Scott Sparks: How Starting in Insurance Gave His Firm an Advantage.

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Welcome to The Way Forward presented by Barron's. I'm Ray Scalfani, the founder and CEO of ClientWise, and today I'll be your host. Well, what does it take to build a firm designed to last more than 200 years? My guest today has made that his mission. Scott Sparks is the founder of Sparks Financial, a Barron's Top 1,200 ranked firm. He and his team have been recognized by Financial Times, Forbes, and even locally in the Denver Business Journal. However, what sets his firm apart is their vision, and we'll dive into that today. His firm serves hundreds of families across the country with more than 100 of those families multigenerationally benefiting from the depth of a family office and the scale of a national platform. Scott has built a career on differentiation, expanding from insurance into comprehensive wealth advising and family office services. He's hired more talented individuals than he initially believed necessary and designed career paths and equity structures that will endure beyond him. Today, we'll discuss his journey, the lessons he's learned, and how Sparks Financial proves that growth, values, and legacy can all work together. So Scott, welcome. I'm glad you're here today.

I'm excited to be here.

Well, let's start with your story. How did you first get into the business and When did you realize it was time to expand beyond insurance into the broader wealth advising space?

Well, Ray, to be honest with you, there was no path originally. I was gonna be a doctor. And in college, I went through organic chemistry, biology, that was not my strength or my passion, fell in love with some financial classes and ultimately found my way into a building where I dropped off a resume to build my resume for a financial, what I thought was a stock brokerage opportunity. Ultimately, Northwestern Mutual, yes, an insurance company, decided to give me a chance. I was the first college intern in 1989 with Northwestern Mutual in Denver, Colorado. From there, the story, what you had alluded to, was really not the path I had thought about. It was an insurance company, and that was the path that I started down, and that's how it all started 35 years ago.

What a heck of a story. A walk-in, no doubt.

A walk-in.

How about that? All right, so that moment of expanding, you start in this insurance space and then move into wealth advising. That's a real turning point for so many. For you, what was that moment like when Sparks Financial needed to be more than just a traditional practice?

You know, for me, in all honesty, being kind of the reverse of our industry where I think a lot of people today are bringing insurance into the wealth management space, I started in that insurance space with an insurance company. And to be perfectly honest with you, in 1999, I was really bored. In fact, I was on the verge of wanting to leave the industry entirely. Northwestern Mutual purchased a company, the Frank Russell Company. I saw some excitement with regards to the investments. I also saw this huge need for our clients to really have an expanded service base. We started with planning and always have done planning from day one, yet we were largely focused really solely and only on insurance. But with the Russell acquisition, Northwestern Mutual had an entree into a new space that really revitalized me to get excited and really think about it from a 3-pillar approach versus a 2, planning first, insurance, and now investments. So I really got reinvigorated, but realized that I had to do this with other people because I couldn't do all things for all people.

That's great. So, so what did the transition look like? Tell us a little bit about some of the key steps because so many advisors today that are high performers are thinking about adding services and expanding their roster of team members, but also the services they offer clients.

Yeah. Well, for me, Ray, honestly, 'cause I had had about 13 years, 14 years with some of the clients I'd worked with, my first and biggest issue was trying to reframe myself and still reframe Northwestern Mutual. And we'll talk a little bit more about that, I think, but really I had to hire some folks. I had to elevate some folks. I had to rebrand what we do for clients. I saw our clients really wanting expanded services. So it started initially with just traditional investment management, retirement planning, education planning. We were already in the planning game. One of the things that I have to attribute to my roots was simply the idea of client building was first and foremost. And so being in the insurance business, that was something we were really, really good at., but now we had to bring a whole new framework to them around planning in the investment space. And I got really excited. It reinvigorated me. So I went out and partnered with a friend of mine who was at A.G. Edwards and brought him into the business. And he became the insurance person. And to be honest with you, when I would tell something to a client, they would look at me as the insurance person and he would say the exact same thing. And 5 minutes later, they thought that was a great idea. So I had to check my ego and let Gary, in this case, really bring some of those ideas forward. And that was an opportunity.

So Gary was your investment guy and you were doing the insurance side of things and together doing planning, you know, those pillars of the CFP framework and also the Investment and Wealth Institute Certified Private Wealth Advisor certification, that CPWA for high net worth families. You know, these kinds of structures and education they invigorate lots of folks to think about the future differently. How did it guide your team in terms of the structure and the value you were creating?

You know, for us, honestly, we were already doing a lot of what they talk about as goal setting and holistic planning and really truly acting like a fiduciary. In every circumstance, back to day one, I was always trying to position myself in the shoes of the client. What would they want? What would they need? I never really thought that people that came into our business that were looking for the big payday were gonna make it, and lo and behold, that's true. And so with that whole ethics standard, doing the right thing always, starting with planning, it really was a framework for us to build upon. And today we have over 12 CFPs on the team and other folks, and that is just something we adhere to always, and integrity is never gonna be compromised.

