you at the hospital?

Yeah, yeah, yeah. You were with me when I broke my ankle on Mount Shasta. Yeah. So, but I did make it to the celebration dinner the next night, you know, fully drugged up on the pain pills.

Yes.

So thank you for reminding me of that. But I do have very fond memories of Mount Shasta. Went back the next year and we made it to the summit. So that was great. But I want to talk about being as successful as you are. There's pressure. There's commitments. How do you think about taking care of the personal health and making sure that you can show up as best you can and not just be a workaholic?

Yeah, I think for me it's just a passion. It's not like a discipline as much as it might not even be a healthy passion as much as I enjoy working out. Like, I was doing carpool this morning with my kids and my neighbor kids, so I drove the Suburban to the school and got back and I I had just barely a window of time, barely an hour to squeeze in a run. So I went for my run and then showed up on my call. I didn't have time to shower, so I'm like wet t-shirt, sweating all over the place, but my Zoom meeting with our senior leadership team. But I look at my day like, where am I going to get a workout in? Because for me, it's right up there with food and air. I could take a day off every once in a while, but if I don't do something most days, I don't feel very good. I just enjoy moving, whether it's— I'd run and I cycle and I ski and mountain bike, and those are my passions.

Yeah, well, and what's great about that is working out is not a chore to you. It's just, I love to do this, it's just part of who I am, and it's not a discipline. And if it becomes a discipline, it's going to be hard to maintain over time, but it's just a part of, of your lifestyle, it sounds like.

Yeah, but I, I was on a trip a couple weeks ago with a newer member of our team, and I think we're at the airport and I ordered a burger and fries and she was shocked that I would eat. I'm like, are you kidding me? Just because I work out a lot doesn't mean I don't— I'm not that disciplined. I eat junk food sometimes too. And that's right, I enjoy, uh, I enjoy drinking beers.

And that's right, I work out so I can't eat a cheeseburger.

That's right. Although my doctor says otherwise, but that's right, that's right.

Well, Scott, this has been, uh, fantastic here. Is there anything else that you want to mention here that we haven't talked about yet?

I just I spent 30 years helping people. I mean, we specialize all with helping people move from the workplace to retirement. And so often people want to retire because they hate what they're doing. And I think some of these companies with these old-line pensions are probably even worse because people say, "I got to stick around another 7 years to get my retirement." That's like indentured servitude at some point. And they've got all these things that they want to do, their bucket list or whatever. And they think, "Well, when I retire one day, I want to do those things." I think it's such a bad way to look at life. Who knows if we're going to make it to tomorrow? I don't know. This is a gift of today. I don't know if I have tomorrow. So I encourage people just to really make sure you've got time to enjoy those things that are important to you outside of work. Frankly, I think people will be more productive. I don't think there's necessarily a direct correlation between hours spent and productivity. People can be highly productive in not that many hours. So for me, I think people in leadership, and they're modeling for the rest of the people on their team, have a good work-life balance, have other outside pursuits and things that are going to be fulfilling. You'll be a better person as a result. And then if you don't make it to retirement, oh well, like, you didn't miss out on anything.

Yeah, I mean, there's so many people who are retiring from something as opposed to retiring to something. And, you know, that's, that's bad when it's like, man, I just got to get out of this job. I, yeah, I got to put 2 more years in and then I'm out of here. It's like, well, That's why so many people fail in the first year or two of retirement is because they're just trying to get away from something as opposed to moving towards something. And that's the beauty of being a financial advisor is you can help people make that transition and make it a successful one to think about, well, what are you retiring to? What are you moving toward as opposed to what are you just trying to get away from?

Totally agree.

So one final thing I want to ask here is what advice or guidance would you give to someone who aspires to be the CEO of a multi-billion-dollar firm.

I never aspired to this job, by the way. I'm an accidental CEO.

That's right.

It's really looking at what can you do to help the company? I remember years ago, this is 20-some years ago, this woman who was a senior leader at Pacific Bell, which was now it's part of AT&T. And I was talking to this lady, Jackie, started out as an operator, and now she's a very senior role in the organization. I said, tell me about your journey. Like, how did you get from where you were doing? And she says, well, she says, first of all, the rest of the operators, and at 5:00 PM, they all went home and I sat and continued to learn about the business. I'd read every manual I could find. I'd learn about the business. And then my focus really became on, what can I do to help the company? So I didn't worry so much about my career. My whole focus on what does this company need and what can I do to help the company? And I think if people focus more on that, like what are those things that I can do to help this company grow, that's when they'll opportunities. Like leaders present themselves, right? So like we've had areas of our company that like for a few years nothing's really happening. Like, well, the person leading it's obviously not leading it because if they were leading it, it would be growing. It would be going places. If it's not going anywhere, that person who's running it is not a leader. They might think of themselves as a leader, but they're not a leader. And leaders tend to emerge. Like what we've found in the organization is they just start doing things and like they have great ideas and Maybe it's not their idea. Maybe it's someone else's idea and they figure out how to cobble those things together and come up with a plan, sell the rest of the team on the plan. That's what leaders do.

Excellent. All right, Scott. Well, I think that is a great place to wrap up. So I appreciate you being on the show today. And what's the best way for folks to either connect with you or learn more about Allworth?

Oh, we've got a page, allworthpartners.com. It's designed specifically for our partners. We've got 21 M&A transactions in the last 4.5 years and looking for many more, finding like-minded people who want to partner with us. It's funny because we, When we originally started with some of this, we thought it was really all about succession planning, like people looking towards retirement. And while some people have joined us for that, a lot of them have been kind of stuck in their— maybe at a point in their career that hit that ceiling of complexity, that inflection point where they're like, "Do I really want to invest what it's going to take to take it to the next level? Or do I want to figure out something else?" And they partner with us and they shed all the stuff that they didn't like doing and just focus on those couple things that they enjoy doing. So Anyway, allworthpartners.com is the website there.

Yeah, another great point there. You and I could talk forever, but I just want to put this in here as we wrap up, which is not everyone is cut out to be a CEO. Not everyone is cut out to be running a multi-billion-dollar RIA firm. A lot of folks are like, "Hey, I just want to spend time with my clients. I love meeting with my clients.

I love having impact." I think there's a lot of people, they're independent advisors. They got into the industry because they love serving people. They love the financial planning. It's really an interesting, it's a really interesting business, really, frankly. It's all the psychology behind it. And everything. I think it's quite fascinating, but they end up running these small businesses. They get bogged down in all the things that it takes to run a business. And then there's always employees issues they gotta deal with. They're not really skilled at that. And they spend time and headache and all that other stuff. And so a lot of 'em get to the point that they're just happy to shed those things and get back to doing what they love to do.

[Speaker:JEFF_LERNER] Right. Yep. So just like an advisor helps their client clarify what their goals and objectives are through life, an advisor has to go through that process themselves and decide, do I want to, do I want to spend my time being an advisor, or do I want to spend my time running a growing business? And a lot of times it's, I want to be an advisor and let someone else run the business for me.

Well, frankly, our best advisors are probably the highest paid people. I'm not the highest paid person in the organization, so that's fine.

You've done pretty well for a C student.

I might have a bigger equity stake in the organization than some of our advisors, but anyway, that's right. Okay, Scott, again, working for something effort. That's right.

Thank you, Steve. Thanks, buddy. Thanks for being on the show. My key takeaway from my conversation with Scott Hanson is you don't have to have it all figured out from day one. Scott talked about how in the early years they were focused on making enough money to reduce financial stress at home, and it wasn't until well into their careers that they shifted their thinking to the point now where they want to build a 100-year company. 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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