Key Financial's Patti Brennan on Emphasizing 'Skin in the Game'

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Hello and welcome to The Way Forward. I'm Scott Wengor, Editorial Director of Barron's Advisor. Today we welcome Patti Brennan of Key Financial. Patti and her team of 28 oversee client assets of $1.7 billion. She is also a ranked advisor on the Barron's list of top independent advisors in the United States. Patti, welcome.

Thank you so much, Scott. It's a Real pleasure to be here.

Today, Patty and I are going to talk about culture. Every firm, every company, every corporation, every organization insists that their culture is what differentiates them. But a lot of it can be talk and not action. Patty and I are going to dig deep on this today to see how firms can really build a culture that can differentiate them and help drive their practice. Patty, let's get, let's get started.

Sounds great.

Most employers insist that their culture differentiates them. But certainly, some organizations are far more advanced than others. Walk us through some of the best practices, and then we'll pick apart some of the ideas and how advisory firms can really tell if the culture that they're trying to build will really help differentiate them and grow their business.

Yeah, you know, Scott, it's really interesting. When I hear you asking this question, I think about our culture and I think, gee, you know, was there a book that I read or was there something specific that I followed to create the culture that we have today? And I must say that it's really kind of evolved over time. It's, you know, I have— I've got this sign in front of my desk and it's one that I quote, you know, an awful lot. It's John Ruskin's quote. It basically says, "When love and skill come together, expect a masterpiece." And that's really kind of our motto. I borrowed it from a dear friend of mine. And basically, it sounds kind of corny, but it really is effective, at least for us. Love everyone, expect excellence. And that's what we get.

Interesting. You said to me recently You want to be the reason everyone loves coming to work. As a leader, why is that so important?

I think it's so important because we spend so much time together. And I think when you think about it, even our hiring practices, one of the things that I look for is, do they have a really good sense of humor? I will tell you, naturally, I'm not naturally a funny person, but I love to laugh. And I love people who have infectious laughs as well. It is, I have to tell you that it's almost like, I don't know whether it's, it's pretty crazy how much fun we have here. It is, not a day goes by when you just don't hear people absolutely losing it for one reason or another. And it just kind of makes it easy to come in. You feel like you're leaving one home to come to another home. That's the spirit of all of this. And I think that that's for us, And for me, that's effective. I also think that, you know, at the end of the day, we have to understand that, that people, people go through stuff. And, you know, it's really nice to know that you are in an atmosphere of unconditional acceptance, unconditional love, that we're here for each other no matter what happens. And I can give you some examples of that.

You know, I just want to point out that the dynamics you're describing are that of a family, right? We're supposed to love our children. Our parents are supposed to love us, we all hope, with that unconditional love. You are applying that in the business sense now.

Yeah, when you think about it, I mean, think about it. I think about my business as a table with 4 legs. Every once in a while, one of our legs gets taken out. And for me, the equivalent is like For example, if an employee is going through a difficult time. A good example of that is several years ago, we had a member of the team, father of two young children, and his wife was diagnosed with a really aggressive form of cancer. And basically, I brought him into my office and I said that, you know, while they are going through this as a family, coming to work is optional. And when, when, when you— when he comes in, and I said, when you come into work, I want you to come in because you're looking forward to the distraction, that you want to laugh, that you— that sometimes it's okay and it's healthy not to have to think about the implications of what you and your wife and your family are going through. And after that conversation, I shared it with the rest of the team And it was really amazing over the next year when that gentleman came in, like nothing happened. I made sure that he knew that we were all thinking about him, but it wasn't something that we were going to bring up because part of the reason that he was coming in is to kind of get away. And that's what we're here for, right, is to, is to give them that opportunity. And so basically, we as, we as a group, as a team, became his fourth leg.

I like that. I like the table analogy. I think it shows that we need each other to support each other. And that sometimes there are probably— you could construct a table that's three legs, but properly, you know, you need that support because we know that a table with two legs would not stand. And I think that kind of understanding and that kind of connection with employees through their ups and downs breeds loyalty. And that kind of intense loyalty is the way that at your firm and your peers in the industry look to grow their practices by having employees really motivated to do the best for your clients.