Yeah, that education, the certifications, the credentialization, that's a real, characteristic of your firm that sets you guys apart. How, how serving families across generations, so many talk about it and you've witnessed the impact of insurance firsthand. And so many of the RIA community is now introducing more insurance products into their client relationships. Tell us a little bit about why you believe it's so crucial for client outcomes and how does it influence the way Sparks Financial builds those lasting relationships with families?

You know, in all honesty, I think it was a blessing that we started in the insurance space, 'cause I have always said that selling insurance will always be sold and investments are bought. And so many times in the insurance space, you're talking about things nobody wants to talk about: death, disability, wills, trusts. Those are things that are frankly not that fun. And so in the insurance space, we're always dealing with what could happen. And usually people don't want to talk about that. So it's interesting. If you look at home foreclosures across the country, over 50% of them are due to disabilities, whereas 3% of home foreclosures are due to deaths. So that tells me that people think about life insurance a little bit more than they do disability, but yet younger in your career, when you don't really have a balance sheet, you don't have an asset, your biggest asset is your income. And us talking about what we call human life value, that ability to protect that future income. Unfortunately, in 35 years, it's come firsthand. I've delivered lots of disability checks and kept people's financial futures afloat. And many of those people became our A+ clients in years in the future as they recovered from those situations. So insurance is a unique space. I think it's highly misunderstood. We use insurance in a lot of different aspects. There's some real tax aspects around insurance. We've been fortunate our organization has access to some of the same tools and strategies that some of the Fortune 500 companies use for some of their non-qualified deferred compensation. And so it's just a unique area that I think as we think about doing holistic planning, it's critically important to have an understanding We've got education in it. One of our values in our firm is something we called Kaizen, which is just constant continual improvement. And so we have an insurance group that really the insurance industry is changing just as fast as the investment industry. And so staying abreast of all the different aspects of insurance, disability, life, long-term care. Unfortunately, some of these things are not fun to talk about, but it happens.

But they're really human.

They're really human.

Yeah, they definitely set the stage. I've observed early on that those that start with investments as their focus have a much more difficult time transitioning into talking about these difficult conversations, disability and death, and where insurance fits in. And at the same time, I've witnessed those that start with the insurance have a much easier time to incorporate the investment side of the equation. And yet each of these are the pillars within the CFP.

Yep, absolutely. There's no doubt about it. And I, I do, in hindsight, looking back, and it was all by chance, I am glad I started down the insurance channel and learned that path because to your point, it's, it's a challenging conversation. And that's all I knew for 10 to 15 years.

Yeah, that's great. So, you know, you've built a firm that just doesn't expand services, you know, But you've really differentiated and you've talked a little bit about that, but I want to get into that just a little bit more. Talk about how Sparks Financial stands out, what feels like kind of a crowded industry where everybody's doing the same thing.

You know, we have really focused on the areas that we feel like we can do the best. For us, that's pre-retirees and retirees. So in that space of what I call retirement planning, I think a lot of people talk about it. Frankly, I see a lot of people talk about it, but never really wanna deal with it.

What do you mean by that?

Well, when you think about how people in the industry today get paid, they get paid based on assets under management. And they don't necessarily get paid to think strategically about how to give money back to people. You know, an analogy I like to use with clients, if you think about each and every year people climb Mount Everest, some go up, they go down, they're alive, everything's great. But there are some that go up and don't make it down. Now, more than 50% of the people that die on Mount Everest, believe it or not, die on the way down. And so the complexities of retirement planning are far greater than that of accumulation planning. So dealing with somebody from 25 to 65, when they're adding money to their portfolio and volatility's their friend and everything's hunky-dory, That's more fun for a planner, right? There's nothing complex about that. But we get to Social Security age and when do you turn that on? And what about Medicare? And when do you turn on that? And how do we utilize a strategy around retirement planning when people are retiring and living 20, 30, 40 years in some cases?

And way longer than they thought they were going to live.

Way longer. And so, you know, we really made an energy focus to that space that we wanted to to work with people to and through retirement planning. And frankly, we see a lot of our clients that we run into, they've got a lot of money, but they're still scared. And so we want to bring some simplicity to that complexity. You know, there's analogy I like to use with clients, and that is there was a study done and they were studying where to build elementary schools. So they looked at 2,000 elementary schools that had a perimeter fence around them. They had another 2,000 schools that had no perimeter fence around them. Well, the mission was to figure out how much land they needed for an elementary school. But what happened was, was the observation when recess occurred, the schools where there was a perimeter fence, the bell would ring, the kids walk out, they find their friends, and they go right to the fence. And they spend the 20 minutes right at the fence conversing with their friends. Bell rings, they go in. As opposed to the school that had no perimeter fence. Bell rings, kids go out, they find their friends, but they observe them almost wandering aimlessly around the school. Bell rings, they go in. What's the analogy? The analogy I find is without proper planning, without giving your clients the vision of what's possible, where their spending fence is, so to speak, I see that a lot of people don't spend the money they could spend or give away the money they could spend without a proper plan. And so that gets us excited. Our mission statement is helping people define, build, and enjoy prosperous lives. So they sometimes laugh at us when we tell them they should spend more money. And it's been really, really fun for us to see, which leads us into that generational aspect. How do we transition dollars during their lifetime to the next generation for the things mom and dad and grandma and grandpa value, support, get excited about, et cetera.

