Succession Planning, Next-Gen Talent, and What the Best Leaders Do

This podcast is 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.

This is Greg Bartolis for Barron's The Way Forward. My very special guest today is Ray Scalfani, founder and CEO of ClientWise, which is an exclusive coaching partner for Barron's. Ray, welcome.

Thanks, Greg. Great to be here.

So let's start high level. Tell me about your firm, your background, the services you render, and what you see happening right now in the advisory space.

Wow, there's a lot there.

Yeah, you have 20 minutes to answer that one question.

So, so I'll be really quick. I founded ClientWise 16 years ago. In January of 2006. And prior to that, I spent 20 years working at an asset management firm. So I understand the business and have called on advisors for many years, really on the asset management side, but the last 16 being an executive coach and setting up a business coaching firm. My firm is really focused on helping advisors create that ripple effect multigenerationally And we're committed to helping them build an enduring firm. It's the reason I founded ClientWise. May sound corny, but I think it's true that advisors do noble work. And when they make a difference in the life of one client, they actually make a difference in families multigenerationally. And when they build wildly successful businesses, they have that great impact in the community and they transform lives. We believe at ClientWise that when we make a difference in the life of just one advisor, wow, we can really change communities. But if we can impact the lives of thousands of advisors, which we have, we can in a funny kind of way, change the world and make it a better place. And so at ClientWise, it's about business coaching. It's about building an enduring firm. It's about enterprise value. Greg, the multiples are expanding for those firms that are building interdependent teams and scaling up wisely, profitably, sustainably. Sustainably, and we want to be at the forefront of helping advisors succeed, first for clients, then second for team, and help them build that next generation so that they can create those enduring firms.

Okay. And when you're providing coaching and helping these firms now, what specifically, in what way are you actually seeing the greatest payoff, or at least client satisfaction for what you're doing?

Client satisfaction or advisor satisfaction? They're very different.

Sure. Let's start with advisors.

Yeah, the advisors are in many cases accidental owners, you know, especially the ones that were wildly successful at finding clients. Most advisors tell us that they didn't intentionally get into the business to build a big team and scale up a firm and have a P&L. And, you know, all of that comes with being an entrepreneur. The unintended consequence is, wow, you've built something pretty successful and now you've got to build a team.

Right, you're now the accidental CEO almost.

Right, that's right. Right. So I think the biggest payoff is helping advisors jump into our community where from a peer-to-peer perspective, they can learn from one another, but they can also learn from their coach and they create systems and structures for themselves that are sustainable. And I think what we do a little bit differently at ClientWise from what advisors tell me is that we're not sort of the telling company. We're, you know, we've never been advisors. We don't have, We don't have an investment in success fees. We're not in the merger acquisition game. You know, we're a coaching company that's built a community with great content and provide some limited consulting work. But for the most part, we want advisors to build the businesses they wanna build. And when they build great businesses for their clients, everybody wins. And so we are affiliated with the International Coach Federation. So there's a code of ethics, a standard of conduct, We are objective, we are independent, and we are fully focused on the advisor's success, not tied to our success.

And tell me about the content component.