It's just amazing, and good for you for picking up on that, because I have to tell you that, first of all, the rest of the team, while we were going through that period of time with that, that family, the rest of the team really got the message that if something happened in their family, if they needed something,— and unfortunately, that has happened— that they would be given the same consideration. And I will also tell you that when those additional things occurred, guess who was the first person to step up? It was that person who was going through it. Fortunately, his wife is doing great. Everything is fine. But it does. It builds that loyalty. It builds that understanding that, you know, That's what life is. We certainly saw that during the pandemic, didn't we?

Oh, for sure, for sure. And part of that loyalty, of course, because this isn't a hobby, it's our work. And at every level, we devote so much of ourselves, we derive so much satisfaction, and it helps us identify who we are in the working world. But at the same time, employees at every level are motivated by compensation?

I will tell you that in our firm, at Key Financial, I'm really the only rainmaker, if you will. Our firm is based— we've got departments, financial planning, and portfolio management, key client services, et cetera. And with that in mind, everybody is on a good base salary. That, to me, is really important. I don't want anybody starving. I don't want anybody worried about how they're going to pay their bills. That's really important. And they get recognized individually when they do something really good. It's really important to catch people doing something right. I think that a basic human need is this feeling like you're— I think it's important for our employees to feel like they are making progress. And that's my job is to help people grow personally, professionally, and financially. And so that's a baseline kind of start. We start with the salary, recognizing when people go above and beyond. And when I do that, I don't just say, I gave you a raise, or I gave you a bonus. I'm very specific as to why they received it. I am not a fan of cost of living raises. Nobody gets a cost of living raise here. Here at Key Financial because they really didn't do anything for it. So, they can't tie their behavior or their actions to their compensation. So, when they do those extra things, and by the way, it may not be just one time a year. I have a couple of employees who got 3 raises in 1 year. And then, I've had those people who didn't get anything for 3 years. And then, all of a sudden, they just popped into gear. And I will tell you that that one person I'm thinking of got 2 plus a bonus. And I wanted to reinforce the new momentum that that person was making. So it's just being very specific and targeted. Again, fair baseline. And the most important thing is they're part of a team and they're making progress.

And what you just said a moment ago, that you're trying to underscore productive behavior. You want to encourage it by identifying it. And then at that moment, swooping in with a compensation increase. So that way the person really ties it to their future behavior. Of course, as the principal of the firm, and as you put it, as the chief and perhaps sole rainmaker, having the clients come in the door and then stay on board is vital. I know you've shared that you've got about 700 clients. Share with us how client retention factors into your team's compensation models.

I will tell you, that is the most important metric I follow. So, just to kind of give you a feel for, again, how the compensation structure works and kind of what makes us a little different, I think, is that I want everybody to feel like they have skin in the game, that we are really a team, that we work together, and we, you know, everybody, you know, plays an important part. So, the way that I kind of demonstrate that is at the beginning of the year, every year, we set a goal. And the goal only has 2 metrics. Number 1, client retention. We must have 98% retention or better. And then, the second metric is new money. We get new money, new clients through new clients, or because we're doing a great job for existing clients. And in the beginning of the year, we set a goal. For example, last year's goal was $110 million of new money. And every week we post where we are with both retention and new money on the whiteboards throughout the firm. So everybody knows exactly where we stand. At the end of the year, it doesn't matter what you do at the firm. You could be a CFA, MBA, CFO, CP, you know, unbelievable, you know, people work here. I'm, I'm just so blessed. And we have amazing, amazing people who answer the phones, help with the scanning and the copying, and, and, and are in key client services. Everybody makes this enterprise work to serve the clients. And so at the end of the year, we kind of look at those two metrics and If we have 98% retention or better, and if we hit the goal, everybody receives a bonus check on top of the bonuses they got throughout the year, on top of the raises.