That's real differentiation. In a world where most financial advisors are just trying to accumulate as many assets as possible with that fee on AUM strategy, actually encouraging clients to live prosperous lives and spend money in a way that brings them joy is really a differentiator, Scott.

Well, you know what's interesting is it, I didn't know it at the time 35 years ago, but it dovetails really nicely with the insurance aspect, right? So today we have over $2.5 billion of assets under management, but we also have over $5 billion of death benefit. So if we encourage our clients to spend their money and we start working with that next generation over and over and over, and we work with them all the way through to their passing, We're capturing dollars on that death benefit that are coming in that are many times more than a dollar because it releases other aspects of the dollar. Not only do you capture the life insurance, but there may have been an old 401(k) out there that you didn't yet manage. So it's just really, didn't know it at the time, but it was a great strategy. And we really enjoy working with those younger generations. But to your point, it's, it's an effort, it's a process.. And it takes work and it takes real thinking about how you're going to do that.

Not bad for a guy that just walked in and dropped off a resume.

It was, it was absolutely— unfortunately, I had dinner a week ago with the managing partner, we called him at the time, the managing partner that quote unquote took a chance on me. And it was really fun to reminisce back to 1989 when frankly he had no idea how to train me as a college intern because they'd never had one. And I had no idea what I was doing, assuming they did. And to look up 36 years later is kind of ironic. And that, that gentleman is now one of my clients. And so we're working with his entire family. So it's kind of come full circle.

Well, this approach is really comprehensive. I know the term holistic sort of gets overused a lot, but it says a lot about the team you've built and the tactics and strategies that you've deployed. One of those, which is sequencing income distribution. And its real differentiator, at least as I've gotten to learn a little bit about your business, for tax mitigation, which is really the hot button, I think, for many practices today. We're noticing in the RIA community, for example, many firms are adding tax services, not just preparation of tax returns, more so using some of the technology tools to help clients mitigate taxes. And as you move into that high net worth and ultra high net worth space, and provide some of those family office services, this becomes a major differentiator. What does the value proposition look like for your firm in that family office space, specifically around sequencing income distribution and tax mitigation? What does that look like for your firm?

You know, all these things, as the firm has grown, I think it's really been critical that we've built processes that are scalable, processes that are the same. I hear so many people that have, you know, 3, 4, 5, 10, 20 advisors, and they're all kind of doing their own thing. When we think about about this whole distribution side of the equation, I have to give a shout out to my son. He's really built an operation in the sense of us being able to scale things and do things across the team that are very much the same. And one of my real visions and missions of a 200-year firm is we've got to have strategies and ideas that are scalable and things that our clients, regardless of who they're working with, are going to get. And so when it comes to this whole distribution planning, I tell people, you know, none of us have a crystal ball. And when you meet with somebody, they may tell you they're the best at investment management, but nobody to my knowledge, and if I can find them, I'd hire them, has the crystal ball of the markets. What I do know, because we've successfully retired well over 100 people, is if we can help them minimize the taxes from the time we meet them to and through retirement. That's the game we want to play to win because that game can really be played in the sense that as we help people build their balance sheet, we want to build that balance sheet with some strategy around the taxation, both now and later. You know, when you think about an accountant, an accountant's job is to minimize taxes in 2025. They're really micro-focused on the current today. Sometimes that's a mistake. Whereas an estate attorney is looking out on the horizon and saying, hey, let's minimize the tax when you're dead. But the reality is we tell people we want to look end to end. And so because we have accountants and attorneys in-house on retainer, we get to look at that entire tax picture. As our clients are saving, we get to help them look at different buckets, strategies around Roth. I still can't believe how many Very successful, high-level people aren't taking advantage of their Roth 401(k), for instance, or don't think they can because they make too much money. They don't know a little bit about the tax law and some of the changes that have had there. So we're trying to help them figure out, hey, when we build a bucket of wealth, would you rather be in a 25% tax bracket, or if we could build it strategically over time, Be in a 13% tax bracket means either you get to spend more money and/or pass on more money. Everybody likes that.

Yeah, that sounds like a winning strategy. What's driving the markets this week? What's on investors' minds as they look ahead? Find out on The Markets Podcast from Goldman Sachs, a breakdown of market moves and macro signals in 10 minutes or less. The Markets Podcast from Goldman Sachs. Listen now. And that brings me to this idea of your second opinion service. It's something that you've shared with me a number of years ago. Why do you offer it and how has it helped connect your team with new families and new clients?