Yeah, yeah. In 2006, I launched a research program where we built a database of every registered rep and RIA in the United States, and then we parsed that data down to advisors that met very specific criteria. They had to be generating at least $3 million in revenue, running about 30% profits, 10 years or or more as advisors and on a team. And then over the course of the last 16 years, we've tested the data set. We've even partnered with Barron's on a number of occasions to benchmark the top-ranked advisors. So the data set today looks more like 4.4 million, just over a billion in AUM, more than 10 years as a firm and certainly on a team. And we started studying advisors, those especially that were growing at a CAGR of high teens, low 20s, the companies, you know, consistently year over year, 3-year rolling CAGR, you know, what was creating that level of success? What did EBITDA look like? Were they hitting their marks at, you know, 28%, 32%, you know, profitability? And what we learned was that there were very consistent patterns among what made the best in the business. And so we built out something called, well, Barron's calls it a 7-part roadmap for practice management growth. We call it the professional advisory model where we provide a little bit of a structure in terms of how advisors sort of set up their firms. And we've created content in these 7 key areas. And then we've divided advisors up into 2 groups, advisors that are still solo-owned firms who are committed to building enduring firms, but they haven't yet really developed that next generation, or they're about to maybe sell an equity stake to a firm. So we've got emerging leaders and master leaders and enterprise leaders, but those are solo-owned firms. The second group are those ensembles. And, We look at those firms that are ensembles, enterprise ensembles, and super ensembles, and multiple member-owned firms, different sizes, size team, revenue, et cetera. But we've created very specific curriculum and content for each of those two groups and the three subsets within the two groups. And we've also created these communities, Greg, where the advisors who are really seeking to build an enduring firm based upon where they are today, based upon their growth rate, based upon their own goals in terms of profitability, what their time to exit looks like. We've parsed the data and then we've partnered with the advisors and created these community groups where they can peer-to-peer learn from one another, but also take advantage of the curriculum and the coach in the process.

Now, in terms of the communicating, how, for the community, how do they, how does that actually happen? Is it message boards, texting, audio, video?

Yeah, well, COVID actually changed things in some funny kind of way in that we have virtual groups. We've always been on WebEx and then converted to Zoom about 6 years ago. So we've got community groups that had been coming together since the beginning of the company's start in 2006 on WebEx. We also have people come live and in person. We have our Business Builders Academy where groups come together every 90 days We keep groups in that 20, 25 kind of range. We find that's a really good size, a group of professionals. And then we also have one of the largest digital online communities called the ClientWise Exchange. And there advisors can interact with one another. They can interact with the coaching team at ClientWise. We have 22 coaches today. Plus a number of facilitators that run our Business Builders Academy as well. We have some EOS-certified coaches. So we, we've got a team, a pretty good-sized team that the advisors can interact with also on the digital community, The Exchange. And then we have some thought leaders, industry experts. We want to help advisors succeed, you know, in their marketing and client acquisition and team building and compensation design. So there's a number of areas where advisors are seeking consulting. And we try not to be everything for everybody, but we want to find sort of the best in class. And we've invited those other professionals onto our platform so they can interact and help advisors as well. So it's a good central place digitally to connect, virtually to connect, and also live and in person to connect. Right.

And I guess it's smart business too. You have this unique place where they will come back. It's like a digital watering hole of people, you know?

That's it.

Yeah.

Yeah.

That's great. So I'm curious about something. Tell me about clients or potential clients who may think they don't need coaching and think, hey, I'm, I'm quite successful. I'm, I'm doing great. I don't need that. But where you genuinely think that coaching could take them to the next level. Tell me about that. Because I assume there are a lot of advisors who fit that profile.

Yeah, there probably are. And they may not be a good fit for us. Yeah.

So you want people who are more proactive, like, I know I want it or—

Yeah. I think, you know, it's interesting, advisors, I don't think that's a static answer. I think it's dynamic. I think there are periods of time where great leaders, you know, really seeking to maybe solve something or maybe wanna shift some belief structures or belief systems, or, you know, they've got a different vision for what they want to achieve. You know, the young 33-year-old, you know, who's killing it, you know, who's growing, who's building a great team, you know, may not be thinking about succession. But they may, you know, 10 years later be thinking about who they're developing to be the next generation leaders and next generation owners in their firm. You know, what is the passage to partnership in their organization? And whoa, hey, I didn't need coaching, you know, when I met you, you know, 5 or 7 or 10 years ago, or I was working with a coach then, you know, doing something more tactical, you know, with my team. That's cool. And so, you know, it's dynamic, I think, Greg. I've been coming to Barron's conferences for 15 years. And I often hear at the conferences, "Hey, you know, I think we're finally ready. We've got something very specific." And then we see a number of alumni, you know, walking around the conference who are former clients and we help them solve something for themselves. They created something that was sustainable. We're cool with that. And then they wanna jump back into the community. So they kind of come in and out. So we're very flexible with helping. Nice.