And amid COVID last year, you still managed to hit your business goals and pay out those bonuses. Share those details with us, if you would.

So last year, our goal was $110 $150 million. At the end of the year, we actually brought in $162,195,090.

So, 50% better than your goal.

Exactly. And you know what's really interesting about that? We have consistently out— overachieved on our goals every single year, even though we increase them every year. And it's weird because it's an all or nothing. If we don't hit the goal, they don't get a check. We don't hit the 98% retention or better, it doesn't matter if we brought in $500 million. No one's getting a check. Right.

Because if you're bringing in all that new money, but you're losing clients, money's coming in the door and then it's going out the back door.

Exactly. And by the way, that's, that's a really good point you've just brought up. I don't measure net new money. In other words, money coming in, and then money going out, then a net, because I don't want anybody to be hesitant, uh, you know, to send money out to a client. Let's say like last week we had a client who wanted to pay off their mortgage. We went through the pros and cons, and it— and basically they said, I just feel more comfortable not having a mortgage when I retire. Terrific. We'll send you $300,000 right out of the portfolio. That is in their best interest. I don't want to— I don't want any of our employees not doing those things because they think it'll affect their year-end bonus. Does that make sense?

It does. And, you know, 98% is also a pretty tough number because obviously, you do the quick math here, 2% of 700 means that you don't have a lot of room for dissatisfaction. Just 14 clients walk away. And you'd be below 98%. Tell us about what the retention rate is thus far as we, uh, head quickly toward the conclusion of the first half of 2021.

We have lost 2 clients, uh, year to date. One was not a client— it— the— interestingly enough, the assets were not significant. The one, it just made sense for them to be a client anymore. The other one, I'm not gonna lie, I I'm bummed out that they chose to leave. Um, it happens to everybody. It was a misunderstanding that occurred in COVID. Ironically, I had called these people on a Saturday in the midst of COVID uh, because I wanted to check in and see how they were doing. They called me right back. I— and by the way, I left them a long message, you know, yada yada. I, I left them the message They called me right back, but I didn't get the message that they wanted another call. So I thought that everything was fine. And so we moved forward and then we missed an email that he had sent. And so unfortunately, because we are painfully human, that's what happened and they chose to move on. So again, I'll always give it to you straight. I, you know, we're not perfect and that was a client, the assets were not significant. I just felt bad about it.

And I appreciate your candor on that because, as you say, we're all human. And I think as managers and leaders, we should be upset and frustrated with ourselves when an organization we manage, whether it's someone who reports to us who made that error, whether we ourselves made it. What I always try to do, and I'd love to hear your thinking on this, is what can I do next time to ensure that the same mistake, if possible, because it's not always possible, but if possible, the same mistake doesn't happen twice? Are there any processes you put in place to ensure that calls and emails aren't missed, or how else did you try to change your standard operating procedures?

I think first and foremost, I learned a long time ago that the most important the thing that I can do is to make a proper apology. And so in that particular case, I called that client. They had already made their decision, the money was already gone, but I circled back and I just wanted to let them know how sorry I was about the circumstances and to learn from them what we could have done differently. I got to tell you, it was a great call. I mean, I think that it, you know, they were just really surprised that I even did that, and I learned so much in the process, and I really, I really appreciated their honesty and the feedback. So as a result, what I— and I had already known about the email, so on that particular call, I was able to tell them that we now have a new system thanks to them. Unfortunately, it did happen. So on the emails, the email actually came to me I've got a second set of eyes reviewing all of my emails every day because I get a lot of emails, and unfortunately that can happen. And so that is the process that we have implemented as a result of that situation. And that client really appreciated knowing that, you know, I wasn't— we weren't just moving on, that we were going to address the issue. The COVID situation and the phone calls, I will tell you, I don't I don't know about you guys, it was rather chaotic and we were just trying to reach out to every client. Um, so that was just a misunderstanding.