Well, you know, Ray, it's very much, if you think about the analogy of a doctor, doctor, right? If you had a very major diagnosis of something really bad, most people aren't gonna take the first opinion of that first doctor. No, they're gonna get a second opinion. They're gonna get a second opinion because they wanna make sure that if they're gonna go do something major, that it's the right thing to do. In our space, most of the people that we talk to have existing advisors. In fact, I want them to have existing advisors. I'd rather deal with somebody who's willing to pay for advice than do it on their own. But sometimes they're quote unquote happy. They don't really know how happy. Most of them are on a continuum. But what we tell them is, look, if we bring back to you, we've got an opportunity. We have a second opinion service where we can take you through. We're going to look at the place of most potential. We're going to look at the place of most risk. We're going to give you a written brief that tells you all those things. If you want to go back to XYZ person and implement, so be it. But what we find is more times than not, we ask better questions than they've been asked before. We're digging in deeper to the tax side of the equation. We're looking at the kids and the grandkids and all the things that really are near and dear to their heart. Multigenerational aspect. Multigenerational is a big one. And so what's happened is I'll tell some stories and a couple of examples. We have a gentleman we offered a second opinion to He had sold his company a few years prior, about a $50 million net worth, and he had done some great, great planning prior to the sale. He'd put some of the stock in his kids' trusts. He was with a big firm that we all respect, and we simply said, "Let's just give you a second opinion." We had our tax folks look at the trusts. Long story short, it was about a 90-day process. We uncovered that each of his kids at the time were in their, oh, about 8 and 10. Their trusts, they uncovered that they had about $1.2 million mistake in each trust from a tax perspective. Now we just increased those trust accounts by $1.2 million because there was an IRS tax filing mistake. Now that client to this day, if we ever run into somebody that's at this firm, is our biggest advocate, as you might imagine. Oh, for sure. So that's the beauty of this. We had another client who, She had bought, husband and wife had bought some insurance for estate planning. I think insurance is probably one of the most mismanaged assets I've seen. They buy it, they check the box. If you think about it, people buy insurance, this was for estate tax liquidity. Ultimately they figured out, this is going to be great. They check the box, put it in a drawer. Well, as the interest rate world has changed over the years, I said, let's just, let's pull it out. Let's go audit. The insurance. Long story short, we uncovered with the company that it was with, if they kept paying what they were paying, they were 71 and 70 at the time, if either one of them lived to 93, the insurance went to zero. Wow. She was not very happy. So we took it into the marketplace. We interviewed 30 different companies. 25 said no, they didn't want to deal with them at that age, but we did get 5 offers. The premium actually went down and the guarantee went from 93 to age 115. Now, the interesting thing of the story was the company that was Company A they had the insurance with and Company B was the same company because there was a merger, but because that company did not bother to go back to the client, they weren't a mutual company, which we could talk more about, but they didn't go back to the client willingly to say, hey, look, if we move it to this chassis, you get this result. It needed to be a proactive move. So again, that was a monster saving in the client scenario that they were just not aware of. So I think the big thing of the second opinion is making people aware of things they previously were unaware of.

Yeah, that analogy too, from a medical perspective and wanting to get a second opinion, I think rings true. I'm sure you hear all kinds of crazy stories. I'm happy with my advisor. We've worked with our advisor for 37 years, Scott. We're okay. How do you respond to that so you get the appointment to provide that second opinion service?

I'm curious. You know, it's something that I really kind of thrive on, if I'm being honest. I enjoy hearing that. I tell them, as we think about your scenario, let's suppose, Ray, and let's suppose you and I were chatting. Ray, let's suppose I take you through my entire second opinion and the worst case scenario is, I tell you everything is perfect. How would that feel to you? Well, that I'd done a good job. Yeah. And so that in and of itself is probably worth it. Now in my career, that's happened one time. No kidding. In hundreds of times. Wow. One of my favorite stories was a CFA, retired CFA, recently retired, who I was introduced to through another Northwestern Mutual person. We're sitting at lunch. He says, you know, I'm— Scott, I'm good. Super excited to have lunch with you. I hear you're buying. "Um, but I'm good. I do my own stuff. I'm really good. I like Adam, my insurance guy. I like my insurance. Um, but I'm willing to go through this second opinion." Well, what we uncovered in this scenario is there was about a $16 million estate tax problem today. And we said, well, maybe you're going to spend your way out of that problem. Let's, let's do some planning. Let's walk your balance sheet through time with the spending you want. Which is pretty healthy. Ultimately, we figured out when he was in his 80s, closer to the end date, the problem went to $43 million. Holy smokes. Well, he was no longer good, as you might imagine. And the gentleman who said the odds of you managing my money are zero is now doing everything with us. And he is a CFA. He's very knowledgeable. So he wants to be along for the ride. I tell people, hey, on a scale of 1 to 10, as I'm meeting a new client, you can be a 10 and be actively involved in some of our discussions on how and why why we might be doing things. But you might be the one in time— we've got a one who's an 85-year-old widow who just wants her check. So in his case, he was able to come alongside us. His biggest fear, which was interesting, his biggest fear was losing control. And so he could be involved in the process. He never needed to make that decision, but he wanted to be in the process along the way. And that was the first year. Second year, we don't hear from him, we just send him money. So he's happy. It was a second opinion made that happen.