It's almost like a teacher who has a student long ago and then it went on to bigger and better things, right?

Yeah, that's right. That's exactly right.

Absolutely.

I mean, the, the reason I chose a long-term career path as a coach is that I enjoy witnessing sort of the greatness and success in watching others achieve something that they visioned and that they imagined. I also think at ClientWise, one of the things we hear consistently from advisors is, you helped us think bigger. You helped us think about what we didn't realize was possible. And you introduced us by joining the community to other professionals that were building something bigger. You know, just a couple of weeks ago, we had a group of our super ensembles in our Dallas offices for, for one of our full-day Business Builder Academy workshops. And, you know, everybody in the room was somewhere between $1 and $2.5 billion. I think there were a couple of firms in there, you know, $4.4, $7.8, pretty large firms, and all were very successful. And one of One of the 38-year-olds, it's running about $1.8 billion, came up to me afterwards. He said, "I gotta tell you, there's not many places I go where I'm like the smallest potato in the room, but holy smokes, you gave me some ideas today and the group's big vision of what's possible. You know, we are in the advice business and there is a race for talent. Oh my gosh, capacity constraints is the issue, not growth. I've gotta be thinking bigger about my people strategy." And I wouldn't have thought about that if I didn't come today. And I thought, you know, that's exactly right. That's what the community is about, is about us working together to help envision something that's going to make a bigger impact in the lives of many. And so I think that's what's so exciting about being a coach and about the work that we do at ClientWise.

Interesting. Now, you mentioned earlier, you alluded to, you know, being a great leader. Are there any common attributes about what a great leader, in your estimation, holds today in this day and age?

Like, well, what is— Oh, that's interesting. Yeah, that's a big question. You know, Jack Welch, I think, said it best. Said it best many years ago, "The sign of a great leader is somebody who can develop somebody who can develop somebody." And that really connects for me because in the work we do in helping advisors build enduring firms, it's about the people. And, you know, Mark Jabourjian always jokes about the importance that, you know, culture, you know, trumps everything and eats strategy for breakfast, right? That's a really famous quote. I would add to that, that followership is really key. Among the best leaders we observe in financial services, they've surrendered their need for independence in exchange for interdependence, and they've created great followership. And what I mean by that is, you know, in order to build an enduring firm, you've got to create create a team that wants to follow you. And then you've got to build the trust and create an environment that's inclusive and safe for people to take risks and learn and grow so that they can become the next generation set of leaders and owners and run the firm. And so from an authenticity perspective, if advisors are truly committed to building something enduring, and they are fully focused on being, pun intended here, client-wise, and they're acting as full fiduciaries and spelling that with a capital F, not a little f, then they're gonna wanna act in the best interest by building the best team that can serve clients when they're not around through their choice by retiring or God forbid through disability or death. And so the reality is great leaders create great followership and they're great at developing others and building trust and respect and inclusivity in an interdependent team.

All things considered equal, do you think that's easier to do today, harder, or is it just the same regardless of what era you're looking at?

Oh, I think everybody wants to talk about this generation and the millennial group and COVID and the great resignation. And it's interesting, if you're a student of history, you go back in time, I think the young generation in the '70s said it about their parents, and you go back to the '60s and they said it about their parents. And it's true. I mean, from a demographic perspective, you know, there was this great big boomer population that had lots of jobs as they started to retire. You know, the Gen Xers weren't quite as big, and now the Gen Y, the millennial group, they're much bigger. And they have a lot of choice, and the nature of the workplace has changed. I don't think we can argue with that as a truth, but I think it's always been a challenge for leaders, maybe a different set of challenges over time. I think in today's environment, what's really awesome is what we're observing at ClientWise among high-performing teams is the diversity of teams. And I mean diversity, a diversity of thought, You know, having different perspectives, a diversity of gender, of age, of race. And you're seeing teams that are much more colorful. You're seeing teams that, you know, they've got a 60-year-old, the 50s, the 40s, the 30s, and the 20s. They've got apprenticeship programs, not just internship programs. Not everybody's supposed to be a salesperson. Some are supposed to be, you know, great advisors or great leaders of running the business. And so I think there's a maturation. A professionalization of what's happening in financial services among advisory practices. And it's really a great leader's game to lose here. I mean, the need for advice has never been greater. We live in the greatest country in the world. We've got the greatest freedoms to build anything we can dream. And we've got a lot of people that are looking to make purposeful impact in lives of others. And I think financial services is at the center of impacting lives of so many and advisors who are committed to building something that's enduring. I think they, it's never been a better time for advisors.