So, but I think the big takeaway there is that you owned up to it. It's your name on the door. Uh, you know, it's not your team that's necessarily ranked in Barron's and that's, uh, pulling in all the clients. It's you. So as the executive of the company, telling a client who has actually already walked away that you're sad but respectful of the decision. I think that you're right. I think that sets an example. And I presume that you shared your decision to contact the client with your team and told them that, you know, we need a different process going forward to prevent this kind of error from happening again.

It was a— it's a really important point because those things do happen. And it's my job as a leader of this firm to really How do we set the example for the rest of the team to say when these things happen, because they do happen, how are we as a team going to address them? What's the next right thing? That's just so important. And that's a motto that is kind of part of this entire culture. When you're faced with a decision, when you're faced with something, ask yourself the question, What is the next right thing? Use your conscience, use your integrity. The character of this firm stands by those decisions. So, always do the next right thing.

You spent some time at the outset of our podcast today talking about the culture you're trying to build in your office where there is a family kind of feel. There's hard work, but there's also laughter. Both are prioritized. It sounds like Up until a year and a quarter ago, you and your team were in the office crunching the numbers, sharing some laughs, digging in deep and trying to deliver for clients. And then, like virtually every organization on the planet, all of that was disrupted and you found yourselves all having to work remotely, scrambling to get on video calls to get more robust messaging systems in addition to email, a lot of phone calls, of course, no doubt. How has that changed your thinking now on whether everyone needs to be in the office every day?

I will tell you, when it first happened, of course, we set everybody up in their homes, got them their equipment. But that was the one thing I was really worried about, is how it would affect our relationships, and our ability to work together. I will tell you that it was clunky. Some things took longer to get done. The biggest thing that I was worried about was, are things going to fall through the cracks? And fortunately, not very much did fall through the cracks. But to me, the most important thing was to maintain the culture, maintain the relationships, And of course, you know, we did the same thing that a lot of firms did. We had Teams meetings and we, you know, got together virtually. During the summer, I, you know, had the entire team over my home and we were in the backyard and it was kind of funny. We were all gathered in a huge circle, socially distanced. I have to tell you, it was a blast. We had so much fun. It was really just so good to see everybody. And, you know, it was just kind of one of these things. We got beers and wine and, and just kind of chit-chatted. Of course, I talked about what we had been through. One of the things that while it was going on, I was really transparent with everybody, and, and I'm going to be transparent with you. I mean, I don't, I don't really— I have— I don't have a background in any of I was an intensive care nurse. What do I know about business? I don't know anything about management, so I'm kind of winging this, to be perfectly honest with you. And I'm very transparent with my team. So when COVID happened, I said, "You know, this is new for all of us, and I just want you all to know we're going to figure this out." And as things evolved, I just kept on saying, "We're going to figure this out." figure it out. We're going to figure this out together. We're going to find out what works, find out what doesn't work. And that's basically what, you know, how the approach has continued. As it— as if we could fast forward to today, I will tell you that this is not a 9-to-5 type of organization. And what is interesting about that is while we're much more flexible in terms of Do we need to show up in the office every single day? What I think is interesting is everybody does. We are much more flexible. For example, during COVID we got a benching system with the plexiglass so that if people did want to come in and bring their kids in, because most of the kids were out of school, it was virtual, we set them up so that If mom and dad wanted to come in and just stand over their kids' shoulders, but also be here to get some stuff, then they could do that. And what's really interesting to me is they're still bringing their kids in.

In fact, you've told me that you actually redefined your firm's Take Your Child to Work Day into an almost standing permanent invitation. Tell us about that.

Yeah, it is so interesting. I think that people really appreciated the flexibility, the ability to do that. There was no judgment. You know, I have 4 kids, so I understand how chaotic life can be and to figure out who's going to, you know, pick kids up from childcare or pick them up from school or what have you. And, you know, a lot of our families are, you know, dual-income families. So it's this tag-teaming, this divide and conquer. And so whatever I can do to create an atmosphere spheres to help them to that end. That's what we have here. What's— what I think is fascinating has been the client responses. I had one client who came in 2 weeks ago. They loved seeing Susan's 2 daughters at the front desk with Susan. They were working on their— they were working on their homework, they were doing their thing, and they just really thought that was unique.