That's fantastic. So, so you're talking about some of the higher net worth segments that you serve. What does the ideal client look like today? And how has your profile changed over time? You're obviously less relevant in all the day-to-day operations and the day-to-day advising, 'cause you've built out an extraordinary team. What do those family office services look like today and how have you expanded those services?

You know, it's interesting. I think one of the things that I've uncovered and probably a little later than I had hoped, and that is we have to have very, very clearly defined service models for different types of clients. So our Generation 2 clients, for instance, we can't see them 4 times a year. That's just not going to be a profitable scenario and they're not going to want to see us 4 times a year. They don't need you. They don't need us at all. Right. So first and foremost, we have defined our service models to those different generations. So we really look at what we call our 3 pillars of growth. We've got what we call our emerging affluent clients. Those are people in their 30s making $300,000 or more, 40s, $400,000 or more, 50s, $500,000 or more. We have our wealthy clients. Those are typically people with $3 million plus of investable assets. And then we will, and one of the things that I really value, we will work with any generation 2 A+ so to speak client. And help them. And so in that family services, we do family billing. So everybody in the family gets to pool on the billing. We will have family office meetings. We'll have the entire family in the room. We'll help the patriarch and the matriarch figure out what do they want to do? How much do they want to disclose? How are they going to transfer wealth? We have big discussions around should the kids get prenuptials or not? How do we describe that?

So you're doing way more. Than just investment management and insurance and financial planning.

Absolutely. And I can tell you that the planning aspect is important. Those deeper discussions with families is what our clients value the most. And so having our attorneys and CPAs be able to build out a blueprint before they have to have somebody draft it, we tell them, look, we're going to take this thing to the 1-yard line, then you can push it in the end zone. We're going to cut your bills down by 80, 90%. Because we're gonna be in the room with you brainstorming. The power is in our brainstorming. Attorneys would love to brainstorm with you at $1,000 an hour for weeks and months on end. But let's brainstorm together. We get to work coast to coast with attorneys. So we hear great ideas and we hear really bad ideas. And so we're gonna help you figure out what are the ideas that are relevant to you and your family.

That's tremendous. Okay, so in this world, it seems like so many practices look so similar. Yours doesn't. You're doing such a differentiation in terms in terms of the product set and the services you offer, but so many founder-focused firms we see fail to scale, and it's because their leadership team is lacking. Yours is not. Tell us about your leadership team. How have you structured sort of the organization so that you can provide these services for a couple of centuries or more multigenerationally?

Well, I think you're spot on, Ray. I think a lot of us got into this business, we were really good at building clientele. Myself, I was not necessarily good at building an organization. I didn't have the first clue about that. Uh, I was fortunate as my son came into the organization after some years at Deloitte Consulting, uh, we started to put some framework around this and you're spot on. I've had to make myself less relevant. And so we built out second line leadership. We now have 9 advisory teams. We work with 2-person teams. So we believe 2-person teams generally can serve 100 to 150 relationships very well. We've got an insurance department, we have an investment department, and we have a planning department. And so we have leadership in each of these areas with each of those having what we call a workflow lead. So as a task comes into a department, they're making sure those tasks get divided between each of the respective members in each department. And so it's a well-oiled machine today. It's working really, really well. And again, I have to give kudos to my son who splits his time between advising and running the firm in that regard. And I'm just really excited today that I now have 7 partners that are helping create that vision and really transition. And that has been just remarkable to watch. And a lot of this, Ray, has happened over the last 5 to 6 years of my 35-year career. So I'm excited the 200-year vision is is now probably far more in sight than it ever was before because of some of those systems and scalability and processes that I think are repeatable.

Oh, that's great. So sing a few bars, if you don't mind, on these advisory teams. I know I get a lot of questions and I know those listening to this podcast are going to be curious, how do you structure some of that? You talk about 2-person teams. What does that look like and how do you measure sort of the profitability per per those groups?

No, it's a great question. And I think if I've done things wrong, it's been in the compensation arena. I've tried everything and most of them were the wrong things. So, um, that's honest. It's honest. And it's, uh, it's a fact. It's not been fun. Uh, there wasn't a playbook. And I think, you know, the one thing I've observed is there is no one right way to build a business. I think for all of those founders out there and partners in firms, I think you need to figure out what do you want to build? Because what we've done works for us. I'm excited about it because for me, I want to build an internal succession plan. I want to build a firm where the people that are in my organization take over. That is not a merger and acquisition strategy where I can go have a private equity liquidity event and possibly make a lot more money. But these two-person teams, I find, really, really work well. You have what we call a private wealth advisor lead, supported by a client service associate and/or a service advisor. Those two-person teams basically know those clients intimately. They're seeing those clients, they're building their service model based on how many touchpoints they need to have. They're utilizing our broader team, if you will, for the investments, the insurance, and the planning services. And that has worked really, really well. And so as we think about the evolution, when a client comes from one of those groups and is a younger person. One of the things that we've found is to do multi-generational planning, a 20-something-year-old doesn't wanna work with a 40 or 50 or 60-year-old advisor. So we have advisors in their 60s, 50s, 40s, 30s, and now 20s so that we can pair the generations with each other. A, they can understand each other. I can't understand a 25-year-old's visions and goals, but they understand each other. And we find that they're far more honest with each other. So getting them engaged in their own benefits. Well, if I have a client has $30, $40 million with us and his kids or grandkids wanna be helped on their 401(k) asset allocation, we're gonna find the right person to do that.