Tell me about emerging areas in terms of coaching. Where are you seeing increased interest?

Oh, by far it's the succession work. It's the next generation piece. That whole area, developing people, helping advisors develop their people strategy, helping advisors figure out how to create the passage to partnership the criteria for becoming a partner, what the owner's mindset looks like, and how to really successfully develop the people so that the transition can occur successfully. I would say that's number one. That's really emerged. The data told me 16 years ago when I started ClientWise, I was looking at the data and thinking, okay, at what age do people retire? And, you know, what are advisors going to do? And I even wrote an article, we should all go long on oxygen tanks because advisors are going to die at their desks. And, you know, we kept seeing, you know, the advisors advisors, sort of, oh, I can work forever. And I think over the past 5 years, we've really begun to see that shift and advisors, especially the best in the business, getting really serious about next-gen talent development, people development, and most know they may not be the best at that and they wanna partner and outsource in order to make that work. So I'd say that's number one. The other second big, big attention getter for us is coaching organizations, something we spend a lot of time working with Barron's to look at the research and the data data are the enterprise value drivers. It is clear there are those who know how to grow a business to expand the multiple and really scale up successfully. And then there are those that are wanting to do that but don't know how. And I think what we've done at ClientWise is really be students of the advisors we coach and thousands of advisors that we're working with and have worked with to understand what makes the best in the business tick. Why does a multiple expand, you know, from, you know, 2 times revenues to 7 or 8 times EBITDA? And when does that shift occur? And what's the multiple expansion look like? And why are some firms, you know, playing the arbitrage game, trading at 14 to 20 times, buying businesses at 5 to 8? And so we've really dug into that and have coached quite a number of firms to successfully figure out how to expand their multiple depending upon their strategy to acquire, to sell, to merge, or to organically grow and not do any of that activity, but still get the multiple expansion. So I would say those are the two probably primary areas that we're paying a lot of attention to here. Great.

And in the old Barron's tradition, you know what I'm going to ask you.

Yeah. One actionable idea.

Okay. All together now.

Yeah, that's it. Look, and I think I'm a big reader. And I think there's an amazing book called Think Again by Adam Grant, and it's probably the best business book I've read in a number of years. And I'm an avid reader, as I said, and advisors I know who are super successful love the audiobook and videos and things and studying and students of. Adam Grant, Gant really got my attention in his book Think Again because the place we are in time, I think what I'm seeing in our clients and the advisors we coach is we're doing a lot of thinking again. You know, the things we might have known to be true and we took for granted and created strong belief systems and belief structures around, hey, it's this way, this is how the industry is, this is what clients need. You know, I'm noticing that we're all doing a little bit of a Ctrl+Alt+Delete beat and resetting a bit right here. And I think Adam, in his book, Think Again, provided a set of tools to be able to hit the pause button, stop, think again, in order to, you know, kind of race forward. And I think the timing is perfect. The content is great, and the guidance is second to none. So that would be my one actionable idea. Yeah.

Excellent. Well, thank you so much. My guest was Raees Clefani. For more Barron's Advisor-specific podcasts, please check out barrons.com/podcast. For The Way Forward, I'm Greg Bartolis.

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.