They thought that was different, and they really thought that they said that that said a lot about our firm, that, that there could be a family presence, that works can still go on, people can be productive while, uh, the youngsters are being productive with their own set of work, which also has to get done. And it can be easier for parents to ensure that their kids' work is getting done and their own work is getting done when they're in a safe environment and where, uh, you know, if they can be respectful of the office atmosphere. It's really a great learning moment for them to see the way adults get it done.

Absolutely. And what's fascinating about that, I think that you and others listening to this call today might wonder, gee, is it a huge distraction? I will tell you, for us, it has not been. These kids are great kids. You know, they're not running around, although one little girl does, and we just think it's hilarious. She's adorable. But you know, for the most part, you know, Things just continue and the kids are corralled and we've got separate areas. I've actually thought about maybe taking that one step further and maybe getting a nanny or childcare added to kind of the perks that we have here at the firm because we do have a lot of young families, people who are having children, babies, things of that nature, making it easier for mom and dad. Right now, we don't have that need that I've I haven't had anybody express that need, but we, we fortunately have the space to do that. So it might be something I look into in the future.

Beyond the client retention, which is an obvious essential metric, are there culture metrics that you think about or that you measure that help you measure whether your firm is growing at the right pace and whether the culture is evolving the way you want it to?

I think that I don't know that I have any metrics, but there are clues. The clues are, for example, we don't have turnover. I mean, pretty much people are here and they stay here.

That's a pretty vital metric, turnover.

Yeah, yeah, it's pretty good. And it's been amazing. I mean, I will tell you, these people could go anywhere. Honestly and truly, and yet they stay. So, to me, that's a clue. As COVID began to lift, another clue was that, gee, everybody kind of wanted to come back. That was a good sign that says maybe we're doing something right when it comes to culture. Initiative, the things that my team has come up with over the last 2 years alone, whether it be a podcast program with videos, or whether it is an executive dashboard that someone created for me so that I could manage the business more efficiently and more effectively. Somebody did that on their own time. They taught themselves a coding language and thought, "Gee, I think Patty would really appreciate this." Like, I didn't ask for it. They just did it. So those are clues that maybe we're doing something right.

I love that. And as our final question, the time has zipped on by. In keeping with our Barron's tradition, please share one actionable idea that our listeners can put into practice right away with us. Can you tackle that for us?

I have not done this yet, but I think it's such a good idea. I'm going to be doing this. So, I got the idea from the CEO of a hospital, and he's a very dear friend of mine. And basically, the idea is this: have your team write down 5 words to describe your culture and your values. They're just 5 words. And then, bring them all together and see if there's some overlap. See exactly what your team thinks in terms of what they believe their culture or the culture is. For example, Mike Duncan, who is the CEO, did this in the hospital, and they came up with something called ICARE. And ICARE stands for I is innovation, C is collaboration, A is accountability, R is respect, and E is excellence. I care. And every employee has memorized that.

It'd be great to have firms do that at certain firms where they might want to tackle that anonymously to really get the true feedback. But if they feel like everyone is firing on the same cylinders at the same time to really build toward that collaborative direction, it's a surefire way of getting there as quickly as possible. Patty, thank you so much for your time and sharing your knowledge today.

Thank you so much, Scott, and thanks to all of you who tuned in today as well.

Yeah, I think it's so vital that culture be part of the way a company is not just trying to grow revenues, but grow its mission. And you've made it clear for us how they are so intertwined. So again, thank you to Patty Brennan of Key Financial, and thanks to everyone for listening. Please tune in next week for our Barron's Advisor Podcast, Actionable Intelligence with Steve Sandusky. We'll be back in 2 weeks with another edition of The Way Forward.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.