That's great. So it sounds like kind of a hub of central services with some spokes in these groups. You're spot on. Ah, got it. Okay, that's great. So I wanna talk a little bit about one of the things I've seen your firm do incredibly well and you stand out is this professionalized ownership. You've created real pathways to partnership and have thought different about equity and equity distribution. Today, you've got 7 partners, soon to add an 8th. How did you decide it was the right moment to share ownership? This is a big question many are thinking about.

You know, it is, it's a big, big question. And I think true equity is something that people need to be really, really aware of giving away. Because getting married is easy, getting divorced is hard. So we really have two structures. We have an LTIP plan, we've renamed it Leadership and Tenure Incentive Plan, along with the Equity Pathway. And so both of those, a partner will look at somebody in the organization and they will nominate them into one of those programs. That's where it really starts to begin. And this isn't gonna happen, typically isn't gonna happen for at least 5 to 7 years. And so it's a pathway that people know is there, They know they've got to work hard. Once they're nominated, they really get evaluated on some different areas. We talk about productivity, business development, leadership and mentorship, culture, and innovation. So each of those 5 areas we score, each partner scores each person. We score them. In the event that they don't score well, we rescore them 6 months later with some mentorship, because what we've found is they just need to know what they need to work on. If they're the right person for equity ownership, they're willing to work on it. And it has been just remarkable to watch people step up. I think we're in a war on talent in this industry. I'm excited about the industry. I do think I was really remiss in building career paths for everybody as well as being early to the game with building a career path to partnership or passage to partnership. And I like that term. You've said that term before. A lot of people talk about path to partnership. Sounds guaranteed. Sounds guaranteed. And in all honesty, in recent months, I've, I've seen that firsthand, that people hear that path to partnership, that it's just a sequence and it's going to happen. Passage means you got to open some doors and doors will open and they might close. And we had that in our firm where somebody— we had to actually go a different direction because it just wasn't the passage that made sense for them or us.. And having those crucial conversations is something I'm getting better at. Wasn't something that I was good at to begin with. I wanted everybody to like me.

So, okay, so let's talk about that. Many founders worry about sharing. They want everybody to be their friend. They want to build a big team. And oftentimes these founder-focused firms are centered around some gregarious person who is kind of this big big personality, and your firm looks very different. Many founders worry about dilution. You phrased it as an investment in the future. How do you view equity today, and what does that leadership culture look like in your organization where it's not so founder-focused?

You know, you're spot on, and I figured out many, many years ago, in order for this thing to scale, ego had to go away. I don't want any ego. I don't want, in fact, I want my clients to think of me as just supporting their advisor I think that this is the biggest challenge our industry faces. And that is how do we get from a sole advisor who's working with a bucket of clients to scale it anyway? And it has to do with transfer of trust. It has to do with me elevating other advisors. So if I'm sitting in a room and I was the advisor for a while and the other advisor comes in, and I'm ultimately wanting to get that transition to that advisor, I play a little fun game with myself. And that is, as they're asking me questions, I will, it'll probably be 90% of the time the client's talking to me. The goal by the end of that meeting is they're talking to the other advisor at least 50% of the time. And so that has allowed us to scale this relationship building and transfer. I have not had a single client assigned to me for 15 years. Not 15 years. So I have nobody on the daily that I'm responsible for. It doesn't mean I'm not in client meetings.

Yeah, you're strategically maybe moving across? Correct.

Yeah, got it. So it's been really helpful. And then as we're adding the partners and the leadership, I'm seeing that this dilution component that people worry about, for me, we have scaled faster bringing on partners and I've seen revenue grow such that even with a much lesser percentage of the firm today, it was the right move. And if I still owned 100%, we wouldn't have scaled as quickly.

I often say dilution is good so long as you choose partners wisely. 100%. Okay. So that's, that's interesting. Be as specific as you can, if you don't mind. That's what this Barron's Advisor Way Forward is all about, is the specificity of these high-performing teams and leaders talking about what they do in their business. What does the process look like in your firm moving to partnership?

So the process for us is we're gonna identify, in fact, we have a partner meeting every other Monday, and we talked about this week, we talked about, hey, who on the horizon over the next 3 to 5 years do we see has some real potential in the mentoring of others, the leadership of others? And so again, we're gonna elevate people to different roles. So for instance, right now we have I have a 24-year-old who we've elevated to workflow manager. What does that mean? Well, it means that that person essentially is moving tasks and responsible for 3 to 5 people. She's trying to figure out how she's going to do that. She's never had any leadership responsibility. And so it's been a fun little test. And I'm mentoring her and watching her. Well, in 10 years, does that mean she's a partner?

Not necessarily.

But she's got a performative opportunity. But she has an opportunity. And I think, you know, from my seat, people really want to have some sort of vision for themselves. And I think sometimes we have to believe in them before they believe in themselves. And that has been really fun to watch. I've got a gentleman, my most recent partner, who 12 years ago walked in the door at Northwestern Mutual and was working in the agency in our building and saw that probably wasn't going to be his favorite path. So he came into our organization just as a pure operations person doing paperwork progressing through the ranks. We saw real promise in him. So he became an ops person, then he became a service advisor, then he had a few relationships he was responsible for. Well, now here 11 years later, he just became a partner in the firm. And he told that story to our entire team. He spent 15 minutes talking about that whole progression and each step of having some more responsibility, responsibility for some people in the firm, All those, as you allude to, are passages. Are you able and capable? Now, not everybody really, in all honesty, when I think about this gentleman, right, he's an advisor, he's mentoring and managing people, but now he's a partner. He actually has 3 jobs. Doesn't mean that he's gonna do a third, a third, a third. It means that he has 3 jobs. They're all 3 full-time jobs, frankly. So not everybody wants that responsibility either.

That's being an entrepreneurially-minded partner. Absolutely. Okay, so we've talked about this 200-year vision that you have, and I want to be really thoughtful about the space for you to talk about these multi-generational families. I was surprised to learn in the preparation for our time together today about these more than 100 families, often across 2, 3, and even 4 generations. Everybody talks about the nobility of the profession and making that that multi-generational impact, your firm's living it. What's the secret to building trust that does last those kinds of decades to come?

You know, I think first and foremost, having the philosophy, I think everybody talks about this dream or this vision. We've been talking about it for years and years and years, and then we started implementing things. So for instance, we have what we call our young adult event. We're gonna have our 7th annual young adult event We started this where we were just going to do financial literacy education for 12-year-olds to 22-year-olds. And how do you entice a 12-year-old to come to anything? Well, you give them free food. So our first session was in person. We did Chipotle. We brought them in. We did it kind of a science fair scenario where they went around to various stations so we could keep them moving. The real testament was when people came back to the second I think the first one they all get drug into by parents or grandparents. Right. Someone tells them they got to be there. Absolutely. They don't want to be there, but they walk away and then they have long conversations on the way home and they learn about debits and credits and credit scores. And I had to have some of our younger people talk about it because I didn't know about a lot of the things they were talking about 7 years ago, Venmo and so on. So what's happened is that has really taken off. Our clients that are older, certainly our grandparents where they bring their grandkids, they see that we're really not just giving it lip service. We have a program around it. We have a focus on it. We have our 7th annual. It was really fun. We have an annual golf tournament where we raise money for Alzheimer's. In fact, it's next Monday. Last year we had a golf cart that had 4 generations of one family in the golf cart. They were so excited. They had played golf together one other time ever. And the father, grandfather has since passed, but the memories that we're making, the family meetings that we do. So we've just really made a concerted effort. And again, I think the real reason it's worked well is we have paired those second generations, third generations, few, and fourth generations with contemporaries within our firm where they can identify with them, they can trust them. They feel like they're not working with mom and dad's advisor, and it's really taken off. And that's what I tell, we have a client board of advisors and we ask them, what is the number one thing that you value we do for you? And I'm expecting beat the markets or estate planning or whatever. Save taxes or something. They said, you know, it's the time and energy and focus that you put on our kids and our grandkids and the ability to educate them when we know you're not getting paid to do that. That, but it shows us you're being legitimately focused on what is important to me, which is my family. It gets to the heart of the matter. And it's fun for me to watch. And so you've got to do it in such a way that it makes sense so that you have a practice that will be able to financially sustain itself. But it's been really, really rewarding. And coupled with the insurance aspect, I believe very much over time this is going to work well for everybody.

Scott, you talk a lot about this notion of an enduring firm, a 200-year-old firm. You know, every advisor has to make a decision about the platform they choose to partner with, the custodian, or even their broker-dealer, depending upon their business mix. And you've chosen to partner with Northwestern Mutual with a walk-in and a resume on a desk, which some may see mainly as an insurance company, Most people don't know what a mutual is. Most people don't know what the larger organization of Northwestern Mutual looks like. How do you want Sparks Financial and Northwestern Mutual's private wealth group to be perceived by your clients and your peers?

You know, it's, it's a great question because it is a 168-year-old company who's been doing asset management for years. They're a $600 billion firm. Each and every month they put $4 billion into the markets. They've been doing private equity investing for over 50 years. So for us, it gives us extreme access to that knowledge, that institutional knowledge. It's a platform that gives us autonomy. As an independent broker-dealer, it allows us to have total autonomy as we build things out. They don't force us to have any Northwestern Mutual mutual funds in the equation because there isn't one. So it has been an environment that, you know, lucky 37 years ago to walk in a door and drop off a resume. They've been willing, I think the biggest thing, they've been willing to change and adapt. And so they've allowed us to build out, we have access to through our retainer program, attorneys, CPAs, family office services. We're working on some bill pay, do tax returns for the right the right clients. So it has been just a tremendous partnership for us. I do believe that we all could probably thrive where we are if we stop looking around to see what might be better out there. It's like your marriage. If you water the garden that you're in, that garden's going to grow. And that's, for me, has been something that has just been tremendous. And I have the fortunate ability to talk to them and tell them, hey, what are the areas that we're missing? And they listen. And that's been exciting to me.

One of the things I've noticed is over the last decade, as a Fortune 100 company, you know, the CEO and John Slivsky and the transition to Tim Garrand has been nothing short of extraordinary. What a great leadership team, you say, willing to listen to what the needs of the clients are, what the policyholders need, and what the advisors are looking for.

No, you're spot on. And the leadership is tremendous. We've been fortunate to have Tim, the new CEO, CEO be on our client board of advisors to take questions from them, directly from the clients. So, you know, it's just an organization that they care deeply. They want to be here in another 168 years, which matches my vision and dream, but they've got to listen. They have integrity. I've never had to apologize for anything. They've paid claims in circumstances where I thought they might not. So the integrity, back to the CFP, all the integrity issues, I know I'll never have to apologize because some of the policies we put in force with insurance, hopefully they don't come to fruition for 100 years, you know, if we're doing something on a child. So it's been just a true phenomenal match for us.

You talk about people that care. Your team really cares. Alongside of growth and strategy, values and a philanthropic mindset are integral, not only at Northwestern Mutual, but also to your team. Let's discuss just very briefly how that manifests in your work. What do you think that reflects about your team core values and how does that come alive?

You know, for us, this industry, this business, the ability for us to, to do well, we believe strongly that we need to give back into our community. So we, we have 3 big charities that we support each and every year: Alzheimer's, Children's Hospital, and more recently something called Food for Thought. So we, we go in not only with, with time energy, but we bring clients into it, and so it's fun. We have a golf event next Monday where we have 84 golfers and we're raising money for Alzheimer's. Last year we were fortunate in conjunction with Northwestern Mutual Foundation, we raised over $170,000 for Alzheimer's, and we were the number one sponsor in all of Denver for Alzheimer's. So It's the, for me, giving back to the community, involving the clients. They love it. They love giving back. We all, I think, feel better when we give money than when we get money. Most people just don't know it until they do it. Last year, we had a whole bunch of people that come out to the walk. For us, it's just been something that's been another connection for our team. I tell people, I think we're in the human capital business, and I think we're just delivering wealth management. Human capital, making sure making sure that our team's connected, making sure our clients are connected. They want to feel loved by us, both our clients and our teams. And so some of these volunteer things just really get me excited and we can have real impact in our community.

It's building community. It's paying it forward. Okay. So this has been a wide-ranging conversation. I can't thank you enough. Let's close with some wisdom for the advisors listening in. If you could give one piece of advice to advisors aiming to build a lasting firm, what would it be?

You know, I think it's, it's spend more time thinking about how to treat your team, building true long-term vision of what each and every one of them can do. I heard something last night, a gentleman was talking about teammates. He said, I don't think there's a bad teammate, but I think there's bad mentorship. And so for me, and going back, what I wish I would have done earlier, I wish I would have built career paths for everybody. I think without the vision, people tend to leave or they perish in the bigger picture of life. But I would encourage you to build that passage for every person in their career path. Some of those will be passage to partnership. Some of those will be passage to something else. But I think we are in the human capital business where we're gonna be able to deliver on some of these things. And people talk about AI and all of those components. We're in an emotional business with clients, and I don't think AI is ever gonna bridge the gap on the emotional aspects of investing and family and death and disability and all the things we deal with. So care deeply about your team. Show them you care about them. Tell them you care about them and let them serve your clients well.

Yeah, that's great. And just in closing, what do you want listeners to understand about your firm, Sparks Financial, after hearing your story? And what are you most excited about when it comes to the future of financial advising?

You know, I think with 10,000 people turning 65 each and every day and the biggest wealth transfer on the horizon, do I think some of this artificial intelligence is gonna take that away? I do on the lower end, but I think if you continue to progress your education, your knowledge, your ability to learn, I think there's never been a better time for us to be in this business because people need us more than ever. This transition of wealth, this ability to transition wealth to younger generations not screw them up. So scale and get more knowledge around how do I build strategies? So as Warren Buffett says, I wanna give my kids enough to do whatever they want, not enough to do nothing. What are those strategies? How do you do that? How do you frame that? And so I think it's an exciting time and I'm really excited for those firms that are building something that's lasting, but they've gotta do it with no ego. Ego. I mean, ego gets in the way of a lot of these things with team members, with founders. And so be humble, hungry, and smart.

Hey, thanks for sharing your story. And thanks for being here on The Way Forward. Appreciate it. Your story, from building a practice to creating a Barron's 1200-ranked firm, top 1200 in the country, and shaping this 200-year-old vision is really a powerful reminder of what it takes to endure For our listeners, whether you're just beginning to expand your service model or leading an ensemble firm like Scott, Scott, your wisdom provides a clear blueprint. Professionalize early, differentiate intentionally, and build with purpose. Until next time, I'm Ray Scalfani, and this is The Way Forward presented by Barron's.

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